Qinetiq affected by UK and US contract delays despite defence boom

Defence firm Qinetiq has come under pressure from contract delays despite global conflicts and uncertainty driving activity in the sector.

It told shareholders on Monday morning that its UK intelligence business and US arm have been knocked by contract delays this year.

The Farnborough-based company added that it is launching a restructuring of its US business to help drive growth.

It said its underlying profit guidance for this year will face a hit of up to £30 million due to its struggles in the US.

In January, the group hired Tom Vecchiolla to lead its US operation in order to accelerate growth.

The firm’s global division, which is largely in the US, “delivered good on-contract growth” for longer-term contracts but has been impacted by short-term uncertainty.

In the US, the group has “continued to experience further delays to short cycle contract awards, particularly in higher margin product sales”.

Qinetiq added that it expects a goodwill impairment of around £140 million due to the uncertain market backdrop.

The group is among defence firms to have seen shares improve on the back of rising global geopolitical uncertainty, but has seen many countries, such as the US, overhaul defence spending plans after changes in government.

Meanwhile, the group said its UK intelligence operation, which represents 25% of group revenues, has experienced further delays to contracts so far this year, impacting recent trading.

“As a result, we have resized some of our capabilities in this sector whilst maintaining market share,” the company added.

On Monday, the group also confirmed plans to hand around £200 million back to shareholders through a share buyback over the next two years.