Qinetiq Regulatory News (QQ.)

QinetiQ Group plc

Third Quarter Trading Update

QinetiQ Group plc ('QinetiQ' or 'the Group') today issues a trading update for the third quarter during which it has made encouraging progress in the implementation of its strategy to drive future growth.

Strategy update

On 2 December 2016, QinetiQ was awarded a £1bn amendment to its Long Term Partnering Agreement (LTPA) with the UK Ministry of Defence (MOD) which commits approximately half of the core LTPA revenues until 31 March 2028. The Group is already delivering against its commitment to modernise UK air ranges and the Empire Test Pilots' School at MOD Boscombe Down, including the purchase of new aircraft to meet the future training needs of test pilots and aircrew.

On 21 December 2016, the Group agreed and completed the acquisition of Meggitt Target Systems. The business, now renamed QinetiQ Target Systems, generates 90 per cent of its revenue from outside the UK and forms part of QinetiQ's International business unit. It will be reported in the Group's Global Products division.

On 5 January 2017, the Dragonfire consortium - led by MBDA and including QinetiQ as well as other industry partners - was awarded a £30m programme by the UK MOD to deliver a Laser Directed Energy Weapon (LDEW) Capability Demonstrator. QinetiQ's role is to provide the high-powered laser technology for the programme and conduct trials at various ranges over land and water.

Trading update

Underlying trading for the Group was as expected during the third quarter.

In EMEA Services, revenue under contract for this financial year is similar to the same time last year with resilient margins. As stated previously, the division's performance as a whole is expected to remain steady this year.

The Group's Global Products division has shorter order cycles than EMEA Services. Revenue under contract is slightly ahead of this time last year driven by improved order inflow in QinetiQ North America, although the division's performance remains dependent on the timing and shipment of key orders.

Balance sheet

The incremental capital expenditure associated with the amendment to the LTPA contract is expected to be in the region of £10m this year.

The Group is completing the previously announced £50m share repurchase with £13m of the buyback remaining as at 10 Feb 2017.

Outlook

Overall, the Board's expectations for Group performance in the current financial year remain unchanged from those set out in QinetiQ's interim results announcement dated 17 November 2016.

QinetiQ will announce its preliminary annual results for the year ending 31 March 2017 on 25 May 2017.

ENDS

Notes to Editors:

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Listed on the London Stock Exchange (LSE: QQ.L), QinetiQ is a leading science and engineering company operating primarily in the defence, security and aerospace markets. Our customers are predominantly government organisations including defence departments, as well as international customers in other targeted sectors.

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