Qinetiq in U.K. Security Discussions After French Attacks

Updated on
  • Britain's former defense lab trades at highest level since IPO
  • Dividend, looming U.K. spending review provide further boost

Qinetiq Group Plc rose as much as 10 percent to an all-time high after the cyber-security specialist lifted its dividend, announced a share buyback and said it’s in touch with the U.K. defense ministry about additional protective measures following the terrorist attacks in Paris.

Qinetiq traded 8 percent higher at 255.6 pence as of 1:51 p.m. in London after previously reaching 260.30 pence, buoyed by the 6 percent dividend increase, the prospect of further cyber contracts following Friday’s attacks, and the likelihood of a U.K. spending review advocating more outsourcing.

“We’re seeing increasing security threats -- the example over the weekend proves that point -- and government budgets are under pressure,” Chief Executive Officer Steve Wadey said in an interview. “That’s really driving the need for greater efficiency, the need for innovation and leveraging international partnerships.”

Following the events in Paris, Qinetiq has been in contact with Britain’s Ministry of Defense, its biggest customer, and “offered our support,” said Wadey, who joined the London-based company in April after leading the U.K. arm of missile-maker MBDA.

Profit Cap

Chief Financial Officer David Mellors said a U.K. security and defense budget review due Monday has held up a number of service contracts. “I’m not expecting complete clarity,” he said. “It’ll take a little time to feed through to the contract level for us to talk with confidence about what that means for us.”

Qinetiq is also awaiting the outcome of a U.K. review of the level of profit that should be allowed in single-source contracting, which represents 70 percent of services business across Europe, the Middle East and Africa. The company renewed an engineering support contract on the U.K.’s Typhoon, Tornado, and A400M military aircraft valued at 153 million pounds ($234 million).

The company plans to repurchase shares worth 50 million pounds over the next 12 months, following completion of a 150 million-pound program on Sept. 30.

Qinetiq “is not exposed to the global GDP growth-slowdown, it is highly cash generative, and it is clearly committed to return cash to shareholders,” David Perry, an analyst at JP Morgan in London, said in a note to clients.

(Updates with share repurchase from first paragraph, analyst comment in eighth. An earlier version of this story corrected the focus of Qinetiq's talks.)
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