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QinetiQ CEO Happy With U.S. Business

Strong business in the U.S. and rapid organic growth have helped British defence technology group QinetiQ beat expectations with a 20 percent rise in full-year operating profit and raise operating margin targets, CEO Graham Love told CNBC.com.

Underlying operating profit at QinetiQ, which once belonged to the UK Ministry of Defence, rose to 127 million pounds ($251 million) in the year ended March 31, compared with a rise of 18 percent to 125 million pounds forecast in a Dow Jones survey.

"We're particularly pleased with organic growth," Graham Love, QinetiQ CEO, told CNBC.com in a telephone interview. "For the first time in a number of years, the UK business has returned to growth."

QinetiQ, which develops technologies for aircraft and the defence and security sector, underwent a restructuring program aimed at cutting costs.

"We're very well through that restructuring," Love said, adding that the target for cost-cutting was raised to 12 million pounds a year from a previous 10 million, and, although initially the company had announced that 400 jobs will go, only 320 positions will be cut, with 220 jobs axed already.

Organic Growth

The restructuring hurt the company's profit before tax, which came in at 51.4 million pounds, lower than 89.3 million pounds in the year ended in March 31, 2007.

But it helped the company raise its medium-term operating margin target to 11 percent from the current 10 percent, Love said.

"Part of that comes directly from improvement in the UK, but also from our business in the U.S.," he added.

Organic growth – expansion excluding mergers and acquisitions - has played an important role in the company's growth and it is likely to continue to do so, Love said.

"We're particularly pleased with how the U.S. has done," he said, adding that 40 percent of the revenues now came from the U.S., closing in on the medium-term target of reaching 50 percent.

QinetiQ North America reported a 17.5 percent organic growth in revenue and is expected to continue with double-digit growth.

The company's TALON robots have been particularly successful, as they are used by troops in Iraq and Afghanistan to detect and disable roadside bombs.

Acquisitions will continue at the same pace as last year, Love said, but did not elaborate on specific targets. QinetiQ bought five businesses in North America last year.