Breaking News

Tweet TWEET

U.K. Defense Specialist Qinetiq Tests Water for Sale of U.S. Arm

Qinetiq Group Plc (QQ/), the former U.K. defense-research laboratory, said it’s evaluating the level of demand for a potential sale of its U.S. services unit.

The McLean, Virginia-based business, which provides services including ground support, lab operations and flight systems engineering at the Kennedy Space Center, is being subjected to market testing as part of a viability review.

“What we want to make sure is that we understand what the potential maximum value of that business is,” Leo Quinn, London-based Qinetiq’s chief executive officer, said in a telephone interview. “The strategic review is considering what is going on in the market. We have no preconceived outcomes.”

The U.S. government-services sector has been in a state of flux as spending is cut, with underlying operating profit at the Qinetiq unit down 30 percent to 9.4 million pounds ($15 million) in the fiscal first half, according to a statement today.

Shares of Qinetiq, which said net income in the six months to Sept. 30 was little changed at 62.1 million pounds, advanced as much as 9 percent and were trading 6.8 percent higher at 210 pence as of 9:58 a.m. in London. The stock has added 14 percent this year for a market value of 1.4 billion pounds.

The business review is due to be completed this fiscal year and may or may not lead to a transaction, Quinn said, adding that the U.S. unit’s profitable Cyveillance business, which alerts clients to cyber attacks, is not part of the appraisal.

U.K. defense-services company Babcock International Group Plc (BAB) sold U.S. operations last year after a similar study.

U.S. markets are also becoming more competitive, impacting margins and delaying contract awards, Quinn said. The company is seeking growth from the Middle East, where he said there’s a good order flow despite booking delays, Canada and Australia.

Qinetiq, whose main activities include evaluation of military aircraft and development of unmanned drones, would retain a U.S. reach even if it sold the services division after splitting off defense and intelligence operations.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.