12th Nov 2026 12:49
(Alliance News) - Qinetiq Group PLC on Thursday reiterated full-year guidance and said it will return the "majority" of proceeds from the sale of its US business to Serco Group PLC to shareholders.
The Farnborough, Hampshire-based defence technology company announced the USD292 million sale of Qinetiq US to Hook, Hampshire-based government services outsourcing provider Serco alongside results for the half-year ended September 30.
Qinetiq announced a review of its US business in May and on Thursday said it has concluded that the agreed sale offers the best route to realise value for all stakeholders.
"Qinetiq believes Serco provides scale to drive the future growth of the US business and is a good long-term owner for its customers and employees," Qinetiq said in a statement.
Around GBP200 million of proceeds are expected to be returned to shareholders through additional share buybacks following completion of the sale. This will be done by increasing the current financial 2028 and 2029 share buybacks by GBP100 million each, Qinetiq.
In addition, the company will increase its investment in digital and AI technology, and in its infrastructure.
Completion is expected in the first quarter of 2027.
For its part, Serco said the deal further increases its scale and customer access in the world's largest defence market.
"It significantly broadens our position with the US Space Force and adds complementary technology, including advanced sensor, imaging and target-recognition systems, as well as control solutions used to launch and recover aircraft from US Navy carriers," Serco said.
Serco expects the acquisition to be accretive to underlying earnings per share in the first full year of ownership, 2028, and sees run-rate cost synergies of at least USD3 million by 2028.
The deal will be funded by Serco from existing cash and committed debt facilities. The purchase adds around 0.6 times to leverage, which will remain "comfortably" within the target range of 1-2x following the transaction, and reduce thereafter, Serco said.
Serco's existing share buyback, which was increased to GBP150 million in August and is due to complete in December, will continue as planned, it said.
Shares in Qinetiq were down 2.0% at 512.50p each in London, while Serco was up 1.3% to 289.60p.
Alongside the deal, Qinetiq reported a pretax loss of GBP86.8 million in the half-year that ended September 30, swung from a GBP57.3 million profit a year before.
This included a GBP166.4 million impairment charge on goodwill compared to no such charge a year before. In total, Qinetiq said statutory results included GBP175 million non-cash charges relating to the impairment of the US business.
Stripping these out, underlying pretax profit increased by 11% to GBP114.4 million from GBP102.2 million, with underlying earnings per share of 16.8 pence versus 14.2p.
Revenue increased 2.6% to GBP923 million from GBP900 million, and order intake by 9.1% to GBP771 million from GBP707 million.
Qinetiq hiked its interim dividend by 33% to 4p per share from 3p.
Chief Executive Officer Steve Wadey said: "We have delivered solid first-half results, improving profitability through execution and efficiency. The agreed US business sale sharpens QinetiQ's focus on the areas where we see the strongest opportunities for growth."
The full-year outlook was left unchanged.
QinetiQ still expects revenue growth of 3% to 5%, an operating margin of 11.0% to 11.5%, EPS growth 8% to 10% with more than GBP550 million of free cash flow targeted over financial 2027 to 2029.
By Jeremy Cutler, Alliance News reporter
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