There’s less need for battle kit now that US troops are home from Iraq and packing up in Afghanistan. Military spending is being cut and orders deferred, too. That makes life much harder for defence suppliers like Qinetiq (QQ.) and a £256m write-down at the US services division and £16m of restructuring costs have blown a hole in the bottom line. Still, underlying operating profit rose 6 per cent to £168.7m and, despite acknowledging the range of possible outcomes is "wider than usual," management has maintained guidance for the current year.
"We've been sensible, pragmatic and prudent," says chief executive Leo Quinn who has just launched a strategic review to fix the US operation. But even he admits there are "no quick solutions". That's unfortunate because US services profit slumped by nearly a third to £21.9m last year, and a poor second half meant the volatile global products division also made much less. Clearly, sequestration cuts are inevitable and stiff competition will continue to affect pricing. Still, business is better over here and the benefits of a two-year long self-help programme are obvious. Net cash has increased by £50m over the past six months, too, and demand for non-conflict products like Talon robots, used during the Boston marathon bombings, is rising.
Broker Liberum Capital expects a tough year ahead and a 27 per cent slump in underlying EPS to 13.6p (2013: 18.7p).
QINETIQ (QQ.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 201p | MARKET VALUE: | £1.33bn | |
| TOUCH: | 201-202p | 12-MONTH HIGH: | 215p | LOW: 143p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | na | |
| NET ASSET VALUE | 66p* | NET CASH: | £74m | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.62 | 114 | 14.3 | 4.75 |
| 2010 | 1.63 | -66.1 | -9.70 | 1.58 |
| 2011 | 1.70 | 26.6 | 0.80 | 1.60 |
| 2012 | 1.47 | 316 | 37.9 | 2.90 |
| 2013 | 1.33 | -137 | -20.5 | 3.80 |
| % change | -10 | - | - | +31 |
Ex-div: 7 Aug Payment: 6 Sep *Includes intangible assets of £348m, or 53p per share | ||||
