Defense giant QinetiQ shows promise despite UK's slow-moving economy
British defense company QinetiQ keeps growing despite UKʼs economic slowdown. With strong US presence and increased defense budgets worldwide company shows good market position
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
