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QinetiQ, the defence, security and aerospace company, announces its preliminary results for the year ended 31 March 2017 which saw:

Good operational delivery in FY17
High quality growth in total backlog from £1.3bn to £2.2bn
4% year-on-year revenue growth; 1% increase on an organic basis* at constant currency
Solid operating profit enhanced by £7.4m of non-recurring trading items
Cash conversion included c£30m working capital unwind (half related to non-recurring items)
5% increase in dividend; £50m share buyback completed
Strategic progress
Secured £1bn amendment to the Long Term Partnering Agreement with the UK MOD
Established an International business and completed two acquisitions – of Meggitt Target Systems and RubiKon Group in Australia – to support international growth
Global agreement for next generation satellite receivers
Invested £20m in people, technology and campaigns, funded by operational efficiencies
Focus on delivery of FY18
Strategy implementation key to driving growth in a rapidly changing trading environment
74% of FY18 revenue under contract, consistent with the previous year
Maintaining expectations for Group performance in FY18
  Statutory results Underlying* results
  2017 2016 2017 2016
Revenue £783.1m £755.7m £783.1m £755.7m
Operating profit £132.7m £75.3m £116.3m £108.9m
Profit after tax £123.3m £106.1m £103.8m £95.9m
Earnings per share 21.5p 18.1p 18.1p 16.3p
Full year dividend per share 6.0p 5.7p 6.0p 5.7p
 
Total orders £1,676.7m £659.8m
Orders excluding LTPA amendment £675.3m £659.8m
Net cash inflow from operations (pre-capex) £111.9m £133.4m
Net cash inflow from operations (post-capex) £79.0m £103.6m
Cash conversion ratio (post-capex) 68% 95%
Net cash £221.9m £274.5m

Steve Wadey, Chief Executive Officer said:

“FY17 has been a year of building momentum for QinetiQ during which we achieved both good operational performance and significant progress in the implementation of our strategy. Operational achievements included delivering organic revenue growth for the first time for a number of years and the near doubling of the total Group backlog. To support QinetiQ’s future growth, we completed our first two acquisitions and, with the LTPA amendment with the UK Ministry of Defence, secured the largest and most significant contract since privatisation.

“Rapidly changing dynamics in defence and security markets are presenting both opportunities and challenges for our industry. Although demanding, this environment is one in which QinetiQ has the potential to thrive. As a result, we are looking forward to the future with confidence and are maintaining expectations for Group performance in FY18.”

In EMEA Services, revenue under contract for FY18 is in line with the prior year, and the division is expected to deliver modest revenue growth this year although the lower baseline profit rate for single source contracts represents a continued headwind for operating margins.

The Group’s Global Products division has shorter order cycles than EMEA Services and its performance is dependent on the timing of shipments of key orders. As a result of its contracted orders and pipeline of opportunities, as well as the anticipated full year contribution from the Target Systems acquisition, the division is expected to continue to grow in FY18.

FY18 cash flow will reflect increasing investment, with capital expenditure of £80m to £100m, to support the amendment to the Long Term Partnering Agreement announced in December 2016.

Overall for FY18, we are maintaining expectations for steady progress excluding the non-recurring benefits in FY17, supported by revenue growth and consistent with our strategy.

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