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Qinetiq’s US PUSH PAYS OFF

06 Jul 05. Peter Spiegel of the FT reported that Qinetiq, the military technology group formed out of the privatisation of the UK defence ministry’s advanced researched laboratories, saw strong revenue and earnings growth last year, thanks to its aggressive push into the US, the company will announce today.

Its two US acquisitions – it bought Westar, the defence electronics group, for £77m and Foster-Miller, the engineering specialist, for £92m late last year – helped raise revenues in 2004 by 9.7 per cent to £872.4m. Pre-tax profit rose 72.9 per cent to £82.3m.

Sir John Chisholm, Qinetiq’s chief executive, said of the new US units: “They step into a different league when they join us. They may be a $150m (£85m) company but when they join a company [that] is pressing on towards $2bn, they can bid for bigger jobs.” Qinetiq recently re-organised its business in what many regard as a precursor for a public offering. Last year, the company hired Morgan Stanley, the investment bank, to conduct a “readiness study” in advance of an offering, but its shareholders – the Ministry of Defence holds 65 per cent of its shares, while the Carlyle, the private equity group, holds 31 per cent – decided against a float, even though Morgan Stanley had concluded Qinetiq was ready. Qinetiq is expected to make another run at an IPO, perhaps by the end of the year.

But Sir John declined to comment on the prospect, saying only: “It is a matter for the shareholders.” He said, however, that the company was continuing to look for takeover targets, particularly in the US. Despite growth in the US, revenues from the MoD, Qinetiq’s largest customer, were flat, thanks in part to slowing spending that has hit all defence companies. “Uncertainty over government plans for the UK defence budget earlier in the year has resulted in some slippage in the start-up of new projects,” the company said in a statement.

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