Qinetiq shares soar after £1.5bn extension to Ministry of Defence deal
Qinetiq, the FTSE 250 defence contractor, has announced a £1.5bn extension to its partnership deal with the UK Ministry of Defence (MoD).
The Farnborough-based firm said on Thursday it will extend its Long Term Partnering Agreement (LTPA) with the government by five years to 2033.
Qinetiq’s LTPA contract provides UK armed forces with test and training capabilities to improve safety during operations.
Its extension will support more than 1,200 highly skilled jobs at 16 sites across England, Scotland and Wales, according to the company.
“Rigorously tested equipment and the trialling of emerging technologies are key to ensuring our armed forces are using combat-ready capabilities on the frontline,” defence secretary John Healey MP said.
“The contract will help keep Britain secure at home and strong abroad, as we drive forward innovation to bolster our national security and support skilled jobs across the UK.”
Qinetiq shares jumped seven per cent on Thursday morning as investors looked to cash in on the ongoing defence boom.
Chief executive Steve Wadey said: “Through the LTPA, we play a vital role helping to protect and enhance the UK’s defence and security.
“The extension of our partnership with MoD enables us to continue investing to deliver the transformational change in test and evaluation that’s required to ensure our armed forces have operational advantage over disruptive technologies.”
President Donald Trump’s move to pull America back from European defence programmes has led to a surge in military spending from the UK and European Union (EU).
The UK’s current goal is to increase defence spending to 2.5 per cent of GDP by April 2027.
The likes of BAE Systems, Lockheed Martin and Airbus have all cashed in as global geopolitical tension increases in the wake of Russia’s invasion of Ukraine and conflict in the Middle East.
Questions over Qinetiq remain
But Qinetiq, which specialises in cyber and analytics tools, suffered a shock sell-off in March as it flagged ongoing contract delays in its US business.
“The company’s operations on both sides of the Atlantic both fell victim to delays resulting from the UK’s Strategic Defence Review and proposed spending cuts in the US by the Trump administration,” Russ Mould, investment director at AJ Bell, said.
“However, today’s update will have restored a bit of confidence in the technology-focused company. It has recognised a need to rejig operations so it is more aligned with current spending priorities and it has secured an extension to a key Ministry of Defence contract.
“That said, there is still a real sense Qinetiq is being left behind by its peers who have notably more positive outlooks. To avoid coming under pressure, longstanding CEO Steve Wadey will likely need this to change in future updates.”