The UKs weak growth of just 0‚1% in third-quarter 2024 (down from 0‚5% previous quarter) creates headwinds for defense-sector companies. QinetiQ‚ which gets two-thirds of its money from Britain faces unique challenges from this slow-down
The governments plan to boost defense spending from 2‚3% to 2‚5% of GDP brings hope; monetary policy changes might help too. The next US president could push NATO countries to spend more on defense which would benefit defense-related businesses
First-half results for QinetiQ look good: revenue up 7% and orders increased 9% to £1‚03bn (maintaining solid profit margins). The company expanded its share buy-back program by £50m to £150m total – a smart move considering its price-to-earnings ratio of 14‚5
- Revenue growth: 7% increase
- Order growth: 9% rise
- Share buyback: £150m total
- Coverage ratio: 14x interest costs
The firms US division (21% of total revenue) could be a key growth driver. Their balance sheet stays strong with just 21% net gearing‚ while operating profits covered interest costs 14 times over. With global defense spending trending up and solid financials; QinetiQ remains a good long-term investment choice despite UK economic challenges