Qinetiq has forecast modest revenues for the first half of the year, due in part to challenging market conditions that include a slowdown in research spending.

The group said its overall performance has been in line with expectations, with a predicted temporary easing in product orders offset by good revenue growth in its North American services business.

A number of contract awards from the Department of State, the Internal Revenue Service and the General Services Administration in the US contributed to positive growth in its Mission Solutions and Systems Engineering divisions.

However, a slowdown in orders while the new US administration made appointments and finalised its strategy for Afghanistan led to a reduction in orders in the region. The company has predicted a stronger second half to the year and believes that revenues for the US will return to levels similar to those in 2008.

In Europe, the Middle East and Africa, the company has shown positive growth following a move from pure research to services and solutions. However, UK defence markets continue to struggle under funding issues, leading to a decline in research spending.

According to Qinetiq, this is unlikely to change ahead of the government green paper on defence. As a result the group has undertaken cost-cutting action involving the loss of 400 jobs to generate £14m of annualised savings.

Looking ahead, the group predicts first-half revenues to remain at the same level as last year as product orders continue to ease. It is confident, however, that revenues will return to growth in the second half of the year.