QinetiQ profits up on US growth

31-05-2007

QinetiQ profits up on US growth
Britain's largest defence research company QinetiQ has reported a 17 per cent rise in annual operating profit, with the boost attributed to a strong performance by its US arm.

Underlying operating profit increased to £106 million over the year to March 31st, up from £90.7 million a year earlier.

Sales rose 9.3 per cent over the period to £1.15 billion.

QinetiQ said its revenue jump was primarily driven by "acquisitions and organic growth" within its growing North American business.

The former British state-owned company acquired the San Diego-based Ocean Systems Engineering Corp (Osec) in May last year and US defence firm Analex in March.

Revenue for QinetiQ's expanding North American arm leapt 44 per cent to £358.2 million over the year.

The company said increased sales in the US offset reductions in the share of business secured by QinetiQ from the Ministry of Defence (MoD), which still owns a 19 per cent share in the firm.

The MoD intends to open its entire defence research budget to competition from 2008, but QinetiQ stressed that demand for the company's consultancy and advisory services from within the department remained "robust".

"In the short to medium term the effect on revenues of the introduction of competition into the MoD research funding will broadly be countered by continued growth in technology supply," the defence firm said.

Commenting on the results, QinetiQ chief executive Graham Love said: "Looking forward, our principal markets in the United Kingdom and North America continue to provide good opportunities for growth, and we believe we are well positioned as an innovative, technology-based company to perform strongly in future years."

However analysts have warned that QinetiQ could see its US profits hit as the Iraq war begins to wind down.

Nick Cunningham, an analyst with Panmure Gordon in London, warned that US defence spending was certain to "tighten" in the future.



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