QinetiQ Group plc audited preliminary results for the year ended 31 March 2007

31 May 2007

Financial summary
​2007 ​2006
Revenue ​£1,149.5m ​£1,051.7m
Underlying operating profit​ ​£106.0m ​£90.7m
Underlying operating margin​ ​9.2% ​8.6%
Underlying profit before tax​ ​£94.0m ​£80.1m
Statutory profit before tax​ £89.3m​ ​£72.5m
Underlying earnings per share​ ​11.3p ​10.2p
Basic earnings per share​ 10.5p​ ​10.0p
Net debt​ £300.8m​ ​£233.0m
Cash flow from operations​ £107.0m​ ​£107.6m
Orders​ £1,214.0m £816.7m
Backlog (excluding LTPA)​ £850.9m​​ £608.4m​​
Underlying effective tax rate​ 21.2% 22.7%
Dividend per ordinary share​​ 3.65p​​ 2.25p​​
 

Operational summary

Strong orders growth of 48.6% (organic orders growth of 41.6%)
Book to bill ratio of 1.2:1 (2006: 0.9:1)
Revenue increased by 9.3% (QinetiQ North America organic revenue growth of 14.2%)
Continued improvement in underlying operating margin to 9.2% (2006: 8.6%)
Underlying profit before tax up by 17.4%
Underlying earnings per share up by 10.4% to 11.3p
Final dividend increased by 8.9% to 2.45 pence per share (2006: 2.25 pence per share)

QinetiQ CEO Graham Love commented:

“I am delighted to report that QinetiQ performed strongly in the year, proving that our strategy remains effective, our business model robust and that we continue to execute well against both. Our selection as preferred bidder for the Defence Training Rationalisation programme shows that we have successfully repositioned ourselves in the UK defence market, with a track record of delivering technology-rich support services and supplying technology into major programmes. In North America we have seen strong organic growth, supplemented by our continued acquisition of good companies which gives us the critical mass to bid into the bigger defence programmes.

“Looking forward, our principal markets in the United Kingdom and North America continue to provide good opportunities for growth, and we believe we are well positioned as an innovative, technology-based company to perform strongly in future years.”

Outlook

Going forward QinetiQ’s strategy remains consistent with previous plans, and the focus is on execution.

In the UK defence market the Group believes that the rapidly changing needs of defence and security forces can only be met by the kind of agile and innovative technological services in which QinetiQ specialises. In the short to medium term the effect on revenues of the introduction of competition into the MOD Research funding will broadly be countered by continued growth in Technology Supply. Demand for QinetiQ’s consultancy and advisory services to the MOD remains robust, and the Group continues to develop important new business in systems engineering and integration. The Group looks forward to entering the second five year period of the 25 year LTPA with confidence. Significant incremental growth in the UK defence managed service business will be driven from the expected financial close of both packages of DTR in late 2008/early 2009.

In North America QinetiQ’s positioning as a technology rich provider across a wide and deep customer base provides it with the platform to continue to grow at rates above the forecast overall increases predicted in US DoD budgets in the medium term. Additionally the high end nature of QinetiQ’s service offerings will provide it with a significant degree of insulation from the impact of future US government budget pressures.

Commercial markets for services and products for QinetiQ’s Ventures businesses present a tremendous opportunity for the Group. QinetiQ aims to grow these businesses into profitable contributors to the Group and to seek external partners and funders to support their development as appropriate.

QinetiQ looks forward to the coming year with confidence that its robust business model, the quality and commitment of its people and the strength and depth of its customer relationships provide it with a platform for continued growth in core defence and security markets, together with increasing success in taking its technology into other markets of global significance.

Notes for Editors

QinetiQ (pronounced ki net ik as in 'kinetic energy') is a leading international defence and security technology business that was formed in July 2001 from the UK Government's Defence Evaluation & Research Agency (DERA). QinetiQ has approximately 13,500 employees, who deliver technology-based services and exploit QinetiQ's strengths in technology research by selling systems solutions, products and licences to government and commercial customers in a spectrum of defence, security and related commercial markets.

QinetiQ People Who Know How
QinetiQ Group plc audited preliminary results for the year ended 31 March 2007