Privatised defence technology company Qinetiq Group - which has a major facility in Malvern - has posted a 20 per cent rise in profit, helped by a strong performance in the US. The company also raised its operating margin target and said it is eyeing new markets.
The results were helped by strong growth in the US - with fresh sales of its Talon bomb disposal robots - and an overhaul of its UK-focused Europe, Middle East and Africa division.
The results covered a year in which management drew fire from the National Audit Office for “excessive” windfalls when the business was floated in 2006.
Qinetiq’s ten most senior managers gained £107.5 million following the move - a return of 19,990 per cent on their £540,000 share investment - leading to accusations from MPs they had “won the jackpot”.
Qinetiq, once part of the Ministry of Defence, said underlying operating profit rose to £127 million in the year ended March 31 from £106 million the previous year. That was above the £124.8 million average forecast in a poll of five analysts which ranged from £120 million to £129 million.
The company, which develops technologies for aircraft, airports, and the defence and security sectors, also raised its medium-term operating margin target to 11 per cent from ten per cent.
The Ministry of Defence still owns a 19 per cent stake in the firm.
Numis analysts raised their recommendation on the stock to "add" from "hold", with a share price target of 225 pence. "This is a strong result. We feel that the company has made substantial progress transitioning from its historic civil service culture to an ambitious corporate entity.’’ Numis said.
Group revenue rose 19 per cent to £1.37 billion, with organic growth of 8.6 per cent.
Qinetiq’s US business, which made five acquisitions during the year, showed strong organic revenue growth of 17.6 per cent helped by sales of its Talon robots. The group won a $400 million order this month for more of the robots, which are being used in Iraq and Afghanisatan mainly to remotely disable roadside bombs.
The company said it expects the US business to continue outpacing the expected growth rate of the overall US defence budget and is targeting continued double-digit organic growth.
Chief executive Graham Love said the US accounts for 40 per cent of group sales, nearing its target of 50 per cent. Qinetiq is reorganising its lower-growth Europe, Middle East and Australasia (EMEA) business and is seeking new markets.
"There are a number of key markets that we’ll be looking at,’’Mr Love said, citing south east Asia and the Middle East.
The company also plans to open an office in Scandinavia.
Qinetiq cut 320 jobs from its 8,000-strong UK workforce as part of the reorganisation, which it expects to save at least £12 million a year. EMEA posted 4.5 per cent organic revenue growth, which Numis said was encouraging given pressure on the UK government defence budget and increased competition for Ministry of Defence research work.
Mr Love said the company continues to look for acquisitions. Qinetiq spent about £100 million on deals in the last financial year and he expects to continue spending at that rate at least.