In its half yearly report, UK based defence and security technology company, QinetiQ (LSE: QQ.) warned that ‘political and economic factors’ were hitting decision making processes on several contracts that the company is bidding for. As a result the company said it was now unlikely to achieve expectations for the full year. The financial results for the first half however indicate that QinetiQ has been benefitting from the weaker US Dollar.
QinetiQ revealed an 11% increase in group revenues to £806.3 million, however on a constant currency basis revenue growth remains flat. The group’s operating profit margins improved by 40 basis points to 7.8%. Operating profit was improved in the first half also, increasing 17% to £62.5 million. Earnings per share (EPS) increased by 2% to 5.7p, QinetiQ increased its first half dividend by 5% to 1.58p per share.
Due to strong cash conversion and the prevailing currency trends, QinetiQ reduced net debt by approximately £85 million since the start of the period to £452.3 million.
In reference to its outlook, the QinetiQ board believes that it is well positioned to take advantage of longer term trends in the defence and security markets. However they have identified short term uncertainties in specific areas.
In the UK political and economic factors are delaying the letting of contracts and the finalisation of US policy for Afghanistan continues to impact Government decision-making.
QinetiQ said ‘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.’