QinetiQ Group PLC (LSE:QQ.)shares rocketed 10.7% higher to 477.8p after the defence technology specialist loaded up a bigger diviend and share buyback, fueled by record order intake.
The dividend was hiked 24% to 11p a share, and £200 million was added to extend the share buyback over two more years, while management hailed US restructuring and a £4.8 billion backlog as the basis for future growth
Underlying operating profit increased 18% to £218 million for the year to March, as operating margins improved to 11.3% from 9.6% following restructuring and cost-cutting measures.
Revenue was broadly flat at £1.92 billion, though organic growth was 1.3%, supported by stronger performance in the UK business.
Order intake surged 83% to £3.57 billion, lifting the funded order backlog to £4.42 billion. The group highlighted a £1.7 billion extension to its long-term partnering agreement with the Ministry of Defence through to 2033 and a £205 million engineering services contract linked to the Typhoon combat aircraft.
Steve Wadey, group chief executive, said the company had delivered a “resilient performance in more challenging markets” and pointed to “clear visibility of sustainable growth and strong multi-year cash flows”.
Free cash flow rose 41% to £159 million, and Wadey said the board is targeting more than £550 million in free cash flow across the 2027-2029 financial years, leading to around £500 million of dividends and share buybacks.
He said a "year of significant change", led by restructuring in the US, had created a "higher-quality business" featuring a lower cost base, improved contract mix and greater predictability of earnings as it focuses on mission-critical defence programmes tied to rising global military spending.
QinetiQ increased its full-year dividend to 11p per share and, alongside the new buyback extension, plans to buy back £100 million a year through to 2029.
For the 2027 financial year, the group forecast revenue growth of 3-5%, operating margins of 11.0-11.5% and earnings per share growth of 8-10%.
Broker Peel Hunt said the results showed stronger-than-expected margins, earnings and cash generation despite slightly weaker revenue, with analysts highlighting improved operational stability across both major divisions.
"While slightly weaker than consensus forecasts at the profit level, we expect any negative sentiment to be offset by the big dividend increase and extension of the buyback programme."
Peel Hunt also welcomed QinetiQ’s new three-year free cash flow target, describing restructuring in the US business as a "positive sign" longer-term move even as UK government spending pressures remain "an overhang".
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