Defence and security specialist QinetiQ (QQ.) said first-quarter orders and cash generation to 30 June continued to be strong, but declined to provide guidance due to ongoing uncertainties. The shares rallied 1.6% to 304p.
STEADYING THE SHIP
Proactive management action on costs has increased the resilience of the business, allowing it to maintain a strong balance sheet and position it for continued growth in a post Covid-19 world.
Some of the group’s services with Europe, Middle East and Asia (EMEA) are considered critical for maintaining sovereign defence and benefit from long-term contracts, consequently they have seen limited impact from lockdowns.
While the Global Products business has experienced delays to customer deliveries, revenues continued to grow helped by the contribution from US-based MTEQ which was acquired in October 2019.
DELIVERING ON STRATEGY
Management believe a focus on mission-led innovation is becoming increasingly relevant as the global threat environment becomes more complex, and the firm reached some milestones in this regard during the first-quarter and post period-end.
It secured a five-year contract to provide mission data and services to the RAF Typhoon Delivery Team, worth £30 million. It also announced a managed service contract for the Military of Defence (MOD) worth up to £30 million, enabling the Armed Forces to use publicly available information and social media to improve decision making and identify emerging threats.
Internationally the company signed an agreement with the US Defense Counterintelligence & Security Agency (DCSA) to operate all its defense operations under a new Special Security Agreement.
In Australia the company won a contract to design and construct an unmanned aerial systems flight test range for the Queensland government. This leverages the skills learned from operating the most advanced land, sea and air ranges for the MOD.
NAIMURI ACQUISITION
Data intelligence and analytics are becoming more important in modern warfare and so the acquisition of Naimuri looks like a very good fit. It is a leading data and cloud provider to UK intelligence and Law Enforcement communities, having previously worked with QinetiQ on several programmes.
This fits with previous acquisitions where QinetiQ has added specific capabilities and used them as a stepping stone to spur new growth opportunities.
The purchase price was £25 million on a debt-free and cash-free basis, representing 2.8 times revenues to 31 July 2020 and 12.5 times earnings before interest, tax, depreciation and amortisation (EBITDA).
