Qinetiq Shares Plunge After Warning On Revenue And Profit Outlook

Shares in Qinetiq fell sharply after the defence company issued a profit warning, announcing that full-year revenue and profits would be lower than expected due to challenging trading conditions. The firm revealed a £140 million impairment charge on its US operations, sending shares down by as much as 20.6 per cent to 416½p.

In a trading update, Qinetiq cited continued delays in contract awards within its UK intelligence and US sectors, combining with geopolitical uncertainty to impact fourth-quarter sales. The company lowered its expected organic revenue growth for the financial year to 2 per cent, compared to the previously anticipated 7 per cent. Underlying profit margins are also set to fall, with the firm absorbing £25 million to £30 million in one-off charges.

Qinetiq’s leadership outlined plans to extend the company’s share buyback programme by up to £200 million over the next two years, demonstrating confidence in its medium-term outlook despite near-term challenges. However, analysts at Jefferies Bank estimated that consensus earnings for the financial year would drop by around 20 per cent following the firm’s update.

The impairment charge comes as Qinetiq prepares to restructure its US operations amid persistent difficulties in the region. The company also identified additional non-cash charges relating to inventory and cost recovery issues within its US legacy business as part of a wider end-of-year balance sheet review. These issues have raised concerns among investors as geopolitical instability continues to add pressure to key markets.

The FTSE 250 firm, which generates half of its revenue from the UK defence market and 25 per cent from both UK intelligence and international operations, has come under scrutiny since its update. Analysts attributed the challenges to factors such as the Labour government’s 2024 strategic defence review and defence spending pressures in the US. Investors have been left questioning how Qinetiq intends to stabilise its performance.

Qinetiq’s origins trace back to the Ministry of Defence’s decision to privatise much of its Defence Evaluation and Research Agency in 2001. Despite initial success, the firm must now rebuild trust with investors. Analysts see the company’s ability to navigate ongoing market volatility as critical to ensuring future growth in an increasingly competitive sector.