Self-help and Q-Net popularity lift QinetiQ

Privatised defence firm QinetiQ posted a rise in underlying pre-tax profit, despite a decline in revenues which reflected the uncertain trading environment and contract delays in the US and UK defence markets.

The exceptionally strong demand for its Q-Net vehicle survivability product last year was also reported to be a factor in the improved performance.

Revenue fell 11% from £1,702.6m to £1,469.6m, although this was slightly higher than forecasts of £1,460.6m.

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Underlying profit before tax increased from £114.6m to £118.3m, with net finance costs increasing to £43.0m in 2012 (2011: £30.8m) and full year underlying earnings per share up at 14.6p (2011: 14.2p).

Underlying operating profit rose 11% to £161.3m (2011: £145.4m) and the underlying operating margin increased to 11% (2011: 8.5%) as a result of last year's early cost reduction in the UK businesses and improved efficiencies and mix in Global Products.

These improvements were partially offset by lower margins in US Services where the restructuring is now complete, reducing indirect costs by $25m.

Closing net debt at March 31st 2012 improved to £122.2m, compared with £260.9m at the same date the previous year. The board proposed a final dividend of 2.00p, up 0.40p from the previous year, which the firm said reflected the achievement of its 24-months transformational self-help programme and confidence in the medium term.

Following the self-help programme, the company is now about to launch its next phase, which it is calling the Organic-Plus programme, which will see it invest in its defensible core, performance improvement, balance sheet strength and high cash conversion.

In a statement the company said: "Given the continuing uncertainty and lower than normal visibility in our markets, our expectations for trading performance in the current year remain unchanged.

"However, underlying earnings per share will benefit from early repayment of private placement debt and the reduction in the deficit of the UK defined benefit pension scheme following the change to CPI as the inflation index.

"The success of our self-help programme in restoring both the balance sheet and portfolio to strength gives the board confidence in QinetiQ's ability to build significant value over the next phase of its development."

NR