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Qinetiq Group reports 24.8% EBITDA decline and 4.3 pp EBITDA Margin decline from 17.9% to 13.6%

26 May 2016 • About Qinetiq Group ($QQ.) • By InTwits

Qinetiq Group reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • EBITDA Margin is quite volatile: 13.6% in FY2016, 17.9% in FY2015, 16.8% in FY2014, -5.4% in FY2013, 28.8% in FY2012
  • Qinetiq Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's in pair with industry average of 3.1%.
  • CAPEX is quite volatile: 108 in 2016, 48.6 in 2015, 50.6 in 2014, 57.5 in 2013, 32.7 in 2012
  • The company has highly profitable business model: ROIC is at 24.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Qinetiq Group ($QQ.) key annual financial indicators

mln. £201220132014201520162016/2015
P&L
Revenue1,4701,328783764756-1.1%
EBITDA423-71132137103-24.8%
Net Income246-133-131051061.3%
Balance Sheet
Cash11824032218426443.0%
Short Term Debt854310-100.0%
Long Term Debt16417115400
Cash flow
Capex222724252915.3%
Ratios
Revenue growth-13.7%-9.6%-41.1%-2.4%-1.1%
EBITDA growth221.0%-116.9%-284.5%3.9%-24.8%
EBITDA Margin28.8%-5.4%16.8%17.9%13.6%-4.3%
Net Income Margin16.8%-10.0%-1.6%13.7%14.0%0.3%
CAPEX, % of revenue1.5%2.0%3.1%3.2%3.8%0.5%
ROIC44.3%-17.2%17.4%26.8%24.7%-2.1%
ROE46.6%-25.7%-3.1%31.0%34.1%3.1%
Net Debt/EBITDA0.3x-1.3x-1.3x-2.6x-1.2x

Revenue and profitability


The company's Revenue decreased slightly on 1.1% in FY2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.2 pp from 17.3% to 18.4% in 2016.

Net Income marign showed almost no change in FY2016.

Capital expenditures (CAPEX) and working capital investments


Qinetiq Group's CAPEX/Revenue was 3.8% in FY2016. CAPEX/Revenue increased slightly on 1.7 pp from 2.0% in FY2013 to 3.8% in FY2016. It's average CAPEX/Revenue for the last three years was 3.4%.

Return on investment


The company operates at high and attractive ROIC (24.73%) and ROE (34.08%). ROIC decreased on 2.1 pp from 26.8% to 24.7% in FY2016. ROE increased on 3.1 pp from 31.0% to 34.1% in FY2016.

Leverage (Debt)


The company paid down all the debt in FY2016. Cash surged on 43.0% in FY2016.

Appendix 1: Peers in Aerospace & Defense


Below you can find Qinetiq Group benchmarking vs. other companies in Aerospace & Defense industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Cobham ($85GU)2.3%3.5%11.9%-6.2%
Boeing Co ($BOE)18.9%6.0%4.8%5.9%
Bae Systems ($BA.)-7.2%-0.3%-3.7%0.9%
Rolls-Royce Hldgs ($RR.)9.3%20.4%-6.2%-0.1%
Chemring Group ($BC88)-36.2%-14.7%-6.4%26.5%
 
Median (5 companies)9.3%2.3%-3.7%0.9%10.1%
Qinetiq Group ($QQ.)-9.6%-41.1%-2.4%-1.1%


Top companies by Gross margin, %

Top  FY2012 FY2013 FY2014 FY2015 FY2016
Cobham ($85GU)32.9%31.8%30.3%32.0%19.4%
Chemring Group ($BC88)25.4%31.1%31.4%27.8%25.9%
Rolls-Royce Hldgs ($RR.)22.4%21.6%23.3%23.8%
Boeing Co ($BOE)16.0%15.4%15.4%14.6%
 
Median (4 companies)23.9%26.3%26.8%25.8%22.6%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Rolls-Royce Hldgs ($RR.)13.9%14.5%14.8%16.1%
Cobham ($85GU)20.5%21.8%13.4%12.9%-27.3%
Chemring Group ($BC88)11.1%-0.4%16.1%11.4%14.6%
Bae Systems ($BA.)13.1%12.4%12.1%11.0%
Boeing Co ($BOE)9.9%9.7%10.3%9.7%
 
Median (5 companies)13.1%12.4%13.4%11.4%-6.4%
Qinetiq Group ($QQ.)28.8%-5.4%16.8%17.9%13.6%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Cobham ($85GU)2.8%3.2%3.4%4.7%4.3%
Rolls-Royce Hldgs ($RR.)3.6%4.6%4.7%3.5%
Boeing Co ($BOE)2.1%2.4%2.5%2.5%
Chemring Group ($BC88)4.1%2.6%2.7%2.2%2.2%
Bae Systems ($BA.)2.2%1.4%1.7%2.1%
 
Median (5 companies)2.8%2.6%2.7%2.5%3.2%
Qinetiq Group ($QQ.)1.5%2.0%3.1%3.2%3.8%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Boeing Co ($BOE)31.8%25.4%29.5%38.9%
Bae Systems ($BA.)26.3%12.8%26.0%27.9%
Rolls-Royce Hldgs ($RR.)18.0%15.8%13.8%15.3%
Chemring Group ($BC88)4.9%-6.3%4.4%1.4%5.8%
Cobham ($85GU)13.9%9.0%2.6%0.5%-36.7%
 
Median (5 companies)18.0%12.8%13.8%15.3%-15.5%
Qinetiq Group ($QQ.)44.3%-17.2%17.4%26.8%24.7%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Cobham ($85GU)1.0x1.2x4.9x4.5x
Chemring Group ($BC88)3.0x2.1x3.6x1.3x
Bae Systems ($BA.)-0.2x0.4x0.5x0.8x
Rolls-Royce Hldgs ($RR.)-0.7x-0.8x-0.3x0.1x
Boeing Co ($BOE)0.0x0.1x-0.3x-0.1x
 
Median (5 companies)0.0x0.2x0.5x0.8x1.3x
Qinetiq Group ($QQ.)0.3x-1.3x-1.3x-2.6x