QinetiQ's (QQ.) shares jumped to a record high on publication of these annual results. The Tories' election win has helped improve sentiment, as did a £25m increase in net cash balances and a positive showing from the defence group's Europe, Middle East and Africa (EMEA) services decision.
For all the uncertainties surrounding the UK defence budget, robust demand for the group's core consultancy services means that 80 per cent of revenue for fiscal 2016 is already in the bag. The division's underlying operating profit for last year grew 7 per cent to £93m, helped by an insurance recovery and an export contract.
Management isn't holding its breath for an upturn in spending from its main customer, the Ministry of Defence. As defence spending is not protected by a government ring-fence, management stresses the uncertainty around the impending Strategic Defence and Security Review.
The impact of US troops withdrawing from Afghanistan also continued to weigh on group revenues. Depressed demand for conflict-related products sent sales in its global products segment plummeting 21 per cent. That and $5m (£3.2m) of one-off costs linked to the US Services business disposal hurt the division's profits, although cost savings kept operating margins up at 13.2 per cent.
Broker Investec Securities expects adjusted pre-tax profit of £104.5m in FY2016, giving adjusted EPS of 14.9p (from £103.5m and 13.9p in 2014-15).
| QINETIQ (QQ.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 232p | MARKET VALUE: | £1.4bn | |
| TOUCH: | 232-233p | 12-MONTH HIGH: | 235p | LOW: 179p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 50p* | NET CASH: | £196m | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.70 | 27 | 0.8 | 1.6 |
| 2012 | 1.47 | 316 | 37.9 | 2.9 |
| 2013 | 1.33 | -137 | -20.5 | 3.8 |
| 2014 (restated) | 0.78 | 84 | 10.4 | 4.6 |
| 2015 | 0.76 | 105 | 18.6 | 5.4 |
| % change | -2 | +25 | +79 | +17 |
Ex-div: 6 Aug Payment: 4 Sep *Includes intangible assets of £123m, or 21p a share | ||||
