QinetiQ shares blast higher as profits rise; caution over UK defence spend

Like its larger sector peers BAE Systems (LON:BA.) and Rolls Royce (LON:RR.), QinetiQ is facing possible further cuts to the UK defence budget by the government.

Shares in QinetiQ (LON:QQ.) opened higher after the defence technology specialist beat analyst estimates with a rise in profit.

The company, whose products include bomb disposal robots, reported a 7% rise in underlying profit for 2015 to £107mln.

That beat forecasts of £100mln with as its core air, weapons and maritime businesses all posting improved results.

Its global arm was hit by the reduction of US military forces in Afghanistan, it said, which depressed demand for conflict-related products.

New chief executive Steve Wadey, who joined in January from missile-maker MBDA, said the Farnborough-headquartered contractor has "great potential" for further growth.

However, like its larger sector peers BAE Systems (LON:BA.) and Rolls Royce (LON:RR.), the business is facing possible further cuts to the UK defence budget by the government.

QinetiQ said the forthcoming Comprehensive Spending Review and Strategic Defence and Security Review are expected to have an impact on the defence market this year.

Despite the uncertainty, it added the strength of its operations means it is hopeful of meeting market expectations in 2015/16.

The board also proposed a final dividend of 3.6p, making the full year dividend 5.4p, up from 4.6p in 2014.

Shares climbed 15p, or 7%, to 230p.

Quick facts: QinetiQ

Price: 300.2 GBX

Market: LSE
Market Cap: £1.71 billion

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