QinetiQ (LSE:QQ.) Group PLC said it is trading in line with expectations but warned it is experiencing technical and supply chain problems on a large programme.

The defence group said if the problems are not mitigated it might need to perform a one-off write-down to its short-term guidance.

QinetiQ is working closely with the programme’s customer and is making progress towards recovery of the programme and mitigating this risk to less than GBP15mln.

Other than that, performance in the six months to the end of September was in line with market consensus expectations.

Order intake was described as “excellent” at GBP700mln, up 25% year-on-year.

For the full year, the group expects to deliver roughly 5% organic revenue growth and an underlying operating profit margin at the lower end of its 11-12% expected range (prior to any one-off write down). This expectation includes short-term effects of the customer’s mission shifting from Afghanistan and COVID related delivery and supply chain challenges in the US.

Operating cash flow has been good, QinetiQ said, contributing to a positive net cash position at the end of September of around GBP140mln.

“Overall the group has delivered strong operational performance in the first half of the year. We continue to deliver for our customers around the world, with EMEA Services delivering very strong performance to offset short-term weaker US performance in Global Products, due to the changing customer mission and COVID,” said Steve Wadey, the chief executive officer of QinetiQ.

“We remain focused on delivering our strategy to build an integrated global defence and security company, through both organic growth and acquisitions. I am pleased with our continued strategic momentum, demonstrated by excellent order intake including a range of significant contract wins,” he added.

Shares in QinetiQ were up 3.2% at 167.5p in the first hour of trading.

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