XTEK’s small unmanned aerial system support contract with Australian Defence Force potentially worth $35m

XTEK ASX XTE small unmanned aerial system support contract Australian Defence Force
XTEK’s system support contract with the Australian Defence Force is potentially worth $35 million over seven years.

XTEK Ltd (ASX: XTE) has secured a long-term contract to provide repair and maintenance services to the Australian Defence Force’s growing small unmanned aerial system (SUAS) fleet.

Following yesterday’s announcement, XTEK revealed more details of the long-term service and repair contract with the ADF.

As AeroVironment’s exclusive Australian distributor, XTEK completed delivery of the units during the 2019 financial year – generating $30 million in sales revenue for the period.

XTEK also completed installation of its Canberra-based state-of-the-art SUAS repair and maintenance facility in the first half of 2019.

This facility is expected to underpin XTEK’s service and repair offering, in addition to supplying the units themselves.

The ADF currently owns 59 AeroVironment WASP SUAS units, and expects to receive a further 20 in 2020.

It is also anticipated the ADF will purchase more of the units once it finds additional applications to use SUAS technology.

XTEK managing director Philippe Odouard said this was a “significant contract win” for the company.

“This follows the recent installation of the repair and maintenance facility and represents guaranteed support work over the medium and long term,” he explained.

“We are a full-service SUAS supplier, with the ability to provide training, spares, repairs and ongoing maintenance services.”

“This is aligned with the [Australian] Federal Government’s objective to increase domestic content and IP within defence procurement and we look forward to working with the ADF,” Mr Odouard added.

The initial support contract is for three years, with multiple options to extend it through to 2026.

XTEK anticipates the contract will generate revenue of $5 million per year and bring in up to $35 million over seven years.

The company will complete most of the contract in Australia, however it will source original equipment manufactured parts from AeroVironment in the US.

By mid-afternoon, XTEK’s share price was up 1.43% to $0.71.

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