Defence technology supplier QinetiQ Group PLC (LSE:QQ.) has warned that full-year growth will be slower than expected and at lower margins, with a £140 million write-down also to be included due to restructuring and "challenging" conditions in the US market.
The FTSE 250-listed group said it has also experienced delays to contract awards from the UK defence intelligence sector, which represents around 25% of group revenue, and with the delays particularly hitting higher-margin product sales.
This follows a similar warning in January, where it said short-term order intake in the UK has been slower than expected due to the fiscal environment.
Furthermore, in the US, a restructuring has been launched "to support future growth" following the appointment in January of defense industry veteran Tom Vecchiolla to lead the division, but a £140 million goodwill impairment charge will be taken due to these actions and the assumption of a higher discount rate.
Amidst "challenging US market conditions", Qinetiq said it has also identified a number of one-off, largely non-cash charges and provisions primarily relating to inventory and cost recovery in "legacy" US operations.
QinetiQ said it now expects group organic revenue growth of roughly 2% for the year to end-March 2025, down from guidance two months ago of "high single-digit" organic growth.
Underlying profits margins are expected to be around 10%, down from the previous indication that they would be "stable" at the previous year's 12%, with today's update also flagging £25-30 million of one-off charges.
Cash conversion is now expected to be "good", compared to "high" before, with net debt in line with last year.
More positively, order intake for the year is expected to see a book-to-bill ratio of more than one, meaning it has received more orders than it has shipped and billed, suggesting strong demand.
Next year, revenue growth is expected to accelerate to around 3-5% at margins of 11-12%.