Shares in defence and cyber security company QinetiQ (QQ.) dropped 1.5% to 265.8p after first half profit was impacted by a £14.5 million writedown, in line with prior guidance of ‘less than’ £15 million.
The writedown relates to a large complex project that has experienced technical issues and delays which the company flagged at the recent trading update.
Today the company quantified the impact by saying it would reduce orders by £22.5 million, revenues by £8 million and operating profit by £14.5 million.
QinetiQ said: ‘The technical issues associated with the project are well understood and we are making good progress towards their resolution with clear technical and commercial milestones.
‘We are driving progress of the recovery plan to a satisfactory conclusion within FY22 and our objective remains to reduce this exposure further.’
SOLID UNDERLYING PERFORMANCE
Excluding the one-off impact of the writedown, orders for the first half to 30 September were up 22% to £700 million and revenues grew 4% to £608 million while organic operating profit dropped by 6% to £67.9 million.
This represents a margin of 11.2%, which is at the lower end of the guided 11%-to-12% range.
Management reiterated full-year guidance to deliver mid-single digit organic revenue growth and an operating margin at the lower end of the guidance range excluding the write-off.
The write-off is expected to be contained within the current financial year and not impact the 2023 financial year. With over 90% of full-year revenues already delivered under contact the company said it was confident in achieving guidance.
Analyst Richard Palge at Numis has reduced his 2022 operating profit estimate by 10% to £133.5 million and his earnings per share forecast by 7% to 20.2p to incorporate the impact of the write-off.
