QinetiQ Navigates Headwinds, Maintains Optimistic Outlook Despite Revenue and Profit Dip

QinetiQ (LON: QQ.), a key player in the defense market, released its interim results for the six months ending September 30, 2025, revealing a mixed performance amidst challenging market conditions.

While the company reaffirmed its full-year guidance, revenue and operating profit experienced declines compared to the same period last year.

Revenue for H1 FY26 stood at £900.4 million, a decrease from £946.8 million in H1 FY25. Underlying operating profit also saw a reduction, falling from £106.6 million to £96.0 million.

Profit after tax followed a similar trajectory, dropping from £80.9 million to £76.8 million. Despite these declines, underlying earnings per share remained flat at 14.2p, supported by the company's accelerated share buyback program.

QinetiQ demonstrated resilience through strong cash management. Net cash flow from operations remained robust at £127.9 million, reflecting a healthy 85% cash conversion rate.

Net debt remained relatively stable at £180.9 million, resulting in a leverage ratio of 0.6x. Furthermore, the company increased its interim dividend by 7% to 3.0p per share, signaling confidence in its financial position and commitment to shareholder returns.

The company's order intake surged to £2,416.5 million, significantly higher than the £1,034.8 million recorded in the previous year. However, the book-to-bill ratio, a crucial indicator of future revenue, stood at 0.9x, impacted by near-term challenges in the UK market.

The funded order backlog reached an impressive £4,345.7 million, providing substantial revenue visibility for the coming years.

QinetiQ is actively managing its capital deployment, returning £101 million to shareholders through dividends and share buybacks in the first half of the year. This underscores the company's commitment to enhancing shareholder value.

Key Performance Drivers:

• US Restructuring: Refocusing the US business has yielded a strong book-to-bill ratio of 1.5x, setting the stage for sustainable growth in the region.
• LTPA Extension: Securing a £1.5 billion Long Term Partnering Agreement (LTPA) extension will transform the UK's Test & Evaluation capabilities for future warfare scenarios.
• Growing Defence Market: QinetiQ's mission-critical capabilities align with the increasing threat landscape and growing defence spending, providing a solid foundation for long-term growth.

CEO Steve Wadey stated, “Operational performance in the half has been in line with our expectations. Despite tough market conditions, we delivered against our record order backlog and implemented our restructuring activities, including disposal of the US Federal IT business…we have confidence to drive sustained long-term growth and compelling value creation for our shareholders.”

QinetiQ maintains its FY26 guidance, projecting approximately 3% organic revenue growth before foreign exchange impacts and the Federal IT disposal.

The company anticipates a margin of around 11% with approximately 90% cash conversion and earnings per share growth of 15-20%. With 89% revenue cover for the second half of FY26, QQ. appears well-positioned to achieve its full-year targets.