QinetiQ Group plc

FY26 revenue was just over GBP 1.9 billion, flat reported and up 1.3% on an organic basis. Operating profit was GBP 218 million, up 18%, and margin improved to 11.3%; free cash flow was GBP 159 million, up 41% (GBP 45 million) year over year. EPS rose 21% to 31.5p. Order intake was a record GBP 3.6 billion and backlog was GBP 4.8 billion, up 41%/more than 40% year over year. Net debt ended at GBP 159 million, leverage was 0.5x, and shareholder returns were GBP 183 million, up GBP 32 million. For FY27, revenue is guided to grow 3% to 5%, margin to be 11% to 11.5%, cash conversion to be greater than 90%, and EPS to grow 8% to 10%. The company also introduced a 3-year free cash flow target of more than GBP 550 million for FY27-FY29.

Steve Wadey framed the year as a deliberate reshaping of the business: fewer lower-quality revenues, lower cost base, better execution, and stronger alignment to defense demand. He emphasized that QinetiQ is not a platform prime but a defense and technology services partner across engineering, test, mission support, and advanced tech, with positioning in the U.K., Europe, Australia, and the U.S. His tone was confident and strategic, but notably cautious on the U.S. review, saying the company is early in the process and assessing all options to maximize long-term shareholder value.

Martin Cooper highlighted the financial improvement in detail: orders of GBP 3.6 billion, backlog of GBP 4.8 billion, profit of GBP 218 million, margin of 11.3%, EPS of 31.5p, and free cash flow of GBP 159 million with 100% conversion. He said capital intensity was modest, with CapEx of GBP 72 million, including GBP 37 million for LTPA, and that shareholder returns totaled GBP 183 million, including GBP 49 million of dividends and GBP 134 million of buybacks. He also set out the new capital allocation framework: a 35% to 40% dividend payout ratio, roughly GBP 100 million per year of buybacks through FY29, and more than GBP 550 million of free cash flow over FY27-FY29, while leverage stayed at 0.5x.

Analysts pressed on the U.S. review, asking what would change for shareholders if QinetiQ trades the business versus keeps it, and management said the market has been difficult, the business is now smaller and better aligned, and the review will assess fit, perimeter, ownership, and long-term value creation. Questions also focused on guidance sensitivity to U.K. budget clarity, and management said the bottom end of the 3% to 5% revenue range is supported by backlog, while the upper end depends on budget visibility and timing of awards. Another topic was reporting changes: Martin said FY27 will be the last year digital spend runs through exceptions, with about GBP 20 million expected there, and from FY28 RDEC income of around GBP 30 million will be reported at group EBIT level.