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Qinetiq revenues rocket despite defence cuts

By This Is Money
Updated: 07:12 EDT, 26 May 2011

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Defence firm Qinetiq swung back to profit following bumper sales of a hi-tech netting designed to protect armoured vehicles from rocket attacks.

British troops from 3 Para board a Chinook helicopter

Cuts: UK Government aims to reduce defence spending by 8% over 4 years

The Q-NET is a lightweight alternative to heavy armour and is fastened to combat vehicles, such as the US Army's Mine Resistant Ambush Protected vehicle (MRAP), to protect from rocket propelled grenade fire.

Qinetiq said its global products division reported a 66% increase in revenues to £502.8m in the year to March 31, including a £176.5m contribution from Q-NET sales.

Qinetiq shares are up 3p (2.7%) today at 115p.

However, chief executive Leo Quinn warned there was unlikely to be a repetition of last year's level of Q-NET sales after a bumper contract from the US Department of Defence.

Elsewhere, the company, which employs more than 11,000 people worldwide, warned its markets remain challenging as defence budgets in the UK and US are hit by Government austerity measures. The Farnborough-based company reported pre-tax profits of £26.6m in the period, compared to a £66.1m loss in the previous year.

The company is divided into UK services, US services and Global Products, which have all been impacted by reductions in defence budgets. In the UK, the Government aims to reduce its defence spending by 8% over the next four years in a move likely to restrict and delay new contracts.

But the group is half-way through a self-help plan to strengthen the business, which Mr Quinn said would boost competitiveness in the year ahead.

He said: 'We are unlikely to see a repetition of last year's level of Q-NET sales, but the board believes that the programme under way to increase competitiveness will enable the group to perform in line with its expectations for the current financial year in what are likely to remain challenging market conditions.'

The UK services division, which cut 662 jobs over the year, saw revenues decline 10% to £611m due to contract delays and pressure on budgets. But it was given some support from new contracts in Sweden and Norway.

US Services saw revenues decline by 7% to £588.2m, again hit by loss of Government contracts. But the division was boosted by a contract with Nasa for engineering work at its Kennedy Space Centre.

Global Products was boosted by Q-NET sales as well as sales of its TALON bomb disposal robots and SWATS gunfire detection systems. Shares in Qinetiq were up more than 4% after today's results.

Andrew Gollan, analyst at brokers Investec, said: 'Qinetiq's markets remain challenging and highly uncertain, but we acknowledge the group is moving fast to try and neutralise these headwinds.'

Qinetiq offers services across defence and security markets, including submarine technology, police force forensics and space flight.

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