Qinetiq: ‘Good’ start to year helps defence firm to play catch-up on rivals

A landmark deal with NATO and the ongoing success of long-term agreements in the UK and Australia have helped defence firm Qinetiq to a “good” start to the year.

The FTSE 250 constituent, which until recently had largely missed out on the frenzy of gains by many defence firms off the back of Ukraine’s invasion of Russia, said it remained “on-track to deliver high single digit organic revenue growth” when it posts its full year results next year.

Order intake performance during the three months to June 30, it said, with revenue under contract for the full year increasing to 74 per cent, up from 64 per cent when it last reported in April.

The Farnborough-based firm, which in May hiked its dividend after a surge in defence spending helped it to over £200m in profit, pointed to a “major new framework contract” with NATO customers and a deal with the US air force on on a long range assault aircraft as having boosted its performance in the quarter.

Qinetiq is not alone in having benefited from many western countries’ rise in defence spending amid rising geopolitical tensions.

On Wednesday, Babcock International announced double digit revenue rises, while Cohort pointed to “persistent” tensions as having helped it to its own boost in sales.

Steve Wadey, CEO of Qinetiq, said: “I am pleased that we have delivered a good start to the year, with performance for the first quarter in line with our expectations and attractive shareholder returns.

“The relevance and demand for our services and products remains high in the elevated threat environment, as we continue to focus on consistent operational delivery for our customers and disciplined capital allocation.

“These three factors underpin our confidence in delivering our full year 27 target of c.£2.4bn of organic revenue at c.12 per cent margin and compelling value for our shareholders.”

Qinetic confirmed that its new CFO Martin Cooper, who was appointed in April after it abruptly parted ways with its former finance officer, will start in September; earlier than first envisaged.

Jamie Murray, equity analyst at Shore Capital, said: “QinetiQ has published a strong Q1 FY25F trading update, which highlighted “good” operational performance. The outlook is positive, with near term expectations in-tact and the order coverage exceeding the corresponding period last year. We anticipate the market will have a modestly positive reaction to the strong order coverage. BUY.”