QinetiQ MAIDEN RESULTS FOR YEAR ENDED 31 MARCH 2006
07 Jun 06. Highlights
2006 £ 2005
Turnover 1,051.7m 855.9m
Underlying operating profit 90.7m 82.3m
Underlying operating profit 90.7m 65.2m
(excluding profit on
disposal of interest
in pSiMedica Limited)
Underlying operating margin
(excluding profit on
disposal of interest
in pSiMedica Limited) 8.6% 7.6%
Underlying profit before tax 80.1m 58.2m
Underlying earnings per share 10.2p 8.8p
Basic earnings per share 10.0p 12.0p
Net debt 233.0m 176.6m
Free cash flow 141.3m 55.7m
Backlog 608.4m 572.0m
Underlying effective tax rate 22.7% 16.2%
Dividend per ordinary share 2.25p nil
Operational summary
Results in line with expectations; Turnover increased by 22.9%; Underlying profit before tax up by 37.6%; Underlying earnings per share up by 16.3% to 10.2p; Continued improvement in underlying operating margin to 8.6% (2005: 7.6%); Statutory profit before tax of £72.5m (2005: £78.0m; including £17.1m profit on disposal of pSiMedica Limited); Backlog increased by 6.4% to £608.4m (2005: £572.0m); North American turnover increased to £248.4m (2005: £70.1m); Net debt grew by £56.4m after investment of £202.5m in acquisitions and net cash of £136.2m received from IPO; Free cash flow up by 153.7%, driven by underlying operating cash conversion of 84.4%
2006 preliminary results statement
Commenting on the results, Sir John Chisholm, executive Chairman, said:
“I am delighted with the performance underpinning these results, which demonstrate real delivery against our growth strategy. In the UK we have grown our Technology Supply business to mitigate the impact of increased competition for MOD research funding, seen good organic growth and further acquisitions in the US, and significant progression in the commercialisation of defence technology during the year.
The UK government’s Defence Industrial Strategy and the US government’s Quadrennial Defense Review will shape our markets to a considerable degree into the medium term future. It is positive for QinetiQ that both documents emphasise the imperative for agility in military procurement and the key role for advanced
technology in delivering that agility. Budgets will remain constricted on each side of the Atlantic and QinetiQ will have to maintain its pace of transformation through investment, rationalisation and productisation in order to realise the significant potential of its markets. The successes of the year we have just completed have laid a solid foundation for delivering on these opportunities.”
Performance
This year’s results demonstrate QinetiQ’s continued delivery in three strategic areas: the repositioning into growth markets within the Ministry of Defence (MOD) programmes, the expansion of the Group’s US presence and the commercialisation of our defence technologies.
The continued repositioning of the UK defence business saw growth of 28.2% in Technology Supply revenue to £124.2m (2005: £96.9m), as the business continues to transition its business mix, invest in productisation and rationalise its operations to offset the expected ongoing reduction in revenue from the MOD’s research programme. QinetiQ also consolidated its position as a
provider of advisory and managed services to the MOD. A particularly notable event this year included selection as preferred bidder for the 20-year managed service contract for the Combined Aerial Targets Service (CATS).
In the US, turnover increased to £248.4m (2005: £70.1m), with a second half annualised run-rate in excess of