QinetiQ tackles tough US market as half year revenue falls

21st Nov 2013 09:35

QinetiQ, the defence, security and aerospace company, reported a 13 per cent fall in first half revenue to 599.6m pounds, reflecting budget constraints in US government spending. Underlying operating profit for the six months through September fell to £59.2m from £59.3m the previous year and underlying pre-tax profit dropped to £52.3m from £85.8m.The company said market conditions in the US remain challenging with the Federal Government failing to agree a budget for its 2014 fiscal year. While October's government shutdown interrupted some work for customers, it has not had a material impact on the full year performance of QinetiQ due to the implementation of contingency plans. "Despite heightened market uncertainty, US Services is stabilising and the strategic review of this division will determine the path to maximum value," said Chief Executive Officer, Leo Quinn.He added that "the board is maintaining its expectations for overall group performance in the current year absent any material changes in customer requirements". In an effort to address difficult market conditions, the company has implemented its Organic-Plus programme - the second phase of its development, to drive a sustainable increase in underlying earnings and growth from its portfolio. The firm raised its interim dividend per share to 1.4p from 1.1p, due to the group's confidence that its Organic-Plus strategy will deliver value to shareholders over the medium term and its progressive dividend policy."Qinetiq's interims were well signposted and the outturn is largely as expected. In summary - EMEA was solid, the US weak, but gently improving on restructuring, and Global Products was down heavily on a strong comparator," Investec said."Net cash was higher than expected and the pension is being de-risked. We leave our FY14E profit forecasts largely unchanged, but there are risks involved. Our SoTP-based price target remains 220p. 'Buy' retained."Shares rose 6.76% to 210p at 10:00 on Thursday.RD