While a 2 per cent dip in underlying operating profit to £109m is unlikely to get pulses racing, boss Steve Wadey's description of "solid" performance seems fair considering the barrage of headwinds that faced QinetiQ (QQ.) in the reported period. Fortunately, governments worldwide have recently unveiled rising budgets to counter a growing number of terrorist threats, although this time they want their money's worth.
Mr Wadey is confident that QinetiQ's core capabilities match the requirements of today's austerity-driven governments, but also admits that "staying the same won't be good enough". In light of these challenges, he outlined three strategic pillars centred on expanding internationally and becoming more innovative in matching customer requirements. So far this pledge has involved opening up a small office in Canada, partnering with BAE Systems (BA.) on a project in Chile, investing in next-generation robotics, developing cable fibre-optic sensor solutions for the rail industry and modernising the group's test and evaluation facilities.
Strong cash generation means there's plenty of headroom on the balance sheet to invest for the future. But management's admission that margins will soon come under pressure from a crackdown on single source contracts put a dampener on an otherwise spirited performance.
Broker JPMorgan Cazenove expects adjusted pre-tax profit of £106m in the year to March 2017, giving EPS of 16.1p (from £109m and 16.3p in FY2016).
| QINETIQ (QQ.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 239p | MARKET VALUE: | £1.4bn | |
| TOUCH: | 239-240p | 12-MONTH HIGH: | 276p | LOW: 211p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 55p* | NET CASH: | £275m | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.47 | 316 | 37.9 | 2.9 |
| 2013 | 1.33 | -137 | -20.5 | 3.8 |
| 2014 | 0.78 | 84 | 10.4 | 4.6 |
| 2015 | 0.76 | 105 | 18.6 | 5.4 |
| 2016 | 0.76 | 90 | 16.8 | 5.7 |
| % change | -1 | -14 | -10 | +6 |
Ex-div: 4 Aug Payment: 2 Sep *Includes intangible assets of £81.4m, or 14p a share | ||||
