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XTEK eyes significant opportunities as defence expenditure rises to 2% of global GDP

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With the US representing more than half the global defence budget, XTEK is well positioned to access this lucrative market.

XTEK Ltd - XTEK eyes significant opportunities as defence expenditure rises to 2% of global GDP

Quick facts: XTEK Ltd

Price: 0.515 AUD

ASX:XTE
Market: ASX
Market Cap: $27.38 m
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XTEK Ltd (ASX:XTE) has achieved multiple key milestones during the calendar year 2019 and is continuing to execute on its overall business strategy.

US operation

A key milestone was the strategic acquisition of HighCom Armour Solutions, Inc.

This acquisition provides XTEK with direct access to the lucrative US market with HighCom’s strong reputation and broad distribution networks in place, underpinned by a profitable ballistic product business.

XTEK expects the first XTclave manufactured products to be launched in the US in early 2020, following the integration of HighCom’s operations, expertise and experience into XTEK.

This launch aligns with the opening of XTEK’s XTclave factory in Adelaide, Australia, which is currently in the final stages of completion.

These milestones accelerate the commercialisation of XTEK’s high-value ballistic products in key global markets.

Space sector

XTEK has also achieved considerable milestones within the space sector this year, having leveraged the unique advantages that its state-of-the-art XTclave technology can bring to the space industry and formalising relationships with Skykraft and the Australian Space Agency.

Key preliminary designs have started to offer the first parts of satellites for contract in the near future.

XTEK will continue to collaborate with these parties and explore further opportunities to optimise advanced composites for space applications.

SUAS business

A key driver to the record FY19 financial performance was the continued growth of the Small Unmanned Aerial Systems (SUAS) business.

The company has enhanced its capabilities to be a full-service SUAS supplier, with the ability to supply and provide ongoing support throughout the SUAS lifecycle.

These enhanced system capabilities resulted in another key milestone with XTEK being awarded a long-term support contract with the Australian Defence Force (ADF) in September.

XTEK is now well-positioned to improve margins while continuing to leverage channels to expand beyond existing contracts in the future.

Favourable trends in the global defence sector

The company seeks to capitalise on significant value opportunities, underpinned by favourable trends and sentiments in the global defence sector, driven by the highest level of defence expenditure in over 25 years (~2% of global GDP).

With the US representing more than half the global defence budget, XTEK is well-positioned to access this lucrative market with a focus on leveraging the HighCom network to achieve sales with US law enforcement agencies.

As US defence and military contracts require US-based manufacturing and production, XTEK’s long-term plan is to develop its existing manufacturing capabilities in the US in order to target these valuable contracts.

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Full interview: XTEK's US acquisitions result in positive share price moves

XTEK Ltd (ASX:XTE) managing director Philippe Odouard updates Proactive Investors on the latest market news which have seen the company’s share price jump from 40 cents to the high 70s. Odouard said the re-rating could be attributed to US acquisitions, including the newly completed HighCom...

on 1/10/19

3 min read