QinetiQ makes solid progress in third quarter

QinetiQ Group issued a trading update for its third quarter performance on Thursday, reporting that underlying trading was as expected during the period, with the company maintaining its expectations for overall performance for FY18.

The FTSE 250 firm said that, in its EMEA services division, trading for the period was in line with expectations.

It said it was bidding for a number of new opportunities with the UK Government, that would enable enhanced capability while also driving cost efficiencies.

“Although the UK environment continues to be challenging as previously announced at our first half results, this environment creates opportunities for QinetiQ and we remain well placed to support our customers to achieve their objectives,” the board said in its statement.

Internationally, QinetiQ continued to make good progress - particularly in Australia, with positive organic growth, and in the Middle East where it said it saw “strong demand” for its advisory services.

Trading in its global products unit for the period was also in line with expectations, the board said, with good order performance in North America.

“QinetiQ continues to make good progress implementing its strategy to become a more customer focused and international company, helping customers improve their capabilities while addressing budgetary concerns.

“We are making positive steps in modernising UK Defence Test and Evaluation,” it added.

As a result of its strategic investment into UK T&E through the amended long term partnering agreement contract, we delivered the first flights of our new aircraft and signed our first multi-year £6m contract from the Royal Netherlands Air Force to train Dutch test pilots and flight test engineers until at least 2022.”

Under the LTPA contract, QinetiQ received a £9m order to modernise and develop Electromagnetic Open Sea Ranges, which it said played a “vital role” in helping to protect and ensure the survivability of all Royal Navy surface vessels and submarines.

“We continue to build an international company through growth in our US and Australian home countries and wider international markets:

“In the US we won $8m of orders for TALON robots from key defence customers.”

Additionally, and reflective of what the board called the company’s “deepening relationship” with the Australian Department of Defence, an additional AUD 16m had been allocated to its Air 7000 strategic support partner contract, which supported the acquisition of airborne maritime surveillance capability.

The company also signed its first £3m contract for the supply of aerial targets and services to a customer in the Middle East, further building its presence within the region.

“We continue to advance our innovation strategy across our company,” the board explained.

“Our commercial and business model innovation has supported the signing of our first weapon system contract under our Strategic Enterprise framework which has transformed the provision of aircraft test and evaluation services.”

“As an example of our focus on disruptive technology, we are at the leading edge of laser directed energy weapon development, booking further work in the period as well as recently establishing our centre of excellence for the technology.”

QinetiQ also reported that, following the latest triennial valuation and discussions with its pension scheme trustees, it now had a confirmed actuarial pension surplus of £140.5m as at 30 June 2017.

“Consequently, the company will cease making cash deficit recovery payments of approximately £10.5m per annum from March 2018.”