Shares in science and engineering company QinetiQ (QQ.) were the best performers in the FTSE 350, soaring 8.5% to 348p on Wednesday after the company said its full-year results would be above market expectations.
QinetiQ last increased guidance at its interim results presentation in November when it said it expected to deliver low double-digit revenue growth for the full year.
Today the firm upped that guidance to high teens revenue growth and said it also expects a modestly higher operating margin than the first half, resulting in an operating profit of at least £147 million. The interim operating margin was 11.4%.
Analysts’ forecasts for full year revenues to 31 March 2021 are £1.22 billion, representing 14% annual growth, implying more upgrades to come.
Since the beginning of the year consensus earnings per share forecasts have increased by 10%, demonstrating the momentum in the business.
QintetiQ is a running Shares stock pick for 2021.
STRONG CASH GENERATION
The company said cash flow had been good, helping to retain a strong balance sheet with net cash of at least £150 million at the period end.
An over-achievement across the Europe, Middle East and Asia portfolio offset modest Covid-19 impacts seen in Global Products affecting the US and Target Systems.
The company retained guidance for compound organic growth in revenues to be mid-single digit percentage enhanced by strategic acquisitions. The firm is targeting operating profit margins in the 12%-to-13% range.
In the short term, increased investment in the digital transformation programme will reduce operating margins by around 1%, with capital expenditure expected to be between £90 million and £120 million over the next two years.
