XTEK secures support contract with Defence worth up to $110m over a decade

XTEK secures support contract with Defence worth up to $110m over a decade

Canberra-based military technology company XTEK (ASX: XTE) has secured a key support contract with the Australian Department of Defence that could be worth more than $110 million over the next decade.

The agreement stems from the $26.9 million acquisition by Defence of a mixed fleet of XTEK’s AeroVironment Small Unmanned Aerial Systems (SUAS) announced in December last year.

The company has been enlisted to maintain and sustain the SUAS fleet, which is used for tactical reconnaissance and surveillance tasks, building on existing support services the company has provided to Defence over many years.

XTEK says the contract provides for an initial four-year term for support services valued at $15.9 million with an additional $23 million of spare parts to be supplied over this period.

The contract has three two-year extensions, taking it to 10 years over the full term, with the extensions worth an extra $26 million for services and $45 million for spare parts combined.

“XTEK is very pleased to be able to continue to provide the Department of Defence with our high-end sustainment support services – this time for the new mixed fleet of advanced AeroVironment SUAS that we announced in December 22,” says XTEK’s CEO Scott Basham.

“This new multi-year contract, which has the potential to run over 10 years, and is worth up to $110 million over the contract period, demonstrates our ability to secure ongoing support services from our large customers.

“The team of support specialists are all in place and ready to support this new capability as it enters into service with Defence units around Australia.”

XTEK completed delivery of its latest $26.9 million contract for SUAS to the Department of Defence in FY23, helping drive the company’s revenue to a record $89.4 million, up 54 per cent from a year earlier.

The company posted record EBITDA of $10.9 million in FY23, while net profit after tax rose to $6.1 million from $5.7 million in FY22.

The group, which also manufactures and supplies ballistic armour products to the military, has operations in Australia, the US and Poland.

The company’s ballistics division last week scored a $3.2 million supply deal for high-end ballistic body armour products to an undisclosed international military customer.

It’s part of a pipeline of more than $375 million in opportunities the company has identified in the near term.

Today’s announcement of the major support contract with Defence sent shares in XTEK more than 14 per cent higher to 36.5c at 11.48am (AEDT).

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