QinetiQ still expects revenue growth despite slower orders

Defence, security and aerospace-focussed science and engineering company QinetiQ Group saw “slower than expected” orders in its EMEA Services division in the first quarter, amid a “dynamic” trading environment in the wake of the UK General Election.

The FTSE 250 company - which was also set to hold its annual general meeting on Wednesday - said its revenue under contract for the three months to 30 June was similar to its position a year ago in the EMEA Services division, and its still expected the business to deliver “modest” revenue growth in the full year.

“The lower baseline profit rate for single source contracts continues to represent a headwind for operating margins, as previously advised,” the board explained in its statement.

QinetiQ’s Global Products division continued to have shorter order cycles than EMEA Services, the board said, and its performance remained dependent on the timing and shipment of key orders.

Revenue performance in Global Products during the first quarter was similar to the prior year as well, and the board said it expected the division to grow in FY18 as a result of its contracted orders and pipeline of opportunities, as well as the anticipated full year contribution from the Target Systems acquisition.

As outlined at its preliminary results, QinetiQ was investing in “key contracts” and their associated facilities.

It said FY18 cash flow would reflect this increased investment, with capex of £80m - £100m to support the amendment to the Long Term Partnering Agreement announced in December 2016.

“We continue to make good progress delivering our strategy, embedding the cultural changes needed to improve customer focus and deliver our long-term growth aspirations.

“Consequently, we are reaffirming the previous outlook outlined at our preliminary results dated 25 May 2017 and expect steady progress in FY18, excluding the non-recurring benefits in FY17, supported by revenue growth and consistent with our strategy.”