28 Apr 22. Working in partnership with customers in its three main UK, US and Australian ‘home markets’ and continuing to solve an ever increasing range of defence and security issues that customers and governments face in the wake of visibly increased level of threats to global peace and stability, QinetiQ has set out the next stage of a fascinating and ambitious plan for global growth.
QinetiQ is long established and highly respected international science and engineering company and one that is a leader in its field. Suffice to say that this is a company that has been growing customer demand for differentiated technology, test and training solutions with agility and pace and it is one that has been a delight to watch.
Operating primarily within global defence and security markets through delivery of innovative solutions that provide operational and competitive advantage to customers, The world is changing and QinetiQ is understandably recognising that within what it deems to be a £20bn addressable and fast growing defence and security solutions international market that there remains significant growth potential and opportunity for its highly specialist services.
Over the past 6 years QinetiQ’s three principle home markets have been the drivers for the delivery of 75% achieved revenue growth and which as the company states. is equivalent to 10% CAGR. This has been a superb achievement and all credit to the brilliant team put together by CEO Steve Wadey.
But in terms of growth this is only the start and yesterday QinetiQ set out a clear and compelling strategy to investors and customers that while continuing to emphasise primarily on the three home markets, it plans to grow annual revenues to more than £2.3bn over the next five years through a mix of strong organic based growth and strategically aligned acquisitions and in the process, double the size of the US and Australian businesses.
QinetiQ has six highly distinctive offerings – Experimentation and technology, Test and Evaluation, Training and Mission Rehearsal, Information and Sensing, Engineering and Support and Autonomous Systems and Robotics. Through its plan to global leverage all of these highly specialist activities the company clearly has enormous potential to achieve even greater success and long-term growth within what is by any standards, a vast addressable market.
It is the combination of reputation, experience together with the very size of the addressable market that in my view provides credibility needed in order for QinetiQ to achieve the next natural stage of its international growth strategy and I am in no doubt that this well managed company will succeed in the set of well-defined objectives it has outlined.
This forward plan is also based around pursuing coherent customer opportunities across nations. It plays to recently international collaborations amongst our allies such as the recent formation of AUKUS by the US, Australia and UK.
The forward growth plan also play to increased commitments by governments to defence spending by nations such as Australia and the strategically highly important US research and technology development market. This is a global growth plan that will be achieved through implementation of multi-domestic strategies focused on high priority growth segments and by leveraging offerings and capabilities right across the QinetiQ Group.
The Australian defence environment is undergoing huge and positive change. The potential for instability in this strategically very important region has over the past few months significantly increased. China, for example, is systematically exerting more pressure on Australia though its recent agreement with the Solomon Islands. Trade embargoes, freedom of movement, cyber-attacks are challenging regional relationships with similar pressure being felt by some of Australia’s regional neighbours even if these have not yet been recognised by certain Governments.
Alliances and the building of stronger relationships with allies are now a vital component of Australian defence strategy and this is what makes AUKUS so strategically important.
The Australian Government is committed to ensuring peace and stability in the region but it is equally prepared to ensure that it invests in defence and security including nuclear. To that end Australia is increasing its Defence budget to 2.2% GDP – spending $270bn plus over the next ten years.
Australia is also well aware of that Supply Chains need to be made more resilient in order to maintain operational capability and this reasons why Australian Industry Capability (AIC) is being mandated. In so positioning itself to provide strategically important capabilities, Australia has established 14 Government Sovereign Industrial Capability Plans with Implementation plans and capability development strategies
QinetiQ Australia employs over 650 people and has been growing its footprint across this vast and strategically important nations. Having an already excellent track record of growth, core capabilities include Advisory and Engineering Services: Advisory Services supporting Acquisition and Sustainment Programs, Engineering and Technical Services across Structural Integrity, Explosive Ordnance, Design and Prototype capability, Research and Experimentation, Software Development, Experimentation and Technology- Developing positions in Test & Evaluation, Training & Mission Rehearsal and Autonomous Systems & Robotics.
In the US QinetiQ, quite rightly in my view, believes that the current defense budget provides strong growth opportunities across a diverse portfolio. The mission pivot within US defense strategy is to address the threat of near-peer adversaries and we can be in little doubt after what has unfolded this year that geo-political events will accelerate this strategic shift.
The current budget for US defense is $782bn; $50bn higher than had been projected last year.
There is now already established a clear and galvanised political commitment and most analysts anticipate future US defense budgets to further increase. The focus for QinetiQ is deterrence, cyber security, defense R&D and supply chain and industrial base. The company is already well positioned on programs that underpin US modernisation and similarly well-positioned through established technological advances in robotics & autonomous systems, sensing, protection systems, electrification.
QinetiQ US subsidiary companies are providers of technologically advanced services and products to the US Department of Defense and national security agencies, positioned to deliver key aspects of the modernisation required. QinetiQ are already considered to be experts in robotics & autonomous systems, sensing, protection systems and electrification – delivering into air, land and maritime market sectors and over 600 employees are based in Virginia, Massachusetts and Pittsburgh.
QinetiQ US growth ambitions and continued commitment to this vast and important allied nation is based on market and customer position, coherent offerings and partnerships that are relevant to what it terms the US ‘mission pivot’ together with the evolving needs of current and future US warfighters. Again, the scale of ambition is based on leveraging multi-domestic defence and security capabilities.
Within the US the company envisages opportunities for growth based on Land – Next Generation Combat Vehicles program, Air – future airborne ISR and aircraft protection systems and Maritime – services on Ford Class carrier and Virginia submarine platforms. The company believes that it is well positioned for sustained, profitable growth in partnership with our core customers in government and industry.
What QinetiQ has outlined in regard to its well-defined future growth plan makes considerable sense. Ambitious it certainly is but by the same token, very doable too. This is a company that will in the years ahead be one that is very interesting to watch.
CHW (London – 28th April 2022)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785