UPDATE: QinetiQ Says To Meet Forecasts, Awaits Reviews

29th Jul 2010 08:26

(Adds detail.) By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. defense technology company QinetiQ Group PLC (QQ.LN) Thursday said it expects to meet its forecasts this year, despite continued delays in orders from the U.K., and to a lesser extent from some sector in the U.S., as governments in those countries review defense spending. The U.K. and the U.S. governments are seeking to reduce costs and focus on direct operational requirements, the company said in a trading statement which covers the period since May 27. Additionally in the U.K., the company said it is difficult to predict the areas likely to be targeted for cutbacks in defense spending and the levels of any such reductions. The U.K. government is currently conducting a defense spending review, which is set to report in the autumn. QinetiQ said the performance of its service businesses is likely to remain "steady overall" year-on-year. Political and economic factors affecting the letting of orders in the U.K. are not expected to change in the short term, while U.S. services revenues are "similar" to last year, it added. Its global products business is likely to benefit from a strong result in the U.S., but this is expected to be offset by delays and curtailments in the U.K. products business caused by uncertainty in the defense sector, it said. Net debt at June 30 fell to GBP417 million from GBP457 million at March 31, supported by tight control of working capital and some deferral of capital expenditure, the group said. It is targeting a reduction of its ratio of net debt to earnings before interest, tax and amortization to below two by the end of the fiscal year 2011/2012. QinetiQ said it is continuing its restructuring focus on three divisions--U.S. services, U.K. services and global products--and the elimination of loss-making activities. The group has started talks with labor unions over 391 job losses in the U.K., primarily at its corporate sites in Farnborough, Hampshire and Malvern, Worcestershire. The move will incur a non-recurring charge of about GBP20 million, booked largely in the fiscal first half. The group also said it will brief on its consultations during the summer over further cuts to a "similar number" of posts. In the U.S., it announced 90 job losses from its global products division. At the end of May, the group swung to a full-year net loss and said management was taking action over the next 24 months to reduce costs, improve productivity and drive cash generation, both to reduce net debt rapidly and to refocus and reposition its businesses over the medium term for a return to profitable growth. At 0718 GMT, QinetiQ shares were unchanged at 127 pence, valuing the company at GBP837 million. - By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires July 29, 2010 03:26 ET (07:26 GMT)