QinetiQ Group (QQ) H2 2025 earnings summary

Executive summary

• FY2025 was challenging, with tough market conditions and geopolitical uncertainty impacting revenue and profit, especially in the U.K. and U.S. short-cycle work, leading to one-off charges and a U.S. restructuring, including a significant impairment.

• Leadership changes and a refined strategy focused on long-term, mission-critical capabilities, de-risking the portfolio, and sustainable organic growth, particularly in the U.S. and U.K. intelligence sectors.

• Record order intake of £1.95bn (+12%) and a record order backlog of £2.8bn, supported by a £1.54bn LTPA contract extension, provide strong revenue visibility.

• Strong cash conversion at 105% enabled increased shareholder returns through dividends and share buybacks.

• Long-term fundamentals remain robust, with a clear strategy for value creation and alignment with customer needs.

Financial highlights

• Revenue rose 1% year-over-year to £1,931.6m (+2% organic), while underlying profit fell 14% to £185.4m (margin 9.6%) due to one-off charges.

• Underlying EPS down 11% to 26.1p; statutory EPS loss of 33.0p due to exceptional charges.

• Order intake reached a record £1,954.8m (+12%), with a book-to-bill ratio of 1.2x and order backlog at £2.8bn.

• Cash conversion was robust at 105%, supporting a 7% dividend increase and over £100m in share buybacks.

• Free cash flow of £142m, net debt at £133m, and leverage improved to 0.4x; ROCE at 22%.

Outlook and guidance

• FY2026 revenue expected to grow around 3% organically, at the lower end of the previously guided 3%-5% range, with 75% revenue cover.

• Margin expected to recover to around 11%, with EPS growth of 15%-20% and cash conversion to remain at least 90%.

• Guidance does not rely on volatile short-cycle U.S. product sales; any upside from these will be incremental.

• Additional £200m share buyback over two years to commence in June.