QinetiQ Posts Loss as US Sale Triggers Write-Down

QinetiQ (LON: QQ) swung to a statutory first-half loss today after a £175m non-cash impairment tied to the $292m sale of its US business to Serco. The UK defence engineering and testing group said underlying operating profit, its headline segment measure, rose 14% to £110m from £96m.

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The sale needs regulatory approvals and is expected to complete in the first quarter of 2027. The write-down of £174.6m, mostly goodwill, helped turn a £64m statutory operating profit a year ago into a £79m loss, and earnings per share of 7.1p into a loss of 21.6p. Group Chief Executive Officer Steve Wadey explained the decision:

The US market has changed and, despite improvements to the business, we do not have the scale to meet our growth and returns expectations relative to the rest of our portfolio.

Steve Wadey, Group Chief Executive Officer

Underlying margin rose 120 basis points to 11.9% and underlying earnings per share rose 18% to 16.8p. Guidance for the full year is unchanged on the current basis, which includes the US: revenue growth of 3% to 5%, a margin of 11.0% to 11.5% and EPS growth of 8% to 10%.

Shareholders get more. The interim dividend rises 33% to 4.0p, and the company is on track for £100m of buybacks in FY27, with a further £200m over FY28 and FY29, returning most of the sale proceeds to shareholders. The balance sheet moved the other way:

Leverage, net debt relative to EBITDA (earnings before interest, tax, depreciation and amortisation), rose to 0.8x from 0.5x at the end of March. Cash conversion, the share of EBITDA turned into operating cash, was 64% against 85% a year earlier, well short of the full-year target of above 90%.

Excluding the US, revenue grew about 5%. Australia remains challenging and UK Intelligence revenue was lower. The interim dividend goes ex-dividend on 7 January 2027 and is paid on Friday 5 February 2027.