Qinetiq,ד (LONDON:QQ) recent FY15 results came in ahead of our forecasts at the PBT, EPS, DPS and net cash levels. Revenues were slightly below, as strong operating performance enabled margins to be maintained well above medium-term expectations. With order cover for FY16 running at 77%, inline with FY15, and the benefit of a further £44m of the share buyback to go, we forecast 2% EPS growth. This is despite potential headwinds and uncertainty from the forthcoming comprehensive spending review and SDSR, which causes us to remain cautious for FY16.
FY15 results ahead of expectations
QinetiQ’s FY15 results came in ahead of our forecasts at most levels, highlighting the impact of the disposal of the US Services business during the year. Continuing revenue was down 2% to £763.8m (FY14: £782.6m), while underlying operating profit was also down 2% at £111.3m (FY14: £113.7m). Following the disposal of US Services and the resultant early termination of debt, net financial interest fell substantially to £3.5m (FY14: £12.5m), driving PBT up 7% to £107.8m. With £107m of the £150m share buyback complete at year end, EPS increased by 10%. Underlying cash conversion remained strong at 103% and the group demonstrated its confidence in the business model with a 17% DPS increase to 5.4p/share.
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