Investor Teach-In
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Investor teach-in QinetiQ Group Plc An introduction to QinetiQ’s international businesses 13 September 2018 Agenda 1 Introduction 2 International strategy and progress 3 QinetiQ Australia 4 QinetiQ North America 5 Conclusions 2 International Teach-In 13 September 2018 International growth is a key part of our strategy Vision The chosen partner around the world for mission-critical solutions, innovating for our customers’ advantage Strategy UK International Innovation Lead and modernise the UK Defence Build an international company that Invest in and apply our Test & Evaluation enterprise, by working in delivers additional value to our customers inherent strengths for customer advantage partnership with Government and by developing our home countries, creating in defence, security and critical prime contractors new home countries and exporting infrastructure markets Value proposition Capability Generation & Assurance Capability Integration Threat Representation Operational Readiness 3 International Teach-In 13 September 2018 Our UK business supports our international growth ambitions • Long Term Partnering Agreement (LTPA) with UK MOD Capabilities covered under –25-year contract running until 2028, c.£300m pa revenue December 16 amendment • Trusted to deliver critical skills and facilities to enable generation and assurance of national defence capabilities –e.g. submarine and warship signature measurement –Attracts international customers from US, France, South Korea, Taiwan & Turkey –Advise other nations on how to modernise and upgrade their facilities • £1bn amendment in December 2016 to modernise and deliver world-class air ranges and test aircrew training –Investment recovered over life of contract –Attract further UK, international and industry users Modernising enduring capabilities to meet future needs and creating a platform for growth 4 International Teach-In 13 September 2018 We have a large addressable market to pursue • Focus on core offerings SERVICES & PRODUCTS –RDT&E1 + Training: integrated capability generation & assurance (defence, security and critical infrastructure) Size £££bn pa –Services & Products: distinctive Growth +2-5% CAGR –Technology: disruptive Share <1% (£280m) • Focus on target markets UK TRAINING INTERNATIONAL TRAINING –Primary sectors: Defence, Security, Critical Infrastructure Size £1bn pa Size ££bn pa –Home countries: UK, US, Australia Growth +1% CAGR Growth +1-3% CAGR –Selected new countries in Europe, Middle East and Asia-Pacific Share ~5% (£55m) Share <1% (£8m) • Addressable market > £8bn pa: significant growth potential UK RDT&E INTERNATIONAL RDT&E –Increasing share in existing markets Size £1.5bn pa Size £5.9bn pa3 –Leveraging strengths into attractive near-adjacent markets Growth +1% CAGR Growth +4% CAGR Share ~30% (£450m2) Share <1% (£40m) 2 ~£300m pa via Long Term Partnering 3 Australia, Canada, New Zealand, France, Germany, Agreement (LTPA) with UK MOD. Sweden, Saudi Arabia, UAE, Qatar, Turkey included. Driving campaigns, joint ventures & acquisitions USA ($79bn pa) excluded above. 1 RDT&E = Research & Development and Test & Evaluation. Source: Jane’s Market Forecast, FY18 market sizing (USD/GBP exchange rate of 0.76), UK MOD. QinetiQ market share based on FY18 revenue. CAGR = compound annual growth rate (FY18-22) current market share future market potential 5 International Teach-In 13 September 2018 Significant international opportunity, encouraging early progress International revenues (£m) 226 • Revenue from International customers grown from £158m in 176 FY16 to £226m in FY18 through organic & inorganic growth 158 –International revenue grown from 21% to 27% in two years –More than doubled revenue in the Middle East FY17-18 • Two acquisitions successfully integrated, performing FY16 FY17 FY18 well and accelerating our international growth ROW ROW Australia 8% 10% –Third acquisition due to complete in Autumn 2018 4% Australia 7% –Attractive pipeline of further bolt-on opportunities but US 9% maintaining discipline on pricing US 10% • Focus on international revenue growth key part of Group level UK UK management incentivisation 79% 73% FY16 FY18 Long-term ambition to grow international revenues to 50% of Group 6 International Teach-In 13 September 2018 Today’s speakers International QinetiQ Australia QinetiQ North America Iain Farley Greg Barsby Jeff Yorsz • Joined QinetiQ in 2016 as • Joined QinetiQ as Managing Director • President of QinetiQ North America Managing Director, International Australia in 2014 since January 2015 • 25 years experience in the upstream • 20 years’ experience in Defence and • Served as Senior Vice President of oil and gas industry in a range of Defence industry, working within both small Industrial Operations at Metrologic engineering, project management, and global businesses, and serving in the Instruments, Inc. business development, management Australian Army and executive roles • Former Strategic Business Unit Director for • Previous experience leading the Asia Northrop Grumman Corporation • Operator and service company experience Pacific Defence & Government services at Expro Group, Mobil, Schlumberger division of KBR 7 International Teach-In 13 September 2018 International strategy and progress Iain Farley Managing Director – International International today Established businesses Emerging businesses Export sales and campaigns Home Countries: • Canada • UK-based Export Sales Team • United States • Sweden • Strong UK Government support and • Australia • Middle East joint ventures relationships (UK DSO) Subsidiaries: • Regional Sales & Marketing Offices – • Network of global resellers • QinetiQ Target Systems • OptaSense UAE, Malaysia • UK defence prime relationships • Commerce Decisions • EIS* Core Businesses – Organic Growth Seeding, Positioning for Growth Product Sales and Services *Subject to completion 9 International Teach-In 13 September 2018 We help our customers modernise or develop their defence capabilities Modernise defence capability Develop indigenous defence capability • Legacy, outdated infrastructure • Have equipment but need support integrating it • New sophisticated platforms • Looking for a “customer friend” and technical support • Complex threat environments to test and train against • Creating competitive operational readiness • Looking for innovative technical solutions, commercial models and operational efficiencies Example regions: Example regions: • Five Eyes (UK, US, Canada, Australia, New Zealand) • Middle East • Western Europe • South East Asia Tailor our offer to maturity of defence capability 10 International Teach-In 13 September 2018 Focused approach to a range of growing defence markets Modernise Develop UK 5 Eyes Europe Asia/Middle East Modernise and transform Expand into 5 Eyes Position as Europe’s leading Support indigenous UK defence and security leveraging UK assets/ RDT&E partner through capability development capability capability and building collaborative projects & in- via local partners/JVs in-country capability country capability and selective investment Defence budget growth rates 2018-2023 +0.5% +2.0% +1.8% +3.9% Prioritisation Existing customer relationships Customer appreciation of Value Proposition Opportunity to grow at pace UK Government support Market dynamics & defence spending Sustainable growth potential Tier 1 Priority Markets Tier 2 Tier 3 Australia, Germany, Canada, Qatar, France, India, Japan, Malaysia KSA and US Sweden and UAE South Korea and Turkey 11 International Teach-In 13 September 2018 We use our range of services and products to enter new markets… Integrated QinetiQ’s unique integrated proposition Capability Generation & Assurance Test & Evaluation • Enhanced Test & Evaluation Capabilities Modernisation • Range Modernisation Research & • Contracted R&D • Strategic partner • Experimentation & • Co-invested Development Innovation • IP creation Distinctive • Test & Evaluation • Value added services • Operational Training • Advice, intelligence, information systems, Services • Rehearsal & Trials protection, unmanned systems, space systems Engineering & • Pre-acquisition • Leveraging UK MOD track record • Engineering Support • Independent “Customer Friend” Advisory Services • Commerce Decisions • Technical consulting and professional services • UK Export Sales • Using products to seed new markets Product Sales • QTS Targets • Develop brand awareness • QNA, OptaSense • Establishing new relationships 12 International Teach-In 13 September 2018 … and then focus on increasing our value proposition Integrated Professional services R&D – Federal Mine Warfare Major Service agencies Maintenance Facility Capability Generation Provider (MSP) DTSG Workshop & Assurance Test & Evaluation Australia Range Modernisation modernisation Land range Coastguard Fleet Renewal Research & modernisation Future Fighter Capability Development Programme Canada Distinctive Services Germany Aerial, land and EIS aerial training maritime targets Land T&E facility Engineering & Advisory Services Qatar Land pre-acquisition support Future Navy transformation programme Product Sales 13 International Teach-In 13 September 2018 Supporting Canada to modernise its defence capabilities Modernise • “Strong. Secure. Engaged.” • Government of Canada – Coast to Coast Facilities Review Enacting defence policy –Consolidation of under-utilised laboratories and test facilities – Doubling of Capital Projects by 2021 ($4B to $8B) • Government’s Innovation Agenda –Capacity shortage to stand-up Project Management Offices (PMOs)