Defence and security firm QinetiQ (QQ.) said full year revenues to 31 March 2020 grew 18% and operating profit was up 7%, around 5% higher than analysts were expecting, lifting the shares 5.6% higher to 321p.
The company has so far seen limited impact from the global lockdowns, limited to some delays in trial activity and reduced orders. This is because the work QinetiQ does is vital to maintaining defence capabilities, critical infrastructure and emergency services.
Management point out that longer-term defence budgets may come under pressure as a result of governments’ stimulus spending pressuring national finances.
However, they believe the challenges presented by coronavirus will accelerate the shift towards mission-led innovation and play into the company’s expertise and strategy.
QinetiQ has taken actions to mitigate the impact from the virus, controlling cash flows and reduce operating expenditure, while discretionary capital expenditure has been deferred.
The chief executive and financial chief have taken around a 33% cut to their salaries, while the wider board has reduced its fees by 25%.
At 31 March the balance sheet showed net cash of £85m and the business also had access to undrawn revolving credit facilities of £275m.
The decision on the dividend and forward guidance has been delayed until later in the year.
DELIVERING ON STRATEGY
The vision-based strategy was launched in 2016 and in the intervening period significant progress has been made.
The company has now delivered four years of growth with 2020 representing the largest annual order intake in nine years, up 25% to £972m. The ambition to become an integrated global business is going to plan with international now representing 31% of revenues, a doubling over the last four years, and on the way towards the 50% long-term target.
The acquisition of US based MTEQ significantly enhanced the company’s capabilities in sensing technology while complementing existing US businesses, expanding its presence in the world’s largest defence market.
At the start of the new financial year the company had secured contracted revenues of approximately £800m compared with £706m at the same point last year. This reflects the contribution from the two acquired businesses as well as the 19% organic growth from orders won during the year.
Management believes the business is well positioned strategically and financially to respond to changing customer requirements and to deliver long-term profitable growth.