LONDON QinetiQ, the former U.K. government-owned defense research operation, has released its first results since floating on the London Stock Exchange in February. Turnover in the financial year ended March 31, increased by 22.9% to £1051.7million producing an underlying profit before tax up by 37.6% to £90.7million.
Following a number of acquisitions designed to broaden the geographic spread of its operations, North American turnover grew to £248.4million from £70.1million while net debt grew by £56.4million after investment of £202.5million in acquisitions and net cash of £136.2million received from the IPO.
Orders won in year increased by 22.2% to £816.7million and do not include a value for the revenues from the £5.6bn core service contract for the Long Term Partnering Agreement (LTPA), a 25 year contract established in 2003 to manage the MOD’s test and evaluation ranges.
Sir John Chisholm, executive Chairman, said: “In the U.K. we have grown our technology supply business to mitigate the impact of increased competition for MOD research funding, seen good organic growth and further acquisitions in the U.S., and significant progression in the commercialisation of defence technology during the year.”
“The U.K. government’s Defence Industrial Strategy and the US government’s Quadrennial Defense Review will shape our markets to a considerable degree into the medium term future. It is positive for QinetiQ that both documents emphasize the imperative for agility in military procurement and the key role for advanced technology in delivering that agility. Budgets will remain constricted on each side of the Atlantic and QinetiQ will have to maintain its pace of transformation through investment, rationalization and productisation in order to realize the significant potential of its markets.”
The continued repositioning of the U.K. defense business saw growth of 28.2% in technology supply revenue to £124.2million (2005: £96.9million), and Chisholm believes that as the business continues to transition its business mix, invest in productisation and rationalize its operations to offset the expected ongoing reduction in revenue from the MOD’s research program.
U.S. expansion was accelerated with three major acquisitions in specific growth markets: Apogen Technologies, an IT services company working mainly for the Departments of Defense (DoD) and Homeland Security (DHS), technology firm Planning Systems and, subsequent to the year-end, IT services specialist Ocean Systems Engineering.
New business opportunities are anticipated as the U.S. companies work more closely together and with the UK, and the disciplined approach to acquisitions continues to be pursued, according Chisholm.