Acquisition

RNS Number : 5341A

QinetiQ Group plc

04 August 2008

 



QinetiQ Group plc

4 August 2008

Further expansion of North American operations -

$104.5 million acquisition of Dominion Technology Resources, Inc. 

QinetiQ Group plc announces today that it has agreed to acquire Dominion Technology Resources, Inc. ('DTRI'), a leading provider of high end products and services to the US Intelligence Community. DTRI's expertise focuses on mission architecture engineering, integration and operations support. 

Under the terms of the agreement, which is conditional upon regulatory clearance in the United States, QinetiQ will acquire 100% of the stock of DTRI for a net cash consideration of approximately $104.5m (post tax attributes of the transaction). The acquisition will be organised under the Mission Solutions Group of QinetiQ North America ('QNA').

This acquisition provides QNA with:

• A significant increase in QNA's presence in the US Intelligence Community enhancing its existing presence through DTRI's established relationships and proven performance with classified Intelligence Community customers;

• An exceptionally skilled senior management team will remain moving forward and a team of more than 100 experienced and skilled employees, virtually all of whom have high level security clearances. The founders will remain with QNA in a senior advisory role;

• Significant opportunity to leverage capabilities, customer relationships, reputation and domain experience to increase QNA's prominence as an industrial partner to the US Intelligence Community;

• Strong history of growth and profitability with 55% compound revenue growth from $12.4m in 2004 to $46.6m in 2007 and 35% compound  EBITDA growth from $2.4m in 2004 to $5.9m in 2007;

• Strong visibility to future revenues under long term contract awards - $397m of backlog through to 2016 as at 31 December 2007 and;

• A business well positioned to continue substantial year on year growth.

Commenting on the acquisition, QinetiQ's chief executive officer Graham Love said: 

'We are delighted to be joining forces with a high quality business like DTRI. We look forward to welcoming their employees into QinetiQ and working with the existing management team to grow the business substantially in the future.  DTRI operates in an important, fast growing market which is typically difficult to enter. Very importantly, DTRI brings new customer relationships from within the US Intelligence Community and provides us with further growth opportunities within the broader North American market.'

For further information please contact:

David Bishop, Media Relations                [phone]

Ben Lewis, Investor Relations                   [phone]

About DTRI

DTRI is a privately held company, headquartered in Reston, Virginia, which is almost 100% owned by current management. The senior management team has an average of over 30 years industry experience, are recognised as experts in mission architecture programmes by customers and will continue with the business after the acquisition. 

DTRI's expertise spans the development of concept of operations, target analysis, information processing solutions and training. It provides professional services in the areas of programme management, acquisition support, operations analysis, systems engineering and integration to various enterprise projects and a number of other risk reduction activities.  DTRI has strong and long term relationships with important classified customers of the US Government.  The programmes which DTRI supports for these customers provide end-to-end operational support tied directly to mission success. This wide range of expertise is highly valued in the US Intelligence Community. At 31 December 2007, the business had gross assets of $12.2m and a total contract backlog of $396.7m, of which $63.5m was funded. Profit before tax for the year ended 31 December 2007 was $5.6m. 

Further transaction details

QinetiQ will pay $123m of initial consideration to the vendors on completion. Two further deferred payments of $21m each will be made on the first and second anniversary of completion. The transaction will generate income tax deductions that will be utilisable against the taxable income of QNA providing cash tax benefits to QNA over the next two to three years following completion of $60.5m. The resultant net cash outflow associated with the transaction is $104.5m, before acquisition costs.  The consideration will be paid in cash from existing banking facilities and the transaction is expected to complete by early September 2008. 

About QinetiQ

QinetiQ (pronounced 'kinetic') is a leading international defence and security technology company with over 8,000 employees in EMEA (Europe, Middle East and Australasia) and more than 6,000 in North America. 

QinetiQ's vision is to be the world's leading provider of defence and security based technology solutions and services. QinetiQ's strategy is to strengthen its presence in North America, build on its powerful UK defence franchise by growing market share in technology insertion, advice and managed services, build valuable new market positions in selected EMEA markets outside the UK and take selected defence technologies into new commercial markets. 

In February 2006, QinetiQ Group plc was listed on the London Stock Exchange and joined the FTSE250 in June 2006.  In the year to 31 March 2008, QinetiQ delivered a 19 per cent increase in revenue to £1,366m, including organic growth of 8.6 per cent, and a 20 per cent increase in underlying operating profit to £127m.  Underlying earnings per share increased by 19% to 13.4p per share.  

 

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