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QinetiQ, the defence, security and aerospace company, announces its interim results for the half year ended 30 September 2015 which saw:

Good trading result in challenging markets
Solid revenue and operating profit performance
Continued high cash conversion
Reduced order intake during H1 against a strong comparator period
Approximately two thirds of the orders reduction due to timing of multi-year contract awards
£153m 5-year UK MOD renewal for aircraft engineering services awarded after period end
Some de-scoping and delay to orders in tough and uncertain markets
90% of FY16 revenue under contract at start of H2, consistent with prior period
Continued focus on shareholder returns
16% increase in underlying eps due to lower finance costs and reduced share count
6% increase in interim dividend in line with commitment to a progressive dividend
£50m share buyback over next 12 months, consistent with capital allocation policy
QinetiQ has core competencies well matched to emerging themes in global markets
Priorities to improve customer focus and competitiveness
H1 2016 2015
Business Performance
Orders £228.4m £320.5m
Revenue £370.9m £365.6m
Underlying operating profit £49.8m £49.3m
Underlying operating margin 13.4% 13.5%
Underlying profit before tax £49.7m £46.0m
Underlying net cash from operations (post capex) £46.9m £57.0m
Underlying cash conversion ratio 94% 116%
Underlying earnings per share (eps) 7.3p 6.3p
Net cash £181.5m £205.7m
Dividend per share 1.9p 1.8p
Statutory Reporting
Operating profit from continuing operations £48.9m £48.0m
Profit attributable to shareholders £42.0m £32.9m
Total earnings per share 7.1p 5.1p

Steve Wadey, Group Chief Executive Officer said:

“This is a good trading result in a challenging market environment and our expectations for Group performance in the current financial year remain unchanged.”

“Whilst markets are tough and uncertain, I am convinced that we have the core competencies required to help our customers deliver both more for less and respond to increasing security threats through innovation. To address this, I have identified clear priorities to improve our customer focus and competitiveness that will build a stronger future for QinetiQ.”

The UK Government’s Strategic Defence and Security Review, together with ongoing defence transformation, are expected to continue to have an impact on the UK defence market. This will provide future opportunities for EMEA Services to build on its strong record of delivering more for less, whilst recognising that in FY16 there will continue to be uncertainty and the potential for interruptions to order flow. However, revenue under contract for this financial year is as anticipated at this stage, and the division’s performance as a whole is expected to remain steady this year.

The Group’s Global Products division has shorter order cycles than EMEA Services. Although the performance of Global Products remains dependent on the timing and shipment of key orders, revenue under contract for this financial year is as anticipated at this stage.

Overall, the Board’s expectations for Group performance this financial year remain unchanged.

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