It's unclear whether Donald Trump will withdraw overseas military support if allies don't pay their dues, as the US president-elect claimed during his campaign. But the doubt he's created could lift security spending in Europe. Defence contractor Qinetiq (QQ.) wouldn't mind the boost: organic revenue on a constant-currency basis fell 3 per cent, limiting growth in adjusted operating profits to 4 per cent, at £52m.
Tepid trading pushed underlying sales down 1 per cent in the EMEA Services division, which provides technical expertise, testing and training in Europe, the Middle East and Africa (EMEA). However, orders leapt two-thirds there after management renewed a Ministry of Defence contract - worth £109m over 11 years - to test, integrate and develop combat systems for UK surface warships. The division also secured £20m in contracts for tasks such as providing in-service support for Apache and Puma helicopters.
The smaller global products division netted $28m (£23m) in orders from US aircraft carriers for advanced launch and recovery equipment. But lower robot shipments pushed divisional organic revenues down 8 per cent. Management is betting on international expansion, operational improvements and its more than 40 research projects to revive Qinetiq's top-line growth.
Broker JPMorgan Cazenove expects adjusted pre-tax profits of £105m this financial year, giving EPS of 16p, down from £109m and 16.3p in FY2016.
| QINETIQ (QQ.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 241.5p | MARKET VALUE: | £1.4bn | |
| TOUCH: | 241.5-241.6p | 12-MONTH HIGH: | 276p | LOW: 204p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 54p* | NET CASH: | £271m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 371 | 48.3 | 7.1 | 1.9 |
| 2016 | 362 | 51.2 | 8.6 | 2.0 |
| % change | -2 | +6 | +21 | +5 |
Ex-div: 12 Jan Payment: 10 Feb *Includes intangible assets of £85.6m, or 15p a share | ||||
