Trading Statement

RNS Number : 3953T

QinetiQ Group plc

28 September 2010

QinetiQ Group plc

Pre-Close Period Trading Statement

for the five months ended 31 August 2010

QinetiQ Group plc ('QinetiQ') today issues a trading statement for the five months ended 31 August 2010, prior to entering its close period. The Group's Interim Results for the six months ending 30 September 2010 are due to be announced on 18 November 2010.

Trading Environment

QinetiQ's principal markets have remained uncertain, due both to the UK Government's ongoing Strategic Defence and Security Review and the drive by the US Secretary of Defense to reduce non-operational costs. Decisions on orders continue to be delayed across the sector and visibility remains limited, particularly in the UK.

UK Services

With market conditions remaining tough, revenues are running below last year, but the businesses continue to make progress on their restructuring programme to enhance competitiveness through a better focus in offerings and a reduction in structural and discretionary costs.

US Services

Revenues are running at a similar level to the second half of last year, following the impact of government insourcing. Management control of overheads is enabling the businesses to make a steady contribution to performance.

Global Products

The products business in the US has now received significant orders for its new Q-NETS vehicle survivability product. This continues to be largely offset by the performance in the UK, where the business, in spite of making progress on the alignment of its technology portfolio to a challenging market, is suffering delayed or cancelled orders.

Update on actions following the Operational Review

The Group is implementing its self-help plan to refocus the businesses, build a more commercial performance-oriented culture and strengthen the balance sheet. Work continues on reshaping the Group structure and processes, and on creating a strong leadership team. Tight working capital management and deferred contract capital expenditure have resulted in good cash flow. The Group remains on target to reduce its ratio of net debt to EBITDA to below 2 times, by the end of 2011/2012.

The UK employee consultations announced in July and August address the potential reduction of over 700 positions which, subject to completion of the consultation process, are expected to incur non-recurring charges totalling approximately £40m. These will be taken largely in the first half of the current year with the cash impact mainly falling in the second half.

Outlook

As yet the outcome of governments' policy reviews is difficult to predict. Absent any resulting changes in customer requirements, overall the Board believes that the Group will meet its expectations for the current year, while continuing to reposition the business for a return to profitable growth over the medium term.

ENDS

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