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UK defence technology group Qinetiq has warned full-year growth will be lower than expected amid contract delays and difficult trading conditions, sending its shares down more than 20 per cent.
The FTSE 250 group, which specialises in areas from defence robotics to surveillance and cyber security, said in a fourth-quarter trading update that “tough near-term trading conditions” it had referred to in January had persisted.
It now expects group organic revenue growth of roughly 2 per cent for the year to the end of March, down from guidance two months ago of “high single-digit” organic growth.
Underlying profit margins are expected to be about 10 per cent, down from the previous indication that they would be “stable” at the 12 per cent reported in the last financial year. Qinetiq’s shares fell 20 per cent to 412p in London on Monday morning.
The company also noted further delays to a number of contract awards in UK and US intelligence. The UK intelligence sector accounts for about 25 per cent of group revenue.
It has taken an impairment charge of about £140mn for the year because of the market backdrop and operational performance in the US. It also flagged a number of one-off exceptional charges of £35mn-£40mn — largely non-cash — related to some of its US operations.
More positively, order intake for the year is expected to be strong. It also confirmed plans to hand up to another £200mn back to shareholders through a buyback over the next two years.
Steve Wadey, chief executive, acknowledged “clearly disappointing news” but stressed the group was well-positioned for the longer term.
“We understand the issues, we’ve taken action and other actions are under way. We do see this as a short-term effect on the business,” he said on a call with analysts.
Qinetiq, like other defence suppliers in Europe, had benefited from rising geopolitical tension since Russia’s full-scale invasion of Ukraine. However, the UK’s ongoing strategic review of its defence capabilities is creating some delays to spending, according to analysts. At the same time, uncertainties over the direction of US defence spending are adding to the challenges.
The company was demerged from the UK Ministry of Defence in 2001. Its main customers are the UK, US and Australian governments, which make up more than 90 per cent of its revenues.
