QinetiQ Group plc Interim Results Announcement Six months ended 30 September 2009

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Headlines
  • Group revenue up 11% to £806.3m (H1 FY09: £727.4m), organic revenue broadly flat at constant currency;
  • Operating profit margin* improved to 7.8% (H1 FY09: 7.4%);
  • Strong operating cash conversion* of 148% (H1 FY09: 129%);
  • Net debt reduced to £452.3m (31 March 2009: £537.9m, 30 Sept 2008: £414.3m) due to continued cash generation and weakening of US dollar since 31 March 2009;
  • EPS* increased 2% to 5.7p (H1 FY09: 5.6p);
  • Dividend increased 5% to 1.58p (H1 FY09: 1.50p);
  • Mark Elliott appointed non-executive director and Chairman designate on 1 June 2009; and
  • Leo Quinn appointed Chief Executive Officer on 16 November 2009
  H1 FY10  H1 FY09  Reported change %  Organic change at constant currency  
Business Performance 
Revenue  £806.3m  £727.4m  11%  (1)%  
Operating profit*  £62.5m  £53.5m  17%   
Operating margin*  7.8%  7.4%     
Profit before tax*  £45.1m  £45.9m  (2)%   
Cash conversion ratio*  148%  129%     
Net debt  £452.3m  £414.3m     
Earnings per share*  5.7p  5.6p  2%   
Dividend per share  1.58p  1.50p  5%   
Statutory Results 
Operating profit  £9.6m  £44.2m  (78)%   
Profit before Tax  £(1.3)m  £36.6m  (104)%   
Basic earnings per share  0.1p  4.3p  (98)%   

*Underlying financial measures are presented as the Board believes these provide a better representation of the Group's long-term performance trends. Definitions of underlying measures of performance can be found in the glossary on page 24. Specific non-recurring items include amounts relating to gain on business divestments, unrealised impairments of investments and the EMEA reorganisation costs.
Prior year comparatives have been restated to show the finance elements of the IAS 19 pension cost in the finance income and expense lines. There is no impact on reported profit before tax from this restatement.

Trading Environment and Outlook
The Board continues to believe that QinetiQ is well positioned to take advantage of the longer term trends in the defence and security markets. However currently both its main geographic markets are experiencing short term uncertainties in specific areas. In the UK, political and economic factors are delaying the letting of contracts; in the US, the finalisation of policy for Afghanistan continues to impact Government decision-making.

Historically the EMEA business experiences a seasonally stronger second half, including the letting of a large number of shorter term contracts. At this point in time and in the current environment the business therefore has more limited visibility on the amount and timing of these orders.

In the US the services businesses continue to grow, but as previously stated, Technology Solutions is experiencing delays on certain orders in its pipeline for survivability products and Unmanned Ground Vehicles (UGVs).

Given the risks around closing pending orders in the US, and achieving the normal pattern of contract wins in UK, the Board considers that it is unlikely to achieve its previous expectations.
 

Download the Interim Results Announcement Six months ended 30th September 2009 [PDF]