Qinetiq announces pre-tax loss

Defence group Qinetiq has said that it is unlikely to achieve its financial expectations after revealing a 104 per cent drop in its pre-tax profit in the first half of the year.

In its interim results covering the six months ending 30 September 2009, the company posted a pre-tax loss of £1.3m compared with a profit of £36.6m a year earlier.

However, the period saw the group increase its revenue by 11 per cent to £806.3m. Operating profit was up 17 per cent to £62.5m as a result of a margin increase of 7.6 per cent in its Europe, Middle East and Africa (EMEA) business.

The group also benefited from the removal of the equity-accounted results of Cody Gate Ventures, which incurred a £3.2m loss in the first half of last year. Overall, orders decreased to £675.9m, compared with £777.9m a year earlier, generating a book-to-bill ratio of 0.9:1.

John Chisholm, chairman of the company, said: ‘The board continues to believe that Qinetiq is well positioned to take advantage of the longer-term trends in the defence and security markets. However, currently both its main geographic markets are experiencing short-term uncertainties in specific areas.’

In the US, the group’s Technology and Solutions business has experienced delays on certain orders for survivability products and unmanned ground vehicles following uncertainty on policy in Afghanistan.

The group’s UK business has said it would also fall short of its full-year profit forecast as a result of uncertainty on future contracts from the Ministry of Defence. Research revenues from the government, which represent 13 per cent of total EMEA, have declined to 21 per cent in the period.

Chisholm added: ‘Historically, the EMEA business experiences a seasonally stronger second half, including the letting of a large number of shorter-term contracts. At this point in time and in the current environment, the business therefore has more limited visibility on the amount and timing of these orders.

‘Given the risks around closing pending orders in the US and achieving the normal pattern of contract wins in UK, the board considers that it is unlikely to achieve its previous expectations.’