QinetiQ targets drones in £57 million takeover
Auto and aeroplane parts maker Meggitt Target systems has sold its target drone division to QinetiQ as part of a plan to re-focus on business of scale.
Meggitt Target systemsMeggitt Target systems, which provides land, aerial and seaborne drones for military training in 40 countries, is headquartered at Meggitt Holdings Canada with production carried out in both the UK and Canada. This year, the business is expected to generate revenues of £28 million and an operating profit of about £5.5 million.In a statement, Meggitt said the disposal was in line with its "strategy to focus on businesses of scale in attractive markets where our leading positions offer greater potential for growth and operational efficiencies". The company also said it would channel £10.2 million from the deal into a fund to reduce a deficit in its UK pension plan.
QinetiQSteve Wadey, chief executive of QinetiQ – a UK science and engineering company operating primarily in the defence, security and aerospace markets – 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."It has a significant number of customer relationships and that gives us additional routes to market where we can bring capability to wider areas of test and evaluation."
Annual profit plungeMeggitt has had a rough time of late with annual profits plunging 60 per cent last August, mainly because of a £50.8 million hit on its currency hedges and despite an 11 per cent rise in revenues to £883 million.The Financial Times commented, "Meggitt knows a lot about what keeps aircraft in the air. It has been in the aviation business since 1860, when it supplied altimeters to hot-air balloonists. However, it seems to have lost the knack of keeping its own shares aloft. After a series of profit warnings, Meggitt shares are at 468p, way below the early 2015 heights of 550p. That is despite activist Elliott Advisors arriving on the share register this summer."Meggitt, which supplies parts and materials for new aircraft, spares to old ones and systems to the energy industry, has been knocked off course by the oil price fall and customers cutting budgets just as its own spending peaked."This year, Stephen Young, Meggitt’s boss, has been tipping out the ballast. He has cut costs, reduced debt, rationalised plants, and pushed further into faster growing areas in civil aviation and sold non-core divisions. Now he thinks Meggitt might be at the turning point. End-of-year net debt will be comfortably between 1.5 and 2.5 times earnings before tax, interest, depreciation and amortisation."
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