Qinetiq, the FTSE 250-listed defense contractor, has announced a £1.5 billion extension to its partnership contract with the UK Ministry of Defence (MoD).
The Farnborough-based company announced on Thursday that it would extend its long-term partnership agreement (LTPA) with the government by five years until 2033.
Qinetiq's LTPA contract provides the UK Armed Forces with testing and training capabilities to improve safety during operations.
The extension will create more than 1,200 highly skilled jobs across 16 sites in England, Scotland and Wales, according to the company.
"Rigorously tested equipment and the testing of new technologies are key to ensuring that our armed forces deploy combat-ready capabilities on the front line," said Defense Secretary John Healey MP.
"The contract will help keep the UK safe at home and strong abroad, while driving innovation to strengthen our national security and support skilled jobs across the UK."
Shares in Qinetiq rose seven percent on Thursday morning as investors sought to profit from the ongoing defense boom.
Chief executive Steve Wadey said: "Through the LTPA, we play a vital role in protecting and enhancing the UK's defense and security.
"Extending our partnership with the US Department of Defense allows us to continue to invest to deliver the fundamental change in test and evaluation required to ensure our armed forces have an operational advantage over disruptive technologies."
President Donald Trump's move to withdraw America from European defense programs has led to an increase in military spending in the UK and the European Union (EU).
The UK's current target is to increase defense spending to 2.5 percent of GDP by April 2027.
Companies such as BAE Systems, Lockheed Martin and Airbus have all benefited from the increasing geopolitical tensions in the world as a result of the Russian invasion of Ukraine and the conflict in the Middle East.
Questions about Qinetiq remain
But Qinetiq, which specializes in cyber and analytics tools, experienced a shock sell-off in March when it announced ongoing contract delays in its US business.
"The company's operations on both sides of the Atlantic fell victim to delays arising from the UK Strategic Defense Review and the Trump administration's proposed spending cuts in the US," said Russ Mould, investment director at AJ Bell.
However, today's update should have restored confidence in the technology-focused company. It has recognized the need to restructure to better reflect current spending priorities and has secured the extension of a key contract with the Department of Defense.
However, there is still a feeling that Qinetiq is being left behind by its peers with a much more positive outlook. To avoid coming under pressure, long-serving CEO Steve Wadey will likely need to change this in future updates.
https://www.cityam.com/qinetiq-shares-soar-after-1-5bn-extension-to-ministry-of-defence-deal/
