| Type | Public limited company |
|---|---|
| Traded as | LSE: QQ. |
| Industry | Research and development |
| Founded | 2001 |
| Headquarters | Farnborough, United Kingdom |
| Number of locations | UK, North America and Australia |
| Key people | Mark Elliott, Chairman Leo Quinn, CEO |
| Products | Defence, Security, Aviation and Energy and Environment |
| Revenue | £1,625.4 million (2010)[1] |
| Operating income | £120.3 million (2010)[1] |
| Net income | £(63.3) million (2010)[1] |
| Employees | 13,580 (2010)[1] |
| Website | www.qinetiq.com |
Qinetiq ( /kɪˈnɛtɪk/ as in kinetic; officially styled QinetiQ) is a British global defence technology company, formed from the greater part of the former UK government agency, Defence Evaluation and Research Agency (DERA), when it was split up in June 2001 (with the smaller part becoming Dstl). Its major sites are in Farnborough, Hampshire, and in Malvern, Worcestershire where it was formerly DERA and is the largest single employer in the area. Former Central Intelligence Agency Director George Tenet served as an independent non-executive director to Qinetiq's board between October 2006 and January 2008.[2] It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
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In 2001, when Defence Minister Lewis Moonie announced the creation of Qinetiq, he said that it would remain a British company based in the UK. The MoD would keep a 'Special Share' in the company, and safeguards would be in place to prevent conflicts of interest. In February 2003, the U.S. private equity firm the Carlyle Group acquired a 33.8% share in the company for £42m. Prior to stock market flotation, ownership was split between the MoD (56%), Carlyle Group (31%) and staff (13%). The Carlyle Group was expected to invest for three to five years, after which a stock exchange float would take place.[3]
In September 2004 Qinetiq acquired the U.S. defence companies Westar Corporation[4] and Foster-Miller (maker of the Talon robot).[5] Also in 2004, it acquired HVR Consulting Services Ltd. a leading UK based engineering consultancy.[6] In early August 2005, the company announced it would acquire Apogen Technologies, Inc., pending regulatory approval.[7] The Qinetiq website lists this merger as costing $288.0m (£162.7m). In September 2005, it acquired a 90% share of Verhaert Design and Development NV (VDD), the Belgian space systems integrator.[8] In October that year, it acquired Broadreach Networks Limited, a supplier of Wi-Fi internet to the European rail industry,[9] and in February 2006, it bought Graphics Research Corporation Ltd, developer of the Paramarine software suite of ship and submarine design tools.[10]
The flotation of the company has been dogged with controversy.[11][12][13][14] Ennobled in 2005, Lord Moonie who handled the initial sale, said in 2006 that the government's 31 per cent stake in Qinetiq should not have been sold when equity markets were languishing in 2002. He said that he had argued for the sale to be delayed but was overruled by the Treasury who had convinced the Ministry of Defence to go ahead.[15]
Qinetiq was floated on the London Stock Exchange in February 2006. The company had been valued at between £1.1bn and £1.3bn, with the MoD holding estimated to be worth £616m – £728m, the Carlyle Group's holding £341m – £403m, and staff/management's holding worth £143m – £169m. Controversy was generated by the very large returns for the Carlyle Group and senior managers, with figures of over £20m suggested in the media for Sir John Chisholm. Financial press speculation concerning a stock exchange float increased in January 2006. On 12 January 2006 an announcement was made in parliament by Dr John Reid, Secretary of State for Defence. He said that the Carlyle Group, 'will continue to retain a significant stake in the company', and that the British government would continue to hold a 'Golden Share' in Qinetiq to protect the United Kingdom's security and defence interests.
Controversy also arose around the fact that retail investors were to be excluded from the initial public offering (IPO) due to Qinetiq's complexity and the fact that institutional investors would require less complicated marketing and financing. This led to contrasts with the 'Sid' campaign for British Gas plc in 1986, where retail investors were encouraged to buy shares, both with discounts and a large advertising campaign. The issue was partially resolved by allowing some brokerage firms to place orders in the IPO as part of a combined order, allowing the firm to purchase as though an institutional investor, but on behalf of clients. While this did not result in a public campaign or retail investor discounts, it did allow many investors to purchase shares directly in the IPO.
The company floated on 10 February 2006, with an IPO of 200p per share, which gave Qinetiq an initial market value of £1.3bn. On 13 February 2006 (the Monday after the Friday IPO) Qinetiq shares closed at 219.5p per share, valuing the company at over £1.4bn. However, by late March 2006 Qinetiq shares dropped 15% from that peak (7% from the IPO price) to 186p each. Following the IPO, the MoD held 19.2% of Qinetiq with the Carlyle Group holding 10.3%.
Speculation that a consortium including Qinetiq was about to win a £10bn MoD training contract helped push their share price back above 190p in early November 2006. It was announced on 17 January 2007 that the Qinetiq-led Metrix consortium was the preferred bidder for package one of the MoD's Defence Training Rationalisation programme, worth approx £16bn.[16]
In January 2007, the Company bought Analex, a U.S. corporation providing high technology professional services and solutions, principally to the United States Government and its agencies.[17] Analex originally incorporated in 1964 under the name Biorad which then evolved into Hadron, Inc.,[18] a U.S. government systems consulting firm chaired by Earl Brian, a controversial, often shady, businessman who eventually became the centre of focus in a Ronald Reagan-era, software piracy case: Inslaw Inc. v. United States Government.
On 9 February 2007, the Carlyle Group sold its remaining 10.3% stake at a price of 205p per share, giving it an overall £290m return on its original investment.[19]
In February 2007 the acquisition of ITS Corporation, a provider of IT services to the US government and its agencies, was announced.[20] The disposal of Aerospace Filtration Systems (formerly part of Westar) was announced at the same time.[21] In June, Qinetiq Group plc announced that its U.S. subsidiary Apogen Technologies Inc. had completed the acquisition of 3H Technology LLC, a specialist IT company with US government and commercial clients.[22] In October, the company completed the acquisition of Boldon James Holdings Limited, a UK-based provider of software solutions for high end secure messaging, primarily for military, government and security customers worldwide.[23]
In March 2007 Qinetiq spun off a new company, Omni-ID, Ltd., for the purpose of commercialising passive UHF Radio-frequency identification (RFID) tags.[24]
The MoD sold its remaining 18.9% holding in Qinetiq in September 2008 at 206p per share, raising £254m. The government retained its 'special share' in the company, giving it control over any potential takeover.[25]
In 2007, the National Audit Office conducted an inquiry into the privatisation of Qinetiq to determine whether UK taxpayers got good value for money from the sale. The NAO inquiry looked at the following issues:
In November 2007, the NAO reported that taxpayers could have gained "tens of millions" more and was critical of the incentive scheme given to Qinetiq managers, the 10 most senior of whom gained £107.5m on a total investment of £540,000 in the company's shares. The return of 19,990% on their investment was described as "excessive" by the NAO. The role of Qinetiq's management in negotiating terms with the Carlyle Group, while the private equity company was bidding for the business, was also criticised by the NAO. Carlyle bought a third of the business for £42m which grew in value to £372m in less than four years.[27] However, the Ministry of Defence defended the sale:
Qinetiq is an international defence and security technology company that provides technology-based products and services to government and commercial customers. More than 2,000 of Qinetiq's Talon robots have been deployed to Iraq and Afghanistan most of which are being used to remotely locate and disable roadside bombs. Qinetiq's SPO stand-off threat detection system has been sold to the US Transportation Security Administration for use at American railway stations and airports.[28] Qinetiq's Zephyr, solar powered unmanned aerial vehicle recently flew non-stop for fourteen days – an official world record for longest duration unmanned flight.[29]
Qinetiq has a 25-year agreement with the UK Ministry of Defence (MoD) to provide test and evaluation services and manage military ranges. This agreement is the Long Term Partnering Agreement (LTPA). It is a major stakeholder in the UK Defence Technology Centre which places military research contracts on behalf of the MoD.
Also, Qinetiq has a 15-year agreement with the MoD under the Maritime Strategic Facilities Agreement (MSCA) to provide strategic maritime facilities and capabilities, including hydromechanic facilities at Haslar, biomedical facilities on the UK's South Coast, and submarine structures, survivability and shock testing facilities at Rosyth.
The Qinetiq Group comprises Qinetiq EMEA (Europe, Middle East and Australasia) and Qinetiq North America. There are three business divisions in North America (technology solutions, systems engineering and mission solutions) and three in EMEA (consultancy, managed services and technology solutions).
The major UK sites are at Farnborough, Hampshire (the historical Royal Aircraft Establishment) and Malvern, Worcestershire (the historical RSRE/RRE/TRE), each having more than 2,000 employees. Trials aircraft are flown out of Boscombe Down, Wiltshire (the historical A&AEE).
Qinetiq is one of the top 10 largest UK employers of science and engineering graduates,[30] recruiting around 150 a year.[31] Between 2002 and 2006, it has appeared in the Times Top 100 Graduate Employers list. However Qinetiq has since been accused by workers' unions of exhibiting higher than average levels of stress-related depression among employees, although this is strongly denied by the company.[32]
QinetiQ have pursued a redundancy policy that has resulted in the loss of considerable and broad technical capability, while maintaining (and growing) the numbers of non-revenue earning middle and upper managers.
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