10 Feb 09. Qinetiq expects the government’s research budget to tighten further and will focus on cost savings to protect its margins. The defence research group, which was spun off from the Ministry of Defence in 2006, still counts the MoD as its largest customer and derives 38.4 per cent of group revenues from it. It said it was also seeing further delays to contract awards. It reiterated it would continue to monitor the cost base of its European, Middle East and Australasian business “to seek opportunities for efficiencies and to protect margins during this transition”. Previously announced disposals of non-core assets are progressing. Qinetiq’s comments came as it reported that in the nine months to the end of December, group revenues rose 17.4 per cent to £1.13bn, with organic growth at constant currency rates up 8.1 per cent. Qinetiq’s North American division, which it built up through a string of acquisitions, accounted for almost all of the company’s revenue growth and the business now makes up 45 per cent of group sales. Although the strong US dollar increased revenues by £51.1m, organic revenue growth on a constant currency basis in North America was 19.2 per cent. This was well ahead of the 2.9 per cent growth in the EMEA business, although its revenues are weighted towards the final quarter. The company said it had secured a private debt placement with US financial institutions worth $300m (£202m) to diversify the source of its debt facilities, bringing its total available facilities to £886m. Shares in Qinetiq fell 5½p to 157¾p.
Three years after its flotation Qinetiq appears to be turning into two distinct businesses: a mature European business that is still largely dependent on work from the MoD and a recently built-up North American business delivering double-digit organic growth. So far, the strong US performance has offset the lower growth in Europe. However, although the European business is now operating from a lower cost base, Graham Love, chief executive, still faces a challenge if he wants to meet the group’s medium-term operating margin target of 11 per cent. In addition, Qinetiq’s venture fund, designed to extract value from some of its proprietary technologies – a key hope at flotation – continues to be lossmaking. Despite these challenges, Qinetiq has delivered on its financial targets. Credit Suisse forecasts pre-tax profits for the year to end-March of £129.6m, up from £109m last year. The stock is trading on a multiple of about 9.4 times 2009 earnings, a discount to aerospace and defence sector peers. (Source: FT.com)
10 Feb 09. EADS reaffirms its full commitment to deliver on the European A400M Military Transport Aircraft programme and welcomes the public support given by the French Senators today towards making this exceptional aircraft a success – an aircraft that represents a “brickstone of sovereignty” for the European Defence, as the Senators outlined. Concerning overcosts, in contrary to statements made in media reports, EADS confirms that no indication can be given today beyond the provision of 1.7bn euros already taken, as long as a binding industrial plan, which includes the availability of systems, is not stabilised and not before the outcome of discussions with OCCAR. This is in line with what the audit commission of the French Senate on the A400M has expressed. EADS made a proposal to OCCAR at the end of 2008 to enter discussions to redefine certain technical and contractual specifications of the programme. According to the announcement of January 9, EADS confirms that the delay between the first flight and the first delivery of the A400M Future European Military Transport Aircraft will be three years. The Group is working with the engine consortium to define the date for this first flight. The group is simultaneously studying possibilities to facilitate the production ramp-up. EADS is more than ever determined to deliver on this programme which is one