REG - QinetiQ Group plc - Completion of the acquisition of Avantus

QinetiqAnnouncement

23/11/2022 12:30

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RNS Number : 3838H  QinetiQ Group plc  23 November 2022

News release

QinetiQ Group Plc

Completion of the acquisition of Avantus Federal LLC

23 November 2022 - QinetiQ Group plc ("QinetiQ" or the "Company") is pleased
to announce that, further to the announcement on 5 August 2022, it has
completed the acquisition of Avantus Federal LLC, a leading provider of cyber,
data analytics and software development solutions to the US Department of
Defense, Intelligence Community, Department of Homeland Security and other
Federal civilian agencies.

 

The acquisition of Avantus is a major step towards achieving our strategic
growth ambition in the largest defence and security market in the world.
Avantus' customer relationships, contract vehicles and technical capabilities
are complementary to our existing US business and the combination creates a
strong platform to drive further growth in the US and beyond. Avantus is a
highly attractive business at the heart of the US customers' mission and a
strong strategic fit directly aligned with the Group's six distinctive
offerings. We are on-track to deliver our long-term strategy to build a
world-leading defence and intelligence company delivering mission-led,
disruptive innovation to our customers across the US, UK, Australia and other
customers around the world.

 

Since the initial announcement of the acquisition, Avantus has continued to
perform well: the business has won significant new awards, maintained its high
employee retention rate and delivered financial results in line with our
expectations. Our integration plan has been fully prepared and we are now
focused on executing the integration of Avantus to create opportunities for
our customers and employees whilst delivering attractive financial returns.

 

Steve Wadey, Group Chief Executive Officer of QinetiQ, said:

 

"I am delighted that we have completed the acquisition of Avantus today - it
is a strategic milestone in our five-year ambition to build an integrated
global defence and security company, delivering innovation for our customers'
mission. This acquisition extends our customer base, strengthens our
capabilities and builds scale in the largest defence and security market in
the world. With a strong track record of 10%+ growth at attractive margins,
Avantus is a brilliant strategic and cultural fit and positions us to meet the
increasing mission-critical needs of our US defence and intelligence customers
with agility and pace."

 

Shawn Purvis, President and Chief Executive Officer of QinetiQ US, said:

 

"We are thrilled to welcome our Avantus colleagues to QinetiQ US. Avantus'
elite talent, differentiated technology solutions, and dedication to mission,
complement our innovative culture. I am honored to lead a combined team that
shares a focus on performance and a proven ability to be agile in impactful
delivery at the speed of our customers' missions"

 

Impact of acquisition on FY23 outlook

 ●    $590m paid, financed through cash and term loans; interest rate and FX were
      hedged at the point of announcement.
 ●    Leverage at completion is 1.1x Net Debt to EBITDA on a full year pro-forma
      basis - this is lower than 1.3x previously guided due to good underlying cash
      performance and continued discipline on working capital management. As
      previously communicated, we are actively planning to rapidly deleverage to
      less than 1x before the end of the first full year after completion.
 ●    Avantus continues to trade in line with expectations: contribution to FY23
      results is expected to be c.$110m revenue with stable operating profit
      margins, consistent with the 10.8% operating profit margin previously
      guided.  Longer term, we expect Avantus to deliver at least double-digit
      revenue growth and margins consistent with Group guidance.
 ●    With higher profit in the US, this increases our Effective Tax Rate (ETR). Our
      FY23 ETR will be c.13% with the partial-year contribution from Avantus. For
      FY24 ETR will increase to c.17% and will modestly increase thereafter. We will
      utilise the $70m tax asset acquired with Avantus, therefore expect zero cash
      tax payable in the US in the short-term, as previously guided.

 

About QinetiQ

QinetiQ (QQ.L) is a leading science and engineering company operating
primarily in the defence and security markets. We work in partnership with our
customers to solve real world problems through innovative solutions delivering
operational and competitive advantage. Visit our website www.QinetiQ.com
(http://www.QinetiQ.com) . Follow us on LinkedIn and Twitter @QinetiQ.  Visit
our blog www.QinetiQ-blogs.com (http://www.QinetiQ-blogs.com) .

For further information please contact:

John Haworth, Group Head of Investor Relations:
 
+44 (0) 7920 545841

Lorna Cobbett, Citigate Dewe Rogerson (Media
enquiries):
            +44 (0) 7771 344781

 

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