QinetiQ UK, US Challenging But Sees FY In Line With Board Views

29th Jul 2010 07:16

LONDON (Dow Jones)--QinetiQ Group PLC (QQ.LN) said Thursday that defense markets in both the U.K. and the U.S. remain challenging and as a result, delays continue to be seen in orders from government customers in the U.K. and, to a lesser extent, from some sectors in the U.S., but is still confident of meeting its full year expectations. MAIN FACTS: -In the U.K., the Strategic Defense and Security Review makes it difficult at this point to predict the areas likely to be targeted for cutbacks in defense spending and the levels of any such reductions. -Management is rolling out its action plan to refocus the businesses, create a more commercial and performance-oriented culture and strengthen the balance sheet. -Work is ongoing to align the structure around U.K. Services, U.S. Services and Global Products. -All businesses are now using a consistent financial reporting process. -Committed to resetting its cost base, including a redesign of key processes to increase productivity and to rationalize corporate headquarters. -Consultation has started with U.K. trades unions regarding a potential reduction of up to 391 employees, primarily at its sites in Farnborough, Hampshire and Malvern, Worcestershire. -Subject to successful completion of the consultation process, it is expected that the non-recurring charge for this restructuring, in the region of GBP20 million, will be taken largely in the first half of the current year, but with the cash impact falling during the second half. -As management continues to reshape the Group, it will announce consultation during the summer regarding further rationalization of a similar number of positions. -In the U.S., the Global Products workforce has been reduced by 90 to raise productivity within the business. -Net debt at June 30 was GBP417 million (March 31: GBP457 million). -This improvement resulted mainly from tight control of working capital and some deferral of capital expenditure. -Remains well within its banking covenants and is focused on achieving its stated target of reducing its ratio of net debt to EBITDA to below 2 times by the end of 2011/2012. -In the current financial year, the performance of QinetiQ's service businesses is likely to remain steady overall in comparison to last year. -The Global Products business, whose performance is by its nature more lumpy, is likely to benefit from a strong result in the U.S. -This is expected to be offset by delays and curtailments in the U.K. products business caused by uncertainty in the defense sector. -Board believes that it will meet its expectations for the current year, while continuing to implement its plans to reposition the business for a return to profitable growth over the medium term. -Shares closed Wednesday at 126.7 pence. By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; [email protected] Order free Annual Report for QinetiQ Group PLC Visit http://djnweurope.ar.wilink.com/?ticker=GB00B0WMWD03 or call +44 (0)208 391 6028 (END) Dow Jones Newswires July 29, 2010 02:16 ET (06:16 GMT)