Qinetiq impresses with dividend hike and 2016 outlook despite sales shortfall
Although full-year sales from Qinetiq were slightly short of expectations, the defence and aerospace technology company brought investors around with a 17% hike in the dividend.
Aerospace and Defence
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QinetiQ Group
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Underlying revenues for the year to end-March fell 2% to £763.8m, some way off the market's hopes of £796m, but with a 10 basis point improvement in underlying operating margins leading to a solid 7% increase in underlying pre-tax profits to £107.8m.
The core air, weapons and maritime businesses all performed well, as the core Europe Middle East and Africa (EMEA) business, which made up more than three quarters of revenues, drove performance.
Underlying earnings per share rose 10% to 15.2p and the full year dividend was fired up 17% to 5.4p from the 4.6p a year before.
The FTSE 250 group, which was spun out of the Ministry of Defence's research agency and whose biggest customer remains the UK government, has swelled the order book 3% to £613.6m and reiterated its forecast for 2016 after "balancing the market uncertainties with the strength of the group's operations".
At the start of the new financial year, Qinetiq said the portion of revenue under contract at the EMEA unit was "similar to a year ago" and the balance was supported by opportunities in the pipeline, although it noted that order flow and contract cover will be "watched closely" over the coming months.
"Overall, given the opening backlog position, expectations for the performance of EMEA Services in the current financial year are unchanged."
For Global Products there is "a range of possible outcomes" for performance in the current year, as the division continues to be impacted by the ongoing reduction of US military forces deployed in Afghanistan.
New chief executive Steve Wadey, who joined on 27 April, said: "In my first few weeks at QinetiQ I've been impressed with the expertise of our people, as well as our capabilities and technologies, all of which are well matched to the dynamics in our markets.
"It's a company with great potential and I look forward to working with our customers to develop and grow QinetiQ to meet their changing needs."
Analyst Keith Bowman at Hargreaves Lansdown also highlighted the appointment of a former Northrop Grumman executive to lead the repositioning of Qinetiq's US business.
"In all, today’s news provides a boost to investor sentiment. Key metrics have moved in the right direction, with net cash growing and the group’s progressive dividend policy appearing to underline management confidence in the outlook.
"Broader UK uncertainty has reduced following the general election, while opportunities outside of the group’s core UK and US markets continue to be pursued."
Shares in Qinetiq, which were boosted by a recent upgrade from JP Morgan to 'overweight' from 'neutral', were near the top of the leaderboard, up 6.6% to 229.30p by 08:55 on Thursday.