QinetiQ Group plc Q1 Trading Update and Acquisition of Naimuri (8781S)

TIDMQQ.

RNS Number : 8781S

QinetiQ Group plc

14 July 2020

News release

QinetiQ Group plc

First Quarter Trading Update and Acquisition of Naimuri

14 July 2020 - QinetiQ Group plc ("QinetiQ" or "the Group") today issues a trading update covering its first quarter of trading and announces the acquisition of Naimuri Limited ("Naimuri").

First quarter performance

As we entered the COVID-19 crisis, we took decisive action to maintain the strength of our company and ensure we retain the critical skills and capabilities to drive long-term growth. Our response has continued to focus on our three strategic priorities of protecting the health and wellbeing of our employees, continuing to deliver critical work for our customers and maintaining the strength of QinetiQ for the long-term. The actions we have taken have increased the resilience of our company, allowing us to maintain a strong balance sheet and position the company for growth as we emerge from this crisis.

Order intake throughout the first quarter continued to be strong, despite COVID-19 related disruption in all of our markets. Although revenue and profit have been impacted by the disruption, the proactive and robust cost management actions taken have reduced the impact on profitability and delivered a strong cash performance. As we have stated previously, due to the on-going uncertainty of the COVID-19 crisis around the world, we will provide guidance for Group performance as soon as possible to do so.

EMEA Services

We have seen limited impact from COVID-19 within EMEA Services as the division benefits from long-term contracts and delivers work that is critical to sovereign defence capabilities. Some customer trials and training activity have been delayed causing impacts such as reduced flying hours in Germany; however, much of this activity is now resuming.

Global Products

In Global Products we experienced more significant disruption causing delays to customer deliveries, which are beginning to resume; however, top line growth continued, driven by the contribution of MTEQ.

Strategy Update

Our strategy to deliver mission-led innovation for our customers' advantage and grow the company, whilst enhancing returns for shareholders continues to gain momentum. With growing uncertainty globally and an increasingly complex threat environment, we believe our strategy is increasingly relevant to this new world and will support growth in the coming years. We successfully delivered a number of strategic milestones in the first quarter demonstrating our progress as we leverage our capabilities globally.

We are delivering on our commitment to lead and modernise UK test and evaluation:

 
            --   Through our Engineering Delivery Partner (EDP) programme, we secured 
                  a GBP30m five year contract to provide mission data and technical 
                  services to the RAF Typhoon Delivery Team. This contract is an example 
                  of partnering with UK MOD to deliver better programme performance 
                  and long-term savings. 
            --              We have continued to operate all the ranges under the Long Term 
                             Partnering Agreement (LTPA) during the COVID-19 crisis to support 
                             critical national defence outputs, including the first firing of 
                             the Martlet missile from a Wildcat helicopter at MOD Aberporth, 
                             a key milestone in demonstrating the ability to protect the UK's 
                             new aircraft carriers. 
 

We are continuing to successfully build a more international company in our key home countries:

 
            --   On 13 July 2020 we announced the signing of an agreement with the 
                  Defense Counterintelligence & Security Agency (DCSA) to operate 
                  all our US defence operations under a new Special Security Agreement 
                  (SSA), replacing the previous Proxy Agreement. This agreement fundamentally 
                  improves how we approach the largest defence market in the world 
                  and is a major milestone in our growth strategy. 
            --              In Australia we have secured a contract to design and construct 
                             an unmanned aerial systems (UAS) flight test range for the Queensland 
                             Government, leveraging our skills and experience of operating some 
                             of the most advanced land, sea and air ranges in the world under 
                             the LTPA for the UK MOD. 
 

We are increasing our focus on delivering mission-led innovation to meet our customers' needs:

 
            --   We have secured a managed service contract with the UK MOD, worth 
                  up to GBP30m, to provide an Open Source Intelligence capability, 
                  enabling our Armed Forces to use publicly available information 
                  and social media content to improve understanding of global events, 
                  emerging threats and to support operational decision-making. This 
                  win builds momentum in our strategy to grow our data analytics and 
                  intelligence capability critical to the future of modern warfare. 
            --              Today, we announce the acquisition of Naimuri on a cash-free, debt-free 
                             basis for GBP25m. Naimuri is a leading software development and 
                             data analytics company, providing agile cloud-based services and 
                             technology to the UK Intelligence and Law Enforcement communities. 
                             QinetiQ partners with Naimuri on several critical programmes delivering 
                             mission-led innovation around data-intensive challenges. We will 
                             invest and build upon Naimuri's strong capabilities in data analytics, 
                             data intelligence and agile software development to meet customer 
                             needs and drive growth in both the security and defence sectors. 
                             In the 12 months to 31 July 2020, Naimuri is expecting to deliver 
                             in excess of GBP9m revenue and GBP2m EBITDA. Naimuri employs c.70 
                             people with its headquarters and main facility in Manchester. Naimuri 
                             will be reported in EMEA Services, managed within the Cyber & Information 
                             business. 
            --              On 25 June 2020 we announced the disposal of Boldon James Limited 
                             to HelpSystems International Limited for GBP30m. Boldon James provides 
                             data classification and secure email solutions, and in the year 
                             ended 31 March 2020 generated GBP9m revenue. The disposal of Boldon 
                             James and acquisition of Naimuri have been strategy-led choices, 
                             generating capital from a non-core asset and reinvesting in a capability 
                             that is central to our vision-based strategy, to drive growth and 
                             shareholder value 
 

AGM

QinetiQ's 2020 Annual General Meeting (AGM) will be held at 11am today at our registered office at Cody Technology Park, Ively Road, Farnborough, Hampshire, GU14 0LX.

About QinetiQ

QinetiQ (QQ.L) is a leading science and engineering company operating primarily in the defence, security and critical infrastructure 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 . Follow us on LinkedIn and Twitter @QinetiQ. Visit our blog www.QinetiQ-blogs.com .

For further information please contact :

 
 John Haworth, Group Head of Investor Relations:            [phone] 
 Chris Barrie, Citigate Dewe Rogerson (Media enquiries):    [phone] 
 

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July 14, 2020 02:00 ET (06:00 GMT)