Government spending cuts may be damaging Qinetiq's sales - organic revenue fell 9 per cent in the first half - but an 18-month-old self help programme continues to deliver improvements to both margins and cash flow. Analysts rushed to upgrade estimates after chief executive Leo Quinn told them full-year profit would be 20 per cent higher than first thought. Broker JP Morgan Cazenove now expects adjusted pre-tax profit of £133m and EPS of 16.2p in the 12 months to March 2012, up from £115m and 14.2p last year.
The group's global products division proved the key to a 27 per cent surge in underlying operating profit to £82.6m and 370 basis-point growth in margin to 11.2 per cent. The unit, responsible for the best-selling Talon robots and anti-RPG netting Q-net, doubled profits to £37m and margin swelled to 20.5 per cent. Cost cutting was evident in strong numbers from the UK services division, offsetting a slowdown in the US on budget uncertainty and lower-margin work for NASA.
A £62m working capital inflow and lower capital spend on government contracts, led to underlying cash flow from operations of £157m and larger than expected reduction in net debt to £145m - a record low and down 56 per cent in the past year.
QINETIQ (QQ.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 125p | MARKET VALUE: | £826m | |
| TOUCH: | 124-125p | 12-MONTH HIGH: | 138p | LOW: 96p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 65p* | NET DEBT: | 34% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 865 | -37.6 | -6.4 | nil |
| 2011 | 740 | 80.5 | 10.2 | 0.9 |
| % change | -14 | - | - | - |
Ex-div: 18 Jan Payment: 17 Feb *Includes intangible assets of £617.7m, or 94p per share | ||||
