- Defence tech firm doubles US business at a stroke
- Qinetiq actively ramping US exposure after exit in 2014
- Shares have rallied 40% this year, eclipsing most UK equities
If investors had any doubts about Qinetiq’s (QQ.) US ambitions, today’s substantial acquisition will surely put them to bed. The UK defence technology company will pay $590 million for Avantus Federal, a deal that leaves little doubt that QinetiQ sees the US as a growth market again after it sold the bulk of its operations across the pond in 2014.
Avantus provides mission-focused cyber, data analytics and software development to the US Defence and Homeland Security departments, intelligence services and other US government agencies. In sort, Avantus will bring more defence, intelligence and national security customers as well increase QinetiQ’s own technological capabilities and expertise.
Analysts at Numis Securities called the deal ‘transformational,’ albeit, a term that can get overused. What Numis does say is that Avantus will provide a platform to realign and accelerate QinetiQ’s US growth. Last year (to 31 March 2022) US revenues were about 12% of the £1.32 billion overall figure.
DOUBLING UP ACROSS THE ATLANTIC
The acquisition doubles the size of QinetiQ’s US business at a stroke, helping the wider QinetiQ business to push revenue grow by 25% or so. In the year ended 30 June 2022, Avantus had $298 million in revenue with $35.5 million in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation).
Numis believes that Avantus is highly complementary, with strong capabilities in important and growing market segments of the US defence and security markets. ‘Successful execution and integration, in line with management’s ambitions for the business,’ said Numis.
‘We think this is an exciting deal.’
Avantus was an attractive target because of its double-digit growth and strong operating margins. It also has a stable of existing contracts. QinetiQ estimated Avantus’ pipeline over the next five years to be $2.4 billion.
Rarely for a growth company this year, investors have rallied behind Qinetiq stock in 2022, presumably on the increasingly unstable geopolitical backcloth.
The shares have risen 40% to 300.8p, which probably explains the lukewarm reaction today, nudging barely 1% up.
