QinetiQ confident on full year despite challenging markets

7th Feb 2014 07:08

Ministry of Defence spin-off QinetiQ assured cash generation in the third quarter was "good" and that despite short-term uncertainties and challenging markets it is confident of delivering on expectations for its full year to March. In a third-quarter update the Farnborough-based defence technology company said that "the short-term range of possible outcomes [for the group] remains wider than usual", particularly for its global products business. However, absent any material changes in customer requirement, it is content to maintain full-year guidance provided in its half-year statement last November. For the medium term management believes QinetiQ's core businesses and newer growth opportunities will drive an increase in sustainable earnings.The company said its EMEA Services arm delivered a "robust" performance over the third quarter despite challenges presented in the UK where the government remains focused on financial stability and revamping defence strategy. The US Services business performed in line with expectations during the third quarter despite the US federal services market remaining challenging due to uncertainties in the federal government budget and a slower contracting environment. Despite these headwinds, US Services is stabilising following actions implemented last year to reduce costs. During the quarter the division won a $12m oceanography contract with the US Naval Research Laboratory. The Global Products arm, which has shorter order cycles than the services divisions, continues to be impacted by the drawdown of military forces, which has had a negative effect on demand for conflict-related products. The division is being hampered by the limited visibility of further significant orders, with their timing remaining limited both in the US and overseas. In response to the challenging conditions the Global Products business is continuing to work on broadening its portfolio, especially beyond defence, the most mature of these new commercial initiatives being the group's OptaSense bespoke fibre sensing business. Qinetiq shares opened Friday morning at 220.3p, valuing the company at £1.43bn. KP