Completion of the acquisition of Avantus Federal LLC
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 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.
For further information please contact:
John Haworth, Group Director Investor Relations: +44 (0) 7920 545841
Lorna Cobbett, Citigate Dewe Rogerson (Media enquiries): +44 (0) 7771 344781