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QinetiQ Group plc (GB:QQ)
:QQ
Top Page
QinetiQ
(LSE:QQ)
73Outperform
Positive Factors
Cash Flow Management
Cash conversion at 84% is better than the guidance and contrasts with a poor performance from the same period last year.
Financial Performance
QinetiQ has delivered a solid set of results, with operating profit exactly in line with expectations and showing good continued top line momentum.
Revenue Growth
Organic revenue growth of 8% comes against a tough 19% comparison, indicating strong performance.
Negative Factors
Geopolitical Impact
Recent geopolitical uncertainty has impacted higher-margin US sales in the Global Solutions division in 4Q25, which represents c.25% of group revenue.
Leadership Changes
The head of QinetiQ US, Shawn Purvis, is leaving the organisation.
Order Intake
A weakness in short-cycle order intake for the UK Intelligence and US Sectors business are the major source of downgrades to the top line.
QinetiQ (QQ) vs. S&P 500 (SPY)
Market Cap
£2.09B
Dividend Yield2.26%
Average Volume (3M)3.10M
Price to Earnings (P/E)15.3
Beta (1Y)0.64
Revenue Growth10.36%
EPS Growth32.77%
CountryUK
Employees8,500
SectorIndustrials
Sector Strength70
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.24
Shares Outstanding554,235,400
10 Day Avg. Volume4,222,582
30 Day Avg. Volume3,096,020
Financial Highlights & Ratios
PEG Ratio0.47
Price to Book (P/B)N/A
Price to Sales (P/S)1.05
Price to Cash Flow (P/CF)12.60
P/FCF Ratio25.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
509.33pPrice Target Upside34.60% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
QinetiQ Business Overview & Revenue Model
Company DescriptionQinetiQ (QQ) is a multinational defense technology company that operates primarily in the defense, security, and aerospace sectors. The company specializes in providing engineering services, consultancy, and technology solutions, including advanced testing and evaluation, robotics, and mission-critical software. QinetiQ works closely with both government and commercial clients, leveraging its expertise to deliver innovative solutions that enhance operational capabilities.
How the Company Makes MoneyQinetiQ generates revenue through a combination of service contracts, product sales, and research and development partnerships. The company primarily makes money by offering its engineering and consultancy services to defense and security agencies, which include testing and evaluation of new technologies and systems. Additionally, QinetiQ sells specialized products, such as unmanned systems and advanced sensors, to a range of government and commercial clients. The company also engages in collaborative research and development projects, often funded by governmental contracts or in partnership with other corporations, which contribute to its revenue streams. Strategic partnerships and long-term contracts with defense agencies, particularly in the UK and US, play a significant role in QinetiQ's financial performance.
QinetiQ Financial Statement Overview
Summary
QinetiQ has demonstrated strong financial performance with significant revenue and free cash flow growth. Despite a slight decline in net income and increased debt levels, the company maintains robust profitability and operational efficiency, suggesting a solid financial standing.Income Statement
QinetiQ has demonstrated strong revenue growth with a 20.97% increase from 2023 to 2024. The gross profit margin stands at 14.05%, and the net profit margin is 7.30%, indicating a healthy profitability trend. The EBIT margin of 10.07% and EBITDA margin of 15.21% highlight operational efficiency. However, a slight decline in net income from 2023 to 2024 suggests room for improvement in cost management.85
Very Positive
Balance Sheet
The balance sheet shows a solid equity ratio of 43.97%, reflecting strong asset backing. The debt-to-equity ratio is 0.42, indicating moderate leverage, and the ROE is 15.08%, showcasing good returns on equity. However, the increase in total debt over the year suggests a higher financial obligation, which could pose risks if not managed carefully.78
Positive
Cash Flow
QinetiQ's cash flow statements reflect robust growth in free cash flow, with a growth rate of 51.44% from 2023 to 2024. The operating cash flow to net income ratio of 1.74 indicates strong cash generation relative to net income. Free cash flow to net income ratio is 1.05, suggesting effective cash use. However, capital expenditures have increased, which could impact future liquidity if not managed properly.80
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 2.49B | 1.91B | 1.58B | 1.32B | 1.28B | 1.07B | Gross Profit |
| 360.75M | 268.70M | 229.00M | 178.80M | 189.90M | 170.90M | EBIT |
| 256.70M | 192.50M | 172.80M | 117.50M | 112.30M | 117.60M | EBITDA |
| 384.85M | 290.90M | 261.70M | 183.60M | 205.10M | 179.00M | Net Income Common Stockholders |
| 176.85M | 139.60M | 154.40M | 90.00M | 121.70M | 106.30M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 231.00M | 231.00M | 156.90M | 248.70M | 191.00M | 105.80M | Total Assets |
| 2.11B | 2.11B | 2.07B | 1.76B | 1.49B | 1.44B | Total Debt |
| 391.80M | 391.80M | 368.90M | 22.10M | 26.70M | 27.90M | Net Debt |
| 160.80M | 160.80M | 217.70M | -226.00M | -163.40M | -77.90M | Total Liabilities |
| 1.18B | 1.18B | 1.10B | 713.30M | 596.90M | 550.80M | Stockholders Equity |
| 926.10M | 926.10M | 968.30M | 1.04B | 889.40M | 884.70M |
| Cash Flow | Free Cash Flow | ||||
| 287.55M | 146.80M | 97.00M | 104.40M | 102.10M | 46.60M | Operating Cash Flow |
| 392.90M | 243.10M | 206.00M | 188.70M | 181.60M | 156.00M | Investing Cash Flow |
| -122.90M | -99.10M | -464.40M | -81.60M | -53.20M | -185.50M | Financing Cash Flow |
| -118.40M | -63.20M | 159.70M | -47.30M | -55.60M | -48.70M |
QinetiQ Technical Analysis
Negative
378.40
Price Trends
409.61
Negative
415.78
Negative
435.83
Negative
Market Momentum
-5.79
Positive
37.19
Neutral
7.39
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:QQ, the sentiment is Negative. The current price of 378.4 is below the 20-day moving average (MA) of 448.02, below the 50-day MA of 409.61, and below the 200-day MA of 435.83, indicating a bearish trend. The MACD of -5.79 indicates Positive momentum. The RSI at 37.19 is Neutral, neither overbought nor oversold. The STOCH value of 7.39 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:QQ.
QinetiQ Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $46.30B | 24.58 | 17.85% | 1.89% | 14.01% | 6.03% | |
73 Outperform | £2.09B | 15.33 | 14.44% | 2.26% | 10.36% | 32.77% | |
72 Outperform | $68.00B | 26.47 | ― | 14.70% | 3.76% | ||
66 Neutral | £407.55M | 171.97 | 1.82% | 1.37% | 9.11% | ― | |
66 Neutral | £664.96M | 25.63 | 5.59% | 1.53% | 1.41% | -16.76% | |
62 Neutral | $8.27B | 14.03 | 2.36% | 3.08% | 3.85% | -14.32% |
* Industrials Sector Average
Performance Comparison
GB:QQ
QinetiQ
378.40
17.17
4.75%
GB:BA
BAE Systems
1,584.00
246.84
18.46%
GB:RR
Rolls-Royce Holdings
790.00
362.00
84.58%
GB:AVON
Avon Protection
1,366.00
327.94
31.59%
GB:SNR
Senior plc
160.20
-15.60
-8.87%
QinetiQ Earnings Call Summary
Earnings Call Date: Nov 14, 2024 | % Change Since: -18.24% | Next Earnings Date: May 22, 2025
Earnings Call Sentiment Positive
The earnings call highlights strong financial performance, significant contract wins, and robust growth opportunities, particularly in the U.S. and Europe. However, challenges such as potential impacts from U.S. continuing resolutions, flat backlog, and uncertainty in the U.K. defense sector are noted. Despite these challenges, the positive aspects significantly outweigh the negatives, indicating a strong position for future growth.Highlights
Strong Financial Performance
The company secured more than GBP 1 billion of orders with a book-to-bill ratio of 1.3. Revenue increased by 7% and operating profit rose by 7%, maintaining a stable margin of 11.3%. Underlying basic earnings per share increased by 6%.
Significant Contracts and Growth Opportunities
Notable contracts include a 10-year EUR 284 million contract for Aerial Training Services in Germany, a 3-year GBP 150 million contract for British Army communications, and significant growth in the U.S. with a new Aerial Target Systems contract.
Strong Cash Flow and Shareholder Returns
Cash conversion was strong at 84%, with leverage at 0.6x. The company extended its GBP 100 million share buyback program by a further GBP 50 million and maintained a 7% dividend growth.
Strategic Growth and Pipeline
The company's pipeline is robust, with opportunities worth more than GBP 15 billion. Significant pipeline opportunities include the U.K. long-term partner agreement extension and the U.S. Tethered Aerostat Radar System program in Poland.
Lowlights
Challenges with U.S. Continuing Resolutions
Continuing resolutions in the U.S. could potentially impact revenue predictability, although the company has planned for this disruption in their guidance.
Flat Backlog and Impact of Exchange Rates
Backlog remained flat versus FY '24 at GBP 2.9 billion, and a stronger dollar provided a headwind to reported growth rates of about 0.5% for revenue and profit.
Uncertainty in U.K. Defense and Intelligence Sector
The ongoing defense review and change in government in the U.K. have led to some slowdown in the intelligence business, though the impact is considered a short-term disruption.
Company Guidance
During the QinetiQ FY '25 interim results call, management highlighted several key financial metrics and strategic initiatives. The company delivered a 7% increase in revenue, reaching GBP 947 million, with a book-to-bill ratio of 1.3, and secured over GBP 1 billion in orders. Operating profit rose by 7% to GBP 107 million, maintaining a stable margin of 11.3%. The group achieved good cash conversion at 84%, and leverage stood at 0.6x, excluding proceeds from the sale of Cody Technology Park. The strategy focuses on achieving GBP 2.4 billion in organic revenue with a 12% margin by FY '27, supported by a robust order backlog and a pipeline exceeding GBP 15 billion. QinetiQ announced an extension of its share buyback program by GBP 50 million and maintained a 7% dividend growth. The company remains committed to organic growth and disciplined capital allocation, with a focus on investing in people, technology, and capabilities to drive long-term sustainable growth.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.