Qinetiq Regulatory News (QQ.)

QinetiQ enhances position in global test and evaluation through acquisition of Meggitt Target Systems 

21 December 2016 - QinetiQ announces this morning that it has acquired Meggitt Defence Systems Limited and Meggitt Holdings Canada Inc. (together "Meggitt Target Systems") from Meggitt for £57.5 million on a cash-free, debt-free basis.

Meggitt Target Systems is a leading international provider of unmanned aerial, naval and land-based target systems and services for test and evaluation ("T&E") and operational training and rehearsal. The business is expected to generate approximately £28 million of revenue and approximately £5.5m of operating profit in the year to 31 December 2016.

Meggitt Target Systems provides target systems to approximately 40 countries from its operations in the UK and Canada, and performs on-site target services in 15 of those countries. It will form part of QinetiQ's new International business unit and will be reported within QinetiQ's Global Products division.

Strategic rationale

· Meggitt Target Systems holds a leading position in the growing global target systems and services market

o Meets increasing global demand for high-fidelity threat representation to validate defence and security capabilities against current and future threats

o Generates 90% of its revenue from outside the UK

· Opens new routes to market to accelerate QinetiQ's international growth

o Establishes a design and manufacture capability in Canada

o Adds multiple customer relationships in Europe, Asia and North America

· Strengthens QinetiQ's ability to deliver world-class test and evaluation

o Adds cost effective unmanned aerial, naval and land-based target systems and services

o Accelerates the modernisation of T&E services through the integration of threat representation with QinetiQ's existing capabilities

Financial highlights

· Acquisition of a highly cash generative and growing business

· Expected to be EPS accretive in the first full year of ownership

· Returns exceed QinetiQ's cost of capital within three years

· Financed from existing cash resources

Steve Wadey, QinetiQ CEO, said: "This acquisition accelerates the delivery of our strategic priorities to drive growth of our core capabilities in international markets, and to modernise and strengthen our ability to deliver world-class test and evaluation services."

"Meggitt Target Systems is a distinctive business with a strong management team and employees in Canada and the UK who are experts in the development and delivery of unmanned target systems and services. We know the business well having worked together for the past decade and I am delighted to welcome the team to QinetiQ."

This announcement contains inside information and the person responsible for making this announcement is Jon Messent, Company Secretary.

There will be a call for QinetiQ analysts and investors at 0745 hours UK time on 21 December 2016.

Dial in details: +44 (0) 20 3003 2666 Password: QinetiQ.

ENDS 

Notes for Editors:

About QinetiQ:

QinetiQ is a leading science and engineering company operating primarily in the defence, security and aerospace markets. We work in partnership with our customers to solve real world problems through innovative solutions delivering operational and competitive advantage.

About Meggitt Target Systems:

Meggitt Target Systems' core capability is in the provision of unmanned aerial, naval and land-based target systems and associated turnkey services for test and evaluation as well as operational training and rehearsal. The business has a broad range of non-ITAR restricted unmanned targets across multiple domains, including jet and propeller aircraft, rotary wing aircraft, land targets and high speed naval craft. It designs the command, control and avionics systems for its products and is able to provide bespoke integration solutions for individual customer requirements. For more information see: https://meggitttargetsystems.com/en-ca/

Gleacher Shacklock, Grant Thornton and Osborne Clarke provided advice to QinetiQ on the acquisition of Meggitt Target Systems.

For further information please contact:

Media relations: QinetiQ press office +44 (0) 1252 393500

Investor relations: David Bishop, QinetiQ +44 (0) 7920 108675