Qinetiq Group’s (LON:QQ) AGM statement reconfirmed the outlook even in an environment that remains uncertain post the UK election. While some order deferrals in EMEA Services have undoubtedly occurred, this was to be expected and management maintains the modest revenue growth expectation for the full year. This suggests confidence that such delays are likely be recovered during the year, leading to a more heavily weighted H2. Global Products’ results are more lumpy and dependent on timing of deliveries but further growth is forecast from improved year-on-year order backlog and pipeline, enhanced by the Target Systems acquisition. With LTPA investment on track and customer-focused change embedded, QinetiQ remains focused on driving medium-term organic growth and returns.
QinetiQ’s statement confirmed the outlook, but was clear on the fact that near-term uncertainty caused by the UK election has resulted in some delays and deferrals of orders for the EMEA Services division. We see this as expected and it will not have come as a surprise to the company. Fundamentals, however, remain strong and with the £80-100m capex in the Long Term Partnering Agreement (LTPA) underway, the focus is very much on positioning the group to deliver enhanced returns over the medium term despite some margin pressure from SSRO headwinds.
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