Defence firm QinetiQ warns of US, UK contract award delays, shares fall

(Reuters) -British defence and security company QinetiQ warned on Monday of delays in short-term contracts being awarded in the U.S. and UK, where new policies are being implemented after changes in government.

Shares in the company, which develops and tests systems used across defence, space, government and other sectors, fell as much as 22.2% and are on track for their worst day on record, after QinetiQ said the delays would affect its revenues.

Its UK Intelligence business, which makes up about a fourth of revenues, has experienced delays in contracts of shorter duration, with delays also seen at its Global Solutions unit, which accounts for another quarter of sales and records QinetiQ's U.S. contracts.

QinetiQ is also restructuring its U.S. business, expecting a charge of about 140 million pounds ($181.3 million) at year-end.

The rest of its business under EMEA services and UK defence, however, is performing strongly due to greater exposure to longer contracts, the company said.

Britain's Labour government, which took office last July, is aiming to speed up defence procurement, but the industry is awaiting clarity on government spending priorities in a review expected this spring. 

Britain last month also announced an increase in military spending amid rising geopolitical tensions.

Citi analysts said in a note that the U.S. political situation and UK contract delays are likely to create an uncertainty overhang for QinetiQ stock in the near term, without elaborating.

The company forecast organic revenue growth of about 2% for the year ending March 31. That implies sales of about 1.95 billion pounds, short of analysts' consensus of 2.04 billion pounds.

For fiscal 2026, growth is expected to improve slightly to about 3% to 5%, QinetiQ said, adding that it would buy back shares of up to 200 million pounds over the next two years.

($1 = 0.7721 pounds)

(Reporting by Pushkala Aripaka in Bengaluru and Sarah Young in London; Editing by Mrigank Dhaniwala, Jan Harvey and Rod Nickel)