Qinetiq: "mixed" feelings - FT.com Any company that says - twice, in its investor presentation - things are "mixed" on the operating front yet sees its share price jump 7 per cent must have something else going for it. Such was the case with Qinetiq on Thursday after the UK defence group's first-half results. Its pre-tax profit was down 40 per cent and its operating margin shrank by nearly a third. But with its US business under review, net cash up two-thirds and full-year guidance maintained, investors clearly expect a reward for pushing the group's share price close to its all-time high. That reward - think the return of cash - should materialise. Qinetiq's turnround over the past three years has been impressive. For instance, it has gone from net debt of £540m in 2009 to net cash of £120m now. But the restructuring will not be finished until the review of the US business, which sells to the departments of Defense and Homeland Security, and Nasa is completed early next year. In the first half, this segment accounted for about a third of group revenue, compared with more than two-fifths in the same period last year, and its operating margin of about 4 per cent hardly stands out. The business has stabilised, but the contracting environment remains very difficult. In the absence of an earnings-transforming order, which is wishful thinking in this defence industry climate, a sale looks increasingly likely; analysts say it is worth north of £200m. A disposal would, however, leave a question over whether a smaller Qinetiq can stand alone if the industry continues to deteriorate. It used to be the research facility of the UK ministry of defence, although its growing focus on commercial customers is a strength. But the downturn could spark consolidation among second-tier contractors. On a full-year 2014 price/earnings multiple of 14, at the high end of the UK defence sector, investors have priced a lot of ifs into Qinetiq's shares.