QinetiQ Group plc Annual Report & Accounts 2024
Delivering
enduring
operational
advantage
QinetiQ Group plc
Annual Report & Accounts 2024
Our Purpose
Protecting lives by
serving the national
security interests
of our customers
Contents
Strategic report
Overview
01 Financial and operational highlights
02 Group Chair’s statement
04 Group CEO review
Strategy and operating environment
08 Strategic framework
09 What we do
10 Business model
12 Investment case
14 Market themes
16 Trading environment
Performance
18 Segmental reporting
20 Sector review
28 Group CFO review
32 Key Performance Indicators
Sustainability
34 Environment
48 Social
54 Governance
Risk
56 Risk management
62 Viability statement
Section 172 statement
65 Section 172 statement and
stakeholder engagement
67 Section S172 relevant disclosures
68 Non-financial and sustainability
information statement
Corporate governance
72 Group Chair’s Introduction to Governance
74 Governance framework and Board
at a glance
76 The significance of our purpose,
values and strategy
78 Board biographies
81 Governance structure
82 Division of responsibilities
83 Composition, succession
and evaluation
85 Board decision-making
87 Board activity
88 Management and control of
US subsidiaries
89 Employee engagement
92 Nominations Committee report
97 Director effectiveness
100 Audit Committee report
106 Risk & Security Committee report
110 Directors’ remuneration report
112 Remuneration at a glance
117 Annual Report on remuneration
130 Directors’ Report and Statutory
information
134 Independent auditors’ report
Financial statements
142 Consolidated income statement
143 Consolidated comprehensive income
statement
143 Consolidated statement of changes
in equity
144 Consolidated balance sheet
145 Consolidated cash flow statement
145 Reconciliation of movements in net debt
146 Notes to the Financial Statements
193 Company balance sheet
194 Company statement of changes in equity
195 Notes to the Company Financial
Statements
Other information
197 Five-year financial summary
198 Additional financial information
199 Glossary
200 Alternative performance measures
201 Shareholder information
203 Company information and advisers
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
01
Orders
£1,740.4m 1%
FY23: £1,724.1m
£1,740.4m
£1,724.1m
£1,226.6m
FY23
FY22
FY24
Book-to-bill ratio of 1.1x with 19% growth in orders
excluding the 10 year, £260m Maritime Strategic
Capability Agreement contract in FY23.
Statutory operating profit
£192.5m 11%
FY23: £172.8m
£192.5m
£172.8m
£123.7m
FY23
FY22
FY24
Highlights
Our performance
Financial Highlights
Revenue
£1,912.1m 21%
FY23: £1,580.7m
£1,912.1m
£1,580.7m
£1,320.4m
FY23
FY22
FY24
Underlying earnings per share
29.4p 11%
FY23: 26.5p
29.4p
26.5p
20.6p
FY23
FY22
FY24
Underlying* operating profit
£215.2m 20%
FY23: £178.9m
£215.2m
£178.9m
£137.4m
FY23
FY22
FY24
Statutory earnings per share
24.2p 10%
FY23: 26.8p
24.2p
26.8p
15.7p
FY23
FY22
FY24
Operational Highlights
Experimentation and technology
DragonFire
Achieved the UK’s first high-power
firing of a laser weapon against aerial
targets using our advanced coherent
beam-combining technology.
Test and evaluation
Formidable Shield ‘23
Successfully facilitated the Formidable
Shield exercise designed to test ballistic
missile defence capabilities of NATO
and partner nations.
Robotics and autonomous systems
Robotic Combat Vehicle
More than $30m orders won in Robotic
Combat Vehicle (RCV) Portfolio
Programs and selection by US Army for
Phase I, Platform Prototypes as part of
Oshkosh Defense Consortium.
Cyber and information advantage
TARS
Awarded $170m contract by U.S.
Department of Homeland Security (DHS)
to deliver the Tethered Aerostat Radar
System (TARS) programme.
Engineering services and support
Engineering Delivery Partner
Continuing to deliver customer benefits,
we secured a further £472m of orders
through this UK Defence Framework
contract, taking orders over the first five
years to £1.5bn.
Training and mission rehearsal
JATTS
Our Air Affairs team has seen a 24%
increase in demand in flying hours
through the Joint Adversarial Training
and Testing Services (JATTS) contract
for the Australian Defence Force.
* Definitions for the Group’s ‘Alternative Performance Measures’ can be found in the glossary. Underlying operating profit refers to operating profit from segments. See note 2 for details .
QinetiQ Group plc | Annual Report & Accounts 202402
Neil Johnson
Non-executive
Group Chair
//QinetiQ continues to
provide critical expertise,
protecting lives and
serving the national
interest of our customers
– I’m proud of the
important role we play
in national defence and
security, helping to make
the world a safer place.//
We continue to see increased demand for our
six distinctive offerings with particularly strong
progress in EMEA Services. Budget delays
and market uncertainty has impacted the
speed of growth in the US over the past year;
whilst this was an area of risk identified at the
point of the Avantus acquisition it has been
challenging to offset these delays, impacting
the overall Global Solutions segment this year.
Despite these setbacks, at a Group-level we
once again achieved good revenue growth and
stable margins and remain confident in the
future prospects of the business, which is well
aligned to the planned structural growth areas
of defence spending.
As a Board we continue to actively engage
in the refinement and iteration of Company
strategy – at our October 2023 Board meeting
we engaged external experts from our main
customers, partners and academia to review
and consider the 10+ year view of the Company
and its strategic direction. As part of this we
remain focused on delivering for our customers,
people and shareholders; both organically,
and once current acquisitions are proven, with
further acquisitions.
Delivering for our customers, people
and shareholders
We understand that excellent customer
relationships are critical to our success.
Ensuring we retain an engaged and committed
workforce helps us to meet and exceed
customer expectations. We actively engage
as a Board with our people, and this year
have enjoyed extensive interactions with our
colleagues in Australia, the UK and the US,
including a number of site visits.
I’m delighted to have engaged directly with a
large number of shareholders in the last year,
either via one-to-one meetings or through the
completion of our Shareholder Perception Audit
– all of these engagements have helped me
and the Board to understand the views of our
UK, US and European shareholders to shape our
thinking and decision-making. We are pleased
to demonstrate our balanced capital allocation
policy with the commencement of the share
buyback and, reflecting our confidence in the
Delivering value for our
customers, people and
shareholders
Group Chair’s statement
We continue to see
unrest and conflict across
many regions of the
world, demonstrating
the important role of the
defence sector. QinetiQ is
critical to national defence
and security, delivering
world-class engineering
and technology through
our committed and
inspirational people.
Alongside our customers, we continue to
witness the remarkable pace of change of
modern warfare. Such structural change,
coupled with escalating tensions, has resulted
in unprecedented levels of funding. In April, the
UK Government announced an incremental
£75bn of defence spending, the ‘biggest
strengthening of our national defence in a
generation’, with defence spending set to rise
to 2.5% of GDP by the end of the decade. Such
commitment, and transatlantic recognition
of the requirement for greater investment,
transcends party politics. It is increasingly
apparent that we are at a turning point in terms
of global security, with the consequences of
inaction potentially catastrophic. Within this
context, I am extremely proud of the critical
and unique role we have in developing, testing
and assuring cutting-edge systems that give
our customers advantage on the battlefield.
This, combined with the work we do to train our
customers to use those enhanced sovereign
defence capabilities in the land, sea, air, cyber
and space domains, ensures they are able to
protect and enhance their defence and security.
We have a clear and relevant strategy to drive
meaningful outcomes for our customers,
growth and opportunity for our people, and
significant returns for our shareholders.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
03
Key: Final Interim
2019
2020
2021
2022
2023
2024
7.7p
8.25p
6.6p
6.6p
6.9p
7.3p
2.1p 4.5p
2.2p 4.4p
2.2p 4.7p
2.3p
2.4p
2.6p
5.0p
5.3p
5.65p
future, an increase in our progressive dividend
growth rate from 5% to 7%. The buyback
represents an attractive use of our capital to
drive shareholder value whilst maintaining
the financial flexibility to invest in the ongoing
execution of our strategy to deliver sustainable
growth and attractive returns.
Sustainability remains an important area for
consideration and debate, both within the
business and at Board-level. In the past year
we have retained our rating as a top-rated
ESG company by Sustainalytics and our AA
rating from MSCI. We have identified the
most material issues for our business and
monitor these as non-financial KPIs, where
we are pleased to have seen improvements
across safety (lost time incidents), employee
engagement and Scope 1 and 2 greenhouse
gas emissions.
Board changes
On 16 April we announced that Carol Borg,
Group Chief Financial Officer (CFO) would be
stepping down immediately from her role. In
her place we have appointed Martin Cooper
and he is expected to join the QinetiQ Board
no later than October. Martin is a qualified
chartered accountant and has more than 25
years’ experience leading multi-disciplinary
teams in senior finance roles. He joins QinetiQ
from BAE Systems where he held a number of
positions including UK & Rest of World Financial
Controller, Divisional Finance Director and most
recently Investor Relations Director.
To enable a smooth transition in the interim
period prior to Martin joining QinetiQ, Heather
Cashin, currently the Group Financial Controller,
has been appointed Interim Group CFO. David
Smith, former Group CFO of QinetiQ, has agreed
to provide advice and support services to
Heather and the Board during the interim period.
In addition to the above, a few months ago I
was delighted to announce two new Board
appointments which further strengthens the
breadth and depth of skills on the Board: Ross
McEwan CBE and Dina Knight both joined the
Board on 1 March 2024.
Historical dividend payments
Ross has been Chief Executive Officer and
Managing Director of National Australia Bank
Limited (NAB) since December 2019 and will
retire from NAB on 1 July 2024. Ross brings
extensive global business experience at the
highest level and his successful track record
is recognised in both the UK and in Australia.
Dina is Chief People Officer of global technology
services and solutions provider Datatec Group
and Logicalis International, accountable for
its people operations and strategy. Dina is a
seasoned HR professional and will bring a broad
spectrum of corporate strategic experience to
the role.
Susan Searle will remain as Chair of the
Remuneration Committee for the time being
to provide an extended handover to Dina, after
which Susan Searle will step down as a Non-
executive Board member. I would like to thank
Susan for her invaluable contribution to both the
Board and the QinetiQ Group.
Larry Prior took the decision to step down
from the Board to be able to devote his time
and focus to another corporate role. Larry’s
thoughtful advice and guidance to the Board
and the business will be missed. During the
coming year we will be looking at options for
bringing a US perspective back onto the Board.
Overall I am confident we have the right mix of
skills and experience on the Board to provide
effective challenge and support to the business
as it continues its global growth.
Whilst not Executive-level appointments, I am
also pleased to see the QinetiQ Leadership
Team develop further, with the appointment
of Iain Stevenson to the newly created role of
Chief Operating Officer, and Will Blamey, as
Chief Executive of our UK Defence sector. The
new role of Chief Operating Officer will provide
increased focus on the delivery of consistent
operational performance across the Group as
we continue to scale and grow.
Finally, I would also like to take this opportunity
to thank Steve Wadey, our Group CEO, and
all of the QinetiQ leaders and employees for
pulling together to deliver for our customers
and shareholders.
Looking ahead
We are well placed to deliver our long-term
growth and returns ambitions, with good
customer relationships, strong employee
engagement and positive support from
shareholders for our strategy. I remain
hugely impressed by the commitment,
determination and focus of our people, living
our values of Integrity, Collaboration and
Performance on a day-to-day basis, making
a real difference to defence and security
around the world.
Neil Johnson
Non-executive Group Chair
23 May 2024
QinetiQ Group plc | Annual Report & Accounts 202404
Strong Group
performance
Group CEO review
Steve Wadey
Group Chief Executive Officer
We have delivered strong
overall Group financial
results, against the
background of difficult
market conditions in the US.
These results have been achieved through the
outstanding skills and capabilities of our people
working in partnership with our customers
and supply chain. The world is experiencing
the highest and most rapidly evolving threat
environment for a generation and our teams
have continued to deliver our highly relevant
services and products, critical to enduring
national defence and security priorities.
Since launching our strategy in 2016 to build a
disruptive and uniquely integrated global defence
and security company, we have grown our
revenue by more than 2.5x, doubled earnings
and now have more than 8,500 highly-skilled
people across 60 sites globally. Our depth and
breadth of expertise across the defence and
security lifecycle helps our customers to rapidly
create, test and use capability to stay ahead
of the threat. Our cutting edge technology and
innovation, allied with world leading expertise in
science, technology and engineering, is critical to
enabling our customers’ mission.
Our strategy is structurally aligned and focused
on enabling the shared security mission of our
Australian, United Kingdom and United States
(AUKUS) customers and their allies. Our six
distinctive offerings
1
are highly relevant to the rapidly
changing character of warfare and aligned to our
customers’ high-priority areas that are attracting
increasing defence and security spending, most
notably in Research & Development (R&D),
Test & Evaluation (T&E), Training & Mission
Rehearsal and Cyber & Intelligence.
For our people, we’ve made significant progress
creating an environment where they can all
thrive, with our highest ever level of employee
engagement achieved this year. Having a highly
skilled and engaged team, with an inclusive
culture, enables us to deliver for our customers’
mission with even greater agility and pace.
For our shareholders, we are focused on
continuing disciplined execution of our strategy
and are on-track to deliver our FY27 outlook
of c.£2.4bn organic revenue at c.12% margin.
With a strong balance sheet and enhanced
focus on disciplined capital allocation, we are
well positioned and have a clear strategy with
optionality for investment in sustainable growth
and further shareholder returns.
Performance in the year
We delivered another year of strong overall Group
operational and financial performance. Revenue
growth was 21%, or 14% on an organic constant
currency basis and underlying operating profit
grew by 20%, or 16% on an organic constant
currency basis, with stable margin at 11.3%.
We continued our track record of high cash
generation with underlying cash conversion
at 104%, contributing to the reduction of our
leverage (net debt to EBITDA) from 0.8x to 0.5x.
Order intake achieved a record high of £1.74bn,
with a book-to-bill of 1.1x and an order backlog
of £2.9bn. As part of our enhanced capital
allocation policy, we launched a value accretive
£100m share buyback programme and have
increased the growth rate of our progressive
dividend from 5% to 7%.
EMEA Services
EMEA Services delivered excellent growth,
achieving 19% organic revenue growth with
stable margin at 11.5%. This performance was
driven by the strong execution of prior year
orders and consistent operational delivery on
our long-term contracts.
In the UK, service delivery partnerships remain
the bedrock of our offering. Our large long-term
Engineering Delivery Partner (EDP) contract has
now delivered more than £1.5bn of orders since
inception, enabling capability and sustainment
of the majority of UK military systems; and we
signed a Principles Agreement with UK MOD to
extend the Long Term Partnering Agreement
(LTPA) to 2033, where we test, trial, train and
evaluate (T3E) national defence and security
capabilities critical to mitigating global threats.
Both of these contracts make a meaningful
contribution to the sustainable performance and
returns generated by EMEA Services. In addition,
to accelerate the production of mission data for
//We enter this year with
strong momentum and
increasing spending in
our major markets, which
gives us confidence to
increase our guidance
for FY25 and underpins
our FY27 outlook of
c.£2.4bn organic revenue
at c.12% margin.//
1: Our six distinctive offerings are: Experimentation and
Technology, Robotics and Autonomous Systems,
Engineering Services and Support, Test and
Evaluation, Cyber and Information Advantage, Training
and Mission Rehearsal
2: Underlying operating profit margin refers to operating
profit from segments
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
05
the Royal Air Force, the SOCIETAS transformation
programme has achieved full operating
capability three months early. Also in the UK
we commenced support of the new AUKUS
submarine programme through initial tasking
as a capability partner. In Australia, as a leading
provider within Team Nova, we secured a three
year extension to our Managed Service Provider
(MSP) contract to provide technical advisory
services in support of the Australian Capability
Acquisition and Sustainment Group; and we
continue to successfully develop the high energy
defensive laser system prototype in collaboration
with the Defence Science and Technology Group.
In Germany, we signed a significant, multi-year
contract to provide aerial training and mission
rehearsal services for their Armed Forces.
Strategic achievements include:
– Formidable Shield for NATO – Over three
weeks in May 2023 at UK MOD Hebrides,
we hosted Formidable Shield 23, one of the
world’s largest and most complex tests of
naval and missile defences. The exercise
saw over 20 ships, 35 aircraft, and nearly
4,000 allied military personnel from 13
NATO nations come together to test military
platforms, missiles, and sensor systems
against representative threat scenarios in
realistic live-fire mission rehearsal exercises.
– DragonFire for the UK – In collaboration with
the UK’s Defence Science and Technology
Laboratory (Dstl), MBDA and Leonardo, we
demonstrated the capabilities of our world-
leading beam combining technology with
the UK’s first high-power firing of a laser
weapon against aerial targets. Subsequently,
the MOD has recently announced that the
cutting-edge DragonFire laser directed energy
weapon system will be installed on Royal
Navy warships for the first time from 2027,
far sooner than previously envisaged.
– Joint Adversarial Training and Testing
Services (JATTS) for Australia – The JATTS
contract supports our ambition to double
the size of the Australian business over the
next four years through training support to
the Australian Defence Force with ‘enemy’
force aircraft and aerial targets. In the year
we achieved a 20% increase in aircraft flying
hours and 90% more aerial target missions
than originally planned. A notable highlight
was providing our threat representation
services into the Talisman Sabre training
exercise involving 13 allied nations and
involving 30,000 military personnel.
With strong visibility, and a pipeline of
significant opportunities, our confidence
remains high that EMEA Services will continue
to support the sustainable growth of the Group.
Global Solutions
Global Solutions was impacted by difficult
market conditions in the US, with recent
headwinds including one of the longest periods
of Continuing Resolution on record. Overall,
revenue was up 23%, declining 3% on an
organic basis, with margin remaining stable
at 10.5%.
Avantus, delivered a high single digit revenue
decline over the course of the year. However,
the business achieved modest revenue growth
in the second half, with double digit margin and
cash conversion of c.100% over the full year.
With the integration now complete, the benefits
of Group synergies are now being realised
with $977m of total contract awards during
the year and a funded book-to-bill of 1.2x. We
remain confident of Avantus delivering value for
shareholders and expect mid-single digit growth
in FY25 before returning to double digit growth
in FY26. Notable contract awards include a
$170m five year Tethered Aerostat Radar
System (TARS) contract providing surveillance
operations along the southern border of the US
and its territories, a $126m five year contract
to provide technical, professional, and support
services to the Office of the Secretary of
Defense Strategic Capabilities Office (SCO),
and a $224m, five year, firm fixed price contract
with the US Space Development Agency (SDA)
to provide systems engineering and technical
assistance support needed to deliver the
Proliferated Space Warfare Architecture.
Revenue in the rest of Global Solutions was
broadly flat for the year, due to the loss of
the Optionally Manned Fighting Vehicle
(OMFV) opportunity. We also saw the planned
production ramp down of the Common Robotic
System – Individual (CRS-I) small ground
robots in the US, offset by QinetiQ Target
Systems (QTS) achieving its highest ever
production levels within the year in the UK.
A significant step forward in the year was the
successful certification of our Banshee target
by the US Threat Systems Management Office,
enabling market entry and opening up growth
opportunities in FY25 and beyond.
JATTS
Formidable Shield
DragonFire
UK MOD Crown Copyright 2024
UK MOD Crown Copyright & LPhot Bradley
11.3%
FY24 operating profit margin
2
£1.9bn
FY24 revenue
104%
FY24 cash conversion
QinetiQ Group plc | Annual Report & Accounts 202406
Group CEO review continued
NGABS
RCV-L
– Next Generation Advanced Bomb Suits
(NGABS) –A five year, $83m contract for
the testing and production of over 700 next
generation advanced bomb suits for the US
Army, demonstrating our ability to leverage
our R&D into core capability.
With an attractively positioned portfolio of
high priority capabilities, and the integration of
Avantus complete, we are confident that Global
Solutions is well placed to deliver a meaningful
contribution to our FY27 organic revenue target
of c.£2.4bn.
Aligned with high priority needs
Global tensions continue at elevated levels.
In the Middle East, Houthi forces attempt to
disrupt world supply lines and broaden the
Yemeni civil war, whilst Iran has escalated
the Israel-Hamas conflict, and Russian forces
remain entrenched within Ukraine. China
continues to provide a destabilising influence,
notably in the Indo-Pacific, as does North
Korea and transnational terrorist networks. As
a result, Australia, the UK and the US, through
the AUKUS security pact, and with their 5-Eyes
and NATO allies, continue to review their
evolving defence and security capabilities and
investment priorities.
Given this heightened threat environment,
levels of defence spending are expected to
increase over the long-term. In the US, the
Research, Development, Test and Evaluation
(RDT&E) budget is the largest ever at $145bn
3
.
Governments in the UK and Australia intend to
increase defence spending to c.2.5% of GDP
over the long-term, with the UK ring-fencing
5% of the defence budget for R&D and 2% for
exploitation. In total, our addressable market is
estimated to be greater than £30bn
4
per annum.
More broadly, a record 18 member countries
are now set to meet NATO’s target of spending
2% of their economic output on defence and
security this year, a marked increase from 11
out of the 31 members a year ago.
These investment priorities are driving
increasing spending in high-priority areas such
as, R&D, T&E, Training & Mission Rehearsal, and
Cyber & Intelligence, to enable our customers to
maintain and develop technological superiority
in areas such as robotics, autonomy, directed
energy, hypersonics, integrated sensing,
cyber, advanced data analytics and artificial
intelligence. We remain at the forefront of the
adoption and integration of these new and
emerging technologies with traditional defence
capabilities, providing enhanced inter-operability
between allied systems and enhancing our
customers’ operational effectiveness.
TARS
The appearance of U.S. government visual information does
not imply or constitute U.S. government endorsement.
A combination of our global reach and alignment
to these high-priority high-growth areas provides
confidence in the Group’s ability to deliver
organic revenue growth at double the rate of
growth of national defence budgets, as we have
done consistently over the past five years.
Clear strategy delivering
At this time of heightened geopolitical
uncertainty and conflict, our purpose has never
been more relevant: protecting lives by serving
the national security interests of our customers.
With a unique customer value proposition to
rapidly create, test and train effective use of
capability, we enable our customers to respond
to their national and global security needs and
counter the increasing threat at pace.
With a clear purpose and strategy, the Group
is well positioned to deliver sustainable
shareholder value. Our strategy has three inter-
related components:
1. Delivering six distinctive and mutually
supportive offerings: We co-create high-value
differentiated solutions for our customers in
experimentation, test, training, information,
engineering and autonomous systems;
2. Applying disruptive and innovative technology
and business models: We invest in and apply
disruptive business models, digitisation
and advanced technologies to enable our
customers’ operational mission at pace; and,
3. Leveraging those capabilities across our
global operations: We are developing an
integrated global defence and security company
that leverages our capability in the UK, the US,
Australia, Canada and Germany.
The disciplined execution of our strategy
is building a global platform and delivering
sustainable growth, underpinning our FY27
outlook to deliver c.£2.4bn organic revenue at
c.12% margin. Our focus on our customers’
high-priority areas, specifically Research and
Development (R&D), Test and Evaluation (T&E),
Training & Mission Rehearsal, and Cyber &
Intelligence, provides confidence in our high
single digit revenue growth guidance and is
why our growth outpaces headline defence
spending. Our strategy is further underpinned by
a record order intake of £1.74bn with a backlog
of £2.9bn, and an exceptionally strong pipeline
of future growth opportunities worth more than
£11bn over the next five years.
Disciplined capital allocation
Our strategy to deliver long-term sustainable
growth is underpinned by an enhanced focus
on disciplined capital allocation and execution.
Given the highly cash generative nature of the
Group, as well as the strength of the balance
sheet, we continually assess the best risk
adjusted opportunities to deploy capital to
support shareholder returns.
Strategic achievements include:
– Tethered Aerostat Radar System for
the US – We were awarded a five
year $170m TARS contract as a Prime
System Integrator to the Department of
Homeland Security providing persistent
surveillance operations and sustainment
along the southern border of the US and
its territories. Upon award, we successfully
transitioned eight operational sites in six
weeks, hired 229 employees, negotiated
union agreements, and the management
of all critical services providers. We are on
track to secure more than 10% on-contract
growth in FY25 through expanded mission
scope and capability enhancements,
and have identified c.50% on-contract
growth opportunities over the life of
the programme.
– Robotic Combat Vehicle Light (RCV-L)
for the US – Working alongside Oshkosh
Defence, we were one of four awardees
for the RCV-L full scale prototype contract
from the US Army, following successful
operational trials. The RCV-L solution
works directly with warfighters on the
ground providing an intelligence and
reconnaissance platform used for forward
scouting with the ability to carry lethal
payloads. The prototype contract positions
us well to compete for our share of the
future development and production phases
worth up to $500m.
3: IN12209 (congress.gov)
4: Sources: Jane’s Market Budget Forecast March 2023,
UK MOD and US DOD forecasts, Australia Defence
publications, QinetiQ estimates
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
07
This will deliver an attractive return on capital
employed at or above the upper end of the
15-20%+ range.
Cash conversion will remain high at 90%+
with capital expenditure within the £90m
to £120m range. Our strengthened balance
sheet provides optionality, through disciplined
deployment of capital, for bolt-on acquisitions
to compound growth at 11-12% margin and
further shareholder returns.
Summary
I am pleased with the significant progress we
have made in FY24, delivering another year
of strong Group operational and financial
performance with stronger growth in EMEA
Services and stable performance in Global
Solutions. The company is well positioned
with a clear strategy, underpinning our
confidence in delivering sustainable growth
and attractive returns for our shareholders.
Our strategy and distinctive offerings
are uniquely relevant to our customers’
mission within the current heightened threat
environment. Everything we do is about
delivering on our purpose: protecting lives by
serving the national security interests of our
customers. Our purpose continues to connect
us all, giving us a sense of focus, direction and
pride. We look forward to continuing to deliver
for the benefit of all our stakeholders in the
coming years.
Steve Wadey
Group Chief Executive Officer
23 May 2024
We are continuing to invest in value accretive
organic growth, with a focus on our people,
technology and capability. This will be
complemented by value accretive bolt-on
acquisitions in time, following strengthened
delivery and performance of our US platform
and growth of Avantus.
Reflecting our confidence in the future
prospects of the business, we have increased
the growth rate of our progressive dividend
from 5% to 7% and are returning excess cash
to shareholders through the £100m share
buyback programme announced in January.
Our strengthened balance sheet provides
optionality for investment in growth and further
shareholders returns.
Sustainability
In delivering our strategy, the single biggest
contributor will be our people. Their safety,
wellbeing and motivation is essential for
our success.
We measure employee engagement each
quarter and I was delighted that at the end
of this year we achieved our highest ever
employee engagement measure since
introducing this metric five years ago. Since
its introduction we have improved employee
engagement by 19% and the loyalty measure by
25%, a fantastic achievement and symbolic of
the inclusive culture we are growing.
We were deeply saddened by the fatal crash
involving two aircrew on-board one of our PC-9
aircraft in the Neuenstein area of Germany
whilst on a customer training exercise in
September 2023. Our thoughts remain with
the families and close colleagues. Although
the formal investigations into this accident are
ongoing, we do not believe that there was any
contributory fault by the company.
We continue to make good progress on our Net-
Zero plan. Our Scope 1 and 2 emissions have
now reduced by 33% against our re-baselined
FY20 base year, including a c.8% reduction
in FY24, whilst some elements of our Scope
3 emissions, such as business travel, have
increased as we have grown globally. With our
strong focus on our Environmental, Social and
Governance (ESG) agenda, we are ranked as
one of the top ESG companies in the defence
and security sector by Sustainalytics and we
have retained our AA rating from MSCI.
Leadership changes
At the start of April, we announced that Carol
Borg, Group CFO, and the Board together agreed
that Carol would step down from her role. The
Board and I were delighted to announce the
appointment of Martin Cooper as Group CFO.
Martin is a qualified chartered accountant
with more than 25 years’ experience leading
multi-disciplinary teams in senior finance roles
and is expected to join QinetiQ no later than
October. To enable a smooth transition prior to
Martin joining, Heather Cashin, previously Group
Financial Controller, has been appointed Interim
Group CFO.
Also in April, I was delighted to announce the
appointment of Iain Stevenson to the newly
created role of Chief Operating Officer. As an
experienced senior business leader having
previously led large business divisions in the
defence and construction sectors, his skills will
strengthen the delivery of consistent operational
performance across the Group as we continue
to scale and grow.
Finally, I was extremely pleased to confirm
the internal promotion of Will Blamey to Chief
Executive UK Defence. Will has played a critical
role leading the successful development and
delivery of major programmes, such as the LTPA.
These appointments will add strength and
depth to our leadership team and further
enhance our capabilities to execute our plan for
sustainable growth.
FY25 guidance increased and
on-track to deliver FY27 outlook
We enter FY25 with strong momentum, a
healthy order book and increased visibility, with
64% revenue under contract. We expect FY25
to deliver high single-digit organic revenue
growth, compared to FY24, at a stable operating
profit margin.
We are on-track to achieve c.£2.4bn organic
revenue at c.12% margin by FY27.
5: Compound annual growth rate
Capital allocation policy
Invest in our
organic growth
Complement with value
accretive acquisitions
Provide a progressive
dividend to shareholders
Return excess cash to
shareholders
0
0.5
1.0
1.5
2.0
2.5
3.0
FY
16
FY
17
FY
18
FY
19
FY
20
FY
21
FY
22
FY
23
FY
24
FY
25
FY
26
FY
27
Revenue (£bn)
c.16% Total CAGR
5
at c.12% margin
c.8% organic CAGR
at c.12% margin
Global SolutionsEMEA Services
QinetiQ Group plc | Annual Report & Accounts 202408
Our strategy is increasingly relevant
to respond to market dynamics
Strategic framework
Our purpose
Our vision
The chosen partner around the world for mission-critical solutions,
innovating for our customers’ advantage
Create It
Test It Use It
Mission-led innovation
We deliver safely, responsibly and sustainably
for the benefit of all our stakeholders
Creating a safe and secure environment for us all to thrive
Our values
Integrity Collaboration Performance
Our behaviours
Listen Focus Keep my promises
Customer-focused growth strategy
Global leverage Distinctive offerings Disruptive innovation
Build an integrated global defence and security
company to leverage our capability through
single routes to market in the UK, the US,
Australia, Canada and Germany.
Co-create high-value differentiated solutions
for our customers in experimentation,
test, training, information, engineering
and autonomous systems.
Invest in and apply disruptive business
models, digitisation and advanced
technologies to enable our customers’
operational mission at pace.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
09
D
i
s
t
i
n
c
t
i
v
e
o
f
f
e
r
i
n
g
s
G
l
o
b
a
l
l
e
v
e
r
a
g
e
D
i
s
r
u
p
t
i
v
e
i
n
n
o
v
a
t
i
o
n
Customer focused growth strategy
aligned with AUKUS shared mission
Test and
evaluation
QinetiQ leverages
unique skills, data
and facilities to
test and evaluate
the performance of
military systems. This
provides assurance
for our customers
that their equipment
and platforms will
work effectively when
needed in demanding
environments and
threat scenarios,
helping to reduce
operational risk and
through-life cost.
Robotics and
autonomous
systems
QinetiQ develops,
tests, evaluates
and supplies
trusted robotic and
autonomous systems
across land, sea and
air domains.
Cyber and
information
advantage
QinetiQ innovates
with a broad range
of partners across
leading-edge sensor
technologies, data
processing, advanced
analytics, cyber and
artificial intelligence
to use data and
information in a more
effective way.
Engineering
services
and support
Working alongside
a large network of
suppliers, QinetiQ
uses its innovative
approach and deep
understanding
of customer
requirements and
existing systems
to provide our
customers with
reliable technical
advice and support,
through all phases
of procurement and
systems engineering.
Training
and mission
rehearsal
QinetiQ combines
engineering expertise,
operational know-
how and leading-
edge technologies
to deliver physical
and virtual training
exercises to support
operational readiness
and mission
rehearsal.
Experimentation
and technology
QinetiQ collaborates
with customers and
partners to explore
innovative technology
solutions that solve
our customers’
complex problems.
We bring together a
wide range of experts
to deliver new, fully
assured capabilities
that provide mission
advantage.
What we do
QinetiQ Group plc | Annual Report & Accounts 202410
Create It
Developing cutting-edge
technology and rapidly
turning it into capability
Test It
Assuring a capability
will work when it is
critically needed
Use It
Ensuring our customers
are trained and
operationally ready
Business model
Our business model
Sources of value Value we create
Delivering
enduring
operational
advantage
Our customer relationships
– Understanding our customers’ mission We invest
time in gaining a broad and deep understanding of
our customers’ mission, operations and challenges.
– Gaining insights from operations Through our
training and mission rehearsal activities and in-service
support experience, we gain unique and valuable
insights into the operational context.
– Collaborating and co-creating solutions We put the
customer at the heart of what we do. Collaborating with
our customers, we innovate at pace and co-create value
for money solutions.
Our skills and knowledge
– Deep technical expertise and know-how Our highly skilled
scientists and engineers apply their world-leading technical
and domain expertise to deliver evidenced-based solutions,
services and intelligence to our customers.
– Understanding of threats and environments Our capability to
replicate realistic and dynamic threat environments enables us
to evaluate system performance across the domains of cyber
and information, land, maritime, air and space.
– Broad knowledge of existing and emerging technologies
Our world leading experts apply their scientific and engineering
knowledge across existing and emerging technologies, harnessing
them for the benefit of our customers.
Our partner relationships
– Small to medium sized enterprises (SMEs) In all our home
countries, we have established relationships with a large network of
SMEs, drawing on their specialist expertise and services to deliver
value, agility and innovation.
– Universities and research institutions We actively engage and
team with universities and research institutes to undertake
collaborative research and development of new operationally
relevant technologies.
– Large defence and non-defence technology enterprises
We frequently form teaming relationships with a variety of large
defence and non-defence companies, collaborating to deliver
cutting-edge solutions to our customers.
Our tools and techniques
We invest in and maintain specialist tools such as facilities,
aircraft, test ranges and software:
– Test facilities, aircraft and ranges We operate some of the
most advanced facilities and land, sea and air ranges in
the world and manage live-fire exercises and rehearsals
combined with digitally enabled infrastructure.
– Datasets and models We maintain and create extensive
datasets and models to support the performance and
evaluation of defence and security capabilities.
– Digital engineering, innovation and transformation
We apply digital engineering techniques to accelerate
innovation, improve efficiency and create new defence
and security capabilities for our customers.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
11
Value we deliver
Our people
We are developing a culture that enables sustainable growth across
our global business and supply chains. With world-leading engineers,
scientists and technologists employed at QinetiQ we are focused
on a high performance environment where all can thrive and deliver.
This year we achieved, while also delivering, the highest employee
engagement score we have recorded a breadth of development
and growth opportunities for our people.
Our partners
We forge partnerships with industry and academia to address the
challenges of the current threat environment with agility. We form
complementary partnerships to deliver the most effective solutions
for our customers by, often managing large networks of small and
medium-size enterprises.
Supporting UK Home Office Accelerated Capability Environment
(ACE), we continue to lead Vivace Community consisting of
over 350 organisations (75% SMEs and academia) to deliver
cross-government impact at pace.
Our communities
We aim to make a positive contribution to the communities where
we work. Our people volunteer and we support a number of charities
across all our markets. We work with Armed Forces organisations
and those which are aligned with the development of technology
and STEM skills.
Working with our Partner the Jon Egging Trust we have delivered
interactive workshops to provide young people with insights into
the range and value of apprenticeships (page 51).
Our environment
We play our part in tackling climate change by reducing
our greenhouse gas emissions. We are also developing
and delivering solutions for our customers to support their
sustainability ambitions.
During the year we ran energy saving campaigns to help
employees understand how to plan their part in our
Net Zero programme. (page 34).
Our customers
Using our world-leading expertise we help our customers fulfil their
defence and security needs. We are critical to the development, testing
and assurance of cutting- edge systems and technologies essential to
our customers’ ability to maintain operational advantage.
Our ability to add considerable value to customers was perhaps
best demonstrated during Formidable Shield, with in excess of
20 ships, 35 aircraft, and c.4,000 Allied military personnel, from
13 NATO nations, involved in the test of missile defence capabilities.
Image courtesy of UKMoD Crown Copyright & LPhot Bradley
Our shareholders
By focusing on our customers’ needs and ensuring a disciplined
approach to the management and governance of the Company,
we aim to deliver sustainable and attractive returns to our shareholders.
We engaged with our shareholders during the year through both
physical/virtual roadshows, results presentations, the AGM and an
Investor Day. Our Chair also engaged with shareholders to proactively
seek their views on QinetiQ. This engagement was fundamental in
the decision to instigate a £100m buyback programme.
QinetiQ Group plc | Annual Report & Accounts 202412
Investment case
Investment case
Increasingly threat relevant
We have unique capabilities around the world critical to maintaining
national defence and security, well aligned with customer priorities:
– Unique position in the defence ecosystem, often in-between and
alongside the end-customer and the prime equipment providers
– Involved across the lifecycle of defence systems, from early-stage
research and development, through engineering services and
support, complex test and evaluation capabilities, provision of
advanced mission rehearsal, cyber security and data analytics and
select niche defence and security products
– Key partner to sovereign nations providing world-leading technical
expertise and state-of-the-art facilities, trusted by national defence
agencies, with decades of project history and specialist capabilities
– A leader in advanced technologies with the ability to partner
across industry and academia to deliver innovation at pace for
our customers
Aligned strategic markets
Our business operates in global defence and security markets
which are seeing significant spending increases; furthermore our
capabilities are well aligned with those areas that are growing faster
than their overall defence budgets:
– We are aligned to higher growth areas of the defence budgets,
including sensors, communications, cyber, electronic warfare,
autonomy and artificial intelligence
– We are a key partner to nations with shared defence and security
interests, most significantly in the UK, Australia and the US, known
collectively as AUKUS
– Our total addressable market is worth more than £30bn
>£30bn
addressable market
£2.9bn
backlog underpins long-term
revenue visibility
High single-digit
organic revenue growth
to FY27+
c.8,500
highly skilled employees
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
13
Investing in sustainable growth
QinetiQ has taken a proactive focus on ESG for many years and is
uniquely placed to help our partners and customers achieve Net-
Zero through effective use of technology:
– No exposure to controversial weapons
– AA Rated by MSCI and Top-Rated ESG company by Sustainalytics
– 33% reduction of our Scope 1 and Scope 2 emissions against our
re-baselined FY20 base year
– Unique position to help our customers meet their ESG targets
through advancements in technology
Strong operational performance
Our business has attractive financial characteristics supported by
a strong balance sheet which enables us to invest and realise our
long-term growth ambitions:
– Long-term contracts and repeatable business: predictable and
strong revenue visibility
– Asset-light and cash-generative business model supports organic
investment to drive future growth: organic investment funded from
operating cash flow
– Strong balance sheet and clear capital allocation policy –
investment to drive long-term growth
– Progressive dividend policy and buyback programme
Top-rated
ESG company
by Sustainalytics
AA-rated
by MSCI
90%+
cash conversion
21%
return on capital employed
QinetiQ Group plc | Annual Report & Accounts 202414
Market themes
Themes driving market growth
Themes reshaping
defence markets
around the world
We are operating in an environment where
there is an increasing threat of wider global
conflict. This follows Russia’s full-scale
invasion of Ukraine; the threat posed by
China’s growing military power, coupled
with its push to change global norms and
potentially threaten its neighbours; and the
Israel-Hamas conflict increasing further
tension in the Middle East and threatening
wider escalation in the region. These
conflicts and ongoing tensions come at
a time when many countries are holding
national elections and this could potentially
compound global uncertainty.
In parallel, rapidly emerging and evolving
technologies continue to disrupt traditional
business and society with both positive and
negative outcomes including the creation of
unprecedented vulnerabilities.
To meet these increasing challenges,
Australia, the UK, the US and their allies
continue to review their evolving defence
and security capabilities and are increasing
spending in high-priority areas aligned with
our strategy.
How are defence and security markets changing?
Rising global tensions and
increasingly complex threats
Need for advanced capabilities,
information advantage and better
inter-operability
Resilience of supply chains
The threat environment continues to
become increasingly complex, fuelled
by rapid advances in technology and
heightened geo-political tensions. From
hypersonic missiles and advanced fighter
jets to low-cost consumer drones adapted
to cause harm, technological advances have
enhanced the lethality of threats at both
ends of the spectrum, giving both state and
non-state actors access to capabilities that
have the potential to undermine Western
superiority. In addition, digital-based threats
continue to grow in sophistication and are
often deployed in conjunction with more
conventional capabilities.
Maintaining technological superiority is
critical in this increasingly complex threat
environment. Our customers are investing
heavily in R&D to develop next-generation
capabilities and ensure informational
advantage. Areas such as robotics, autonomy,
advanced data analytics, artificial intelligence
and novel weapons are all of particular
interest to our customers. These new and
emerging technologies must be integrated
with traditional defence capabilities, and
across our markets, there is a need for
greater inter-operability between platforms
and systems to enhance operational
effectiveness. This extends to the need for
greater co-operation between different forces
and nations to ensure a concerted effort in
countering these modern threats.
In light of the growing tension and competition
between global powers, nations are
increasingly focused on developing resilient
domestic supply chains. These supply chains
must demonstrate the agility, breadth and
depth of capability to respond to changing
and complex customer requirements. This
is a critical part of maintaining capability
that can function without undue reliance on
international trade, expertise or raw materials
from potentially hostile states.
How are we addressing these market dynamics?
Delivering disruptive science,
engineering and technology required
to modernise defence and security
capabilities
Partnering for innovation
A multi-domestic strategy
QinetiQ was founded on innovation with
research, development, test and evaluation at
the core of what we do. As a predominantly
service-based business, we are uniquely
placed to operate across the breadth
of platforms, systems and lifecycles,
unlike a more traditional vertical platform
manufacturer. We experiment, innovate
and develop new capabilities, drawing
on a broad range of existing, emerging
and disruptive technologies. We emulate
advanced threats and test and evaluate the
resilience and inter-operability of systems and
platforms used to respond to these threats,
to provide assurance.
The capabilities our customers require can
often be so complex that no one company
can deliver them alone. In addition, cutting-
edge technology is often found in the
commercial sector and academia. The
defence industry can benefit from leveraging
this technology, but it needs new and more
effective partnerships to convert emerging
technologies rapidly into assured deployable
capability. We collaborate across the supply
chain, but also form partnerships with
organisations outside of defence to provide
the agility and expertise required to innovate
at pace. Our ability to work across platforms
and technologies and form powerful
partnerships helps deliver mission-led
innovation to our customers.
Our multi-domestic strategy is aimed at
developing sovereign defence capabilities
within the countries in which we operate.
The focus for growth is in our three home
countries, Australia, the UK and US, where we
are pursuing similar opportunities to support
their shared defence and security missions.
The formation of the AUKUS alliance
between these nations reinforces our multi-
domestic strategy and makes us increasingly
relevant. We are well positioned to deliver
strong growth in the Australian, UK and US
businesses in the next five years.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
15
© Crown copyright
//Our customers seek to
rapidly modernise their
defence and security
capabilities so they can
better address current
and future threats.//
How are defence and security markets changing?
Rising global tensions and
increasingly complex threats
Need for advanced capabilities,
information advantage and better
inter-operability
Resilience of supply chains
The threat environment continues to
become increasingly complex, fuelled
by rapid advances in technology and
heightened geo-political tensions. From
hypersonic missiles and advanced fighter
jets to low-cost consumer drones adapted
to cause harm, technological advances have
enhanced the lethality of threats at both
ends of the spectrum, giving both state and
non-state actors access to capabilities that
have the potential to undermine Western
superiority. In addition, digital-based threats
continue to grow in sophistication and are
often deployed in conjunction with more
conventional capabilities.
Maintaining technological superiority is
critical in this increasingly complex threat
environment. Our customers are investing
heavily in R&D to develop next-generation
capabilities and ensure informational
advantage. Areas such as robotics, autonomy,
advanced data analytics, artificial intelligence
and novel weapons are all of particular
interest to our customers. These new and
emerging technologies must be integrated
with traditional defence capabilities, and
across our markets, there is a need for
greater inter-operability between platforms
and systems to enhance operational
effectiveness. This extends to the need for
greater co-operation between different forces
and nations to ensure a concerted effort in
countering these modern threats.
In light of the growing tension and competition
between global powers, nations are
increasingly focused on developing resilient
domestic supply chains. These supply chains
must demonstrate the agility, breadth and
depth of capability to respond to changing
and complex customer requirements. This
is a critical part of maintaining capability
that can function without undue reliance on
international trade, expertise or raw materials
from potentially hostile states.
How are we addressing these market dynamics?
Delivering disruptive science,
engineering and technology required
to modernise defence and security
capabilities
Partnering for innovation
A multi-domestic strategy
QinetiQ was founded on innovation with
research, development, test and evaluation at
the core of what we do. As a predominantly
service-based business, we are uniquely
placed to operate across the breadth
of platforms, systems and lifecycles,
unlike a more traditional vertical platform
manufacturer. We experiment, innovate
and develop new capabilities, drawing
on a broad range of existing, emerging
and disruptive technologies. We emulate
advanced threats and test and evaluate the
resilience and inter-operability of systems and
platforms used to respond to these threats,
to provide assurance.
The capabilities our customers require can
often be so complex that no one company
can deliver them alone. In addition, cutting-
edge technology is often found in the
commercial sector and academia. The
defence industry can benefit from leveraging
this technology, but it needs new and more
effective partnerships to convert emerging
technologies rapidly into assured deployable
capability. We collaborate across the supply
chain, but also form partnerships with
organisations outside of defence to provide
the agility and expertise required to innovate
at pace. Our ability to work across platforms
and technologies and form powerful
partnerships helps deliver mission-led
innovation to our customers.
Our multi-domestic strategy is aimed at
developing sovereign defence capabilities
within the countries in which we operate.
The focus for growth is in our three home
countries, Australia, the UK and US, where we
are pursuing similar opportunities to support
their shared defence and security missions.
The formation of the AUKUS alliance
between these nations reinforces our multi-
domestic strategy and makes us increasingly
relevant. We are well positioned to deliver
strong growth in the Australian, UK and US
businesses in the next five years.
QinetiQ Group plc | Annual Report & Accounts 202416
Trading environment
Australia, the UK and US
are our home countries
and collectively represent
94% of our revenue.
Our >£30bn
addressable market
Australia
1 Budget 2024-25 Budget Paper No.
1.4A, page 16
Trading environment
In 2024, the Australian Government released the inaugural National
Defence Strategy and Integrated Investment Program complementing
the 2023 Defence Strategic Review. Recognising that the current
environment demands a new approach to defending its national
interests, there is a commitment to invest in conventionally armed,
nuclear-powered submarines through a partnership between Australia,
the UK and the US (AUKUS), alongside deepening cooperation on
a range of advanced security and defence capabilities. The Defence
Industry Development Strategy (DIDS) now articulates the defence
industrial base required with Test and Evaluation, Certification and
Systems Assurance (TECSA) forming one of the seven Sovereign
Defence Industrial Priorities.
The consolidated Defence and Australian Signals Directorate
funding for FY24/25 is estimated at AUD $55.3bn
1
. In April 2024,
the Australian Government announced that it will increase defence
spending by $50.3bn over the next decade, hitting $100bn by 2033,
or c.2.4% of GDP.
833
employees
9
sites
UK
2 PM announces ‘turning point’ in
European security as UK set to increase
defence spending to 2.5% by 2030,
23 April 2024 (gov.uk)
3 Defending Britain 23 April 2024 (gov.uk)
Trading environment
A more contested and volatile international environment has reinforced
the UK Government’s commitment to increased defence spending.
In April, the UK Government announced an incremental £75bn of
defence spending over six years, with defence spending set to rise
to 2.5% of GDP by the end of the decade - reaching £87bn a year in
2030. The Government states that “additional funding will be used to
put the UK’s defence industry on a war footing, deliver cutting-edge
technology and back Ukraine against Russia”
2
. The new spending plan
comes with a promise to spend at least 5% of the budget on R&D from
next year, and another 2% to “support the exploitation of promising
science and technology in military capability”
3
.
As the UK seeks to develop and deploy next-generation capabilities
faster than its adversaries, we are well positioned to support our
customers in applying mission-led innovation to achieve this.
6,174
employees
32
sites
>£5bn
Market opportunity
1
£1,265.8m
FY24 revenue
>£1.5bn
Market opportunity
1
£130.6m
FY24 revenue
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
17
EMEA Services £1,417m
Global Solutions £495m
74%
26%
UK £1,266m
US £402m
Australia £131m
Rest of world £114m
21%
66%
7%
3%
Rest of the worldUS
4 FY24 NDAA Bill Report
(senate gov)
5 IN12209 (congress.gov)
6 Janes Defence Budgets,
January 2024
Trading environment
During 2023 there has been a marked increase in global defence
investment as many countries have re-evaluated their defence and
security priorities as a consequence of the Russia-Ukraine war. The
2024 forecast for global defence spending stands at $2.47tn
6
, which
represents a 13% increase since 2022.
While priority and investment focus will be attached to the
prosecution of our three home country strategies (Australia,
UK and US), we continue to conduct business in the support of
allied nations.
Trading environment
The US continues to address the comprehensive and serious
challenge of the People’s Republic of China, while tackling the
acute threat of a highly aggressive Russia, and increasing vigilance
against the persistent threats of North Korea, Iran and transnational
terrorist networks.
To support these aims, the Department of Defense funding for
2024 is $841.4bn
4
. As part of this, the Research, Development,
Test and Evaluation (RDT&E) budget is the largest ever at $145bn
5
.
Investment in critical technology areas aimed at strengthening
technological advantage include directed energy, hypersonics,
integrated sensing and cyber.
We serve our US customers’ mission in the areas of Intelligence,
Surveillance, Reconnaissance (ISR), mission operations, advanced
cyber, information advantage, multi-domain autonomous solutions
and systems and engineering and innovation.
186
employees
5
sites
1,389
employees
14
sites
Revenue by customer location Revenue by division
>£23bn
Market opportunity
1
£401.9m
FY24 revenue
>£1bn
Market opportunity
1
£113.8m
FY24 revenue
Canada
Germany
QinetiQ Group plc | Annual Report & Accounts 202418
United States
£407m
FY24 revenue
Our US sector provides
design, rapid prototyping,
systems engineering,
integration and manufacture
of defence mission solutions.
It also delivers mission
support, modernisation,
enablement and operations,
technical advisory, cyber
and information advantage
services for US Defense,
Federal, Homeland and
National Security customers.
Read more on page 27
Segmental reporting
QinetiQ reports via EMEA Services and Global Solutions segments
We operationally manage the business through four operating sectors, each with their own Chief Executive and Leadership Team.
This outlines how the sectors correlate with our external reporting framework and the financial results for each segment.
EMEA Services
Global Solutions
Combines world-leading
expertise with unique
facilities to generate and
assure capability. We do this
through capability integration,
threat representation and
operational readiness,
underpinned by long-term
contracts that provide
good revenue visibility and
cash generation.
Global Solutions combines our world-
leading technology-based products and
services. Our strategy is to expand the
portfolio of solutions to win larger, longer-
term programmes providing good visibility
of revenue and cash flows.
Segmental reporting
Total revenue
£1,417m
Total revenue
£495m
UK Defence
£825m
FY24 revenue
Our UK Defence sector
provides test & evaluation,
engineering assurance
services, science & technology
solutions, and enables training
and mission rehearsal for
our Air, Maritime and Land
customers in the UK. It is a
trusted partner throughout
the acquisition lifecycle
and provides services to
international allies via our UK
base capabilities.
Read more on page 23
UK Intelligence
£446m
FY24 revenue
The UK Intelligence sector
helps government and
commercial customers
respond to fast-evolving
threats based on its expertise
in data and digital engineering
(including Artificial Intelligence
(AI) /Machine Learning
(ML)), quantum, training
and simulation, secure
communication networks and
devices, intelligence gathering,
surveillance sensors and
cyber security.
Read more on page 24
Australia
£146m
FY24 revenue
Our Australia sector delivers
advisory and engineering
services, threat representation
and capability assurance
services to customers in
Australia and the rest of the
world. This includes target
services used for live-fire
training and weapon systems
test and evaluation, operational
air-to-air training and special
mission service delivery.
Read more on page 20
UK Defence,
UK Intelligence and
Australia Products
£88m
FY24 revenue
The portfolio of our other
products and solutions
provides research services
and bespoke technological
solutions developed from
intellectual property spun
out from EMEA Services,
and includes our threat
representation product sales in
QinetiQ Target Systems (QTS).
Read more on pages 23, 24
and 20
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
19
Financial performance
Orders increased by 56% to £547.3m (FY23: £351.9m), 7% organically.
This was driven by a growing order intake in the targets business and
good order intake in the Avantus business.
Revenue was up 23% on a reported basis at £494.7m (FY23: £401.4m)
due to the full-year impact of the Avantus acquisition. There was a small
organic decline of 3%, with Avantus delivering high single digit revenue
decline over the course of the year, but achieving positive revenue growth
in the second half.
Revenue in the rest of Global Solutions was broadly flat for the year,
impacted by the loss of the Optionally Manned Fighting Vehicle (OMFV)
opportunity. We also saw the planned production ramp down of the
Common Robotic System – Individual (CRS-I) small ground robots in the
US, offset by the highest ever production levels in QinetiQ Target Systems
(QTS) in the UK.
At the beginning of FY25, we have 52% of Global Solutions’ FY25 revenue
under contract, compared to 44% (of the FY24 revenue) at the same
point last year. In addition, we have a further $150m of US contract
awards in FY24, which are expected to be funded during FY25. This
would increase revenue cover to 75% in FY25.
Underlying operating profit increased to £51.8 (FY23: £41.8m) due to
the full-year impact of the Avantus acquisition, with a stable underlying
operating profit margin of 10.5% (FY23: 10.4%). Organically, operating
profit increased by 6%, driven by improved margins in the US business.
FY24
£m
FY23
£m
Orders 547.3 351.9
Revenue 494.7 401.4
Underlying operating profit 51.8 41.8
Underlying operating margin 10.5% 10.4%
Book-to-bill ratio
1
1.1x 0.9x
Total funded order backlog 321.3 301.5
1 Book-to-bil (B2B) ratio is orders won divided by revenue recognised.
Financial performance
Orders increased 7% excluding the 10 year £260m MSCA order in FY23.
Including MSCA in the strong FY23 comparator, orders decreased
by 13% (organic and reported). The funded order backlog excluding
LTPA ended the year at £1.4bn, with a book-to-bill ratio of 1.04x (FY23:
1.17x, excluding MSCA). There has been an increase in orders through
the Engineering Delivery Partner (EDP) framework totalling £472m in
FY24 (FY23: £404m), as well as an increase in the German business,
which secured a significant, multi-year aerial training services contract,
representing the single largest and longest contract award within our
Threat Representation business.
Revenue increased by 20% to £1,417.4m (FY23: £1,179.3m), and grew
by 19% on an organic basis, as a result of good growth in the UK,
underpinned by new work as part of the EDP framework and a variation
of price uplift on the LTPA.
At the beginning of FY25, we had £1.0bn of EMEA Services’ FY25
revenue under contract, compared to £0.8bn (of the FY24 revenue) at the
same point last year.
Underlying operating profit grew by 19% to £163.4m (FY23: £137.1m)
in line with revenue growth. Operating margin remained stable at 11.5%.
Approximately 66% of EMEA Services revenue is derived from single-
source contracts (FY23: approximately 64%). By investing in our core
contracts and extending their duration the high proportion of single-
source revenue contracted on a long-term basis provides visibility and
reduces our exposure to future changes in the baseline profit rate set
annually by the Single Source Regulations Office.
FY24
£m
FY23
£m
Orders 1,193.1 1,372.2
Revenue 1,417.4 1,179.3
Underlying operating profit 163.4 137.1
Underlying operating margin 11.5% 11.6%
Book-to-bill ratio
1
1.0x 1.4x
Total funded order backlog 2,551.7 2,768.8
1 Book-to-bill (B2B) ratio is orders won divided by revenue recognised, excluding the LTPA
non-tasking services revenue of £266m (FY23 £225m).
QinetiQ Group plc | Annual Report & Accounts 202420
Sector review
Gary Stewart
Chief Executive
Australia
Australia
A specialist Australian advisory and engineering business
with threat representation in the Australian, UK, German
and Canadian markets.
//In my first year at
QinetiQ, it has been great
to learn and confirm the
potential of the Australia
Sector. We have a clear
plan to expand our
capabilities and relevance
to our Australian and
international customers,
with a truly global team
of 1,200 people operating
in Australia, Canada,
Germany and the
United Kingdom.//
Overview
During the year we established a new leadership
team, implemented an integrated operating
model, adapted to the new Australian defence
policy and priorities, and completed the
integration of Air Affairs. Tragically, we lost two
of our experienced and long-serving German
pilots in a fatal aircraft crash while delivering
training for the German military.
Order Highlights
The sector has performed well throughout
the year. Order intake was impacted due to
Australian customer delays arising from the
Defence Strategic Review. However, we secured
a number of strategic and long term orders, that
position us well for the future.
– Our Advisory business obtained a significant,
multi-year extension to deliver professional
and technical services to major defence
capability programmes in vehicles, maritime
warfare, guided weapons, explosive
ordnance, and aerospace surveillance and
reconnaissance.
– Our German operation secured a significant,
multi-year aerial training services contract,
representing the single largest and
longest contract award within our Threat
Representation business.
– Our Canadian target systems operation
entered an agreement with the Royal
Canadian Navy and Defence Research and
Development Canada (DRDC) to develop
and supply a new Uncrewed Surface Vehicle.
Joining the existing maritime target portfolio,
this new multi-role boat will also feature
remote autonomous operation with crewed
and uncrewed functionality.
Operational Highlights
We continued to see demand for our technical
engineering and advisory services in Australia,
and global demand for our portfolio of aerial
and maritime targets and mission rehearsal
services. Notable operational highlights for the
year include:
– Our UK target systems operation
manufactured and delivered over 600 aerial
targets, representing a 50% increase in volume.
– Our Engineering business invested in state-of-
the-art facilities to support business growth.
In Melbourne we established the QinetiQ
Technology and Engineering Centre (QTEC),
delivering a complex vehicle project for the
Australian Army. In Adelaide we opened QLabs,
providing critical capability in Directed Energy
Weapons with the Department of Defence.
– Our MakerSpace programme added additional
sites, helping the Australian Army create a
culture of digital thinking and innovation.
– Substantial progress was made integrating
the Air Affairs business acquired in December
2022. Now named QinetiQ Air Affairs
(QAA), over the last year it was transformed
from a local Australian specialist business
into a key pillar of QinetiQ’s global threat
representation offering. QAA’s achievements
in FY24 have included participation in a
number of international defence exercises and
development of new training targets.
QinetiQ Target Systems (QTS)
Demand for QTS products led to the highest
production levels ever during FY24. QTS will
achieve the significant production milestone of
10,000 Banshee and 750 Hammerhead targets
during FY25 and continues to innovate to meet
the changing customer training needs and
evolving threats.
QTS continues to make positive progress with
customers such as the US Department of
Defence, recently providing test and evaluation
capabilities utilising the Rattler supersonic
target to support the development of defensive
high energy lasers in response to emerging and
evolving threats.
QTS has delivered multi-domain threat
representation, utilising both uncrewed aerial
and maritime surface targets to present a
realistic threat scenario for warships on
pre-deployment training.
In Germany, QTS, working in collaboration
with QinetiQ Germany as part of the newly
established Threat Representation Business Unit,
has delivered target services in support of the
training and deployment of anti-aircraft systems.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
21
Case study
QinetiQ’s multi-faceted contribution
to regional security training
A range of offerings from QinetiQ Air Affairs were employed
for Exercise Talisman Sabre 2023, the major military exercise
involving Australia, the United States, along with their allies and
regional partners.
QAA’s Learjet capability was engaged to support various
maritime strike operations. Learjet crews also flew threat
representation profiles as aerial opposing forces from Darwin.
In a first in Australia, QAA’s Remotely Piloted Aerial Target team
carried out a number of Phoenix aerial target operations for the
Japan Ground Self-Defense Force. Phoenix targets were used for
radar tracking trials in preparation for the
firing of a Type 12 Surface-to-Ship missile. Additional Phoenix
target flights supported Surface-to-Air missile firings.
Finally, QAA provided a range of Learjet and helicopter
aeromedical services to support military personnel participating
in the exercise, with aircraft based in Weipa, Townsville and
Bradshaw Range for rapid response evacuation support flights.
//QAA’s engagement for
Exercise Talisman Sabre 23
demonstrated the role we have in
supporting a secure and prosperous
Indo-Pacific region through our
specialist capability in multi-domain
threat representation and other
aviation support functions.//
Graham Ollis
Managing Director Threat Representation
QinetiQ Group plc | Annual Report & Accounts 202422
Sector review continued
Case study
UK’s first high-power firing of a
laser weapon against aerial targets
In collaboration with The Defence Science and Technology
Laboratory, MBDA and Leonardo we achieved the UK’s first
high-power firing of a laser weapon against aerial targets during
a trial at the QinetiQ operated MOD Hebrides Range. This was
an important step forward demonstrating the capabilities of
QinetiQ’s world-leading beam combining laser technology, and
development of the enabling test and evaluation capability.
QinetiQ is investing in laser directed energy weapons and will
continue to play a central role in the development, test and
evaluation, and transition into operational capability of this UK
sovereign capability.
//Investments with industry
partners in advanced technologies
like DragonFire are crucial in a
highly contested world, helping us
maintain the battle-winning edge
and keep the nation safe.//
The Rt Hon Grant Shapps
UK Secretary of State for Defence
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
23
UK Defence
Will Blamey
Chief Executive
UK Defence
The UK Defence Sector is focused on protecting
lives through innovative solutions for our Air,
Maritime and Land customers.
Overview
The UK Defence Sector delivers mission critical
solutions, innovating for our Air, Maritime and
Land customers’ advantage. The distinctive
offerings across our customer base have
delivered good revenue growth this year,
whilst sustaining strong cash conversion and
operating profit. Framework partnerships
remain central to how we deliver customer
value, with the EDP contract alone delivering
over £1.5bn of orders in its first five years.
Following a Principles Agreement with UK MOD
for an extension option to jointly develop the
LTPA test, trials, training and evaluation (T3E)
capabilities beyond 2028, future prospects are
well underpinned.
Test, Trials, Training & Evaluation (T3E)
Over three weeks in May 2023 at MOD
Hebrides, we hosted Formidable Shield 23, one
of the world’s largest and most complex multi-
domain tests of naval and missile defences.
Operated by QinetiQ, the exercise saw over 20
ships, 35 aircraft, and nearly 4,000 allied military
personnel from 13 NATO nations come together
to test missiles, systems, sensors and software
against representative threat scenarios in
realistic live-fire mission rehearsal exercises.
We have secured significant orders to increase
environmental testing capacity in support of
the UK’s Weapons stockpile resilience effort,
and for further work at our Hurn vehicle testing
capability. We delivered a complex synthetic
training demonstration from Portsdown
Technology Park delivering collective training
to three platforms docked at HM Naval Base
in Portsmouth: HMS Queen Elizabeth, HMS
Diamond and HMS Kent. This ability to train
across multiple geographically dispersed units
provides a step change in capability to the Navy.
Engineering Services
Demand remains strong for engineering
services across a broad range of programmes,
primarily as the Engineering Delivery Partner
for MOD. Key achievements this year
include securing:
– An initial task as Capability Partner in support
of the new AUKUS submarine programme,
and a greater role supplying specialist design
services;
– Supply of further technical support
services to the DE&S Catalyst delivery
team for the Future Combat Air System
(FCAS) programme;
– The Defence Science and Technology
Laboratory (Dstl) funded Modular
Integrated Protection System programme
developing a new pan-fleet active
protection system architecture for British
Army vehicles.
Science and Technology
We have also been working closely with DE&S
in support of the new acquisition reforms
and investing in our enabling digital toolsets
to deliver increased customer value from our
engineering services.
In collaboration with Dstl, MBDA and
Leonardo, we achieved the UK’s first high-
power firing of a Laser Directed Energy
Weapon (LDEW) against aerial targets. This
was an important step forward demonstrating
the capabilities of QinetiQ’s world-leading
beam combining laser technology, and
development of the enabling Test & Evaluation
capability. The MOD has recently announced
that the cutting-edge DragonFire laser directed
energy weapon system will be installed on
Royal Navy warships for the first time from
2027, far sooner than previously envisaged.
We also delivered the UK’s first jet-to-jet
crewed-uncrewed-teaming demonstration
in March 2024 working in partnership
with Dstl, the Royal Navy and the Air and
Space Warfare Centre as part of the UK’s
Accelerating Air Autonomy Capability
Experimentation programme. The trial
showcased human machine teaming between
a crewed aircraft and an autonomous drone;
the UK’s first jet-to-jet crewed-uncrewed-
teaming demonstration.
During the 2023 NATO Robotic
Experimentation Prototyping Augmented by
Maritime Unmanned Systems (REPMUS)
Exercise, we supported the Royal Navy
leading a UK team delivering the experimental
Command & Control exercises for the mission
management of multiple uncrewed vehicles
across a task group.
//The UK Defence Sector
has delivered a very
successful year providing
greater value and
operational advantage
to our customers in an
increasingly challenging
threat environment.//
QinetiQ Group plc | Annual Report & Accounts 202424
Sector review continued
UK Intelligence
James Willis
Chief Executive
UK Intelligence
Helping Government and commercial customers
deploy mission critical capabilities at pace.
//The UK Intelligence
Sector continues to serve
as a key trusted partner
to the UK Government,
across the defence
and national security
mission. This is reflected
in our strong financial
performance during
FY24, and will position
us for further growth
as the need for our
C5ISTAR, training, & digital
intelligence mission critical
capabilities, to support
customer operations, are
continually in demand.//
Overview
The UK Intelligence Sector utilises its
unique domain knowledge across C5ISTAR
(Command, Control, Communications,
Computers, Cyber, Intelligence, Surveillance
and Reconnaissance), allied to its research,
innovation and applied engineering pedigree, to
support UK Government in the development,
assurance, integration and deployment of
mission critical capabilities at pace. We are a
key industry partner to the MOD, and continue
to be well-placed to deliver critical digital
change programmes over the coming years
to Defence Digital (DD), Defence Intelligence
(DI) and Defence Science and Technology
Laboratory (Dstl).
Within the year, highlights include:
– SOCIETAS – An £80m transformation
programme focused on accelerating the
production of mission data, enabling the
UK’s military platforms and personnel to be
better protected in a rapidly changing threat
landscape. SOCIETAS continues to perform
beyond expectations with the Full Operating
Capability declared three months early.
– The establishment of the Training and
Simulation Centre of Excellence at
Farnborough providing increased support
to Land (Army Virtual Proving Ground),
Maritime (Type 23 and Type 45 training
simulation systems) and the RAF, Dstl and
secure cyber domains. This business area
is growing strongly, achieving 30% revenue
growth on prior year.
– New Style of IT (Deployed) (NSOITD) - We
have continued our strong and enduring
relationship with Defence Digital’s successful
NSOITD programme for over five years to
a value of £107m, and have now secured
another 12 months of support. Our offering
enables the agile delivery of the nodes across
Design, Engineering, Test and Integration
and through engineering support to the
Live Services.
Operational highlights
We continue to demonstrate our ability to
leverage our acquisitions for future success.
Fully acquired in 2020, Naimuri demonstrated
strong year-on-year orders growth exceeding
80%, and headcount growth to c.200
employees in the same time frame. Naimuri’s
portfolio has significantly diversified beyond
National Security into Homeland Security,
and UK MOD. Amongst the new orders
were two sizeable three year contracts in
Homeland Security, delivering two strategic
aims: i) diversification of Naimuri’s customer
base; and ii) increase to the longevity of
contracts. Naimuri continues to be cited
as an example of a high-performing SME
working on the highest priority Government
systems and highly engaged in supporting
social values and growth as part of the
Northern Powerhouse.
UK Intelligence continues to evolve to ensure
we have the capabilities and expertise
in emerging technologies e.g. quantum
technology. This is an emerging and disruptive
capability covering quantum sensing,
navigation and computing. We are building
the capability through a mixture of internal
investment and customer projects, and
ensuring alignment with the UK’s National
Quantum Technology Programme.
Finally, we remain committed to providing
operational support to the UK Government
including 24/7 support to operations and
deployment throughout this difficult period
in Eastern Europe, which has enabled UK
platforms to support burden sharing with
allies, assisting with military aid provision.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
25
Case study
Rapid Innovation Cell within the Defence
Intelligence Pillar
The Defence Intelligence Pillar (DI Pillar) was established
over two years ago, and since its establishment has
generated over £97m in revenue, of which £26.6m is
focused on the Rapid Innovation Cell (RIC). The DI Pillar
now encompasses 12 different thematic areas critical to
DI. The Rapid Innovation Capability offers UK MOD a route
to deliver exploitable innovation at pace. We are currently
delivering approximately 30 commissions for a range of
Defence customers, and across a range of technical and
non-technical domains including the piloting of a
reprogramming node at RNAS Yeovilton.
//As we’ve seen from the diversity
of RIC users, the utility can extend
beyond delivery of isolated innovation
commissions, moving towards
supporting in the wider delivery
of the MOD’s innovation strategy.
This may include sharing of best
practice, supporting triage of ideas
with relevant technical input and
aiding the evolution of innovation
into operational capability.//
Chris Walker
Managing Director, Cyber & Strategic Command
QinetiQ Group plc | Annual Report & Accounts 202426
Sector review continued
Case study
Robotic Combat Vehicle Light
QinetiQ US continues to enable human machine integration via
the Robotic Combat Vehicle-Light (RCV-L) surrogate programme
through collaboration with the US Army Futures Command
(AFC), Next Generation Combat Vehicle Cross Functional Team
(NGCV CFT), the Combat Capabilities Development Command’s
(CCDC), and Ground Vehicle Systems Centre (GVSC).
FY24 Highlights include continued delivery of 12 RCV-L platforms,
development and integration of multiple capability upgrades, and
ongoing support of user test and experimentation events.
After receiving multiple soldier centric upgrades, the RCV-L
went through two training rotations with 11th Armored Cavalry
Regiment “Black Horse” opposing force unit at the Fort Irwin
National Training Centre during the summer of 2023.
//Black Horse has proved
tremendously adaptive in
how they have employed
the robots.//
Major General Glenn A. Dean
Program Executive Officer
Ground Combat Systems
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
27
United States
Shawn Purvis
President & CEO
United States
The combination of QinetiQ and Avantus to create
a disruptive mid-tier US Defence and National
Security business.
Overview
Our US Sector provides design, development,
rapid prototyping, systems engineering and
integration and manufacture of speciality
defence mission products and solutions
related to robotics, autonomy, maritime and
sensors. The integration of Avantus provided
a complementary suite of services related to
mission support, modernisation, enablement
and operations, technical advisory, cyber,
information advantage for US Defense, Federal,
Homeland and National Security customers.
Order and Operational Highlights
The US Sector had $1.3bn of total contract
awards during the year, including $977m from
Avantus. We have completed the integration of
Avantus into a single operating model for the
Sector and expect to benefit from market and
operational synergies.
We won a $223m, five year, firm fixed price
contract with the US Space Development
Agency (SDA) to provide systems engineering
and technical assistance support needed
to deliver the Proliferated Space Warfare
Architecture, a threat-driven constellation of
small satellites that deliver critical services
to our warfighters from space. Services
include tracking of advanced missile threats,
low-latency data transport integrated with
tactical data links, custody of time-critical
land and maritime targets, and space-based
battle management. During the autumn,
our team supported SDA’s successful
demonstration of the first-ever Link 16 space
to ground transmission.
We won a $126m, five year, hybrid firm fixed
price contract to provide technical, professional,
and administrative support services to the
Office of the Secretary of Defense Strategic
Capabilities Office (SCO). This award builds
upon our existing work within SCO and supports
SCO’s mission to analyse and accelerate the
development, demonstration, and transition of
capabilities to counter strategic adversaries and
improve the United States security posture in
peacetime, crisis, and conflict.
We won a $170m, five year, firm fixed price
Tethered Aerostat Radar System (TARS)
Operations & Maintenance contract with
the US Department of Homeland Security,
Customs and Border Protection and Air
and Marine Operations. The team provides
persistent surveillance operations and
sustainment services at eight sites along
the southern border of the United States
and territories, spanning from Arizona to
Puerto Rico. Services include, air-surface
radar operations, ground control and data
networking systems monitoring, and data
fusion and analysis as an integral part of the
mission to detect, sort, intercept, track, and
apprehend criminals in diverse environments
at and beyond the US borders.
We secured $2.7m of incremental funding
on an existing contract to build and test
the Electromechanical Actuator Power
Conditioner and Controller (EPCC) for ten
shipsets for the Virginia class submarine
programme as an extension of our previous
design and development effort. The EPCC is
a rack of hardware and software designed
to control precision actuators as part of
the weapon stowage and handling system.
In FY24, we have successfully delivered the
first two shipsets.
We won a five year indefinite delivery,
indefinite quantity (IDIQ) contract for $83m
to deliver the Program of Record Next
Generation Advanced Bomb Suit (NGABS)
for Product Manager Soldier Protective
Equipment. QinetiQ’s technology increases the
situational awareness through advancement
in its low/no light operation integrated
capability provided by a Modular Sensor Suite
and Heads Up Display.
//The integration of
Avantus generated
positive momentum in
the order book and sets
the foundation to deliver
mission led innovation
in support of our
customers’ most critical
mission needs.//
QinetiQ Group plc | Annual Report & Accounts 202428
Group CFO review
Heather Cashin
Interim Group
Chief Financial Officer
Overview of
full year results
//Another year of strong
cash generation has
enabled us to return
additional capital to
shareholders.//
Strong organic growth at
stable margins
The Group has delivered strong growth and
underlying performance across all metrics,
reflecting continued disciplined execution of
our strategy.
Consistently strong cash generation contributed
to net debt to EBITDA falling to 0.5x (FY23:
0.8x). We have increased the growth rate
of our progressive dividend from 5% to 7%,
growing the distribution to 8.25p per share
(FY23: 7.70p).
The Group achieved record orders in the year,
totalling £1,740.4m (FY23: £1,724.1m), a
year-on-year 1% increase and a book-to-bill
of 1.1x. This is on the back of a very strong
prior-year comparator, which included the 10
year £260m Maritime Strategic Capability
Agreement (MSCA) contract. Excluding the
MSCA contract, orders were up 19%; orders
declined 10% organically with MSCA included.
We have secured major orders across both of
our operating segments. Within EMEA Services
we secured £1,193m of orders, including a
£54m variation of price uplift to the LTPA, a
£39m extension to our Battlefield and Tactical
Communications & Information Systems
(BATCIS) contract and a significant multi-year
aerial training services contract in Germany.
Within Global Solutions, FY24 orders were
£547m, a 56% increase on a reported basis and
7% organic. The drivers of this performance are
an 18% increase in our QTS business to £68m,
together with a significant increase in funded
orders through the US business as a result of
the Avantus acquisition in FY23.
In the US, the total value of contract awards
was $1.3bn. Of this, $571m has been funded
and is reported within the Global Solutions
order intake. The remaining $729m represents
unfunded orders, which are contract awards for
which funding has not yet been appropriated
or authorised.
Highlights include a $46m funded order for
our Electromagnetic Aircraft Launch System
(EMALS) and Advanced Arresting Gear (AAG)
systems for the US Navy’s CVN 81 aircraft
carrier, and a five year contract worth $83m
for the Next Generation Advanced Bomb
Suit (NGABS) ($34m funded and $49m
unfunded). We secured contract awards
for a five year contract with the Secretary
of Defense Strategic Capabilities Office
Financial performance
(£m)
Underlying* results Statutory results
FY24 FY23 FY24 FY23
Revenue 1,912.1 1,580.7 1,912.1 1,580.7
Operating profit
1
215.2 178.9 192.5 172.8
Profit after tax 169.6 152.9 139.6 154.4
Earnings per share (p) 29.4 26.5 24.2 26.8
Full year dividend per share (p) 8.25 7.70 8.25 7.70
Funded order backlog 2,873.0 3,070.3
Orders 1,740.4 1,724.1
Net cash inflow from operations 320.2 270.1 294.1 240.6
Net (debt)/cash (151.2) (206.9)
* Definitions of the Group’s ‘Alternative Performance Measures’ can be found in the glossary
1 Underlying operating profit refers to operating profit from segments. See note 3 for details.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
29
1% total growth
19% growth excl. MSCA
Acquisitions
& disposals
FY24Foreign
exchange
Global
Solutions
EMEA
Services
FY23
1,724.1 (187.3)
23.1 (23.5)
204.0 1.740.4
10% organic decline
7% growth excl. MSCA
2
1 Book-to-bill ratio is orders won divided by revenue recognised, excluding LTPA revenue of £266m (FY23: £225m)
2 MSCA 10 year £260m contract in FY23
MSCA
£260m
(SCO) for $126m ($14m funded and $112m
unfunded), a $223m contract award for Space
Development Agency (SDA) support ($43m
funded and $180m unfunded), and a five
year Tethered Aerostat Radar System (TARS)
Operations & Maintenance contract with a total
contract value of $170m ($16m funded and
$154m unfunded).
Funded order backlog remains strong at £2.9bn,
or £3.7bn including unfunded orders, providing
good visibility going forward:
– In EMEA Services the total funded order
backlog was £2.6bn (FY23: 2.8bn). The
reduction in the backlog is due to the delivery
of non-tasking revenue (c.£266m per annum)
within the Long-term Partnering Agreement
(LTPA). This is a large multi-year contract
that was booked in prior years and as we
deliver this will naturally reduce the LTPA
order backlog. Outside of the LTPA, backlog
has remained broadly stable at £1.4bn (FY23:
£1.5bn).
– In Global Solutions the total funded order
backlog grew from £302m in FY23 to £321m
in FY24. Our US unfunded order backlog
grew from $245m to $974m driven by the
contracts referenced above.
At the beginning of FY25 approximately £1.3bn
of the Group’s FY25 revenue was under
contract, compared to £1.1bn (of the FY24
revenue) at the same point last year. In addition,
it is anticipated that $150m of unfunded orders
will be funded during FY25.
We delivered strong revenue growth of 21%
to £1,912.1m (FY23: £1,580.7m), 14% on
an organic basis, demonstrating increasing
demand for our six distinctive offerings. We
saw a 19% organic revenue increase in EMEA
Services primarily due to good growth in the
UK, underpinned by new work as part of the
EDP framework (delivering 28% revenue growth
within the framework) and a variation of price
uplift on the LTPA. Global Solutions revenue
decreased by 3% organically with Avantus
delivering high single digit revenue decline over
the course of the year. Revenue in the rest of
Global Solutions was broadly flat for the year,
impacted by the loss of the Optionally Manned
Fighting Vehicle (OMFV) opportunity. We also
saw the planned production ramp down of the
Common Robotic System – Individual (CRS-I)
small ground robots in the US from $40.2m
in FY23 to $13.8m in FY24, offset by the
highest ever production levels in QinetiQ Target
Systems (QTS) in the UK.
21% total growth
Acquisitions
& disposals
133.4
Global
Solutions
(10.7)
FY24
1,912.1
Foreign
exchange
(20.9)
EMEA
Services
229.6
FY23
1,580.7
14% organic growth
Revenue growth (£m)
20% total growth
Acquisitions
& disposals
10.6
Global
Solutions
2.1
FY24
215.2
Foreign
exchange
(2.2)
EMEA
Services
25.8
FY23
178.9
16% organic growth
11.3%
margin
11.3%
margin
Underlying operating profit
from segments (£m)
Orders bridge
1
(£m)
Operating profit from segments of £215.2m
(FY23: £178.9m) was up 20%. This represents
a stable 11.3% operating margin (FY23: 11.3%),
consistent with our guidance range of 11-12%.
The largest contributions to year-on-year
growth were the full-year impact of the Avantus
acquisition and organic revenue growth at
stable operating margin in EMEA Services.
To ensure consistency and clarity on our
headline profit figures, our headline profit figure
remains as operating profit from segments and
excludes any benefit arising from RDEC income
(which was previously reported within the tax
line prior to FY23). Statutory operating profit
was £192.5m (FY23: £172.8m), including the
impact of specific adjusting items and RDEC
income. Underlying RDEC income increased to
£27.2m (FY23: £17.4m) due to the increase in
the applicable rate.
Underlying profit before tax increased 16%
to £227.0m (FY23: £189.7m) in line with the
increase in underlying operating profit, with
underlying net finance expense at £15.4m
(FY23: £6.6m). Underlying net finance expense
increased due to the full-year impact of interest
payable on the term loan drawn down to fund
the Avantus acquisition.
QinetiQ Group plc | Annual Report & Accounts 202430
104% Cash conversion
215.2
Underlying
operating profit
from Segments
27.2
RDEC
65.5
Depreciation &
amortisation
307.9
Underlying
EBITDA
Other
1
(96.1)
Capex Underlying net
cash inflow from
operations (post
capex)
9.8
Underlying
working capital
movement
320.22.5
Underlying net
cash inflow from
operations
224.1
Group CFO review continued
Specific adjusting items
The total impact of specific adjusting
items (which are excluded from underlying
performance due to their distorting nature)
on operating profit was a £49.9m cost
(FY23: cost of £23.5m).
Acquisition and disposal costs of £2.7m
(FY23: £16.4m) comprise costs associated
with an aborted acquisition attempt during the
year, as well as a number of ongoing disposal
projects. Acquisition-related remuneration
relates to specific post-deal retention
arrangements relating to Avantus employees.
Acquisition integration costs of £5.3m
(FY23: £2.0m) comprises costs associated
with the Avantus and Air Affairs acquisitions
which were completed in H2 of FY23.
We continue to deliver on our discrete
investment project to build our digital platform
to enable our global growth strategy and our
AUKUS customers’ needs. The project runs
for a further three years and we expect an
additional c.£35m of non-recurring costs to
be reported as specific adjusting items in
the P&L, with ongoing recurring operating
costs (such as licence costs and overheads)
remaining within underlying operating
costs. In FY24 the non-recurring cost of
the digital investment project was £16.9m
(FY23: £5.8m).
FY23 included exceptional restructuring costs
of £5.0m, as part of the significant Group-wide
organisation redesign, and a £19.6m credit in
respect of UK MOD appropriation for RDEC,
following a determination by the Single Source
Regulations Office on the interpretation of
the Statutory Guidance for Allowable Costs
regulations. The accounting judgement
remains that RDEC on single-source contracts
from 1 April 2019 onwards will not be paid on
to the UK MOD, which was a change from the
accounting judgement at the FY22 year end.
Also included within specific adjusting
items are a gain on the sale of property of
£2.1m (FY23: £2.0m), financing income
from pensions of £5.6m (FY23: £9.9m),
impairment of right-of-use lease assets in
the US following space relocation of £0.7m,
and amortisation of acquisition intangibles
of £25.2m (FY23: £15.6m). Amortisation of
acquisition intangibles has increased due to
the amortisation of new intangible assets
recognised on the FY23 acquisitions (primarily
the Customer Relationships asset associated
with Avantus). FY23 also included a gain on
disposal of the Space NV business in Belgium
of £15.9m.
Through FY24 we have demonstrated our
capital allocation policy in action:
– Invest in our organic growth – net capital
expenditure of £96.1m (FY23: £109.0m),
focused on contractual commitments (39%
relating to customer funded contracts
including £37m into the LTPA), sustainment
of the portfolio and investment to support
future growth
– Complement with value accretive
acquisitions – successful integration of
Avantus and Air Affairs with focus on proving
delivery performance and growth
– Provide a progressive dividend to
shareholders – increase in the year-on-year
growth rate from 5% to 7%
– Return of excess cash to shareholders –
£100m share buyback programme, with
£16m completed by the end of March
The Group is not subject to any externally
imposed capital requirements.
FY24
£m
FY23
£m
Acquisition, integration and disposal costs (9.2) (18.7)
Digital investment (16.9) (5.8)
Restructuring costs – (5.0)
Release of RDEC MOD appropriation liability – 19.6
Gain on sale of property 2.1 2.0
Impairment of property (0.7) –
Amortisation of intangibles assets arising from acquisitions (25.2) (15.6)
Gain/(loss) on disposal of business – 15.9
Pension net finance income 5.6 9.9
Total specific adjusting items gain/(loss) before tax (44.3) 2.3
Cash management and capital
allocation policy
Working capital management and overall
cash performance has remained robust,
with a particularly strong performance in the
second half.
Underlying net cash flow from operations
was £320.2m (FY23: £270.1m). Our cash
conversion definition reflects our pre-capital
expenditure cash flows as a proportion of
EBITDA to demonstrate how we convert our
profit (excluding interest, tax, depreciation
and amortisation) into cash flow – under this
definition we achieved consistent underlying
cash conversion of 104%, (FY23: 106%).
As at 31 March 2024 the Group had £151.2m
net debt, reduced from £206.9m as at 31
March 2023 due to the strong operating cash
conversion during the year. During the year,
we have successfully reduced leverage to 0.5x
(31 March 2023: 0.8x).
Cash flow bridge (£m)
Cash generation
1 Other movements driven by share based payments, pensions impacts and provision movements
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
31
Tax
The total tax charge was £43.1m (FY23:
£37.6m). The underlying tax charge was
£57.4m (FY23: £36.8m), on a higher underlying
profit before tax, with an underlying effective
tax rate of 25.3% for the year ending 31 March
2024 (FY23: 19.4%), increased from the prior
year due to the change in UK statutory rate. The
underlying effective tax rate is above the UK
statutory rate of 25% (FY23:19%) primarily as
a result of higher overseas tax rates and non-
deductible overseas interest, offset by prior year
adjustments to returns.
The underlying effective tax rate is expected
to remain marginally above the UK statutory
rate, subject to the impact of any tax legislation
changes and the geographic mix of profits. The
Group has engaged with advisers to assess
any potential impact on the tax charge by the
UK’s enactment of the OECD’s Global Anti-Base
Erosion Model Rules (Pillar Two). The Group
performed an assessment of the potential
exposure to Pillar Two income taxes based on
current period data. The Group understands
it qualifies for one of the transitional safe
harbours provided in the rules in all territories
in which it operates. Therefore, the Group does
not anticipate a material impact from Pillar
Two legislation in the near future. The Group
has applied the temporary exemption issued
by the International Accounting Standards
Board from the accounting for deferred
taxes under IAS12 and neither recognises
nor discloses information about deferred
taxes related to Pillar Two income taxes.
The Group does not anticipate a material
quantitative impact from Pillar Two legislation,
however, there are expected to be significant
compliance obligations.
Committed facilities
The Group has a £336m Term Loan split into
two tranches: GBP Term Loan £273m (Tranche
A); and, USD Term Loan £63m (Tranche B),
which will mature on 27 September 2026
and has a one year option to extend the final
maturity to 27 September 2027. In line with
Group policy, £270m (c.80%) of the floating
rate debt has been fixed using SONIA interest
rate swaps split over a three year and five year
tenure at a weighted average rate of 3.29%.
Including all fees and charges, the weighted
average cost of debt is 5.21%.
At the year-end, the Group had a £275m bank
revolving credit facility with an additional
‘accordion’ facility to increase the limit up to
£400m. The facility was due to mature on 27
September 2025 and was undrawn at 31 March
2024. The facility was refinanced on 22 April
2024 and replaced with a new £290m facility,
which will mature on 22 April 2027. It has two
one year extension options to extend the final
maturity date to 22 April 2029. It provides the
Group with significant scope to execute its
strategic growth plans.
The Group adopts a strict policy on managing
counterparty risk through a combination of
diversification of investments and regular
reviews of counterparty limits using credit
rating assessments. We are proud that our debt
sits with our key relationship banks who have
strong credit-ratings and diverse portfolios,
demonstrating their resilience. The banks have
been selected for their capabilities in our home
countries to support our business.
Return on Capital Employed (ROCE)
To help understand the overall return profile of
the Group, we continue to report our Return on
Capital Employed, using the calculation of: profit
from segments less underlying amortisation
/ (average capital employed less net pension
asset), where average capital employed is
defined as shareholders’ equity plus net debt
(or minus net cash).
For FY24 Group ROCE was 21% (FY23: 23%),
modestly lower due to the full-year impact
of the increased capital employed with the
acquisitions completed in the prior year. As we
continue to invest in our business to support
sustainable long-term growth, our ROCE is
forecast to remain attractive, at or above the
upper end of the 15-20%+ range, excluding the
impact of any further acquisitions.
Earnings per share
Underlying basic earnings per share increased
by 11% to 29.4p (FY23: 26.5p) driven by the
higher underlying profit after tax. Basic earnings
per share for the total Group (including specific
adjusting items) reduced 11% to 24.2p (FY23:
26.8p), with the prior year including the gain
on disposal of the Space NV business and the
release of the liability for the MOD appropriation
of RDEC.
The average number of shares in issue during
the year, net of treasury shares and as used in
the basic earnings per share calculations, was
577.0m (FY23: 575.9m). There were 573.5m
shares in issue at 31 March 2024, reduced due
to the ongoing share buyback.
Dividend
The Board proposes a final FY24 dividend per
share of 5.65p (FY23: 5.30p) making the full-
year dividend 8.25p (FY23: 7.70p). The full-year
dividend represents an increase in the Group’s
progressive dividend from 5% to 7%.
Subject to approval at the Annual General
Meeting, the final FY24 dividend will be paid
on 22nd August 2024 to shareholders on the
register at 26th July 2024.
Pensions
The triennial valuation of the Scheme was
undertaken as at 30 June 2023 and resulted in
an actuarially assessed surplus.
The net pension asset under IAS 19, before
adjusting for deferred tax, was £18.4m
(31 March 2023: £119.8m). The key driver
for the decrease in the net pension asset
since the March 2023 year end was an
actuarial adjustment following recalibration
of demographic and financial assumptions
to the recently completed 30 June 2023
triennial valuation.
The next triennial valuation will be performed
as at 30 June 2026. Under the new schedule of
contributions agreed, and reflecting the Scheme
being in surplus, there are no deficit reduction
employer contributions required.
During the year the pension fund took out a loan
of £125m to facilitate an increase in the level of
hedging in place. This has increased the hedges
to cover approximately 80% of the interest rate
risk and 85% of the inflation rate risk as at 31
March 2024, as measured on the Trustees’ gilt-
funded basis. The loan will be repaid in tranches
by FY27 using proceeds from the realisation
of investments.
The key assumptions used in the IAS 19
valuation of the Scheme are set out in note 28.
Net finance costs
Net finance expense was £9.8m (FY23: income
of £3.3m). The underlying net finance expense
was £15.4m (FY23: £6.6m), increased due to
a full year of interest payable on the Avantus
funding borrowings, with additional income of
£5.6m (FY23: £9.9m) in respect of the defined
benefit pension net surplus reported within
specific adjusting items.
Heather Cashin
Interim Group Chief Financial Officer
23 May 2024
Details of the Group’s tax strategy, treasury policy and approach to managing currency risk and liquidity risk can be found in the Additional Information section on page 198.
QinetiQ Group plc | Annual Report & Accounts 202432
£1,740.4mFY24
£1,724.1mFY23
£1,226.6mFY22
£215.2mFY24
£178.9mFY23
£137.4mFY22
£2,873.0mFY24
£3,070.2mFY23
£2,828.8mFY22
£220.7mFY22
£270.1m
5%
FY23
FY22
12%
20.6p
FY23
£320.2mFY24
FY22
26.5pFY23
14%FY24
29.4pFY24
Key Performance Indicators
Description Description Description
This is the level of new orders and amendments
to existing orders booked in the year.
The earnings before interest and tax, excluding
all specific adjusting items.
This represents the total future revenue
currently on contract.
Performance this year Performance this year Performance this year
Orders increased by 1%, or19% excluding the
MSCA contract in the prior year. On an organic
basis EMEA Services declined 14% whilst Global
Solutions grew 7%.
Increased by 20%, driven by the full year impact
of the Avantus acquisition in Global Solutions
and organic revenue growth at stable margins
in EMEA Services.
Backlog decreased to £2.9bn in year due to
the expected reduction in the LTPA as the
backlog naturally decreases over the course
of the contract.
Link to strategy Link to strategy Link to strategy
Enables us to assess the execution of our
strategy to grow the Group. Order intake is
used as a metric for the Annual Bonus Plan.
Used for performance analysis as a measure of
operating profitability. Specific adjusting items are
excluded because their size and nature mask the
true underlying performance.
Backlog allows us to assess the effectiveness
and execution of the Group strategy to move
towards larger longer-term contracts, increasing
confidence in our long-term revenue guidance.
Description Description Description
The underlying earnings, net of interest and tax,
excluding all specific adjusting items, expressed
in pence per share.
Calculated by taking the increase in revenue over
prior year, at constant exchange rates excluding
the impact of acquisitions and disposals.
This represents net cash flow from operations
before cash flows of specific adjusting items
and capital expenditure.
Performance this year Performance this year Performance this year
Increased by 11% to 29.4p due to the increase in
underlying profit after tax, driven by organic and
inorganic revenue growth at stable margins.
Grew 14% due to 20% organic growth in EMEA
Services offset by 3% organic decline in Global
Solutions.
Growing 19%, reflecting higher underlying
operating profit and consistent operating cash
conversion of 104%.
Link to strategy Link to strategy Link to strategy
Provides a measure of the earnings generated
by the Group after deducting tax and interest.
Specific adjusting items are excluded because
their size and nature mask the true underlying
performance year-on-year.
Demonstrates the Group’s ability to grow market
share within its chosen markets. Delivering long-
term sustainable growth reflects the successful
execution our strategy.
A measure of the ability to generate cash from
operations. Gives an indication of the ability
to make discretionary investments and pay
dividends.
* Definitions for the Group’s ‘Alternative Performance Measures’ can be found on page 200. Underlying
operating profit refers to operating profit from segments. See note 3 for details.
Orders Underlying operating profit* Backlog
Underlying earnings per share Organic revenue growth
Financial KPIs
Underlying net cash flow from
operations
29.4p 14% £320.2m
£1,740.4m £215.2m £2,873.0m
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
33
32,354**FY23
35,349**FY22
29,904FY24
7.4FY23
7.1FY22
7.5FY24
1.74*FY23
2.05FY22
1.58FY24
Description Description Description
The Lost Time Incident (LTI) rate is calculated
using the total number of accidents resulting
in at least one day taken off work, multiplied
by 1,000, divided by the average number of
employees in that year.
* FY23 data have been restated (previously published as
1.20) following a data improvement programme.
We use WorkDay Peakon, an employee
engagement measurement tool, which provides
regular insights into how our people feel about
working at QinetiQ, enabling us to identify what we
are doing well, but also where we can improve and
take action.
Our Net-Zero plan includes a near-term target of
50% reduction in Scope 1 and 2 emissions by
FY30 from a base year of FY20.
** Figures are restated as we have re-baselined our GHG
data – please see page 37 for details.
Near-term and long-term targets and details
of methodology are shown on page 37).
Performance this year Performance this year Performance this year
Our LTI decreased to 1.58 in FY24 from 1.74 in
FY23, supported by our EHS Strategy and Safety
Improvement Programme.
Read more on pages 48 and 49
We continued to have good participation rates (71%)
and have seen an increase in the overall score, 7.5 in
FY24 compared with 7.4 in FY23.
Read more on pages 50 and 51
We saw a decrease in our Scope 1 and Scope 2
emissions in FY24 compared with FY23, equating
to a 33% reduction against our re-baselined FY20
base year.
Read more on pages 36-41
Link to strategy Link to strategy Link to strategy
It is imperative we operate with the highest level
of safety. This is the right thing to do for our
people and for our customers who entrust us
with safety-critical work. The safety, health and
wellbeing of our people is therefore intrinsically
linked to our success.
Safety is linked to our Leadership Incentives
(page 118).
Employee engagement is a key part of sustaining
our strategy. Having an engaged workforce delivers
increased productivity and retention. Improving
employee engagement is essential to creating a
positive culture within QinetiQ and aligns with our
behaviour of ‘listen’.
Employee Engagement is linked to our
Leadership Incentives (page 118).
Setting a target and measuring and reporting
our greenhouse gas emissions is a key
way to demonstrate our commitment to
addressing climate change. It is a critical part
of our ESG strategy and underpins our wider
business performance.
Scopes 1, 2 and elements of Scope 3 GHG
emissions are linked to our Leadership
Incentives (page 118).
Greenhouse gas emissions
Scope 1 & 2 (tonnes CO
2e)
Employee engagement
(score out of 10)
Health and safety
(LTI)
Non-Financial KPIs
29,9047.51.58
QinetiQ Group plc | Annual Report & Accounts 202434
Sustainability
Sustainability:
Environmental, Social & Governance
articulate the sustainability-related risks and
opportunities that could reasonably be expected
to affect QinetiQ’s prospects over the short,
medium or long term. To ensure we understand
future requirements, we actively horizon scan
and this year have invested in new tools to
support us. We provide monthly updates to the
ESG Steering Committee, chaired by our Group
CEO, and regular updates in our ESG reports
to the Board.
Stakeholder engagement
A core driver for our focus is meeting the needs
and expectations of our stakeholders, so regular
engagement with them is vital. Throughout the
year, we engage with shareholders, customers
and employees about ESG directly, and via
reporting, surveys and questionnaires, so we
are able to listen, understand, and identify what
matters most to them. We also track and share
best practice through industry sustainability
networks. We strive to be proactive, chairing
a number of industry groups. We actively
collaborate with customers, peers and suppliers
on topics such as climate change, ethics,
diversity and inclusion and skills.(see pages 39
and 55 for more details).
We recognise the importance of supporting
national and international sustainability
programmes and frameworks. Our Net-Zero
targets are validated by the Science Based
Targets initiative (SBTi) (see page 36) and
we support Race to Zero. We use the UN
Sustainable Development Goals (SDGs) as
a guide and remain committed to driving
progress on specific goals that are aligned to
our sustainability agenda.
Based on this approach, we believe that the
aspects of sustainability that we are focusing
on are the most material to our business and to
our stakeholders, and our approach is to embed
ESG into strategy, and our business processes.
In FY25 we will be focusing across all our
programmes and looking further at non-
financial data.
2023 was the warmest year
on record. We have also
seen further conflict and the
increased cost of living. It is
clear that environmental, social
and governance (ESG) factors
are important to QinetiQ and
to our stakeholders. Focusing
on the safety, security and
sustainability of the world around
us is critical; everything we do at
QinetiQ is about protecting what
matters most.
Strategy and materiality
Sustainability encompasses a broad range
of ESG factors but not all are material to
QinetiQ, to our sector or the communities in
which we operate. It is therefore important
that we are focused on what matters most
to our business as it evolves and grows and
we meet the expectations and the needs of
our stakeholders. Delivering our sustainability
strategy, based on key ESG material factors,
ensures we are addressing risks and creating
value for our shareholders and customers.
It means we create a great place to work for
our people and future workforce, protect the
environment and have a positive impact in our
communities. Our ESG framework (page 35)
provides a high-level overview of these factors
and we describe our progress and plans in
this section (pages 34-53).
External landscape
The changing external landscape and how
we and our stakeholders need to respond
continues to evolve. With 2023 recognised
as the warmest year on record, the focus
on climate change continues and that on
biodiversity has further increased. Conflict
and the cost of living have also been
important drivers. The evolution of a range
of new reporting requirements is shaping our
programmes to ensure we are better able to
Highlights in FY24
Included in Sustainalytics Top-rated ESG
Companies List (for second year)
New Internal Research and Development
(IRAD) fund focused on sustainability
Accreditation by the Living Wage
Foundation in the UK
AA rating from MSCI
New carbon calculator for all employees
‘Let’s Talk Sustainability’ regular series
of talks on a range of sustainability topics
UK Government Modern Slavery
Assessment Tool score increased to 82%
International Women in Engineering Day
(INWED) STEM outreach event
Signatory to the ADS Defence ESG charter
Implementation of new ESG horizon
scanning approach
Supply Chain Climate Summits across
Europe, US and Australia
Signatory to the Defence Aviation Net-Zero
Charter
Employee recognition Gala awards Net-
Zero project
“Count me in” campaign, part of our
diversity, equity and inclusion programme
Over the following pages (34–55), we report
progress on those areas of sustainability
we consider most important including our
regulatory required submissions.
Signposting
Through this report we have also indicated
where ESG is an enabler for our business:
– Business Model value creation on page 10–11
– Investment Case on page 12
– Non-financial KPIs on page 33
– Risk management on page 56
– Stakeholders/Section 172 on page 65
– Non-financial and sustainability information statement on
pages 68–69
– Corporate Governance including ESG page 70
– ESG in leadership remuneration page 118
Additional information is provided on our website:
www.qinetiq.com/en/our-company/sustainability
Strategic report
QinetiQ Group plc | Annual Report & Accounts 2024 35
Our ESG framework
Integrity
ESG fully supported by the QinetiQ
Leadership Team and Board.
Collaboration
Industry engagement and leadership.
Multidisciplinary internal collaboration.
Performance
MSCI AA rating and included in Sustainalytics
2023 Top-Rated ESG Companies List.
Our purpose
Protecting lives by serving the national security
interests of our customers
We deliver safely, responsibly and sustainably
for the benefit of all our stakeholders
Creating a safe and secure
environment for us all to thrive
Our values demonstrate our purpose
and ESG framework in action
Our ESG framework
We have a clear framework and focus to deliver change
in the three areas of ESG
Environmental
Material factors
– Climate change – Net-Zero
– Climate change resilience
– Sustainable solutions for customers
– Environmental management
– Waste and resources
– Conservation and biodiversity
Social
Material factors
– Health, safety and wellbeing
– Employee engagement
– Diversity, equity and inclusion
– Learning and development
– Reward and recognition
– Human rights/modern slavery
– Community impact
Governance
Material factors
– Business ethics and Code of Conduct
– Anti-bribery and corruption
– Ethical trading
– Sustainable procurement
– Leadership ESG remuneration
– Responsible tax management
Our values
QinetiQ Group plc | Annual Report & Accounts 202436
Environmental
2023 was the warmest
year on record. We have
also seen the growing
focus on degradation of
natural habitats and the
impact on biodiversity.
Every business has a
role to play and a duty
of care to manage their
environmental impact.
We actively play our part in the stewardship of
the environment, by reducing our greenhouse
gas emissions, through our conservation
activities and the solutions we offer to our
customers to help meet their sustainability
ambitions, while maintaining capability.
Climate change
Transition to Net-Zero
QinetiQ is committed to reducing our
contribution to climate change. Building on
our environmental stewardship and reductions
in Greenhouse Gas (GHG) emissions, our
journey to Net-Zero began in earnest in
2021, with the creation of a Climate Change
Steering Group (CCSG), chaired by the Group
CFO and attended by senior stakeholders
from across the business. A commitment to
setting science-based GHG emissions targets,
and a Net-Zero Plan followed in early 2022,
along with the creation of a permanent role
for a Climate Change Programme Manager
to lead the delivery of the key initiatives
outlined in this Plan. In FY23, our ESG team
transferred to the Finance & Governance
function, to create a direct link to our Group
CFO and consolidate closer alignment with
key stakeholders across the QinetiQ Group. In
the same year we introduced new metrics into
our Leadership Incentive Scheme, tracking the
personal contribution of our senior leaders to
our Net-Zero Plan and activities to reduce GHG
emissions. The scheme was subsequently
expanded to a wider leadership community and
renamed the Annual Bonus Plan (page 118).
Net-Zero target setting
QinetiQ has been collecting and reporting
GHG emissions figures for many years,
and we have evolved our methodologies
in-line with the GHG Protocol. We have set
emissions targets which cover our full value
chain, across all categories of Scope 1, 2 and 3
and these were validated by the Science Based
Targets initiative (SBTi) in 2022, confirmed as
ambitious, and fully aligned to a 1.5°C global
temperature pathway. Through SBTi validation,
QinetiQ is a member of the SBTi Business
Ambition for 1.5°C Campaign and the United
Nations Race to Zero Campaign.
https://sciencebasedtargets.org/companies-
taking-action
Sustainability continued
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
37
As outlined in our Net-Zero Plan, our Climate
Change Programme is built on four key
initiatives, which are summarised in the
table below. Our goal is to focus on absolute
reductions in emissions. Within our emissions
targets we have made a commitment to at
least a 90% reduction across our full value
chain by 2050 or sooner. We recognise that
eliminating all sources of emissions will be
challenging with current technologies and so
up to 10% of our footprint may need to be
offset. We recognise that change is essential to
meet our goals, but change can introduce risk,
so we apply programme management rigour
with a clear strategy and robust governance.
Our Climate Change Programme has been
designed to ensure appropriate governance
across the QinetiQ Group, to facilitate and
support transformational changes to our ways
of working. A variety of scheduled reviews and
briefings are undertaken to both the Group
Director ESG and Group CFO throughout the
year, with climate change an agenda item on
the monthly ESG Steering Committee, chaired
by the Group CEO. Regular progress updates
are provided by stakeholder groups across
the business, and these are presented in a
simplified dashboard, allowing progress to
be captured and any areas of concern to be
highlighted and resolved.
GHG emissions methodology
Our methodology for calculating our GHG
emissions is aligned to the GHG Protocol, and
best practice outlined by the SBTi. We are
constantly striving to improve our calculations,
to obtain a more accurate indication of our
emissions. To be transparent about our
approach, we publish our methodology
documentation on our website.
www.qinetiq.com/en/our-company/
sustainability/climate-change
Capturing accurate Scope 3 data is challenging,
and we use a ‘spend-based’ calculation for
various categories of Scope 3, where ‘activity-
based’ data are currently unavailable. Our
largest source of emissions, and most difficult
to obtain accurate activity data is Scope 3
Category 1, ‘procured goods and services’.
As our business grows there is an obvious
connection in rising procurement activity to
support increased operations. As a result,
we expect GHG emissions associated with
procurement to increase in the short term, while
we work with our supply chain to obtain activity-
based emissions data and encourage and
support reductions in the emissions associated
with what we buy. We are investing in new
tools, and developing new processes and policy
to improve data management (for example
business travel).
Re-baselining of emissions targets
In FY23 QinetiQ made several acquisitions and
divestments. Under the guidelines set out by the
SBTi, (as outlined within the Restatement Policy
of our methodology document), corporate
growth beyond a threshold value of 5% should
trigger a ‘re-baseline’ of stated GHG emissions
targets, to be formally reported once any new
acquisitions have been part of the Group for at
least 12 months. We are therefore presenting
the revised figures here for the first time. The
re-baseline process requires the business
to re-evaluate the carbon footprint of the
organisation as it is today, while ‘back-dating’
the emissions associated with the new
organisational structure to the date on which
the original baseline was set.
For QinetiQ, we track our GHG emissions
levels against the figures for FY20 (April
2019 – March 2020), therefore as part of
the re-baseline we have removed all of the
historic emissions figures back to FY20
from the businesses we have divested, while
adding historic emissions figures from the
new businesses we have acquired. We have
maintained our original emissions targets, in
terms of the percentage reductions against
our Scope 1, 2 and 3 totals, as outlined above.
Net-Zero targets
FY20 FY30 FY50 or sooner
Scopes 1&2 Base year
-50%
Absolute reduction
Net-Zero
Scope 3 Base year
-30%
Absolute reduction
Net-Zero
Total Base year
-33%
Absolute reduction
Net-Zero
Net-Zero Plan
Initiative 4
Co-create with customers, invest
in research & development and
care for our environment
QinetiQ will be a Net-Zero company by 2050 or sooner with achievable and ambitious near-term GHG emissions reduction targets.
To deliver this, we will take a global whole value chain approach. We will work proactively with our supplier ecosystem, continue to invest
in relevant climate positive research and development to help our customers achieve their Net-Zero ambitions, while improving the
operational efficiency and biodiversity of our estates and those we manage on behalf of our customers.
Achieving QinetiQ Net-Zero Contributing to Global Net-Zero
Initiative 1
Net-Zero Operations
(Scope l and 2
GHG emissions)
Initiative 2
Net-Zero Upstream
and Downstream focus
(Scope 3 GHG emissions)
Initiative 3
Deliver critical internal
and industry-wide
enabling activities
50% reduction from 2020
to 2030 and Net-Zero by
2050 or sooner
30% reduction from 2020
to 2030 and Net-Zero by
2050 or sooner
Create and foster the internal
foundation and productive
industry engagement to
deliver success
Our
ambition
Our
targets
Our
Net-Zero
pathway
initiatives
Helping our customers
achieve their Net-Zero ambitions
without compromising
their capability
QinetiQ Group plc | Annual Report & Accounts 202438
Sustainability continued
Environmental
continued
The original and updated FY20 baseline
emissions for Scope 1 and 2 are as follows:
FY20 Baseline GHG emissions (tCO
2
e)
Re-baselined Original
Scope 1 28,377 19,289
Scope 2 16,281 16,298
The increase in our recalculated Scope 1
emissions is due primarily to the nature of Air
Affairs business which is aircraft based and
so significant users of jet fuel. Re-baselining
of our Scope 3 data will be finalised during
the first half of FY25 and we will publish all
updated figures on our website alongside our
published methodology.
Scope 1 and Scope 2 emissions
We have adopted a financial control approach,
and used the GHG Protocol Corporate
standard and UK Government emission
conversion factors. We collect relevant data
throughout the year via a dedicated team
of energy experts. PricewaterhouseCoopers
LLP (PwC) carried out a limited assurance
engagement on selected GHG emissions
data for the year ended 31 March 2024 in
accordance with International Standard on
Assurance Engagements 3000 (revised) and
3410, issued by the International Auditing
and Assurance Standards Board. The figures
covered by this assurance process are
indicated in the table below by the following
symbol
. A copy of PwC’s report is available
on our website: www.qinetiq.com/en/our-
company/sustainability/climate-change
Streamlined Energy and Carbon
Reporting (SECR)
To comply with the UK Government’s
Streamlined Energy and Carbon Reporting
(SECR) requirements, we present our energy
performance in the table below (indicating
the proportion for the UK). Our re-baselining
exercise has resulted in adjustments to
previous years’ data and so we have included
both re-baselined and previously reported
figures in the table below for completeness.
The following are examples of energy reduction
projects undertaken in FY24:
– Implementation of a new energy monitoring
software platform across our UK estate,
to provide dynamic consumption figures,
helping to highlight anomalies and forecast
future demand.
– Installation of low-energy LED lighting
solutions at various UK sites.
– Integration of a new multi-engine aircraft
within our UK fleet, to increase capability
while reducing the utilisation of larger less
fuel-efficient platforms.
– Reductions to our UK vehicle fleet, and
sourcing hybrid or pure electric alternatives to
replace existing assets where possible.
– A trial of bio-fuel as a low emission
alternative to diesel.
– UK “Energy Shutdown” campaigns across
extended holiday periods in the UK.
For more information see page 40, Initiative 1.
Scope 3 emissions
We have set Scope 3 reduction targets and
on page 40 (under Initiative 2) report the
programmes that are supporting our goal to
reduce these emissions.
We have previously published our FY20 baseline
total Scope 3 emissions of 229 ktCO
2
e, and
we publish selected categories of our UK
Scope 3 footprint within our annual Carbon
Reduction Plan (please see our website for
our 2023 report). While we are still processing
our full Scope 3 footprint for FY24, we have
already identified a significant increase in our
emissions associated with business travel,
which reflects the increasingly global nature of
our business. As part of our annual processing
of Scope 3 emissions and our emissions
re-baselining activity, we will be restating all of
our historic Scope 3 emissions figures from
our FY20 baseline year to date, and we will be
publishing this information on our website in
FY25 enabling us to demonstrate our progress
against our target.
GHG emissions reporting
In addition to the information presented here
and on our website, we disclose our GHG
emissions figures in a variety of formats
to a number of external organisations
annually including disclosures on our Air Affairs
business to meet Australian Government
National Greenhouse and Energy Reporting
Scheme (NGERS); the publication of a Carbon
Reduction plan for our UK business to meet
UK Government Policy Procurement Note PPN
06/12; Carbon Disclosure Project (CDP) and
Sustainalytics Climate Questionnaire.
Scope 1 and Scope 2 emissions FY24 FY23 FY22 FY21 FY20
Total Scope 1 emissions (tCO
2
e) 19,362 20,996
(PR 13,360)
23,126
(PR 15,727)
23,710
(PR 15,872)
28,377
(PR 19,289)
Total Scope 2 emissions (tCO
2
e) 10,542 11,358
(PR 11,358)
12,222
(PR 12,236)
13,555
(PR 13,572)
16,281
(PR 16,298)
Total Scope 1 and 2 emissions (tCO
2
e) 29,904 32,354
(PR 24,718)
35,349
(PR 27,963)
37,265
(PR 29,444)
44,658
(PR 35,587)
Intensity ratio (tCO
2
e per £m of revenue) 16 20
(PR 16)
27
(PR 21)
29
(PR 23)
42
(PR 33)
Energy consumption (kWh) resulting
in the above reported emissions
132,659,501 146,600,802
(PR 114,809,565)
154,759,131
(PR 125,261,565)
156,719,332
(PR 122,808,625)
176,376,247
(PR 139,780,656)
Proportion of energy consumption arising
from UK operations (%)
73% 75%
(PR 96%)
80%
(PR 98%)
79%
(PR 99%)
77%
(PR 98%)
Proportion of emissions arising
from UK operations (%)
70% 72%
(PR 95%)
78%
(PR 98%)
78%
(PR 99%)
78%
(PR 98%)
Please note, following the re-baselining of our GHG emissions described on page 37, the figures (in black) in this table are different from those published in previous Annual Report and
Accounts. We have included all previously reported figured in green and labelled ‘PR’ (Previously Reported), for completeness and to meet the requirements of SECR.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
39
Investment in Net-Zero
To deliver our Net Zero plan, aligned with
the four initiatives highlighted on page 37,
we are delivering a number of projects; a
comprehensive list can be found on pages 40
and 41, summarising what has been delivered
in FY24, and planned activities for FY25 and
beyond. These programmes are built into our
annual Integrated Strategic Business Plan
(ISBP). During FY25 we will be developing our
Transition Plan (in line with the Transition Plan
TaskForce) and aim to publish details in 2025.
Stakeholder engagement
We have seen interest and focus on climate
change from all stakeholders with a growing
interest in climate resilience as well as
emissions reduction. We have been actively
participating, sharing knowledge and best
practice in a number of cases leading and
driving engagement across our industry and
business community, for example our Group
CEO is Industry Co-Chair of the Defence
Suppliers Forum (DSF) and our Group Director
ESG Chairs the UK Trade body ADS (Aerospace,
Defence and Security) Sustainability Group. We
have also engaged with our supply chain, via
our industry working groups.
Case study
Photovoltaic (PV)
panel installation
At our Haslar site in the UK, we have
installed three arrays of ground-mounted
PV panels. The 2,000m
2
installation is
expected to generate over 200 MWh,
avoiding approximately 45 tCO
2
e annually.
The arrays were installed towards the
end of FY24 and in total, 35 MWh of
renewable power was generated in
the year.
This project and the installation of
PV arrays at our QTEC facility
in Melbourne form part of a wider
programme to reduce our use of
fossil fuels.
In January 2024, ADS launched a Defence
ESG Charter which serves as a guiding
framework, outlining commitments to
environmental sustainability, social impact,
and robust governance. QinetiQ contributed
to the development of the charter, and were
a primary signatory.
Our round table at the Defence and Security
Equipment International (DSEI) Exhibition in
September 2023 brought together a group
of senior stakeholders from NATO, Australia
and UK defence organisations, industry and
academia and will be followed with a thought
leadership report ‘Sustainability on the Edge’.
Cross-sector innovation will be central to
defence and security effectiveness and climate
adaptation. To support this, we engaged with
innovators culminating in a Sustainable ‘Tech
Demo’ Day to showcase an exciting breadth of
emerging solutions to defence stakeholders.
We have continued and strengthened our
cross-defence and industry collaboration. We
are working with our academic partners to
explore future capability development. We
have continued to run the CHACR (Centre for
Historical Analysis and Conflict Research)
programme which includes collaboration on
Climate Change and (In)stability with Oxford
University.
We engage with shareholders directly to
discuss ESG and also provide ESG information
to MSCI, Sustainalytics and CDP.
For our people we communicate regularly
about sustainability through a range of
channels and on a variety of topics. We have
a dedicated online Community of Interest for
sustainability (The Sustainability Knowledge
NetworQ). During the year we have run a
number of talks as part of our “Let’s Talk
Sustainability” series, with inspirational
internal and external speakers. Many of our
people show significant interest in climate
change and regularly pose questions to
leaders as part of our Global Employee
Roadshow. Net-Zero forms part of our
leadership incentive scheme see page 118
and we have provided a range of resources,
blogs and drop-in sessions to support leaders.
QinetiQ Group plc | Annual Report & Accounts 202440
Sustainability continued
Environmental
continued
Net-Zero pathway initiatives
QinetiQ’s Net-Zero GHG Emissions reduction programme:
activities delivered to date and future plans
Achieving Net-Zero
Net-Zero operations
Scope 1 and 2 GHG emissions
Net-Zero upstream
and downstream focus
Scope 3 GHG emissions
Initiative
01
Initiative
02
Completed in FY24 Completed in FY24 Completed in FY24 Completed in FY24
– Bio-fuel trial, testing the replacement of diesel in specific assets
with Hydrotreated Vegetable Oil (HVO), as a scoping exercise to
support finalising plans for a phased removal of fossil fuels from
our operations.
– Installation of Photovoltaic (PV) arrays at our Haslar site in the
UK, as a pilot for future implementations across our UK estate
and the estate that we manage on behalf of our UK customers.
See Case Study on page 39.
– Installation of additional electrical sub-meters across our
UK estate, providing greater granularity on our electricity
consumption, coupled with the implementation of a new third-
party energy monitoring platform to enable more dynamic
management of our energy usage and deeper analysis of trends
to drive improvements in efficiency.
– Installation of additional Electric Vehicle (EV) charging stations
across our UK estate, to support the ongoing adoption of more
EVs across our corporate fleet, and for use by employees,
customers and visitors.
– Performed risk analysis for a specific use-case to determine
feasibility of using Sustainable Aviation Fuel (SAF) in future
flight trials.
– Roll-out of a new business travel booking platform across the
Group, to provide a consistent approach to sourcing travel services
and greater access to travel data to enable analysis and insight.
Also making it easier for employees to include their travel carbon
footprint into informed travel choices.
– Successfully delivered three Supply Chain Net-Zero summits
across Europe, Americas and Australia to provide an in-depth
understanding of the importance of supply chain to reducing Scope
3 emissions associated with Purchased Goods and Services and
Capital goods.
– Engagement with colleagues across our Procurement functions,
providing tools and resources to enable greater knowledge-sharing
with our supply chain.
– Implementation of a new Supply Chain Taxonomy, enabling greater
analysis and insight into our procurement practices to drive change.
– Following installation in 2022, the 200kw PV array is successfully
running at the leased QTEC facility in Melbourne. The project won
the Responsibility and Sustainability category of the 2023 Global
Recognition Gala Awards.
– Investment in a number of innovation projects, directly supporting
our Net-Zero plan, sourced through our employee ideation
platform the IdeaXChange, and our internal research and
development fund.
– Improved climate change element of our environmental
mandatory training module for all employees.
– Second year of direct alignment of the Annual Bonus Plan for
senior leaders to GHG emissions reductions, and inclusion of
a larger leadership community (see page 118).
– Internally-developed Carbon Calculator available to all employees
to help them calculate the carbon footprint of their activities.
– Hosted a roundtable discussion at the Defence & Security
Equipment International (DSEI) exhibition with key customer
representatives around sustainability and the forecast impact of
climate change on their operations.
– Leadership of a number of industry collaboration forums and
initiatives (see page 39).
– Signatory to the ADS EGS Charter (see page 39).
– Signatory to the Defence Aviation Net-Zero Charter
– Significant contribution to the Defence Supplier’s Forum GHG
Code of Practice.
– Successfully delivered a Sustainable ‘Tech Demo’ event and
webinar, focussing on small to medium enterprise (SME)
business innovators and examples of potential for cross-sector
innovation to support Defence challenges.
– Successfully delivered an ACE Research Network event
relating to sustainability and how digital, data and security can
contribute towards Net-Zero.
– Delivered support to DE&S on Sustainable Acquisition and the
changes required to enable MOD to purchase lower-emission
and more climate-resilient technology.
– Worked with customers to develop the Deployable Active Smart
Grid (see case study page 42)
Planned for FY25 and beyond Planned for FY25 and beyond Planned for FY25 and beyond Planned for FY25 and beyond
– Installation of more renewable power sources across our UK
estate.
– Installation of additional electrical sub-meters across our UK
estate.
– Installation of additional EV charging units across our UK estate.
– Assess the findings of the HVO trial, and use these to refine our
plans for the phased removal of fossil fuels from our operations.
– Evolving our approach to business travel, enabled and supported by
our new travel booking platform.
– Potential project to install PV panels at our leased facility in
Medicine Hat, Canada.
– Implementation of a new Net-Zero clause in our standard terms
and conditions, to support a drive for greater sustainability across
our supply chain (see Page 55).
– Implementation of a new platform for GHG Emissions Data
Management, to streamline our data processing and enable
greater agility in meeting emerging reporting requirements, while
offering analytical capabilities to support future planning.
– Strengthen environmental impact within our Technical Assurance
processes, to drive greater sustainability in our ways of working
and our delivered solutions.
– Review the introduction of environmental metrics into our Project
Management toolset, to provide a better understanding of the
impact from our operations.
– Review the formal introduction of our existing internal carbon
price into financial forecasting toolsets.
– Ongoing participation in collaborative forums to shape future
solutions to address defence and security sustainability
challenges.
– Presentation of our work in software-defined mobility solutions
to NATO panel.
– Delivery of internally funded studies on defence energy
transition termed ‘energy-informed operations’ and climate
scenario war-gaming.
– Publication of ‘Sustainability on the Edge’ thought
leadership report.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
41
SWITCH OFF
Three things to
Lighting | Heating | Electrical equipment
Contributing to Global Net-ZeroAchieving Net-Zero
Deliver critical internal
and industry-wide
enabling activities
Co-create with customers,
invest in research and
development and care
for the environment
Initiative
03
Initiative
04
Completed in FY24 Completed in FY24 Completed in FY24 Completed in FY24
– Bio-fuel trial, testing the replacement of diesel in specific assets
with Hydrotreated Vegetable Oil (HVO), as a scoping exercise to
support finalising plans for a phased removal of fossil fuels from
our operations.
– Installation of Photovoltaic (PV) arrays at our Haslar site in the
UK, as a pilot for future implementations across our UK estate
and the estate that we manage on behalf of our UK customers.
See Case Study on page 39.
– Installation of additional electrical sub-meters across our
UK estate, providing greater granularity on our electricity
consumption, coupled with the implementation of a new third-
party energy monitoring platform to enable more dynamic
management of our energy usage and deeper analysis of trends
to drive improvements in efficiency.
– Installation of additional Electric Vehicle (EV) charging stations
across our UK estate, to support the ongoing adoption of more
EVs across our corporate fleet, and for use by employees,
customers and visitors.
– Performed risk analysis for a specific use-case to determine
feasibility of using Sustainable Aviation Fuel (SAF) in future
flight trials.
– Roll-out of a new business travel booking platform across the
Group, to provide a consistent approach to sourcing travel services
and greater access to travel data to enable analysis and insight.
Also making it easier for employees to include their travel carbon
footprint into informed travel choices.
– Successfully delivered three Supply Chain Net-Zero summits
across Europe, Americas and Australia to provide an in-depth
understanding of the importance of supply chain to reducing Scope
3 emissions associated with Purchased Goods and Services and
Capital goods.
– Engagement with colleagues across our Procurement functions,
providing tools and resources to enable greater knowledge-sharing
with our supply chain.
– Implementation of a new Supply Chain Taxonomy, enabling greater
analysis and insight into our procurement practices to drive change.
– Following installation in 2022, the 200kw PV array is successfully
running at the leased QTEC facility in Melbourne. The project won
the Responsibility and Sustainability category of the 2023 Global
Recognition Gala Awards.
– Investment in a number of innovation projects, directly supporting
our Net-Zero plan, sourced through our employee ideation
platform the IdeaXChange, and our internal research and
development fund.
– Improved climate change element of our environmental
mandatory training module for all employees.
– Second year of direct alignment of the Annual Bonus Plan for
senior leaders to GHG emissions reductions, and inclusion of
a larger leadership community (see page 118).
– Internally-developed Carbon Calculator available to all employees
to help them calculate the carbon footprint of their activities.
– Hosted a roundtable discussion at the Defence & Security
Equipment International (DSEI) exhibition with key customer
representatives around sustainability and the forecast impact of
climate change on their operations.
– Leadership of a number of industry collaboration forums and
initiatives (see page 39).
– Signatory to the ADS EGS Charter (see page 39).
– Signatory to the Defence Aviation Net-Zero Charter
– Significant contribution to the Defence Supplier’s Forum GHG
Code of Practice.
– Successfully delivered a Sustainable ‘Tech Demo’ event and
webinar, focussing on small to medium enterprise (SME)
business innovators and examples of potential for cross-sector
innovation to support Defence challenges.
– Successfully delivered an ACE Research Network event
relating to sustainability and how digital, data and security can
contribute towards Net-Zero.
– Delivered support to DE&S on Sustainable Acquisition and the
changes required to enable MOD to purchase lower-emission
and more climate-resilient technology.
– Worked with customers to develop the Deployable Active Smart
Grid (see case study page 42)
Planned for FY25 and beyond Planned for FY25 and beyond Planned for FY25 and beyond Planned for FY25 and beyond
– Installation of more renewable power sources across our UK
estate.
– Installation of additional electrical sub-meters across our UK
estate.
– Installation of additional EV charging units across our UK estate.
– Assess the findings of the HVO trial, and use these to refine our
plans for the phased removal of fossil fuels from our operations.
– Evolving our approach to business travel, enabled and supported by
our new travel booking platform.
– Potential project to install PV panels at our leased facility in
Medicine Hat, Canada.
– Implementation of a new Net-Zero clause in our standard terms
and conditions, to support a drive for greater sustainability across
our supply chain (see Page 55).
– Implementation of a new platform for GHG Emissions Data
Management, to streamline our data processing and enable
greater agility in meeting emerging reporting requirements, while
offering analytical capabilities to support future planning.
– Strengthen environmental impact within our Technical Assurance
processes, to drive greater sustainability in our ways of working
and our delivered solutions.
– Review the introduction of environmental metrics into our Project
Management toolset, to provide a better understanding of the
impact from our operations.
– Review the formal introduction of our existing internal carbon
price into financial forecasting toolsets.
– Ongoing participation in collaborative forums to shape future
solutions to address defence and security sustainability
challenges.
– Presentation of our work in software-defined mobility solutions
to NATO panel.
– Delivery of internally funded studies on defence energy
transition termed ‘energy-informed operations’ and climate
scenario war-gaming.
– Publication of ‘Sustainability on the Edge’ thought
leadership report.
QinetiQ Group plc | Annual Report & Accounts 202442
Sustainability continued
Environmental
continued
Waste management
For several years we have been reporting annual
proportion (%) of UK waste that is re-used and
recycled from underlying waste production.
Non-hazardous solid waste and hazardous
waste generated represents a relatively low level
of materiality on environmental and financial
impact as part of our operations. We are
currently reviewing our environmental data and
metrics and will be defining new metrics and
targets in the year ahead to reflect our priorities
and new reporting requirements.
Conservation and biodiversity
Eelmoor Marsh is a SSSI (Site of Special
Scientific Interest), and forms part of our site
in Farnborough, in the UK. We have worked
with our conservation experts Marwell Wildlife
to provide stewardship on this important site.
We have raised awareness of the importance
of biodiversity and conservation through our
sustainability talk series as well as running
conservation days as part of our environmental
volunteering programme. We continue
to perform conservation and biodiversity
protection works at the sites we run on behalf
of the MOD locations; supporting operation
delivery while protecting flora and fauna.
In FY25 we will continue to focus on
environmental stewardship programmes,
building greater connection with our
Net-Zero plan. We will be reviewing our policy
and further improving training, awareness
and environmental volunteering to engage
our people.
Sustainable solutions and innovation
This year we allocated a modest but
dedicated portion of our internal research
and development (IRAD) funding to focus on
sustainable science and technology. Supported
by an Innovation Mentor, this builds on the
launch of the IdeaXchange Net-Zero channel
in 2023. Projects included the sustainable
disposal of energetic materials, work on plant-
based polymers, eletro-optic monitoring of
building heat loss, exploring cultural change
toolkits and the benefits of electrification in
defence operations (see case study below).
We supported our customers in the UK to
establish methods to acquire and support
lower-emission, more climate-resilient capability,
and collated the methods required to enable
a coherent energy transition for defence. We
continue to deliver a small proportion of our
revenue from sustainability-related products
and services (also see page 41).
Environmental management
Reflecting our intent to integrate
environmental governance and leadership
more strongly into our core strategies,
QinetiQ’s environmental policy commitments
were incorporated into a new Environmental,
Social and Governance Policy in FY24,
sponsored by the Group CFO. We continue
to demonstrate environmental management
systems conformance to the Standard
ISO14001:2015 for our activities at 24
locations in the UK and one location
in Canada.
Our Environment Council is now operational,
and the primary focus of this multi-national
governance forum in FY24 has been to develop
an overarching approach to the environment
across the Group, and development of a
new set of environmental requirements
that go beyond legal compliance and set a
framework for continual improvement in the
way we progress environmental stewardship
across QinetiQ. These requirements are due
to be published in early FY25. A Group-level
environmental management assurance initiative
commenced in FY24, focusing on Business
Management Systems documentation related
to internal environmental standards in the UK
and customer environmental management
plans in Australia. Trends in environmental
incident reporting is part of Board reporting,
and in conjunction with a health and safety
incident reporting campaign, an initiative to
improve the awareness of environmental
incident reporting is under development and
will be promoted in FY25.
During FY24 we developed new environmental
content for our integrated environment, health
and safety training which all employees will
be required to complete in FY25. This training
will continue to evolve and new content,
focusing on climate change, will be developed
during FY25.
Artist’s impression of DASG
Case study
Deployable Adaptive Smart Grid
The energy transition is intricately linked with climate change and
requires our customers to adapt to maintain their ability to operate. In
parallel, the electrification of the battlespace is significantly increasing
the demand for electrical capacity and reliability. QinetiQ is co-creating
a Deployable Adaptive Smart Grid (DASG) with our Australian Defence
customers (image shows an artist’s impression) When mature
the DASG will address the shortfalls in current deployable electrical
systems by managing generators, loads, energy storage and external
connections to reduce fuel consumption, maximise grid resilience
and maintain power quality. It will be accessible to non-expert users
and will enable the integration of varied energy sources such as gas
turbines, fuel cells, energy storage and renewables.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
43
In addition the Board reviews our Integrated
Strategic Business Plan (ISBP), where climate
change is integrated into functional/sector
plans and approves the annual budget (which
contains Net-Zero targets and programmes).
The Board also received updates on principal
risks twice each year, which includes the
climate change principal risk.
The Audit Committee reviews and monitors
QinetiQ’s financial and non-financial
reporting requirements including TCFD.
Updates on non-financial reporting were
provided at both the November and March
FY24 meetings (see page 100).
The Remuneration Committee has overseen
and supported the inclusion of ESG within
leadership incentives, including Net-Zero for
the 2nd year, approved at the May meeting.
The Risk and Security Committee has
oversight of and provides assurance to the
Board on QinetiQ’s risk management system.
This includes quarterly monitoring and review
of all QinetiQ principal risks, which includes the
climate change principal risk (page 60).
Management governance and oversight
The ESG Steering Committee, Chaired by the
Group CEO, provided oversight, leadership and
scrutiny of our Group ESG commitments and
initiatives including performance against our
Net-Zero Plan (see page 54). The Committee
meets monthly and includes the Group CFO,
Group Director ESG and members of the QLT.
Leadership and delivery of the Climate Change
Programme are the responsibility of the Group
Director of ESG, reporting to the Group CFO. The
Climate Change Programme includes leaders
and subject matter experts from across the
business, ensuring the necessary multidisciplinary
approach. The programme is supported by a
dedicated programme manager. The regular
programme reviews and meetings create a
Taskforce on Climate-related Financial Disclosures
Governance
Disclose the organisation’s governance around climate related-risks and opportunities
TCFD recommended disclosures: Additional information
a) Describe the Board’s oversight
of climate-related risks and
opportunities
b) Describe management’s role
in assessing and managing
climate-related risks and
opportunities
Page 68: Non-financial information and sustainability statement
Page 78-81: Board Directors and board structure and committees
Page 100: Audit Committee
Page 110: Remuneration Committee
Page 60: Climate Change Principal risk
Page 54: ESG Governance
Page 118: Leadership incentives
Page 39: Leadership engagement
senior forum for developing and implementing
strategy and plans and for reviewing risks and
performance.
Climate change is a principal
risk (see page 60) and the Group Director ESG
is responsible for identification, assessment
and oversight of the risk and opportunities,
undertaking monthly reviews of the programme
and capturing those risks through the enterprise
risk management governance process. The
Group CFO has oversight of the programme
and in addition to regular updates, undertakes a
formal six-monthly review of progress and plans.
Functional Councils support good governance
across QinetiQ, where functional and sector
leaders come together to communicate, review
and agree on issues, actions and standards of
best practice that are enterprise-wide and/or
have operational significance. Relevant to our
Climate Change Programme is the Environment
Council, Chaired by the Group Director ESG, and
the Risk and Assurance Council, Chaired by the
Group Chief Risk Officer, attended by the Group
Director ESG. Climate change has also been on
the agenda at the Finance Council.
ESG and climate change form an integral part
of our ISBP process, and so consideration of
the role of individual sectors and functions
was undertaken in H2 during the planning
process, with oversight by the Group Director
ESG and then reviewed by the CEO, CFO and
Chief Strategy Officer.
In FY24, leaders were again incentivised
specifically linked to our Net-Zero plan (See
page 118). The scheme was expanded to
include a larger cohort than FY23. This ongoing
focus and involvement by leaders strengthens
our commitment to our Net-Zero plan and
underpins our leadership engagement (see
page 39), oversight and governance.
The Financial Stability Board’s Taskforce on
Climate-related Financial Disclosures (TCFD)
recommends a reporting framework across four
themes: governance, strategy, risk management
and metrics and targets. In line with Companies
Act disclosure requirements (CA06 s414CB(2a)
and following the TCFD all-sector guidance
(there is no specific supplementary guidance
for our sector) we provide our disclosures here
(pages 41-45) aligned to the four themes and
providing material information against each
requirement (we also outline our approach on
page 68 in our Non-financial information and
sustainability statement). We provide links
to where further information is provided in
this Annual Report and Accounts and on our
website. We are committed to implementing
this approach to provide investors and other
stakeholders with information on climate-
related risks that are relevant and material to
our business.
Compliance statement
We believe our approach is consistent with
10 of 11 of the TCFD recommendations and
recognise we need to do more on quantitative
modelling as part of the Strategy disclosures.
During FY24 we have worked with third-party
experts to develop new financial models to
progress our quantitative financial assessment
and will be testing these during FY25. We are
also currently re-baselining our GHG emissions
and so will be publishing our Scope 3 data for
FY24 during FY25, and not in this report.
Board governance
The QinetiQ Board has overall responsibility for
our ESG approach and climate change forms a
core part of this agenda. It has oversight of the
threats and opportunities resulting from climate
change, and this is considered as part of our
strategy. Our Group CFO is the Board Sponsor
for the wider ESG programme, including climate
change. Both the Group CFO, and our Group
Director of ESG provide regular reports and
briefings on ESG and climate change to the
Board and Board Committees (see page 81
for our Board Governance Structure and pages
78-80 for membership of these committees).
The QinetiQ Board sets the Company’s
strategic priorities, including ESG and Net-Zero
and has regular oversight and input into our
Net-Zero programme. As part of the regular
monitoring and reporting cycle, the Board were
updated and discussed climate change at the
May and November FY24 meetings, ensuring
their oversight of progress against our targets.
QinetiQ Group plc | Annual Report & Accounts 202444
Sustainability continued
Environmental
continued
Taskforce on Climate-related Financial Disclosures continued
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the
organisation’s business strategy and financial planning where such information is material
TCFD disclosures: Additional information
a) Describe the impact of climate-related risks and
opportunities on QinetiQ’s business, strategy and
financial planning
b) Describe the resilience of QinetiQ’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
c) Describe the resilience of QinetiQ’s strategy
taking into consideration different climate related
scenarios, including 2°C or lower scenario
Pages 40–41: Net-Zero initiatives
Page 8: Strategic framework
Page 60: Climate Change risk
Page 118: Leadership incentives
Page 33: Non-financial KPIs
Page 37: Net-Zero plan and targets
Page 42: IRAD funding
Page 62: Viability statement
We have committed funding to support our
Net-Zero programme for a range of initiatives
across our functions and sectors (see pages 40
and 41).
This is illustrated as follows:
– Our commitment to sustainability is part of
QinetiQ’s overarching strategic framework
(page 8).
– Climate change is a principal risk (outlined on
page 60).
– Scope 1 and Scope 2 GHG emissions form
one of our core non-financial KPIs (page 33).
– Net-Zero is integrated into our leadership
incentives (page 118).
– In FY22 we developed and published our
Net-Zero plan; including targets for emissions
reduction (page 37). An overview of progress
and plans is provided on pages 40-41 along
with links to the full plan.
ESG and climate change are embedded in
our annual ISBP process. During FY23 we
planned for a number of actions which were
implemented in FY24, including:
– Allocation of budget to deliver energy saving
projects which reduce our dependence on
fossil fuels.
– Increase in resource: increasing our energy
team capability and capacity and a new
dedicated role to lead on sustainable
solutions for customers.
– Investment in development of tools to mature
the modelling and financial quantification of
climate impacts.
– A new internal research and development
(IRAD) fund to support Net-Zero projects
(see page 42).
– Investment in access to third-party horizon
scanning tools.
During our ISBP planning process in FY24 we
undertook the following:
– The requirement for all sectors and functions
to consider their contribution to ESG and
Net Zero.
– Refinement of our investment approach
including greater emphasis on Net-Zero;
– Allocation of investment in our Net-Zero plan
- including new GHG management tools and
energy saving projects.
– Development of further resources and
training on climate change for leaders
and employees.
In addition as part of the broader scenario
impact assessment of our ISBP, a climate
change event (a significant flood at a critical
site) was selected as one scenario for
financial modelling. The findings inform the
consideration of the recommended longer-
term viability statement and going-concern
statement disclosures (see page 62). Through
the ISBP process we have also identified
potential business growth opportunity with
our customers.
Focus for FY25
During FY24 we worked with third-party experts
to develop new tools to help define how to
quantify the financial impacts of climate
change, and will continue to develop this as part
of our climate resilience programme, focusing
on the risks and the controls and mitigations.
We will continue to develop detailed transition
planning (see page 39) which will underpin how
we achieve Net-Zero targets and commitments,
and mitigate the climate related risks we
have identified. We will be further focusing on
quantifying the growth potential of customer
solutions, currently a small part of our capability
portfolio, but with recognised potential.
Climate-related risks and
opportunities
Working with third-party experts, in FY24
we have reviewed and refined our climate-
related risks and opportunities (see table
on page 45). We have assessed that our
business is exposed to both physical and
transitional risks (before mitigation activities)
and opportunities, with impacts varying over
the short (0-2 years), medium (2-5 years)
and long-term (5-20 years), depending
on climate change scenarios. This aligns
with our business planning cycle (our ISBP
operates a rolling five-year cycle). Each risk
was associated (qualitatively) with a financial
impact, for example an increase in costs
or in the case of opportunities, an increase
in revenue.
We will continue to review our risks and
opportunities as the external landscape and
our business evolves over time, and we will
also refine our approach, particularly focusing
on quantifying the impacts, and we will report
further information as this develops.
Impact on business strategy
and planning
As the climate change risks (threats and
opportunities) we have identified what will
impact our business, we recognise the
importance of integrating climate change and
wider ESG into our strategy and planning and
our wider business processes. While there
is no requirement for a fundamental shift
in our overarching business strategy due to
climate change, having assessed the risks
we understand it to be resilient to climate
change (subject to the delivery of the plans
and programmes).
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
45
Scenario
Type of risk Cause Risk effect (unmitigated) Financial impact
Declining
emissions
Stabilising
emissions
Rising
emissions Mitigation/adaptation
Physical
(acute)
Flooding Direct damages to sites due to
increase in severity and frequency of
flooding, resulting in damage to assets
and causing disruption to operations.
Reduced revenue
and increased
costs
X
SM
XX
SML
XX
SML
– Risk assessment
– Climate resilience business
continuity planning
– Customer and supplier
engagement
Physical
(chronic)
Extreme
temperature
fluctuations
Increased need for cooling and
heating to minimise damage to high-
value equipment within buildings.
Increased costs X
SM
XX
SML
XX
SML
– Risk assessment
– Climate resilience business
continuity planning.
– Customer and supplier
engagement
Physical
(acute)
Wind and
storms
Direct damage to operational sites
due to wind and associated storms,
resulting in disrupted operations and
increased cost for building repairs.
Reduced revenue
and increased cost
X
SM
XX
SML
XX
SML
– Risk assessment
– Climate resilience business
continuity planning
– Customer and supplier
engagement
Transition
(market)
Increased
cost of
energy
Energy costs, such as those related to
fossil fuels and electricity derived from
non-renewable sources, are expected
to increase.
Increased costs XX
SML
XX
SML
XX
SML
– Improving forecasting
– Reduce reliance on energy
through Net-Zero programme
Transition
(policy &
legal)
Carbon taxes Current and emerging regulations
on carbon emissions may result in
carbon taxes.
Increased costs XX
ML
XX
SML
XX
SML
– Legislative monitoring
– Energy reduction programmes
Transition
(market)
Cost of raw
materials
Potential for exposure to increases in
prices of raw materials directly or in
supply chain.
Increased costs X
ML
X
M
X
M
– R&D investment
– Customer and supplier
engagement
Transition
(reputation)
Access to
capital
Failure to meet shareholder
expectations of Net-Zero
commitments, and resulting access to
or cost of capital.
Increased costs X
L
X
SML
X
ML
– Reporting of progress
– Investor advocacy
– Customer and supplier
engagement
Opportunity
(product and
service)
Increased
customer
demand
Growth in customer demand for more
sustainable and resilient solutions
could result in increased sales/access
to new markets.
Increased revenue X
ML
XX
ML
XX
SML
– R&D investment
– Customer and supplier
engagement
Key: Scenarios (see below) Impact: x=low; xx=medium and xxx = high impact; Timescale: S=short term; M=medium term and L= long term
Climate scenarios
While it is unequivocal that the climate is
changing, the precise trajectory is dependent on
the influence of activities in the past, the global
action taken now and in the coming years and
the rate at which that action is taken.
To guide our strategy and planning, we consider
different scenarios:
– <2°C strongly declining emissions:
Intensification of decarbonisation action
resulting in increasing and rapid transition,
with more limited physical impacts.
– 2-4°C stabilising/slowly declining emissions:
Physical risks continue and transition risks
continue to increase.
– >4°C: rising emissions: Failure to address
climate change results in high physical risks
with more limited transition issues.
We used the scenarios above, based on the
Representative Concentration Pathways (RCPs),
which are used by the Intergovernmental Panel
on Climate Change (IPCC). We considered
horizons aligned with our Net-Zero targets and
used a variety of data sources.
We have aligned our assessment with our
risk management approach (see next section
- page 46) so that we are able to evaluate as
low, medium or high. We plan to review this
approach regularly.
We have made a qualitative assessment
of the financial impacts (see above) and
are currently working on modelling the
quantitative impacts and this will be a focus
for FY25.
QinetiQ Group plc | Annual Report & Accounts 202446
Sustainability continued
Environmental
continued
progresses and we are focusing on improving
data capture processes. We have also explored
how we can further include aspects of Net-Zero
and climate resilience as part of our mergers
and acquisitions (M&A) approach.
Assessing risk
We recognise the need to review and update
our risks regularly as our business evolves and
the global landscape changes. So, building
on the risk assessment work completed in
FY22 and FY23 (which included briefings and
workshops), we undertook a detailed risk review
and multi-stakeholder workshop supported by
third-party experts. Risks and opportunities
were scored considering:
– the potential impact,
– the likelihood of occurrence,
– the velocity (proximity of occurrence).
Scenario analysis has been undertaken on our
most material risks and opportunities, and this
has formed the foundation for our new financial
models to quantify financial impacts (taking
into account impact on revenue, costs, and
asset value).
Management of risk
Our risk management and control framework
enables us to effectively identify, assess,
monitor and manage risks.
Ownership and management of individual
risks are assigned to members of the QLT who
are responsible for ensuring the operational
effectiveness of internal control systems and
for implementing risk mitigation plans. Climate
change is recognised as a principle risk (see
page 60) and the Group CFO is accountable.
This risk is reviewed quarterly.
The Board Risk and Security Committee
review and discuss principle risks quarterly
and the Board undertakes a twice
yearly assessment of the principal risks
(see page 43).
The QLT is supported by our Chief Risk Officer
and our risk managers, who are able to have
more tactical and operational oversight. All
risks are assigned owners.
Integrating/embedding into risk
management
We have based our approach to climate
risks on our existing risk management
methodology (see page 56), to ensure that we
are embedding it into our existing processes.
We will continue to regularly review physical
risks across our sites, recognising potential
for different impacts across our different
geographies (primarily UK, US and Australia
as well as Germany and Canada), as part
of our risk management process. Managing
transition risks requires us to consider a range
of factors which could impact our business
in the future. We routinely undertake horizon
scanning for aspects such as emerging
regulation and evolving markets (e.g. via
our close engagement with customers
on Net-Zero). Any new changes (e.g. new
legislation) will be addressed in line with our
standard processes. Key to supporting the
management of risks is raising awareness
and engagement with internal stakeholders.
Our Sustainability Knowledge NetworQ (an
interactive online portal for key stakeholders
and all employees) includes a dedicated
climate resilience ‘resource hub’. We also
engage with key stakeholders such as our
Environment Council. We ran climate change
workshops for our procurement community
across the Group to explore emissions
reduction and climate resilience associated
with our supply chain. We are also co-creating
a sector programme on climate resilience,
through our role in the Defence Suppliers
Forum (page 39).
Through FY24 and FY25 we are reviewing
our Group policy to ensure that we have
established and are maintaining robust and
adequate procedures, systems and controls,
to ensure the Group is able to manage risk
and comply with its obligations.
Taskforce on Climate-related Financial Disclosures continued
Risk Management
Disclose how the organisation identifies, assesses and manages climate-related risks
TCFD disclosures: Additional information
a) Describe QinetiQ’s processes for managing climate-
related risks
b) Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall risk management
c) Describe how processes for identifying, assessing
and managing climate related risks are integrated into
QinetiQ’s overall risk management
Page 56: Strategic risk management
Page 37: Net-Zero plan
Page 37: GHG emissions data
Page 39: Industry engagement
Page 42: Environment Council
Page 60: Climate change principal risk
Page 43: Board oversight
Identifying risk
In line with TCFD recommendations, our
risk assessment approach addresses both
physical risks and transition risks.
Climate change is a significant global issue
and considerations for businesses include
physical risks (with factors such as flooding
and extreme weather events) and transition
risks, which are related to the transition to
a lower-carbon economy, such as policy or
regulation change and changing markets. It
is important that we understand where these
types of issues are material to our business.
For physical risks we considered these
primarily by site, and also considered issues
such as our supply chain and business
delivery. A variety of potential risks have been
identified and captured (for example where
there may be increased flood risk or exposure
to storm events). We recognise that this
needs to be a continuous process as there
may be change, either due to new emerging
information or changes to our business (e.g.
use of site, supplier, etc). As part of our day-
to-day management of our site operations, we
are have a good understanding of the physical
risks posed and the suitable mitigations.
To identify transition risks (such as market
or regulatory changes) we undertake horizon
scanning to identify any relevant changes.
We have invested in access to a new
third-party tool to strengthen our horizon-
scanning approach.
During FY23 we acquired new businesses:
Avantus, with offices in the US and Air Affairs,
with facilities and an aircraft fleet, based in
Australia. Integration of these acquisitions
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
47
Our targets
As part of our Net-Zero plan, published in March
2022, we committed to near-term and long-
term targets across our value chain (see page
37) validated by SBTi in June 2022 (all from a
FY20 baseline).
Scope Reduction Target date
Scope 1&2 50% absolute 2030
Scope 3 30% absolute 2030
Scopes 1,2 & 3 Net Zero 2050 or sooner
We aim to limit neutralization to less than10%
of our emissions.
In FY23 we introduced Net-Zero into our
leadership incentive scheme and for FY24
aligned with reductions in Scope 1, Scope 2 and
aspects of Scope 3 emissions (page 118).
Disclosure of Scope 1, 2 and 3 emissions
We align with the Greenhouse Gas Protocol
to calculate our emissions (page 35) and
publish our methodology for Scope 1 and
2 on our website.
www.qinetiq.com/en/our-
company/sustainability/climate-change
We
have re-baselined our data to account for new
acquisitions and divestments (page 38).
Year GHG Emissions (tCO
2
e)
Scope 1 FY24 19,362
Scope 2 FY24 10,542
Scope 1 and scope 2 emissions have been
subject to independent limited assurance
procedures (see page 38 for details). We
are in the process of calculating our Scope 3
emissions and will be publishing data in FY25
(we are not publishing previous Scope 3 data
here as it is currently being re-baselined and
so figures would not be correct and could be
misleading). We disclose our GHG emissions
as part of a number of regulatory, customer,
and voluntary requirements, (see page 38).
Our Net-Zero plan identified how we will
address the reduction of emissions through
four initiatives, and we describe the progress
against these plans on pages 40 and 41. As
part of our risk management approach we
are managing the risks associated with the
delivery of this plan and these are described
on page 56. We also describe on page 38 the
challenge of Scope 3 data and the approach
we are taking to address this.
During FY25 will engage with stakeholders
to develop a Transition Plan (aligned with
guidance from the Transition Plan Taskforce)
to build on our published Net-Zero plan and
our current programmes. We plan to publish
information on the Transition Plan in 2025.
Performance against targets
On page 33 we have reported a 33% reduction
in our Scope 1 and Scope 2 emissions against
our re-baselined FY20 number towards our
target of 50% reduction by 2030. We will
be reporting progress against our Scope 3
emissions target during FY25 when we have
published our FY24 data and completed the
re-baselining exercise. However, we have
identified there have been an increase in some
categories of Scope 3, (e.g. Business Travel).
We use our Net-Zero targets to drive our Net-
Zero plan, managing the risks to delivery and
maximising opportunities. Progress against
the plan is detailed on pages 40-41. Progress
against the non-financial component of the
leadership incentives are reported in our
remuneration report (page 118).
Plans for FY25
We will be focusing on an ESG data
improvement programme during FY25 and so
will be looking holistically at the most material
metrics and targets to inform our climate
change and wider ESG programmes and aim
to share further metrics and targets as part of
future TCFD reporting.
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related
risks and opportunities where such information is material
TCFD disclosures: Additional information
a) Disclose metrics used by the organisation to
assess climate-related risks and opportunities
in line with its strategy and risk management
process
b) Disclose Scope 1, 2, and if appropriate, Scope
3 GHG emissions and if appropriate Scope 3
GHG emissions and the related risks
c) Describe the targets used by the organisation
to manage climate related risks and
opportunities and performance against targets
Page 33: Non-financial KPIs
Page 37: Net-Zero targets
Page 36: Validation of targets
Page 118: Leadership incentives
Page 38: Scope 1 and Scope 2 GHG emissions
Page 38: Intensity ratio and energy consumption
Page 38: Scope 3 GHG emissions
Page 56: Risk management
Page 37: Net-Zero plan
Metrics and targets
A key part of addressing the risks of climate
change is to transition QinetiQ to Net-Zero, and
so key metrics and targets are associated with
our GHG emissions. We report progress against
all key material metrics within the relevant
sections of our Annual Report and Accounts.
Our metrics
In FY21 we introduced Scope 1 and Scope 2
GHG emissions as one of our non-financial KPIs
(see page 33). We currently monitor a number
of non-financial metrics for our wider ESG
programme and environmental stewardship.
This includes our waste, water use, and
contribution to biodiversity. We report a number
of material metrics in this Annual Report and
Accounts (summary table below), which have
a bearing on climate change; such as intensity
ratio and energy (see page 38). Our sites form
the basis of our assessment of the physical
risks, and employees are a driver for our
operational footprint (e.g. business travel).
Metric FY24 FY23
Intensity ratio (tCo2e per £m
of revenue) 16 20
Energy consumption (GWh) 133 147
Proportion of energy
consumption from UK 70% 72%
Sites 60 60
Employees 8,588 8,261
QinetiQ Group plc | Annual Report & Accounts 202448
Our Employee
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Sustainability continued
Social
To support our people we
are focused on having
a culture that enables
sustainable growth and
a high-performance
environment where they
can thrive and deliver.
Furthermore, it is also
important to us that we
have a positive social
impact in the communities
in which we operate.
Our people
Safety and wellbeing
Safety
We continue to reinforce the positive impact we
have on the health, safety and wellbeing of our
people, creating a safe and secure environment
for us all to care and thrive. Our QinetiQ Group-
wide Safety Improvement Programme which
was established in FY22 provides us with
strong foundations for the future and we are
proud of our achievements in FY24:
– Strengthened our global safety organisation
further and built internal capability, enabling
us to transition our safety improvement
delivery in-house, while still maintaining a
partnership with third-party experts dss+.
– Conducted risk stabilisation activities across
the majority of our global footprint, setting us
up for sustained, detailed safety assurance
activities and refining our future approach.
– Brought in additional subject matter experts
to support a risk-based approach at a
strategic, tactical, and operational level in
the areas of safety, occupational health
and wellbeing.
– Refined the safety maturity assessment we
introduced in FY23 to enable the ongoing
measurement of our safety culture maturity
and to identify improvement opportunities
throughout the year.
– Linked our Common Goals to safety culture
maturity to amplify the impact our leadership
community has on our Safety Improvement
Programme (see page 118).
– Refreshed our safety technology suite,
introducing a new safety compliance tool
to work in a more standardised way across
the Group as well as making ongoing
enhancements to our safety incident
reporting system.
– Continued to update and refresh our
safety management system and refine our
processes, working closely with the teams in
all our markets.
Our safety performance over the past 12
months shows:
– A fall in our Total Recordable Incident Rate
(TRIR) rate from 2.75 in FY23 to 2.54 in
FY24. (TRIR is calculated using the total
number of recordable incidents, multiplied
by 1000, divided by the average number of
employees in that year).
– A decrease in our LTI rate from 1.74 in FY23
to 1.58 in FY24. LTI rate is one of our non-
financial KPIs (see page 33).
Lost Time Incident (LTI) Rate
1
1.58
1.58
1.74*
2.05
FY23
FY22
FY24
1 LTI rate is calculated as the number of lost time
incidents where the employee is away from work for
one or more days, multiplied by 1,000, divided by the
total number of employees.
* FY23 data have been restated (previously reported
as 1.20) following a data improvement programme.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
49
There were no prosecutions or prohibition
notices issued by regulators during FY24.
We were deeply saddened by the fatal crash
involving two aircrew on-board one of our PC-9
aircraft in the Neuenstein area of Germany
whilst on a customer training exercise in
September 2023. Our thoughts remain with
the families and close colleagues. Although
the formal investigations into this accident are
ongoing, we do not believe that there was any
contributory fault by the Company.
As we prepare to transition our Safety
Improvement Programme activities into
business as usual, and refine our ways
of working, we continue to invest in our
commitment to safety. Ongoing engagement of
our people in our safety improvement journey
is key and we will undertake a follow-on global
safety perception survey in FY26.
Wellbeing
Our wellbeing strategy provides direction
and a common approach for our wellbeing
programme, which ensures we have the tools,
techniques and support networks to take care
of our people. Our strategy includes not only
physical and mental health, but also personal
growth, working environment and financial
wellbeing. Senior Level-led governance is in
place with oversight of both wellbeing and
safety through our Wellbeing Steering Group.
Through our Group enterprise agreement with
LinkedIn Learning, we’ve provided access to
resources to support the leadership of wellbeing
for managers to help build their skills to
support their own wellbeing and the wellbeing
of their team. We’ve also reviewed the toolkits
we provide to cope with workload and stress
and anxiety.
To support financial wellbeing we’ve continued
our employee hardship fund which has enabled
74 employees to access additional funds to
help them through times of financial difficulty.
Our progressive pay and reward review this
year has also supported our Financial wellbeing
initiatives, uplifting salaries to address market-
rate gaps.
One of our many wellbeing interventions is
Yu-life, an incentive-based App, providing daily
challenges to improve physical and mental
wellbeing. There is also a social impact benefit
as completing the challenges can convert into
opportunities to contribute to environmental or
social good causes. We have seen 4,574 trees
planted and 4,204 meals gifted.
We are progressive with adaptive working
patterns, with colleagues shaping how and
where they work so as to deliver the best
business outcomes and support employee
wellbeing.
How we support our people through our
wellbeing agenda and strategy is evolving for
FY25. Our focus will be to review our overall
approach to health and wellness, across the
entire employee life cycle.
Diversity, equity and inclusion
Creating an environment where everyone feels
they belong and can thrive is a vital part of our
culture. In FY23 we launched our Inclusion,
Diversity and Belonging Strategy (published
on our website www.qinetiq.com/en/our-
company/sustainability/diversity-and-inclusion).
It shares our progress so far, as well as our
focus and direction, demonstrating how we are
committed to:
– Fostering inclusive behaviours and creating
an environment where our people can thrive;
– Actively increasing the diversity of our
Company to reflect the communities in which
we operate;
– Providing equity of opportunity to all our
people and prospective employees;
– Engaging with our customers, supply chain
and external partners demonstrating and
promoting best practice;
– Keeping our people, customers and
shareholders informed of our progress.
In FY24 we appointed a new Global Inclusion,
Diversity & Cultural Development Lead to work
with colleagues across our Company to deliver
our strategy.
The following outlines our focus and
achievements in FY24.
Since October 2022, we have been proud to
be part of KPMG’s Cross Company Allyship
programme, which is a mentorship initiative
bringing together mentors with mentees
with a focus on supporting those from black
heritage and ethnic minority backgrounds to
address under-representation in leadership
positions. In our first cohort we had 20
mentees and 13 mentors and the current
cohort, 16 mentees and 16 mentors.
In the US, our Head of Diversity Initiatives
has launched a Leadership Inclusion Council
to identify and champion “The Path to
Belonging” which focuses on:
– Take care of yourself (Health and wellness)
– Take care of each other (ERGs)
– Take care of our community (Service
Squad)
These focus areas are underpinned by the US
Employee Resource Groups (ERG).
In FY23 we introduced a new diversity and
inclusion category into our Gala Awards.
The winners in the category represent
the teams and people who go above and
beyond their day-to-day roles to create a
workplace where everyone feels they belong.
In FY24 the winners of the category were the
Neurodiversity Employee Network Group; a
team of volunteers who care passionately
about creating an inclusive place to work. The
team were aware there was a need to raise
awareness and understanding of this topic
and they collaborated to create a session
they could deliver virtually. They worked
hard to research content, building on their
own experiences to ensure it was presented
in a way that was thoughtful, sensitive and
impactful. Over 1,000 people voluntarily
attended the sessions, demonstrating that
this is a topic people would like to know
more about.
QinetiQ Group plc | Annual Report & Accounts 202450
25%
75%
Women
Men
All employees (including leaders)
Women
Men
40%
60%
QinetiQ Leadership Team
Sustainability continued
Social
continued
Gender balance data
FY24 FY23 FY22 FY21
Female Male Female Male Female Male Female Male
Board Directors
1
4
(44%)
5
(56%)
3
(33%)
6
(67%)
4
(44%)
5
(56%)
3
(37%)
5
(63%)
Senior managers
2
69
(22%)
251
(78%)
57
(19%)
244
(81%)
59
(20%)
240
(80%)
57
(19%)
239
(81%)
Other employees
3
2,114
(26%)
6,152
(74%)
1,976
(25%)
5,989
(75%)
1,478
(22%)
5,136
(78%)
1,447
(22%)
5,145
(78%)
1 For more information on Board diversity see page 74.
2 Senior managers are defined as employees who have responsibility for planning, directing or controlling the activities of
the Group, or a strategically significant part of it. This includes Directors of subsidiary Companies. It includes our QinetiQ
Leadership Team (QLT) but excludes our CEO and CFO who are captured under Board Directors.
3 Excluding senior managers and the CEO and the CFO.
With the introduction of a new people
system (Success Factors) in FY21, we
ensured we were able to capture diversity
information about our people; to address
gaps in representation, to shape and inform
future decisions and facilitate targeted,
measurable action. This information is driven
by self-identification and we recognise that
requesting personal data requires us to
regularly share why it is so important.
In FY24 we launched the ‘Count Me In’
campaign in the UK to encourage greater
awareness and participation in the UK and
form a proactive step to building a more
diverse and inclusive QinetiQ. Thorough and
accurate reporting will help drive KPIs and
subsequent progression. While we regularly
publish data on gender, we look forward to be
able to present more diversity information in
future Annual Reports and Accounts.
QinetiQ is committed to fostering
diverse leadership and increasing female
representation. Not just because its the
right thing to do, but because we recognise
the value that it brings to the culture of our
business, and our ability to innovate.
Our target is to achieve 30% female
representation at all levels across the
Company, by 2030, and we are also focused
on increasing ethnic diversity in leadership
roles by 2027. These initiatives are integrated
and mutually reinforcing, as progress in one
area positively impacts the other.
Through inclusive leadership development,
targeted recruitment strategies, mentorship
programmes and a supportive work
environment, we are cultivating a diverse
talent pipeline and fostering an inclusive
workplace culture.
The table and charts above show our gender
balance data and we are pleased to see a
further small improvement.
In our latest UK Gender Pay Gap report (for the
FY23 reporting period) we report a mean pay
gap of 11.8% which is a reduction compared
with the previous year (12.9% for the FY22
reporting period).
We also participate annually in the FTSE
Women Leaders Review. During FY24 we
reported 28.2% female representation in our
Executive Committee (the QLT) plus direct
reports, compared with 27.8% in FY23.
No one action drives gender diversity and we
recognise there is more to do to meet our
target; we are focusing on further developing
our plan in FY25.
Employee voice
Critical to all of our people is feeling informed and
ensuring that the employee voice is heard. Our
global operating model and ‘Adaptive Working’,
requires an engagement approach that supports
both a geographically and temporally dispersed
workforce.
Two-way communication channels, including our
Global Portal Intranet, monthly live events through
Q-Talk, and virtual communities, encourage our
people to share their thoughts, feedback and
experience.
We have a global Site Champion network, which
focuses on creating a sense of community.
We hold Global Employee Roadshows twice a
year, providing an opportunity for our people to
hear from the QinetiQ Leadership Team about
our growth strategy and important topics from
across the global business, and to enable them to
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
51
ask questions of leaders. Employee views are
represented by the Global Employee Voice (GEV),
a group of employees who work alongside
leaders to help shape ideas and initiatives that
make QinetiQ a great place to work. The GEV
representatives meet regularly with the Group
CEO and Chief People Officer and have also met
with the Chair and Board members during the
year (see page 89).
In FY24 the GEV gave feedback that contributed
to changes including significant investment in
our employee reward offering (reward uplifts),
changes in working schedules (compressed
working), and the introduction of new
learning solutions.
Our voluntary attrition has shown a small
reduction from 14.1% in FY24, compared with
14.3% in FY23. We continue to observe some
hotspots in the US and Australia, in line with
the skills landscape.
Employee engagement is one of our three
non-financial KPIs (see page 33), reflecting its
importance to our business strategy. We have
now been using the Workday Peakon as our
Group Employee Engagement Survey platform
for five years; it enables us to measure and
track progress and benchmark against other
organisations. Peakon also provides regular
insights that enable us to make informed
decisions and direct focus where it is most
needed. This helps us understand what is
important to our people, so that we can take
action at a global, business and team level.
In FY24 we achieved our highest employee
engagement score to date, reaching 7.5 (out of
10), an increase of 0.1 from FY23. Engagement
has increased by 19% over the five years, and
participation is now 71%. This is against a
difficult backdrop with cost of living challenges
for employees across our international footprint,
which saw a dip in the Reward element of the
survey in the middle of the year. Through our
continuous listening approach we were able
to quickly identify these concerns, understand
how best to address them, whilst balancing our
financial performance, and make meaningful
pay interventions, which was reflected in an
improvement in the reward indicators in Peakon.
Our employee engagement survey helps
us understand areas we need to focus on
to improve engagement. Effort in FY25 will
continue across all elements of engagement
with particular focus on employees having
the right equipment to perform their roles (as
currently we see this is below benchmark).
Our Digital Transformation programme and
site investment strategy will make a material
difference in this area.
Adaptability and flexibility
We continue to place adaptability and flexibility
as a key part of our employee offering. Our ability
to attract and retain talent at QinetiQ is enhanced
by having an adaptable approach to where, how
and when our people deliver in their roles. In
FY24 we saw more than 1,000 employees take
advantage of compressed working patterns,
driving benefits for customers, internal service
levels and for the employees themselves.
In FY25 we will focus on our Digital
Transformation of internal tools, so that global
collaboration, cross-team and project working
and the productivity of employees working a
hybrid home/office pattern all benefit.
Learning and development: skills
and talent
We are committed to nurturing talent and
fostering a culture of progression within QinetiQ
where our people can thrive and develop the
right skills to grow and deliver. Similarly, as a
company we see upskilling and reskilling as
core to our AUKUS ambition, working across
Australia, UK and US to build the capabilities for
the future in support of our mission.
An example of this is the successful Test and
Evaluation, Sovereign Skills Program (TESS-P)
which upskills engineers in Australia with
UK domain expertise because those skills
are scarce but required. We are proud of this
programme because it spans our international
boundaries and is delivered both digitally and
face to face through real exposure to live
projects. Learners and instructors alike get a
huge amount from each other as do wider parts
of our organisation who benefit from the out-
turn of digital courses.
Another area of success across the year
has been the creation and early delivery of
Project Management Improvement. This
focuses on project delivery and seeks to
unify our approach to projects with tools for
understanding competence, improvement
and learning aspects so that we can all
execute, consistently and to a high quality,
across our global portfolio. This will continue
into FY25.
Through employee feedback, we know
that having opportunities to develop and
grow careers is vitally important. We have
partnered globally with LinkedIn Learning
delivering digital content to all parts of the
Company with over 80,000 courses and
videos accessed in the past nine months
alone (June to February 24). This enables our
people to access learning flexibly, at pace, in
the flow of work.
Combining this technology with in-house
content also allows us to build skills at scale
by developing bespoke learning paths and
helping us plan for the future.
Building on our success this year a key
priority for us in FY25 will be to further
enhance learning capability globally. We
will do this through adopting new tools and
process and partnering across all business
leaders to enable in-year performance with
various personal and collective development
and mentoring interventions.
Leadership
We operate in a highly competitive and
challenging market with an ambition to
continue significant, sustainable growth.
We recognise that to realise this, it is critical
for us to develop the right leadership skills
and capabilities, investing in our leaders to
continually improve. Leaders are encouraged
to take a coaching approach to their work
with others and may have self-elected
to become reverse mentees, themselves
learning from Early Careers colleagues. The
feedback on this programme continues to be
very positive.
QinetiQ Group plc | Annual Report & Accounts 202452
Sustainability continued
Social
continued
//We are proud to be founding
members of The 5% Club.//
Chris Shirley, Head of UK Skills and Development
To further support leaders we completed a
Group-wide Organisation Network Analysis
providing a quantitative baseline from
which to measure future progress. This has
given valuable insight to design leadership
expectations for performance, culture and
global collaboration.
Our Early Careers approach provides a rich and
rewarding learning experience for individuals
as they start their career with us. In the UK
we focus on graduates and apprentices,
as well as Year in Industry students and
summer placements.
We continue to focus on ensuring our Early
Careers community is involved in meaningful
work, with opportunity to develop their business
knowledge, personal skills and understand
how their work contributes to meeting our
customers’ requirements.
We have seen an increase in the number
of apprentices being recruited with very
encouraging feedback from all stakeholders,
including customers, managers and the
apprentices themselves. In addition, more
graduates are being recruited and we have a
stable level of Year in Industry students working
with us during their degree programmes.
It should be noted that these numbers do not
include re-skilling; we have 39 experienced
employees using apprenticeships to reskill
across a range of disciplines.
Reward and recognition
Reward and recognition is key to our people
strategy and an important part of our global
employee offering. Our approach is designed
to enhance the wellbeing of our people and
incentivise both collective performance and
individual contribution; enabling us to make
choices about what works best for ourselves
and for our families. Focus in FY24 includes:
– Through our Rewarding for Performance
framework, our people have been able to
collectively share in our success:
– Our All Employee Incentive Scheme (AEIS)
for contribution in FY24 paid £1,138 to each
employee.
– We continue to invest in Pay and Progression,
addressing market anomalies and managing
in-year role and grade progression, with an
investment of over £1.5m.
– Through Thank Q, our global recognition
scheme, we celebrated 5,451 individual
people and 1,688 teams, with 12,705 awards.
Commitment to The 5% Club
As a patron and a founding member of The
5% Club, we remain committed to achieving
5% of our workforce being within our Early
Careers population. We commit to publishing
a breakdown of our UK Early Careers
community each year (see table above)
including the percentage they comprise
of the UK workforce and we are pleased with
the progress we have made towards our goal.
Early Careers
Investing in the next generation ensures
we are developing the skills and capabilities
needed for the future, as well as creating
a near-term talent pipeline.
This was launched recently and already well
received within the leadership community. The
data is also being used to inform Group-wide
leadership development initiatives for FY25 with
the help of a recently established global QLC
design community.
Spanning sector and functional stakeholders
in design sprints, this shapes our leadership
development approach and through
cascading behaviours and positive
attributes, helps set a tone for others to follow.
UK Early Careers community FY24 FY23 FY22 FY21
Apprentices 139 85 53 72
Graduate programme 105 128 105 98
Sponsored students
1
16 26 24 24
% UK workforce 5 4 3 4
1 Includes eight-week paid work experience and Year in Industry placements.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
53
Our defence partnerships
We have always been passionate about
supporting our Armed Forces community.
Including veterans and reservists within our
Company greatly enhances how we connect
with our customers. This relationship goes
beyond our legal obligations whether in
Australia, UK, or US. In 2016 we were awarded
Gold Award status by the UK Ministry of
Defence (MOD) in their Defence Employer
Recognition Scheme. This recognises
employers who demonstrate a commitment
to Defence by proactively supporting the
Armed Forces community and inspiring
others to do the same. Through our advocacy
approach we were revalidated in 2022 and
were delighted to receive our Gold Award from
Major General Swift in March 2023.
We signed the UK Armed Forces Covenant
in 2013 and continue to create covenant-
related initiatives, such as our global QinetiQ
Veterans and Reserves Network, which helps
to connect, support and value colleagues
who serve or have served in their nations’
Armed Forces. A new covenant with enhanced
support of forces and reservists’ spouses and
families was published in 2023.
In the US, we have an Outreach programme
for Veterans through Circa and Military Offices
Association of America and we participate in
military hiring events through Recruit Military
and Corporate Grey. We contribute to the
Virginia Veteran Values Program and have
been active participants in ‘Hiring our Heroes’
events.
In Australia we are pledge partners with
Soldier On and attend their network events
which has resulted in attracting talent into the
business as well as encouraging others to do
likewise. We are also a signatory to the Prime
Minister’s Veteran Employment programme.
We value the expertise of partnerships with
organisations such as the Jon Egging Trust
(JET), where we’ve continued to roll out our
interactive apprentice workshop. We also
started a new UK partnership with the Royal Air
Forces Association (RAFA), which has enabled
QinetiQ employees the opportunity to volunteer
in RAFA’s community check-in calls campaign.
During FY24 we launched our new external
STEM Discoveries section of our website. This
highlights the activities delivered by our STEM
volunteers throughout the year; additionally it
hosts valuable resources, including our new
CREST-accredited project on compostable
plastic, which students and teachers can freely
download.
In FY25 we will be focusing on increasing our
impact, including growing our volunteering
include a new focus in our US business called
“Impact Day”.
Charities
Across QinetiQ group we remain committed to
creating a positive impact in the communities
local to our sites. We proudly support a
diverse range of charitable organisations and
community causes, with a focus on areas such
as health, veterans and local rescue services.
We supported 23 individual site charities
nominated by our people. Our Corporate partner
charities include two in the UK - JET and
RAFA. In the US, we support the Joint Service
Special Operations Fund (JSSOF). In Australia
we’ve continued to partner with Legacy, and in
Canada, we’ve supported Ottawa Food Bank
and Root Cellar. Please see our website for
more information: www.qinetiq.com/en/our-
company/sustainability/community-investment
In FY25 we intend to continue to develop
our partnerships with organisations that
support us in creating a positive impact in our
communities.
Building on the cost of living measures we
implemented in FY23, we have invested further
in our overall employee offering in FY24. In the
UK, we have implemented a reward strategy
and addressed market relativity through
providing additional base salary increases to
employees ensuring they receive a fair market
level of pay. In the US we have implemented
a compensation framework in support of
integration. In the Australia sector we have
commenced a benchmarking exercise and will
be developing a sector-level reward strategy
over FY25.
In March 2024 we were delighted to achieve
accreditation by the Real Living Wage
Foundation in the UK and are now one of over
14,000 Living Wage employers.
Our Group Hardship Fund and Employee
Assistance Programmes (EAP) continue
to provide additional support to our people
who are experiencing challenging personal
circumstances.
Looking forward to FY25, the Company will
continue to invest in our global reward and
benefits strategy and our employee offering.
Responsibility and sustainability:
Volunteering
At QinetiQ, volunteering is a vital part of our
community impact strategy enabling our skilled
workforce to dedicate their time and expertise
to deliver social, environmental and economic
benefits within the communities where we
work. We focus on skills based volunteering,
on STEM (Science, Technology, Engineering
and Maths) outreach, to inspire the next
generation of scientists and engineers and
also environmental volunteering to contribute
towards conservation and biodiversity.
In FY24 we supported a variety of projects,
including scrub clearing on a SSSI (Site of
Special Scientific Interest), our annual outreach
event for International Women in Engineering
Day, our Powerboat Challenge, where young
people design build and race model boats,
and a hands-on hydraulic experience at our
QTEC facility in Melbourne. Through our global
employee volunteering programme we’ve
contributed over 2,600 hours of service.
QinetiQ Group plc | Annual Report & Accounts 202454
Sustainability continued
Governance is a
critical pillar, supporting
us in how we deliver all
we do, responsibly
and sustainably.
Governance and leadership of
our responsible and sustainable
business approach
Our approach to sustainability is sponsored
by our Group CFO and actively supported
by our Board. Our Group Director of ESG
leads our strategy and programmes, working
with leaders and subject matter experts
across the business, and provides regular
papers and briefings to the Board and Board
Committees. These cover all material aspects
of our sustainability programmes including
sustainability strategy, climate change,
stakeholder engagement and non-financial
reporting, ethics and community impact
(page 87). Programmes such as anti-bribery
and corruption, confidential reporting, safety
or diversity, equity and inclusion are updated
to the Board via direct papers from the
function leaders. This provides oversight of
our approach, including progress against
programmes and plans.
During FY24 governance and oversight was
also conducted via our monthly ESG Steering
Committee, chaired by our Group CEO. Our
Functional Councils provide additional focus
on environment, our people and safety and
wellbeing, as well as risk and assurance and
governance. Pages 68 and 69 detail our policy
and assurance approach.
Our sustainability strategy forms an integral
part of our ISBP and includes longer-term
plans e.g. our Net-Zero plan with targets to
2030 and 2050. Each function and sector is
also required to articulate their contribution
to sustainability within the ISBP process
and we continue to embed ESG factors into
our strategy and our day-to-day business
processes. ESG is linked to the non-financial
element of our leadership incentive scheme.
In FY25 we will be focusing on the new
regulatory reporting requirements, supported
by how we improve reliability and predictability
of data and assurance of our non-financial
information.
Business ethics, doing business
the right way
Our values of integrity, collaboration and
performance underpin all that we do (page 76).
Our Code of Conduct defines our ethical
standards, providing clear direction and
guidance on how we do business. It contains
information on ethical decision-making and also
how to seek help and advice. We review the
Code annually to reflect the evolving needs of
our business, the regulatory environment and
best practice. The Code is for our people but we
also make it available for customers, suppliers
and other partners. Our Code of Conduct is
available on our website.
www.qinetiq.com/en/our-company/
sustainability/business-ethics
Annual business ethics training is mandatory
and supports our people in understanding and
using the Code of Conduct. The training is
undertaken by our Board and is available to our
suppliers and customers. We provide a number
of challenging scenarios to help our people
know what to do if they were to come across
issues such as bribery, fraud, harassment,
conflict of interest and modern slavery.
Speak up
We strive to create an environment where
our people feel confident to speak up and we
provide a number of different ways for them
to seek help or to raise concerns. Employees
can talk to a manager, use our ethics email
advice services, our global network of Ethics
Champions and our independently run, 24/7,
confidential reporting line.
These are also available to third parties via our
Code of Conduct and Supplier Code of Conduct
(page 55), both published on our website.
Throughout the year we have promoted the
importance of speaking up and the various
different contact routes, via awareness
campaigns, in the Code of Conduct and in
our mandatory business ethics training. We
promoted our Speak Up Guide for Managers,
supporting them in creating an open and
inclusive environment, where our people feel
confident to raise concerns, and managers
know how to listen to and support anyone who
may come to them with an issue.
For third parties, we have promoted our Speak
Up contacts via our website and in our supplier
Code of Conduct. We have responded to all
queries received via our ethics email advice
services and confidential reporting line. Our
Audit Committee oversees our approach to
confidential reporting (see page 90).
Our Business Ethics Committee, chaired by
our Chief Ethics Officer (Group Director Legal
& Company Secretary), oversees our ethics
programme. We are members of our trade
association, ADS, Business Ethics Network
where members can share best practice on
ethics, human rights and anti-bribery.
Our focus in FY25 will be to continue to
promote and raise awareness on Speak Up.
Anti-bribery and corruption
Our zero-tolerance approach to bribery and
corruption in any form is explicitly stated in our
Code of Conduct and our global anti-bribery
and corruption procedures require that all
business activity is conducted without the
intent to bribe or corrupt; is reasonable and
transparent; is appropriately documented with
a business rationale and is authorised at an
appropriate level.
Our anti-bribery and corruption programme is
designed to support our people and business
partners to demonstrate the highest standards
of ethical conduct within all the jurisdictions in
which we operate.
We provide practical guidance, including regular
training, to ensure that our people understand
what is expected of them and where they can
get support or raise concerns.
Governance
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
55
Risk-based due diligence procedures are
in place to identify and assess exposure to
bribery and corruption in our operations;
these are subject to on-going monitoring and
periodic review. We review our programme
regularly to ensure that it remains effective and
incorporates improvements identified through
internal assurance activity and feedback from
our people.
In FY25 we will be focusing on supporting
our people through training with a review of
targeted role specific training modules.
Human rights and modern slavery
As part of our ongoing programme to address
the risk of modern slavery, we operate and
manage an action plan across the Group. We
continue to provide in-depth training to those
in key roles (we have moved from e-learning
to live training), and develop new supporting
resources for all employees and suppliers,
including industry engagement events such
as our Collaborate programme. We regularly
review our policies and our approach to risk in
the supply chain. Our updated supplier Code
of Conduct helps to ensure our suppliers
have clarity of their responsibilities on human
rights, modern slavery and speaking up. Our
annual modern slavery and human trafficking
statement is published on our website
homepage. We achieved 82% against the UK
Government Modern Slavery Assessment Tool.
We seek to anticipate, prevent and mitigate
potential negative human rights impacts
through our policy and processes, which
underpin our commitment to responsible
business practices. For example, we address
salient human rights issues through our Code of
Conduct, our ethical trading policy, international
business risk management process, grievance
mechanisms, due diligence and export controls
process. Our confidential reporting mechanism
(page 54) provides routes for third parties to
raise concerns. We monitor the application
of these policies and procedures through our
business and supplier assurance processes and
regular self-assessment, with oversight by our
Business Ethics Committee. We believe that
this integrated approach is effective in ensuring
our business acts responsibly and respects all
human rights. More information, including all
our annual modern slavery statements, can be
found on our website:
www.qinetiq.com/en/ our-company/
sustainability/business-ethics.
In FY25 we will continue to make progress
against our modern slavery action plan and we
will be reviewing and updating our policies and
processes to support our approach to ethical
trading and human rights.
Responsible tax management
We make a significant tax contribution to the
economies of the countries where we operate.
In alignment with our sustainability and tax
strategies, we strive to be responsible in all
our business dealings with zero tolerance of
tax evasion. Our annual tax strategy statement
is published on our website. We apply our
approach to tax management in a consistent
and transparent manner in our dealings with
tax authorities around the world. As a UK-
headquartered Group we file our country-by-
country report with the UK tax authorities. Our
policies, processes and controls are regularly
reviewed and risk assessed. Recognising the
importance of embedding the tax strategy
as a Group-wide culture, we provide relevant
tax insights through our quarterly internal
newsletter and bespoke tax training. Our
Audit Committee oversees our approach to tax.
Working with our supply chain
Our supply chain is an extension of our
Company. We ensure that our suppliers are
committed to the same standards and values of
safety, security, sustainability and governance
as we are. Working in collaboration with wider
industry, we foster and develop ecosystems
which draw together suppliers, academia and
third-sector communities to answer complex
challenges in science, social, engineering and
technology, to support our customer offering.
Through this approach we enable access to
opportunities for diverse suppliers, including
Small to Medium Sized Enterprises (SMEs)
and non-traditional defence suppliers,
removing barriers to entry and promoting
inclusive procurement. We continue to
support the SME community through the
Defence Suppliers Forum SME Working
Group and being an active prime contractor
at the Defence Procurement Research and
Technology Exportability (DPRTE) trade show.
This has included enhancing our Small-
Medium Enterprise Hub webpages to make
it easier for suppliers to engage with QinetiQ
and register their interest with us, by routing
their enquiries directly to the relevant supply
chain category management team through
our taxonomy linked registration form.
Our QinetiQ Collaborate series aims to ensure
good practices are shared throughout our
supply chain and wider external stakeholders.
We provide a consistent platform for learning
through panels of subject matter experts from
across the defence and security industry. In
FY24 we ran Collaborate events on modern
slavery and SME’s and Net Zero. We also
continue our work with the Aerospace and
Defence Procurement Group (ADPG) and the
Joint Supply Chain Accreditation Register
(JOSCAR), an industry collaboration.
We have our Sustainable Procurement
Guide and Supplier Code of Conduct; both
documents are available on our website:
www.qinetiq.com/en/our-company/suppliers
-and-smes
As signatories to the UK Prompt Payment
Code, we continue to report our payment
performance as required by UK legislation.
In FY24 we gained accreditation from the UK
Real Living Wage Foundation, guaranteeing
an above-statutory level of pay for third-party
subcontractors working on our UK sites. We
are currently working towards Real Living
Wage accreditation with QinetiQ Canada.
In FY25 we will continue to develop our
approach to sustainable procurement and run
further Collaborate events. In support of our
Net-Zero programme, we have developed new
supplier terms and conditions related to GHG
emissions, and will be engaging with suppliers
in FY25.
QinetiQ Group plc | Annual Report & Accounts 202456
Risk Management
Risk management
On behalf of the Board, the Risk & Security
Committee provides oversight of the
Company’s principal risks, reviewing and
monitoring them through the course of the year.
Each principal risk is assigned to a specific
category (strategic, operational or financial),
which helps establish appropriate risk control
strategies and activities and provides an
appropriate level of oversight and assurance.
Risk owners are accountable for confirming
adequate controls are in place, and that the
necessary mitigation plans are used to bring the
risk within an acceptable tolerance level.
Identifying and managing our risks
As part of our continual review and
improvement of our risk maturity, we have
embedded a cyclical process of identifying,
evaluating, managing and reporting of current
and emerging risks. This process ensures
we keep pace with a growing business in a
complex industry and that we manage our risks
in line with our long-term priorities.
Risk management in
QinetiQ is an established
process that is critical
to the achievement of
the Company’s strategic
goals. The Group has
effective systems and
controls in place to
manage current and
emerging risks within
the established risk
appetite levels.
In an ever-changing
risk landscape, our
end-to-end review and
improvement cycle
aims to ensure we
are well positioned to
deliver results, while
understanding and
addressing the risks that
could impact the ability
to execute our strategy.
Our annual cycle consists of comprehensive
identification and review of risks material
to the Group which we conduct together
with our Sectors and Functions, taking into
account industry insights, competitor analyses,
geopolitical developments and advancements
in technology.
We align our assurance activity to the identified
risks in the context of our business processes
and how those risks may affect our strategic
goals and day-to-day operations. This is
presented to the Board and Risk and Security
Committee, ensuring adequate monitoring
to maintain the effectiveness of the Group’s
risk management activities and internal
control processes.
Sectors conduct bi-annual detailed reviews of
their risks which is reported to the Board and
Risk and Security Committee. This process
ensures bottom-up and top-down views of risk
have been considered and that the actions and
controls to mitigate these risks are in place and
are appropriate.
How we protect our business
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
57
Risk management and assurance activity
The Three Lines Model
Our risk management and assurance activity follows the Institute of Internal Auditors’ Three Lines Model which is the industry standard. The first
line reports to the QinetiQ Leadership Team, second line through the Chief Risk Officer to the QinetiQ Leadership Team and the Risk and Security
Committee, and the independent third line that sits outside the risk management processes and reports to both the QinetiQ Leadership Team and to
the Audit Committee. The first line is performed by operational management who are responsible for managing risks. The second line is performed
by teams that provide expertise, framework design and oversight role but sit outside of day-to-day management of the risks. The third line is
performed by internal or external teams such as Internal Audit that provide independent objective assurance.
Responsible for effective
risk management and
internal control across
the QinetiQ Group,
sets risk appetite and
assesses principal
and emerging risks
Receive reports from the
assurance functions
Monitor and review
the principal and
emerging risks
Undertake risk deep dives Monitor the effectiveness
of internal controls
First Line
– Identify and evaluate risks
– Design and operate internal controls
and other mitigation measures
– Apply risk appetite, delegated
authorities, policies, procedures and
codes of practice
– Report risks through relevant reporting
and escalation processes
– Manage the day-to-day
operational risks
– Report to the Board and the QinetiQ
Leadership Team
Second Line
– Perform oversight of risk management
and other oversight functions with
independence
– Design and facilitate the risk
management processes across
the Group
– Provide risk expertise and support
– Responsible for continually improving
the risk management process across
the Group
– Report to the Board and the QinetiQ
Leadership Team
Third Line
– Internal Audit and other external
independent assurance providers
– Review and evaluate risk management
activity and provide assurance
over the effectiveness of the
control environment
– Manage the confidential
reporting process
– Report to the Board and the QinetiQ
Leadership Team
Management
QinetiQ Leadership Team
Identify and monitor the principal and emerging risks, as well as material risks
(including operational) reported from the operating Sectors
Independent Assurance
Board Audit Committee and Risk & Security Committee
QinetiQ Group plc | Annual Report & Accounts 202458
10 12
7
6
1
8
5
9
3 2
13
Impact
Likelihood
11
4
Principal risks F24
Link to Strategy
Category Risk Owner*
Executive
Owner
Global
Leverage
Distinctive
Offerings
Disruptive
Innovation
Strategic
1
Competitive Landscape GH Business Development CGO
2
Disruptive Technologies GD S&T Engagement & Enablement CTO
3
Acquisition Integration GD Mergers & Acquisitions CSO
Operational
4
Climate Change GD ESG CFO
5
Organisational Culture GD Employee Experience CPO
6
Cyber Security CIO CESO
7
Management of Change GD Transformation CESO
8
Health, Safety & Welbeing GD Safety Excellence CTO
9
Information Security CIO CESO
10
IT Infrastructure CIO CESO
11
Licence to Operate GD Legal & CRO CFO
12
P3M Capability GD Programme Excellence CTO
13
Strategic Capability Planning GD Skills & Capability CPO
* GD – Group Director
GH – Group Head
Principal risks
The Group Principal Risk Register consists
of material risks that could affect the delivery
of our strategic objectives and may have
a material impact on our stakeholders and
environment. We accept that risk is an inherent
part of doing business and our Principal Risk
Register aims to provide reasonable assurance
that we understand, monitor and manage the
effects of the main uncertainties that we face in
delivering our objectives.
Each principal risk is assessed in relation to the
impact to the Group and is overseen directly
by the Board. The Board confirms that a robust
assessment of the principal risks facing the
Group has been carried out, including those
that would threaten its business model, future
performance, solvency or liquidity.
The summary of risks and associated handling
actions taken by management including the
controls and any additional mitigations are
provided below.
.
Risk management continued
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
59
Strategic risks
Competitive Landscape
Potential Impact Mitigation
Loss of market share for QinetiQ associated with the
changes in market landscape, business agility, changes
in defence spending or competitors or new entrants with
highly aggressive risk appetite.
QinetiQ is enhancing its competitive position as an established player in the defence and technology sector
through our customer-centric approach to the digital transformation of our offerings. We are augmenting
our diverse product portfolio and unique skill, capability and resource mix to align to our customer needs in
our home and priority markets. This will mitigate contract risk, optimise project delivery, ensuring efficiency
and customer satisfaction throughout capture & project delivery.
Company performance will benefit from leveraging improved ‘win’ strategies which enhance through-life
delivery and optimised business operational costs.
We have strong collaborative and supporting processes that focus budgets, investment and resources on
our strategic priorities. In addition, we are innovating the customer interface that aim to reduce customer
costs, streamlines communication and makes it easy to conduct business with QinetiQ.
Disruptive Technologies
Potential Impact Mitigation
Failure to exploit the emerging disruptive technologies
(such as AI) into our operations (e.g. HR or Finance) or
customer offerings as quickly or effectively may result in
a decreased competitiveness in the market.
Group has established technical capability priorities with the operating sectors delivering insight into future
customer and internal needs including plans for embedding and exploiting new technologies. This includes
creation of an ethical trading policy in terms of artificial intelligence that carefully considers regulatory and
legal frameworks and potential future regulatory needs. We continue to carefully monitor developments in
this area.
Acquisition and Integration
Potential Impact Mitigation
Failure to integrate, deliver the planned business
benefits and drive subsequent value from our inorganic
acquisitions.
Integrated governance process focused on transactions and progress monitoring through Merger &
Acquisition and Integration Committee is in place for 3 years post completion. This is supported by relevant
Integration Steering Groups for each newly acquired company. Enhanced due diligence process and
associated policies including ESG, and external advisory support, are all in place to enable early warning,
monitoring and action where and when necessary.
Key changes to our Principal Risks
In Q3 FY 2024, we conducted a series of
workshops with function and sector leaders
to review and discuss the company’s risks.
The results were shared with the QinetiQ
Leadership Team, who agreed the principal
risks and a number of key (watchlist) risks.
The Risk & Security Committee subsequently
reviewed and approved the risks.
– The Digital & Data Programme and Large
Contract Renewal principal risks were
retired due to mitigation activities that
lowered their risk scores to an acceptable
level.
– The Macroeconomic Uncertainty, People
Security and Physical Security principal
risks were moved to key risks
(see section below).
– The Health and Safety principal risk
was refined to include Wellbeing as a
component.
– Recognising the dynamic landscape,
Competitive Landscape and Disruptive
Technologies were added as principal risks.
– With a number of key transformation
projects underway, Management of Change
was added as a principal risk.
– IT Infrastructure was added as a principal
risk recognising the importance of the
implementation of GII/DW and supportability
of some of our business services.
– License to Operate was added as a principal
risk acting as umbrella for legal, compliance
and regulatory related risks.
Key (Watchlist) Risks
List of Key risks which sit outside of our
principal risks, yet considered important to
the Group, have been added. In addition to
Macroeconomic Uncertainty, People Security
and Physical Security, they include Business
Tools and Tension Related to Targets.
Strengthening our Framework
We continue to enhance and embed our
risk management framework to promote
consistency across all our sectors.
Over the course of the year, we have:
– Completed a full risk review in conjunction with
functions and sectors finalising the outcome
with the Leadership Team and the Board
enabling us to “ready, set, go” our risk strategy
for the forthcoming year
– Achieved risk reduction in three major risk
areas enabling us to decrease our overall
risk exposure
– Successfully completed and achieved
recertification in our major ISO
certifications
– Established and continue to embed
the Three Lines Model. The three lines:
Sectors, the Chief Risk Officer and the Risk
Team, other functional assurance and the
Internal Audit continue to work together
contributing to creation and protection of
value.
– Continued to deliver our Business
Management System transformation on-
time and on-cost
– Continued to monitor and regularly
report the status of our risk position and
associated mitigation plans throughout
the year, and perform in-depth reviews of
our risks which have been presented to the
Board and Risk and Security Committee.
– Continued to engage with our operating
Sectors to improve our risk culture
QinetiQ Group plc | Annual Report & Accounts 202460
Risk management continued
Operational risks
Climate Change
Potential Impact Mitigation
Failure to meet our published targets, stakeholder
expectations and resilience needs for climate change
and Net-Zero, resulting in operational disruption, loss
of new business, reduced investor confidence and
compromised reputation.
We have developed a Net-Zero plan and are committed to science based targets to drive our emissions
to Net-Zero by 2050 or sooner. We have in place initiatives across the Group to ensure that we are
embedding our Net-Zero transition plan. These are: investment in energy efficiency projects, development of
programmes to deliver reductions in Scope 3 emissions, internal and industry-wide enabling activities (e.g.
engagement, remuneration incentives) and working with our customers to develop sustainable solutions
and protecting biodiversity. We are regularly reviewing the risk of climate change to our business and are
embedding climate change into business as usual, including governance, strategy, risk management and
metrics. We continue to improve this approach. See ESG section on page 34.
Organisational Culture
Potential Impact Mitigation
Failure to define and build a single organisational culture
and leadership behaviour set to achieve our strategic
goals and ambition.
Implementation of our QinetiQ Operating Model meant we were able to invest in developing our culture
and focus on embedding our approach to inclusion, diversity, and people management as well as align
rewards, pay and progression and other tools and processes that enable performance and help us to
continuously improve our ways of working. Examples include quarterly Peakon reviews and actions, and
completion of Organisational Network Analysis which inform our priorities in building and embedding a
single organisational culture.
Cyber Security
Potential Impact Mitigation
A successful cyber-attack which is able to exfiltrate data,
deny the use of data, degrade or deny capabilities.
The implementation of a Group Cyber Security Programme and targeted cyber security training for
key IT staff, including mandatory training for all staff and contractors. We have a robust programme
of deployment and continual upgrade of our cyber security detection and protective capabilities and
technologies. This includes a routine exercising and technical assessment of our networks, enhanced
requirements for IT architecture and security.
Management of Change
Potential Impact Mitigation
Failure to effectively embed, and realise the benefits of,
operational change may impede our competitiveness
and ability to realise market opportunities.
We are establishing an Enterprise Change Management capability to create a coherent approach to
business change management and drive focus on successfully embedding change and realisation of
benefits. This will be supported by integrated change management plans for each operating sector.
Health, Safety & Welbeing
Potential Impact Mitigation
Serious physical or mental health injury, fatality of
employee(s), third party personnel, or member(s)
of the public; loss of assets or significant regulatory
enforcement action.
A global Safety Improvement Programme is in place enabling measurable improvements in the safety
culture maturity including more effective global safety processes to achieve overall risk reduction, aligned
and integrated three lines of safety assurance approach, enhanced competence and upskilling employees
to become better safety leaders and role models and inclusion of technology as an enabler for safety.
We have established local emergency preparedness and in-country safety teams and are focusing on
improving the engagement and training across the Group.
Information Security
Potential Impact Mitigation
Compromise of QinetiQ, or customer, confidential,
proprietary or sensitive information. Includes Intellectual
Property (IP), ITAR and Personally Identifiable
Information(PII); digital, verbal and hard-copy.
Information is protected through policy, procedural, physical and digital security controls, supported by
ongoing assurance activities, ongoing awareness campaigns and the annual mandatory security training.
We are further investing in tooling to improve tracking of trends to inform improvement in our security
measures.
IT Infrastructure
Potential Impact Mitigation
Unplanned instability in Sector IT services could affect
broader Company business operations e.g. ability to
support revenue generating services.
Implementation of Global Interoperable Infrastructure and Digital Workspace which enhances our
collaboration and enables us to leverage our skills globally is well underway and includes replacement of
some of the poorly-performing systems and introduction of new, more powerful tools. We have a robust
programme of deployment and continual upgrade of our cyber security detection and protective capabilities
and technologies. This includes a routine exercising and technical assessment of our networks, enhanced
requirements for IT architecture and security.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
61
Operational risks continued
Licence to Operate
Potential Impact Mitigation
Non-compliance with relevant laws, regulations or non-
conformance with business certifications may impact
on the Group’s reputation, operations, impact to share
price, potential penalties or suspension or debarment
from government contracting, with the potential to
compromise our ability to conduct business, which
would then have a further potential impact on our
people, physical assets and the environment.
QinetiQ has a mature enterprise risk management in place, with a focus on maintaining and strengthening
safety and regulatory compliance across the Group. The QinetiQ Operating Model defines responsibility
throughout the organisation, led by the QinetiQ Code of Conduct that helps drive attitudes and behaviours.
There are proportionate compliance policies and procedures in place, supported by mandatory training
programmes applicable to all employees. QinetiQ has adopted the Three Lines Model, structuring a
compliance and assurance framework that enables a risk-focused approach to compliance, alongside an
assurance programme that includes reporting regularly to the Board and senior management. Continuous
improvement is driven using a range of approaches such as audit and evaluation, focused training and
strategic improvement programmes. The effectiveness of our internal control environment continues to be
assessed at both senior management and Board level, helping identify any potential gaps in assurance over
key risks.
P3M Capability
Potential Impact Mitigation
Varying levels of competence, experience, capacity,
capability, culture and behaviours in Project, Programme
and Portfolio Management (P3M) community lead to
poor delivery performance and increased likelihood of
major programme failure.
We have updated and rolled out the Global P3M Competency Framework and the P3M Delegations
process, ensuring Project Managers’ skills and experience are matched to the project complexity. The P3M
framework has been improved and provides a scalable and consistent approach to delivering outputs on
time, cost and quality. We have launched Performance Excellence Global Training which in conjunction with
Group Performance Excellence (GPE) outputs, Global Competency Framework and the P3M Delegations
process form part of our business-as-usual controls.
Strategic Capability Planning
Potential Impact Mitigation
Failure to implement a successful 2-5 year view of skills
supply and development, and subsequent failure to
create the right people capacity and competence for our
future ambition.
Having implemented a Joint Strategy and People approach to Strategic Capability Planning which is
supported by Talent Management Systems, we are further developing our Early Careers Programme
and Diversity and Inclusion (D&I) plans. Employees’ career growth is enhanced through the Personal
Development Fund. This is further enabled through our Adaptive Working principles which have capitalised
on the diverse ways that our people work. We have delivered a significant investment in our award and
pay and progression strategy positioning us as a global employer of choice for both early careers and
experienced hires.
The People function is developing a global engagement activity for harnessing future capability
requirements, assimilating better understanding of the skills gaps and identifying strategic solutions to
mitigate these. Our operating Sectors are supervising local SWPs via quarterly Programme Steering Boards.
QinetiQ Group plc | Annual Report & Accounts 202462
Viability statement
Viability statement
This viability statement should be read in
conjunction with the Group’s Growth strategy
on pages 8 - 9.
The Group’s corporate planning processes
involve the following individual processes
covering differing time frames:
– An annual Integrated Strategic Business Plan
(ISBP) process that looks at the financial
outlook for the following five years. This
process commences with an assessment
of the orders pipeline producing an order
intake scenario. A review of the phased
delivery profile of that order intake as well
as contracted order backlog, and the cost
base required to support this enables
generation of low-case, base-case and high-
case profit forecasts. Capital expenditure
and working capital requirements are
also collected, reviewed, approved and an
operating cash flow produced for the Plan
period. This is then overlaid with inorganic
growth assumptions as well as detailed tax,
interest, funding and other non-operating
assumptions to produce a five year net debt/
cash forecast including relevant covenant /
funding metrics;
– An annual budget process that covers the
first year of the five-year planning horizon in
detail;
– A rolling monthly ‘latest best estimate’
process to assess significant changes to the
budget for the year in progress.
The corporate planning process is underpinned
by assessing scenarios and risks that
encompass a wide spectrum of potential
outcomes, both favourable and adverse. The
sensitivity analysis undertaken by management
explores the resilience of the Group to the
potential impact of each of the principal risks
set out on pages 59 - 61, and a combination of
those risks.
Assessing the
prospects of the Group
The scenarios are designed to be severe but
plausible, and take full account of the availability
and likely effectiveness of the mitigating
actions (as described on pages 59 - 61) that
could be taken to avoid or reduce the impact
or occurrence of the underlying risks, and
that realistically would be open to them in
the circumstances. In considering the likely
effectiveness of such actions, the conclusions
of the Board’s regular monitoring and review of
risk and internal control systems, as discussed
on page 87, is taken into account.
Alongside the annual review of risk scenarios
applied to the strategic plan, performance is
rigorously monitored to alert the Board and
QinetiQ Leadership Team to the potential
crystallisation of a key risk.
We consider that this stress-testing based
assessment of the Group’s prospects is
reasonable in the circumstances of the inherent
uncertainty involved.
The period over which we confirm
longer-term viability
The period over which the Directors consider
it possible to form a reasonable expectation
as to the Group’s longer-term viability is the
five-year period to 31 March 2029. This period
is deemed appropriate as the Group has
significant contract cover out to 2029 driven
by long term contracts. The Group’s financing
arrangements cover the majority of this period,
as the term loan has been extended to August
2026, with one year extension option to take it
to August 2027, and the revolving credit facility
has been extended to April 2027 post year-end.
This is also the period covered by our strategic
planning process and is subject to stress-
testing and scenario planning around potential
risks. It has been selected because it presents
the Board and readers of the annual report with
a reasonable degree of confidence whilst still
providing an appropriate longer-term outlook.
The ISBP base case assumes the renewal of
the Long Term Partnering Agreement (LTPA). A
Principles Agreement was signed with the UK
MOD for a five year extension during FY24.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
63
Assessing the viability of the Group
The scenarios applied consider the key risks
facing the Group, as summarised in the
Risks and Uncertainty section on page 56.
These include:
– An environmental risk focusing on a severe
flooding event at the Shoeburyness site
– Sensitivities on growth metrics in the
plan such as margin achievement and
revenue growth as a result of competitive
pressures, macroeconomic environments,
P3M capability, disruptive technologies and
workforce planning
– Sensitivities based on our cash position
including increased working capital burden
– Sensitivities linked to the economic
environment including revenue reduction
and FX risk
The impact of each scenario is assessed in
terms of revenue, operating profit, net cash/
(debt) and loan covenants (leverage and
interest cover ratio). They are considered
individually and aggregated through two
combined stress-tests, covering financial
pressures and poor trading performance.
The Group has significant forecast growth
resulting in a return to positive net cash from
FY27. The sensitivities assume that the Group
continues to have access to Revolving Credit
facilities of £275m (renewed in April 2024 at
£290m to expire in April 2027) and that the
term loan of £336m can be extended by one
more year (expiring September 2026). This level
of liquidity is deemed sufficient for all of the
viability scenarios analysed.
The financial impacts are inherently subjective
and highly variable, but have provided an
indicative assessment to the Board. None of the
risks applied individually, or in aggregate, have a
material impact on long term viability (in terms
of breaching our available facility headroom or
associated covenants). Despite being unlikely,
the Directors have considered mitigations that
could be put in place to offset the risks. The
Group has a number of cost control levers that
could immediately be drawn on to control cash
outflows.
In addition, it continues to explore its portfolio
of assets to ensure they remain relevant to the
strategic ambition (through disposal of non-
core assets). The revolving debt facility has
the option to increase further by an additional
£125m, prior to considering the reduction of
dividends. All of these options can be drawn
on to ensure the Group remains a going
concern and does not breach covenants.
Confirmation of longer-term viability
As noted on page 109, the Directors confirm
that their assessment of the principal risks
facing the Group was robust. Based upon
the robust assessment of the principal risks
facing the Group and their stress-testing
based assessment of the Group’s prospects,
all of which are described in this statement,
the Directors have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall
due over the period to 31 March 2029.
Scenarios modelled Links to Principal Risks
Scenario 1 - Major environmental event
For the purposes of this scenario we have assumed a failure at the exposed area that would result in significant flooding. This
flooding would, despite mitigation measures, damage the equipment and infrastructure resulting in significant remediation work to
safely restore capability.
Assumptions:
There would be an immediate impact to our ability to deliver. The impact has been modelled through lost backlog, pipeline revenue
and reputational damage, together with lost recoveries from staff impacted.
Climate change
Scenario 2 - Profit margin downgrade
Profit margin is downgraded as a result of competitive pressure, project execution, inability to achieve supply chain and
organisational efficiency savings or a regulatory fine.
Assumptions:
A 2% reduction in profit margin, no impact on revenue.
P3M Capability
Health, Safety and Wellbeing
Competitive Landscape
Organisational Culture
Information Security
QinetiQ Group plc | Annual Report & Accounts 202464
Viability statement continued
Viability statement continued
Scenarios modelled Links to Principal Risks
Scenario 3 - Reduction in revenue growth
Revenue grows at a slower rate through the planning period driven by slow down in orders as a result of customer spending,
macroeconomic pressures, a cyber incident or failure to plan the future resource and skillset needed.
Assumptions:
Revenue restricted to 4% organic growth per annum.
Cyber Security
Strategic Capability Planning
Disruptive Technologies
License to Operate
Scenario 4 - Reduced operating cash conversion
Economic environment causes delays in customer payments, high inventory levels driven by supplier shortages, or IT system failure
resulting in inability to raise invoices and receipt of supplier payments.
Assumptions:
Cash conversion restricted to 85%.
Management of Change
IT Infrastructure
Scenario 5 - Increased FX rates
Macro-economic trends, global events and government interventions may cause foreign exchange rates to move in unfavourable
directions (mainly an increase in the USD:GBP and AUD:GBP rates) such that the returns of the US and Australia businesses are
worth less in GBP terms.
Assumptions:
10% increase in FX (USD & AUD) rates.
Acquisition and Integration
Competitive Landscape
Combined stress tests modelled Scenarios used
a) Financial pressures - Continued strengthening of GBP against USD and AUD crystallises a translation risk at group level.
Customers exposed to FX volatility may struggle to meet milestone payment deadlines. Increasing returns on FX markets drives
shareholders to demand better returns on investment.
Likelihood moderate given macroeconomic environment.
4 & 5
b) Poor trading performance (profitability).
Combination of all profitability related scenarios.
1, 2 & 3
Going Concern Disclosures
The Group’s activities, combined with the
factors that are likely to affect its future
development and performance, are set out on
pages 1 - 27. The Group meets its day-to-
day working capital requirements through its
available cash funds and its bank facilities.
The Interim Group Chief Financial Officer’s
review on pages 28 - 31 sets out details of the
financial position of the Group, the cash flows,
drawn and committed borrowing facilities
(including associated covenants), liquidity,
and the Group’s policies and processes for
managing its capital and financial risks.
This past year has seen continued unrest
and growing conflict across many regions of
the world. The defence and security context
continues to elevate the market needs for our
six distinctive offerings. Both our addressable
market and our confidence in capitalising on
that market opportunity continues to grow.
The Group enters the new-year with a healthy
balance sheet and leverage position, and
strong order backlog and pipeline. After making
enquiries, the Directors believe that the Group is
well positioned to manage its overall business
risks successfully and have a reasonable
expectation that the Group has adequate
resources to continue in operational existence
for the foreseeable future. The Group therefore
continues to adopt the going-concern basis in
preparing its financial statements.
The Group is exposed to various risks and
uncertainties, the principal ones being
summarised in the ‘Principal risks’ section on
pages 56 - 61. In reaching its conclusion on
the going concern assessment, the Board also
considered the findings of the work performed
to support the statement on the long term
viability of the Company and the Group. As
noted below, this included assessing forecasts
of severe but plausible downside scenarios
and further downside stress testing related to
the Company’s principal risks. Crystallisation
of such risks, to the extent not fully mitigated,
would lead to a negative impact on the
Group’s financial results but none are deemed
sufficiently material to prevent the Group from
continuing as a going concern for at least the
next 12 months from 23 May 2024.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
65
Creating lasting societal value
We are committed to our responsibilities to promote the success of the
Group. The Board of QinetiQ Group plc confirms that during the year
under review, it has acted in the way that it considers, in good faith,
would be most likely to promote the Group’s success for the benefit
of its members as a whole, having due regard to the matters set out in
section 172(1)(a) to (f) of the Companies Act 2006.
QinetiQ Group plc is a public Company limited by shares, registered in
England and Wales No. 4586941.
Typically in large and complex companies such as QinetiQ, the Directors
partly fulfil their duties through a governance framework that delegates
day-to-day decision-making to the employees of the Company. The
Board recognises that such delegation needs to be part of a robust
governance structure which covers our values, how we engage with
our stakeholders, and how the Board assures itself that the governance
structure and systems of controls continue to be robust.
The main methods used by the Directors to perform their duties are
outlined below.
This statement and the relevant disclosures referenced on this page
summarise how the Board has upheld and discharged its duties,
consider:
(a) The likely consequences of any decision in the long term.
(b) The interests of the Company’s employees.
(c) The desirability of the Company maintaining a reputation for high
standards of business conduct.
(d) The need to act fairly between members of the Company.
(e) The need to foster the Company’s business relationships with
suppliers, customers and others.
(f) The impact of the Company’s operations on the community and
the environment.
See page 67 for relevant disclosures.
How we engage with our
key stakeholder groups
Section 172 Statement
Section 172 statement and stakeholder engagement
Customers
Our customers are at the heart of our purpose and we strive
to apply our strengths to their advantage to enable delivery of
mission-led innovation. Every QinetiQ customer has a delivery
team and we regularly invest time listening and understanding
their views and needs via our formal customer research systems,
for more information see page 10 and stakeholder engagement at
page 32.
People
We are a people business and our people are critical to our
success. A key engagement form is our Global Employee Voice
Group. To see more about how we engage with our people see
page 89.
Shareholders
We engage with our shareholders during the year through physical
and virtual roadshows, results presentations and the AGM and
we seek to keep an open dialogue with them regarding business,
our strategy, and the management team. In the year under review,
we also held an Investor Seminar in the US, a General Meeting,
for engagement on the £100 million Share Buyback Programme,
as well as undertaking a Shareholder Perception Audit, see pages
90 to 91.
Suppliers
We occupy a unique position in defence and actively engage with
our suppliers, working collaboratively to ensure we treat them
with integrity and take a fair and sustainable approach. We are
active Co-Chair of the Defence Suppliers Forum (DSF) and hold
strategic relationships across organisations and engage with our
supply chain through in a variety of ways, including our QinetiQ
Collaborate events and industry working group; see Working with
our Supply Chain page 55.
Communities
We strive to have a positive impact on our local communities
by engaging in community investment such as our outreach
programme, volunteering, supporting local charities and
community liaison. We provide services that promote the safety
and security of members of society, supported by our Net-Zero
plan; see ESG pages 53 & 55.
Regulators
We engage with Regulators to understand changing regulations
and ensure we meet their requirements. Our Audit Committee
has undertaken a consultation in relation to the new proposed
Corporate Governance Code and we have participated in the Parker
Review by way of reporting on Board diversity, see pages 74, 87 &
104 or Directors’ report pages 130 to 133.
QinetiQ Group plc | Annual Report & Accounts 202466
Primary stakeholders Other stakeholders
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To deliver responsibly and for the benefit of all stakeholders, we must
understand what matters to them. To do this we engage in a variety of
ways in an open and transparent manner, with the aim of identifying
common goals.
In some cases the Board will engage directly with certain stakeholders,
however, the relevant delivery teams will also manage this engagement
if they are better-placed to facilitate meaningful engagement.
We consider the stakeholder and relevant issues to ensure that
engagement is led by those best-placed to affect any necessary change.
We expect that our approach and how we engage with our stakeholders
will continue to evolve as we pursue further growth and geographic
expansion, for the benefit of all of our stakeholders.
Board activity and principal decisions in FY24
The principal decisions taken by the Board in FY24 are detailed on pages
85 to 86. These decisions cover a variety of topics, including capital
allocation, succession planning and the Company’s 10-year outlook. Due
to the nature of these decisions, a variety of stakeholders are considered
as part of the Board’s discussions.
Impact of stakeholder engagement
and how we create value
Customers
The formal feedback we receive from our customers allows us to
respond and adapt our approach when achieving their objectives. It
is reviewed at all levels of our organisation to ensure we continuously
improve and evolve our business processes and delivery solutions.
It enables us to deliver mission-critical solutions and help customers
address their most pressing challenges. They benefit from a
responsive and agile approach and the ability to innovate at pace
while delivering value for money.
People
We have been able to identify priority focus areas to improve the
employee experience by listening to our people through our Peakon
surveys and directing our efforts to enhance areas highlighted
by direct feedback. Including; ways of working, safety, digital
improvements and concerns about the cost of living. See Page 89
for more information on Peakon.
Our peoples work makes a genuine difference to our customers,
and we are committed to providing an employee experience which
fosters rewarding careers in highly skilled areas, giving our people the
opportunity to satisfy their intellectual curiosities.
Shareholders
Shareholder feedback and comments helps shape our strategic
thinking and decision-making and their ongoing support enables
us to invest in our business and execute our growth strategy for
the benefit of all stakeholders. In return we aim to deliver long-term
sustainable growth and attractive returns, and have sought to keep
both our investors and the financial markets up-to-date with our
progress and strategic decisions throughout the year.
Suppliers
We aim to bring down barriers for suppliers in defence and emerging
sectors. Engagement with our supply chain gives us insight into
industry partnering to effectively support our customers.
Communities
We aim to benefit the wider socio-economic wellbeing of
communities and our community investment is viewed positively
where we operate. Regular community liaison updates ensure
local people are aware of our outreach activity. This has created
aspirations and provided signposting to rewarding careers for young
people, particularly in STEM.
Regulators
We take an active role in the defence industry through various forums
and industry networks. Our engagement supports us meeting the
high standards expected by our regulators.
Our stakeholders and approach
to engagement
Creating lasting societal value continued
Section 172 statement and stakeholder engagement continued
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
67
Considering long-term consequences
s172 link (a)
The Board holds annual strategy meetings which assess the long-term
sustainable success of the Group and our impact on our investors,
customers, people, and local communities over a 10-year outlook.
Our Group Chair and Company Secretary working with the Executive
Directors, set a rolling agenda for each Board meeting, including a
two-day strategy review to consider the Company’s overall purpose
and strategy. This is supported by a budget for the following year
and both medium and long-term (five and 10-year) financial planning
informed by strategic assessments, such as SWOT analysis. These
arrangements are supported by external political, institutional,
customer and academic inputs. There are also risk management
procedures that identify the potential consequences of decisions in
the short, medium and long term, so that mitigation plans can be put
in place to prevent, reduce or eliminate risks to our business and wider
stakeholders (see pages 57 to 61).
Protecting communities and environment
s172 link (d)
The Group is committed to corporate responsibility oversight including
business ethics, anti-bribery and corruption, human rights, modern
slavery, environmental stewardship and use of resources, sustainable
solutions, greenhouse gas emissions and energy management,
investing in our local communities and the armed forces. Any major
decisions taken by the Board includes formal consideration to these
factors where relevant as well as regular reviews through the Board
risk management process and the Audit, Risk and Security and
Remuneration Committees.
Setting culture and conduct
s172 link (e, f)
The Board sets the Group’s purpose, values and strategy, ensuring it
is aligned with our culture. To ensure section 172 requirements
are met, stakeholder factors are addressed in Board papers, and
through standing agenda matters presented at each Board meeting
(for example, the CEO presents updates on the financial overview,
strategic progress, investor relations, business development, and
operational progress) and the Company Secretary presents updates
on relevant corporate governance and compliance matters.
Fostering stakeholder relationships
s172 links (b, c)
To encourage mutually beneficial stakeholder relationships,
specific training is provided for Directors and senior
managers and we ensure external assurance, through
audits, stakeholder surveys and reports from brokers and
other advisers, and stakeholder engagement. The Board receives
regular presentations and reports on customer engagement,
risk, health and safety, confidential reporting, defence process
review, dividend policy, people and culture strategy, and operational
business updates. The Company listened to direct feedback from
UK employees this year in relation to reward and responded by
committing to the implementation of a ‘fair baseline for all’ which
enabled the Company to uplift UK employee rewards in line with
its Rewarding for Performance approach. The Company also took
feedback from its shareholders through direct Board engagement
and a shareholder perception audit, which helped inform deployment
of its capital allocation policy.
Section 172 relevant disclosures
Section 172 relevant disclosures
Relevant S172(a) disclosures
Pages 76 to 77 Company purpose
Pages 10 to 11 Business model
Pages 6 to 7 Strategy
Pages 30 to 31 Dividend and Capital Allocation policy
Pages 62 to 64 Viability statement
Page 54 Governance and leadership of our responsible
and sustainable business approach
Page 109 Frameworks for risk management and internal control
Pages 40 to 42 Net-Zero pathways initiatives
Relevant S172(b,c) disclosures
Pages 46 to 51 Our people
Page 48 Safety and wellbeing
Page 89 Employee engagement
Pages 51 to 52 Learning and Development: skills and talent
Pages 52 to 53 Reward and recognition
Pages 68 to 69 Non-financial information statement
Page 91 Board engagement
Pages 49 to 50 Diversity, equity and inclusion
Page 35 ESG framework
Pages 76 to 77 Purpose and culture
Page 90 Shareholder engagement
Relevant S172(e,f) disclosures
Pages 48 to 53 Social
Pages 76 to 77 Purpose and culture
Page 57 Internal controls
Pages 90 to 91 Shareholder engagement
Pages 73 and 132 Annual General Meeting
Pages 56 to 61 Risk Management
Page 81Governance structure
Relevant S172(d) disclosures
Pages 36 to 42 Environmental
Page 68 Energy management
Page 53 Responsibility and sustainability
Pages 43 to 47 TCFD disclosures
Page 69 Community and Society, Human rights
and Anti- bribery and anti-corruption
Page 87 Engagement environment and community
QinetiQ Group plc | Annual Report & Accounts 202468
Non-financial information statement
Our people
Policy statement Description
Code of Conduct Our Code of Conduct lays out our ethical standards, providing our people with clear direction and guidance on how we do business across the
Company (page 54). There is guidance on our standards, on ethical decision-making and also how to seek help and raise concerns. We review our
Code of Conduct annually to reflect the needs of our business, regulations and best practice.
Speak Up Guidance for our people and third parties on how to ‘speak up’ is provided within our Code of Conduct and our supplier Code of Conduct (see
page 55), both are available on our website. Speak up and the Code of Conduct form part of the Business Ethics Committee and ESG Steering
Committee agenda and updates are part of ESG papers for the Board. Confidential reporting is overseen by the Audit Committee; the process is
described on page 90.
Health and safety Our Health and Safety policy outlines our commitment to continuously improving standards of safety management and compliance. This is
supported by our EHS Strategy. The effectiveness of the policy is governed through our assurance process and our six-monthly self-certification.
Safety issues are part of a regular governance timetable, quarterly through the Technology and Operational Excellence Council meetings, through
QinetiQ Leadership Team (QLT) meetings and regularly as part of the Board Risk and Security Committee (see page 106). Lost Time Incidents (LTI)
as a key non-financial KPI (page 33), and have shown an improvement compared with FY23. Safety programmes are described on page 48 and
listed in our operational risks (page 60).
Diversity and
inclusion
Diversity and Inclusion forms part of our Employee Engagement and Culture Group Requirement and underpins our approach to supporting an
inclusive workplace. The effectiveness is governed via our assurance processes and KPIs with monthly oversight by our QLT as well as regular
oversight by the Board. Our Inclusion, Diversity and Belonging Strategy including an improvement in gender diversity (against our 30% by 2030
target), is described on pages 68 and 69. Data and progress against the Board’s Diversity and Inclusion Policy is described on page 96.
The environment
Policy statement Description
Environmental
management;
waste management
and sustainability
appraisal
We are committed to embedding an environmentally sustainable approach to business because we understand its importance to our business
and our stakeholders (see page 39). The effectiveness of our Environmental Group Requirement is governed through our assurance process
and our six-monthly self-certification. Environmental issues are part of a regular governance timetable, with oversight by the ESG SteerCo, the
Environment Council (page 40) and the Board Risk and Security Committee. We are certified to ISO 14001 in the UK and Canada and so are
subject to external audit. We recognise that reducing waste meets our sustainability goals and contributes to our Net-Zero plan. On page 42 we
outline our approach. Our Environment Council has oversight of our approach. Sustainability appraisals are required under the LTPA. They involve
an assessment of an activity across 16 sustainability themes. The effectiveness is governed via our assurance processes as well as regular review
and oversight by the UK MOD
Climate-related financial disclosure requirements S414CB(2A)
The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 place requirements on QinetiQ to incorporate climate disclosures in the
annual report and accounts. We believe these have been addressed within this years climate related disclosures within our statement on TCFD (pages 43-47)
(a) QinetiQ’s governance arrangements in relation to assessing and managing climate-related risks and opportunities (page 43)
(b) how QinetiQ identifies, assesses, and manages climate-related risks and opportunities (page 46)
(c) How processes for identifying, assessing, and managing climate-related risks are integrated into QinetiQ’s overall risk management process (page 46)
(d) The principal climate-related risks/opportunities arising in connection with QinetiQ’s operations, and time periods to which they are assessed (pages 44-45)
(e) The actual and potential impacts of the principal climate-related risks and opportunities on QinetiQ’s business model and strategy (pages 44-45)
(f) An analysis of the resilience of QinetiQ’s business model and strategy, taking into consideration different climate-related scenarios (pages 44-45)
(g) The targets used by to manage climate-related risks and to realise climate-related opportunities and of performance against those targets (page 47)
(h) The key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the
calculations on which the KPIs are based (page 47)
Non-financial and sustainability information statement
Certain of the non-financial and sustainability information required pursuant to the
Companies Act 2006 is provided by reference to the following locations:
Non-financial information Section Pages
Business model Business model 14
Policies Non-financial and sustainability information statement 68
Risk management Risk management 56
Principal risks Risk management 58
Key Performance Indicators Key performance indicators 33
Sustainability (ESG) Environmental Social Governance 35
Board Diversity Policy Corporate Governance 96
The non-financial and sustainability
reporting requirements contained in
sections 414CA and 414CB of the
Companies Act 2006 are addressed
within this section by means of cross
reference, in order to indicate where they
are located within the strategic narrative
and to avoid duplication. We have a
range of policy and guidance, some of
which is published on our website:
www.QinetiQ.com.
QinetiQ Group plc | Annual Report & Accounts 2024
Strategic report
69
Community and society
Policy statement Description
Volunteering Our instructions provides guidance for employees to use Company time to use their skills, which enable us to make a positive difference
in the community (page 53). The effectiveness is monitored by the ESG team, with oversight by the ESG Steering Committee and via our
assurance process.
Safeguarding children
and vulnerable adults
Our Instructions explain the importance of safeguarding as part of our community investment programme and outlines requirements for risk
assessment and the right behaviours. The Instructions are managed both by the ESG team and locally by safeguarding experts in our Early
Careers Team and via our assurance process.
Tax Our tax strategy (available on our website) outlines our commitment to being compliant with tax legislation, wherever we do business.
We recognise our responsibility to pay the right amount of tax, at the right time and in the right jurisdiction. Oversight of this commitment
comes through external challenge, such as business risk reviews and audit questions from tax authorities and external auditors and internal
reviews such as quarterly tax updates with executive level reviews of process and procedure. The tax strategy also has oversight by the Audit
Committee (page 55).
Sponsorship
and donations
Our approach is designed to ensure that all donations are made to appropriate organisations. We ensure that there is screening and due
diligence and we also undertake selection with oversight by the Sponsorship and Donations Committee and our assurance process.
Human rights
Policy statement Description
Human rights We seek to anticipate and prevent potential negative human rights impacts through our policy and processes and address salient human
rights issues through our Code of Conduct, ethical trading policy, international business risk management process and export controls
process. Our policies ensure we meet all statutory requirements. We monitor the application of these policies through our business assurance
processes and regular self assessment and with leadership oversight (ESG Steering Committee, Business Ethics Committee and Board).
We believe that this integrated approach is effective in ensuring our business acts responsibly and respects human rights. (See page 55).
Modern slavery We recognise our responsibility to comply with all relevant legislation, including The UK Modern Slavery Act 2015 and in accordance the
modern slavery laws of other locations in which QinetiQ operates. Our supporting policies focuses on management of the supply chain and
the requirements for due diligence. In addition we include modern slavery in our resourcing policy. Our Modern Slavery and Human Trafficking
statement is updated annually, signed by our Board and published on the homepage of our website. The effectiveness is monitored via our
assurance programme and leadership oversight (QLT and Board). See page 55 for details of the programme.
Data protection Our Data Protection Group Requirement details how we manage the privacy and security of personal information. The effectiveness
is monitoring via our assurance programme and leadership oversight (QLT and Board).
Supply chain code
of conduct
Our Supplier Code of Conduct helps ensure our suppliers have clarity on our expectations on human rights issues. See page 55 and our
website for more details.
International trade
compliance
As an international business, it is vital that we operate fully within the requirements of international export requirements and this is addressed
by our policies. The effectiveness is monitored via our assurance programme and leadership oversight (QLT and Board).
See our website for more details.
Anti-bribery and anti-corruption
Policy statement Description
Code of Conduct Our Code of Conduct lays out our ethical standards, and contains advice on anti-bribery and corruption (see page 54).
Anti-bribery
and corruption
Our Anti-Bribery and Corruption (ABC) Group Requirement sets out our responsibilities in observing and upholding our zero-tolerance
approach to all forms of bribery and corruption. This ensures we meet applicable statutory requirements, has significant senior oversight at
QLT and Board level, is managed via our assurance processes and self-certification and there are regular internal audits. Details of our ABC
programme are provided on page 54.
Commercial
intermediaries
Managing commercial intermediaries is one of a suite of key Group Requirements which supports our zero tolerance approach to ABC. It
provides clear guidance on approach. This has Executive and Board oversight, is subject to our assurance process and self-certification.
Sanction screening It is key that we comply with any sanctions requirements and so undertake various screenings. This is captured in our Sanctions Compliance
Group Requirement, which is designed to ensure we comply, has QLT and Board oversight, and is subject to our assurance process and self-
certification.
Gifts and hospitality Our Gifts and Hospitality procedure and guidance in the Code of Conduct supports our zero-tolerance approach to ABC. It provides clear
guidance on what is appropriate and how to record. This has QLT and Board oversight, and is subject to our assurance process and self-
certification.
Non-financial information statement continued
QinetiQ Group plc | Annual Report & Accounts 202470
Corporate governance
72 Group Chair’s Introduction to Governance
74 Governance framework and Board
at a glance
76 The significance of our purpose,
values and strategy
78 Board biographies
81 Governance structure
82 Division of responsibilities
83 Composition, succession
and evaluation
85 Board decision-making
87 Board activity
88 Management and control of
US subsidiaries
89 Employee engagement
92 Nominations Committee report
97 Director effectiveness
100 Audit Committee report
106 Risk & Security Committee report
110 Directors’ remuneration report
112 Remuneration at a glance
117 Annual Report on remuneration
130 Directors’ Report and Statutory information
134 Independent auditors’ report
Corporate
Governance
QinetiQ Group plc | Annual Report & Accounts 2024 71
Corporate governance
QinetiQ Group plc | Annual Report & Accounts 202472
Neil Johnson
Non-executive
Group Chair
//At a time of heightened
world conflict, the
Company’s clear,
proportionate and
well-embedded
system of corporate
governance, which
effectively supports
and guides how we
deliver against our
mission and objectives,
is key to giving our
customers, partners
and shareholders
transparency and
confidence in how
our Company executes
against its strategy.//
Environmental, Social and Governance
(ESG)
QinetiQ is committed to responsible and
sustainable business practice and is proud to
be acting as a catalyst, by driving and leading
these important issues within our sector. During
the year, the Board have had many discussions
on how to best keep evolving our approach to
ESG matters including our Net-Zero programme
and the evolution of non-financial reporting . As
part of our regular business review, we are able
to oversee and monitor management of ESG
aspects, which are being delivered through our
ESG function. We are proud of the significant
progress made to date on our ESG strategy and
programmes, and we continue to support the
business in its ambition to embed this further
into corporate strategy and decision-making.
Health, safety and wellbeing
At QinetiQ, health, safety and wellbeing remain
our number one priority. Our commitment to
look after our people, customers and visitors
while ensuring the public is never harmed by the
work we do is at the heart of our culture.
This year, considerable effort has been made to
further enhance the Company’s safety culture,
especially at senior leadership level, and further
information on health, safety and wellbeing can
be found on page 48.
Culture
Promoting a culture of openness and debate in
the Boardroom is one of my key responsibilities
as Group Chair, and as a Board we play an
important leadership role in promoting the
desired culture throughout the organisation. By
spending time with the business and its people,
the Board and I have seen that the culture and
values of QinetiQ (integrity, collaboration and
high performance), are clearly embedded and
are genuinely lived. In QinetiQ, I have found
a culture that is grounded, responsible and
humble, where people have confidence in their
capabilities and our strategy, with a strong
desire to learn and develop. The Company
continues to spend considerable time on
engagement with our people to embed and
harness the benefits of our Company values.
Introduction to
Governance
Group Chair introduction
The following corporate
governance statement
provides an overview of
the system of governance
adopted by the Company
and will enable our
shareholders to evaluate
the manner in which UK
Corporate Governance
Code Principles and
Provisions have been
applied by the Company
for the year ended
31 March 2024.
Key Board activities
During this reporting year, the Board has made
improvements to its Board Diversity Policy,
announced the commencement of a £100m
share buyback programme and has overseen
a number of changes to the make-up of the
Board. The Audit Committee has been planning
to implement the changes to the audit, risk
and internal control provisions in the recently
published 2024 UK Corporate Governance
Code, as well as the proposed changes in the
non-financial reporting and audit environment.
A fuller summary of the Board’s activity during
the year can be found on page 87, and further
information about the Group’s stakeholder
engagement can be found on page 65.
I have already covered a number of areas in the
Group Chair Statement earlier in this Report, so
rather than repeat those comments, I set out
below a few further additions.
QinetiQ Group plc | Annual Report & Accounts 2024 73
Corporate governance
Board succession and evaluation
of the Board’s performance
I have already set out in the Group Chair
Statement, earlier in the Report, the changes
that are being made to the composition of
the Board and I will say more about this in the
Nominations Committee Report.
Central to setting the correct tone is the review
of the Board’s own performance. Following
on from the external assessment carried out
in FY22 and FY23 by Tom Bonham-Carter of
The Effective Board LLP, an internal review was
conducted in FY24 to assess how the Company
is progressing against the last two years’
recommendations. Please see pages 97 to 98
for details of the outcome of the review.
Remuneration
During the year, the Board’s Remuneration
Committee has focused on ensuring that the
Remuneration Policy approved at the 2023
AGM is operating as intended, to reward, retain
and incentivise appropriately the Executive
Directors who are driving the Company’s
success. It has done so by seeking to ensure
that the Company’s remuneration schemes and
their outcomes for Executive Directors continue
to be transparent, aligned with the Company’s
strategy and also aligned with the interests of,
our shareholders and the returns we deliver
to them.
The Company has also continued to enhance
the reward schemes for its people, aimed
at supporting them with the continued high
cost-of-living in a number of its home countries,
including additional support through a hardship
fund available to those who have been
most affected.
Application of the provisions of the
2018 UK Corporate Governance Code
(the “Code”)
In respect of the year ended 31 March 2024,
the Company was subject to the Code. The
Board confirms that it applied the principles
and complied with the provisions of the Code
throughout the year, with the exception of
Provision 4. At the AGM in July 2023, the
Chair received more than 20% of votes cast
against his reappointment as a Director of the
Company. Provision 4 of the Code requires
the Company to publish an update on the
views received from shareholders and actions
taken, no later than six months after the
shareholder meeting. The Company released an
announcement on 14 May 2024 giving further
details in this regard. The reason for delay after
20 January 2024 until 14 May 2024 was to
enable the Company to make a full response to
the issues raised. Further details can be found
on page 90.
Further information on compliance with the
Code can be found on page 74.
Annual General Meeting
We are delighted this year to again welcome
shareholders to our AGM. The AGM will be
held at 11:00 on Thursday 18 July 2024 at the
office of Ashurst LLP, London Fruit and Wool
Exchange, Duval Square, London E1 6PW.
Further details will be provided in our Notice
of AGM and on our website
www.QinetiQ.com.
Neil Johnson
Non-executive Group Chair
QinetiQ Group plc | Annual Report & Accounts 202474
Board leadership and Company purpose
Governance framework
and Board at a glance
FY24 Board gender diversity
FY24 Board independence
FY24 Board Ethnicity
44%
Female
7
Independent Non-executive Directors
2
Executive Directors
56%
Male
78%
Independent
89%
White
11%
Ethnic Minority
Non-executive Director tenure
Name Tenure (as at 22 May 2024). Average 3.3 years
Neil Johnson (Chair)
5
Shonaid Jemmett-Page
4
Dina Knight
0
Ross McEwan
0
Gordon Messenger
3
Steve Mogford
1
Susan Searle
10
Board leadership and Company
purpose
Provides an overview of the activities
undertaken by the Board in the year, how
the Board has considered its section 172(1)
responsibilities and its governance framework.
– Section 172(1) statement pages 65 to 67.
– Board of Directors pages 78 to 80.
– Company purpose page 76.
– Social pages 48 to 53.
– Stakeholder engagement pages 65 to 67.
– Employee engagement page 89.
Division of responsibilities
– Governance structure page 81.
– Division of responsibilities page 82.
– Board of Directors pages 78 to 80.
– Time commitment page 83.
– Board and Committee processes pages 83
to 84.
Composition, succession and
evaluation
– Nominations Committee report pages 92
to 99.
– Board of Directors pages 78 to 80.
– Director effectiveness pages 97 to 98.
Audit, risk and internal control
– Audit Committee report pages 100 to 105.
– Risk & Security Committee report pages
106 to 109.
Remuneration
– Directors’ Remuneration Committee report
pages 110 to 129.
The Board is accountable to shareholders
for its standards of governance and as a UK-
listed company our governance is based on
applying the principles and provisions of the
UK Corporate Governance Code.
The UK Corporate Governance Code is
publicly available at www.frc.org.uk.
Further information on compliance with
the Code can be found as follows:
QinetiQ Group plc | Annual Report & Accounts 2024 75
Corporate governance
41–50
0 1 2 3 4 5 6 7 8 9
51–60
61–70
71–80
11%
22%
56%
11%
Women
Men
27%
73%
Direct reports to the QLT:
Gender balance
Board members: Age
44%
56%
Board members: Gender balance
Women
Men
Women
Men
40%
60%
QinetiQ Leadership Team:
Gender balance
Skills and experience
The chart below demonstrates the skills and experience of the Board members:
R&D/Technology
Cyber security
Remuneration
Defence
M&A
Strategy
Emerging markets
Aerospace and aviation
Transformation
Finance and financial reporting
International business
Government services
QinetiQ Group plc | Annual Report & Accounts 202476
Board leadership and Company purpose continued
The significance of our purpose,
values and strategy
We deliver safely, responsibly and sustainably for the benefit of all our stakeholders
Our purpose
Protecting lives by serving the national security interests of our customers
Our vision
The chosen partner around the world for mission-critical solutions, innovating for our customers’ advantage
Driven by mission-led innovation
Applying our unique technical expertise across the product lifecycle, helping our customers to create,
test and use defence and security capabilities as needed to meet their mission requirements
Creating a safe and secure environment for us all to thrive
Through our core values of Integrity, Collaboration and a High-Performance Culture,
and our Company behaviours of Listening, Focusing and Keeping Our Promises
Delivered through a customer-focused growth strategy
Global leverage – Building an integrated global defence and security company to leverage our unique technical capabilities
Distinctive offerings – Co-creating high-value differentiated solutions for our customers in experimentation,
test, training, information, engineering, disruptive innovation and autonomous systems
Collaboration
The chosen partner for customers and
industry colleagues, we are a diverse and
inclusive community with a common purpose;
every contribution is valued. Delivering value
through partnership and teamwork, we actively
collaborate with our colleagues, customers and
industry partners to bring together the best
thinking, the smartest talent, breadth and depth
in capability to our work, driving ambition. We
know that working together is the best way to
meet our stakeholders’ needs.
Integrity
Trusted to do the right thing at all times, we
take pride in our decisions, and work to create
a sustainable and responsible business. We are
responsible and accountable for all our actions.
We take personal responsibility to do the right
thing, demonstrating this individually and as
an organisation in our decisions, behaviour
and day-to-day actions. We actively support
each other to meet the highest ethical and
professional standards.
Performance
Customer-focused and highly responsive,
providing operational excellence and assuring
safe and secure delivery. Our performance is
measured by how we deliver for our customers;
meeting their needs through flawless execution
and delivery of the mission-critical solutions
on which they depend. This includes being
accountable for getting things right the first
time, safely, securely and in a cost-effective
way. Taking an innovative and responsive
approach to creating an outstanding customer
experience, we try to go the extra mile and act
with courage.
Our Values
QinetiQ Group plc | Annual Report & Accounts 2024 77
Corporate governance
The Board has supported the review and further
refinement of the Company’s purpose, to
ensure it continues to capture the Board’s view
of the Company, its evolving global strategy and
its role in society. Our purpose communicates
the Group’s strategic direction and intentions
to customers, employees, partners, investors,
the local communities we work in and its
wider stakeholders. Our values make clear
our priorities and form the foundations of the
Company’s culture.
While the Recognition Gala and Thank Q
programmes raise awareness of, and recognise
and reward, the behaviours that demonstrate
our values, there are many other actions which
contribute to the creation of a healthy corporate
culture. These include:
– Our corporate policies, reviewed and
approved by the Board, which set a clear
expectation, and mandate, for every member
of the workforce to perform the Company’s
business with integrity and in accordance
with applicable laws, including anti-bribery
and corruption, anti-slavery and human
trafficking, data protection and ‘Speak Up’
policies and procedures.
– Fair and transparent employee policies and
practices which ensure that employees’
rights are respected in accordance with
applicable laws and employment contracts,
together with a number of programmes
and initiatives which support the health and
wellbeing of our people, develop talent and
promote diversity.
– Supplier protocols and procedures which
seek to ensure that our key suppliers
operate their businesses and respect their
employees’ rights in the same way that
we do.
– The application and monthly assessment
by business and functional executive
teams and the QinetiQ Leadership Team
of safety and operational KPIs to enable
management to monitor and drive continuous
improvements in safety, reliability and
efficiency of our services.
– Implement the work of Group support
functions to advise on the Group’s policies,
procedures and standards at every level
and location of the business around the
world, including dedicated safety and
operational excellence teams, finance, legal
and governance teams, procurement, the
People function, and the Group internal
audit function.
In addition, we as a Board use a number of
other methods to understand and monitor the
Company’s culture and assess whether our
people reflect our values. These include:
– Reviews, in the Boardroom, of the outcomes
of the Company’s staff Peakon surveys,
customer satisfaction scores and updates on
confidential reporting ‘Speak Up’. These give
us insights into what the Company does well
and what could be improved, as well as any
particular areas of concern.
– The employee interaction with the Global
Employee Voice (GEV), discussing the issues
which matter most to our people
– Directors’ attendance at Company events,
such as the bi-annual virtual Global
Employee Roadshows.
Through feedback from all of these monitoring
activities, the Board is satisfied that the
Company’s culture is aligned with our values.
Where the Peakon surveys, workforce
engagement events or other interactions
between Directors and employees and other
stakeholders, have revealed matters that can be
improved upon or have flagged concerns, the
Board has discussed these and assured itself
that management is putting action plans in
place that are designed to drive improvements
or address those concerns.
Safety culture
QinetiQ’s Health and Safety strategy sets
the direction for how we look after ourselves,
each other and our partners. Our Safety
culture journey, is constantly progressing and
adapting. The Safety Improvement Programme,
established by the Board and led by the QLT
is driving a step-change in our safety culture.
More information on the SIP can be found on
page 48.
Stakeholder engagement
Engagement and collaboration through our
value chain is essential. Partnering with our
stakeholders, understanding their challenges
and managing risks, we can find solutions to
enable shared success, sustain our business
and benefit all our stakeholders. We have
aligned our strategic priorities with the
requirements and needs of our stakeholders
to enable delivery of profitable, sustainable
value. The Board recognises that it has a duty
to act in the best interests of the Company
for the benefit of its shareholders, as well as
considering other stakeholder interests.
In its decision-making, the Board considers
all relevant factors, including:
– How the decision would align with the
Group’s over-reaching purpose
– The likely short-, medium- and long-term
consequences of the decision
– The value created for our investors
– The enhancement of our performance
created by the decision
– The potential impacts on our people, local
communities and environment of making
the decision
– The need to create strong,
mutually-beneficial customer
and supplier relationships
– The Group’s commitment to
business ethics
The section 172(1) statement on pages
65 to 67 explains how the Directors have
had regard to the matters set out in section
172(1)(a) to (f) of the Companies Act
2006, when performing their duty under
section 172. The Board aims to promote
the success of the Company for the benefit
of its shareholders as a whole, taking into
account the long-term consequences of its
decisions while giving due consideration to
the interests of the Company’s stakeholders
(including employees, customers, suppliers,
shareholders, as well as the environment and
local communities which are impacted by
our operations), while also considering the
importance of maintaining our reputation
for high standards of business conduct.
Examples of what that has looked like in
practice over the past year can be found
as follows:
Shareholders pages 65 to 67 & 90
Employees page 89
Customers/suppliers page 6
Environment pages 36 to 47
Social pages 48 to 53
Further information about how the Directors
have accounted for stakeholders in their
decision-making is set out on pages 85 to 86.
QinetiQ Group plc | Annual Report & Accounts 202478
Board leadership and Company purpose continued
Experienced and strategically focused
Neil Johnson
Group Chair
Steve Wadey
Group Chief Executive Officer
Steve Mogford
Senior Independent
Non-executive Director
Committees
N R RS
Committees
RS
Committees
A N R RS
Nationality
British
Nationality
British
Nationality
British
Appointed
April 2019
Appointed
April 2015
Appointed
August 2022
Skills, competence and experience Skills, competence and experience
Skills, competence and experience
Neil’s former CEO experience and current
roles as a plc Group Chair and Non-executive
Director brings to the Board relevant
knowledge, challenge and leadership.
Starting his career at Sandhurst and the
army, Neil spent much of his early career in
the automotive and engineering industries.
He was worldwide Sales and Marketing
Director at Jaguar before being seconded
to the UK Ministry of Defence to command
4th Battalion The Royal Green Jackets.
He returned to the industry with British
Aerospace, initially running Land Rover
and then all of its European automotive
operations. Neil was later CEO of the RAC,
and former Director General of the EEF
and a Home Office appointed Independent
Member of the Metropolitan Police Authority.
He was previously Chair of Motability
Operations Group Plc, Synthomer Plc and
Electra Private Equity Plc.
Steve’s proven track record of driving growth,
and his in-depth experience of defence and
technology industries is of essential importance
and benefit to the Board.
Steve is a Fellow of the Institution of
Engineering and Technology, the Royal
Aeronautical Society, and the Royal Academy of
Engineering. He was previously a member of the
Prime Minister’s Business Advisory Group, Co-
Chair of the National Defence Industries Council
Research and Development Group, and a Non-
executive Director of the UK MOD Research and
Development Board. He has held various roles
with MBDA, including as Managing Director,
MBDA UK. Previously he held various roles with
Matra BAe Dynamics and British Aerospace. He
was also Chair of the Defence Industry Liaison
Board of the UK Department for International
Trade, Defence and Security Exports.
Steve has vast experience in both executive and
non-executive roles across a range of sectors.
In particular, his long and comprehensive
international defence and security sector
experience equip him to further develop the
skill sets of our Board. Steve has a first class
honours degree in astrophysics, maths and
physics from London University.
Formerly the CEO of United Utilities Group
PLC, Steve started his career at British
Aerospace. During his long career with them,
he held a number of senior positions before
being appointed COO and a member of the
BAE Systems plc Board. Steve then joined
Finmeccanica as Chief Executive of SELEX
Galileo. He also served on the Board of G4S
plc as Senior independent Director up to its
acquisition in 2021.
Other appointments Other appointments Other appointments
Chair of Dialight plc, Trustee and Council
Member - National Army Museum.
Co-Chair of UK Defence Growth Partnership
and Climate Change and Sustainability steering
group with UK MOD.
Independent Non-executive Director of Costain
Group PLC.
QinetiQ Group plc | Annual Report & Accounts 2024 79
Corporate governance
Shonaid Jemmett-Page
Independent
Non-executive Director
Dina Knight
Independent
Non-executive Director
Ross McEwan
Independent
Non-executive Director
Committees
A N R RS
Committees
A N R RS
Committees
A N R RS
Nationality
British
Nationality
British
Nationality
New Zealand
Appointed
May 2020
Appointed
March 2024
Appointed
March 2024
Skills, competence and experience
Skills, competence and experience
Skills, competence and experience
Shonaid has widespread experience as an
Executive and Non-executive Director spanning
a variety of sectors, including industrial and
technology-based businesses with international
operations. This, combined with her extensive
financial experience, is invaluable in her role
as Chair of the Audit Committee. Shonaid is a
Fellow of the ICAEW.
Previously she was the Chief Operating Officer
of CDC Group plc, the UK Government’s
development finance institution, having joined
from Unilever, where she was Senior Vice-
President Finance and Information, Home and
Personal Care, originally in Asia and later for the
Group as a whole. Her early career was spent
at KPMG, latterly as a partner. Her Board-level
experience includes Non-executive Chair of
Greencoat Wind plc, MSAmlin plc and Non-
executive Director at GKN plc.
Dina has over thirty years’ HR experience gained
across private and PLC business environments.
She is highly experienced in working across
international workforces, building strong teams
to deliver change and drive results, whilst
ensuring that the workforce and business’s well-
being remain a top priority. Dina read Business
Studies and gained a Post Graduate Diploma in
Personnel Management from Teeside University.
Dina is Chief People Officer of global technology
provider Datatec Group and Logicalis
International, accountable for its people
operations and strategy. Previously she was
Global HR Director at Truphone, responsible for
driving a collaborative and innovation-centred
culture. She has also held positions as Group
HR Director for Teledyne e2v and Northgate
Information Solutions.
Ross has more than thirty years’ experience
in the finance, insurance and investment
industries, and brings a strong focus on
customers, business performance, capital
management, technology transformation,
risk management, and people and culture.
He holds a Bachelor of Business Studies
from Massey University, New Zealand.
Ross has been Chief Executive Officer and
Managing Director of National Australia
Bank Limited since December 2019. He
was previously Group CEO of Royal Bank
of Scotland. He also held the positions of
Group Executive for Retail Banking Services
and Executive General Manager at the
Commonwealth Bank of Australia, as well
as Managing Director of First NZ Capital
Securities and Chief Executive Officer of
National Mutual Life Association of Australia
Limited/AXA New Zealand Limited.
Other appointments
Other appointments
Other appointments
Non-executive Chair of Cordiant Digital
Infrastructure Limited and ClearBank Limited
and Non-executive Director of Aviva plc.
Chief People Officer of Datatec Group.
Chief Executive Officer and Managing Director
of National Australia Bank Limited (until
1 July 2024) and Non-executive Director of
BHP Group Limited.
Committee membership key
A
Audit
N
Nominations
R
Remuneration
RS
Risk & Security
Committee Chair
QinetiQ Group plc | Annual Report & Accounts 202480
Board leadership and Company purpose continued
General Sir
Gordon Messenger
Independent Non-executive
Director
Susan Searle
Independent
Non-executive Director
James Field
Company Secretary
and Group Director Legal
Committees
A N R RS
Committees
A N R RS
Committees
Nationality
British
Nationality
British
Nationality
British
Appointed
October 2020
Appointed
March 2014
Appointed
July 2022
Skills, competence and experience
Skills, competence and experience Skills, competence and experience
Gordon brings considerable experience
from the armed forces having served for
37 years as a Royal Marine. Throughout his
military career he served in key appointments
in various UK and NATO headquarters,
overseeing the planning and execution of
UK and coalition military and humanitarian
relief operations worldwide. He most recently
served as Vice Chief of the Defence Staff,
a position he held for three years until his
retirement in 2019.
Gordon’s unique experience enables him to
provide invaluable insight in his role as the
Chair of the Risk & Security Committee.
Susan brings to the Board essential experience
of investing in growing technology businesses,
acquisitions and exploitation of new technologies.
Her extensive experience as a plc Remuneration
Committee Chair enables her to efficiently
and valuably chair the QinetiQ Remuneration
Committee.
Susan was a founder of Touchstone Innovations
plc, and formerly its CEO. She has served
on a variety of private company boards in
engineering, healthcare and advanced materials,
and held a variety of commercial and business
development roles with Shell Chemicals, the
Bank of Nova Scotia, Montech (Australia),
and Signet Group plc. Previously she was the
Senior Independent Director and Remuneration
Committee Chair of Horizon Discovery Group plc
and Benchmark Holdings PLC, as well as Chair
of Mercia Asset Management plc and Schroder
UK Public Private Trust plc.
James joined QinetiQ as an in-house lawyer in
2004, progressing through various roles to Head
of the Group Legal and Intellectual Property
team, before becoming Group Director Legal
and Company Secretary. Prior to QinetiQ, James
worked as in-house Legal Counsel at Transport
for London, and has a background in London-
based private legal practice.
Other appointments
Other appointments Other appointments
A Board member of the UK Health Security
Agency, a member of the Advisory Board
of C3.ai Inc., Senior Independent Advisor
to BUPA, Trustee of Historic Royal Palaces,
Trustee of the Kings Foundation, and
serves as Constable of His Majesty’s
Tower of London.
Non-executive Director and Chair of the
Sustainability Committee of Gooch &
Housego PLC, Chair of Greenback Recycling
Technologies Ltd and Non-executive Director
of Bibby Line Group.
N/A
Committee membership key
A
Audit
N
Nominations
R
Remuneration
RS
Risk & Security
Committee Chair
Carol Borg was Group Chief Financial Officer during all of FY24 and stepped down from the Board on 16 April 2024. Larry Prior was a Non-executive
Director until he stepped down from the Board on 16 March 2024. More details can be found on page 3.
QinetiQ Group plc | Annual Report & Accounts 2024 81
Corporate governance
This is the structure through which the Company is managed. It has evolved over time, and continues to evolve to meet the needs of the business and
the Company’s stakeholders. Boards of large companies invariably delegate day-to-day management and decision-making to Executive Management.
Directors should maintain oversight of a company’s performance and ensure that management is acting in accordance with the strategy and its
delegated authorities. At QinetiQ, the culture, values and standards that underpin this delegation help to ensure that when decisions are made, their wider
impact has been considered. The Board has reserved certain matters (posted at www.QinetiQ.com) for its own consideration so that it can exercise
judgement directly when making major decisions, and in doing so, promoting the success of the Company.
Governance structure
Audit Committee
Reviews and monitors
the Group’s financial and
non-financial accounting
and reporting processes
and the integrity of
published financial
statements. Reviews
the Group’s system of
internal control, including
the effectiveness of its
internal audit function
and the independence
and effectiveness of its
external auditors.
See pages 100 to 105
for Committee Report
Nominations
Committee
Considers the structure,
size and composition
of the Board and
Committees, and
succession planning.
It identifies and
proposes individuals to
be Directors and also for
Executive Management,
and establishes
the criteria for any
new positions.
See pages 92 to 99 for
Committee Report
Remuneration
Committee
Determines and
recommends to the
Board the framework
for the remuneration of
the Group Chair, Group
CEO, Group CFO and
QLT. Oversees workforce
remuneration and
workforce policy.
See pages 110 to 129
for Committee Report
Risk & Security
Committee
Provides scrutiny
and assurance to the
Board, that the required
standards of risk
management, security,
health, safety and
environment within the
UK, and internationally,
are achieved.
See pages 106 to 109
for Committee Report
Disclosure
Committee
Considers and acts
on the need for
disclosures to be made
to the market under
the requirements of
the Market Abuse
Regulations. The
Committee comprises
all Board members,
except for when called
at short notice, when
it comprises the Group
Chair, the Group CEO, the
Group CFO and any one
of the Committee Chairs.
Shareholders
Group Chair
Board of Directors
Committees
Responsible for the leadership of the Board and for ensuring that it operates effectively through dynamic discussions and challenge.
The Board is responsible for leading the Group, by setting strategic priorities and overseeing the delivery of the
strategy in a way that promotes sustainable long-term growth, while cultivating a balanced approach to risk
within a framework of effective controls and taking into account the interests of a diverse range of stakeholders.
Group Chief Executive Officer
QinetiQ Leadership Team (QLT)
Responsible for the day-to-day running of the Group’s business and performance, and the development and implementation of the Group strategy.
The interaction between the Board and the QLT enables the Board to receive information first-hand about the Company and its operations and to give guidance
on strategy and oversight of the business directly to senior management. The QLT meets twice a month. It is responsible for the day-to-day management of
the Group’s activity. The focus of the QLT includes managing the operational performance of the business, delivering the strategy, managing risk, managing
regulatory compliance, establishing financial and operational targets and monitoring performance against those targets.
QinetiQ Group plc | Annual Report & Accounts 202482
Division of responsibilities
Role of the Board
Underpinned by good corporate governance, the Board is focused on
delivering an effective and entrepreneurial Board which:
– Provides challenge, advice and support to management
– Drives informed, collaborative and accountable decision-making
– Creates long-term sustainable success and value for our shareholders,
having regard to the interests of all our stakeholders
Group Chair
Neil Johnson
– Provides overall leadership and ensures effectiveness of
the Board
– Sets the agenda, character and tone of the Board meetings
and discussions
– Maintains an effective working relationship with the
Group CEO
– Leads the annual performance evaluation of the Board, its
Committees and ensures that each Non-executive Director
makes an effective contribution
Group CEO
Steve Wadey
– Develops the Group’s strategy for consideration and approval
by the Board and provides effective leadership of the QinetiQ
Leadership Team in its delivery of strategy
– Develops the Group’s business model and manages the
Group’s operations
– Overseas the development and implementation by the QinetiQ
Leadership Team’s corporate, safety and environmental
policies and standards
– Establishes and services relationships with key stakeholders
– Reinforces the Group’s values and sets expected
employee behaviours
– Communicates (alongside the Group CFO) the Group’s
financial performance and strategic progress to investors
and analysts
– Ensures the Board is kept fully appraised of the Group’s
operational and safety performance, risks and opportunities
Group CFO
Heather Cashin
(Interim)
– Responsible for the financial stewardship of the Group’s
resources through appropriate accounting, financial and other
internal controls
– Directs and manages the Group’s finance, tax, treasury,
risk management, ESG, legal and governance and
insurance functions
– Communicates (alongside the Group CEO) the Group’s
financial performance and strategic progress to investors
and analysts
Senior Independent
Non-executive
Director
Steve Mogford
– Acts as sounding board for the Group Chair and a trusted
intermediary for the other Directors
– Available to shareholders to discuss any concerns that
cannot be resolved through the normal Group Chair or
Group CEO channels
– Leads the Board in the annual performance evaluation of the
Group Chair and in developing the long-term plans for the
Group Chair’s succession
– Meets with the Non-executive Directors without the Group
Chair present at least annually, and as required, to discuss
Board matters
Independent
Non-executive
Directors
Shonaid Jemmett-
Page, Dina Knight,
Ross McEwan,
General Sir Gordon
Messenger,
Steve Mogford,
Susan Searle
– Monitor and scrutinise the Group’s performance against its
strategic goals and financial plans
– Provide an objective perspective on the Board’s deliberations
and decision-making, drawing on their own broad collective
experience and individual expertise and insights
– Monitor and assess the Group’s culture, use appropriate and
effective means to engage with employees and acquire an
understanding of other stakeholders’ views
– Assess the effectiveness of, provide support to, and
constructively challenge, the Executive Directors
– Play a lead role in the functioning of the Board’s Committees
Company
Secretary
James Field
– Provides advice and support to the Board, its Committees,
the Group Chair and other Directors individually as required,
primarily in relation to corporate governance matters, and
Non-executive Directors’ training and development needs
– Responsible, with the Group and Committee Chairs, for setting
the agenda for Board and Committee meetings and for high-
quality and timely information and communication between
the Board and its Committees, and between the Directors and
senior management as required
– Ensures that Board and Committee procedures are
complied with
Board leadership and Company purpose continued
Roles and responsibilities
The Board has agreed a clear division of responsibilities between the
Group Chair and the Group CEO. Other Directors and the Company
Secretary’s roles are also clearly defined to assist in enhancing the
effectiveness of the Board. A summary is set out below:
QinetiQ Group plc | Annual Report & Accounts 2024 83
Corporate governance
Composition, succession and evaluation
Composition of the Board
The Board considers that its composition
reflects the requisite balance of skills,
experience, challenge and judgement
appropriate for the requirements of the
business and full Board effectiveness. The
skills and experience of the Board’s individual
members, particularly in the areas of UK
defence and security, the commercialisation
of innovative technologies, corporate finance
and governance, international markets and
risk management, have brought both support
and challenge to the Group CEO, Group CFO
and the QinetiQ Leadership Team during
the year.
Independence
A majority of the Board is comprised of
independent Non-executive Directors. The
independence of the Non-executive Directors
is considered annually by the Nominations
Committee, using the independence criteria
set out in Provision 10 of the UK Corporate
Governance Code. The Group Chair was
independent upon his appointment in
April 2019 and continues to use objective
judgement in his leadership of the Board.
As part of this process, the Board keeps under
review the length of tenure of all Directors, as
this is a factor when assessing independence.
The independence of Susan Searle, who has
served on the Board for more than nine years,
was again subject to a rigorous review by
the Nominations Committee in March 2024.
When making this assessment for Susan
(who has served on the Board since March
2014), the Nominations Committee based
its decision on the fact that Susan continues
to demonstrate integrity and independence
in her advice and challenge. Susan was not
in attendance during the review and the
Nominations Committee remains satisfied
that the length of her tenure has not impacted
on her level of independence or contributions.
Time commitment
Each Non-executive Director must be able
to devote sufficient time to their role as a
member of the Board to discharge their
responsibilities effectively. As part of the
appointment process, consideration is given
to assess Non-executive Directors’ ability
to devote time to an additional directorship.
Prior to undertaking an additional external
role or appointment, the Non-executive
Directors are asked to confirm that they will
continue to have sufficient time to fulfil their
commitments to the Company. This means
not only attending and preparing for formal
Board and Committee meetings, but also
making time to understand the business of
the Company. The Non-executive Directors’
commitment is reviewed as part of the Board
and Director evaluation process.
The Group Chair is conscious that some
shareholders have concerns regarding
Directors taking on too many non-executive
roles. Consequently, he has assessed the
ability to meet the commitments required by
QinetiQ for those members of the Board who
hold more than one other Board position, and
he is satisfied that all Board members are able
to meet the Company’s time commitment. In
addition to their work on the QinetiQ Board and
its Committees, the members of the Board also
regularly make themselves available for Board
calls, sub-Committee meetings and Executive
leadership events and engagement with
employees at the Company’s global facilities.
Shonaid Jemmett-Page holds appointments
in three other companies, Aviva plc, Cordiant
Digital Infrastructure Limited and ClearBank
Limited. She is the Chair of Cordiant Digital
Infrastructure Limited, which is an investment
trust listed on the Special Funds Segment
of the FTSE, rather than a full operating
company. Therefore, by its nature, the
time requirements for this role are not as
significant as at a FTSE 250 operating
company such as QinetiQ. The Group Chair
has reviewed Shonaid’s current commitments
and contribution to the QinetiQ Board, and
he confirms that during the year she has
provided significant input and advice at
QinetiQ’s Board and Committee meetings, in
particular in her role as the Audit Committee
Chair. He is therefore confident and satisfied
that Shonaid has the time and availability to
commit fully to her role on the QinetiQ Board.
Board and Committee processes
The Board has a formal schedule of matters
reserved for its approval, which includes (but is
not limited to): strategy; risk appetite and review
of Group-wide principal and emerging risks;
major M&A, contracts and bids; share capital,
debt financing and other liquidity matters;
financial results and budgets; key policies; Board
and Committee membership; and governance.
Other matters, responsibilities and authorities
have been delegated by the Board to its
standing Committees, comprising Nominations,
Audit, Risk & Security, Remuneration and
Disclosure. Any matters outside of the schedule
and the responsibility of the Committees fall
within the authority of the Group CEO and/or
Group CFO. The schedule of matters reserved
for the Board and the terms of reference of
each Committee, which are regularly reviewed
and approved by the Board, can be found on the
Company’s website at www.QinetiQ.com.
The Group Chair and the Company Secretary
are responsible, in consultation with the Group
CEO and the Chairs of the Committees, for
maintaining a scheduled 12-month programme
of business for the Board and its Committees,
with flexibility for additional business to be
discussed as required. The programme ensures
that all necessary matters are covered and
appropriate time is given for discussion and,
if thought fit, approval of relevant business.
At each scheduled Board meeting, the Board
rigorously reviews updates from the Executive
Directors on Group and operational sector
safety, operating and financial performance,
investor relations, and from the Group
Director Legal & Company Secretary on legal
compliance and corporate governance. Other
regular Board agenda items include strategic
proposals (including those relating to M&A,
major contract bids and capital allocation),
transformation and digital programme, risk
management (including reviews of risk appetite
and Group-level risks), tax and treasury updates,
pension updates, people updates (including
on employee relations, talent development
and diversity promotion), and stakeholder
engagement. Senior management and external
advisers regularly attend both Board and
Committee meetings, which allows for detailed
and informed discussions on specific matters
on which their input or advice is needed.
The Board also seeks to hear external
viewpoints inside and outside the Boardroom,
including from customers, suppliers and experts
in areas relevant to the Company’s strategy.
QinetiQ Group plc | Annual Report & Accounts 202484
Composition, succession and evaluation continued
In advance of each Board and Committee
meeting, Directors receive, via a secure web
portal, high-quality briefings, prepared by the
Executive Directors, senior management, the
Company Secretary and/or external advisers
where appropriate, on the agenda items to be
discussed. The secure web portal also gives
Directors immediate access to a range of
other resources, including previous meeting
papers, minutes, financial reports, business
presentations, investor reports, Company
policies and governance guidelines, and details
of Board and Committee procedures. If a
Director is unable to attend a meeting due to
illness or exceptional circumstances, they will
still receive all supporting papers in advance of
the meeting and are directed to discuss with,
and provide input, opinion and any instructions
to, the Group Chair or relevant Committee
Chair on the business to be considered at
that meeting.
The Board has access to the Company
Secretary for support and advice as required,
and the Company operates a policy which
allows Directors to obtain, at the Company’s
expense, independent professional advice
where required to enable them to fulfil their
duties effectively. In addition to Board and
Committee meetings, the Non-executive
Directors hold private meetings without the
Executive Directors present, including to discuss
Executive Director performance. There are
also opportunities during the year for Directors
to have informal discussions outside the
Boardroom, either between themselves or with
senior management or external advisers.
Conflict of interest
The Board operates a policy to identify and
manage situations declared by the Directors
(in accordance with their legal duty to do so)
in which they or their connected persons have,
or may have, an actual or potential conflict
of interest with the Company. In accordance
with the Companies Act 2006, and the Articles
of Association, the Board has the authority to
authorise conflicts of interest. This ensures
that the influence of third parties does not
compromise the independent judgement of
the Board. Directors are required to declare
any potential or actual conflicts of interest that
could interfere with their ability to act in the best
interest of the Group.
Board leadership and Company purpose continued
NED board attendance FY24
Board and Committee attendance – 1 April 2023 to 31 March 2024
Members Board
Audit
Committee
Nominations
Committee
Remuneration
Committee
Risk & Security
Committee
Carol Borg
5, 6
7/7 – – – 4/4
Michael Harper
3
2/2 1/1 0/0 2/2 2/2
Shonaid Jemmett-Page 7/7 4/4 2/2 4/4 4/4
Neil Johnson 7/7 – 2/2 4/4 4/4
Dina Knight
2
0/1 0/1 0/1 0/1 0/0
Ross McEwan
1
1/1 1/1 1/1 1/1 0/0
General Sir Gordon Messenger 7/7 4/4 2/2 4/4 4/4
Steve Mogford 7/7 4/4 2/2 4/4 4/4
Larry Prior
4
6/6 3/3 1/1 3/3 4/4
Susan Searle 7/ 7 4/4 2/2 4/4 4/4
Steve Wadey
6
7/7 – – – 4/4
1 Ross McEwan was appointed to the Board on 1 March 2024.
2 Dina Knight was appointed to the Board on 1 March 2024, but was unable to attend the Board meeting on 20 March 2024, and the Audit, Remuneration and Nominations Committee
meetings on 21 March 2024, due to a conflict with a prior commitment.
3 Michael Harper resigned from the Board on 20 July 2023.
4 Larry Prior resigned from the Board on 16 March 2024.
5 Carol Borg resigned from the Board on 16 April 2024.
6 In compliance with the UK Corporate Governance Code, and the Committee Terms of Reference, Steve Wadey is not, and Carol Borg was not a member of the Audit, Nominations, and
Remuneration Committees, and Neil Johnson is not a member of the Audit Committee.
The Company Secretary maintains a
conflicts register, which is a record of
actual and potential conflicts, together with
any Board authorisation of the conflict.
The authorisations are for an indefinite
period and are reviewed annually by the
Nominations Committee, which also
considers the effectiveness of the process
for authorising Directors’ conflicts of
interest. The Board reserves the right to
vary or terminate these authorisations at
any time. No Director conflict of interest
currently exists.
Board and Committee Meetings
During the year, the Board has seven
meetings, each scheduled over two days,
for Board and Committee business.
Additional Board sub-Committee meetings
and conference calls are held between the
scheduled meetings as required. The table
below sets out the Board and Committee
membership and attendance by members
at meetings held in FY24.
QinetiQ Group plc | Annual Report & Accounts 2024 85
Corporate governance
Board decision-making
In making decisions, the Board of Directors is cognisant of undertaking its legal duties, including its duty under section
172(1), in the way that is most likely to promote the success of the Company for the benefit of its members as a whole,
and the need to have regard to the factors set out therein; see pages 65 to 67 for more information.
Examples of some of the most important decisions taken by the Board during the year of reporting, and an explanation of which factors the Board
had regard to when reaching such decisions, are set out below.
1. Share Buy-back Programme
Background
In January 2024 the Company announced a 12-month, £100m share buyback programme.
Board
discussion
Prior to a decision being made in January 2024 to commence a buyback programme, the Board held a number of meetings
to consider and understand various factors which informed their decision: direct feedback from shareholders; advice from the
Company’s brokers; the views of its analysts; considering the application of the Company’s capital allocation policy, including return
of value to shareholders; and considering impact on the Company’s five-year strategy and planned investments.
Board
stakeholder
considerations
and impact
In arriving at its decision, the Board took account of the views of a number of its largest shareholders, through direct engagement at
investor roadshows and one-to-one meetings held by the Group Chair. The Board also considered the cost impact the buyback would
have on (i) its ability to invest in its facilities for the benefit of delivering to its customers; (ii) investment in operational improvements
to reduce its carbon footprint; and (iii) planned investments for the benefits of its employees.
Outcome and
next steps
The Board concluded that, based on and balancing the various considerations, a share buyback was in the best interests of its
investors, including delivering returns on investment in the short term, and could be undertaken at a level of £100m without materially
reducing the Company’s ability to make planned investments in the medium to long term for the benefit of its customer delivery,
employees and environmentally focused improvements to its operations.
2. Board succession planning
Background
FY24 saw a number of planned changes to the composition of the Board, driven by the implementation of succession planning aimed
at ensuring the skills and experience of the Board remained best aligned to the Company’s evolving global strategy and its geographic
focus areas, and provided appropriate diversity of experience, culture and thought.
Board
discussion
Succession planning during the year was supported by discussion at both Nominations Committee and at Board-level, which
included input from the CEO and various senior leaders on the strategic focus of the Company and its businesses, and the support
an input they would require from the Board, and advice from the Chief People Officer on people strategy and diversity plans within the
Company, both of which would need to be well aligned with Board skills, experience and culture.
Board
stakeholder
considerations
and impact
In setting its succession plans, the Board took consideration of the Company’s strategic focus on the AUKUS partnership to meet
the needs of its core US, UK and Australian government customers; its investors desire to see continued strong strategic input and
direction at Board level, with the right experience to guide the effective growth of the Company, both organically and inorganically;
and, from an employee perspective, the support needed for the continuing development of cultural diversity, especially in the areas of
gender and ethnicity.
Outcome and
next steps
During the year, as a result of its succession planning, the Board saw the planned retirement of Michael Harper, with Steve Mogford
taking on the role of Senior Independent Director. As well as the appointments of Ross McEwan and Dina Knight who respectively
bring additional experience of financial controls and intimate knowledge of the Australian market, and talent management, cultural
diversity and leadership in multi-national corporates.
QinetiQ Group plc | Annual Report & Accounts 202486
Board decision-making continued
3. Ten-year strategic outlook
Background
Conscious of a dynamic and fast-changing geopolitical environment and rapid advances in disruptive technology enablers, such as
artificial intelligence, the Board perceived the need to enhance the Company’s Integrated Strategic Business Plan (ISBP) process to
ensure a longer-term lens was applied to the Company’s strategic plans.
Board
discussion
Board considerations included the time horizon for strategic planning; the need for a variety of external views points across industry,
political, customer and academic perspectives to fully inform planning; and inputs and information required from the Company’s
businesses to inform the strengths, weaknesses, opportunities and threat position of the organisation. Board discussion also focused
on how the individual Board members could most effectively bring their experience to bear on the long-term strategic decisions of the
Company, which required a more interactive engagement in the planning process.
Board
stakeholder
considerations
and impact
The Board brought to bear its experience of customer requirements and how those changed in a dynamic geopolitical environment,
including where global allies are operating on a war-footing, which would drive how the Company needed to plan and position itself
to respond to both changing customer needs and the changing nature of warfare. Thought was also given to potential impacts
on partnerships on the Company’s supply chain and how the Company would need to respond to those dynamics. Employee
perspectives included the future changing needs and expectations of employees, and impacts that would have on planning for talent
attraction and retention. From an investor perspective, thought was given to the Company’s ability to set strategy in a way which
enabled the rapid realisation of the benefits of critical technology enablers, such as artificial intelligence, in an ethically responsible
and organisationally secure way.
Outcome and
next steps
The FY24 ISBP process was initiated with a revamped approach to the Board Strategy meeting in October 2024, unpinned by a 10-
year strategic outlook, beyond the Company’s usual five-year ISBP process, and informed by external experts who provided longer
term perspectives across a combination of industry, politics, customer relationships and academia, and UK, US and Australian
geographical axes aligned to the Company’s core operational centres. Board members’ inputs were gained through interactive
scenario setting sessions, providing richer and deeper insights for the strategy planning process. The output of those sessions were
fed into the process for constructing the Company’s FY25 ISBP, which was further reviewed and refined through regular engagement
with the Board and its Committees at meetings between November and March 2024.
4. Board Diversity Policy update
Background
The Board considered updates to its Diversity and Inclusion policy to reflect the latest guidance in the UK Corporate Governance Code
and from the Parker Review.
Board
discussion
Board discussions centred on the current diversity culture of the Company and its plans for further development of its diversity and
inclusion programmes, taking advice and input from the Chief People Officer, to ensure its own diversity policies were reflective of the
Company’s position and plans, as well as latest corporate governance guidance.
Board
stakeholder
considerations
and impact
The Board was cognisant of its ESG commitments, in terms of social responsibility and from a governance perspective, in ensuring
that its own diversity and inclusion policies were reflective of the Company’s own cultural journey, including gender and ethnic
diversity; and ensured that the make-up of the Board included the necessary diversity of perspectives and experience needed to
recognise and promote opportunities for increased diversity within the Company. A key focus would be to create the diversity of
thinking and operating which would ultimately provide benefit to the Company’s customers and investors by ensuring that its
operations and strategic planning harnessed a broad range of experience, skills and perspectives.
Outcome and
next steps
The Board approved an updated version of its Diversity and Inclusion Policy, and committed to continue to review this through its
Nominations Committee on a regular basis.
Board leadership and Company purpose continued
QinetiQ Group plc | Annual Report & Accounts 2024 87
Corporate governance
The key business and activities of the Board during the year were as follows:
Board activity
Topic Key activities
Strategy and
operations
– Reviewed and considered the Company’s purpose, values and strategy.
See more on page 76
– Approved the FY25 component of the Group’s five-year Integrated
Strategic Business Plan (ISBP). See more on page 62
– Undertook in-depth reviews of business strategy and performance
– Undertook in-depth reviews of M&A pipeline and specific opportunities
– Reviewed and approved material bid, contract and M&A proposals,
divestments and assessed performance against these
– Received updates from each of the Group’s Sectors and Functions
on their performance vs strategy and budget, and their priorities
and initiatives
– Received reports and discussed the Group’s Transformation
strategy and investments
– Reviewed progress of the Group’s Digital & Data
improvement programme
– Monitored the economic, environmental, legislative and geopolitical
landscape, particularly as regards the political climate in Ukraine
and Gaza and regarding other global economic pressures
Financial
performance
– Approved the Company’s annual budget, business plan and KPIs,
and monitored performance against them. See more on page 32
– Reviewed and approved the Group’s full and half-year results
and interim trading updates
– Approved the full-year and half-year dividends
– Approved the Company’s Annual Report, including its fair,
balanced and understandable nature
– Reviewed and confirmed the Group’s viability statement and going
concern status
– Reviewed the Group’s capital, debt and other liquidity arrangements
– Approved the Group’s tax strategy and treasury policy
– Considered and approved expenditure and guarantees related
to material bids, acquisitions and contracts
Internal
control
and risk
management
– Reviewed and approved the Group’s risk appetite and reviewed the
Group’s principal and emerging risks, the processes for identifying
them, and actions to mitigate those
– Received reports from the Chair of the Risk & Security Committee
on its activities
– Received reports from the Chair of the Audit Committee on its activities
and assessments
– Reviewed and validated the effectiveness of the Group’s system
of internal control
– Reviewed the status of the Group’s internal Delegation
of Authority framework
– Reviewed and approved confidential reporting policy and process
– Regularly reviewed reports on confidential reporting made within the
Company (the process of which is described further on page 90)
Leadership,
people and
culture
– Received recommendations from the Nominations Committee on the
appointment of new Directors, the re-election of Directors and other
advice regarding the structure, size and composition of the Board
– Reviewed and actioned succession plans for the Board and senior
management, having regard to skills, experience and diversity
– Reviewed and approved amendments to the Board Diversity Policy
– Received reports from the Chair of the Remuneration Committee
on its activities, recommendations regarding remuneration strategy
and decisions regarding the Group Chair’s, Executive Directors’ and
senior management pay, and reviewed and approved Non-executive
Director fees
– Reviewed people reports, including updates on talent
development, retention and acquisition programmes and diversity
and inclusion programmes
Engagement,
environment
and
community
– Undertook an annual review of the Group’s stakeholders – who they
are, methods of engagement, outcomes and feedback. See more on
pages 65 to 67
– Reviewed feedback from investors and analysts and the output
of engagement with major shareholders and other stakeholders
– Reviewed workforce engagement activities and outcomes, including
the results of the Peakon surveys and received reports on the
Group Chair’s workforce engagement activities
– Reviewed regular reports on our approach to ESG issues - see more
on page 34
– Reviewed the activities of, and approved a financial commitment
to, the Company’s environmental programmes, Net-Zero plan and
charitable and community initiatives
– Reviewed the reasons for having received a more than 20% against
vote at AGM in respect of re-appointment of the Group Chair
Governance
and legal
– Approved the Group’s section 172(1) statement. See more on
pages 65 to 67
– Approved the Notice of the AGM
– Undertook an annual compliance review of the UK Corporate
Governance Code and DTR7
– Reviewed the results of the internal Board and Committee
effectiveness evaluations
– Reviewed and approved matters reserved for the Board and its
Committees’ terms of reference
– Reviewed and approved the Group’s annual Modern Slavery and
Human Trafficking statement, published on www.QinetiQ.com
QinetiQ Group plc | Annual Report & Accounts 202488
Board leadership and Company purpose continued
Management and control of US subsidiaries
QinetiQ’s US sector is comprised of QinetiQ
Inc and its subsidiary operating companies,
including Foster Miller Inc and the Avantus
Federal group. These companies operate
under a Special Security Agreement (SSA)
between QinetiQ and the US Defense
Counterintelligence & Security Agency (DCSA),
which governs how the rest of the QinetiQ
Group interfaces, collaborates and works with
the companies in the US sector. The controls
established by the SSA are required by the US
National Industry Security Program for cleared
facilities security, to appropriately mitigate
foreign ownership, control or influence to
the extent that it could adversely affect the
interests of US national security. QinetiQ
Group plc, QinetiQ Inc and the US Department
of Defense (DoD), represented by the DCSA,
are parties to the SSA, which establishes
procedures that regulate the management
and operation of our US sector, to achieve
that mitigation. Under the SSA, the Board of
Directors of QinetiQ Inc is comprised of three
types of Directors, all nominated by QinetiQ
Group plc, as the foreign owner of QinetiQ Inc.,
and approved by the DCSA. The three types of
Director appointments are Outside Directors,
Inside Directors and Officer Directors of
QinetiQ Inc.
The Inside Directors are the means by which
QinetiQ maintains appropriate visibility of the
management and operations of the Companies
in the US sector. These positions are held
by the Group CEO and Group CFO of QinetiQ
Group plc. The Inside Directors serve as a
minority representative of QinetiQ Group plc as
the foreign owner, to ensure there is no undue
control or influence on the actions of the US
sector. Inside Directors do not need to be US
citizens, and are excluded from access to US
classified and export-controlled information in
possession of QinetiQ Inc and its subsidiaries.
The Officer Directors are responsible for the
day-to-day operations of the US sector, and
serve as a liaison with the wider QinetiQ Group.
These positions are held by Shawn Purvis,
President and CEO of the US sector and
Andy Maner, who is a consultant to Shawn.
The Officer Directors must ensure that the
procedures and requirements of the SSA are
effectively implemented, and have an obligation
to maintain the security of classified and export-
controlled information entrusted to QinetiQ Inc
and its subsidiaries, as well its ability to perform
on classified contracts and participate in
classified programmes. They must be resident
US citizens who either have, or are eligible to
possess, personal US security clearance.
Outside Directors must be resident US
citizens who are objective individuals, who
have no prior relationship with QinetiQ, and
possess personal US security clearance.
Our appointed Outside Directors are John
Hillen, Chair of the QinetiQ Inc Board, Pamela
Drew and Tom Vecchiolla. The number of
Outside Directors must outnumber the Inside
Directors. The Outside Directors also form the
Government Security Committee, which is in
place to ensure US national security interests
are upheld.
QinetiQ Group plc | Annual Report & Accounts 2024 89
Corporate governance
Employee engagement
How we engage with our people
Dedicated Non-Executive Director
Neil Johnson is the dedicated Non-executive
Director for gathering the views of employees.
– At least two meetings with the Global
Employee Voice (GEV) each year
– Attends the Global Recognition Gala and
also Global Employee Roadshows
– Reports back to the Board
Global Employee Voice (GEV)
The GEV is a global forum that acts as the
collective voice of all QinetiQ employees.
Elected employees from across QinetiQ sites
in all home countries represent the employees
to the leaders of the Company
– Regular contact with Neil Johnson
– Two meetings annually with Susan Searle,
the Chair of the Remuneration Committee
– Regular meetings with the Chief People
Officer, who reports to the Board on
culture, employee and people strategy,
and employee engagement
Global Employee Roadshows
Delivered bi-annually by the QinetiQ Leadership
Team, the Global Employee Roadshows give
an update on the progress we are making
against our vision and strategy, and provide
an understanding of our key priorities for
the future
– Employees have the opportunity to ask
questions, either in person or through a
number of online mediums
– Reported on to the Board by the CEO
Regular QinetiQ Leadership Community
(QLC) events – delivered by the QinetiQ
Leadership Team (QLT)
Providing updates to the direct reports of the
QLT on latest operational, financial, strategic,
and key stakeholder issues
– The members of the QLC feedback to their
teams by way of Q-Talks, team meetings and
regular one-to-one engagement
Monthly Q-Talks
Delivered by members of the QLC to their
teams, with the purpose of keeping employees
up-to-date with what is currently important
across QinetiQ
– A mechanism accessible for employees
to get a thorough understanding of what
is happening in the Company and also to
provide individual feedback
Peakon Employee Engagement surveys
Quarterly surveys enabling the Board and the
Leadership team to assess and understand issues
affecting employee engagement throughout the
Group See more on page 33
– After each survey, the Group Director
Employee Experience has a meeting with
the CEO where they discuss the results,
trends and any matters for concern
– The CEO feeds back to his fellow Board
members at each Board meeting
– QLC members interact directly with their
team to identify tangible actions in response
to feedback from each survey
Global Portal – our intranet
A platform where all employees can access our
polices and be kept fully informed of the latest
Group news through internal communications
and community groups
– Enables employees to ask questions
and discuss topics internally
Confidential Reporting
Our ‘Speak Up’ programme includes an
anonymous reporting line for employees to
raise any concerns with escalations to the
Board as necessary
– Issues raised reported to the Board at each
Board meeting
How does it work?
– By using a number of different employee
engagement mechanisms and accessibility
ensuring flexibility
– By having a direct link to the Board via the
designated Non-executive Director
– By way of a dedicated forum to relay the
voice of the employees
– By regularly reporting to the Board on culture,
people strategy and employee engagement
– By drawing on each individual Board
member’s accessibility and unique
experience as business leaders
We have experienced, diverse and dedicated
people who are recognised as key assets to our
business and who are critical to our success.
The Group has a long-standing
commitment to the importance and value
of employee engagement.
The Board recognises the value of engaging
directly with employees to ensure an
understanding of their views and inform its
decision-making in considering employee
interests. The Board typically holds a number
of its meetings at different Company sites and
undertakes site visits outside of scheduled
board meetings, both in the UK and other home
countries, to take the opportunity to meet with
employees in person.
The engagement channels set out below
describes how the Board continued to be able
to effectively gain the views of employees
throughout the year.
QinetiQ Group plc | Annual Report & Accounts 202490
Board leadership and Company purpose continued
Shareholder engagement timeline
Approach
The Board is committed to communicating
in an open and transparent manner with all
shareholders, and places a clear importance
on shareholder engagement. The Investor
Relations programme is managed by the
Investor Relations team, which provides
day-to-day contact with investors. This is
complemented by engagement with the CEO
and CFO, who regularly attend meetings with
institutional investors. In addition, the Group
Chair and other Non-executive Directors make
themselves available to discuss matters such
as governance, ESG factors, remuneration and
other relevant topics. The Board is also kept up
to date on shareholders’ views and concerns
through regular Board papers, presentations
and feedback from the Investor Relations team.
The AGM provides an opportunity for
shareholders to engage directly with the
Board and receive an update on business
performance. The Company’s results,
presentations and other investor events are also
webcast live, and made readily available on the
company’s website, enabling a wider audience
to access them.
Activities during the year
During FY24 the CEO, CFO and Investor
Relations team collectively met with over 30%
of the share register, and hosted a number of
meetings with non-shareholders. This contact
was conducted during routine roadshows after
results announcements, ad-hoc roadshows
and at various conferences. The Group’s
Chair, Neil Johnson, engaged with a number of
shareholders on governance-related matters
and the Chair of the Remuneration Committee,
Susan Searle, engaged with shareholders ahead
of the AGM on remuneration matters.
This year has seen increasing engagement,
particularly with investors in North America.
The Investor Relations team and Management
held a US Investor Conference and roadshow
in November; overall North American
institutional ownership of QinetiQ represents
24% of the share register as at 31 March 2024,
increasing from 22% last year, and 14% the
year before. We continue to be proactive in
investor engagement.
2023
2024
May
– Full-year results
announcement
– Analyst briefings
– Full-year results
investor roadshow
June
– Annual Report
published
July
– Governance
meetings ahead of
AGM
– Trading update and
analyst briefings
– AGM
– Farnborough
International Air
Show
October
– Q2 post-close
trading update
– New York Investor
seminar
– US Shareholder
meetings
November
– Interim results
announcement
– Analyst briefings
– Interim results
investor roadshow
December
– Shareholder
perception audit
January
– Q3 Trading update
– Analyst briefings
– Buyback
programme
announced
– Group Chair
meetings with
shareholders
February
– Approval of Buyback
at General Meeting
Shareholder engagement
Constructive use of the Annual General
Meeting (AGM)
The Notice of AGM and related papers will,
unless otherwise noted, be sent to shareholders
at least 20 working days before the meeting.
For those shareholders who have elected to
receive communications electronically, notice
is given of the availability of the documents
via www.QinetiQ.com. This year’s AGM will be
held at 11:00 on Thursday 18 July 2024 at the
offices of Ashurst LLP, London Fruit and Wool
Exchange, 1 Duval Square, London E1 6PW.
After receiving more than 20% votes against
the re-election of its Group Chair at the 2023
AGM, the Company engaged with a number
of shareholders to understand the reasons for
that. It related to concerns about the number
of external Board mandates held by the Group
Chair, and the Board composition not including
anyone from a minority ethnic background.
These concerns have been addressed through
the Group Chair having resigned as Chair of
Unbound Group plc in July 2023 as part of a
planned succession; and the Company having
made changes to its Board appointments which
promote its objective to achieve and maintain
targets on gender and ethnic diversity. More
information on the Board’s and the Company’s
progress towards its gender and ethnic diversity
targets can be found on page 96.
Any updates to the arrangements for the
conduct of the meeting will be communicated
via www.QinetiQ.com.
Confidential reporting process
QinetiQ has in place a Group-wide Speak up
programme, which includes a confidential
reporting process, and this is detailed on the
Company’s intranet and in its Code of Conduct.
If an individual does not feel that they can resolve
any concerns with the Company directly through
discussions with their functional manager, they
can use an externally provided confidential
internet and telephone reporting system. All
concerns are passed by the external third party
to the Group Director – Internal Audit, who
ensures that they are held in strict confidence
and properly investigated. Reports on confidential
reporting activity and outcome of investigations
are reported to the Board at each of its meetings.
The Board reviewed the effectiveness of the
Group’s confidential reporting process, provided
challenge and advice on the issues raised, and
was satisfied that the process in place is fit for
purpose. More information on the Group’s Speak
up programme can be found on page 54.
QinetiQ Group plc | Annual Report & Accounts 2024 91
Corporate governance
59%
41%
17%
75%
8%
UK
US
EU
Shareholders
Non-shareholders
Board leadership and Company purpose continued
Case study
Board engagement
In January 2024, Neil Johnson, Steve
Wadey, General Sir Gordon Messenger, Steve
Mogford and Susan Searle visited the Group’s
operations and facilities based in Australia,
including its recently acquired Air Affairs
group. The objective was to gain a deeper
understanding of the nature and technical
capability of, and risks being managed by,
that business; and to engage with a range of
people working there, to take a perspective
on the issues important to them. Following
an overview of the Australia-based operations
and its sites, from the Chief Executive and
leadership team of the Australia sector, the
Directors visited the Air Operations Centre in
Nowra and had a tour of the Air Manufacturing
facilities, enabling them to gain an in-depth
understanding of the intricacies of operating
in a highly-regulated air environment. The
Directors also visited the Australia sector
headquarters in Canberra; to meet with the
sector’s extended leadership team and gain
insights into the issues and opportunities in
the various businesses which operate in the
Australia sector, including its plans to leverage
its capabilities for the benefit of the AUKUS
partnership which comprises three of the
Group’s core government customers.
A BBQ lunch with employees based at
Canberra gave the Directors access to a
valuable range of views and perspectives
across a broad spectrum of roles within the
Australia sector workforce. The visit allowed
engagement with a significant number of
employees, all of whom have a role to play in
delivering a safe and compliant environment
for our Australia-based people and facilities.
The Directors were able to constructively
engage with them to understand the strategy
for the Australia sector, and directly input into
thinking for its future development.
Investors met: By investor locationInvestors met: By type
QinetiQ Group plc | Annual Report & Accounts 202492
Nominations Committee report
Nominations
Committee report
Neil Johnson
Nominations
Committee Chair
//QinetiQ’s strategy
includes the retention
and attraction of highly
skilled and inspirational
people delivering world-
class engineering and
technology for the benefit
of our customers and
the national defence and
security of the countries
we work in, both today
and tomorrow.//
The Nominations
Committee continues to
mature and develop its
focus on bringing diverse
perspectives into the
Company, to help form
our strategic decisions in
a way that complements
and reflects both the
strategy, and the breadth
of skills, of the Company’s
growing business.
This year has seen continued development of
our succession plans designed to maintain the
effectiveness of the Board and its Committees,
in-line with the Company’s strategic priorities.
Further details of the changes to the Board
during the last year can be found on page 3.
This year we are pleased to have met the new
Listing Rules targets on Diversity and have
refreshed the Board’s Diversity policy.
You can read more, later in this report, about the
development of our Directors and our talented
senior management team.
The Nominations Committee undertook its
usual assessment of Directors’ continued
independence for the year in review, and further
information on the Committee’s effectiveness
can be found on pages 97 to 98.
QinetiQ Group plc | Annual Report & Accounts 2024 93
Corporate governance
Key responsibilities:
–Keep under review
the structure, size and
composition of the
Board
–Succession planning
for Directors and other
senior Executives
–Keep under review
the leadership needs
of the organisation,
both Executive and
Non-executive, with a
view to ensuring the
continued ability of
the organisation to
compete effectively in
the marketplace
–In accordance with
the Board Diversity
Policy, identifying and
nominating, for the
approval of the Board,
appropriately diverse
candidates to fill
Board and Committee
vacancies, as and
when they arise
–Review annually
the time required
from Non-executive
Directors
–Undertake
performance
evaluation to assess
whether the Non-
executive Directors
are spending
sufficient time to fulfil
their duties
–Review the
independence of
the Non-executive
Directors and any
potential conflict
of interest for all
Directors
FY24 activity highlights:
–Reviewed the
structure, size
and composition
of the Board and
its Committees,
including the
skills, experience,
independence
and diversity of
its members, in
anticipation of Non-
executive Director
changes to the Board
and its Committees
–Led the process to
recruit two new Non-
executive Directors
–Reviewed the
Board and senior
management
succession plans,
including via a review
of potential internal
successors and other
high potential talent
for executive and
senior management
positions
–Reviewed and
updated the Board’s
Diversity Policy
as well as the
Company’s inclusion
initiatives
–Ensured leadership
succession
plans enabled
–Diversity targets
under Listing Rules
would be met
–Oversaw the setting
of Parker Review
targets for diversity
balance within Senior
Management of the
Company
QinetiQ Group plc | Annual Report & Accounts 202494
Nominations Committee report continued
Succession planning
Board and Committees
The Committee annually reviews the
composition of the Board and its Committees
and the Nominations Committee expects
to continue to implement its succession
plans for the Board and its Committees in
Process step Action Outcome/impact
Identifying current
and future needs
and skills gaps
The Committee maintains and regularly reviews a matrix of the
Directors’ experience and skills to ensure that the Board and its
Committees are composed of individuals who have the right
experience and skills to enable them to shape (and, in the case of
the Executive Directors, deliver) the Company’s strategy and to
monitor and assess the effectiveness of the Company’s control
environment and management of risk.
The matrix considers the following:
– Diversity, including age, gender and ethnicity
– Background, professional skills and experience
– The number and balance of Executive and
Non-executive Directors
– Length of tenure
– Independence
– The appointment of Ross McEwan and Dina Knight as
Non-executive Directors
– At the conclusion of the 2023 Annual General Meeting,
Michael Harper stepped down as a Director of the Company,
and Steve Mogford assumed the role of Senior Independent
Director thereafter.
Ensuring that we get
access to the best
candidates
Regularly reviewing the recruitment agencies that we use to ensure
that they are best placed to find QinetiQ the right mix of candidates
capturing the clear benefits of greater diversity. In addition, we pick
the best suited agency for the specific role currently recruited for.
Odgers (who has no other connection to the Group or to any
individual Directors) was used for the recruitment of Dina Knight.
No recruitment agency was used for the recruitment of
Ross McEwan.
Ensuring accountability
and success of the
Board’s performance
– Annual Board effectiveness and performance evaluation, using
an external provider every three years. See more on pages 97
to 98
– Annual review of the Group Chair’s performance led by the
Senior Independent Director. See more on page 99
– Annual independence review of the Non-executive Directors. See
more on page 83
– Continued assessment of the Non-executive Directors’ time
commitment. See more on page 83
– Policy on Board members’ appointments to other Boards
– Annual performance review of the CEO and CFO, supplemented
by the Group Chair’s and Non-executive Directors’ continual
assessment of their performance. See more on page 99
– A thorough induction programme for new Directors. See more
on page 99
– Annual training for the Board as a whole and on an individual
basis. See more on page 99
– The FY24 Board effectiveness review concluded that the
Board has been effective, engaged with and helpful to
the organisation
– A summary of the Board’s decision-making, considering
section 172(1) can be found on pages 65 to 67
The effectiveness of the Committee’s succession plans is demonstrated by the appointment in FY24 of Ross McEwan and Dina Knight, who
have further enhanced the Board’s experience in financial controls, talent management and corporate strategy. Ross brings valuable Executive
and Non-executive Director experience as well as intimate knowledge of the Australian market, while Dina has great experience of executive
leadership in multinational corporates.
2024/2025 and beyond. We use the process
outlined below to ensure that we continue to
recruit only candidates of the highest standard,
that we continue to make progress towards our
diversity and inclusion targets, and that we have
the right balance of an experienced Board, yet
with a fresh perspective.
Following this year’s review the Committee
is satisfied that we have an appropriate
mix of skills, knowledge and experience to
operate effectively.
QinetiQ Group plc | Annual Report & Accounts 2024 95
Corporate governance
The process that the Committee has established, together with the particular considerations it takes into account, in identifying and nominating
Director candidates, is set out below.
Background, skills
and experience
Independence and
other commitments
Diversity
Other individual attributes
to widen the Board’s
overall knowledge, providing
challenge and further support
A sub-Committee of the Nominations Committee is appointed to oversee the recruitment and appointment process
A tender process identifies the most suitable recruitment agency to conduct the search and prepare candidate specifications
The sub-Committee conducts initial interviews with the candidates on the short-list and identifies preferred candidates
Other Board members, including the Group CEO and Group CFO, interview the preferred candidates
The sub-Committee reviews the list of candidates and narrows down to a short-list of those
who best meet the Company’s requirements, considering the following:
Nominations Committee recommends to the Board which of the preferred candidates best fulfils the Board’s and its Committees’ needs
Senior management succession
planning programme
The Committee has undertaken its usual
programme of senior management
succession planning. Senior management
for this purpose includes the members of the
QinetiQ Leadership Team, as well as those
talented individuals who have demonstrated
the potential for promotion to higher or
broader positions in the Group’s senior
management structure.
The programme includes an annual review of
such senior managers’ experience and skills
and their progress and notable achievements
to ascertain their potential for further career
progression. The Committee also keeps
the performance of potential successors to
Executive Director roles under regular review
throughout the year during Board interactions
and visits to the Company’s operations.
This gives Committee members the opportunity
to observe senior managers’ working practices
and relationships with their stakeholders
first-hand. These reviews complement the
Executive Directors’ assessment of these
individuals’ performance through a formal
process of annual reviews and continual
feedback and support. This programme
enables the Committee to identify any gaps in
the senior management succession pipeline
and any requirements for senior managers’
further development.
In FY24, the Group’s leadership has embedded
the new operating model, implemented in the
previous year, which was restructured into four
sectors, supported by six Group functions.
This year has seen further focus on
both promotion of internal talent and the
strengthening of key aspects of the executive
QinetiQ Leadership Team. This has resulted in
leadership changes announced in April 2024,
including the recruitment of Martin Cooper as
a new CFO and Iain Stephenson in a newly
created Chief Operating Officer role, as well as
the internal promotion of Will Blamey to Chief
Executive UK Defence.
QinetiQ Group plc | Annual Report & Accounts 202496
Nominations Committee report continued
Board and company commitment
to diversity
The Board is committed to ensuring diversity
in all aspects (including as regards to gender,
ethnic and social background), at Board and
senior management-level and throughout the
Company’s employees. This is because we
believe diversity can:
– Improve decision-making at all levels of the
business by ensuring diverse perspectives
– Attract and retain the best talent with a
culture of inclusion where all individuals
are respected and supported to reach their
full potential
– Better serve our customers, other
stakeholders and the communities in
which we operate by ensuring that the
diversity of our workforce demographic
is representative of the diversity of
such stakeholders
This commitment is aligned with our values
(see more on page 76), which in turn
support our strategy of growth by retaining
and winning business through having the
best talent delivering the best service for
our customers.
Board Diversity Policy
Our commitment is confirmed in the Board’s
Diversity Policy, which has been updated and
strengthened this year, and which applies to
the Board and all of its Committees – the main
objectives of which are:
– To achieve and maintain targets on gender
and ethnic diversity on the Board and
its Committees
– To ensure that the membership of the Board
and its Committees reflects the diversity
of the geographies and communities we
operate in, and the customers that the
Group serves
– To respect the differences of its members,
and value and encourage the diversity of
thought that such differences can bring -
in each case within the context of Board
members having, between them, the
experience and skills required to support the
development, oversight and delivery of the
Company’s strategy
We are pleased to have seen the positive
benefits to these initiatives, which have
resulted in improvements in both gender and
ethnic diversity at a number of levels of the
business, including:
– One member of the Board comes from an
ethnic minority background
– The Audit and Remuneration Committee
Chairs are female
– Female representation on the QLT has
increased from 36.4% in 2023 to 40% in 2024
– Female representations of the direct reports
to the QLT has remained at 27%, and remains
a key area of focus
– Data obtained on a voluntary basis
through a secure electronic portal detailing
the ethnic representation of the senior
management team.
Further to the appointment of Dina Knight
in March 2024, the Company has, as at
31 March 2024, met the following targets, as
referenced in Listing Rule 9.8.6(9): that at least
40% of the Board should be women, that the
CFO is a woman, and that there should be a
Director from a minority ethnic background on
the Board. Although we note the subsequent
departure of our CFO Carol Borg at the
beginning of FY25 has taken us below the
targets, we believe that our established and
effective process, as outlined above, will help
us once again achieve and maintain these
important targets in the future. The Company’s
mandatory requirement for a diverse candidate
pool ensures that we continue to have the
opportunity to recruit candidates from all
gender, cultural and ethnic backgrounds, while
we remain focused on recruiting the best
candidate for any role based on merit.
Voluntary disclosures required under Listing Rule 9.8.6 as at 31 March 2024
(a) Table for reporting on gender identity or sex
Number of
Board members
Percentage
of the Board
Number of
senior positions on
the Board (CEO,
CFO, SID and Chair)
Number in
executive
management
Percentage
of executive
management
Men 5 56% 3 1 50%
Women 4 44% 1 1 50%
Not specified/prefer not to say N/A N/A N/A N/A N/A
(b) Table for reporting on ethnic background
Number of
Board members
Percentage
of the Board
Number of
senior positions on
the Board (CEO,
CFO, SID and Chair)
Number in
executive
management
Percentage of
executive
management
White British or other White (including
minority-white groups)
8 89% 4 2 22%
Mixed/Multiple Ethnic Groups N/A N/A N/A N/A N/A
Asian/Asian British 1 11% N/A N/A N/A
Black/African/Caribbean/Black British N/A N/A N/A N/A N/A
Other ethnic group, including Arab N/A N/A N/A N/A N/A
Not specified/ prefer not to say N/A N/A N/A N/A N/A
The above data was obtained on a voluntary self-reported basis. Participants were invited to provide information through a secure electronic portal,
wherein they were asked to share detail such as ethnic background. As part of our inclusion, Diversity and Belonging strategy, we are focusing on
increasing our ethnic minority representation within our Senior Management team by the end of 2027. This will be achieved through creating diverse
recruitment and talent pipelines and creating an inclusive culture where everyone can feel they belong and thrive.
QinetiQ Group plc | Annual Report & Accounts 2024 97
Corporate governance
The employee Inclusion, Diversity
and Belonging Strategy
Pages 49 to 53 describe the progress of our
Inclusion, Diversity and Belonging Strategy
in relation to employees and other diversity
policies and procedures of the Company.
Our Inclusion, Diversity and Belonging
strategy can be found on www.QinetiQ.com
which outlines our approach to creating an
environment where everyone feels they belong
and can thrive. We encourage inclusion and
diversity to be fully embraced in our workplace
so that each and every one of our colleagues
can be themselves, fulfil their potential and feel
inspired to deliver for our customers.
The effectiveness of the policy is governed by
our assurance processes and with oversight
by our Executive Team. To help us reach our
goals we have various tools in place, including
global employee mandatory training, inclusive
leadership development and employee
network groups. During the year we continued
to see an increase in employee activity and
engagement around Diversity and Inclusion
including the launch of a global ‘Count Me In’
campaign enabling employees to voluntarily
share information about their diversity to inform
our strategic priorities. We are confident that
this focus will continue in 2024 and beyond to
ensure we create an environment where people
have a true sense of belonging, enabling us to
attract and retain the very best people who will
make us a stronger company.
Director effectiveness
A performance evaluation of the Board, its
Committees and the individual Directors
is conducted annually, with an externally
facilitated review required at least every three
years. As illustrated by the adjacent chart,
FY22 was the first in the three-year cycle when
an external evaluation was undertaken by
Tom Bonham-Carter of The Effective Board
LLP. In FY23 a follow-up independent review
was undertaken through The Effective Board
LLP. Neither Tom Bonham-Carter, nor The
Effective Board LLP has any other connection
to the Group. In FY24 an internal review was
undertaken to identify whether further actions
were required to meet recommendations made
in the FY22 and FY23 external reviews.
The principal sources of data used to assess
the effectiveness of the Board and its
Committees were questionnaires completed
by each Board member, the Company
Secretary and a selection of members of the
senior management team.
The FY22 and FY23 reviews were designed
to understand whether the Directors have
thoroughly discussed and agreed the use
and investment of the shareholders’ funds
to ensure the Company is successful while
managing the risks inherent in its strategy,
operational plans and operating environment.
This was augmented by an assessment of
how effective the Board is in ensuring that the
Executive team implements the strategy and
plans and manages all the other activities of
the Company including engaging across the
spectrum of its stakeholders.
The FY24 internal review analysed evidential
progress against recommendations made
in the FY22 and FY23 reviews and identified
any potential gaps in recommendations being
met. The questionnaires were designed to
understand the need for further actions to be
taken to address gaps and what those actions
should be.
The Company Secretary, in consultation
with the Group Chair and Committee Chairs,
analysed the results of the evaluation
by reference to the scores given, the
specific observations made, and any
recommendations given or improvements
suggested. Following which, those results
were presented to and discussed by the Board
and its Committees.
The overall outcomes of the evaluations
were positive, evidencing that significant
improvements had been made, acting on
the prior two year’s recommendations, and
demonstrating that the Board and each of its
Committees continue to function effectively
with a high level of probity, integrity and
independence, through the mediums of both
open and challenging debate in meetings
and appropriate engagements outside
of meetings.
Year 1
FY22 – External
evaluation by selected independent
consultants (specific basis and
approach agreed)
Year 2
FY23 – External
evaluation to focus on reviewing core
effectiveness and areas identified for
development from the Year 1 external
evaluation
Year 3
FY24 – Internal
evaluation to focus on reviewing
progress made on areas identified
for development from the Year 2
external evaluation and identify any
gaps where further action is required to
improve
QinetiQ Group plc | Annual Report & Accounts 202498
Nominations Committee report continued
Director effectiveness continued
The key strengths and material areas for further attention identified by the FY24 Board and Committee evaluation are shown below:
Key strengths Areas for further attention
The Board has evolved its review of the Group strategy to ensure that a longer
five to 10-year view is taken when considering factors that impact the operational,
financial and competitive performance of the Company’s businesses; to take
into account broad external perspectives; and to support its review with SWOT
analysis. This has increased the effectiveness of the Board’s support to the
development and implementation of the Company’s strategy, aligned to its
purpose and vision.
Achieving a deeper level of Board understanding of material risks in the
Company’s supply chain and how those risks are managed and mitigated by
its businesses.
The Board has continued to work well as a unit during the year, with Board
discussions being constructive and appropriately challenging, the Executive
Directors being transparent with the Board and open to advice. This way of
working has been effectively preserved throughout the recent planned changes to
the Board’s composition.
Supporting the further maturation of the Company’s Three Lines Model within its
Group-wide control and assurance framework, including the embedding of defined
roles and responsibilities for the first and second lines of assurance
The Board has further strengthened its oversight of, and input to, the Company’s
ESG agenda. This has included a particular focus on progress against the
Net-Zero plan and implementation of non-financial reporting on climate change,
including TCFD, and planning for development of internal controls to meet the
upcoming changes to the UK Corporate Governance Code. This has been enabled
by review of both of these areas at each Audit Committee meeting during the
year. See more information on ESG on page 34.
Undertaking re-assessment of the Board’s skills and experience, following a
number of recent changes in Board composition, to be reflected in an update to
the Board’s skills matrix, aligned to the Company’s evolving strategy
When comparing the outcome of the FY24 evaluation against principal areas for improvement identified through the FY23 review process,
the following progress has been seen:
Areas for further attention Progress during the year
Increased assessment of emerging risks which have impacted the Company
and lessons learned as a result. A specific example being assessment of the
effectiveness of business continuity plans and procedures
The Annual Planners of matters considered by the Board and its Committees
have been further evolved to ensure regular Board updates and oversight of (i) the
operational performance of the Company’s four business sectors; (ii) the strategic
development and operational delivery of its four Global Campaigns; and (iii) deep
dives in to areas of key transformational improvement across its Group. These
have included tangible examples of emerging risk issues which have affected
areas of the business, business continuity response to those issues and actions
taken to mitigate the impact of those risks. This has allowed the Board to engage
in lessons learned from such risk issues and input into improvements made to
better manage emerging risk issues.
Review needed for improvements to the Group-wide control and assurance
framework, including clarity between the roles and responsibilities of the first
and second lines of assurance within the company’s ‘three lines model’
Throughout the year, the Board has been actively engaged in evaluating and
inputting guidance into the Company’s programme for strengthening and
maturing its Three Lines Model, with a particular focus on improvements required
to its first-line capability and second-line controls. This has been facilitated
through updates to the Board and its Committees by the Chief Risk Officer and
Group Director Internal Audit; facilitated workshops outside of the regular Board
meeting cycle; the provision of more granular data enabling the Board to assess
progress against improvement plans; and site visits allowing members of the
Board to gain tangible and contextualised insights into the control environment
for some of the Company’s more highly regulated operations.
QinetiQ Group plc | Annual Report & Accounts 2024 99
Corporate governance
The Group Chair’s individual performance
As part of our annual evaluation process, Steve Mogford, as Senior Independent Director, led a review
of the Group Chair’s performance. At a private meeting, the Non-executive Directors, with input from
the Executive Directors, assessed the Group Chair’s ability to fulfil his role as such. It was concluded
that the he showed effective leadership of the Board and his actions continued to influence the
Board and the wider organisation positively.
The Directors’ individual performances
The Group Chair, Neil Johnson, held performance meetings with each Board member to discuss
their individual contribution and performance over the year, and their future training and development
needs. Following these meetings, Neil Johnson confirmed to the Nominations Committee that,
during the year, all Directors have demonstrated a clear commitment to their roles.
Director induction
On joining the Board, whether in an Executive or Non-executive role, each Director undertakes
an induction programme covering subject areas relevant to the requirements of their role. This
programme is designed to fast-track a new Director’s understanding of the Group’s purpose, values,
strategy and operations, thereby equipping them to perform their role.
Details of the induction programme, organised by the Company Secretary in conjunction with the
Group Chair, for new Non-executive Directors, is illustrated by the diagram below:
Background reading material, including previous Board and Committee books, investor
and strategy presentations, relevant Company procedures and Board policies
Meetings with the Group Chair, Executive Directors and members of senior management
Guidance on corporate governance arrangements, including the Board and
Committee agendas and procedures, Board succession-planning and Board evaluation –
provided by the Company Secretary
Visits to Company sites, meeting with senior local management
Meetings with the Chair of the Committees, external auditors
and external remuneration advisers
Meetings and Director site visits
Physical Board meetings and Director visits
are scheduled throughout the year at our sites,
both in the UK and internationally. Locations
for meetings and site visits are agreed
annually and are arranged by the Company
Secretary with assistance from the QLT
as appropriate.
During the year the Board held physical
meetings in Farnborough, London and
Portsmouth in the UK, as well as some Board
meetings that continue to be held virtually.
In May 2023, the Group Chair paid a visit to
our Inzpire business headquarters in Lincoln,
where he received briefings, including the DMI
project in Qatar, and had a demonstration of
both GECO and JTAC Case firsthand. He was
able to engage with Early Careers employees
and plans for further developing their
career opportunities.
In July 2023 the Group Chair visited the
Applecross site and MOD Hebrides, and in
October he visited the Haslar site.
In September 2023 Shonaid Jemmett-Page,
General Sir Gordon Messenger and Steve
Mogford spent two days visiting MOD Pendine
and MOD Aberporth.
In January 2024 a number of the Directors
visited sites in Australia. For more information
on this trip see page 91.
Ongoing Director training
The Directors have the opportunity to
participate in an ongoing training programme
organised by the Company Secretary. This
includes the Company Secretary keeping the
Board briefed on relevant regulatory changes,
and arranging external training, as required.
During the year PwC briefed the Board on
forthcoming changes to the external audit
and governance environment and training on
safety was provided to the Board, including a
special session on the use of defibrillators.
Further training on recent legal and regulatory
updates, as well as further safety and security
training is planned for FY25.
QinetiQ Group plc | Annual Report & Accounts 2024100
Shonaid Jemmett-Page
Audit Committee Chair
Audit, risk and internal control
Audit Committee
report
//We continue to
strive for continuous
improvement and I am
proud of the progress
that has been made
this year in enhancing
the internal control
environment.//
Dear Shareholder,
I am pleased to present
the report of the Audit
Committee for the
work carried out by the
Committee over the
course of the year. This
report outlines the key
topics the Committee has
considered during FY24
and how it has discharged
the responsibilities.
The main purpose of the Committee continues
to be the oversight of a robust system of
internal controls and risk management across
the business. This includes considering both
financial and non-financial risks and ensuring
the integrity of all reporting, including the Annual
Report and Accounts. The key areas for focus,
which are addressed by the internal audit plan,
the approach of the external auditors and ‘deep
dive’ reviews are determined by the needs of
the business and the risks it faces. The full
terms of reference of the Committee can be
found at www.QinetiQ.com.
We continue to strive for continuous
improvement and I am proud of the progress
that has been made this year in enhancing the
internal control environment, including evolving
the assurance model with the risk function
in alignment with the updated UK corporate
governance code. A particular focus during
FY24 was the Group’s capital allocation model,
with discussion around the priorities for capital
allocation and the £100m share buyback
programme which was initiated during the
second half of the financial year.
The US continues to be an area of focus for the
business and therefore for the Committee. This
year has seen the first year of post-acquisition
performance of the Avantus business, which
has been a key topic during the year. As the
business continues to evolve and the integration
progresses, we need to ensure that there
remains a robust system of internal control and
risk management which is appropriate for the
scale of operations in the US. The Committee
maintains regular dialogue with the US Special
Security Arrangement (SSA) Audit Committee,
regarding scope and coverage and the sharing
of best practice.
The Committee continues to embrace the
relevant aspects of the evolving sustainability
agenda, including target-setting, assurance
and reporting. The Task Force on Climate-
related Financial Disclosures (TCFD) reporting,
on pages 34 - 55, have been reviewed and
endorsed by the Committee.
In May 2023 the FRC published its Audit
Committees and the External Audit: Minimum
Standard. The Committee is content that it
meets the relevant responsibilities set out in
the Standard.
I hope you find the information in this report
about the Committee’s work helpful and I will
be pleased to answer any questions you have
about it at this year’s AGM.
Shonaid Jemmett-Page
Audit Committee Chair
QinetiQ Group plc | Annual Report & Accounts 2024 101
Corporate governance
Activities during the year
Financial reporting
Following the Group entering into a net debt
position for the first time in several years in
FY23, the Committee held deep-dive sessions
into covenant management, operating cash
performance management and foreign
exchange management. Foreign exchange
management is increasingly important with
the expansion of overseas operations and the
associated internal financing arrangements.
The Committee again spent significant time
reviewing the critical accounting estimates
and judgments inherent within the annual
financial results. These include judgments
relating to the Group’s complex long-term
contract accounting, the assumptions within
the Goodwill Impairment calculations, the
quality of income generated during the year
and the distinction between specific adjusting
items and those which impact underlying
performance. The quality of income review
includes considering one-off items such as
provision releases within the income statement
and the overall sustainability of earnings.
The assessment informs the Committee’s
work on whether the accounts are fair,
balanced and understandable, and whether
any adjustments should be considered in
remuneration calculations.
Fair, balanced and understandable
In accordance with the Code, the Board has
established processes to ensure that all reports
and information it is required to present in
accordance with regulatory requirements,
represent a fair, balanced and understandable
assessment of the Company’s performance,
position and prospects.
As such, the Audit Committee was requested
to provide advice to the Board on whether
the FY24 Annual Report and Accounts, taken
as a whole, provide a fair, balanced and
understandable assessment of the Company’s
financial position and future prospects
and provide all information necessary to a
shareholder to assess the Group’s performance,
business model and strategy.
Following the established process, the
Committee reflected on the information it had
received and its discussions throughout the year.
The review is a well-established and documented
process involving senior management and
the core reporting team. The assessment was
assisted by an internal verification of the factual
content by management, a review at different
levels of the Group to ensure consistency and
overall balance, and a comprehensive review
by the senior management team and the
external auditors.
The Board considers that the FY24 Annual
Report and Accounts, taken as whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the company’s position, and
performance, business model and strategy.
Rigour over non-financial reporting
(TCFD and other sustainability metrics)
In FY22 we were one of the first companies
required to report, in line with Listing Rule
9.8.6(R)(8) which addresses the four TCFD
recommendation pillars (Governance, Strategy,
Risk and Metrics) and 11 disclosures. We are
committed to continuous improvement as
guidance and methodologies mature. For the
FY24 reporting (see pages 43 - 47) aligned with
the TCFD and BEIS recommendations, we are
able to demonstrate a number of refinements,
for example reviewing and updating our risk
profile. The Committee reviewed the proposed
disclosures and endorsed assumptions and
judgements applied by management.
With the growing body of non-financial reporting
requirements ahead, the Committee have a
standing agenda item to continue to be briefed
regularly on this evolving area of interest. An
overview of the various new requirements across
relevant geographies was discussed, including
the International Sustainability Standards Board
(ISSB) sustainability-related financial reporting
standards; reporting in both the US and Australia
and the next steps and investment needed. The
Audit Committee charter has been extended into
ESG, which strengthens the Audit Committee’s
oversight of non-financial reporting (including
TCFD), increasing its reviews to quarterly.
Internal financial controls
Internal financial controls are the systems
that the Group employs to support the Board
in discharging its responsibilities for financial
matters and the financial reporting process.
The main elements include:
– Assessment by Internal Audit of the
effectiveness of operational controls
– Clear terms of reference setting out the
duties of the Board and its Committees,
with delegation to management in
all locations
– Group Finance and Group Tax and Treasury
manuals outlining accounting policies,
processes and controls
– Weekly, monthly and annual reporting
cycles, including targets approved by the
Board and regular forecast updates
– Leadership teams reviews of results against
forecast and agreed performance metrics
and targets with overall performance
reviewed at region and Group levels
– Specific reporting systems covering
treasury operations, major investment
projects and legal and insurance activities,
which are reviewed by the Board and its
Committees on a regular basis
– Confidential reporting procedures allowing
individuals to report fraud or financial
irregularities and other matters of concern
without risk of retaliation
– Data protection policies to detect breaches
and other issues
QinetiQ Group plc | Annual Report & Accounts 2024102
Audit, risk and internal control continued
Key issues and Judgements impacting FY24 accounts
Issue Key uncertainties and judgement Review and challenge Conclusion
Impairment of
goodwill and
acquired intangibles
The Group holds goodwill on its
balance sheet in respect of various
Cash Generating Units (CGUs).
An impairment review has been
undertaken confirming that sufficient
headroom (the gap between the
assessed net present value of future
cash flows and the carrying value of
net operating assets) exists in respect
of these CGUs and no impairment
is required.
There is a reduced level of headroom
in respect of the US CGUs however
applying a reasonable level of
sensitivity to the assumptions would
not lead to an impairment.
The Committee reviewed the outputs
of management’s annual impairment
testing exercise, noting the use of
external advisors to prepare the
technical assumptions (discount rates,
long term-inflation) which have also
been verified as appropriate by the
external auditors.
The Committee held detailed
discussions with management
and the external audit team,
specifically challenging revenue and
profit assumptions, as well as the
technical assumptions.
There are a wide range of outcomes
to the impairment test which is
very sensitive to outer year cash
flows. On challenging management,
the Committee concluded that no
impairments need to be recorded
in the year. The committee also
agreed that the disclosures made
within the financial statements were
adequate.
Long-term contract
accounting
Risk assessment on
key contracts
The Group has a large number of
contracts which span multiple periods
and are accounted for on a percentage
of completion’ basis in accordance
with IFRS 15.
Long-term contract accounting
requires a number of judgements and
management estimates to be made,
particularly in calculating the forecast
costs to complete the contract, and
resultant contract profitability.
The Committee received commentary
from both management and the
external auditors in respect of the
most significant contracts being
delivered by the Group and discussed
the main financial assumptions
(including level of risk reserves,
assumed forecast savings challenges
and the use of Monte-Carlo modelling).
The Committee concluded that
management’s best estimates
were reasonable.
Provisions and
contingent liabilities
Pendine and other
provisions
The Group holds provisions in respect
of legal, regulatory and environmental
issues. Judgement is required in
determining whether provisions are
required.
Specifically, a provision is held in
respect of a serious incident at the
MOD range at Pendine in a previous
financial year.
The key judgements considered by the
Committee were: (i) the likelihood of
QinetiQ being prosecuted, found guilty
and subject to financial penalties; (ii)
the quantum of the liability in respect
of such penalties; (iii) that insurance
will cover the cost of any civil
damages (with a provision of c£12.8m
being recorded together with an
equally offsetting Other Receivable).
The Committee concluded that
management’s best estimates
were reasonable.
Specific
adjusting item
Digital investment
Acquisition
and disposal
related costs
The Group reports underlying
performance which excludes the
impact of specific adjusting items.
Following the change in accounting
policy relating to the capitalisation
of intangible assets for software as
a service, the ongoing one-off period
of digital investment is included as a
specific adjusting item.
Specific adjusting items also include
a number of acquisition and disposal
related costs including post-acquisition
integration costs and one-off post-
acquisition remuneration costs.
The Committee receives an update
on the nature and quantum of
specific adjusting items, as well as
management assessment as to their
appropriate use.
The Committee agreed with
management’s assessment that the
current Digital investment and other
such items are distorting in nature
and it is therefore helpful to the
reader to separate their impact.
QinetiQ Group plc | Annual Report & Accounts 2024 103
Corporate governance
Issue Key uncertainties and judgement Review and challenge Conclusion
Pensions
Net pension asset
valuation
The Group’s net pension asset
increased during the year, with a
significant increase in the value
of the assets being partially offset
by changes in the demographic
assumptions and liability
experience data.
The Committee reviewed and
challenged the results of the valuation
exercise, and the key assumptions
used, noting the use of external
advisers to prepare the calculations.
The Committee concluded that the
assumptions and outputs made
by management and the external
advisers were reasonable.
Taxation
Key judgments
including
recoverability
of losses
The key accounting assumptions
relating to tax include tax provisioning,
acquisition related tax balances, the
recoverability of deferred tax balances
relating to historical losses and the
impact of statutory rate changes.
The Committee reviewed and
challenged the key judgments taken by
management, particularly relating to
the future recoverability of deferred tax
relating to losses, which will depend
on the future financial results of the
relevant entities.
The Committee concluded that the
judgments made by management
were reasonable.
Going concern and long term
viability statements
The acquisitions of Avantus and Air Affairs
during FY23 took the Group into a net debt
position. It has been pleasing to see leverage
reduce during FY24 and we continue to pay
particular attention to these assessments,
specifically considering if covenants may be
breached, debt capacity and the implications
of the share buyback programme which was
announced in the year. With consideration to
the available information, following review and
challenge, the Committee concluded that the
Group will be able to continue in operation and
meet its liabilities as they become due through
to 31 March 2029. The Committee considered
it appropriate that the long term viability
statement covers a five-year period. In reaching
its conclusion, the Committee reviewed the
budget for the next financial year, the five-
year forecast, the stress tests applied and the
mitigating actions available to the Company.
The viability statement and the going concern
statement can be found in full on pages 62
- 64, including the detail on how the process
was conducted.
Internal Audit
The Group Internal Audit function operates
independently within the business, as part of
the third line under QinetiQ’s adoption of the
Three Lines Model (see page 57 for further
details). The function is well integrated within
the business, providing an independent input
to help maintain a robust system of risk
management and internal control, and also to
ensure there remains a collaborative approach
to assurance across the Group.
Group Internal Audit have formally reported
to the Audit Committee four times during the
year. The Committee approves the annual audit
plan, reviews findings, and assesses the overall
effectiveness of the internal audit process.
A key aim for the audit plan is to ensure that
significant financial and non-financial risks are
reviewed within a rolling four year period.
The audit plan was built around a number of
priorities including a US integration review,
a review of the internal cultural change
programme, an assessment of large contract
renewal and facilities management processes,
and a review of the operating model adoption
across the Group. The overall assessment
following the audit and assurance activity is that
the control environment is considered effective,
with a culture conducive to improving internal
controls and risk management processes.
The effectiveness of the Group Internal
Audit function, and the internal assurance
model more generally, was assessed by the
Committee in the year using a survey and
questionnaire completed by members of
the Committee, the external auditors, and a
number of senior managers from across the
business. The outcome was that the Group
Internal Audit function remains effective in its
activities, noting the period of transition in the
last 12 months, as a new team has been built.
Looking forward into the next financial year
the Committee recognise the importance of
addressing the new UK corporate governance
requirements including those relating to
material risks and controls whilst allowing
sufficient time to provide assurance over other
key internal projects such as the business
systems upgrade in the UK and Australia.
Other priorities include the Group-wide project
management improvement programme and
fraud risk management, which is planned
to be reviewed following the release of new
UK legislation.
QinetiQ Group plc | Annual Report & Accounts 2024104
Audit, risk and internal control continued
Risk Management
The Group Risk Management function
operates independently within the business,
as part of the second line under QinetiQ’s
adoption of the Three Lines Model (see
page 57 for further details). The function
works closely with the business, providing an
independent input to help develop a robust
system of risk management and internal
control, and also to ensure there remains a
collaborative approach to assurance across
the business. The Committee notes the
continual activity to monitor the risk landscape
and ensure the principal risks to the business
are mitigated effectively through robust and
transparent risk management activity.
Treasury strategy and compliance
The Group Treasury policies and procedures
provide a robust framework of internal
controls for the management of treasury
risks faced in a net debt environment. These
include monitoring of leverage and availability
of liquidity through Group cash forecasting,
meeting our covenant compliance and legal
requirements for our banking partners, and
managing our financial exposures to foreign
exchange and interest rate fluctuations.
The Committee continually challenges and
reviews this framework to ensure that it is fit
for purpose and robust to meet the changing
nature of financial and counterparty risks, the
new higher interest rate environment and the
banking sector’s policies on investing in the
defence sector, which impact the availability
of liquidity.
Tax strategy and compliance
The Group Tax policies and procedures
provide the framework of internal controls for
the management of tax risks for the growing
business in an ever-changing global regulatory
environment, in which tax transparency has
increasing prominence. The Committee
reviews the Group’s tax affairs annually, which
includes considering the Group Tax Strategy,
status of any tax audits and filings, tax
accounting judgements and disclosures, the
structuring of key transactions and important
regulatory changes. Group tax policies and
procedures were tested last year with the
identification of a significant VAT error and the
issuance of a suspended penalty by the tax
authority. The matter has now been resolved
without any penalties in large part due to the
Group’s open and transparent approach with
the tax authority.
External Audit
PwC audit scope
Consistent with last year QinetiQ Australia,
QinetiQ Inc. (C5ISR) and QinetiQ Limited, are
full scope. Following its first full year of trading
post the acquisition, and its significance to
the Group’s overall results, Avantus has been
included as a full scope component in the
FY24 audit. The scope for Foster Miller Inc.
(Technology Solutions) consists of audit
procedures being performed over Cash and
cash equivalents, Inventory, Revenue and
associated balances only. Consistent with the
prior year, QinetiQ Target Systems Limited is
also in scope for inventory only. The Committee
viewed it appropriate for the audit scope to
be enhanced for Avantus so as to provide
sufficient audit coverage over the consolidated
financial statements.
Non-audit work and auditors’ independence
The Committee is responsible for the Group’s
policy, the Code of Practice on non-audit
services and the approval of non-audit
services. The Code of Practice is applicable to
all employees and sets out the principles for
regulating the award of non-audit work to the
external auditors.
To safeguard the auditor’s independence and
objectivity, and in accordance with the 2019
FRC’s ethical standard, the Group does not
engage PwC for any non-audit services except
where it is work that they must, or are clearly
best suited to perform. Accordingly, the Group’s
policy for the engagement of the auditors to
undertake non-audit services broadly limit these
to audit-related services such as reporting to
lenders and grant providers, where there is a
requirement by law or regulation to perform
the work. All other non-audit services are
considered on a case-by-case basis in light of
the requirements of the ethical standards and in
compliance with the Group’s own policy.
The Committee approves the terms of all audit
services as well as permitted audit-related and
non-audit services in advance. Pursuant to
the Code of Practice, any non-audit services
conducted by the external auditors require
the prior consent of the Group Chief Financial
Officer or the Chair of the Audit Committee,
and any services exceeding £50,000 in value
require the prior consent of the Committee as
a whole. For work that is permissible by type,
the Committee will take into consideration the
size of the contract in proportion to the Group’s
revenue and profit, and also the total size when
aggregated with other contracts with PwC,
noting that some non-auditing services are
subject to an annual regulatory 70% spending
cap of the average of the audit fees billed over
the last three year period.
It is also the Group’s policy that no former PwC
employee may be appointed to a senior position
within the Group without the prior approval of
the Group Chief Financial Officer.
Review of non-audit work during the year
The Committee reviews the cost and nature
of non-audit work undertaken by the external
auditors at three meetings during the financial
year as a standing item, with a fourth meeting
considering the auditor’s fees as part of the
year-end review. The Committee concluded,
prior to engaging PwC for the provision of
these services, that there had not been any
conflict of interest that might compromise the
independence of PwC’s audit. Fees paid to
PwC are set out in note 8 to the Consolidated
Financial Statements on page 151.
Non-audit related fees paid to the auditor
QinetiQ Group plc | Annual Report & Accounts
2024 105 Corporate governance during the year
were £0.15m (FY23: £0.15m), representing
9% (FY23: 8%) of the audit fee. This included
£0.12m (FY23: £0.11m) relating to the review
of the half-year results. Our annual review of the
external auditors takes into account the nature
and level of all services provided.
Review of the effectiveness and the
independence of the external auditors
At its September meeting the Committee
discussed the effectiveness of the external
audit for FY23. It concluded that there had
been several improvements implemented since
the FY22 audit, following learnings for both
PwC and the Group. It was confirmed that
PwC continues to perform its audit work to a
high standard, in particular as a result of its
comprehension of the Company’s business,
control processes and the matters on which
significant accounting judgements or estimates
are required and its appropriate validation or
challenge of management’s views.
QinetiQ Group plc | Annual Report & Accounts 2024 105
Corporate governance
Audit appointment and partner succession
PwC was appointed as auditor of the Group
at the 2017 Annual General Meeting (AGM)
following a tender process. PwC are now in
their seventh year as auditor, with the external
audit engagement partner, John Ellis, in his
second year, having taken the lead for the
FY23 audit cycle. The external audit contract
will be put out to tender at least every 10
years, and the Committee considers that it
would be appropriate to conduct an external
audit tender during FY27 to ensure that new
auditors are appointed for the FY28 audit
cycle. The timing for the audit tender strikes
an appropriate balance between continuity
for the current audit firm and consideration of
alternative firms.
The Committee and the Board will be
recommending PwC’s re-appointment at the
2024 AGM.
Governance
Audit Committee structure
The Audit Committee is comprised entirely
of independent Non-executive Directors and
is chaired by Shonaid Jemmett-Page, who
is considered by the Board to fulfil the Code
requirement of recent and relevant experience
from the financial sector.
The Board considers the members of the
Audit Committee to be independent and,
in accordance with the Code, the Board
concludes that the Committee as a whole
possesses competence relevant to the
Group’s sector, having a range of financial and
commercial experience in the industry and the
commercial environment in which the Group
operates. The Chair, Group Chief Executive
Officer, Group Chief Financial Officer, Group
Financial Controller, Group Director Internal
Audit, Chief Risk Officer and representatives
of the external auditor attended all Committee
meetings by invitation during the year. Twice
a year we also welcome the Chair of the US
SSA Audit Committee to update us specifically
on the internal controls and risk management
across the US business.
The Committee met with PwC and the Group
Director Internal Audit on two separate
occasions, without Executive Directors
present, to discuss the audit process and
assure itself regarding resourcing, auditor
independence and objectivity.
Audit Committee effectiveness review
The evaluation of the effectiveness of the
Committee was conducted alongside the
Board effectiveness review. See more on
pages 97 - 98. The outcome of the evaluation
confirmed that the Committee continues to
operate highly effectively and determined that
Committee members have good oversight of,
and are able to raise appropriate challenges in
respect of, important financial matters, such
as management’s significant accounting
judgements and the implementation of new
accounting standards.
Statutory audit services compliance
The company confirms that during the year
under review it applied and was in compliance
with the Competition and Market’s Authority’s
Order on statutory audit and services, which
relates to the frequency and governance of
external audit tenders and the setting of a policy
on the provision of non-audit services.
QinetiQ Group plc | Annual Report & Accounts 2024106
General Sir Gordon Messenger
Risk & Security Committee Chair
Audit, risk and internal control continued
Risk & Security
Committee report
//We continue to
strengthen our
processes to protect
tomorrow, navigating
risk and security in a
dynamic world.//
Dear Shareholder,
I am pleased to present
our Risk & Security
Committee report for
FY24, which describes
our activities and areas of
focus during the year.
The Risk & Security Committee risk
management responsibilities
The Risk and Security Committee has a close
relationship with the Audit Committee which
enhances the efficiency and effectiveness
of Board oversight. The Committee provides
further scrutiny and assurance to the Board
that the required UK and international standards
in risk management, quality, security and
health and safety are achieved. This includes
ensuring that the organisation fulfils its
statutory requirements and duty of care. This
assists the Board in setting the risk appetite
and reviewing and assessing the Group’s risk
management systems.
Risk profile of the Group
During the year, the Committee has focused
on further developing the maturity of the
Group’s risk management system. This
includes robust review and progress updates
on various process enhancements including a
deep-dive workshop on risk management and
internal controls, dynamically reviewing new
risks and successfully reducing the Group’s
risk profile. The continual cyclical review of the
Group Risk Register, which is described further
on pages 58 - 61 continues to be key for the
Committee to undertake its duties. The Principal
Risk Register contains details of the Group’s
principal risks, their impact on the Group and
how they are managed.
Security profile of the Group
One of our core responsibilities is to oversee
the Group’s physical and non-physical security
systems. As our future success is dependent
on our ability to exploit and operate technology
at pace while still retaining the rigorous
levels of security required by our customers
and partners, the Committee members and
I have, together with the Chief Enterprise
Services Officer, Group Director Security, and
Chief Risk Officer, developed a schedule of
security-related agenda items, ensuring that
the Committee continues to be able to oversee
this key pillar. As a defence, technology and
engineering Company, we are set to remain
continuously aware about our risks and adapt
our tools, processes, systems and people
to address increasing risks arising from
changing cyber, climate, technological and
geopolitical instability.
I hope you find the information in this report
about the Committee’s work helpful and I will
be pleased to answer any questions you have
about it at this year’s AGM.
General Sir Gordon Messenger
Risk & Security Committee Chair
QinetiQ Group plc | Annual Report & Accounts 2024 107
Corporate governance
Key Highlights FY24:
–Strengthened our risk
and security teams
–Progressed the
implementation
of the Three Lines
model contributing
to improved first line
compliance and second
line assurance activities
–Embedded the Security
& Information and
Risk & Assurance
Councils as key bodies
to reinforce Group-
wide awareness of risk
and assurance
–Progressed our
transformation
activities including the
Global Interoperable
Infrastructure (GII)
Programme that
strengthens the
security and agility
of the Group
–Improved the
consistency of
enterprise risk reporting
FY25: Priorities
–Fully embedding the
Three Lines model
–Further enhancing
our enterprise
risk management
framework
–Driving a positive and
mature risk culture to
ensure we stay on top
of our global dynamic
view of risk
–Enhance exiting and
embed new tools that
help us manage our
governance, risk and
control activities
–Continuing to ensure
that we are recruiting,
building and retaining
the right workforce
skills and talent to
drive our environment,
health and safety and
physical and non-
physical security focus
–Further build on
foundations set
to ensure our
compliance to the
announced changes
to the FRC UK
Corporate Governance
Code
Key responsibilities
The Committee’s primary functions are:
– To oversee the sound operation of the
Group’s risk management systems
– The ongoing review of the Group’s principal
and emerging risks (see pages 56 - 61)
– To oversee the Group’s physical and
non-physical security systems, including
monitoring security exposures and security
culture, and considering emerging security
issues
– To ensure that health and safety risks are
being effectively managed across the Group
– To oversee the Group’s second line
assurance activity over the first line
compliance activity taking place across the
Group’s functions and businesses
– To monitor adherence to the generic MOD
compliance system
– To review the Group’s policies, processes
and controls for the detection and prevention
of bribery, corruption and modern slavery and
compliance with applicable laws, regulations
and codes of conduct
The Board assumes ultimate responsibility
for the effective management of risk across
the Group, determining its risk appetite and
ensuring that each operating Sector implements
appropriate internal controls. The Group’s
risk management systems are designed to
appropriately manage the risk of failure to
achieve business objectives, and thus can only
provide reasonable and not absolute assurance
against material misstatement or loss.
These systems are also designed to be
sufficiently agile to respond to changes in
circumstances, such as increased competition
and disruptive business models, technological
advancements, economic volatility and supply
chain disruptions.
Risk & Security Committee structure
All members of the Board are members of the
Risk & Security Committee, which is chaired
by General Sir Gordon Messenger. The Chief
Enterprise Services Officer, the Group Director
Security, the Chief Information Officer, the Chief
Information Security Officer, the Chief Risk
Officer and the Group Director – Internal Audit
attend Committee meetings by invitation.
To enable the Committee to get a
comprehensive understanding of how
risk management processes have been
implemented and to ensure that these are
fully embedded within the business’s day-
to-day work, deep-dives are presented to the
Committee by employees who have first-hand
knowledge of such matters, i.e. perform the
work on a daily basis.
Risk monitoring and reporting is incorporated
into the management of the business through
the QinetiQ Leadership Team and monthly
performance reviews feed into the Group
strategy at the Executive and Board level.
The risk management and risk monitoring
processes are divided as following:
Risk
management
– Review risk management
structures and reporting lines
(i.e. effectiveness of control
environment)
– Evaluate the effectiveness
of risk reporting processes
including risk control
assessment
– Review the effectiveness of
risk identification processes
– Consideration of any
security issues relating
to the appointment of
external auditors
Risk
monitoring
– Review of risk register and
key exposures
– Monitor Health, Safety and
Environmental performance
– Scrutinise Internal Audit
reports with respect to risk
and security issues
– Oversee international business
governance
– Oversee application of
applied anti-bribery and
corruption measures
QinetiQ Group plc | Annual Report & Accounts 2024108
Security management
The business is increasingly moving / has
progressed towards a proactive threat
assessment process with effective horizon
scanning for future and emerging threats to
the business- a move from ‘risk identification’
process to one of ‘risk management’. Security
Incident Management has demonstrably
improved through maturing of the Security and
Information Governance process with a defined
structure and escalation process through
Sectors, Group, Security and Information
Council, Security Steering Group and on to
the Risk and Security Committee to ensure
visibility of current and emerging risks and their
management. This has been evidenced by
the timely reaction and successful resolution
to matters that happened over the course of
the year.
The Committee is assured by the progress
made by the Group in the year, although, with
the ever-increasing incidence and sophistication
of cyber-attacks and the consequent need for
the Group to remain vigilant, the Committee
expects security to remain one of its key areas
of focus. As part of the drive to further control
our risk exposure, we are further refining our risk
appetite definitions. The Security Culture Survey,
conducted by the Group Security team covering
the whole Group and aimed at understanding
the security maturity levels across four areas
– information, physical, cyber and personnel
security – proved invaluable in identifying areas
for focus.
Cyber security
Given the nature of our business, emergent
security threats such as the adoption of artificial
intelligence and the broader geo-political
landscape, we continue to invest in our Digital
and Cyber Security Programmes.
In combination with our wider education and
culture initiatives, we continued to strengthen
our policies, procedures and tooling to ensure
we can appropriately identify, assess and
manage cyber security risks. We have expanded
our Cyber Security Operations team with further
improvements to our protective monitoring and
response capability. Our strategy remains under
constant review and our refreshed Cyber and
Information Security Operating Model ensures
we best utilise our technical expertise and
knowledge across all business areas.
Audit, risk and internal control continued
Each sector and functional Chief Officer are
required to make a declaration that their system
of internal controls are effective, are fit for
purpose and are being monitored throughout
the year. Any material risks, control failures or
non-compliance with the Group’s risk policies,
legislation and/or local delegations of authority
must be highlighted as part of this process.
The outcomes of the self-certification process,
which is carried out at the full and half-year, is
reported to the Risk and Security Committee by
the Chief Risk Officer.
Generic MOD compliance system
A key aspect of the Committee’s work is the
oversight of the UK Ministry of Defence’s
(MOD) generic compliance system. This is
integral to the work of QinetiQ in its relationship
with the UK Government. The system is
designed to give the MOD customer confidence
that QinetiQ is able to provide impartial
advice during any competitive evaluation of
a procurement opportunity where the Group
wishes to operate on both the ‘buy’ and the
‘supply’ sides. The aim is to achieve a balance
between meeting the needs of the procurement
customers in the MOD (principally Defence
Equipment & Support) and the need to allow
QinetiQ the flexibility to commercialise research
into the supply chain and pursue its planned
business activities, without compromising the
defence or security interests of the UK. The
Board nominates two senior managers to act
as Compliance Implementation Director (CID)
and Compliance Audit Director (CAD).
Anti-bribery and corruption
The Committee oversees a zero-tolerance
approach to bribery and corruption, as
confirmed by the company’s anti-bribery
and corruption policy and the supporting
local policies that apply to members of its
Group. The Group also has in place a range
of procedures, including regular training
targeted at potentially risk-exposed roles of the
employees, Group and local gifts and hospitality
policies, and Group and divisional procurement,
contracting and partnering practices, which
are designed to prevent bribery. See more on
page 69.
The Committee continues to receive regular
reports from the CIO and CISO on our cyber
and information security risks, the performance
of protective controls and the progress of any
ongoing security improvement activities.
All employees must complete mandatory
cyber, information, physical and personnel
security training each year, which focuses
on our policies, procedures, culture and
behaviours aligned to known threats. Our
Group intranet also includes a comprehensive
Security Knowledge Library which is used both
individually and by leaders for regular security
engagements at team level. This approach
substantially improved security culture and
behaviour during FY24.
Business continuity and crisis
management
Our business continuity and crisis management
procedures have been designed for flexible
arrangements when responding to incidents
and emergencies. They are scalable and can
be adapted to work in a wide range of specific
scenarios. We focus on resilience, informed by
our risk identification and assessment rather
than individual emergency scenarios. Our
Crisis Management Plan sets out a decision-
making model and overarching management
response which supports the Leadership Team
and ultimately the Board in making effective
decisions during an incident. This has proved
to be an effective approach with incidents
managed well without causing adverse effects
on the business. Supplementary training has
been provided to the Leadership Team and we
will continue with this approach in FY25.
Self-certification process
An annual process of self-certification on the
effectiveness of internal controls has been
established and embedded across the Group.
This process provides a documented and
auditable trail of accountability for the operation
of the system of internal controls and continues
to be our preferred tool to tangibly assess the
effectiveness of those controls in all functions
and sectors across the Group. It is informed
by a rigorous and structured self-assessment
that addresses compliance with Group policies
and processes, and provides a comprehensive
level of assurance to be given at higher levels of
management and, finally, to the Board.
QinetiQ Group plc | Annual Report & Accounts 2024 109
Corporate governance
Data privacy
The company respects the personal data
privacy of its customers, employees and other
individuals in respect of whom it and members
of its Group process personal information. The
Group therefore has in place policies which
mandate the lawful processing and protection
of such personal information in accordance
with applicable laws and procedures which
are designed to achieve the same. A report
on GDPR compliance is presented to the
Committee at each Committee meeting.
Effectiveness review
In 2024 an effectiveness review was conducted
internally. This process is described further
on pages 94 - 99. The performance of the
Committee was rated highly overall. The
Committee agreed it would continue to focus
on cyber and security risks in FY25.
Frameworks for risk management and
internal control
The Board is responsible for promoting the long-
term success of the company for the benefit
of shareholders, as well as taking account of
other stakeholders including employees and
customers. To discharge this responsibility,
the Board has established frameworks for risk
management and internal controls using the
Three Lines Model, see page 57, and reserves
for itself the setting of the Group’s risk appetite.
In-depth monitoring of the establishment and
operation of prudent and effective controls in
order to assess and manage risks associated
with the Group’s operations is delegated to the
Audit Committee, complemented by the work
of the Risk & Security Committee. However,
the Board retains ultimate responsibility for
the Group’s systems of internal controls and
risk management and has reviewed their
effectiveness during the year. The frameworks
are regularly reviewed for prudency. They
were in place throughout the financial year
under review and up to the date of this report.
They help ensure the Group complies with the
Financial Reporting Council’s (FRC) guidance
on Risk Management, Internal Controls and
related financial and business reporting.
After discussions with the Audit Committee
and the Risk & Security Committee, the Board
conducts a robust six-monthly assessment
of the Group’s emerging and principal risks
and specifically considered the principal
risks facing the company including the
impacts to the Group’s business model and
future performance and therefore require
management prioritisation and action when
approving the Group business plan.
During the year, as part of the oversight
process, the Board and the Risk & Security
Committee received updates on risks and
associated mitigating actions. Principal
risks were also taken into account in the
design of scenarios which are intended to
stress-test the Group’s five-year strategic
business plan, recovery plan, climate change
impacts, decisions on the return of capital to
shareholders and operational resilience.
Our risk management framework is designed
to consistently identify, evaluate, manage,
monitor and report the principal risks to
the achievement of the Group’s strategic
objectives and is embedded throughout the
Group. It is codified through risk policy and
associated processes and procedures which
set out the risk appetite, requirements and
controls for the Group’s worldwide operations.
This is further described on pages 56 - 61.
The Group maintains a manual of financial
reporting policies which is compliant with
International Financial Reporting Standards
(IFRS). An internal control framework is
in place across the Group which covers
Group financial reporting and local statutory
reporting activity. The process follows a
risk-based approach, with management
identification of key financial reporting-
related controls.
Board oversight of risk management
The Board’s delegated responsibilities
regarding oversight of risk management
and the approach to internal controls are
set out on pages 56 - 58 and 104. There
are strong working relationships between
the Board Committees, which enable robust
oversight of internal controls and risk
management. Committees provide regular
reports to the Board on their activities
and escalate significant matters where
appropriate. The responsibilities and activities
of each Board Committee are set out in the
Committee reports.
QinetiQ Group plc | Annual Report & Accounts 2024110
Remuneration Committee report
Susan Searle
Remuneration
Committee Chair
QinetiQ’s Gender Pay Gap data can be found
on our website at www.QinetiQ.com
Directors’
Remuneration Report
Dear Shareholder,
As the Group Chair notes in his statement on
page 2, FY24 was a year of continued strong
Group performance. This was reflected in
the incentive out-turns where stretch annual
financial targets were exceeded on orders
and cash, with profit between target and
stretch performance.
Reward decisions for FY24
The Remuneration Committee awarded base
salary increases of 3.8% for the CEO and 3.9%
for the former CFO effective 1 July 2023. Both
salary reviews are aligned with the Rewarding
for Performance guidance used for all UK
employees and below the 4.0% budget for the
July 2023 salary review.
Following the approval of the new Directors’
Remuneration Policy (the Policy) at the 2023
AGM, the unadjusted FY24 out-turn under the
new Annual Bonus Plan (ABP) would have been
87.5% and 85.0% of the maximum to the CEO
and former CFO respectively, reflecting strong
financial performance. The payment for FY24
will be structured as 70% in cash and 30% in
shares, deferred for two years.
FY24 saw the first grant under the new Long-
term Performance Award (LPA). The three-
year performance metrics for the grant were
cumulative underlying operating profit, Return
on Capital Employed (ROCE) and total revenue
growth, with stretch targets aligned to our
growth ambition.
Cycle 3 of the legacy Bonus Banking Plan
(BBP) will be released as shares in June 2024
as the FY24 performance underpin has been
achieved. The BBP is now closed and will cease
to operate.
The FY21 contingent share award under the
legacy Deferred Share Plan (DSP) will vest in
June 2024 as the performance underpin, that
FY24 profit had to exceed that delivered in
FY21, has been achieved. No further awards will
be made under the DSP as it was replaced by
the LPA.
The FY24 CEO single figure on page 117 is
higher than FY23, despite the lower FY24
annual incentive payment; this is largely due to
there not being a FY20 DSP contingent share
award vesting in June 2023.
The Committee agreed to exercise discretion
to adjust downwards the ABP payment for
FY24 in view of the tragic deaths of two
of our colleagues in the German business.
Although the formal investigations into this
accident are ongoing, we do not believe
that there was any contributory fault by the
Company. Notwithstanding this, the CEO and
the Committee felt it appropriate to reduce the
safety out-turn of the common goals element
of the ABP to demonstrate our commitment
to the highest levels of safety performance.
The Committee notes, however, that underlying
safety performance and controls continued to
improve in FY24 as a direct result of leadership
actions. This downwards adjustment will be
applied to the CEO, former CFO and all senior
leaders in the QinetiQ Leadership Community
(some 100 employees globally). Further details
are provided on pages 118 and 119.
The Committee also considered carefully the
potential impact on incentives of the share
buyback programme which commenced in
February 2024, involving the gradual purchase
and deletion of some £100m of shares over 12
months. The Committee noted that no current
incentive plans measure performance on a ‘per
share’ basis and that there was no direct boost
to financial performance as a result of the share
buyback. The Committee therefore determined
that no adjustment to incentives is necessary in
relation to the share buyback.
Leadership changes
After the end of FY24 on 16 April 2024, the
Company announced that Carol Borg, Group
CFO, and the Board together agreed that Carol
would step down from her role. Martin Cooper
has been appointed as Group CFO to succeed
Carol and he is expected to join the Company
no later than October 2024. The Committee
determined that she should be treated as a
Good Leaver for elements earned in year and
also agreed the appointment terms for Martin
as detailed on pages 123 and 128.
//The Committee was
pleased that the new
Policy received a 84.3%
‘For’ vote at the 2023
AGM and will continue to
work with stakeholders
to ensure that the Policy
supports the delivery
of our strategy and
growth ambitions.//
QinetiQ Group plc | Annual Report & Accounts 2024 111
Corporate governance
Two further critical roles were appointed to
the QinetiQ Leadership Team (QLT) in April
2024 for which the Committee approved the
remuneration terms - Iain Stevenson to the
newly created role of Chief Operating Officer
and the promotion of Will Blamey as Chief
Executive, UK Defence.
Directors’ Remuneration Policy
In FY23 the Committee spent a significant
amount of time considering the new Policy
and consulted widely with shareholders. The
Committee was pleased that the new Policy
received a 84.3% ‘For’ vote at the 2023 AGM
and will continue to work with stakeholders to
ensure that the Policy supports the delivery
of our strategy and growth ambitions.
Implementation for FY25
The ABP for FY25 is based on the same
financial metrics as in FY24 (orders, profit
and cash) with stretch targets set against the
delivery of the Integrated Strategic Business
Plan (ISBP). Financial metrics have a 70%
weighting and non-financial targets have a
30% weighting based on the achievement of
personal and common goals, with the focus of
the latter on ESG metrics.
The Committee has reviewed the performance
metrics for the FY25 LPA three-year
performance period and decided that as
for FY24 they will be cumulative underlying
operating profit, ROCE and total revenue
growth to drive consistent profit performance,
robust investment selection and value creation
for our customers through collaboration.
The Committee is cognisant that inclusion
of a relative Total Shareholder Return (TSR)
metric is a preference for at least one of
the Company’s major shareholders and it is
therefore committed to keeping the use of
TSR under review. However, the Committee
continues to believe that relative TSR is
strongly influenced by market sentiment and
is also mindful of the challenge of identifying
appropriate comparators for a Company such
as QinetiQ that has few direct UK peers.
Employee engagement and reward
Building on the cost-of-living measures we
implemented in FY23, we have invested further
in our overall employee offering in FY24. In the
UK, we have implemented a reward strategy and
addressed market relativity through providing
additional base salary increases to employees
ensuring they receive a fair market level of pay.
We have also achieved Living Wage
accreditation guaranteeing an above-
statutory level of pay for our lowest paid UK
employees. In the US we have implemented
a compensation framework in support of
integration. In the Australia sector we have
commenced a benchmarking exercise and will
be developing a sector-level reward strategy
over FY25. Our Group Hardship Fund and
Employee Assistance Programmes (EAP)
continue to provide additional support to our
employees who are experiencing challenging
personal circumstances.
QinetiQ’s employees are key to the delivery of
our ambitious growth strategy. Our employees
have been outstanding this year, demonstrating
extraordinary focus, collaboration and drive to
continue to deliver to our customers.
The CEO and the Chief People Officer have
held regular discussions with our Global
Employee Voice on reward matters. The social
section on page 48 details our employee
engagement activity.
I met with the Chair and other representatives
of the Global Employee Voice during the year
which provided a really insightful opportunity to
discuss the evolving global economic situation,
the working environment post COVID and how
we are focused on enhancing the performance
culture within the business.
The Company operates an All Employee
Incentive Scheme (AEIS) whereby every
eligible employee can earn a payment if the
Company achieves a level of operating profit
within a predetermined range from target to
stretch. FY24 performance was just below the
stretch profit target resulting in a payment for
the Company element of the AEIS of £1,138.
In addition, high-performing employees can
earn up to an additional 5% of salary based on
personal performance rating.
The AEIS is a key element of the Company’s
Rewarding for Performance framework and
aligns employees and shareholder interests by
incentivising and rewarding profitable growth.
The Company will operate the AEIS again
for FY25. Looking forward, the Company will
continue to invest in our global reward and
benefits strategy and our employee offering.
Conclusion
Supporting leadership to drive Company
performance and strategy by implementing
the new Policy were the primary areas of
focus of the Remuneration Committee in
FY24. The Committee believes the evolution
of the QLT at the beginning of FY25 sets the
Company up for success as it continues
to scale and grow globally. We also remain
mindful of the global competitive environment
and the increasing levels of responsibility.
The Company performed well in FY24 with
continued strong Group performance. To
achieve the next phase of profitable growth
we need simple stretching incentives which
offer motivating opportunities for leadership
aligned to the five-year strategy with
consistent operational performance.
I am very grateful for the time shareholders
have given us this year and I hope that
we can rely on your vote in support of the
Directors’ Remuneration Report at the AGM
on 18 July 2024.
I am pleased Dina Knight joined the
Committee in March 2024 and it is our
intention that she will take over the Chair
role in 12 months time.
I would welcome comments and questions
from shareholders in relation to this Directors’
Remuneration Report and I can be contacted
through companysecretariat@qinetiq.com.
Susan Searle
Remuneration Committee Chair
23 May 2024
QinetiQ Group plc | Annual Report & Accounts 2024112
Remuneration at a glance
Directors’ Remuneration Report continued
Remuneration at a glance
Components, alignment, application and changes
Annual fixed pay Link to strategy Application in FY25
Salary
Executive Directors’ base salaries are set on
appointment and reviewed annually, or when
there is a change in position or responsibility.
Typically, base salaries will be increased by a similar
percentage to the average pay increase for all
employees of the Group.
Fixed pay is set at a level that enables us to attract
and retain high-quality Executive Directors, who
are capable of successfully leading and executing
our strategy and delivering long-term sustainable
growth. Our Policy aims to ensure that fixed pay
remains attractive and competitive.
No change in prior-year implementation of Policy.
Benefits
Benefits include a car allowance, health
insurance, life assurance, income protection
and taxable expenses.
No change in prior-year implementation of Policy.
Pension
Executive Directors receive 10.5% of base salary
allowance as cash in lieu of pension which is
equivalent to the UK workforce pension available
to all employees.
No change in prior-year implementation of Policy.
Annual Variable pay Link to strategy Application in FY25
The Annual Bonus Plan (ABP) introduced for FY24
onwards is as follows:
– 70% of any outcome is payable in cash at year
end and 30% will be deferred into shares, which
vest after two years
– The maximum incentive for Executive Directors
is 200% of salary
– The performance measures used for the ABP
are the same as those used in prior years. For
FY25 these are orders, operating profit, cash flow,
common goals (which include ESG metrics) and
personal goals. As in FY24, a weighting of 70%
financial and 30% non¬financial metrics will be
used for FY25
The ABP rewards strong sustainable financial
performance through a 70% weighting on core
financial metrics, driven by the implementation of
our strategy.
The ABP also rewards non-financial performance
through the delivery of key common goals related
to environment (Net-Zero roadmap), employee
engagement and inclusion, and safety and the
achievement of personal goals.
The partial deferral of any ABP payment into shares
drives a long-term and sustainable focus aligned to
the interests of shareholders.
For FY25 the Remuneration Committee revised
the annual incentive financial target weightings
(70% in aggregate) by reducing orders to
15% (FY24 20%) and increasing cash to 25%
(FY24 20%), profit remains at a 30% weighting.
The revised weightings reflect the need to drive
profitable growth and strong cash management
and are closely aligned to strategy.
Long-term variable pay Link to strategy Application in FY25
The Long-term Performance Award (LPA)
introduced for FY24 onwards is as follows:
– Three-year performance test with any
shares vesting subject to a further two-year
holding period
– The maximum LPA award for Executive Directors
is 250% of salary for the delivery of truly
stretching financial targets
– The performance measures used for the LPA
for FY25 will be earnings, ROCE and total
revenue growth
– No more than 20% of each element of the award
will vest at threshold levels of performance
The LPA has a clear link to strategy and
incentivising growth:
– Cumulative earnings: To deliver consistent
operational performance over the longer term.
Understood, relevant and actionable for QinetiQ
senior leaders
– Returns: To drive robust investment selection
and delivery
– Total revenue growth: To drive value creation
through collaboration and market leverage
The payment of any LPA in shares which must
be held for a further two years drives a long-term
and sustainable focus aligned to the interests
of shareholders.
No change in prior-year implementation of Policy
and financial targets.
QinetiQ Group plc | Annual Report & Accounts 2024 113
Corporate governance
Fixed pay
ABP
LPA
Year 1 Year 2 Year 3 Year 4 Year 5
Pay at risk subject to performance conditions
Shares held, not subject to performance conditions
Key
Fixed pay
Annual variable pay
Long-term variable pay
* Full year calculation shown
Illustration of FY25 potential
(£’000)
Steve Wadey
Chief Executive Officer
Martin Cooper*
Chief Financial Officer
Target TargetStretch Stretch+50% +50%Min Min
Total
£882
Total
£2,500
Total
£4,118
Total
£5,017
Total
£523
Total
£1,547
Total
£2,570
Total
£3,139
£882
£523
£910
£1,706
£523
£1,438
£2,697
£882
£1,438
£882
£1,798
£910
£523
£1,138
£882
£899
£719
£523
£569
£455
Single Figure FY24
(£’000)
Steve Wadey
Chief Executive Officer
Carol Borg
Chief Financial Officer
Key
Fixed pay
Annual variable pay
Long-term variable pay
FY24FY23 FY24FY23
Total
£2,164
Total
£2,929
Total
£1,393
Total
£1,308
£1,304
£860
£558
£835
£744
£564
£1,180
£901
£848
Timing
To create strong alignment between executive remuneration and the long-term interests of our shareholders, the ABP is paid in part in deferred shares
vesting two years after the award was earned. The LPA has a three-year performance period, after which any vested shares must be retained by the
Executive for a further two years.
Minimum – Fixed pay (FY25 base salary, plus
taxable benefits and pension allowance)
Target – Fixed pay plus ABP at Target (100%
of base salary) and LPA at Target (125% of
base salary)
Stretch – Fixed pay plus ABP at Maximum
(200% of base salary) and LPA at Maximum
(250% of base salary)
+ 50% Share price appreciation – Stretch plus
50% share price appreciation (on 100% of LPA)
QinetiQ Group plc | Annual Report & Accounts 2024114
Directors’ Remuneration Policy Q&A
Directors’ Remuneration Report continued
Q
What are the principles of
QinetiQ’s Directors’
Remuneration Policy?
The principles of the Policy are:
– A clear approach with alignment to market
practice and separation between annual
and long-term incentives;
– To drive sustainable annual performance,
supporting our ambitious growth strategy
and long-term value creation;
– Balance between supporting organic
and inorganic growth;
– Drive collaboration across our teams; and
– Retain, attract and incentivise top talent.
Q
How does the Policy
align executive pay
with the interests of
shareholders?
QinetiQ’s annual incentive scheme and long-
term share plan deliver shares which must be
retained after any award is paid or vests. In
our ABP, 30% of the award is deferred and held
as shares and is therefore subject to share
price exposure. In our LPA there is a three-year
performance period before any shares vest
and then a further two-year holding period.
In addition, the Executive Directors are
required to build and hold a significant
shareholding in the Company of 300%
of salary for the CEO and 200% for other
Executive Directors.
Q
How does your Policy reward
the implementation of
Company strategy?
Our strategy, as detailed in our five-year
Integrated Strategic Business Plan (ISBP),
aims to deliver sustainable and long-term
growth in our business and to increase value
to our shareholders.
The Policy focuses on the achievement of
stretching but sustainable annual and three-
year financial performance targets aligned
to the ISBP, balanced with common goals
and personal objectives, to provide strategic
alignment and support the growth ambition
of the Company.
Q
How does the Policy drive
corporate culture?
Our annual bonus scheme includes a 30%
weighting towards non-financial metrics
including common goals (which include ESG
metrics) and personal objectives. Common
goals are based on ESG targets for employee
engagement and inclusion, progress towards
the Net-Zero target and the overall safety
maturity of the Company.
The personal objectives measure the ‘what’
and the ‘how’ to ensure that key personal
deliverables are achieved through collegiate
and collaborative behaviours.
Q
How is ESG reflected within
the bonus plans?
ESG is measured through metrics such as
route to Net-Zero, employee engagement and
diversity and inclusion interventions. These
have a 17.5% weighting in the current annual
incentive plan, which we anticipate will continue
for the ABP in FY25 and thereafter. At this
current point in the Company’s journey towards
Net-Zero and other core ESG milestones, the
Committee considers it better to focus on
annual incremental performance to deliver long-
term goals.
Q
How do you avoid rewarding
for failure?
In line with best practice, Executive Directors’
contractual notice periods are 12 months with
termination payments normally limited to salary,
benefits and pension with a duty to mitigate
loss if they are terminated by the Company.
Incentives have stretching performance targets
to ensure that any payments are justified with
the Remuneration Committee having discretion
to adjust the formulaic out-turn to ensure that
rewards are appropriate. In addition, bonus
deferral, holding periods and shareholding
requirements ensure a focus on sustainable
share price performance.
Q
How have you supported
employees in FY24
Building on the cost-of-living measures we
implemented in FY23, we have invested
further in our overall employee offering in
FY24. In the UK, in response to the continued
high levels of inflation we have provided
additional base salary increases to ensure
our employees receive a fair market level
of pay. We have also achieved Living Wage
accreditation guaranteeing an above-
statutory level of pay for our lowest paid
UK employees and subcontractors and are
working towards equivalent accreditation in
other geographies (e.g. Canada). In the US
we have concluded a benchmarking exercise
helping us to better understand our market
position and in the Australia sector we have
commenced a benchmarking exercise and will
be developing a sector-level reward strategy
over FY25. Our Group Hardship Fund and
Employee Assistance Programmes (EAP)
continue to provide additional support to our
employees who are experiencing challenging
personal circumstances.
Q
How do you focus on employee
engagement?
Our employees share in the Company’s
success following the introduction of the AEIS
in FY19 which pays up to £1,250 to all eligible
employees on the basis of the Company’s
annual operating profit performance. The
AEIS is important as a performance driver,
to support collaboration and to share the
success we create for shareholders.
Our Global Employee Voice (GEV),
representing our global employees, is deeply
engaged across the Company. We listen to
the views and level of engagement of our
people through a quarterly survey using a
market-leading dynamic tool (Peakon).
QinetiQ Group plc | Annual Report & Accounts 2024 115
Corporate governance
Summary Directors’ Remuneration Policy
The Directors’ Remuneration Policy
was approved by shareholders at the
AGM on 20 July 2023.
The full Policy is provided in the Corporate
Governance section on the Company’s
website, and it will remain in effect until the
2026 AGM. When considering the review of
the Policy, the Committee was mindful of UK
Corporate Governance Code provisions which
state that the Committee should address the
issues as follows:
– Clarity is achieved by the simplification of
the incentives and the better separation
between the annual and long-term plans in
the Policy
– Simplicity is delivered by a simple approach
to incentives in the Policy, particularly
the ABP
– Risk continues to be managed through the
operation of a broad suite of performance
measures and targets, the use of deferral,
holding periods and malus and clawback
provisions, and the close interaction with the
Audit and Risk & Security Committees
– Predictability is achieved by setting clear
performance targets and outcomes
for threshold, target and stretch levels
of performance, with a close link to
Company strategy
– Proportionality is delivered through
performance conditions, both financial
and non-financial, with the clear link to
strategy. The Committee has the discretion
to override formulaic outturns to ensure
that they are appropriate and reflect
overall performance
– Alignment to culture is supported by
performance measures which are
consistent with the Company’s purpose,
values and strategy
A summary of the Policy is set out below:
Element Purpose and link to strategy Operation and performance measures Maximum opportunity
Base salary To attract and retain the
talent needed to lead
our business.
An Executive Director’s base salary is set on
appointment and reviewed annually or when there
is a change in position or responsibility.
When determining an appropriate level of salary,
the Committee considers:
– general salary rises to employees;
– remuneration practices within the Group;
– any change in scope, role and responsibilities;
– the general performance of the Group;
– the experience of the relevant Director;
– the economic environment; and
– pay levels for similar roles among
appropriate comparators.
Individuals who are recruited or promoted to the Board
may, on occasion, have their salaries set below the
targeted policy level until they become established in
their role. In such cases subsequent increases in salary
may be higher than the general rises for employees
until the target positioning is achieved.
Typically, the base salaries of Executive Directors in
post at the start of the Policy period and who remain in
the same role throughout will be increased by a similar
percentage to the average annual percentage increase
in salaries of all other employees in the Group.
The exceptions to this rule may be where:
– an individual is below market-level and a decision
is taken to increase base pay to reflect proven
competence in the role; or
– there is a material increase in scope or responsibility
to the Executive Director’s role.
The Committee ensures that maximum salary levels
are positioned in line with companies of a similar size
to QinetiQ and validated against other companies
in the industry, so that they are competitive against
the market.
Pension
allowance
To ensure that Executive
Directors’ total
remuneration remains
attractive and competitive.
The Company provides a pension contribution
allowance in line with practice relative to its
comparators to enable the Company to recruit and
retain Executive Directors with the experience and
expertise to deliver the Group’s strategy.
The maximum policy pension allowance is aligned with
the Company pension contribution paid to the majority
of UK pension scheme members (which is currently
10.5% of salary).
Benefits To ensure that Executive
Directors’ total
remuneration remains
attractive and competitive.
Benefits include car allowance, health insurance, life
assurance, income protection, expenses incurred which
HMRC may deem taxable and membership of the
Group’s employee Share Incentive Plan which is open
to all UK employees.
Benefit values can vary year-on-year depending on
premiums and the maximum is the cost of providing
the relevant benefits.
QinetiQ Group plc | Annual Report & Accounts 2024116
Directors’ Remuneration Report continued
Summary Directors’ Remuneration Policy continued
Annual Incentive Purpose and link to strategy Operation and performance measures Maximum opportunity
Annual Bonus
Plan (ABP)
The ABP provides
an incentive for the
Executive Directors to
achieve targets that are
entirely aligned to the
Company’s strategy.
– The ABP is an annual incentive plan with a one year
performance measurement period, with any award
paid partly in deferred shares;
– A maximum award of 200% of salary is available
each year;
– At the end of the first year 70% of the award is paid
as a cash bonus;
– The remaining 30% is deferred as an award of
deferred shares that must be held for two years, and
are subject to malus and clawback for up to three
years from the payment date; and
– Dividend equivalents will be paid on the
deferred shares.
Maximum = 200% of salary.
Target = 100% of salary.
Threshold = 0% of salary.
Long-term
Incentive Purpose and link to strategy Operation and performance measures Maximum opportunity
Long-term
Performance
Award (LPA)
The LPA provides an
incentive for the Executive
Directors to achieve
long-term financial targets
that are entirely aligned to
the Company’s strategy
and the creation of
shareholder value.
The delivery of any LPA
in shares, which must be
held for a further two-
years, drives a long-term
and sustainable focus
aligned to the interests
of shareholders.
Vesting of the LPA award will be determined by
performance against a scorecard of three-year
performance measures, the majority of which will be
financial (which will not duplicate those for the ABP).
Any vested shares must be held for a further two years.
Malus and clawback provisions apply to the LPA.
The Committee will normally provide dividend
equivalents on vested shares under the LPA.
Maximum = 250% of salary.
Target = 125% of salary.
Threshold = 50% of salary.
No more than 20% of each element of the LPA may vest at
threshold levels of performance.
Element Purpose and link to strategy Operation and performance measures Maximum opportunity
Minimum
shareholding
requirements
– during
and after
employment
To align Executive Directors’
interests with those of
shareholders through the
build-up and retention of a
personal holding in QinetiQ
shares.
Executives have five years to accumulate the required
shareholding.
300% of base salary for the CEO.
200% of base salary for other Executive Directors.
Executive Directors will have a post-employment
shareholding requirement of 100% of salary for the first
year post cessation, then 50% of salary for the second
year post cessation of employment.
The Committee reviews compliance on an annual basis and
adherence to these guidelines is a condition of continued
participation in the equity incentive arrangements.
Chairman and Non-executive Directors
Fees To attract and retain Non-
executive Directors of the
calibre required to assist
the Company in setting and
delivering its strategy.
Fees are reviewed annually based on equivalent roles in
the comparator group used to review salaries paid to the
Executive Directors.
The fees for Non-executive Directors and the Group
Chair are broadly set at a competitive level against the
comparator group.
QinetiQ Group plc | Annual Report & Accounts 2024 117
Corporate governance
Annual Report on Remuneration
The following section of this report details how the Directors’ Remuneration Policy has been implemented for the year ended 31 March 2024.
Audited information
Executive Directors’ single total figure of remuneration:
Executive Director Year
Salary
£’000
Benefits
£’000
Pension
£’000
Total fixed
pay
£’000
Annual
Bonus Plan
£’000
Deferred
Share Plan
£’000
Total variable
pay
£’000
Total
remuneration
£’000
Steve Wadey (CEO) FY24 689 87 72 848 1,180 901 2,081 2,929
FY23 664 79 117 860 1,304 – 1,304 2,164
Carol Borg (CFO) FY24 448 69 47 564 744 – 74 4 1,308
FY23 431 82 45 558 835 – 835 1,393
Benefits can include travel and subsistence expenses incurred in relation to the execution of their duties with the company that are considered by HMRC to be taxable.
Where the company settles the director’s tax, the value disclosed is not grossed up for tax.
Salary
Salaries are reviewed effective 1 July,
which is the same timing as for the
rest of the UK employee population.
Salary as
1 April 2023
£’000
Increase
in the year
Salary as at
1 July 2023
£’000
FY24 salary
actually paid
£’000
CEO 670 3.8% 696 689
CFO 435 3.9% 452 448
Benefits (audited)
Benefits comprise a car allowance, travel allowance,
private medical expenses insurance, life assurance,
income protection and taxable expenses.
Taxable expenses
£’000
Travel & car
allowance £’000
Insurance benefit
£’000
Total benefits
£’000
CEO 43 19 25 87
CFO 1 63 5 69
Pensions (audited)
The Executive Directors did not participate in the QinetiQ pension scheme for FY24.
The pension figure is cash in lieu of pension equating to 10.5% of base salary.
The FY23 figure for the CEO above has been restated for a pension allowance payroll
error correction payment of £2,316.
Cash in lieu of
pension
£’000
Total in lieu of
pension
£’000
CEO 72 72
CFO 47 47
Annual Bonus Plan (audited)
The ABP is an annual incentive plan with a one-year performance measurement period, with any award paid partly in deferred shares. After the end
of the first year, 70% of the award is paid as a cash bonus. The remaining 30% is made as a deferred share award that must be held for two years
and is subject to continued employment. Malus and clawback apply for up to three years from the payment date.
ABP award
£’000
June 2024
payment in cash
(70% value £’000)
Value of
share payment
(30% value £’000)
30-day average share
price to 31 March 2024
(p)
Estimated Deferred
shares awarded
June 2024
CEO 1,180 826 354 364.9 97,028
CFO 744 521 223 364.9 61,202
Deferred Share Plan (audited)
The FY21 legacy DSP award achieved the performance underpin based on FY24 profit exceeding that in FY21 (£150.0m) and, therefore, the
shares ceased to be contingent, will vest in June 2024 and are disclosed in the single figure for FY24. The 100% vesting refers to the shares which
have passed the underpin of those initially granted based on FY21 performance, which was 100% of the maximum available. The share value used
is the 30-day average to 31 March 2024 (364.9p) and the estimated value includes £51,902 as dividend equivalent payments.
FY21 Shares awarded Vesting % Shares vesting Estimated value £’000
CEO 232,746 100% 232,746 901
QinetiQ Group plc | Annual Report & Accounts 2024118
% of maximum
Orders
Underlying net cash flow from operations
Underlying operating profit
Common goals
Personal goals
12.5%
20%
30%
20%
17.5%
Directors’ Remuneration Report continued
Annual Bonus Plan (audited)
For the year ended 31 March 2024 achievement of on-target performance
provides a payment equal to 100% of base salary, rising on a linear scale to 200%
of base salary for achievement of stretch performance.
The scheme begins to pay out once threshold performance measures have been
achieved. For the year ended 31 March 2024, the CEO and CFO were measured
against the targets as shown in the chart to the right. The target payment was
50% of maximum for financial and non-financial objectives.
When setting performance targets the Remuneration Committee takes into
account the budget and the Company’s strategy set in relation to the ISBP,
shareholder expectations and the external environment.
The aim is to set stretching targets which incentivise the Executive Directors to
deliver annual results which will exceed the expectations of investors, but which
are also sustainable and do not create undue profit risk. Financial performance
measures exclude the contribution from businesses acquired in the year.
Audited information
FY24 performance outcomes
Threshold Target Stretch Actual
% of
maximum
reward
achieved
CEO
contribution
CFO
contribution
CEO/CFO financial performance measures
Orders
1
20% £1,525.0m £1,650.0m £1,725.0m £1,740.4m 100.0% £275,664 £179,109
Underlying operating profit
1
30% £194.0m £205.0m £217.0m £215.2m 92.5% £382,484 £248,514
Underlying net cash flow from operations
1
20% £230.0m £250.0m £270.0m £304.6m 100.0% £275,664 £179,109
CEO/CFO common goals (as detailed on page 119)
– Performance against key stretching objectives
2
17.5% 40% 50% 100% 55.7% 55.7% £134,386 £87,316
CEO personal goals
– Performance against stretching objectives 12.5% 40% 50% 100% 80.0% 80.0% £137,832
CFO personal goals
– Performance against stretching objectives 12.5% 40% 50% 100% 60.0% 60.0% £67,166
CEO overall result
2,3
87.5% £1,206,030
CFO overall result
2,3
85.0% £761,214
1 Definition of underlying measures and performance can be found in the glossary on page 200.
2 Based on a recommendation by the CEO, the Committee agreed to exercise discretion to adjust downwards the ABP payment for FY24 in view of the tragic accident when two of our
colleagues lost their lives in the German business. This downwards adjustment reduced the actual FY24 ABP payment by £25,844 and £16,791 for the CEO and former CFO respectively,
resulting in actual payments of CEO £1,180,186 (85.6% of the maximum) and former CFO £744,423 (83.1% of the maximum).
3 The FY24 ABP payment will be made 70% in cash in June 2024 and 30% will be awarded as deferred shares in June 2024 which must be held for two years.
Annual Report on Remuneration continued
QinetiQ Group plc | Annual Report & Accounts 2024 119
Corporate governance
Common goals (17.5% weighting) (audited)
Measures FY24 Performance
Out-turn
(% maximum)
Net-Zero (5.0% weighting) Make demonstrable progress towards the QinetiQ Net-Zero plan by reducing Scope 1, 2 and some
elements of Scope 3 emissions.
The FY24 Net-Zero Threshold performance level was not achieved resulting in a zero payment for
this element.
Engagement (5.0%
weighting)
Achieve Group Peakon (third-party employee engagement survey) improvement target above FY23
baseline.
FY24 employee engagement was above FY23 baseline performance and, at year end, was at an all-time
highest level. FY24 performance was between Target and Threshold for this measure.
Safety (7.5% weighting)
Safety Maturity (3.75%)
Safety Interventions (3.75%)
Drive the overall safety maturity of the Group as measured by an independent process. Make specific
tangible safety interventions that improve underlying safety performance and controls.
For FY24 the safety maturity score was above Stretch, marking strong progress against this independent
process, and both Executive Directors delivered the Stretch requirement for tangible safety interventions.
Total
Overall out-turn reduced by 1.875% (i.e. 50% of the 3.75% weighting aligned to safety maturity) as an
exercise of discretion in relation to the two employee deaths in FY24. The adjusted out-turn is 45.0% 55.7%
Personal goals (12.5% weighting) (audited)
FY24 Performance
Out-turn
(% maximum)
CEO Mature safety, security and organisational capability. Measures - demonstrable progress against
improvement plans for safety, security and programme management.
Deliver consistent operational performance in FY24. Measures - demonstrable consistent performance
throughout the year evidenced by KPIs, with minimal programme performance issues.
Develop culture that enables sustainable growth to realise 5-year ambition. Measures -
launch a programme of work focused on enabling our leadership in support of our culture
development programme.
Enable growth through customer focus and investment in capabilities consistent with AUKUS. Measures -
strong customer feedback and delivery of AUKUS roadmap to shape our future strategy.
Total 80.0%
CFO Mature Finance & Governance Function consistent with 5-year ambition. Measures - demonstrable
progress of functional development and capability enhancement with consistent positive feedback from
key stakeholders.
Deliver consistent operational performance in FY24. Measures - demonstrable consistent performance
throughout the year evidenced by KPIs, with minimal programme performance issues.
Embed Three Lines assurance model across company. Measures - evidenced progress of Three Lines
assurance model embedding across the Company
Deliver year 2 of ESG plan. Measures - evidenced progress against Net-Zero plan in year with proactive
leadership in support of the ESG development company wide.
Total 60.0%
QinetiQ Group plc | Annual Report & Accounts 2024120
Measurement date at the end of each Plan Year
Contribution or forfeiture
Participant’s plan account
50% of closing balance paid out at the
end of each Plan Year. Unpaid balance deferred in notional shares.
100% of closing
balance in Plan account
paid in shares.
Cycle 3
Year 1
FY21
FY22 FY23 FY24
Year 2 Year 3 Year 4
BBP payout mechanism
How the legacy BBP operated
– The Plan operated on a fixed three-year
performance cycle with a four-year
vesting cycle. FY24 represents Year 4
of Cycle 3.
– Performance targets were set at the
beginning of each Plan year.
– At the end of each of the first three Plan
years the performance against targets
was assessed and the level of the
incentive earned is determined and paid
into the Plan account.
– Each year 50% of the account balance
was subject to forfeiture based on the
achievement of a profit underpin target.
– At the end of each of the first three Plan
years, 50% of the account balance was
paid in cash and the balance retained and
held in the Plan as notional shares.
– At the end of Year 4 for Cycle 3, any
remaining balance in the Plan account is
paid out in shares and a cash dividend
equivalent is paid.
Directors’ Remuneration Report continued
Annual Report on Remuneration continued
Forfeiture
For BBP Cycle 3 the CEO and CFO retained notional shares in their Plan accounts of which 50% were subject to forfeiture. Forfeiture would have
been enacted if Group underlying operating profit was less than the level determined by the Remuneration Committee at the start of the year of
£173m for FY24. Group underlying operating profit for FY24 was £215.2m therefore no notional shares were forfeited and the closing balance will
be paid out in shares following the end of FY24.
Termination of the BBP
Following the introduction of the ABP, the BBP has been terminated and no investment made in FY24. The notional shares on account as at the
end of Plan Year 3 (as identified below) will be delivered to the CEO and former CFO as actual shares with a dividend equivalent payment in
June 2024.
Audited information
Vesting of Cycle 3 closing account balance
Notional
shares on
account at
start of
Plan Year 4
(1 April 2023)
30-day
average share
price to
31 March
2024
(p)
Share
value as at
measurement
(£)
Bonus plan
contribution
date for
Plan Year 4
(£)
Dividend
equivalent
payment
(£)
Bonus
pool total
value as at
measurement
date
(£)
Gross
payment in
cash for Plan
Year 4
(£)
Bonus pool
total value
after cash
payment
(£)
Notional shares
on account
at end of
Plan Year 4
(31 March 2024)
CEO 322,568 364.9 1,177,147 – 25,483 1,202,534 – – 329,551
CFO 149,658 364.9 546,147 – 11,823 557,925 – – 152,898
QinetiQ Group plc | Annual Report & Accounts 2024 121
Corporate governance
Legacy Deferred Share Plan (DSP) (audited)
Termination of the DSP
Further to shareholder approval of the new Directors’ Remuneration Policy at the 2023 AGM, the DSP was terminated and no award was made in
relation to FY24 performance. The FY23 DSP award was 100.0% of the maximum available (125% of salary for Executive Directors); it has been
deferred for three years and remains subject to a performance underpin; any vested shares are then subject to a further two-year holding period.
Details of the final FY23 DSP award, which was made on 20 June 2023, were provided in the FY23 Report. Subsisting DSP awards as identified
on page 123 will continue to be available to vest on the basis of the relevant performance underpin.
The FY21 DSP award achieved the performance underpin based on the FY24 profit exceeded that in FY21 (£150.0m) and, therefore, the shares
ceased to be contingent and will be released on 25 June 2024. Had the FY24 profit not been greater than FY21, 50% of the DSP award would have
lapsed. The net shares vesting from the FY21 DSP must be retained for a further two years. The value of this award is shown in the single figure
table for the CEO (the former CFO did not receive an FY21 DSP award). The value of the 232,746 shares vesting is £849,290 based on the 30-day
average to 31 March 2024 (364.9p). The estimated value includes £51,902 as dividend equivalent payments based on an aggregate dividend of
22.3p paid in FY22 to FY24 and a share price appreciation between grant and vesting of £100,081.
Long-term Performance Award (LPA) (audited)
Performance targets for FY24
The Committee set performance measures and targets for the Long-term Performance Award with a clear link to Company strategy and
incentivising growth:
– Earnings: organic underlying operating profit on a three-year cumulative basis (35% weighting)
– Designed to deliver consistent operational performance over the longer term
– Understood, relevant and actionable for QinetiQ senior leaders
– Returns: ROCE (35% weighting)
– Average EBITA for the three-year period divided by average capital employed
– Designed to drive robust investment selection and delivery
– Value creation through collaboration: total revenue growth (30% weighting)
– Designed to drive value creation through collaboration and market leverage
For the FY24 LPA the Committee agreed the following targets aligned with our growth ambition (20% of each element vests at Threshold).
Cumulative earnings targets are deemed commercially sensitive at this time but are consistent with our growth ambition at 11-12% margin.
ROCE Threshold 15.0% Stretch 20.0%.
FY26 Total revenue Threshold £1.9bn Stretch £2.7bn.
The FY24 Target level of performance is not calculated on a linear basis and the Target is deemed commercially sensitive at this time as it is
aligned to confidential Group strategy.
FY24 LPA conditional share awards were granted based on a maximum of 250.0% of base salary at a share price of 321.3p determined over a
five-day period prior to grant. The three-year performance period for the FY24 award ends on 31 March 2026. Any shares which vest must then be
held for a further two years.
QinetiQ Group plc | Annual Report & Accounts 2024122
Audited information
Statement of Directors’ shareholding and share interests.
In relation to the shareholding requirement adopted on 1 April 2017 the Company requires Executive Directors to hold shares (beneficially owned)
equivalent to 300% (CEO) and 200% (CFO) of base salary. Executive Directors have five years from the adoption of the guideline to achieve the
required level through, at a minimum, retaining 50% of the after-tax shares vesting from Company incentive plans.
The CEO has achieved his shareholding requirement and currently holds shares equivalent to 335% of base salary using a share price of 354.7p
(three-month average to 31 March 2024). On 27 July 2023 the CEO sold 300,000 QinetiQ shares which had vested as part of his participation in
Company share incentive plans. After the share sale the CEO remained compliant with his shareholding requirement.
The former CFO was appointed during 2021 and had not achieved the minimum shareholding requirement at year-end, with a holding of shares
equivalent to 0% of base salary. The post-cessation shareholding requirement will be applied to shares vesting after the termination of her
employment as per Policy.
The Remuneration Committee continues to monitor compliance with the shareholding requirement.
Shares
beneficially
owned
Shares
subject to
performance
conditions
Shares
not subject
to performance
conditions
Total share
interests at
31 Mar 2024
Steve Wadey 657,308 1,164,740 544 1,822,592
Carol Borg – 551,044 193,199 744,243
Michael Harper
1
45,000 – – 45,000
Shonaid Jemmett-Page 7,000 – – 7,000
Neil Johnson 100,000 – – 100,000
Dina Knight
2
– – – –
Ross McEwan
2
– – – –
General Sir Gordon Messenger 11,958 – – 11,958
Steve Mogford – – – –
Lawrence Prior III
3
– – – –
Susan Searle 48,300 – – 48,300
1 Michael Harper – Resigned 20 July 2023
2 Dina Knight and Ross McEwan – Appointed 1 March 2024
3 Lawrence Prior III – Resigned 16 March 2024
Shares beneficially owned comprise shares purchased under the Share Incentive Plan (SIP) and shares owned by the Director and any connected
persons. SIP matching shares are identified as shares not subject to performance conditions. On 9 April 2024 Steve Wadey purchased 56 shares,
then on 9 May 2024 he purchased a further 56 shares, through his participation in the SIP. Shares subject to performance conditions comprise
awards made under the Deferred Share Plan and Long term Performance Award which remain contingent subject to the relevant performance
conditions as detailed on page 123.
Carol Borg’s share interests were adjusted on leaving the Company as detailed on page 123.
There have been no other changes to the shares shown above between 31 March 2024 and 23 May 2024. Notional shares held by the CEO and
former CFO in the BBP Cycle 3 do not appear in the table above as they are not actual shares at 23 May 2024. However, it is anticipated that the
BBP Cycle 3 shares will vest as actual shares in June 2024.
Directors’ Remuneration Report continued
Annual Report on Remuneration continued
QinetiQ Group plc | Annual Report & Accounts 2024 123
Corporate governance
Audited information
Total scheme interests summary
Total scheme interests, including those awarded during the financial year ended 31 March 2024, are as follows.
Plan name Date of grant
Number
1 April
2023
Granted in year
(maximum
potential of
awards)
Vested
in year
Lapsed
in year
Number
31 March
2024
Share price
on date
of grant Vest date
Steve Wadey
DSP 2021 25 Jun 21 232,746 – – – 232,746 321.9 25 Jun 24
DSP 2022 14 Jun 22 159,198 – – – 159,198 302.1 14 Jun 25
DSP 2023
1
20 Jun 23 – 251,444 – – 251,444 330.2 20 Jun 26
LPA 2024
2
28 Sep 23 – 521,352 – – 521,352 321.3 28 Sep 26
391,944 772,796 – – 1,16 4,740
Carol Borg
Compensation
Share Plan 5 Jan 22 193,199 – – – 193,199 258.8 5 Jan 25
DSP 2022 14 Jun 22 49,299 – – – 49,299 302.1 14 Jun 25
DSP 2023
1
20 Jun 23 – 163,256 – – 163,256 330.2 20 Jun 26
LPA 2024
2
28 Sep 23 – 338,489 – – 338,489 321.3 28 Sep 26
242,498 501,745 – – 74 4,24 3
1 The FY23 DSP contingent share award granted on 20 June 2023 at a share price of 330.2p (30-day average to 31 March 2023) is calculated on awards of 100.0% of the maximum
(125.0.% of salary) with a face value of £830,268 and £539,071 for the CEO and former CFO respectively. If the FY23 Group underlying organic profit (£169.5m) is not achieved in FY26,
a minimum of 50% of the award will lapse.
2 The FY24 LPA conditional shares granted on 28 September 2023 at a share price of 321.3p (5-day average prior to grant) are calculated on the basis of 250.0% of salary with a face
value of £1,675,104 and £1,087,565 for the CEO and former CFO respectively. The performance period for the FY24 LPA ends on 31 March 2026 based on the achievement of earnings,
ROCE and revenue targets. Any shares which vest must be retained for a further two years.
As part of the package approved by the Remuneration Committee for Carol Borg at recruitment, it was agreed that she would receive a share
award in part compensation for share awards which were forfeited on resigning from her former employer. On 5 January 2022 Carol was granted
an award over 193,199 shares which will vest in three years. The QinetiQ share price used was the average closing price over the 30 days prior to
the award with a value at grant of £500,000. As part of her termination arrangements, these shares will vest in full on the normal vesting date.
Carol Borg’s FY22 and FY23 DSP awards will be reduced for time pro-rating and remain subject to the relevant performance underpin being met.
Any DSP shares which vest will remain subject to a two-year holding period. Her FY24 LPA award lapsed on leaving on 15 April 2024.
The FY24 ABP payment will be paid 30% in shares deferred for two years. It is anticipated that these shares will be awarded in June 2024.
There have been no other changes to the interests shown above between 31 March 2024 and 23 May 2024.
Payments to past Directors and payment for loss of office (audited)
No payments were made to past Directors during the year and no payments were made for loss of office during the year.
As announced on 16 April 2024, Carol Borg stepped down from the role of Group CFO by mutual agreement and Martin Cooper will join QinetiQ
to succeed Carol as Group CFO. Full details were disclosed in accordance with s.430(2B) of the Companies Act 2006 and in the FY25 Directors’
Remuneration Report.
The Remuneration Committee exercised its discretion taking account of her contribution to determine that Carol should be treated as a Good
Leaver in respect of a number of her incentive arrangements. The details of her remuneration following the cessation of her employment are
as follows:
– Pay in lieu of her 12-month notice period. This will be paid in quarterly instalments and reduced if she secures employment.
– FY24 ABP payment based on actual results, 70% in cash and 30% in shares which will vest after two years from payment in June 2024.
– The conditional share award termed the Compensation Share Plan, awarded in part compensation for share awards which were forfeited
on resigning from her former employer, will vest on the normal vesting date in accordance with the original terms of the award.
– FY22 and FY23 DSP awards, reduced for time pro-rating, subject to the relevant performance underpin being met. Vested shares will remain
subject to a two-year holding period.
– No incentive payments will be paid in respect of her service in FY25 and the FY24 LPA will lapse.
– Shares vesting will be subject to the post-cessation share ownership requirement as per Policy.
QinetiQ Group plc | Annual Report & Accounts 2024124
TSR – Value of a £100 investment
made on 31 March 2014
As at 31 March
Ten-year comparator chart
QinetiQ
FTSE 250 (excluding investment trusts)
Source: : Refinitiv Eikon
250
200
150
100
50
0
2014
2015
2017
2019
2020
2016
2021
2018
2022
2023
2024
Performance review
The ten-year chart shows the Company’s Total Shareholder Return over the period from 31 March 2014 to 31 March 2024 compared with the
FTSE 250 (excluding investment trusts) over the same period based on spot values.
The Committee has chosen to demonstrate the Company’s performance against this index as it is the index in which the Company is listed.
Directors’ Remuneration Report continued
CEO remuneration
The table below shows the CEO’s remuneration over the same performance period as the Total Shareholder Return chart (31 March 2014 to
31 March 2024):
Financial Year
ended 31 March CEO Salary/fees Single figure
Annual bonus
(% of maximum)
Long-term incentives
(% of maximum
vesting)
FY24 Steve Wadey 689,160 2,928,669 85.6% 100.0%
FY23 Steve Wadey 664,126 2,164,306 98.2% –
FY22 Steve Wadey 639,121 2,477,069 71.4% 100.0%
FY21 Steve Wadey 511,550 2,695,414 95.7% 100.0%
FY20 Steve Wadey 610,357 1,978,247 87.5% 38.4%
FY19 Steve Wadey 596,422 2,339,474 94.4% 31.7%
FY18 Steve Wadey 582,167 1,522,460 66.7% –
FY17 (restated) Steve Wadey 568,166 1,829,470 86.4% –
FY16 Steve Wadey 520,219 1,654,546 85.4% –
FY16 David Mellors 455,885 1,423,382 82.9% –
FY15 David Mellors 501,227 1,725,960 88.6% 13.9%
FY15 Leo Quinn 469,776 673,979 – –
Annual Report on Remuneration continued
QinetiQ Group plc | Annual Report & Accounts 2024 125
Corporate governance
CEO pay ratio
The calculation below is based on the FY24 single figure for the CEO of £2,928,669 and similar calculations for the UK workforce (i.e. ‘Option A’
as defined by the Companies (Miscellaneous Reporting) Regulations 2018). The Remuneration Committee chose Option A as it is the approach
generally favoured by investors and GC100. The calculations for the UK workforce were performed as at 31 March 2024.
Total remuneration
Ratio of the CEO’s to the pay of UK employees
Year 25th percentile Median 75th percentile
FY24 67: 1 50: 1 38: 1
FY23 53: 1 40: 1 31: 1
FY22 67: 1 49: 1 37: 1
FY21 70: 1 52: 1 39: 1
FY20 56: 1 41: 1 31: 1
The CEO pay ratios have increased between FY23 and FY24 as a result of the lower CEO single figure for FY23 due to no DSP award vesting in the
year. The Company believes that the median pay ratio for FY24 is consistent with the pay, reward and progression policies for the UK employees
as the approach for all QinetiQ employees is monitored and reported to the Remuneration Committee on an annual basis.
Year-on-year movements in the CEO pay ratio are likely to be volatile due to the wide range of incentive outcomes for the CEO single figure, but the
Remuneration Committee does note the ratio and will monitor long-term trends.
Total pay of UK employees
25th percentile Median 75th percentile
Total pay and benefits £43,906 £58,329 £76,690
Salary component
1
£39,711 £39,922 £70,153
1 The base salary data is impacted by the fact that the employee identified at the Median on a total pay basis had a significant overtime payment.
The Remuneration Committee welcomes the opportunity to provide this information to shareholders. The Company aims to reward all employees
fairly for the success and growth they create.
Remuneration policy for all employees
All employees of QinetiQ are entitled to base salary, benefits and pension. UK and Australia-based employees are entitled to participate in the
QinetiQ Share Incentive Plan. The maximum incentive opportunity available is based on the seniority and responsibility of the role. Participation in
the LPA is available to Executive Directors, senior leaders and selected employees throughout the organisation.
The All Employee Incentive Scheme (AEIS) provides every eligible employee the opportunity to earn a cash bonus based on Company and
personal performance. For FY24 the Company element of the AEIS was paid at an above target level of £1,138 as the profit target was exceeded.
The AEIS will be operated again in FY25 and thereafter.
The Committee reviews (but does not decide) the general reward policy for all employees and any significant changes proposed. Alignment with
the workforce is delivered through the Rewarding for Performance framework, including a transparent and consistent approach to the annual
salary review, the AEIS to drive Company and personal performance, recognition schemes and market competitive benefits in our countries. For
FY24 the Company has agreed further significant investment in the employee offering across the Group including, in the UK, addressing market
relativity through providing additional base salary increases to employees ensuring they receive a fair market level of pay.
The Group Chair, the Remuneration Committee Chair, the CEO and Chief People Officer have met with the Global Employee Voice several times
during FY24. Amongst other things, these meetings have discussed how executive remuneration is aligned to the broader employee offering in
support of Group strategy.
QinetiQ Group plc | Annual Report & Accounts 2024126
Directors’ Remuneration Report continued
Audited information
Single figure total remuneration for the Chairman and each Non-executive Director
Non-executive Directors’ remuneration is shown as a single figure to provide an annual comparison between the remuneration awarded during the
financial year ended 31 March 2024 and the preceding year.
Fees £’000 Benefits £’000 Single figure £’000
Non-executive Directors FY24 FY23 FY24 FY23 FY24 FY23
Michael Harper
1
20 65 – 4 20 69
Shonaid Jemmett-Page
2
73 67 – 4 73 71
Neil Johnson 270 259 – 7 270 266
Dina Knight
3
5 – – – 5 –
Ross McEwan
3
5 – 5 – 10 –
General Sir Gordon Messenger
2
73 67 – 4 73 71
Steve Mogford 67 37 – 4 67 41
Lawrence Prior III
4
67 65 13 16 80 81
Susan Searle
2
73 67 – 4 73 71
1 Michael Harper – Resigned 20 July 2023
2 Fees include Committee Chair fees
3 Dina Knight and Ross McEwan – Appointed 1 March 2024
4 Lawrence Prior III – Resigned 16 March 2024
Benefits include travel and subsistence expenses (grossed-up for tax) incurred in relation to the execution of their duties with the Company that
are considered by HMRC to be taxable.
Lawrence Prior is a US resident and received a $4,000 fee for attending UK meetings until his resignation; as an Australian resident Ross McEwan
receives a UK meeting fee of AU$8,000. UK-based Non-executive Directors are entitled to receive a £2,500 fee for attending US meetings. The
fees for Michael Harper include £12,000 as Senior Independent Director until his date of resignation, when Steve Mogford was elected to this role
and received this fee. For Lawrence Prior and Ross McEwan, a payment of £10,000 was paid as senior US and Australia resident Non-executive
Director respectively.
Percentage change in Directors’ remuneration
The following table compares the percentage change in the Director’s salary/fees, bonus and benefits to the average percentage change in salary,
bonus and benefits for a comparison group (4,371 employees) in the UK business in service between 1 April 2023 and 31 March 2024. The
analysis only includes Directors who served for FY24 and includes the temporary salary/fee sacrifice in FY21.
Fees £’000 Benefits £’000 Annual bonus £’000
FY24 FY23 FY22 FY21 FY24 FY23 FY22 FY21 FY24 FY23 FY22 FY21
Executive Directors
Steve Wadey 3.8% 3.9% 24.9% -16.2% 9.2% 21.5% -4.3% 35.9% -10.5% 43.0% -22.7% 10.3%
Carol Borg 3.9% – – – 1.8% – – – -10.9% – – –
Non-executive Directors
Michael Harper -69.2% 1.6% 18.4% -15.9% -100% 0% 100% – – – – –
Shonaid Jemmett-Page 8.2% 1.5% – – - 62.1% 0% – – – – – –
Neil Johnson 4.2% 3.6% 14.3% 17.1% -7 7.2% 33.3% 100% -100% – – – –
Dina Knight 100.0% – – – 100.0% – – – 100.0% – – –
Ross McEwan 100.0% – – – 100.0% – – – 100.0% – – –
General Sir Gordon
Messenger 4.3% – – – -76.8% – – – – – – –
Steve Mogford 82.4% – – – -52.7% – – – – – – –
Lawrence Prior III 3.1% – – – -70.8% – – – – – – –
Susan Searle 8.2% 1.5% 21.2% -6.8% 74.8% 0% 100% -100% – – – –
Employees
Average UK employee
1
7.8% 4.4% 2.9% 1.2% -22.2% 5.7% 10.9% -1.2% 3.0% 96.2% -38.2% 62.2%
1 UK employees were chosen to avoid the impact of exchange rate movements over the year. QinetiQ Group plc has no employees so QinetiQ Group Ltd employees were used.
The reduction in salary and fees which the Board implemented as a waiver for six months in FY21 impacted the analysis above, as did the reduced
travel and physical meeting attendance. The benefits paid to Non-executive Directors are largely travel and subsistence expenses incurred in
relation to the execution of their duties with the Company that are considered by HMRC to be taxable.
Annual Report on Remuneration continued
QinetiQ Group plc | Annual Report & Accounts 2024 127
Corporate governance
Relative importance of spend on pay
The graph below shows actual spend on all employee remuneration, shareholder dividends and buy-backs and any other significant use of profit
and cash within the previous two financial years.
2023
2024
£693.0m
£567.3m
+22.0%
Difference
Total employee remuneration
The increase in employee remuneration is due to a full year of the Avantus and Air Affairs acquisitions and the FY24 UK reward interventions.
£96.7m
£43.4m
+123%
Difference
Share-based profit distribution
Dividend cash payment plus purchase of own shares
(see CFO Review page 28).
Other significant profit distribution
There were no other significant profit distributions in 2023 or 2024.
2023
2024
Gender related pay
QinetiQ is subject to gender pay reporting for UK employees and a copy of our latest report is available on the Company’s website.
Service contracts/letters of appointment
The Company’s policy is that Executive Directors have rolling contracts which are terminable by either party giving 12 months’ notice. The Group
Chairman and the Non-executive Directors do not have service contracts but are appointed under letters of appointment. All service contracts and
letters of appointment are available for viewing at the Company’s registered office and at the AGM.
Non-executive Directors typically serve two three-year terms but may be invited by the Board to serve for an additional period (see table in the
Nominations Committee report on page 92).
Director Date appointed Arrangement Notice period
Steve Wadey 27 April 2015 Service contract 12 months
Carol Borg 11 October 2021 Service contract 12 months
Shonaid Jemmett-Page 19 May 2020 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Neil Johnson 02 April 2019 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Dina Knight 01 March 2024 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Ross McEwan 01 March 2024 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
General Sir Gordon Messenger 12 October 2020 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Steve Mogford 01 August 2022 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Susan Searle 14 March 2014 Initial term of three years from date of appointment, subject to annual reappointment at the AGM. –
Implementation of Policy for the year ended 31 March 2024
Fees
Non-executive Directors’ fees were reviewed effective 1 July 2023 were set as follows:
– Basic fee £60,000 (was £55,000)
– Committee Chair fee £14,000 (was £12,000)
– Senior Independent Director fee £12,000 (was £10,000)
The fee increase was based on a NED fee benchmarking report provided by Mercer, and having considered the workload and contribution of the
NEDs, the increase in base fee is 9.1%, which is the first increase in two years since July 2021 and is less than the increases applied to the UK
workforce over FY23 and FY24.
The Non-executive Group Chair receives a fee of £273,000 per annum which was increased by 4.0% effective 1 July 2023; the increase aligned to
that applied to the UK workforce over FY24.
Fees are reviewed in line with Policy.
Executive Directors are permitted to accept one external Non-executive Director position with the Board’s approval. Any fees received in respect of
these appointments may be retained by the Executive Director. The CEO and CFO do not hold any Non-executive Directorships in other companies.
QinetiQ Group plc | Annual Report & Accounts 2024128
Directors’ Remuneration Report continued
Fees effective
1 July 2023
£
Group Chairman 273,000
Basic fee for UK Non-executive Director 60,000
Additional fee for chairing a Committee 14,000
Additional fee to Deputy Chair/Senior Independent Non-executive Director 12,000
Additional fee for attendance at a Board meeting held in US by UK resident Non-executive Director 2,500
Additional fee for attendance at a Board meeting held in UK by US resident Non-executive Director $4,000
Additional fee for attendance at a Board meeting held in UK by Australia resident Non-executive Director AU$8,000
Implementation of Policy for the year ending 31 March 2025
At the 15 May 2024 meeting of the Remuneration Committee, a base salary increase of 4.5% (to £727,000p.a.) was approved for the CEO, effective
1 July 2024. The CEO’s salary review is below the Rewarding for Performance guidance used for all UK employees which included a 5.0% budget for
the July 2024 salary review plus 0.5% for in-year salary progression.
New CFO Terms of Appointment
On joining QinetiQ as Group CFO, Martin Cooper will receive:
– A base salary of £455,000 p.a. subject to review in July 2025, benefits and pension allowance aligned to Policy.
– An ABP maximum annual payment of 200% of salary and an LPA maximum annual grant of 250% of salary, as per Policy.
– As part compensation for share awards lost on resignation from his former employer, some performance dependent and others lost on cessation
of employment, two awards of restricted stock will be granted as soon as practicable after joining with a total value of £900,000. Tranche 1 with a
value of £550,000 will vest in March 2026; Tranche 2 with a value of £350,000 will vest in March 2027. Both vesting dates are a one year extension
on the awards surrendered and conditional on continued employment.
– In addition and in part compensation for the value of other awards forfeited at his current employer, his FY25 LPA will not be pro-rated to take
account of the months between the grant of the FY25 awards to other employees and his start date.
Incentives for Executives
The table below shows the measures and relative weighting for the Annual Bonus Plan for the CEO and incoming CFO:
Annual Bonus Plan Performance measure (excluding FY25 acquisitions) Relative weighting(%)
Orders 15.0%
Target performance 100% of base salary Underlying operating profit 30.0%
Stretch performance 200% of base salary Underlying net cash flow from operations 25.0%
Common, ESG and Personal Goals 30.0%
For FY25 the Remuneration Committee agreed to re-balance the annual incentive weightings by reducing the orders metric to 15% (FY24 20%) and
increasing the cash metric to 25% (FY24 20%); profit remains at 30% weighting. The revised financial weightings reflect the need to drive profitable
growth and strong cash management. The focus on ESG goals as part of the non¬financial metrics continues for FY25 with a 17.5% weighting.
For FY25, the Remuneration Committee set the target level of performance at 50% of stretch for the financial measures, common and personal goals.
Details of specific performance targets for the ABP have not been provided as they are deemed commercially sensitive. The targets will be disclosed
retrospectively in next year’s Annual Report on Remuneration.
For FY25 the Committee has set performance measures and targets for the LPA with a clear link to Company strategy and incentivising growth:
– Earnings: organic underlying operating profit on a three-year cumulative basis (35% weighting)
– Designed to deliver consistent operational performance over the longer term
– Understood, relevant and actionable for QinetiQ senior leaders
– Returns: ROCE (35% weighting)
– Average EBITA for the three-year period divided by average capital employed
– Designed to drive robust investment selection and delivery
– Value creation through collaboration: total revenue growth (30% weighting)
– Designed to drive value creation through collaboration and market leverage
For the FY25 LPA the Committee agreed the following targets aligned with our growth ambition (20% of each element vests at Threshold).
Cumulative earnings targets are deemed commercially sensitive at this time but are consistent with our growth ambition at 11-12% margin.
ROCE Threshold 15.0% Stretch 20.0%.
FY27 Total revenue Threshold £2.0bn Stretch £3.0bn.
Annual Report on Remuneration continued
QinetiQ Group plc | Annual Report & Accounts 2024 129
Corporate governance
Votes for
Votes against
Directors’ Remuneration
Report 2023 % of votes
(%)
Directors’ Remuneration
Policy 2023 % of votes
(%)
14.0% 15.7%
84.3%
86.0%
Remuneration Committee meetings, activities and decisions FY24
The following table provides a summary of all the key activities during the year. The attendance at each meeting is detailed on page 84.
The membership of the Remuneration Committee for the whole of FY24 was Susan Searle (Chair), Neil Johnson, General Sir Gordon Messenger,
Shonaid Jemmett-Page and Steve Mogford. Michael Harper and Lawrence Prior resigned from the Committee on 20 July 2023 and 16 March 2024
respectively; Dina Knight and Ross McEwan both joined the Committee on 1 March 2024.
Date Incentives Share awards Governance Salaries and resourcing
May 2023 Review of FY23 company
performance and final results
for BBP and DSP
FY23 DSP awards Approve FY24 Directors’ Remuneration Report
2023 Directors’ Remuneration Policy
QLT base salary reviews
July 2023 AGM preparation and feedback on 2023
Directors’ Remuneration Policy
November 2023 FY24 half-year forecast Review of QLT shareholdings
Review of all-employee remuneration to ensure,
inter alia, alignment of incentives and reward
with culture
March 2024 FY24 provisional results
FY25 target setting
Mercer review of independence
Remuneration Committee effectiveness review
A performance evaluation of the Committee is conducted annually. This process is described further on page 97.
Remuneration consultants
In FY23 the Committee appointed Mercer as independent adviser to the Committee to provide advice on market practice, corporate governance and
investors’ views. Mercer were selected by the Committee after providing ad-hoc advice in support of the design of the new Directors’ Remuneration
Policy and based on members’ prior experience of working with them.
Fees paid to Mercer during the year for services provided were £80,165 calculated on a time-spent basis at pre-agreed rates. Mercer provides the
Company with consulting advice on conditions for employees in the US and manages the UK DC pension fund. The Committee reviews the nature
of the advice received from Mercer on an annual basis to satisfy itself that the advice it receives is independent and objective.
Statement of voting
Directors’ Remuneration Report – 2023
Votes for 414,786,551 (86.0%)
Votes against 67,584,010 (14.0%)
Total votes cast 482,370,561 (83.4% of share capital)
Abstained 32,213
Directors’ Remuneration Policy – 2023
Votes for 406,828,507 (84.3%)
Votes against 75,547,245 (15.7%)
Total votes cast 482,375,752 (83.4% of share capital)
Abstained 26,105
Details on the voting on all resolutions at the 2024 AGM will be
announced via the RNS and posted on the QinetiQ website after
the AGM.
Susan Searle
Remuneration Committee Chair
23 May 2024
QinetiQ Group plc | Annual Report & Accounts 2024130
Directors’ report
Directors’ report
The Directors present their report together with the audited consolidated
financial statements for the year ended 31 March 2024.
Statutory information contained elsewhere in the
Annual Report
Information required to be part of this Directors’ report can be found
elsewhere in the Annual Report as indicated in the table below, and is
deemed to be incorporated into this report by reference:
Information Page
Corporate governance statement 72
Directors’ details 78 - 80
Directors’ conflicts of interest 84
Directors’ interests in shares 122
Dividends 31
Employees 48 - 53
Financial instruments: Information on the Group’s financial risk
management objectives and policies, and its exposure to credit
risk, liquidity risk, interest rate risk and foreign currency risk
165
Greenhouse gas emissions 36 - 47
Likely future developments in the business of the Company or
its subsidiaries
1 - 69
Results 28 - 31
Disclosure specifically required pursuant to the Companies
(Miscellaneous Reporting) Regulations 2018 can be found on
the following pages:
Stakeholder engagement statement 77
Statement in the Directors’ report summarising how Directors
have engaged with employees and taken account of their
interests
72 - 74
Statement in the Directors’ report about the corporate
governance arrangements applied by the Company
Publication of the ratio of the CEO’s remuneration to the
median, 25th and 75th quartile pay remuneration of their UK
employees in the Directors’ Remuneration report
125
Illustration of the effect of future share price increases on
executive pay outcomes in the Directors’ Remuneration report
113
Management report
The Strategic report on pages 1 to 69 and the Directors’ report,
as detailed on pages 130 to 133, including information which has
been incorporated into those sections by reference, comprise the
management report specified by rules 4.1.5R (2) and 4.1.8R of the
FCA’s Disclosure Guidance and Transparency Rules (DTRs).
Research and development
One of the Group’s distinct business capabilities is the provision of funded
research and development (R&D) to customers. The Group also invests in
the commercialisation of promising technologies across all areas
of business.
In the financial year, the Group recorded £328.2m (FY23: £313.8m) of
total R&D-related expenditure, of which £315.4m (FY23: £299.2m) was
customer-funded work and £12.8m (FY23: £14.6m) was internally funded.
Additionally, £4.0m (FY23: £2.7m) of late-stage development costs were
capitalised and £3.3m (FY23: £3.5m) of capitalised development costs
were amortised in the year.
Political donations
QinetiQ’s policy is that it does not make what are commonly regarded as
donations to any political party. QinetiQ does undertake legitimate
interactions with MPs and others in the political world, to make them
aware of key industry issues and matters that affect QinetiQ, and to make
an important contribution to their understanding of QinetiQ, the markets in
which it operates and the work of their constituents.
Branches
The Company and its subsidiaries have established branches in a number
of different countries; their results are, however, not material to the
Group’s financial results.
Share capital
As at 31 March 2024, the Company had an allotted and fully paid up
share capital of 574,395,891 ordinary shares of 1p each with an aggregate
nominal value of £5.7m and one Special Share with a nominal value of
£1. The ordinary share total includes 869,661 shares held by employee
share trusts.
Details of the shares in issue during the financial year are shown in note
29 on page 176.
Share buyback
Pursuant to the £100 million share buyback programme which was
announced on 16 January 2024, and commenced on 7 February 2024, the
Company has, as at 22 May 2024, bought back 8,234,261 Ordinary Shares
of £0.01, representing 1.4% of the Company’s issued share capital. These
shares have subsequently been cancelled. Further details on the share
buyback programme can be found on our website www.qinetiq.com
Directors’ report and statutory information
QinetiQ Group plc | Annual Report & Accounts 2024 131
Corporate governance
Rights of ordinary shareholders
The holders of ordinary shares are entitled to receive the Company’s
Reports and Accounts, to attend and speak at general meetings of the
Company, to exercise voting rights in person or by appointing a proxy, and
to receive a dividend where declared or paid out of profits available for
that purpose.
Rights of special shareholder
The Special Share is held by HM Government through the Secretary of
State for Defence (the Special Shareholder) and it may only be held by
and transferred to HM Government. It confers certain rights to protect UK
defence and security interests. These include:
– The promotion and reinforcement of the MOD compliance principles
which require QinetiQ to be an impartial, ethical and responsible
contractor by avoiding conflicts of interest in its dealings with the MOD
– The protection of defined strategic assets of the Group, such as certain
testing facilities, by providing the Special Shareholder with an option to
purchase those assets in certain circumstances
– The right to require certain persons with a material interest in QinetiQ to
dispose of some or all of their ordinary shares on the grounds of
national security or conflict of interest
– A provision whereby at least the Non-executive Chairman or Chief
Executive Officer must be a British citizen
The Special Share carries no financial and economic value and the Special
Shareholder is not entitled to vote at a general meeting of the Company.
At any time the Special Shareholder may require QinetiQ to redeem the
share at par and, if wound up, the Special Shareholder would be entitled to
be repaid at its nominal value before other shareholders. Any variation of
the rights attached to the Special Share requires the written approval of
the MOD. Further details can be found in note 29 on page 176.
Restrictions on the transfer of shares
As detailed above, the special share requires certain persons with an
interest in QinetiQ’s shares that exceed certain prescribed thresholds to
dispose of some or all of their ordinary shares on the grounds of national
security or conflict of interest.
Employee share schemes
The QinetiQ Group plc Employee Benefit Trust (the Trust) holds shares in
connection with QinetiQ’s employee share schemes, excluding the Share
Incentive Plan. As at 31 March 2024, the Trust held 869,661 ordinary
shares of 1p each (the Trust Shares). The Trustees of the Trust have
agreed to waive their entitlement to dividends payable on the Trust
Shares. The Trust holds further ordinary shares in respect of deferred
shares held on behalf of participants in the company’s Deferred Annual
Bonus Plan. Dividends received by the Trust in respect of the deferred
shares are paid direct to the Plan participants on receipt and are not
retained in the Trust.
Equiniti Share Plan Trustees Limited acts as Trustee in respect of all
ordinary shares held by employees under the QinetiQ Group plc Share
Incentive Plan (the Plan). Equiniti Share Plan Trustees Limited will vote
on all resolutions proposed at general meetings in accordance with
voting instructions received from participants in the Plan.
Corporate sponsored nominee
In circumstances where ordinary shares are held by the corporate
sponsored nominee service, Equiniti Corporate Nominees Limited will
vote on all resolutions proposed at general meetings in accordance with
voting instructions received from shareholders using such corporate
nominee service.
Major shareholdings
In accordance with DTR 5, the Company has been notified of the
following from holders representing 3% or more of the issued ordinary
share capital of the Company.
Name of shareholder
As at 31 March 2024
% of issued
share capital*
As at 22 May 2024
% of issued
share capital*
Klear Kite LLC 11.48% 11.48%
Schroders 9.98% 9.98%
Franklin Mutual Advisers LLC 5.04% 5.04%
* As notified by the shareholder and based on the issued ordinary share capital at the time
of the notification.
Employees
The Group is committed to the fair treatment of people with disabilities
in relation to applications, training, promotion and career development.
If an existing employee becomes disabled, the Company makes every
effort to enable them to continue their employment and career
development and to arrange appropriate training, wherever practical.
Directors’ interests in contracts
At the date of this report, there is no contract or arrangement with the
Company or any of its subsidiaries that is significant in relation to the
business of the Group as a whole in which a Director of the Company is
materially interested.
Indemnities
The Company has entered into indemnity deeds with all its current
Directors containing qualifying indemnity provisions, as defined in
Section 234 of the Companies Act 2006, under which the Company has
agreed to indemnify each Director in respect of certain liabilities, which
may be attached to them as Directors or as former Directors of the
Company or any of its subsidiaries. The qualifying third-party indemnity
was in force during the financial year and also at the date of approval of
the financial statements. The Directors of QinetiQ Pension Scheme
Trustee Limited, a Group Company and the Trustee of the QinetiQ
Pension Scheme (the Scheme), benefit from an indemnity contained in
the rules of the Scheme. The indemnity would be provided out of the
Scheme assets.
QinetiQ Group plc | Annual Report & Accounts 2024132
Change of control – significant agreements
The following significant agreements contain provisions entitling the
counterparties to require prior approval, exercise termination, alteration
or other similar rights in the event of a change of control of the
Company, or if the Company ceases to be a UK company:
– The Combined Aerial Target Service contract is a 20-year contract
awarded to QinetiQ Target Services Limited by the MOD on 14
December 2006. The terms of this contract require the Company to
remain a UK company which is incorporated under the laws of any
part of the UK, or an overseas company registered in the UK, and that
at least 50% of the Board of Directors are UK nationals. The terms
also contain change of control conditions and restricted share transfer
conditions which require prior approval from HM Government if there
is a material change in the ownership of the Company’s share capital,
unless the change relates to shares listed on a regulated market;
‘material’ is defined as being 10% or more of the share capital. In
addition, there are restrictions on transfers of shares to persons from
countries appearing on the restricted list as issued by HM
Government.
– The Long Term Partnering Agreement (LTPA) is a 25-year contract,
which QinetiQ Limited signed on 28 February 2003, to provide test,
evaluation and training services to the MOD. This contract contains
conditions under which the prior approval of HM Government is
required if the contractor, QinetiQ Limited, ceases to be a subsidiary of
the QinetiQ Group, except where such change in control is permitted
under the Shareholders Agreement to which the MOD is a party.
– The Maritime Strategic Capabilities Agreement Future Arrangement
contract is a 10-year contract awarded by the MOD which came into
effect on 1 April 2023. The contract terms include a provision
requiring that any change of control of QinetiQ Limited requires prior
approval from HM Government (with control being defined as the
ability to control the Company’s affairs by reason of the holding of
shares or by means of voting or other powers). If such approval is not
obtained, the MOD reserves the right to terminate the agreement.
– The Engineering Delivery Partner Agreement placed with QinetiQ
Limited by the MOD came into force on 5 October 2018 and has a
10-year duration. The contract contains a provision under which any
change of control of QinetiQ Limited requires prior approval from HM
Government (with control being defined as the ability to control the
Company’s affairs by reason of the holding of shares or by means of
voting or other powers). The MOD is entitled to terminate the contract
where a change of control has occurred without such approval having
been obtained.
– The Group is party to funding agreements, provided by a consortium
of banks: a £275m multi-currency revolving credit facility which was
due to mature on 27 September 2025 has been replaced, as at 22
April 2024, with a £290m multi-currency revolving credit facility, which
will mature on 22 April 2027; with two one-year options to extend the
final maturity to 22 April 2029; a multi-currency floating rate term loan
of £336m which matures on 27 September 2026, with a one-year
option to extend the final maturity to 27 September 2027; and interest
rate derivative contracts over three and five years to fix the floating
rate bank borrowings in line with Treasury policy. Under the terms of
the agreements, in the event of a change of control of the Company,
any lender may give notice to cancel its commitment and require all
outstanding amounts to be repaid.
The Directors’ contracts contain no provisions for compensation for loss
of office on a change of control of the Company.
Disclosures in accordance with Listing Rule 9.8.4
There are no matters requiring disclosure under the FCA’s Listing Rule
9.8.4, other than details of long-term incentive schemes, which are
explained further on page 112.
Articles of Association
Changes to the Articles must be submitted to shareholders for approval
Save in respect of the rights attaching to the Special Share, the
Company has not adopted any special rules relating to the appointment
and replacement of Directors or the amendment of the Company’s
Articles of Association, other than as provided under UK corporate law.
Appointment and replacement of Directors
According to the Articles of Association, all Directors are subject to
election by shareholders at the first AGM following their appointment,
and must stand for re-election at intervals of no more than three years
thereafter. In line with best practice reflected in the UK Corporate
Governance Code, however, the Company requires each serving member
of the Board to stand for election or re-election on an annual basis at
each AGM.
Powers of the Directors: allotment/purchase of own shares
At the company’s AGM held in July 2023, the shareholders passed
resolutions which authorised the Directors to allot relevant securities up
to an aggregate nominal value of £1,928,997 (£3,857,994 pursuant only
to a rights issue) and to disapply pre-emption rights (up to 5% of the
issued ordinary share capital). The authorities will remain valid until the
2024 AGM.
The authority to purchase ordinary shares (up to 10% of the issued
ordinary share capital) was granted at the Company’s AGM in July 2023,
however this was incorrecty expressed to expire at the annual general
meeting in 2024 or on 20 October 2023, whichever is the earlier. At a
general meeting on 6 February 2024, authority to purchase ordinary
shares (up to 5% of the issued ordinary share capital) was granted in
connection with the share Buyback programme announced by the
Company on 16 January 2024. This authority will remain valid until the
Annual General Meeting in 2024 or on 20 October 2024, whichever is
the earlier.
Resolutions in respect of the allotment of relevant securities, the
disapplication of pre-exemption rights and the purchase of own shares
will be laid before the 2024 AGM.
Annual General Meeting
The Company’s AGM will be held on Thursday 18 July 2024 at 11:00 at
the office of Ashurst LLP, London Fruit and Wool Exchange, Duval Square,
London E1 6PW.
Independent auditors
PwC has expressed its willingness to continue in office as independent
auditors and a resolution to re-appoint them will be proposed at
the AGM.
Directors’ report and statutory information continued
QinetiQ Group plc | Annual Report & Accounts 2024 133
Corporate governance
Statement of Directors’ responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have prepared the Group
financial statements in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act
2006 and the Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law). Additionally, the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules require the
Directors to prepare the Group Financial Statements in accordance with
UK-adopted International Accounting Standards.
Under company law, Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for
that period. In preparing the financial statements, the Directors are
required to:
– Select suitable accounting policies and then apply them consistently
– State whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006 and
UK-adopted International Accounting Standards have been followed
for the Group financial statements and United Kingdom Accounting
Standards, comprising FRS 101 have been followed for the Company
financial statements, subject to any material departures disclosed and
explained in the financial statements
– Make judgements and accounting estimates that are reasonable
and prudent
– Prepare the financial statements on the going-concern basis unless it
is inappropriate to presume that the Group and Company will continue
in business
The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure
that the financial statements and the Directors’ Remuneration report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors of the Company who were in office during the financial
year and up to the date of sigining the financial statements were:
Neil Johnson
Steve Wadey
Carol Borg (resigned 16 April 2024)
Steve Mogford
Shonaid Jemmett-Page
General Sir Gordon Messenger
Lawrence Prior (resigned 16 March 2024)
Susan Searle
Dina Knight (appointed 1 March 2024)
Ross McEwan (appointed 1 March 2024)
Each of the Directors confirm that, to the best of their knowledge:
– The Group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to UK-adopted
International Accounting Standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Group
– The Company Financial Statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising
FRS 101, give a true and fair view of the assets, liabilities, financial
position and profit of the Company
– The going-concern statement on page 64 includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal risks
and uncertainties that it faces
In the case of each Director in office at the date the Directors’ report
is approved.
Scope of the reporting in this Annual Report
The Board has prepared a Strategic report which provides an overview
of the development and performance of the Group’s business in the year
ended 31 March 2024.
For the purposes of DTR 4.1.5R(2) and DTR 4.1.8 the Directors’ report,
the Directors confirm that, so far as they are aware, there is no relevant
audit information of which the Company’s auditor is unaware, and that
they have taken all steps that they ought to have taken as Directors to
make themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
By order of the Board.
James Field
Company Secretary
23 May 2024
QinetiQ Group plc | Annual Report & Accounts 2024134
Independent auditors’ report to the
members of QinetiQ Group plc
Report on the audit of the financial statements
Independent auditors’ report to the members of QinetiQ Group plc
Opinion
In our opinion:
– QinetiQ Group plc’s group financial statements and company financial
statements (the “financial statements”) give a true and fair view of
the state of the group’s and of the company’s affairs as at 31 March
2024 and of the group’s profit and the group’s cash flows for the year
then ended;
– the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards as
applied in accordance with the provisions of the Companies Act 2006;
– the company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework”, and applicable law); and
– the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual
Report & Accounts 2024 (the “Annual Report”), which comprise: the
Consolidated and Company balance sheets as at 31 March 2024; the
Consolidated income statement, the Consolidated comprehensive
income statement, the Consolidated cash flow statement and the
Consolidated and Company statements of changes in equity for the
year then ended; and the notes to the financial statements,
comprising material accounting policy information and other
explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to listed
public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 8, we have provided no non-audit
services to the company or its controlled undertakings in the period
under audit.
Our audit approach
Overview
Audit scope
– We conducted full scope audit work in the United Kingdom over QinetiQ
Limited, in the United States over QinetiQ Inc. (C5ISR) and Avantus
Federal, and in Australia over QinetiQ Pty Ltd based on their size. This
provides significant coverage over all financial statement balances,
except inventory;
– We performed a full scope financial statement line item audit
over inventory balances at Foster-Miller Inc. (Technology Solutions)
and QinetiQ Target Systems Limited to provide sufficient overall
group coverage;
– Additionally in Technology Solutions, we performed full scope financial
statement line item audits over cash and cash equivalents, revenue and
associated balances;
– We performed procedures over goodwill, intangible assets, share-based
payments, the defined benefit pension scheme, IFRS 16 lease
accounting, taxation, borrowings and testing of the consolidation at a
group level.
Key audit matters
– Long-term contract accounting (group);
– Impairment of goodwill and acquired intangibles (group);
– Impairment of investments in subsidiary undertakings (parent).
Materiality
– Overall group materiality: £11,300,000 (2023: £7,950,000) based on 5%
of underlying profit before tax;
– Overall company materiality: £5,300,000 (2023: £5,000,000) based on
1% of total assets;
– Performance materiality: £8,475,000 (2023: £6,000,000) (group) and
£3,975,000 (2023: £3,750,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
QinetiQ Group plc | Annual Report & Accounts 2024 135
Corporate governance
Acquisition accounting (Avantus Federal), which was a key audit matter last year, is no longer included because of no acquisitions being made during
the year. Otherwise, the key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Long-term contract accounting (group)
Refer to page 100 (Audit Committee report) and page 183 (note 36,
material accounting policies - Revenue from contracts with customers)
and page 146 (note 2, Revenue from contracts with customers and
other income).
QinetiQ Group plc has a large number of contracts which span multiple
periods and are accounted for on a percentage of completion (POC) basis
in accordance with IFRS 15. Long term contract accounting requires a
number of judgements and management estimates to be made, particularly
in calculating the forecast costs to complete the contract. These
judgements drive revenue and profit recognition, and together with cash
paid by the customer, impact the balance sheet position at the year end.
Onerous contract provisions are recorded where there is an expectation that
a contract will be loss-making, and judgement is applied to determine the
magnitude of any provision. Particular focus is given to contracts which are
technologically challenging.
We evaluated the contract governance policies and controls in place within the
business and tested the design and operating effectiveness of certain key controls
over long-term contracts.
We performed risk assessment procedures over the portfolio of contracts to identify
higher-risk contracts. These higher risk contracts were selected for detailed contract
audits. These detailed contract audits involved meeting with key financial and non-financial
personnel throughout the year and at year end to discuss contract performance, as well as
challenging management to provide evidence to support contract financials. Specifically,
our procedures included the following: We assessed the basis of revenue recognition to
ensure it is in line with applicable accounting standards. We agreed overall anticipated
revenue to the underlying contract and validated a sample of customer invoices through
to cash receipt. We recalculated revenue recognised and agreed revenue, costs and
associated balance sheet positions to the underlying general ledger. We obtained evidence
to corroborate management estimates and judgements, particularly around forecast costs
to complete and risk contingencies. We validated costs incurred allocated to contracts
during the year to supporting documentation. For the remaining untested contracts, we
selected a sample and performed testing over revenue and costs, agreeing to supporting
documentation including customer contracts and validating a sample of customer
invoices to cash receipts. Additional testing was performed, where not sufficiently covered
by the above, over the contract asset and liability balance sheet positions to gain
assurance over the accuracy of these balances. These have been sample tested and
agreed to supporting documentation. No material exceptions were found
Impairment of goodwill and acquired intangibles (group)
Refer to page 100 (Audit Committee report), page 187 (note 36, Material
accounting policies - Impairment of goodwill and tangible, intangible and
held for sale assets), page 154 (note 14, Goodwill) and page 156 (note 15,
Intangible assets).
The group has a material amount of goodwill and acquired intangible assets
(£401.4m and £251.2m respectively at 31 March 2024). There is a risk of
impairment where the performance of the cash generating unit is behind
expectation and does not support the value held on the balance sheet.
Management performed a discounted cash flow analysis based on the
Board-approved five-year strategic plan to assess whether the goodwill and
acquired intangible assets are supported by future cash flow projections.
This annual impairment review was performed as at 31 January 2024.
No triggering events have been identified in the period to 31 March 2024
and therefore no additional impairment reviews have been performed.
No impairment charge has been recognised during the year.
Our audit focused on the risk that the carrying value of goodwill and acquired intangible
assets could be overstated. A greater level of testing was performed over the Avantus,
US C5ISR, US Technology Solutions and Germany cash-generating units (CGUs), being
the CGUs with more significant assumptions than the other CGUs.
We assessed the design and implementation of the goodwill impairment processes and
related controls; however, we concluded that we would not rely on the controls over
financial reporting and therefore we performed only substantive procedures in this area.
We have tested the principles and mathematical integrity of the group’s discounted cash
flow model used to assess goodwill and indefinite-lived intangible assets for potential
impairment. With the assistance of our valuation specialists, we assessed the long- term
growth rates and discount rates used in the impairment calculation, by comparing the
group’s assumptions to external data.
We concluded that the group’s assumptions were materially appropriate. We confirmed
that cash flows for the next 5 years, consistent with internal budgeting and strategic
planning processes and the long term viability assessment, have been input to the model
and that the underlying budgets and strategic plans have been approved by the Board.
In respect of the heightened risk CGUs (Avantus, US C5ISR, US Technology Solutions and
Germany CGUs), we challenged the cash flow projections (driven principally by revenue
growth) used within the model by reference to current cash flows, analysis of management’s
historic growth rates, understanding future market growth and contract opportunities
through obtaining third party evidence where possible. We held discussions with financial
and non-financial personnel, corroborating explanations to supporting evidence.
We tested the sensitivity of the impairment calculations to changes in the underlying
assumptions and concluded that no impairments are required, and that the sensitivity
to key assumptions is sufficiently disclosed. We did not identify any indication of
management bias and did not identify any impairment triggers which would require
an updated impairment assessment in the intervening period to year end.
QinetiQ Group plc | Annual Report & Accounts 2024136
Key audit matter How our audit addressed the key audit matter
Impairment of investments in subsidiary undertakings
(parent)
Refer to page 195 (Accounting policies – Investments and note 2,
Investments in subsidiary undertakings).
The company has investments of £530.5m in its subsidiary undertakings.
Annually, the Directors consider whether any events or circumstances have
occurred that could indicate that the carrying amount of the investment in
subsidiaries may not be recoverable. If such circumstances are identified,
an impairment review is undertaken to establish whether the carrying
amount of the investments exceeds its recoverable amount, being the
higher of fair value less costs to sell or value in use.
Impairment assessments of this nature require significant judgement and
there is a risk that a potential impairment trigger may not be identified by
management and in the event that there is an impairment trigger identified,
there is a risk that the calculation of the recoverable amount of the
investment is incorrect and therefore the value of the investment may be
misstated. No such indicators of impairment have been identified.
We have evaluated management’s consideration of impairment triggers through
performing our own independent assessment, which has included;
– Considering the market capitalisation of the group at year end and comparing this
to the carrying value of the investment.
– Assessing the overall financial performance of the group to identify any indicators
of impairment as a result of poor financial performance.
– Considering other information gathered during the course of our audits of components
and assessing whether there are any other indicators of impairment.
– Comparing the carrying value of the investment to the carrying value of the underlying
net assets.
We found that management’s conclusion, that there are no impairment triggers in the
investments in subsidiaries carrying value, was reasonable.
Independent auditors’ report to the members of QinetiQ Group plc
continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company,
the accounting processes and controls, and the industry in which
they operate.
We conducted full scope audit work over QinetiQ Limited, C5ISR,
Avantus and QinetiQ Pty Ltd, with QinetiQ Limited being the only
component considered financially significant to the group. The audit of
QinetiQ Limited is performed in the United Kingdom and the audit of
C5ISR, Avantus and QinetiQ Pty Ltd are performed by our local PwC
component teams based in the United States and Australia, respectively.
This provides sufficient coverage over all financial statement balances,
except inventory and central balances audited by the group team.
We performed additional procedures over inventory balances at two
further entities to ensure sufficient coverage over that financial
statement line item. QinetiQ Target Systems Limited is located within
the UK and work was performed by the group audit team. Technology
Solutions is located in the United States and work was performed by
our local PwC component audit team.
We performed additional procedures over revenue and associated
financial statement balances at Technology Solutions, located in the
United States, which was performed by our local PwC component team.
In addition to the above, we performed analytical procedures on the
remaining entities to understand key balances and transactions in
the year and performed additional procedures on any unusual
balances identified.
The audit procedures performed over the financial information of full
scope components, QinetiQ Limited, C5ISR, Avantus Federal and QinetiQ
Pty Ltd, accounted for 88% of consolidated group revenue and 89% of
underlying profit before taxation (on an absolute basis, excluding holding
companies and consolidation entities).
The full scope audits plus the additional audit procedures over inventory
in two other locations and cash and cash equivalents, revenue and
associated balance sheet accounts within Technology Solutions, resulted
in coverage of 92% of consolidated group revenue and 87% of total
group assets.
The combination of the work referred to above, together with additional
procedures performed at a group level, including testing of significant
journals posted within the consolidation, significant adjustments made to
the financial statements, goodwill, intangible assets, share-based
payments, pensions, IFRS 16 lease accounting, taxation and borrowings
gave us the evidence required for our opinion on the financial statements
as a whole.
The group engagement leader discussed and agreed the audit plan with
our component audit teams, in addition to agreeing the format and
content of communications. We determined that the level of involvement
we were able to have in the audit work at our reporting entities was
sufficient, and appropriate audit evidence had been obtained, to enable us
to form our opinion on the financial statements as a whole. The group
engagement leader visited our local PwC component team and the local
management team in the United States as part of our planning
procedures. We maintained regular dialogue throughout the audit process
with our component audit teams through the use of video conferencing.
We also supervised the work performed by all component teams through
the review of component team working papers and we concluded that
sufficient and appropriate procedures have been performed.
QinetiQ Group plc | Annual Report & Accounts 2024 137
Corporate governance
The company audit was performed by the group audit team. The parent company is principally a holding company and there are no branches or other
locations to be considered when scoping the audit. There are no financial statement line items in scope for the group audit. The company is audited on
a stand-alone basis, and hence, testing has been performed on all material financial statement line items.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and company’s
financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. In particular, when
carrying out our work over long term contracts we challenged management over the impact of climate change (e.g. flooding at exposed areas) on the
forecasted costs to complete as well as any potential risks arising from physical and environmental issues. Our procedures did not identify any material
impact as a result of climate risk on the group’s and company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - group Financial statements - company
Overall materiality
£11,300,000 (2023: £7,950,000). £5,300,000 (2023: £5,000,000).
How we determined it
5% of underlying profit before tax 1% of total assets
Rationale for benchmark
applied
Underlying profit before tax is one of the primary measures
used by the shareholders in assessing the performance of the
group, and is a generally accepted auditing benchmark. It is
considered appropriate to exclude specific adjusting items due
to the nature of these balances as disclosed in note 4 of the
financial statements.
We believe that total assets is the primary measure used by
shareholders in assessing the performance of this entity, and
is a generally accepted auditing benchmark for a holding
company. This materiality relates to the audit of the parent
company only, as the parent company was not in scope for
the group audit.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality
allocated across components was between £6,000,000 and £9,900,000. Certain components were audited to a local statutory audit materiality that
was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2023:
75%) of overall materiality, amounting to £8,475,000 (2023: £6,000,000) for the group financial statements and £3,975,000 (2023: £3,750,000) for the
company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk
and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £525,000 (group audit) (2023:
£400,000) and £265,000 (company audit) (2023: £250,000) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
QinetiQ Group plc | Annual Report & Accounts 2024138
Independent auditors’ report to the members of QinetiQ Group plc
continued
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the
company’s ability to continue to adopt the going concern basis of
accounting included:
– Obtaining management’s Board-approved strategic plan. We held
discussions with management to understand the budgeting process
and the key assumptions made in the forecasting processes, over
management’s going concern assessment period;
– Performing a comparison of the cash flow forecasts used in the going
concern assessment to those in the strategic plan and, where
applicable, compared these forecasts for consistency to those used
elsewhere in the business, including for long term contract accounting
and impairment assessments;
– Assessing whether the stress testing performed by management
appropriately considered the principal risks facing the business,
and were adequate;
– Using our own knowledge from the audit and assessment of previous
forecasting accuracy we calculated sensitivities to apply to
management’s cash flow forecasts. These procedures confirmed
significant liquidity and covenant headroom in management’s
forecasts when performing severe but plausible sensitivities;
– Evaluating the feasibility of management’s mitigating actions in
response to the severe stress testing scenarios; and
– We assessed the adequacy of disclosures in the Going Concern
statement on page 64, the Audit Committee report on page 100 and
statements in Note 36 of the Financial Statements and found these
appropriately reflect our understanding of the process undertaken
and the conclusion reached.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and the
company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the group’s and the company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the Companies
Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit,
the information given in the Strategic report and Directors’ Report for the
year ended 31 March 2024 is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company
and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
QinetiQ Group plc | Annual Report & Accounts 2024 139
Corporate governance
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation
to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance
statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing material to add
or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks,
what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material
uncertainties to the group’s and company’s ability to continue to do
so over a period of at least twelve months from the date of approval
of the financial statements;
– The directors’ explanation as to their assessment of the group’s and
company’s prospects, the period this assessment covers and why the
period is appropriate; and
– The directors’ statement as to whether they have a reasonable
expectation that the company will be able to continue in operation and
meet its liabilities as they fall due over the period of its assessment,
including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability
of the group and company was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’
process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of the group
and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
– The directors’ statement that they consider the Annual Report, taken
as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s and
company’s position, performance, business model and strategy;
– The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
– The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to report when
the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of
the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities,
the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or
have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that
the principal risks of non-compliance with laws and regulations related
to Single Source Contracting Regulations, the Health and Safety
Executive and anti-bribery and corruption legislation, and we considered
the extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations
that have a direct impact on the financial statements such as the
Companies Act 2006 and relevant tax legislation. We evaluated
management’s incentives and opportunities for fraudulent manipulation
of the financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting
inappropriate journal entries to increase revenue as well as considering
management bias in accounting estimates.
QinetiQ Group plc | Annual Report & Accounts 2024140
Independent auditors’ report to the members of QinetiQ Group plc
continued
The group engagement team shared this risk assessment with the
component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures
performed by the group engagement team and/or component
auditors included:
– Discussions with management at multiple levels across the business,
internal audit and the group’s legal counsel throughout the year, as
well as at year end. These discussions have included consideration
of known or suspected instances of non-compliance with laws and
regulations and fraud;
– Evaluation of management’s controls designed to prevent and detect
irregularities, in particular their anti-bribery controls;
– Assessment of matters reported on the group’s whistleblowing
helpline and the results of management’s investigation of
such matters;
– Reviewing correspondence with and reporting to relevant
regulatory authorities;
– Challenging assumptions and judgements made by management in
their significant accounting estimates and judgements, particularly in
relation to the key audit matters above;
– Designing risk filters to search for journal entries, such as those
posted with unusual account combinations, and testing those journals
highlighted (if any); and
– Incorporating elements of unpredictability into the audit
procedures performed.
There are inherent limitations in the audit procedures described above.
We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for
testing, rather than testing complete populations. We will often seek
to target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable
us to draw a conclusion about the population from which the sample
is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the
company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
– we have not obtained all the information and explanations we require
for our audit; or
– adequate accounting records have not been kept by the company, or
returns adequate for our audit have not been received from branches
not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not
made; or
– the company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the members on 22 June 2017 to audit the financial
statements for the year ended 31 March 2018 and subsequent financial
periods. The period of total uninterrupted engagement is 7 years, covering
the years ended 31 March 2018 to 31 March 2024.
Other matter
The company is required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rules to include these financial statements in
an annual financial report prepared under the structured digital format
required by DTR 4.1.15R - 4.1.18R and filed on the National Storage
Mechanism of the Financial Conduct Authority. This auditors’ report
provides no assurance over whether the structured digital format annual
financial report has been prepared in accordance with those requirements.
John Ellis
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Southampton
23 May 2024
Financial statements
142 Consolidated income statement
143 Consolidated comprehensive income statement
143 Consolidated statement of changes in equity
144 Consolidated balance sheet
145 Consolidated cash flow statement
145 Reconciliation of movements in net cash
146 Notes to the Financial Statements
193 Company balance sheet
194 Company statement of changes in equity
195 Notes to the Company Financial Statements
Other information
197 Five-year financial summary
198 Additional financial information
199 Glossary
200 Alternative performance measures
201 Shareholder information
203 Company information and advisers
Financial
Statements
QinetiQ Group plc | Annual Report & Accounts 2024 141
Financial statements
Consolidated income statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
142
* Alternative performance measures are used to supplement the statutory figures. These are additional financial indicators used by management internally to assess the
underlying performance of the Group. Definitions can be found on page 200. Also refer to note 4 for details of ‘specific adjusting items’.
FY24 | FY23 | ||||||
| Specific | Specific | ||||||
| adjusting | adjusting | ||||||
All figures in £ million | Note | Underlying * | Items * | Total | Underlying * | Items * | Total |
Revenue | 2, 3 | ||||||
Operating costs excluding depreciation and amortisation | ( | ( | ( | ( | ( | ( | |
Other income | 2 | ||||||
EBITDA (earnings before interest, tax, depreciation | |||||||
and amortisation) | ( | ( | |||||
Depreciation and impairment of property, plant and equipment | 3, 16 | ( | ( | ( | ( | ( | |
Amortisation of intangible assets | 3, 4, 15 | ( | ( | ( | ( | ( | ( |
Operating profit/(loss) | 3 | ( | ( | ||||
Gain on business divestments | 4, 13 | ||||||
Finance income | 7 | ||||||
Finance expense | 7 | ( | ( | ( | ( | ||
Profit/(loss) before tax | 8 | ( | |||||
Taxation (charge)/credit | 9 | ( | ( | ( | ( | ( | |
Profit/(loss) for the year | ( | ||||||
Earnings per share for profit attributable to the owners of the parent company | FY24 | FY23 | |||||
All figures in pence | Note | Underlying * | Total | Underlying * | Total | ||
Basic | 10 | ||||||
Diluted | 10 |
Consolidated comprehensive income statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
143
Financial Statements
Consolidated statement of changes in equity
For the year ended 31 March
All figures in £ million
Share
capital
Capital
redemption
reserve
Share
premium
Hedge
reserve
Translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total
equity
Note
29
At 1 April 2023
5.8
40.8
147.6
6.3
(4.2)
772.0
968.3
–
968.3
Total comprehensive income/(expense)
Profit for the year
–
–
–
–
–
139.6
139.6
–
139.6
Other comprehensive income/(expense)
for the year, net of tax
–
–
–
0.1
(12.5)
(81.7)
(94.1)
–
(94.1)
Total comprehensive income/(expense)
for the year
–
–
–
0.1
(12.5)
57.9
45.5
–
45.5
Purchase of own shares
(0.1)
–
–
–
–
(51.0)
(51.1)
–
(51.1)
Share-based payment
–
–
–
–
–
8.8
8.8
–
8.8
Tax on share-based payments (note 9)
–
–
–
–
–
0.2
0.2
–
0.2
Dividends
–
–
–
–
–
(45.6)
(45.6)
–
(45.6)
At 31 March 2024
5.7
40.8
147.6
6.4
(16.7)
742.3
926.1
–
926.1
At 1 April 2022
5.8
40.8
147.6
0.1
1.9
845.0
1,041.2
0.2
1,041.4
Total comprehensive income/(expense)
Profit for the year
–
–
–
–
–
154.4
154.4
–
154.4
Other comprehensive income/(expense)
for the year, net of tax
–
–
–
6.2
(7.0)
(190.4)
(191.2)
–
(191.2)
Total comprehensive income/(expense)
for the year
–
–
–
6.2
(7.0)
(36.0)
(36.8)
–
(36.8)
Purchase of own shares
–
–
–
–
–
(0.8)
(0.8)
–
(0.8)
Share-based payments
–
–
–
–
–
5.7
5.7
–
5.7
Tax on share-based payments (note 9)
–
–
–
–
–
0.7
0.7
–
0.7
Movements on business divestment
–
–
–
–
0.9
–
0.9
(0.2)
0.7
Dividends
–
–
–
–
–
(42.6)
(42.6)
–
(42.6)
At 31 March 2023
5.8
40.8
147.6
6.3
(4.2)
772.0
968.3
–
968.3
All figures in £ million
Note
FY24
FY23
Profit for the year
139.6
154.4
Items that will not be reclassified to profit or loss:
Actuarial loss recognised in defined benefit pension schemes
28
(108.9)
(253.9)
Tax on items that will not be reclassified to profit and loss
18
27.2
63.5
Total items that will not be reclassified to profit or loss
(81.7)
(190.4)
Items that may be reclassified to profit or loss:
Foreign currency translation losses on foreign operations
(12.6)
(6.5)
Movement in deferred tax on foreign currency translation
0.1
(0.5)
Increase in the fair value of hedging derivatives
0.1
7.8
Movement in deferred tax on hedging derivatives
–
(1.6)
Total items that may be reclassified to profit or loss
(12.4)
(0.8)
Other comprehensive expense for the year, net of tax
(94.1)
(191.2)
Total comprehensive income/(expense) for the year
45.5
(36.8)
Financial Statements
Consolidated income statement
For the year ended 31 March
QinetiQ Group plc | Annual Report & Accounts 2024142
Consolidated income statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
142
* Alternative performance measures are used to supplement the statutory figures. These are additional financial indicators used by management internally to assess the
underlying performance of the Group. Definitions can be found on page 200. Also refer to note 4 for details of ‘specific adjusting items’.
FY24
FY23
All figures in £ million
Note
Underlying
*
Specific
adjusting
Items
*
Total
Underlying
*
Specific
adjusting
Items
*
Total
Revenue
2, 3
1,912.1
–
1,912.1
1,580.7
–
1,580.7
Operating costs excluding depreciation and amortisation
(1,644.3)
(26.1)
(1,670.4)
(1,353.4)
(29.5)
(1,382.9)
Other income
2
40.1
2.1
42.2
28.0
21.6
49.6
EBITDA (earnings before interest, tax, depreciation
and amortisation)
307.9
(24.0)
283.9
255.3
(7.9)
247.4
Depreciation and impairment of property, plant and equipment
3, 16
(58.1)
(0.7)
(58.8)
(51.5)
–
(51.5)
Amortisation of intangible assets
3, 4, 15
(7.4)
(25.2)
(32.6)
(7.5)
(15.6)
(23.1)
Operating profit/(loss)
3
242.4
(49.9)
192.5
196.3
(23.5)
172.8
Gain on business divestments
4, 13
–
–
–
–
15.9
15.9
Finance income
7
5.3
5.6
10.9
6.8
9.9
16.7
Finance expense
7
(20.7)
–
(20.7)
(13.4)
–
(13.4)
Profit/(loss) before tax
8
227.0
(44.3)
182.7
189.7
2.3
192.0
Taxation (charge)/credit
9
(57.4)
14.3
(43.1)
(36.8)
(0.8)
(37.6)
Profit/(loss) for the year
169.6
(30.0)
139.6
152.9
1.5
154.4
Earnings per share for profit attributable to
the owners of the parent company
FY24
FY23
All figures in pence
Note
Underlying
*
Total
Underlying
*
Total
Basic
10
29.4
24.2
26.5
26.8
Diluted
10
29.0
23.8
26.3
26.5
Consolidated comprehensive income statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
143
Financial Statements
Consolidated statement of changes in equity
For the year ended 31 March
All figures in £ million
Share
capital
Capital
redemption
reserve
Share
premium
Hedge
reserve
Translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total
equity
Note
29
At 1 April 2023
5.8
40.8
147.6
6.3
(4.2)
772.0
968.3
–
968.3
Total comprehensive income/(expense)
Profit for the year
–
–
–
–
–
139.6
139.6
–
139.6
Other comprehensive income/(expense)
for the year, net of tax
–
–
–
0.1
(12.5)
(81.7)
(94.1)
–
(94.1)
Total comprehensive income/(expense)
for the year
–
–
–
0.1
(12.5)
57.9
45.5
–
45.5
Purchase of own shares
(0.1)
–
–
–
–
(51.0)
(51.1)
–
(51.1)
Share-based payment
–
–
–
–
–
8.8
8.8
–
8.8
Tax on share-based payments (note 9)
–
–
–
–
–
0.2
0.2
–
0.2
Dividends
–
–
–
–
–
(45.6)
(45.6)
–
(45.6)
At 31 March 2024
5.7
40.8
147.6
6.4
(16.7)
742.3
926.1
–
926.1
At 1 April 2022
5.8
40.8
147.6
0.1
1.9
845.0
1,041.2
0.2
1,041.4
Total comprehensive income/(expense)
Profit for the year
–
–
–
–
–
154.4
154.4
–
154.4
Other comprehensive income/(expense)
for the year, net of tax
–
–
–
6.2
(7.0)
(190.4)
(191.2)
–
(191.2)
Total comprehensive income/(expense)
for the year
–
–
–
6.2
(7.0)
(36.0)
(36.8)
–
(36.8)
Purchase of own shares
–
–
–
–
–
(0.8)
(0.8)
–
(0.8)
Share-based payments
–
–
–
–
–
5.7
5.7
–
5.7
Tax on share-based payments (note 9)
–
–
–
–
–
0.7
0.7
–
0.7
Movements on business divestment
–
–
–
–
0.9
–
0.9
(0.2)
0.7
Dividends
–
–
–
–
–
(42.6)
(42.6)
–
(42.6)
At 31 March 2023
5.8
40.8
147.6
6.3
(4.2)
772.0
968.3
–
968.3
All figures in £ million
Note
FY24 | FY23 | ||
Profit for the year | |||
Items that will not be reclassified to profit or loss: | |||
Actuarial loss recognised in defined benefit pension schemes | 28 | ( | ( |
Tax on items that will not be reclassified to profit and loss | 18 | ||
Total items that will not be reclassified to profit or loss | ( | ( | |
Items that may be reclassified to profit or loss: | |||
Foreign currency translation losses on foreign operations | ( | ( | |
Movement in deferred tax on foreign currency translation | ( | ||
Increase in the fair value of hedging derivatives | |||
Movement in deferred tax on hedging derivatives | ( | ||
| Total items that may be reclassified to profit or loss | ( | ( | |
Other comprehensive expense for the year, net of tax | ( | ( | |
Total comprehensive income/(expense) for the year | ( |
Consolidated comprehensive income statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
143
Financial Statements
Consolidated statement of changes in equity
For the year ended 31 March
Capital | Non- | ||||||||
| Share | redemption | Share | Hedge | Translation | Retained | controlling | Total | ||
All figures in £ million | capital | reserve | premium | reserve | reserve | earnings | Total | interest | equity |
Note | 29 | ||||||||
| At 1 April 2023 | ( | ||||||||
Total comprehensive income/(expense) | |||||||||
| Profit for the year | |||||||||
Other comprehensive income/(expense) | |||||||||
for the year, net of tax | ( ) | ( | ( | ( | |||||
| Total comprehensive income/(expense) | |||||||||
| for the year | ( ) | ||||||||
Purchase of own shares | ( | ( | ( | ( | |||||
Share-based payment | |||||||||
Tax on share-based payments (note 9) | |||||||||
Dividends | ( | ( | ( | ||||||
| At 31 March 2024 | ( | ||||||||
| At 1 April 2022 | |||||||||
Total comprehensive income/(expense) | |||||||||
Profit for the year | |||||||||
| Other comprehensive income/(expense) | |||||||||
for the year, net of tax | ( | ( | ( | ( | |||||
| Total comprehensive income/(expense) | |||||||||
| for the year | ( | ( | ( ) | ( | |||||
Purchase of own shares | ( | ( | ( | ||||||
Share-based payments | |||||||||
Tax on share-based payments (note 9) | |||||||||
Movements on business divestment | ( | ||||||||
Dividends | ( | ( | ( | ||||||
| At 31 March 2023 | ( |
All figures in £ million
Note
FY24
FY23
Profit for the year
139.6
154.4
Items that will not be reclassified to profit or loss:
Actuarial loss recognised in defined benefit pension schemes
28
(108.9)
(253.9)
Tax on items that will not be reclassified to profit and loss
18
27.2
63.5
Total items that will not be reclassified to profit or loss
(81.7)
(190.4)
Items that may be reclassified to profit or loss:
Foreign currency translation losses on foreign operations
(12.6)
(6.5)
Movement in deferred tax on foreign currency translation
0.1
(0.5)
Increase in the fair value of hedging derivatives
0.1
7.8
Movement in deferred tax on hedging derivatives
–
(1.6)
Total items that may be reclassified to profit or loss
(12.4)
(0.8)
Other comprehensive expense for the year, net of tax
(94.1)
(191.2)
Total comprehensive income/(expense) for the year
45.5
(36.8)
Consolidated comprehensive income statement
For the year ended 31 March
Consolidated statement of changes in equity
For the year ended 31 March
QinetiQ Group plc | Annual Report & Accounts 2024 143
Financial statementsFinancial statements
Consolidated balance sheet
As at 31 March
QinetiQ Group plc Annual Report and Accounts 2024
144
31 March | 31 March | ||
All figures in £ million | Note | 2024 | 2023 |
Non-current assets | |||
Goodwill | 14 | ||
Intangible assets | 15 | ||
Property, plant and equipment | 16 | ||
Other financial assets | 24 | ||
Equity accounted investments | 17 | ||
Net pension asset | 28 | ||
Deferred tax asset | 18 | ||
Current assets | |||
Inventories | 20 | ||
Other financial assets | 24 | ||
Trade and other receivables | 21 | ||
Current tax asset | 19 | ||
Cash and cash equivalents | 24 | ||
| Total assets | |||
| Current liabilities | |||
Trade and other payables | 22 | ( | ( |
Current tax payable | 19 | ( | ( |
Provisions | 23 | ( | ( |
Other financial liabilities | 24 | ( | ( |
( | ( | ||
Non-current liabilities | |||
Deferred tax liability | 18 | ( | ( |
Provisions | 23 | ( | ( |
Borrowings and other financial liabilities | 24 | ( | ( |
Other payables | 22 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | |||
| Equity | |||
Ordinary shares | 29 | ||
Capital redemption reserve | |||
Share premium account | |||
Hedging reserve | |||
Translation reserve | ( | ( | |
Retained earnings | |||
| Total equity |
Financial Statements continued
Consolidated balance sheet
As at 31 March
QinetiQ Group plc | Annual Report & Accounts 2024144
Consolidated cash flow statement
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
145
Financial Statements
All figures in £ million | Note | FY24 | FY23 |
Underlying net cash inflow from operations | 25 | ||
Less: specific adjusting items | 25 | ( | ( |
Net cash inflow from operations | 25 | ||
Tax paid | ( | ( | |
Interest received | |||
Interest paid | ( | ( | |
Net cash inflow from operating activities | |||
Purchases of intangible assets | 15 | ( | ( |
Purchases of property, plant and equipment | 16 | ( | ( |
Proceeds from sale of property | |||
Proceeds from sale of plant and equipment | |||
Proceeds from disposal of business | |||
Acquisition of businesses | 12 | ( | ( |
Net cash outflow from investing activities | ( | ( | |
Purchase of own shares | ( | ( | |
Dividends paid to shareholders | 11 | ( | ( |
Payment of bank facility arrangement fee | ( | ( | |
Capital element of lease payments | ( | ( | |
Drawdown of new borrowings | |||
Repayment of borrowings | ( | ||
Repayment of acquired borrowings | ( | ||
Cash flow relating to intercompany loan hedges | ( | ||
Net cash (outflow)/inflow from financing activities | ( | ||
Increase/(decrease) in cash and cash equivalents | ( | ||
Effect of foreign exchange changes on cash and cash equivalents | ( | ||
Cash and cash equivalents at beginning of the year | |||
Cash and cash equivalents at end of the year | 24 | ||
| Reconciliation of movement in net (debt)/cash for the year ended 31 March | |||
All figures in £ million | Note | FY24 | FY23 |
Increase/(decrease) in cash and cash equivalents in the year | ( | ||
Add back net cash flows not impacting net (debt)/cash | ( | ||
Movement in net (debt)/cash resulting from cash flows | ( | ||
Lease liabilities derecognised on disposal | |||
Lease liabilities recognised on acquisition | ( | ||
Net increase in lease obligations | ( | ( | |
Net movement in derivative financial instruments | ( | ||
Other movements including foreign exchange | ( | ||
Movement in net (debt)/cash as defined by the Group | ( | ||
Net (debt)/cash as defined by Group at the beginning of the year | ( | ||
Net debt as defined by the Group at the end of the year | 24 | ( | ( |
Less: borrowings | 24 | ||
Less: total net derivative financial instruments, capitalised borrowing costs and lease liabilities | 24 | ||
Total cash and cash equivalents | 24 |
Consolidated cash flow statement
For the year ended 31 March
QinetiQ Group plc | Annual Report & Accounts 2024 145
Financial statementsFinancial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
146
All figures in £ million | FY24 | FY23 |
Services contracts with customers | 1,811.2 | 1,481.4 |
Sale of goods contracts with customers | 95.7 | 96.1 |
Royalties and licences | 5.2 | 3.2 |
Total revenue | 1,912.1 | 1,580.7 |
Less: adjust current year for acquired businesses 1 | (161.0) | – |
Less: adjust prior year for disposed businesses 1 | – | (27.6) |
Adjust to constant prior year exchange rates | 20.9 | – |
Total revenue on an organic, constant currency basis 2 | 1,772.0 | 1,553.1 |
Organic revenue growth at constant currency 2 | 14% | 12% |
All figures in £ million | FY24 | FY23 |
Share of joint ventures’ profit after tax | 0.8 | 0.8 |
Research and development expenditure credits (RDEC) | 27.2 | 17.4 |
Other income | 12.1 | 9.8 |
Underlying other income | 40.1 | 28.0 |
Specific adjusting item: gain on sale of property (note 4) | 22..11 | 22..00 |
Specific adjusting item: release of RDEC MoD appropriation liability (note 4) | –– | 1199..66 |
Total other income | 42.2 | 49.6 |
All figures in £ million | FY24 | FY23 |
United Kingdom (UK) | 1,265.8 | 1,045.7 |
United States of America (US) | 401.9 | 301.0 |
Australia | 130.6 | 124.1 |
Home countries | 1,798.3 | 1,470.8 |
Europe | 52.8 | 69.4 |
Rest of world | 61.0 | 40.5 |
Total revenue | 1,912.1 | 1,580.7 |
Home countries revenue % | 94% | 93% |
International (non-UK) revenue % | 34% | 34% |
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc | Annual Report & Accounts 2024146
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
147
Financial Statements
All figures in £ million | FY24 | FY23 |
UK government | 1,184.9 | 969.4 |
US government | 389.3 | 230.8 |
Other | 337.9 | 380.5 |
Total revenue | 1,912.1 | 1,580.7 |
All figures in £ million | FY25 | FY26 | FY27 | FY28+ | Total |
Total f orecast revenue allocated to unsatisfied performance obligations | 1,304.6 | 621.0 | 401.9 | 545.5 | 2,873.0 |
All figures in £ million | FY24 | FY25 | FY26 | FY27+ | Total |
| 1,124.6 | 601.3 | 467.9 | 876.5 | 3,070.3 |
FY24 | FY23 | |||
| Revenue | Underlying | Revenue | Underlying | |
| from external | operating | from external | operating | |
All figures in £ million | customers | profit 1,2 | customers | profit 1,2 |
EMEA Services | 1,417.4 | 163.4 | 1,179.3 | 137.1 |
Global Solutions | 494.7 | 51.8 | 401.4 | 41.8 |
Revenue/Operating profit from segments 1,2 | 1,912.1 | 215.2 | 1,580.7 | 178.9 |
Research and development expenditure credits (RDEC) | 27.2 | 17.4 | ||
Underlying operating profit 2 | 242.4 | 196.3 | ||
O p e r a t i n g p r o f i t m a r g i n f r o m s e g m e n t s 2 | 11.3% | 11.3% |
QinetiQ Group plc | Annual Report & Accounts 2024 147
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
148
3. Segmental analysis (continued)
All figures in £ million | Note | FY24 | FY23 |
Operating profit from segments 1,2 | 215.2 | 178.9 | |
| Research and development expenditure credits (RDEC) | 27.2 | 17.4 | |
Underlying operating profit 2 | 242.4 | 196.3 | |
Specific adjusting items operating loss | 4 | (49.9 ) | (23.5) |
| Operating profit | 192.5 | 172.8 | |
Gain on business divestments | 13 | – | 15.9 |
Net finance (expense)/income | 7 | (9.8) | 3.3 |
| Profit before tax | 182.7 | 192.0 | |
Taxation expense | 9 | (43.1) | (37.6) |
Profit for the year | 139.6 | 154.4 |
Rest of | ||||||
All figures in £ million | UK | US | Australia | Germany | world | Total |
| As at year ended 31 March 2024 | 576.1 | 572.8 | 46.5 | 46.3 | 13.3 | 1255.0 |
As at year ended 31 March 2023 | 519.3 | 598.8 | 45.4 | 52.8 | 13.5 | 1,229.8 |
EMEA | Global | ||
| All figures in £ million | Services | Solutions | Total |
Underlying depreciation of property, plant and equipment | 50.8 | 7.3 | 58.1 |
Underlying amortisation of purchased or internally developed intangible assets | 4.2 | 3.2 | 7.4 |
55.0 | 10.5 | 65.5 |
EMEA | Global | ||
| All figures in £ million | Services | Solutions | Total |
Underlying depreciation of property, plant and equipment | 44.7 | 6.8 | 5511..55 |
Underlying amortisation of purchased or internally developed intangible assets | 5.2 | 2.3 | 77..55 |
49.9 | 9.1 | 59.0 |
QinetiQ Group plc | Annual Report & Accounts 2024148
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
149
Financial Statements
I | |||
All figures in £ million | FY24 | FY23 |
| Underlying profit after tax | 169.6 | 152.9 |
| Total specific adjusting items (loss)/gain after tax | (30.0 ) | 1.5 |
| Total profit for the year | 139.6 | 154.4 |
QinetiQ Group plc | Annual Report & Accounts 2024 149
Financial statementsFinancial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
150
As at 31 March | Monthly average | |||
2024 | 2023 | FY24 | FY23 | |
| Number | Number | Number | Number | |
EMEA Services | 6,936 | 6,437 | 6,735 | 6,158 |
Global Solutions | 1,652 | 1,831 | 1,724 | 1,275 |
| Total employees | 8,588 | 8,268 | 8,459 | 7,433 |
All figures in £ million | Note | FY24 | FY23 |
Wages and salaries | 562.1 | 456.9 | |
Social security costs | 55.7 | 47.3 | |
Other pension costs | 65.0 | 55.2 | |
Share-based payments costs | 30 | 10.2 | 7.9 |
Total employee costs | 693.0 | 567.3 |
All figures in £ million | FY24 | FY23 |
Short-term employee remuneration including benefits | 9.1 | 9.5 |
Post-employment benefits | 0.1 | 0.1 |
Share-based payments costs | 2.1 | 1.9 |
| Total | 11.3 | 11.5 |
All figures in £ million | FY24 | FY23 |
Bank interest receivable | 5.3 | 6.8 |
Finance income before specific adjusting items | 5.3 | 6.8 |
Amortisation of deferred financing costs | (1.2) | (0.8) |
Bank interest and commitment fees | (16.6) | (10.6) |
| Lease expense | (2.8) | (1.1) |
| Unwinding of discount on financial liabilities | (0.1) | (0.1) |
Other interest | – | (0.8) |
| Finance expense | (20.7 ) | (13.4) |
Underlying net finance expense | (15.4) | (6.6) |
| Plus: specific adjusting items – defined benefit pension scheme net finance income | 5.6 | 9.9 |
| Net finance (expense)/income | (9.8) | 3.3 |
QinetiQ Group plc | Annual Report & Accounts 2024150
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
151
Financial Statements
All figures in £ million | FY24 | FY23* |
Cost of inventories expensed | 59.4 | 55.2 |
Owned assets: depreciation | 49.3 | 45.3 |
Leased assets: depreciation | 8.8 | 6.2 |
Foreign exchange loss/(gain) | 0.6 | (0.6) |
Research and development expenditure – customer funded contracts | 315.4 | 299.2 |
Research and development expenditure – Group funded | 12.8 | 14.6 |
All figures in £ million | FY24 | FY23 |
| Fees payable to the auditors and its associates: | ||
Audit of the Group’s annual accounts | 1.0 | 1.1 |
Audit of the accounts of subsidiaries of the Company | 0.8 | 0.7 |
Total audit fees | 1.8 | 1.8 |
Audit-related assurance services (Interim financial statements) | 0.1 | 0.1 |
Other assurance services | 0.1 | 0.1 |
| Total non-audit fees | 0.2 | 0.2 |
| Total auditors’ remuneration | 2.0 | 2.0 |
I | ||||||
QinetiQ Group plc | Annual Report & Accounts 2024 151
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
152
9. Taxation charge (continued)
All figures in £ million | FY24 | FY23 |
Current tax: share-based payments | (0.2) | (0.3) |
Deferred tax: share-based payments | – | (0.4) |
Total: share-based payments | (0.2) | (0.7) |
FY24 | FY23 | ||
| Weighted average number of shares | Million | 577.0 | 575.9 |
Effect of dilutive securities | Million | 8.7 | 6.4 |
| Diluted number of shares | Million | 585.7 | 582.3 |
FY24 | FY23 | ||
Profit attributable to the owners of the Company | £ million | 139.6 | 154.4 |
Remove loss/(profit) after tax in respect of specific adjusting items | £ million | 30.0 | (1.5) |
Underlying profit after taxation | £ million | 169.6 | 152.9 |
Weighted average number of shares | Million | 577.0 | 575.9 |
Underlying basic EPS | Pence | 29.4 | 26.5 |
Diluted number of shares | Million | 585.7 | 582.3 |
Underlying diluted EPS | Pence | 29.0 | 26.3 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
153
Financial Statements
Basic and diluted EPS
11. Dividends
An analysis of the dividends paid and proposed in respect of the years ended 31 March 2024 and 31 March 2023 is provided below:
The proposed final dividend in respect of the year ending 31 March 2024 will be paid on 22 August 2024. The ex-dividend date is 25 July
2024 and the record date is 26 July 2024
.
12. Business combinations
Acquisitions cash flow in the year to 31 March 2024
There were no acquisitions in the year ended 31 March 2024. However, £5.1m of deferred consideration payments were made in respect of
the Air Affairs acquisition and legacy acquisitions within Avantus. The specific adjusting items operating result for the year includes various
acquisition related items as set out in note 4.
Acquisitions cash flow in the year to 31 March 2023
Total acquisition costs of £16.4m relating to the two acquisitions, as well as an aborted disposal, were included within operating profit as a
specific adjusting item (see note 4). A further £2.3m of integration costs and acquisition related remuneration costs, both relating to Avantus,
were also included within operating profit as a specific adjusting item (see note 4).
Avantus Federal LLC
On 23 November 2022, the Group acquired 100% of the issued share capital of Avantus for an enterprise value of $590m, on a cash-free,
debt-free valuation basis. Avantus is a leading provider of mission-focused cyber, data analytics and software development solutions to the
US Department of Defense, Intelligence Community, Department of Homeland Security and other Federal civilian agencies.
Air Affairs Australia
On 1 December 2022, the Group acquired 100% of the issued share capital of the Air Affairs Australia group of companies for an enterprise
value of A$53.0m, on a cash-free, debt-free valuation basis. Air Affairs is an Australian defence services company – a leader in air threat
representation, Test and Evaluation, unmanned targets and mission rehearsal.
FY24
FY23
Profit attributable to the owners of the Company
£ million
139.6
154.4
Weighted average number of shares
Million
577.0
575.9
Basic EPS
Pence
24.2
26.8
Diluted number of shares
Million
585.7
582.3
Diluted EPS
Pence
23.8
26.5
Pence
per share
£m
Date paid/
payable
Interim 2024
2.60
15.0
Feb 2024*
Final 2024 (proposed)
5.65
31.9
Aug 2024
Total for the year ended 31 March 2024
8.25
46.9
Interim 2023
2.40
13.8
Feb 2023
Final 2023
5.30
30.6
Aug 2023*
Total for the year ended 31 March 2023
7.70
44.4
* Total cash paid in the year to 31 March 2024 was £45.6m (FY23: £42.6m).
Contribution post-acquisition
All figures in £ million
Date
acquired
Total consideration
Goodwill
Fair value
of net assets
acquired
Revenue
Operating
profit
Avantus Federal LLC
23 November 2022
392.2
264.6
127.6
82.9
8.9
Air Affairs Australia
1 December 2022
12.6
3.1
9.5
8.2
0.5
Total
404.8
267.7
137.1
91.1
9.4
Less: deferred consideration
(4.0)
Less: cash acquired
(14.9)
Net cash outflow for the year
385.9
QinetiQ Group plc | Annual Report & Accounts 2024152
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
153
Financial Statements
FY24 | FY23 | ||
Profit attributable to the owners of the Company | £ million | 139.6 | 154.4 |
Weighted average number of shares | Million | 577.0 | 575.9 |
Basic EPS | Pence | 24.2 | 26.8 |
Diluted number of shares | Million | 585.7 | 582.3 |
Diluted EPS | Pence | 23.8 | 26.5 |
Pence | Date paid/ | ||
| per share | £m | payable | |
Interim 2024 | 2.60 | 15.0 | Feb 2024* |
Final 2024 (proposed) | 5.65 | 31.9 | Aug 2024 |
| Total for the year ended 31 March 2024 | 46.9 | ||
Interim 2023 | 2.40 | 13.8 | Feb 2023 |
Final 2023 | 5.30 | 30.6 | Aug 2023* |
Total for the year ended 31 March 2023 | 44.4 |
Contribution post-acquisition | ||||||
| Fair value | ||||||
| Date | of net assets | Operating | ||||
| All figures in £ million | acquired | Total consideration | Goodwill | acquired | Revenue | profit |
Avantus Federal LLC | 23 November 2022 | 392.2 | 264.6 | 127.6 | 82.9 | 8.9 |
Air Affairs Australia | 1 December 2022 | 12.6 | 3.1 | 9.5 | 8.2 | 0.5 |
Total | 404.8 | 267.7 | 137.1 | 91.1 | 9.4 | |
Less: deferred consideration | (4.0) | |||||
| Less: cash acquired | (14.9) | |||||
| Net cash outflow for the year | 385.9 |
QinetiQ Group plc | Annual Report & Accounts 2024 153
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
154
All figures in £ million | 31 March | 31 March |
| 2024 | 2023 | |
| Cost | ||
At 1 April | 562.7 | 296.1 |
Acquisitions | – | 267.7 |
Disposals | – | (5.6) |
Foreign exchange | (11.0) | 4.5 |
At 31 March | 551.7 | 562.7 |
Accumulated impairment | ||
| At 1 April | (153.7) | (146.7) |
Foreign exchange | 3.4 | (7.0) |
| At 31 March | (150.3 ) | (153.7) |
| Net book value at 31 March | 401.4 | 409.0 |
All figures in £ million | Primary reporting segments | 31 March | 31 March |
| 2024 | 2023 | ||
US Technology Solutions | Global Solutions | 43.1 | 44.1 |
US C5ISR | Global Solutions | 36.0 | 36.8 |
US Avantus Federal | Global Solutions | 252.5 | 257.8 |
Target Systems | Global Solutions | 24.4 | 24.5 |
Germany | EMEA Services | 2.7 | 2.7 |
Naimuri | EMEA Services | 14.8 | 14.8 |
Inzpire | EMEA Services | 11.7 | 11.7 |
QinetiQ Training & Simulation | EMEA Services | 7.8 | 7.8 |
Australia | EMEA Services | 5.6 | 5.8 |
Air Affairs Australia | EMEA Services | 2.8 | 3.0 |
Net book value at 31 March | 401.4 | 409.0 |
QinetiQ Group plc | Annual Report & Accounts 2024154
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
155
Financial Statements
All figures % | US | Target | US Avantus | US C5ISR | Inzpire | Australia | Air Affairs | QinetiQ | QinetiQ | Naimuri | ||||||||||
| 31 March 2024: (2023) | Technology | Systems | Australia | Germany | Training & | |||||||||||||||
Solutions | Simulation | |||||||||||||||||||
Terminal growth rate | 2.3 | (2.3) | 2.2 | (2.2) | 2.3 | (2.3) | 2.3 | (2.3) | 2.2 | (2.2) | 2.4 | (2.3) | 2.4 | (2.3) | 2.2 | (2.2) | 2.2 | (2.2) | 2.2 | (2.2) |
Pre-tax discount rate | 10.7 | (11.1) | 11.1 | (10.9) | 10.6 | (11.2) | 10.7 | (11.2) | 11.1 | (12.0) | 13.0 | (12.9) | 12.8 | (12.9) | 8.8 | (8.9) | 11.1 | (10.9) | 11.0 | (11.8) |
QinetiQ Group plc | Annual Report & Accounts 2024 155
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
156
14. Goodwill (continued)
| For the year ended 31 March 2024 | |||||
Acquired intangibles | |||||
Other | |||||
| Customer | Other | Development | in ternally | ||
| All figures in £ million | relationships | acquired | costs | generated | Total |
| Cost | |||||
At 1 April 2023 | 308.5 | 96.0 | 37.3 | 82.5 | 524.3 |
Reclassifications from PPE | – | – | 7.4 | (0.2) | 7.2 |
Reclassifications between categories | – | – | 1.5 | (1.5) | – |
Additions – internally developed 2 | – | – | 6.1 | 1.1 | 7.2 |
| Additions – purchased | – | – | 0.8 | 3.3 | 4.1 |
| Disposals | – | – | (2.0) | (4.1) | (6.1) |
| Foreign exchange | (4.7 ) | (3.4 ) | – | (0.7) | (8.8 ) |
| At 31 March 2024 | 303.8 | 92.6 | 51.1 | 80.4 | 527.9 |
| Accumulated amortisation and impairment | |||||
At 1 April 2023 | (59.4) | (63.1) | (22.3) | (36.5) | (181.3) |
Amortisation charge for year | (19.0) | (6.2) | (3.5) | (3.9) | (32.6) |
Reclassifications between categories | – | – | – | – | – |
Disposals | – | – | 1.7 | 3.5 | 5.2 |
Foreign exchange | (1.2) | 3.7 | – | 0.1 | 2.6 |
At 31 March 2024 | (79.6) | (65.6) | (24.1) | (36.8) | (206.1) |
Net book value at 31 March 2024 | 224.2 | 27.0 | 27.0 | 43.6 | 321.8 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
157
Financial Statements
Other significant individual assets from past acquisitions include: customer relationships associated with US C5ISR, Germany and QinetiQ
Training & Simulation Limited (NBV: £11.9m; £18.7m; £2.5m respectively) with remaining amortisation periods of approximately 6 years, 8
years and 8 years respectively, and acquired technology associated with US C5ISR, Germany, and QinetiQ Training & Simulation Limited
(£10.2m; £3.2m; £1.5m respectively) all with remaining amortisation periods of approximately 6 years.
For the year ended 31 March 2023
* Additions per the table above are different to the capital expenditure included in the cash flow statement due to the relative timing of cash payments compared to the
recognition of balance sheet assets.
16. Property, plant and equipment
For the year ended 31 March 2024
* Additions per the table above are different to the capital expenditure included in the cash flow statement due to the relative timing of cash payments compared to the
recognition of balance sheet assets.
Acquired intangibles
All figures in £ million
Customer
relationships
Other
acquired
Development
costs
Other
internally
generated
Total
Cost
At 1 April 2022
114.5
81.5
31.6
72.0
299.6
Reclassifications from PPE
–
–
5.0
0.5
5.5
Reclassifications between categories
–
–
0.2
(0.2)
–
Additions – internally developed*
–
–
1.6
8.7
10.3
Additions – purchased*
–
–
1.1
2.4
3.5
Disposals
–
–
(0.2)
(1.9)
(2.1)
Amounts recognised on business acquisitions
197.5
11.1
0.9
2.1
211.6
Amounts derecognised on business disposal
(2.5)
–
(2.8)
(2.0)
(7.3)
Foreign exchange
(1.0)
3.4
(0.1)
0.9
3.2
At 31 March 2023
308.5
96.0
37.3
82.5
524.3
Accumulated amortisation and impairment
At 1 April 2022
(49.1)
(55.4)
(18.9)
(35.9)
(159.3)
Amortisation charge for year
(11.0)
(4.6)
(3.5)
(4.0)
(23.1)
Disposals
–
–
0.2
1.8
2.0
Amounts derecognised on business disposal
2.5
–
–
1.9
4.4
Foreign exchange
(1.8)
(3.1)
(0.1)
(0.3)
(5.3)
At 31 March 2023
(59.4)
(63.1)
(22.3)
(36.5)
(181.3)
Net book value at 31 March 2023
249.1
32.9
15.0
46.0
343.0
Owned assets
Right of use assets
All figures in £ million
Land and
buildings
Plant,
machinery
and vehicles
Computers
and office
equipment
Assets under
construction
Land and
buildings
Plant,
machinery
and vehicles
Computers
and office
equipment
Total
Cost
At 1 April 2023
365.7
309.3
124.3
115.5
68.7
6.5
0.4
990.4
Reclassifications to intangibles
0.2
(7.4)
–
–
–
(7.2)
Reclassifications/transfers
7.3
14.6
20.6
(42.5)
–
–
–
–
Additions – purchased*
4.2
3.8
6.5
79.5
31.4
–
–
125.4
Disposals
(1.3)
(1.2)
(10.4)
(2.4)
(5.6)
(3.1)
–
(24.0)
Foreign exchange
(0.2)
(2.1)
(0.3)
(0.4)
(2.1)
–
–
(5.1)
At 31 March 2024
375.7
324.4
140.9
142.3
92.4
3.4
0.4
1,079.5
Accumulated depreciation and impairment
At 1 April 2023
(215.6)
(177.7)
(70.8)
–
(41.9)
(6.2)
(0.4)
(512.6)
Charge
(12.9)
(18.3)
(18.1)
–
(8.7)
(0.1)
–
(58.1)
Disposals
1.3
1.1
10.4
–
5.6
3.1
–
21.5
Impairment
–
–
–
–
(0.7)
–
–
(0.7)
Foreign exchange
0.2
0.6
0.1
–
1.3
–
–
2.2
At 31 March 2024
(227.0)
(194.3)
(78.4)
–
(44.4)
(3.2)
(0.4)
(547.7)
Opening Net Book Value
150.1
131.6
53.5
115.5
26.8
0.3
–
477.8
Closing Net Book Value
148.7
130.1
62.5
142.3
48.0
0.2
–
531.8
QinetiQ Group plc | Annual Report & Accounts 2024156
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
157
Financial Statements
| For the year ended 31 March 2023 | |||||
Acquired intangibles | |||||
| Other | |||||
| Customer | Other | Development | internally | ||
All figures in £ million | relationships | acquired | costs | generated | Total |
| Cost | |||||
At 1 April 2022 | 114.5 | 81.5 | 31.6 | 72.0 | 299.6 |
Reclassifications from PPE | – | – | 5.0 | 0.5 | 5.5 |
Reclassifications between categories | – | – | 0.2 | (0.2) | – |
Additions – internally developed* | – | – | 1.6 | 8.7 | 10.3 |
Additions – purchased* | – | – | 1.1 | 2.4 | 3.5 |
Disposals | – | – | (0.2) | (1.9) | (2.1) |
Amounts recognised on business acquisitions | 197.5 | 11.1 | 0.9 | 2.1 | 211.6 |
Amounts derecognised on business disposal | (2.5) | – | (2.8) | (2.0) | (7.3) |
| Foreign exchange | (1.0) | 3.4 | (0.1) | 0.9 | 3.2 |
| At 31 March 2023 | 308.5 | 96.0 | 37.3 | 82.5 | 524.3 |
Accumulated amortisation and impairment | |||||
At 1 April 2022 | (49.1) | (55.4) | (18.9) | (35.9) | (159.3) |
Amortisation charge for year | (11.0) | (4.6) | (3.5) | (4.0) | (23.1) |
Disposals | – | – | 0.2 | 1.8 | 2.0 |
Amounts derecognised on business disposal | 2.5 | – | – | 1.9 | 4.4 |
Foreign exchange | (1.8) | (3.1) | (0.1) | (0.3) | (5.3) |
| At 31 March 2023 | (59.4) | (63.1) | (22.3) | (36.5) | (181.3) |
| Net book value at 31 March 2023 | 249.1 | 32.9 | 15.0 | 46.0 | 343.0 |
| For the year ended 31 March 2024 | ||||||||
Owned assets | Right of use assets | |||||||
Plant, | Computers | Land and | Plant, | Computers | ||||
| Land and | machinery | and office | Assets under | buildings | machinery | and office | ||
| All figures in £ million | buildings | and vehicles | equipment | construction | and vehicles | equipment | Total | |
Cost | ||||||||
At 1 April 2023 | 365.7 | 309.3 | 124.3 | 115.5 | 68.7 | 6.5 | 0.4 | 990.4 |
Reclassifications to intangibles | 0.2 | (7.4) | – | – | – | (7.2) | ||
Reclassifications/transfers | 7.3 | 14.6 | 20.6 | (42.5) | – | – | – | – |
| Additions – purchased* | 4.2 | 3.8 | 6.5 | 79.5 | 31.4 | – | – | 125.4 |
| Disposals | (1.3) | (1.2) | (10.4) | (2.4) | (5.6) | (3.1) | – | (24.0) |
| Foreign exchange | (0.2) | (2.1) | (0.3) | (0.4) | (2.1) | – | – | (5.1) |
| At 31 March 2024 | 375.7 | 324.4 | 140.9 | 142.3 | 92.4 | 3.4 | 0.4 | 1,079.5 |
| Accumulated depreciation and impairment | ||||||||
| At 1 April 2023 | (215.6) | (177.7) | (70.8) | – | (41.9) | (6.2) | (0.4) | (512.6) |
Charge | (12.9) | (18.3) | (18.1) | – | (8.7) | (0.1) | – | (58.1) |
Disposals | 1.3 | 1.1 | 10.4 | – | 5.6 | 3.1 | – | 21.5 |
| Impairment | – | – | – | – | (0.7) | – | – | (0.7) |
Foreign exchange | 0.2 | 0.6 | 0.1 | – | 1.3 | – | – | 2.2 |
At 31 March 2024 | (227.0) | (194.3) | (78.4) | – | (44.4) | (3.2) | (0.4) | (547.7) |
| Opening Net Book Value | 150.1 | 131.6 | 53.5 | 115.5 | 26.8 | 0.3 | – | 477.8 |
Closing Net Book Value | 148.7 | 130.1 | 62.5 | 142.3 | 48.0 | 0.2 | – | 531.8 |
QinetiQ Group plc | Annual Report & Accounts 2024 157
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
158
16. Property, plant and equipment (continued)
| For the year ended 31 March 2023 | ||||||||
Owned assets | Right of use assets | |||||||
Plant, | Computers | Plant, | Computers | |||||
| Land and | machinery | and office | Assets under | Land and | machinery | and office | ||
| All figures in £ million | buildings | and vehicles | equipment | construction | buildings | and vehicles | equipment | Total |
Cost | ||||||||
At 1 April 2022 | 350.6 | 274.5 | 102.8 | 94.5 | 56.5 | 16.6 | 0.4 | 895.9 |
| Reclassifications to intangibles | – | – | – | (5.5) | – | – | – | (5.5) |
| Reclassifications/transfers | 13.8 | 7.4 | 16.2 | (37.4 ) | – | – | – | – |
Additions – purchased* | 4.6 | 12.4 | 5.4 | 63.1 | 1.5 | – | – | 87.0 |
Additions – recognised on acquisitions | 0.5 | 20.8 | 2.1 | 0.7 | 14.0 | – | – | 38.1 |
Disposals | (0.7) | (4.5) | (2.2) | (0.2) | (3.9) | (7.7) | – | (19.2) |
Business divestments | (3.5) | (2.3) | – | – | (1.8) | (2.5) | – | (10.1) |
Foreign exchange | 0.4 | 1.0 | – | 0.3 | 2.4 | 0.1 | – | 4.2 |
At 31 March 2023 | 365.7 | 309.3 | 124.3 | 115.5 | 68.7 | 6.5 | 0.4 | 990.4 |
| Accumulated depreciation and impairment | ||||||||
At 1 April 2022 | (204.5) | (164.8) | (56.7) | (0.4) | (39.1) | (15.5) | (0.4) | (481.4) |
Charge | (12.0) | (17.9) | (15.4) | – | (5.9) | (0.3) | – | (51.5) |
Disposals | 0.4 | 4.3 | 1.9 | 0.4 | 3.9 | 7.6 | – | 18.5 |
Business divestments | 1.0 | 1.9 | – | – | 0.9 | 2.0 | – | 5.8 |
Foreign exchange | (0.5) | (1.2) | (0.6) | – | (1.7) | – | – | (4.0) |
At 31 March 2023 | (215.6) | (177.7) | (70.8) | – | (41.9) | (6.2) | (0.4) | (512.6) |
Net book value at 31 March 2023 | 150.1 | 131.6 | 53.5 | 115.5 | 26.8 | 0.3 | – | 477.8 |
31 March 2024 | 31 March 2023 | |||
Joint | Group net | Joint | Group net | |
| Ventures’ | share of | Ventures’ | share of | |
financial | Joint | financial | Joint | |
| All figures in £ million | results | Ventures | results | Ventures |
Non-current assets | 1.1 | 0.6 | 1.4 | 0.7 |
Current assets | 5.9 | 3.7 | 5.8 | 3.6 |
7.0 | 4.3 | 7.2 | 4.3 | |
| Current liabilities | (0.3) | (0.1) | (4.7) | (2.3) |
| Non-current liabilities | (4.1) | (2.0) | (1.2) | (0.6) |
(4.4) | (2.1) | (5.9) | (2.9) | |
Net assets of joint ventures | 2.6 | 2.2 | 1.3 | 1.4 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
159
Financial Statements
18. Deferred tax
For the year ended 31 March 2024
Deferred tax asset
Deferred tax liability
Deferred tax has been calculated at the rate at which the timing difference is expected to reverse using enacted future statutory rates. Deferred
tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred
tax balances relate to the same taxation authority.
At 31 March 2024 the Group had unused tax losses and carried forward interest expense of £212.3m (31 March 2023: £175.6m) which are
available for offset against future taxable profits. Deferred tax assets are recognised on the balance sheet of £29.0m in respect of £109.8m
of US net operating losses, £4.9m in respect of £20.9m of Canadian net operating losses and £2.0m in respect of £6.8m of German trade
losses. A deferred tax asset of £1.0m is recognised in respect of £3.3m of German excess interest. No deferred tax asset is recognised in
respect of the £71.5m of US interest deductions due to uncertainty over the timing and extent of their utilisation. Full recognition of the US
carried forward interest expense would increase the deferred tax asset by £19.3m.
The Group has £32.4m of time-limited US net operating losses of which £22.9m will expire in 2035 and £9.5m in 2036. The Group made
overseas losses in the period ended 31 March 2024 and recognition of deferred tax assets is dependent on future forecast taxable profits.
The Group has reviewed the latest forecasts for these businesses which incorporate the unsystematic risks of operating in the defence
business. In the period beyond the 5 year forecast we have reviewed the terminal period profits and based on these and our expectations for
these businesses we believe it is probable the losses, with the exception of the interest deductions, will be fully utilised. Based on the current
forecasts the losses will be fully utilised over the next 9-11 years. A 10% change in the forecast profits would alter the utilisation period by 3
years.
There are no material temporary differences associated with investments in subsidiaries or interests in joint ventures for which deferred tax
liabilities have not been recognised.
For the year ended 31 March 2023
Deferred tax asset
All figures in £ million
Short-term
timing
differences
Carried
forward
interest
expense
Lease
liabilities
Tax
losses
Total
At 1 April 2023
17.5
–
7.4
30.6
55.5
Credited to income statement
6.4
1.0
1.5
6.0
14.9
Charged to other comprehensive income
0.1
–
–
–
0.1
Reclassification to Right of use assets
(3.2)
–
–
–
(3.2)
Foreign exchange
(0.7)
–
–
(0.7)
(1.4)
Gross deferred tax asset at 31 March 2024
20.1
1.0
8.9
35.9
65.9
Less: liability available for offset
(29.2)
Net deferred tax asset at 31 March 2024
36.7
All figures in £ million
Pension
surplus
Owned
property,
plant &
equipment
Right of use
assets
Acquisition
intangibles
Total
At 1 April 2023
(35.4)
(65.7)
(9.7)
(24.1)
(134.9)
Charged to income statement
(1.4)
(14.8)
(1.4)
(2.4)
(20.0)
Credited to other comprehensive income
27.2
–
–
–
27.2
Reclassification from Short–term timing differences
–
–
3.2
–
3.2
Foreign exchange
–
0.1
0.3
0.5
0.9
Gross deferred tax liability at 31 March 2024
(9.6)
(80.4)
(7.6)
(26.0)
(123.6)
Less: asset available for offset
29.2
Net deferred tax liability at 31 March 2024
(94.4)
All figures in £ million
Short-term
timing
differences
Carried
forward
interest
expense
Lease
liabilities
Tax
losses
Total
At 1 April 2022
14.7
–
4.0
21.7
40.4
(Charged)/Credited to income statement
(1.2)
–
3.1
8.2
10.1
Charged to other comprehensive income
(2.1)
–
–
–
(2.1)
Credited to equity
0.4
–
–
–
0.4
Acquired in business combination
5.1
–
–
–
5.1
Foreign exchange
0.6
–
0.3
0.7
1.6
Gross deferred tax asset at 31 March 2023
17.5
–
7.4
30.6
55.5
Less: liability available for offset
(22.9)
Net deferred tax asset at 31 March 2023
32.6
QinetiQ Group plc | Annual Report & Accounts 2024158
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
159
Financial Statements
| Deferred tax asset | |||||
Carried | |||||
Short- term | forward | ||||
timing | interest | Lease | Tax | ||
| All figures in £ million | differences | expense | liabilities | losses | Total |
At 1 April 2023 | 17.5 | – | 7.4 | 30.6 | 55.5 |
| Credited to income statement | 6.4 | 1.0 | 1.5 | 6.0 | 14.9 |
| Charged to other comprehensive income | 0.1 | – | – | – | 0.1 |
| Reclassification to Right of use assets | (3.2) | – | – | – | (3.2) |
| Foreign exchange | (0.7) | – | – | (0.7) | (1.4) |
| Gross deferred tax asset at 31 March 2024 | 20.1 | 1.0 | 8.9 | 35.9 | 65.9 |
Less: liability available for offset | (29.2) | ||||
| Net deferred tax asset at 31 March 2024 | 36.7 |
| Deferred tax liability | |||||
Owned | |||||
| property, | |||||
| Pension | plant & | Right of use | Acquisition | ||
| All figures in £ million | surplus | equipment | assets | intangibles | Total |
| At 1 April 2023 | (35.4) | (65.7) | (9.7) | (24.1) | (134.9) |
Charged to income statement | (1.4) | (14.8) | (1.4) | (2.4) | (20.0) |
Credited to other comprehensive income | 27.2 | – | – | – | 27.2 |
Reclassification from Short–term timing differences | – | – | 3.2 | – | 3.2 |
Foreign exchange | – | 0.1 | 0.3 | 0.5 | 0.9 |
| Gross deferred tax liability at 31 March 2024 | (9.6) | (80.4) | (7.6) | (26.0) | (123.6) |
Less: asset available for offset | 29.2 | ||||
Net deferred tax liability at 31 March 2024 | (94.4) |
| Deferred tax asset | |||||
Carried | |||||
Short- term | forward | ||||
timing | interest | Lease | Tax | ||
| All figures in £ million | differences | expense | liabilities | losses | Total |
At 1 April 2022 | 14.7 | – | 4.0 | 21.7 | 40.4 |
(Charged)/Credited to income statement | (1.2) | – | 3.1 | 8.2 | 10.1 |
Charged to other comprehensive income | (2.1) | – | – | – | (2.1) |
Credited to equity | 0.4 | – | – | – | 0.4 |
Acquired in business combination | 5.1 | – | – | – | 5.1 |
Foreign exchange | 0.6 | – | 0.3 | 0.7 | 1.6 |
Gross deferred tax asset at 31 March 2023 | 17.5 | – | 7.4 | 30.6 | 55.5 |
| Less: liability available for offset | (22.9) | ||||
| Net deferred tax asset at 31 March 2023 | 32.6 |
QinetiQ Group plc | Annual Report & Accounts 2024 159
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
160
18. Deferred tax (continued)
| Deferred tax liability | |||||
Owned | |||||
property, | |||||
| Pension | plant & | Right of use | Acquisition | ||
| All figures in £ million | surplus | equipment | assets | intangibles | Total |
At 1 April 2022 | (96.4) | (54.3) | (3.4) | (22.0) | (176.1) |
Charged to income statement | (2.5) | (11.5) | (6.3) | (0.9) | (21.2) |
Credited to other comprehensive income | 63.5 | – | – | – | 63.5 |
Acquired in business combination | – | – | – | (0.7) | (0.7) |
Foreign exchange | – | 0.1 | – | (0.5) | (0.4) |
Gross deferred tax liability at 31 March 2023 | (35.4) | (65.7) | (9.7) | (24.1) | (134.9) |
Less: asset available for offset | 22.9 | ||||
| Net deferred tax liability at 31 March 2023 | (112.0) |
| As at 31 March | ||
31 March | 31 March | |
| All figures in £ million | 2024 | 2023 |
Current tax receivable | 5.8 | 4.0 |
Current tax payable | (6.6) | (4.6) |
Net current tax payable | (0.8) | (0.6) |
| As at 31 March | ||
31 March | 31 March | |
| All figures in £ million | 2024 | 2023 |
Raw materials | 46.2 | 36.2 |
Work in progress | 6.5 | 9.1 |
Finished goods | 36.5 | 23.5 |
Total inventories | 89.2 | 68.8 |
| As at 31 March | ||
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
161
Financial Statements
Ageing of receivables and associated loss allowance for expected credit risk
As at 31 March 2024
As at 31 March 2023
Movements in the provision for expected credit loss
The maximum exposure to credit risk in relation to trade and other receivables at the reporting date is the fair value of trade and other
receivables. The Group does not hold any collateral as security.
22. Trade and other payables
As at 31 March
Accrued expenses and other payables includes £34.0m at 31 March 2024 (31 March 2023: nil) relating to an irrevocable contract to purchase
shares as part of the ongoing share buyback programme. This liability relates to financing activities and will result in a financing cash flow in
FY25 as the share buyback programme progresses.
Contract liabilities, which are influenced by the timing of revenue recognition and invoicing on contracts, were consistent with the prior year.
Current
Up to 30 days
past due
30-120 days
past due
>120 days
past due
Total
Gross carrying amount – trade receivables (£m)
141.9
24.8
9.6
4.9
181.2
Gross carrying amount – contract assets (£m)
171.6
–
–
–
171.6
Expected loss rate (%)
–
–
–
34.7%
0.5%
Loss allowance (£m)
–
–
–
1.7
1.7
Current
Up to 30 days
past due
30-120 days
past due
>120 days
past due
Total
Gross carrying amount – trade receivables (£m)
174.5
28.1
8.5
5.5
216.6
Gross carrying amount – contract assets (£m)
158.0
–
–
–
158.0
Expected loss rate (%)
0.1%
––
1.2%
23.6%
0.4%
Loss allowance (£m)
0.2
–
0.1
1.3
1.6
FY24
FY23
All figures in £ million
Trade
receivables
Contract
assets
Trade
receivables
Contract
assets
At 1 April
1.6
–
2.7
–
Increase in loss allowance recognised in income statement
0.1
–
0.5
–
Unutilised amount reversed through income statement
–
–
(0.7)
–
Utilised (receivables written off)
–
–
(0.9)
–
At 31 March
1.7
–
1.6
–
All figures in £ million
31 March
2024
31 March
2023
Trade payables
175.9
135.9
Other tax and social security
50.4
55.7
Contract liabilities
212.6
216.9
Accrued expenses and other payables
215.8
166.7
Total current trade and other payables
654.7
575.2
Contract liabilities
10.2
14.0
Other payables
1.4
1.2
Total non-current trade and other payables
11.6
15.2
Total trade and other payables
666.3
590.4
QinetiQ Group plc | Annual Report & Accounts 2024160
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
161
Financial Statements
| As at 31 March 2024 | |||||
Current Up to 30 days | 30-120 days | >120 days | Total | ||
| past due | past due | past due | |||
Gross carrying amount – trade receivables (£m) | 141.9 | 24.8 | 9.6 | 4.9 | 181.2 |
Gross carrying amount – contract assets (£m) | 171.6 | – | – | – | 171.6 |
Expected loss rate (%) | – | – | – | 34.7% | 0.5% |
Loss allowance (£m) | – | – | – | 1.7 | 1.7 |
| As at 31 March 2023 | |||||
| Current | Up to 30 days | 30-120 days | >120 days | Total | |
| past due | past due | past due | |||
Gross carrying amount – trade receivables (£m) | 174.5 | 28.1 | 8.5 | 5.5 | 216.6 |
Gross carrying amount – contract assets (£m) | 158.0 | – | – | – | 158.0 |
Expected loss rate (%) | 0.1% | –– | 1.2% | 23.6% | 0.4% |
Loss allowance (£m) | 0.2 | – | 0.1 | 1.3 | 1.6 |
| As at 31 March | ||
31 March | 31 March | |
All figures in £ million | 2024 | 2023 |
Trade payables | 175.9 | 135.9 |
Other tax and social security | 50.4 | 55.7 |
Contract liabilities | 212.6 | 216.9 |
Accrued expenses and other payables | 215.8 | 166.7 |
| Total current trade and other payables | 654.7 | 575.2 |
Contract liabilities | 10.2 | 14.0 |
Other payables | 1.4 | 1.2 |
| Total non-current trade and other payables | 11.6 | 15.2 |
| Total trade and other payables | 666.3 | 590.4 |
FY24 | FY23 | |||
Trade | Contract | Trade | Contract | |
| All figures in £ million | receivables | assets | receivables | assets |
| At 1 April | 1.6 | – | 2.7 | – |
Increase in loss allowance recognised in income statement | 0.1 | – | 0.5 | – |
| Unutilised amount reversed through income statement | – | – | (0.7) | – |
| Utilised (receivables written off) | – | – | (0.9) | – |
| At 31 March | 1.7 | – | 1.6 | – |
QinetiQ Group plc | Annual Report & Accounts 2024 161
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
162
| All figures in £ million | Property | Other | Total |
| At 1 April 2023 | 6.6 | 20.2 | 26.8 |
Created in year | 0.4 | 0.8 | 1.2 |
| Released in year | (3.2) | (0.2 ) | (3.4 ) |
Unwinding of discount | 0.1 | – | 0.1 |
| Reclassified | (0.9) | – | (0.9) |
| Utilised in year | (0.5) | (3.7 ) | (4.2 ) |
Foreign exchange | – | (0.1) | (0.1) |
| At 31 March 2024 | 2.5 | 17.0 | 19.5 |
Current liability | – | 15.3 | 15.3 |
| Non-current liability | 2.5 | 1.7 | 4.2 |
| At 31 March 2024 | 2.5 | 17.0 | 19.5 |
| All figures in £ million | Property | Other | Total |
| At 1 April 2022 | 7.3 | 19.8 | 27.1 |
Acquisitions | – | 2.4 | 2.4 |
Created in year | 0.5 | 0.6 | 1.1 |
| Released in year | (0.1) | – | (0.1) |
Unwinding of discount | 0.1 | – | 0.1 |
| Utilised in year | (1.2) | (2.6) | (3.8) |
| At 31 March 2023 | 6.6 | 20.2 | 26.8 |
Current liability | 3.2 | 16.5 | 19.7 |
Non-current liability | 3.4 | 3.7 | 7.1 |
| At 31 March 2023 | 6.6 | 20.2 | 26.8 |
31 March 2024 | 31 March 2023 | |||||
All figures in £ million | Assets | Liabilities | Net | Assets | Liabilities | Net |
Current financial assets/(liabilities) | ||||||
Deferred financing costs | 1.0 | – | 1.0 | 1.3 | – | 1.3 |
| Lease liabilities | – | (8.1) | (8.1) | – | (7.6) | (7.6) |
Derivative financial instruments | 5.2 | (1.1) | 4.1 | 4.4 | (0.6) | 3.8 |
| Total current financial assets/(liabilities) | 6.2 | (9 .2) | (3.0) | 5.7 | (8.2) | (2.5) |
| Non-current assets/(liabilities) | ||||||
Deferred financing costs | 1.1 | – | 1.1 | 1.5 | – | 1.5 |
Borrowings – Term loan | – | (336.3) | (336.3) | – | (337.6) | (337.6) |
Lease liabilities | – | (47.4) | (47.4) | – | (23.7) | (23.7) |
Derivative financial instruments | 3.8 | (0.4) | 3.4 | 4.7 | (0.5) | 4.2 |
Total non-current financial assets/(liabilities) | 4.9 | (384.1) | (379.2) | 6.2 | (361.8) | (355.6) |
Total financial assets/(liabilities) | 11.1 | (393.3) | (382.2) | 11.9 | (370.0) | (358.1) |
Cash | 109.5 | – | 109.5 | 89.1 | – | 89.1 |
Cash equivalents | 121.5 | – | 121.5 | 62.1 | – | 62.1 |
| Total cash and cash equivalents | 231.0 | – | 231.0 | 151.2 | – | 151.2 |
| Total net debt as defined by the Group | (151.2) | (206.9) |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
163
Financial Statements
At 31 March 2024 the Group held £1.5m (2023: £0.4m) of cash which is restricted in its use. The term loan was issued at floating rates as
Tranche A GBP 273.3m and Tranche B USD 79.6m. A proportion of Tranche A has been converted to fixed rate using interest rate swaps.
Further analysis of the terms and maturity dates for financial liabilities are set out in note 27.
25. Cash flows from operations
The working capital movements in the cash flow statement do not agree directly to the balance sheet due to impact of business acquisitions
and disposals, foreign exchange movements, deferred consideration, accrued interest, the share buyback liability and the timing of capex
payments.
Reconciliation of net cash flow from operations to underlying net cash flow from operations to free cash flow
Underlying cash conversion ratio
FY24
FY23
Underlying EBITDA – £ million
307.9
255.3
Underlying net cash flow from operations – £ million
320.2
270.1
Underlying cash conversion ratio – %
104%
106%
All figures in £ million
FY24
FY23
Profit after tax for the year
139.6
154.4
Adjustments for:
Taxation expense
43.1
37.6
Net finance expense/(income)
9.8
(3.3)
Gain on disposal of businesses
–
(15.9)
Gain on sale of property
(2.1)
(2.0)
Loss on disposal of plant and equipment
–
0.2
Loss on disposal of intangibles
0.9
–
Impairment of property
0.7
–
Amortisation of purchased or internally developed intangible assets
7.4
7.5
Amortisation of intangible assets arising from acquisitions
25.2
15.6
Depreciation of property, plant and equipment
58.1
51.5
Share of post-tax profit of equity accounted entities
(0.8)
(0.8)
Share-based payments charge
9.4
6.1
Retirement benefit contributions in excess of income statement expense
(1.9)
(1.6)
Net movement in provisions
(5.1)
(1.0)
284.3
248.3
Increase in inventories
(21.4)
(9.6)
Increase in receivables
(10.0)
(56.7)
Increase in payables
41.2
58.6
Changes in working capital
9.8
(7.7)
Net cash inflow from operations
294.1
240.6
All figures in £ million
FY24
FY23
Net cash flow from operations
294.1
240.6
Specific adjusting items:
Add back specific adjusting item: digital investment
16.9
5.8
Add back specific adjusting item: restructuring costs
–
5.0
Add back specific adjusting item: acquisition integration and remuneration costs
6.5
2.3
Add back specific adjusting item: acquisition and disposal costs
2.7
16.4
Total specific adjusting items
26.1
29.5
Underlying net cash flow from operations
320.2
270.1
Less: tax and net interest payments
(51.0)
(34.6)
Less: net purchases of intangible assets and property plant and equipment
(96.1)
(109.0)
Free cash flow
173.1
126.5
QinetiQ Group plc | Annual Report & Accounts 2024162
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
163
Financial Statements
FY24 | FY23 | |
Underlying EBITDA – £ million | 307.9 | 255.3 |
Underlying net cash flow from operations – £ million | 320.2 | 270.1 |
| Underlying cash conversion ratio – % | 104% | 106% |
I | ||
I | ||
I | ||
All figures in £ million | FY24 | FY23 |
Net cash flow from operations | 294.1 | 240.6 |
Specific adjusting items: | ||
Add back specific adjusting item: digital investment | 16.9 | 5.8 |
Add back specific adjusting item: restructuring costs | – | 5.0 |
| Add back specific adjusting item: acquisition integration and remuneration costs | 6.5 | 2.3 |
| Add back specific adjusting item: acquisition and disposal costs | 2.7 | 16.4 |
| Total specific adjusting items | 26.1 | 29.5 |
| Underlying net cash flow from operations | 320.2 | 270.1 |
| Less: tax and net interest payments | (51.0) | (34.6) |
Less: net purchases of intangible assets and property plant and equipment | (96.1) | (109.0) |
Free cash flow | 173.1 | 126.5 |
QinetiQ Group plc | Annual Report & Accounts 2024 163
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
164
31 March | 31 March | |
| All figures in £ million | 2024 | 2023 |
Within one year | 5.2 | 5.7 |
In the second to fifth years inclusive | 6.6 | 7.7 |
Greater than five years | 1.7 | 1.8 |
Total future minimum lease payments | 13.5 | 15.2 |
31 March | 31 March | |
| All figures in £ million | 2024 | 2023 |
Land and buildings | 48.0 | 26.8 |
Plant, machinery and vehicles | 0.2 | 0.3 |
| Total right of use assets net book value | 48.2 | 27.1 |
31 March | 31 March | |
| 2024 | 2023 | |
| Current | 8.1 | 7.6 |
Non-current | 47.4 | 23.7 |
| Total lease liabilities | 55.5 | 31.3 |
| All figures in £ million | FY24 | FY23 |
Depreciation charge | ||
Land and buildings | 8.7 | 5.9 |
| Plant, machinery and vehicles | 0.1 | 0.3 |
Total depreciation charge (see note 16) | 8.8 | 6.2 |
Interest expense (included in finance cost – see note 7) | 2.8 | 1.1 |
Expense relating to short-term leases (included in operating costs) | 0.6 | 1.6 |
Expense relating to low value leases (included in operating costs) | 0.3 | 0.1 |
Total lease expense charged to profit before tax | 1122..55 | 99..00 |
31 March | 31 March | |
| All figures in £ million | 2024 | 2023 |
Within one year | 8.1 | 7.6 |
In the second to fifth years inclusive | 25.4 | 19.6 |
Greater than five years | 22.0 | 4.1 |
Total future minimum lease payment commitments | 55.5 | 31.3 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
165
Financial Statements
27. Financial risk management
The Group’s international operations expose it to financial risks that include the effects of changes in foreign exchange rates, interest rates,
credit risks and liquidity risks.
Treasury and risk management policies, which are set by the Board, specify guidelines on financial risks and the use of financial instruments
to manage risk. The instruments and techniques used to manage exposures include foreign currency and interest rate swap derivatives. Group
treasury monitors financial risks and compliance with risk management policies during the year. There have been no changes in any risk
management policies during the year or since the year end. For details of the Group’s Treasury policy and management of financial
instruments see ‘Additional Financial Information’ on page 198.
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in
the consolidated statement of changes in equity. The Group has a revolving credit facility and floating rate term loan with its relationship
banks with a requirement for the half yearly testing period that the ratio of Net Debt to EBITDA will not exceed 3.5:1 and the ratio of EBITDA
to net finance charges will not be less than 4:1. The Group complied with both covenants during the year. As at 31 March 2024, the ratio of
Net Debt to EBITDA was 0.5:1 and the ratio of EBITDA to net finance charges was 23.1:1. The revolving credit facility is undrawn at the year
end and post year end was refinanced to mature in 2027. The floating rate term loan is repayable in 2026 and has a one-year extension
option.
A) Fair values of financial instruments
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1 – measured using quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices). Level 2 derivatives comprise forward foreign exchange contracts which have been fair
valued using forward exchange rates that are quoted in an active market; and interest rate swaps which have been fair valued using interest
rates that are quoted in an active market
Level 3 – measured using inputs for the assets or liability that are not based on observable market data (i.e. unobservable inputs).
The following table presents the Group’s assets and liabilities that are measured at fair value as at 31 March 2024:
The following table presents the Group’s assets and liabilities that are measured at fair value as at 31 March 2023:
For cash and cash equivalents, trade and other receivables and bank and current borrowings, the fair value of the financial instruments
approximate to their carrying value as a result of the short maturity periods of these financial instruments. For trade and other receivables,
allowances are made within the carrying value for credit risk. For other financial instruments, the fair value is based on market value, where
available. Where market values are not available, the fair values have been calculated by discounting cash flows to net present value using
prevailing market-based interest rates translated at the year-end rates, except for unlisted fixed asset investments where fair value equals
carrying value. There have been no transfers between levels.
All financial assets and liabilities had a fair value that is identical to book value at 31 March 2024 and 31 March 2023. Detailed analysis is
provided in the following tables:
All figures in £ million
Note
Level 1
Level 2
Level 3
Total
Assets
Current derivative financial instruments
24
–
5.2
–
5.2
Non-current derivative financial instruments
24
–
3.8
–
3.8
Liabilities
Current derivative financial instruments
24
–
(1.1)
–
(1.1)
Non-current derivative financial instruments
24
–
(0.4)
–
(0.4)
Total
–
7.5
–
7.5
All figures in £ million
Note
Level 1
Level 2
Level 3
Total
Assets
Current derivative financial instruments
24
–
4.4
–
4.4
Non-current derivative financial instruments
24
–
4.7
–
4.7
Liabilities
Current derivative financial instruments
24
–
(0.6)
–
(0.6)
Non-current derivative financial instruments
24
–
(0.5)
–
(0.5)
Total
–
8.0
–
8.0
QinetiQ Group plc | Annual Report & Accounts 2024164
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
165
Financial Statements
All figures in £ million | Note | Level 1 | Level 2 | Level 3 | Total |
| Assets | |||||
Current derivative financial instruments | 24 | – | 5.2 | – | 5.2 |
Non-current derivative financial instruments | 24 | – | 3.8 | – | 3.8 |
| Liabilities | |||||
Current derivative financial instruments | 24 | – | (1.1) | – | (1.1) |
Non-current derivative financial instruments | 24 | – | (0.4) | – | (0.4) |
| Total | – | 7.5 | – | 7.5 |
All figures in £ million | Note | Level 1 | Level 2 | Level 3 | Total |
| Assets | |||||
Current derivative financial instruments | 24 | – | 4.4 | – | 4.4 |
Non-current derivative financial instruments | 24 | – | 4.7 | – | 4.7 |
Liabilities | |||||
Current derivative financial instruments | 24 | – | (0.6) | – | (0.6) |
Non-current derivative financial instruments | 24 | – | (0.5) | – | (0.5) |
| Total | – | 8.0 | – | 8.0 |
QinetiQ Group plc | Annual Report & Accounts 2024 165
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
166
27. Financial risk management (continued)
Financial | Financial | Financial | Total | ||||
assets at fair | assets at | liabilities at | Derivatives | carrying | |||
value profit | amortised | amortised | used as | value and | |||
All figures in £ million | Note | and loss | cost | cost | hedges | Other | fair value |
Financial assets | |||||||
| Non-current | |||||||
Derivative financial instruments | 24 | – | – | – | 4.7 | – | 4.7 |
Deferred financing costs | 24 | – | 1.5 | – | – | – | 1.5 |
Current | |||||||
| Trade receivables and similar items | – | 229.2 | – | – | – | 229.2 | |
Derivative financial instruments | 24 | – | – | – | 4.4 | – | 4.4 |
Deferred financing costs | 24 | – | 1.3 | – | – | – | 1.3 |
Cash and cash equivalents | 24 | 151.2 | – | – | – | – | 151.2 |
Total financial assets | 151.2 | 232.0 | – | 9.1 | – | 392.3 | |
| Financial liabilities | |||||||
Non-current | |||||||
Bank borrowings | 24 | – | – | (337.6) | – | – | (337.6) |
Derivative financial instruments | 24 | – | – | – | (0.5) | – | (0.5) |
Lease liabilities | 24 | – | – | – | – | (23.7) | (23.7) |
| Current | |||||||
Trade payables and similar items | – | – | (281.8) | – | – | (281.8) | |
Derivative financial instruments | 24 | – | – | – | (0.6) | – | (0.6) |
Lease liabilities | 24 | – | – | – | – | (7.6) | (7.6) |
| Total financial liabilities | – | – | (619.4) | (1.1) | (31.3) | (651.8) | |
Total | 151.2 | 232.0 | (619.4) | 8.0 | (31.3) | (259.5) |
Financial | Financial | Financial | Total | ||||
assets at fair | assets at | liabilities at | Derivatives | carrying | |||
value profit | amortised | amortised | used as | value and | |||
All figures in £ million | Note | and loss | cost | cost | hedges | Other | fair value |
| Financial assets | |||||||
Non-current | |||||||
Derivative financial instruments | 24 | – | – | – | 3.8 | – | 3.8 |
Deferred financing costs | 24 | – | 1.1 | – | – | – | 1.1 |
| Current | |||||||
Trade receivables and similar items | – | 192.3 | – | – | – | 192.3 | |
Derivative financial instruments | 24 | – | – | – | 5.2 | – | 5.2 |
Deferred financing costs | 24 | – | 1.0 | – | – | – | 1.0 |
Cash and cash equivalents | 24 | 231.0 | – | – | – | – | 231.0 |
Total financial assets | 231.0 | 194.4 | – | 9.0 | – | 434.4 | |
Financial liabilities | |||||||
| Non-current | |||||||
Bank borrowings | 24 | – | – | (336.3) | – | – | (336.3) |
Derivative financial instruments | 24 | – | – | – | (0.4) | – | (0.4) |
Lease liabilities | 24 | – | – | – | – | (47.4) | (47.4) |
Current | |||||||
Trade payables and similar items | – | – | (322.5) | – | – | (322.5) | |
| Irrevocable share buyback | – | – | (34.0) | – | – | (34.0) | |
Derivative financial instruments | 24 | – | – | – | (1.1) | – | (1.1) |
Lease liabilities | 24 | – | – | – | – | (8.1) | (8.1) |
| Total financial liabilities | – | – | (692.8 ) | (1.5) | (55.5) | (749.8) | |
Total | 231.0 | 194.4 | (692.8 ) | 7.5 | (55.5) | (315.4) |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
167
Financial Statements
B) Interest rate risk
The Group’s objective is to manage its exposure to interest rate fluctuations on borrowings through varying the proportion of fixed rate debt
relative to floating rate debt with debt-related derivative financial instruments, including interest rate and cross-currency swaps.
The Group operates an interest rate policy designed to optimise interest costs and to reduce volatility in reported earnings. The Group’s current
policy is to require rates to be fixed for 30%–80% of the level of borrowings, which is achieved primarily through fixed-rate borrowings or debt-
related derivative financial instruments. Where there are significant changes in the level and/or structure of debt, the policy permits borrowings
to be 100% fixed, with regular Board reviews of the appropriateness of this fixed percentage.
At 31 March 2024, the Group had 80% (2023: 80%) of fixed rate debt and 20% (2023: 20%) of floating rate debt based on gross debt of
£336.3m (2023: £337.6m) after including the impact of debt-related derivative financial assets (interest rate swaps).
Financial assets/(liabilities)
As at 31 March 2024
As at 31 March 2023
Floating rate financial assets attract interest based on the relevant reference rate. Floating rate financial liabilities bear interest at the
relevant reference rate. Trade and other receivables/payables and deferred finance costs are excluded from this analysis.
For the fixed or capped rate financial assets and liabilities, the average interest rates (including the relevant marginal cost of borrowing) and
the average period for which the rates are fixed are:
Sterling assets consist of debt-related derivative financial instruments. Sterling liabilities consist primarily of finance leases with the
weighted average interest rate reflecting the internal rate of return of those leases.
Interest rate risk management
The revolving credit facility (note 27E) is floating-rate and undrawn as at 31 March 2024.
As at 31 March 2024, the majority of the Group’s floating rate bank borrowings were fixed through interest rate swaps which swap the
Sterling floating rate interest payable into fixed rate Sterling. The notional principal amount of the outstanding interest rate swap contracts
as at 31 March 2024 is £270m (31 March 2023: £270m). The swaps have the economic effect of converting floating rate borrowings into
fixed rate borrowings and are accounted for as cash flow hedges.
Financial assets
Financial liabilities
All figures in £ million
Fixed or
capped
Floating
Non-interest
bearing
Fixed or
capped
Floating
Non-interest
bearing
Sterling
8.5
173.6
0.5
(24.0)
(273.3)
(35.5)
US dollar
–
37.4
–
(19.5)
(63.0)
–
Euro
–
1.3
–
–
–
–
Australian dollar
–
14.9
–
(11.6)
–
–
Other
–
3.8
–
(0.4)
–
–
Total
8.5
231.0
0.5
(55.5)
(336.3)
(35.5)
Financial assets
Financial liabilities
All figures in £ million
Fixed or
capped
Floating
Non-interest
bearing
Fixed or
capped
Floating
Non-interest
bearing
Sterling
8.1
116.7
1.0
(4.8)
(273.3)
(0.9)
US dollar
–
24.0
–
(17.5)
(64.3)
–
Euro
–
0.1
–
–
–
–
Australian dollar
–
6.7
–
(9.0)
–
–
Other
–
3.7
–
(0.2)
–
–
Total
8.1
151.2
1.0
(31.5)
(337.6)
(0.9)
31 March 2024
31 March 2023
Fixed or
capped
£m
Weighted
average
interest rate
%
Weighted
average years
to maturity
Fixed or
capped
£m
Weighted
average
interest rate
%
Weighted
average years
to maturity
FFiinnaanncciiaall aasssseettss::
Sterling
8.5
3.1
2.2
8.1
3.1
3.2
FFiinnaanncciiaall lliiaabbiilliittiieess::
Sterling
(24.0)
5.4
2.0
(4.8)
4.3
4.5
US dollar
(19.5)
5.9
11.4
(17.5)
4.5
5.5
Euro
–
–
–
–
–
–
Australian dollar
(11.6)
4.7
5.2
(9.0)
4.5
5.0
Other
(0.4)
4.8
2.8
(0.2)
3.7
4.4
Total financial liabilities
(55.5)
4.9
6.2
(31.5)
4.4
5.2
QinetiQ Group plc | Annual Report & Accounts 2024166
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
167
Financial Statements
Financial assets | Financial liabilities | |||||
| Fixed or | Non-interest | Fixed or | Non-interest | |||
All figures in £ million | capped | Floating | bearing | capped | Floating | bearing |
Sterling | 8.5 | 173.6 | 0.5 | (24.0) | (273.3) | (35.5) |
US dollar | – | 37.4 | – | (19.5) | (63.0) | – |
Euro | – | 1.3 | – | – | – | – |
Australian dollar | – | 14.9 | – | (11.6) | – | – |
Other | – | 3.8 | – | (0.4) | – | – |
| Total | 8.5 | 231.0 | 0.5 | (55.5) | (336.3) | (35.5) |
Financial assets | Financial liabilities | |||||
Fixed or | Non-interest | Fixed or | Floating | Non-interest | ||
All figures in £ million | capped | Floating | bearing | capped | bearing | |
Sterling | 8.1 | 116.7 | 1.0 | (4.8) | (273.3) | (0.9) |
US dollar | – | 24.0 | – | (17.5) | (64.3) | – |
Euro | – | 0.1 | – | – | – | – |
Australian dollar | – | 6.7 | – | (9.0) | – | – |
Other | – | 3.7 | – | (0.2) | – | – |
Total | 8.1 | 151.2 | 1.0 | (31.5) | (337.6) | (0.9) |
F | ||||||
QinetiQ Group plc | Annual Report & Accounts 2024 167
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
168
27. Financial risk management (continued)
Net foreign currency monetary assets/(liabilities) | |||||
All figures in £ millions | US$ | Euro | A$ | Other | Total |
| 31 March 2024 – Sterling | 0.6 | (0.3) | 1.1 | (0.5) | 0.9 |
31 March 2023 – Sterling | 17.7 | 3.3 | 0.9 | 4.1 | 26.0 |
| Counterparty credit rating | 31 March 2024 | 31 March 2023 |
AAA to AA- | 69% | 72% |
A+ to A- | 30% | 28% |
BBB+ to BBB- | 1% | 0% |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
169
Financial Statements
The maximum credit-risk exposure in the event of other parties failing to perform their obligations under financial assets, excluding trade and
other receivables, totals £240.0m (31 March 2023: £160.3m). This balance includes cash and cash equivalents and derivative financial assets.
The cash and cash equivalents of £231.0m at 31 March 2023 (2023: £151.2m) represents the maximum credit exposure on these assets.
The cash and cash equivalents were held with different financial institutions which were rated single A or better. Cash equivalents comprise
£121.5m (31 March 2023: £62.1m) invested in AAA-rated money market funds. The Group’s assessment is that credit risk is limited as a
result of the high percentage of revenue derived from UK and US government agencies. Therefore the provision for expected credit losses is
immaterial in respect of receivables from these customers.
E) Liquidity risk
Borrowing facilities
As at 31 March 2024 the Group had a revolving credit facility (RCF) of £275.0m (2023: £275.0m) and floating rate term loans of £336.3m
(2023: £337.6m). The RCF, which is unutilised, was refinanced in April 2024 and will mature on 22 April 2027. The term loan had an initial
term of 3 years and will mature on 27 September 2026, with a one-year extension option. Total available funds, comprising the RCF, term loan
and the Group’s freely available cash and cash equivalents, are shown in the table below:
* Reference rate refers to SONIA for GBP and SOFR for USD.
Gross contractual cash flows for borrowings and other financial liabilities
The following are the undiscounted contractual maturities of financial liabilities, including interest payments. The cash flows associated with
derivatives that are cash flow hedges are expected to have an impact on profit or loss in the periods shown.
The £336.3m term loan is repayable on 27 September 2026, with a one-year extension option, with interest periods set to three months. The
loan bears interest at a variable margin over the relevant reference rate of between 1.00% and 2.50% dependent on the ratio of Net Debt to
EBITDA.
As at 31 March 2024
As at 31 March 2023
All figures in £ million
Book value
Contractual
cash flows
1 year
or less
1–2 years
2–5 years
More than
5 years
Non-derivative financial liabilities
Term loan
(337.6)
(375.8)
(16.0)
(16.4)
(343.4)
–
Revolving credit facility
–
–
–
–
–
–
Trade payables and similar items
(281.8)
(281.8)
(281.8)
–
–
–
Leases
(31.3)
(32.0)
(7.6)
(6.5)
(13.1)
(4.8)
Derivative financial liabilities
Forward foreign currency contracts – cash flow hedges
(0.9)
(0.9)
(0.6)
(0.3)
–
–
Interest rate swaps
(0.2)
(0.2)
–
–
(0.2)
–
Total
(651.8)
(690.7)
(306.0)
(23.2)
(356.7)
(4.8)
Interest rate:
Reference
rate* plus
Total
£m
Drawn
£m
Undrawn
£m
AAss aatt 3311 MMaarrcchh 22002244
Committed facilities – RCF
0.53%
275.0
–
275.0
Committed facilities – term loan
1.00%
336.3
336.3
–
Freely available cash and cash equivalents
229.5
Available funds 31 March 2024
504.5
AAss aatt 3311 MMaarrcchh 22002233
Committed facilities – RCF
0.53%
275.0
–
275.0
Committed facilities – term loan
1.10%
337.6
337.6
–
Freely available cash and cash equivalents
149.6
Available funds 31 March 2023
424.6
All figures in £ million
Book value
Contractual
cash flows
1 year
or less
1–2 years
2–5 years
More than
5 years
Non-derivative financial liabilities
Term loan
(336.3)
(356.8)
(7.4)
(8.8)
(340.6)
–
Revolving credit facility
–
–
–
–
–
–
Trade payables and similar items
(322.5)
(322.5)
(322.5)
–
–
–
Irrevocable share buyback
(34.0)
(34.0)
(34.0)
–
–
–
Leases
(55.5)
(70.4)
(10.8)
(9.7)
(23.0)
(26.9)
Derivative financial liabilities
Forward foreign currency contracts – cash flow hedges
(1.5)
(1.5)
(1.1)
(0.1)
(0.3)
–
Interest rate swaps
–
–
–
–
–
–
Total
(749.8)
(785.2)
(375.8)
(18.6)
(363.9)
(26.9)
QinetiQ Group plc | Annual Report & Accounts 2024168
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Financial Statements
Financial statements
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
169
QinetiQ Group plc | Annual Report & Accounts 2024 169
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
170
27. Financial risk management (continued)
31 March 2024 | 31 March 2023 | |||||
Asset | Liability | Asset | Liability | |||
| All figures in £ million | gains | losses | Net | gains | losses | Net |
Forward foreign currency contracts – cash flow hedges | 0.5 | (1.5) | (1.0) | 1.0 | (0.9) | 0.1 |
Interest rate swaps | 8.5 | – | 8.5 | 8.1 | (0.2) | 7.9 |
Derivative assets/(liabilities) at the end of the year | 9.0 | (1.5) | 7.5 | 9.1 | (1.1) | 8.0 |
31 March 2024 | 31 March 2023 | |||||
Asset | Liability | Asset | Liability | |||
| All figures in £ million | gains | losses | Net | gains | losses | Net |
Expected to be recognised: | ||||||
In one year or less | 5.2 | (1.1) | 4.1 | 4.4 | (0.6) | 3.8 |
Between one and two years | 2.7 | (0.1) | 2.6 | 2.5 | (0.3) | 2.2 |
More than two years | 1.1 | (0.3) | 0.8 | 2.2 | (0.2) | 2.0 |
| Derivative assets/(liabilities) at the end of the year | 9.0 | (1.5) | 7.5 | 9.1 | (1.1) | 8.0 |
31 March 2024 | 31 March 2023 | |||||
Cash flow | Interest rate | Cash flow | Interest rate | |||
| All figures in £ million | hedges | swaps | Total | hedges | swaps | Total |
Notional amount (gross) | 410.3 | 270.0 | 680.3 | 327.7 | 270.0 | 597.7 |
Carrying value (current and non-current assets and (liabilities)) | (1.0) | 8.5 | 7.5 | 0.1 | 7.9 | 8.0 |
| Maturity date | 2024–2027 | 2025–2027 | 2024–2027 | 2023–2027 | 2025–2027 | 2023–2027 |
| Hedge ratio | 1:1 | 1:1 | 1:1 | 1:1 | 1:1 | 1:1 |
Change in fair value of outstanding hedging instruments in the year | (1.1) | 0.6 | (0.5) | 1.9 | 7.9 | 9.8 |
Change in value of hedged item used to determine hedge effectiveness | (1.1) | 0.6 | (0.5) | 1.9 | 7.9 | 9.8 |
Weighted average hedged rate for the year* | 1.26 | 3.1% | 1.23 | 3.1% |
Trade | Bank | ||||
| payables and | borrowings | Derivative | |||
| similar items | and loan | financial | Lease | ||
| All figures in £ million | payables* | notes | instruments | liabilities | Total |
Due in one year or less | 356.5 | – | 1.1 | 8.1 | 365.7 |
Due in more than one year but not more than two years | – | – | 0.1 | 7.4 | 7.5 |
Due in more than two years but not more than five years | – | 336.3 | 0.3 | 18.0 | 354.6 |
Due in five years or more | – | – | – | 22.0 | 22.0 |
Total | 356.5 | 336.3 | 1.5 | 55.5 | 749.8 |
Trade | Bank | ||||
| payables and | borrowings | Derivative | |||
| similar items | and loan | financial | L ease | ||
| All figures in £ million | payables | notes | instruments | liabilities | Total |
Due in one year or less | 281.8 | – | 0.6 | 7.6 | 290.0 |
Due in more than one year but not more than two years | – | – | 0.3 | 6.5 | 6.8 |
Due in more than two years but not more than five years | – | 337.6 | 0.2 | 13.1 | 350.9 |
Due in five years or more | – | – | – | 4.1 | 4.1 |
Total | 281.8 | 337.6 | 1.1 | 31.3 | 651.8 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
171
Financial Statements
H) Sensitivity analysis
The Group’s sensitivity to changes in foreign exchange rates and interest rates on financial assets and liabilities as at 31 March 2024 is set
out in the following table. The impact of a weakening in Sterling on the Group’s financial assets and liabilities would be more than offset
in equity and income by its impact on the Group’s overseas net assets and earnings respectively. Sensitivity on Group’s assets other than
financial assets and liabilities is not included in this analysis.
As at 31 March 2024
* This relates to the impact on items charged directly to equity and excludes the impact on profit/loss for the year flowing into equity.
As at 31 March 2023
* This relates to the impact on items charged directly to equity and excludes the impact on profit/loss for the year flowing into equity.
The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming that certain market conditions
occur. Actual results in the future may differ materially from those projected as a result of developments in global financial markets that may
cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the previous tables, which should not,
therefore, be considered to be a projection of likely future events and losses.
The estimated changes for interest rate movements are based on an instantaneous decrease or increase of 1% (100 basis points) in the
specific rate of interest applicable to each class of financial instruments from the levels effective at 31 March 2024, with all other variables
remaining constant. The estimated changes for foreign exchange rates are based on an instantaneous 10% weakening or strengthening in
Sterling against all other currencies from the levels applicable at 31 March 2024, with all other variables remaining constant. Such analysis is
for illustrative purposes only – in practice market rates rarely change in isolation. The impact of transactional risk on the Group’s monetary
assets/liabilities that are not held in the functional currency of the entity holding those assets/liabilities is minimal.
1% decrease in
interest rates
10% weakening
in Sterling
All figures in £ million
Equity
*
Profit before
tax
Equity
Profit before
tax
Sterling
(0.1)
1.0
–
–
US dollar
–
0.3
1.6
0.4
Other
–
(0.2)
1.1
–
1% increase in
interest rates
10% strengthening
in Sterling
All figures in £ million
Equity
*
Profit before
tax
Equity
Profit before
tax
Sterling
0.1
(1.0)
–
–
US dollar
–
(0.3)
(1.2)
(0.4)
Other
–
0.2
(1.0)
–
1% decrease in
interest rates
10% weakening
in Sterling
All figures in £ million
Equity
*
Profit before
tax
Equity
Profit before
tax
Sterling
(0.1)
1.6
–
–
US dollar
–
0.4
0.1
0.1
Other
–
(0.1)
0.5
–
1% increase in
interest rates
10% strengthening
in Sterling
All figures in £ million
Equity
*
Profit before
tax
Equity
Profit before
tax
Sterling
0.1
(1.6)
–
–
US dollar
–
(0.4)
(0.3)
(0.1)
Other
–
0.1
(0.4)
–
QinetiQ Group plc | Annual Report & Accounts 2024170
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
171
Financial Statements
1% decrease in | 10% weakening | |||
| interest rates | in Sterling | |||
Profit before | Profit before | |||
All figures in £ million | Equity * | tax | Equity | tax |
Sterling | (0.1) | 1.0 | – | – |
US dollar | – | 0.3 | 1.6 | 0.4 |
Other | – | (0.2) | 1.1 | – |
1% increase in | 10% strengthening | |||
interest rates | in Sterling | |||
Profit before | Profit before | |||
All figures in £ million | Equity * | tax | Equity | tax |
Sterling | 0.1 | (1.0) | – | – |
US dollar | – | (0.3) | (1.2) | (0.4) |
Other | – | 0.2 | (1.0) | – |
1% decrease in | 10% weakening | |||
interest rates | in Sterling | |||
Profit before | Profit before | |||
All figures in £ million | Equity * | tax | Equity | tax |
Sterling | (0.1) | 1.6 | – | – |
US dollar | – | 0.4 | 0.1 | 0.1 |
Other | – | (0.1) | 0.5 | – |
| 1% increase in | 10% strengthening | |||
interest rates | in Sterling | |||
Profit before | Profit before | |||
All figures in £ million | Equity * | tax | Equity | tax |
Sterling | 0.1 | (1.6) | – | – |
US dollar | – | (0.4) | (0.3) | (0.1) |
Other | – | 0.1 | (0.4) | – |
QinetiQ Group plc | Annual Report & Accounts 2024 171
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
172
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
173
Financial Statements
Defined benefit pension plan (‘Scheme’) net pension asset
The Scheme is in a net asset position with the market value of assets in excess of the present value of Scheme liabilities. These have the
values set out below as at 31 March of each year end.
The balance sheet net pension asset is a snapshot view which can be significantly influenced by short-term market factors. The calculation
of the net asset depends on factors which are beyond the control of the Group – principally the value of the various categories of assets in
which the Scheme has invested and long-term interest rates and inflation rates used to value the Scheme’s liabilities. This is particularly
pertinent at times when markets are volatile. Sensitivities and risks are described on page 175.
The key driver for the decrease in the net pension asset since the March 2023 year end was an experience loss following recalibration to the
recently completed 30 June 2023 triennial valuation.
Total expense recognised in the income statement
Movement in the net pension asset
The movement in the net pension asset (before deferred tax) is set out below:
Fair value of Scheme assets by type of asset
The fair value of the Scheme’s assets, which are not intended to be realised in the short term and may be subject to significant changes
before they are realised, were:
^ Restated to reclassify equity and corporate credit derivatives based on fair values.
1
Primarily private market debt investments.
2
Includes unlisted corporate bonds with commercial property held as security.
3
The fair value of equity derivative financial instruments is £15.8m. This reflects the marked to market valuation of all equity derivatives held by the Scheme. The exposure
to equities is significantly greater than the fair value, with a notional value of the equity derivative financial instruments of £171.7m as at 31 March 2024 and a total
economic exposure value of £187.5m.
4
The fair value of corporate credit derivative financial instruments is £2.2m. This is in respect of various credit default swap financial instruments held by the Scheme.
These provide significantly greater exposure to corporate bonds. The notional value of these financial instruments was £100.1m as at 31 March 2024, with a total
economic exposure value of £102.3m.
5
The fair value of other derivative financial instruments is £1.6m. This is in respect of various foreign exchange contracts held by the Scheme. The exposure to foreign
exchange risk is significantly greater than the £1.6m marked to market value of the forward contracts. The notional value of these financial instruments was £210.0m as
at 31 March 2024, with a total economic exposure value of £211.6m.
All figures in £ million
31 March
2024
31 March
2023
TToottaall mmaarrkkeett vvaalluuee ooff aasssseettss –– sseeee ttaabbllee bbeellooww ffoorr aannaallyyssiiss bbyy ccaatteeggoorryy ooff aasssseett
1,316.2
1,355.2
Present value of Scheme liabilities
(1,297.8)
(1,235.4)
Net pension asset before deferred tax
18.4
119.8
Deferred tax liability
(9.6)
(35.4)
Net pension asset after deferred tax
8.8
84.4
All figures in £ million
FY24
FY23
Net finance income
5.6
9.9
Administrative expenses
(1.5)
(1.4)
Total net income recognised in the income statement (excluding tax)
4.1
8.5
All figures in £ million
FY24
FY23
Opening net pension asset
119.8
362.2
Net finance income
5.6
9.9
Net actuarial loss
(108.9)
(253.9)
Administrative expenses
(1.5)
(1.4)
Contributions by the employer
3.4
3.0
Closing net pension asset
18.4
119.8
31 March 2024
31 March 2023^
All figures in £ million
Quoted
Not quoted in
an active
market
Total
Quoted
Not quoted in
an active
market
Total
Equities
–
21.8
21.8
–
32.9
32.9
Liability Driven Investment
414.9
–
414.9
399.2
–
399.2
Asset backed security investments
35.5
–
35.5
4.3
–
4.3
Alternative bonds
1
–
253.8
253.8
–
256.4
256.4
Corporate bonds
2
31.1
120.6
151.7
–
115.6
115.6
Cash and cash equivalents
–
36.5
36.5
–
17.2
17.2
Equity derivative financial instruments
3
15.8
–
15.8
5.4
–
5.4
Corporate credit derivative financial instruments
4
2.2
–
2.2
2.0
–
2.0
Other derivatives (forward FX contracts)
5
1.6
–
1.6
6.7
–
6.7
Insurance buy-in policies
–
507.4
507.4
–
515.5
515.5
Borrowings
–
(125.0)
(125.0)
–
–
–
Total market value of assets
501.1
815.1
1,316.2
417.6
937.6
1,355.2
QinetiQ Group plc | Annual Report & Accounts 2024172
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
173
Financial Statements
31 March | 31 March | |
All figures in £ million | 2024 | 2023 |
T o t a l m a r k e t v a l u e o f a s s e t s – s e e t a b l e b e l o w f o r a n a l y s i s b y c a t e g o r y o f a s s e t | 1,316.2 | 1,355.2 |
Present value of Scheme liabilities | (1,297.8) | (1,235.4) |
Net pension asset before deferred tax | 18.4 | 119.8 |
Deferred tax liability | (9.6) | (35.4) |
| Net pension asset after deferred tax | 8.8 | 84.4 |
All figures in £ million | FY24 | FY23 |
Opening net pension asset | 119.8 | 362.2 |
Net finance income | 5.6 | 9.9 |
Net actuarial loss | (108.9) | (253.9) |
Administrative expenses | (1.5) | (1.4) |
Contributions by the employer | 3.4 | 3.0 |
Closing net pension asset | 18.4 | 119.8 |
I | ||||||||
QinetiQ Group plc | Annual Report & Accounts 2024 173
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
174
28. Post-retirement benefits (continued)
All figures in £ million | FY24 | FY23 |
Opening present value of Scheme liabilities | (1,235.4) | (1,703.5) |
Interest cost | (57.0) | (45.9) |
Actuarial (loss)/gain on Scheme liabilities based on: | ||
Change in demographic assumptions | (9.5) | 45.8 |
Change in financial assumptions | 28.1 | 588.0 |
| Experience losses | (77.9 ) | (171.4) |
Net benefits paid out and transfers | 53.9 | 51.6 |
| Closing present value of Scheme liabilities | (1,297.8 ) | (1,235.4) |
All figures in £ million | FY24 | FY23 |
Opening fair value of Scheme assets | 1,355.2 | 2,065.7 |
Interest income on Scheme assets | 62.6 | 55.8 |
Re-measurement loss on Scheme assets | (49.6) | (716.3) |
Contributions by the employer | 3.4 | 3.0 |
Net benefits paid out and transfers | (53.9) | (51.6) |
Administrative expenses | (1.5) | (1.4) |
Closing fair value of Scheme assets | 1,316.2 | 1,355.2 |
31 March 2024 | 31 March 2023 | |||
Insured | Uninsured | Insured | Uninsured | |
| All figures in £ million | members | members | members | members |
Discount rate applied to Scheme liabilities | 4.80% | 4.80% | 4.80% | 4.65% |
CPI inflation assumption | 2.55% | 2.60% | 2.55% | 2.70% |
Net rate (discount rate less inflation) | 2.25% | 2.20% | 2.25% | 1.95% |
Assumed life expectancies in years: | ||||
At 60 for males currently aged 40 | n/a | 28.3 | n/a | 27.9 |
At 60 for females currently aged 40 | n/a | 30.7 | n/a | 30.3 |
At 60 for males currently aged 60 | n/a | 26.7 | n/a | 26.2 |
At 60 for females currently aged 60 | n/a | 29.1 | n/a | 28.2 |
At 65 for males currently aged 65 | 22.3 | n/a | 21.6 | n/a |
At 65 for females currently aged 65 | 24.8 | n/a | 23.3 | n/a |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
175
Financial Statements
The discount rate is based on observable yields on corporate bonds but there is no direct, observable market rate for CPI. A ‘market approach’
to deriving CPI involves adjusting a market-based RPI rate downward by an ‘inflation risk premium’ and an RPI-CPI adjustment factor
(determined from relevant market yield curves). This market-based approach is required by IAS 19 and results in a CPI inflation rate
significantly in excess of the Bank of England long term target and also in excess of a consensus view of CPI (based on surveys of
economists). However, adopting an economic consensus approach to setting CPI inflation is not acceptable under accounting standards.
The mortality assumptions for both the current and prior year were based on the S3 Normal Lives base tables, with various scaling factors
based on sex and status. Allowance was made for improvements in mortality in line with CMI_2022 core projections (31 March 2023:
CMI_2021 projections) and a long-term rate of improvement of 1.25% per annum (31 March 2023: 1.25%).
The funding of the Scheme is based on long-term trends and assumptions relating to market growth, as advised by qualified actuaries and
investment advisors. The Scheme ‘duration’, calculated using discounted future cash flows, is an indicator of the weighted-average time until
benefits are paid and is approximately 15 years for non-insured liabilities and 10 years for insured liabilities. The average duration for the
Scheme as a whole is 13 years.
The sensitivity of the Scheme liabilities to each of the key assumptions is shown in the following table.
Sensitivity analysis of the principal assumptions
The impact of movements in Scheme liabilities will, to an extent, be offset by movements in the value of Scheme assets as the Scheme has
assets invested in a Liability Driven Investment portfolio. As at 31 March 2023 this portfolio hedged against approximately 65% of the interest
rate risk and also 80% of the inflation rate risk, as measured on the Trustees’ gilt-funded basis. During the current financial year, the hedges
have been increased to cover approximately 80% of the interest rate risk and 85% of the inflation rate risk as at 31 March 2024, as measured
on the Trustees’ gilt-funded basis.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this
is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit
obligation to significant actuarial assumptions the same method (projected unit credit method) has been applied as when calculating
the pension liability recognised within the statement of financial position. The methods and types of assumption did not change.
In addition to the sensitivity of the liability side of the net pension asset (which will impact the value of the net pension asset) the net pension
asset is also exposed to significant variation due to changes in the fair value of Scheme assets. A specific sensitivity on assets has not been
included in the above table but any change in valuation of assets flows straight through to the value of the net pension asset e.g. if equities
fall by £10m then the net pension asset reduces by £10m. The values of unquoted assets assume that an available buyer is willing to purchase
those assets at that value. For the Group’s portfolio of assets, the unquoted alternative bonds of £253.8m; the unquoted corporate bonds of
£120.6m and the unquoted equities of £21.8m are the assets with most uncertainty as to valuation as at 31 March 2024.
The accounting assumptions noted are used to calculate the year end net pension asset in accordance with the relevant accounting standard,
IAS 19 (revised) ‘Employee Benefits’. Changes in these assumptions have no impact on the Group’s cash payments into the Scheme. The
payments into the Scheme are reassessed after every triennial valuation. The triennial valuations are calculated on a funding basis and use a
different set of assumptions, as agreed with the pension Trustees. The key assumption that varies between the two methods of valuation is
the discount rate. The funding basis valuation uses the risk-free rate from UK gilts as the base for calculating the discount rate, whilst the IAS
19 accounting basis valuation uses corporate bond yields as the base.
Risks
Through its defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are detailed below:
Assumption
Indicative impact on Scheme assets
Indicative impact on Scheme liabilities
Indicative impact on net pension asset
Decrease discount rate by 0.25%
Increase by £12.6m
Increase by £42.5m
Decrease by £29.9m
Increase rate of inflation by 0.25%
Increase by £12.3m
Increase by £41.6m
Decrease by £29.3m
Increase life expectancy by one year
Increase by £13.8m
Increase by £34.4m
Decrease by £20.6m
Volatility in market
conditions
Results under IAS 19 can change dramatically depending on market conditions. The present value of Scheme liabilities
is linked to yields on corporate bonds, while many of the assets of the Scheme are invested in various forms of assets
subject to fluctuating valuations. Changing markets in conjunction with discount rate volatility will lead to volatility in
the net pension asset on the Group’s balance sheet and in other comprehensive income. To a lesser extent this will
also lead to volatility in the IAS 19 pension net finance income in the Group’s income statement.
Choice of accounting
assumptions
The calculation of the present value of Scheme liabilities involves projecting future cash flows from the Scheme many
years into the future. This means that the assumptions used can have a material impact on the balance sheet position
and profit and loss charge. In practice future experience within the Scheme may not be in line with the assumptions
adopted. For example, members could live longer than foreseen or inflation could be higher or lower than allowed for in
the calculation of the liabilities.
QinetiQ Group plc | Annual Report & Accounts 2024174
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
175
Financial Statements
Assumption | Indicative impact on Scheme assets | Indicative impact on Scheme liabilities | Indicative impact on net pension asset |
Decrease discount rate by 0.25% | Increase by £12.6m | Increase by £42.5m | Decrease by £29.9m |
Increase rate of inflation by 0.25% | Increase by £12.3m | Increase by £41.6m | Decrease by £29.3m |
| Increase life expectancy by one year | Increase by £13.8m | Increase by £34.4m | Decrease by £20.6m |
| Volatility in market | Results under IAS 19 can change dramatically depending on market conditions. The present value of Scheme liabilities |
| conditions | |
is linked to yields on corporate bonds, while many of the assets of the Scheme are invested in various forms of assets | |
subject to fluctuating valuations. Changing markets in conjunction with discount rate volatility will lead to volatility in | |
the net pension asset on the Group’s balance s heet and in other comprehensive income. To a lesser extent this will | |
also lead to volatility in the IAS 19 pension net finance income in the Group’s income statement. | |
| Choice of accounting | The calculation of the present value of Scheme liabilities involves projecting future cash flows from the Scheme many |
| assumptions | years into the future. This means that the assumptions used can have a material impact on the balance sheet position |
and profit and loss c harge. In practice future experience within the Scheme may not be in line with the assumptions | |
adopted. For example, members could live longer than foreseen or inflation could be higher or lower than allowed for in | |
the calculation of the liabilities. |
QinetiQ Group plc | Annual Report & Accounts 2024 175
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
176
Ordinary shares | Special Share | |||||
| of 1p each (equity) | of £1 (non-equity) | Total | ||||
£ | Number | £ | Number | £ | Number | |
As at 1 April 2023 | 5,787,571 | 578,757,121 | 1 | 1 | 5,787,572 | 578,757,122 |
Cancellation of shares | (43,612) | (4,361,230) | – | – | (43,612) | (4,361,230) |
At 31 March 2024 | 5,743,959 | 574,395,891 | 1 | 1 5,743,960 | 574,395,892 |
Ordinary shares | Special Share | |||||
| of 1p each (equity) | of £1 (non-equity) | Total | ||||
£ | Number | £ | Number | £ | Number | |
As at 1 April 2022 | 5,787,571 | 578,757,121 | 1 | 1 | 5,787,572 | 578,757,122 |
Issue of new shares | – | – | – | – | – | – |
At 31 March 2023 | 5,787,571 | 578,757,121 | 1 | 1 5,787,572 | 578,757,122 |
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
177
Financial Statements
30. Share-based payments
The Group operates a number of share-based payment plans for employees. The total share-based payment expense in the year was £10.2m,
all relating to equity-settled schemes (FY23: £7.9m, all relating to equity-settled schemes). The share-based payment charged to equity is
£8.8m consisting of the £10.2m charge to the income statement offset by a £0.6m charge to equity in respect of dividends accruing on
unvested awards and £0.8m of cash payments relating to the Bonus Banking Plan.
Valuation of share-based awards
Share-based awards that vest based on non-market performance conditions have been valued at the share price at grant date and are
equity-settled.
Group Share Incentive Plan (SIP)
Under the QinetiQ SIP the Group offers UK employees the opportunity of purchasing up to £150 worth of shares a month at the prevailing
market rate. The Group will make a matching share award of a third of the employee’s payment. The Group’s matching shares may be
forfeited if the employee ceases to be employed by QinetiQ within three years of the award of the shares. There is no exercise price for these
SIP awards.
SIP matching shares are equity-settled awards; those outstanding at 31 March 2024 had an average remaining life of 1.5 years (2023: 1.5
years). There is no exercise price for these SIP awards. Of the shares outstanding at the end of the year nil were exercisable (2023: nil).
Bonus Banking Plan (BBP)
During the year the Group granted BBP awards to certain senior executives in the UK and US.
The BBP is a remuneration scheme that runs in three-year performance cycles, with each cycle vesting over a four-year period. Under the
BBP a contribution will be made by the Company into the participant’s Plan account following the end of each Plan year. 50% of the value
of a participant’s Plan account will be paid out annually for three years with 100% of the residual value paid out at the end of year four. 50%
of the unpaid balance of a participant’s bonus account will be at risk of forfeiture. Refer to the Directors’ Remuneration Report for further
details.
At 31 March 2024 the awards had an average remaining life of 0.7 years (2023: 1.7 years). There is no exercise price for these awards. The
fair value of the awards at 31 March 2024 was £3.67 (2023: £3.34) being the Group’s 30 day average on 31 March. The weighted average
share price at date of exercise was nil (2023: £3.68). Of the awards outstanding at the end of the year nil were exercisable.
Deferred Share Plan (DSP)
During the year, the Group did not provisionally award any DSP awards as this share scheme has been replaced by the LTIP share scheme.
FY24
Number of
matching
shares
FY23
Number of
matching
shares
Outstanding at start of the year
745,986
761,828
Awarded during the year
295,731
267,877
Exercised during the year
(243,681)
(220,369)
Forfeited during the year
(44,589)
(63,350)
Outstanding at end of the year
753,447
745,986
FY24
Number of
awards
FY23
Number of
awards
Outstanding at start of the year
892,416
1,122,439
Granted during the year
–
602,408
Exercised during the year
–
(687,079)
Forfeited during the year
–
(145,352)
Outstanding at end of the year
892,416
892,416
FY24
Number of
awards
FY23
Number of
awards
Outstanding at start of the year
6,968,721
6,876,423
Difference between actual awards in year and amount provisionally awarded in prior year
–
26,046
Lapsed during the year
(142,194)
(599,763)
Exercised during the year
(551,909)
(2,368,264)
Provisionally awarded during the year
–
3,034,279
Outstanding at end of the year
66,,227744,,661188
66,,996688,,772211
Provisional awards outstanding
–
3,034,279
Awards outstanding
6,274,618
3,934,442
Outstanding at end of the year
66,,227744,,661188
66,,996688,,772211
QinetiQ Group plc | Annual Report & Accounts 2024176
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
177
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 177
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
178
30. Share-based payments (continued)
FY24 | FY23 | |
Number of | Number of | |
| awards | awards | |
Outstanding at start of the year | – | – |
Granted during the year | 7,556,268 | – |
| Exercised during the year | – | – |
| Lapsed during the year | (250,096) | – |
| Outstanding at end of the year | 7,306,172 | – |
FY24 | FY23 | |
Number of | Number of | |
awards | awards | |
Outstanding at start of the year | 941,348 | 560,002 |
Granted during the year | 213,277 | 608,158 |
Exercised during the year | (135,292) | (221,998) |
Lapsed during the year | (221,962) | (4,814) |
Outstanding at end of the year | 797,371 | 941,348 |
FY24 | FY23 | |
Number of | Number of | |
| awards | awards | |
Outstanding at start of the year | 175,099 | 206,675 |
Forfeited during the year | (175,099) | (31,576) |
Outstanding at end of the year | – | 175,099 |
QinetiQ Group plc | Annual Report & Accounts 2024178
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
179
Financial Statements
FY24 | FY23 | |
Number of | Number of | |
| awards | awards | |
Outstanding at start of the year | 1,323,331 | 1,336,372 |
Granted during the year | 13,041 | – |
Exercised during the year | (1,336,372) | – |
Lapsed during the year | – | (13,041) |
Outstanding at end of the year | – | 1,323,331 |
QinetiQ Group plc | Annual Report & Accounts 2024 179
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
180
31 March | 31 March | |
A ll figures in £ million | 2024 | 2023 |
Total contracted | 57.8 | 43.4 |
Name of company | Country of incorporation | Registered office | ||
Subsidiaries 1,6 | ||||
Aerospace Training Services Pty Ltd. | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
Air Affairs (Australia) Pty Ltd | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
Air Affairs Aviation Pty Ltd. | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
Air Target Services Pty Ltd. | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
Astra Aerospace Pty Ltd. | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
Avantus Federal LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
Avantus Federal Services LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
Avantus National Security Solutions LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
BJ Trustee Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | ||
Bristol, BS2 0HQ | ||||
cueSim Limited | England & Wales | Farnborough 3 | ||
Data Works LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
E3 Federal Solutions PR Inc. | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
Erial LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
Far Ridgeline Engagements LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | |
Foster-Miller Canada Limited | Canada | 318 | Roxton Drive, Waterloo, Ontario, N2T 1R6, Canada | |
Foster-Miller Inc 2 | USA | 350 2 nd Avenue, Waltham, Massachusetts, MA | 02451, | USA |
Graphics Research Corporation Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | ||
Bristol, BS2 0HQ | ||||
Gyldan 11 Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | ||
Bristol, BS2 0HQ | ||||
Inzpire Group Limited | England & Wales | Farnborough 3 | ||
Inzpire Holdings Limited | England & Wales | Landmark House West, Unit 1b, Alpha Court, Kingsley Road, Lincoln, | ||
Lincolnshire, LN6 3TA | ||||
Inzpire Limited | England & Wales | Landmark House West, Unit 1b, Alpha Court, Kingsley Road, Lincoln, | ||
Lincolnshire, LN6 3TA | ||||
Hirose Holdings Pty Ltd. | Australia | Level 33, 101 | Collins Street, Melbourne, VIC 3000, Australia | |
QinetiQ Group plc | Annual Report & Accounts 2024180
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
181
Financial Statements
Name of company | Country of incorporation | Registered office | |||
Leading Technology Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | |||
Bristol, BS2 0HQ | |||||
Lucid Perspectives LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
MTEQ Precision Machining LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
Metrix UK Limited | England & Wales | Farnborough 3 | |||
Naimuri Limited | England & Wales | Farnborough 3 | |||
Occam’s Razor Technologies LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
Operational Intelligence LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
Precis (2187) Limited | England & Wales | Farnborough 3 | |||
Precis (2188) Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | |||
Bristol, BS2 0HQ | |||||
Qinetic Limited | England & Wales | Farnborough 3 | |||
QinetiQ Aerostructures Pty Ltd | Australia | Level 3, 210 | Kings Way, South Melbourne, VIC 3205, Australia | ||
QinetiQ Australia Pty Ltd | Australia | Level 3, 210 | Kings Way, South Melbourne, VIC 3205, Australia | ||
QinetiQ Consulting Pty Ltd | Australia | Level 3, 12 Brindabella Court, Brindabella Business Park, Majura ACT | |||
2609 | , Australia. | ||||
QinetiQ Estates Limited | England & Wales | Farnborough 3 | |||
QinetiQ GmbH | Germany | Flughafenstraße 65, 41066, Mönchengladbach, Germany | |||
QinetiQ GP Limited | Scotland | 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, Scotland | |||
QinetiQ Group Canada Inc. 2 | Canada | 5300 | Commerce Court West, 199 Bay Street, Toronto ON M5L 1A9, | ||
Canada | |||||
QinetiQ Group Holdings Limited | England & Wales | Farnborough 3 | |||
QinetiQ Holdings Limited | England & Wales | Farnborough 3 | |||
QinetiQ Inc 2, | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
QinetiQ Insurance PCC Limited | Guernsey | Mill Court, La Charroterie, St Peter Port, GY1 4ET Guernsey | |||
QinetiQ Limited | England & Wales | Farnborough 3 | |||
QinetiQ Novare Pty Ltd | Australia | Petrie House, level 6, 80 Petrie Terrace, Brisbane QLD 400, Australia | |||
QinetiQ Overseas Holdings Limited | England & Wales | Farnborough 3 | |||
QinetiQ Overseas Trading Limited | England & Wales | Farnborough 3 | |||
QinetiQ Pension Scheme Trustee Limited | England & Wales | Farnborough 3 | |||
QinetiQ PFP Limited Partnership 4 | Scotland | 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, Scotland | |||
QinetiQ Philippines Company, Inc | Philippines | 22 nd Floor Corporate Centre, 139 Valero Street, Salcedo Village, | |||
Makati City, Philippines | |||||
QinetiQ Pty Ltd | Australia | Collins Street, Melbourne, VIC 3000, Australia | Level 33, 101 | ||
QinetiQ Solutions Sdn. Bhd. | Malaysia | Suite 6.01, 6 th Floor, Plaza See Hoy Chan, Jalan Raja Chulan 50200, | |||
Kuala Lumpur, W.P. Kuala Lumpur, Malaysia | |||||
QinetiQ Sweden AB | Sweden | 15, Linkoping, Stockholm, Sweden | Box 1541, | 581 | |
QinetiQ Target Services Limited | England & Wales | Farnborough 3 | |||
QinetiQ Target Systems Limited | England & Wales | Farnborough 3 | |||
QinetiQ Training and Simulation Limited | England & Wales | Farnborough 3 | |||
QinetiQ US Holdings, Inc. | USA | 5885 | Trinity Parkway, Suite 130, Centreville, Virginia 20120-1969, USA | ||
RubiKon Group Pty Limited | Australia | Collins Street, Melbourne, Victoria 3000, Australia | Level 33, 101 | ||
Sensoptics Limited | England & Wales | C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, | |||
Bristol, BS2 0HQ | |||||
Sentinel OpCo LLC | USA | 1800 | Tysons Blvd, Ste 750, McLean, VA 22102, USA | ||
TSG International LLC | USA | 350 2 nd | Avenue, Waltham, Massachusetts 02451, USA | ||
Joint ventures 6 | |||||
Avantus CTA, LLC 5 | USA | 8281 | Greensboro Drive, Ste 400, McLean, VA 22102, USA | ||
Federal Mission Solutions, LLC 5 | USA | 8281 | Greensboro Drive, Ste 400, McLean, VA 22102, USA | ||
Hive Fed Solutions LLC 5 | USA | 8281 | Greensboro Drive, Ste 400, McLean, VA 22102, USA | ||
Houbara Defence & Security LLC 5,6 | United Arab Emirates | Unit 3, Zone 4, Tawazun Industrial Park, Abu Dhabi, United Arab | |||
Emirates, PO Box 128220 | |||||
QinetiQ Dar Massader QDM Limited 5,6 | Saudi Arabia | Al Nakhla Tower, 3026 -Prince Saud Bin Mohamed Bin Muqin Road, PO | |||
Box 2985, | Riyadh 13321, | Kingdom of Saudi Arabia | |||
Quick Services LLC 5 | USA | 409 | Chicago Drive Suite 103 in Fayetteville, NC 28306 | ||
QinetiQ Group plc | Annual Report & Accounts 2024 181
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
182
Distorting due to | Distorting due to | Does not reflect in-year | |
| irregular nature | fluctuating nature | operational performance | |
Item | year on year | (size and sign) | of continuing business |
Amortisation of intangible assets arising from acquisitions | P | ||
Pension net finance income | P | P | |
Gains/losses on disposal of businesses, property and investments | P | P | P |
Transaction, integration and on-off remuneration costs in respect of business | |||
acquisitions and disposals | P | P | |
I mpairment of property and goodwill | P | ||
One-off period of digital investment | P | P | P |
C osts of group-wide restructuring programmes | P | P | |
T he tax impact of the above | P | P | P |
Other significant non-recurring tax and RDEC movements | P | P | P |
QinetiQ Group plc | Annual Report & Accounts 2024182
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
183
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 183
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
184
36. Basis of preparation and material accounting policies (continued)
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
185
Financial Statements
Contract assets
Contract assets represent revenue recognised in excess of amounts invoiced. Revenue is recognised on service contracts by using a
‘percentage complete’ method, applying the proportion of contract costs incurred for work performed to date relative to the estimated total
contract cost, after making suitable allowances for technical and other risks related to performance milestones yet to be achieved, and
applying that proportion to total contract price. Payment for service contracts are not always due from the customer until certain milestones
have been reached and, therefore, a contract asset is recognised over the period in which the services are performed representing the Group’s
right to consideration for services performed to date, to the extent that the customer has not yet been invoiced for those services.
Contract liabilities
The Group, on occasion, bills customers in advance of performing certain types of work which results in the Group recognising contract
liabilities. Once the work has been performed these amounts will be reduced and recognised as revenue. For sale of goods, revenue is
recognised in the income statement when control of the goods has been transferred to the customer; being at the point when the goods are
delivered. Any transaction price received by the Group prior to that point is recognised as a contract liability.
Principal-agent arrangements
The Group enters into certain arrangements which involve a consortium of service providers. The Group acts as a ‘Prime’ contractor in certain
contracts with customers and utilises sub-contractors to undertake the work. Under these contracts the Group is considered to be primarily
responsible for fulfilling the service to the customer. The Group performs a technical assessment of the work before it is delivered to the
customer and is responsible for quality and performance of the sub-contractor. As such the Group is considered to be the principal to the
arrangement with the customer and includes sub-contractor costs within revenue. However, where the Group is merely acting as an agent of
a sub-contractor then no revenue is recognised in respect of sub-contractor costs.
All consortium arrangements are assessed by the Group to determine if it is the principal or agent.
Contract bidding costs
The Group recognises the ‘incremental costs of obtaining a contract’ with a customer as an asset if the Group expects to recover those costs.
The ‘incremental costs of obtaining a contract’ are those costs that the Group incurs to obtain a contract with a customer that it would not
have incurred if the contract had not been won. Costs to obtain a contract that would have been incurred regardless of whether the contract
was won or lost shall be recognised as an expense when incurred, unless those costs are explicitly chargeable to the customer.
Segmental information
Segmental information is presented according to the Group’s internal management reporting structure and the markets in which
it operates. Segmental results represent the contribution of the different segments to the profit of the Group. Corporate expenses are allocated
to the corresponding segments. Unallocated items mainly comprise Research and Development Expenditure Credits (RDEC) and specific
adjusting items. Specific adjusting items are referred to in note 4. Segmental assets and liabilities information is not regularly provided to the
Chief Operating Decision Maker.
Research and development expenditure
Research and development (R&D) costs incurred in respect of specific contracts placed by customers are recognised within operating costs
and revenue is recognised in respect of the R&D services performed. Internally funded development expenditure is capitalised in the balance
sheet where there is a clearly defined project, the expenditures are separately identifiable, the project is technically and commercially feasible,
all costs are recoverable by future revenue and the resources are committed to complete the project. Such capitalised costs are amortised
over the forecast period of sales resulting from the development. All other R&D costs are expensed to the income statement in the period in
which they are incurred. If the research phase cannot be clearly distinguished from the development phase, the respective project-related
costs are treated as if they were incurred in the research phase only and expensed.
Borrowings and financing
The Group has a term loan and access to a revolving credit facility with its relationship banks. Borrowings are initially recognised at fair value.
Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Borrowings are classified as non-current liabilities where the group has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. The Group pays in advance finance costs in
relation to the multi-currency facility which are recognised as a deferred finance cost asset and amortised over the period of the facility, where
it is probable that some or all of the facility will be drawn down. Costs of letters of credit are also charged to finance expense.
QinetiQ Group plc | Annual Report & Accounts 2024184
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
185
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 185
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
186
36. Basis of preparation and material accounting policies (continued)
QinetiQ Group plc | Annual Report & Accounts 2024186
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
187
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 187
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
188
36. Basis of preparation and material accounting policies (continued)
QinetiQ Group plc | Annual Report & Accounts 2024188
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
189
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 189
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
190
36. Basis of preparation and material accounting policies (continued)
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
191
Financial Statements
Share capital
Ordinary share capital of the Company is recorded as the proceeds received. Company shares held by the employee benefit trusts are held at
the consideration paid. They are classified as own shares within equity. Any gain or loss on the purchase, sale or issue of Company shares is
recorded in equity.
Non-controlling interests
The Group recognises non-controlling interest in an acquired entity either at fair value or at the non-controlling interest’s proportionate share
of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. For non-controlling interests that
the Group holds, the Group elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets.
37. Critical accounting estimates and judgments in applying accounting policies
Critical accounting estimates
The following commentary is intended to highlight key sources of estimation uncertainty that have a significant risk of resulting in a material
adjustment to the financial statements in the next financial year.
Estimation of the Group’s defined benefit pension net surplus
The Group’s defined benefit pension obligations (and hence the net surplus) are based on key assumptions, including discount rates, mortality
and inflation. Management exercises its best judgement, in consultation with actuarial advisors, in selecting the values for these assumptions
that are the most appropriate to the Group. Small changes in these assumptions at the balance sheet date, individually or collectively, may
result in significant changes in the size of the net surplus/deficit. Further details of these assumptions and the sensitivity of the net pension
surplus to changes in these assumptions are set out in note 28.
In addition to the sensitivity of the liability side of the net pension surplus (which will impact the value of the net pension surplus) the net
pension surplus is also exposed to significant variation due to changes in the fair value of Scheme assets. A specific sensitivity on assets has
not been included in note 28 but any change in valuation of assets flows straight through to the value of the net pension surplus e.g. if equities
fall by £10m then the net pension surplus reduces by £10m. The values of unquoted assets assume that an available buyer is willing to
purchase those assets at that value. For the Group’s portfolio of assets, the unquoted alternative bonds of £253.8m; the unquoted corporate
bonds of £120.6m and the unquoted equities of £21.8m are the assets with most uncertainty as to valuation as at 31 March 2024.
Estimated value of tax assets
The Group has significant levels of unused tax losses and US carried forward interest expenses as set out in note 18 giving rise to potential
deferred tax assets. When estimating the appropriate amount that should be recognised, management consider sources of taxable profits
including the reversal of deferred tax liabilities and forecast future profits. This estimate is sensitive to similar factors as goodwill, as set out
in note 14 and further described in note 18. A range of scenarios are modelled to consider sensitivity to these and other relevant factors
(including annual profit levels and growth expectations). Based on these scenarios, it is possible that revisions of these forecasts over the
next 12 months could result in up to £11m of the recognised US deferred tax assets not being recoverable.
Estimates of costs to complete on long-term contracts
The Group has a large number of contracts which span multiple years and are accounted for on a percentage of completion basis in
accordance with IFRS 15. Long-term contract accounting requires a number of estimates to be made, particularly in calculating the forecast
costs to complete the contract. These forecast costs will be impacted by various factors including numerous risks that could crystallise in
the future (with a range of cost outcomes), particularly on contracts of a developmental nature. Across the Group’s portfolio of long-term
contracts there is a risk that the actual out-turn of these contracts could be different than assumed in the year end contract forecasts,
impacting both revenue and operating profit.
For firm price contracts the impact of actual costs being above or below estimated costs would generally impact the contract profitability and
the timing of revenue recognition. Costs could increase or decrease based on the level of inflation and the outcome of assumed risk and
identified savings positions. As an example, an increase in total forecast costs to complete of 1% in one of the Group’s most significant
contracts, would reduce profit by approximately £1m to £2m per annum, on average over the remaining contract duration. Depending on the
timing of such cost increases there would be an adjustment to the timing of revenue recognition, which would have no impact on total contract
revenue but could impact an individual years revenue by £2m to £3m. In many cases fixed price contracts include inflation uplift clauses, such
that inflation of costs would create additional contract value and revenue, thus resulting in increased profit.
QinetiQ Group plc | Annual Report & Accounts 2024190
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Notes to the Consolidated Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
191
Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 191
Financial statements
Notes to the Consolidated Financial Statements
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
192
37. Critical accounting estimates and judgments in applying accounting policies (continued)
QinetiQ Group plc | Annual Report & Accounts 2024192
Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
For the year ended 31 March
Company balance sheet
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
193
Financial Statements
The profit for the year ended 31 March 2024 was £44.0m (FY23: profit of £41.3m).
The financial statements of QinetiQ Group plc (company number 4586941) on pages 193 to 196 were approved by the Board of Directors
and authorised for issue on 23 May 2024 and signed on its behalf by:
Steve Wadey
Group Chief Executive Officer
All figures in £ million
Note
31 March
2024
31 March
2023
Non-current assets
Investments in subsidiary undertakings
2
530.6
521.2
530.6
521.2
Current liabilities
Creditors: amounts falling due within one year
3
(131.3)
(78.0)
Net current liabilities
(131.3)
(78.0)
Total assets less current liabilities
399.3
443.2
Net assets
399.3
443.2
Equity
Share capital
4
5.7
5.8
Capital redemption reserve
40.8
40.8
Share premium
147.6
147.6
Retained earnings
205.2
249.0
Total equity
399.3
443.2
Company balance sheet
For the year ended 31 March
Financial statements
QinetiQ Group plc | Annual Report & Accounts 2024 193
Financial statementsFinancial statements
Company statement of changes in equity
For the year ended 31 March
QinetiQ Group plc Annual Report and Accounts 2024
194
Financial Statements
The capital redemption reserve is not distributable and was created following redemption of preference share capital.
All figures in £ million
S
hare
capital
Capital
redemption
reserve
Share
premium
Retained
earnings
Total
equity
At 1 April 2023
5.8
40.8
147.6
249.0
443.2
Profit for the year
–
–
–
44.0
44.0
Purchase of own shares
(0.1)
–
–
(51.0)
(51.1)
Dividend paid
–
–
–
(45.6)
(45.6)
Share-based payments
–
–
–
8.8
8.8
At 31 March 2024
55..77
4400..88
114477..66
205.2
399.3
At 1 April 2022
5.8
40.8
147.6
245.6
439.8
Profit for the year
–
–
–
41.3
41.3
Purchase of own shares
–
–
–
(0.8)
(0.8)
Business divestment
–
–
–
(0.2)
(0.2)
Dividend paid
–
–
–
(42.6)
(42.6)
Share-based payments
–
–
–
5.7
5.7
At 31 March 2023
5.8
40.8
147.6
249.0
443.2
Notes to the Company Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
195
Financial Statements
1. Accounting policies
The Company is a public limited company and is incorporated and domiciled in Farnborough, United Kingdom.
The accounting policies below have been applied consistently in dealing with items which are considered material in relation to the
Company’s financial statements.
Basis of preparation
The financial statements have been prepared on a going concern basis under the historical cost convention and in accordance with applicable
UK Accounting Standards. As permitted by section 408 of the Companies Act 2006, a separate profit and loss account dealing with the results
of the Company has not been presented.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. In preparing
these financial statements, the Company is in accordance with International Accounting Standards in conformity with the requirements of
the Companies Act 2006 and the International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the EU but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of
the FRS 101 disclosure exemptions has been taken.
• A cash flow statement and related notes
• Disclosures in respect of capital management
• The effects of new but not yet effective IFRSs
• Disclosures in respect of the compensation of key management personnel
• IAS 24 in respect of related party transactions entered into between two or more members of a group
• IFRS 2 Share Based Payments in respect of Group-settled share-based payments
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7.
Investments
In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less any impairment in value.
Share-based payments
The cost of share-based payments in respect of employees of Group subsidiaries is charged to those subsidiary undertakings. In the Company
financial statements the recoverable from subsidiaries is credited directly to equity as a capital contribution. The fair value of equity-settled
awards for share-based payments is determined on grant and expensed in subsidiary undertakings (and credited to equity in the Company)
on a straight line basis over the period from grant to the date of earliest unconditional exercise. The charges for equity-settled share-based
payments are updated annually for non-market-based vesting conditions. Further details of the Group’s share-based payment charge are
disclosed in note 30 to the Group financial statements.
Current liabilities
Current liabilities include amounts due within the normal operating cycle of the Company. Costs associated with the arrangement of bank
facilities or the issue of loans are held net of the associated liability presented in the balance sheet.
Share capital
Ordinary share capital of the Company is recorded as the proceeds received. Company shares held by the employee benefit trusts are held at
the consideration paid. They are classified as own shares within equity. Any gain or loss on the purchase, sale or issue of Company shares is
recorded in equity.
2. Investments in subsidiary undertakings
The increase in investments in subsidiary undertakings in FY24 mainly relates to equity-settled schemes during the year.
A list of all subsidiary undertakings of QinetiQ Group plc is disclosed in note 35 to the Group financial statements.
All figures in £ million
31 March
2024
31 March
2023
Subsidiary undertaking – 100% of ordinary share capital of QinetiQ Group Holdings Limited
424.3
424.3
Capital contributions arising from share-based payments to employees of subsidiaries
92.7
83.3
Capital contributions arising from share-settled liabilities
13.6
13.6
Total investment in subsidiary undertakings
530.6
521.2
Financial Statements
Company statement of changes in equity
For the year ended 31 March
QinetiQ Group plc | Annual Report & Accounts 2024194
Company Financial Statements
Notes to the Company Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
195
Financial Statements
1. Accounting policies
The Company is a public limited company and is incorporated and domiciled in Farnborough, United Kingdom.
The accounting policies below have been applied consistently in dealing with items which are considered material in relation to the
Company’s financial statements.
Basis of preparation
The financial statements have been prepared on a going concern basis under the historical cost convention and in accordance with applicable
UK Accounting Standards. As permitted by section 408 of the Companies Act 2006, a separate profit and loss account dealing with the results
of the Company has not been presented.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. In preparing
these financial statements, the Company is in accordance with International Accounting Standards in conformity with the requirements of
the Companies Act 2006 and the International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the EU but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of
the FRS 101 disclosure exemptions has been taken.
• A cash flow statement and related notes
• Disclosures in respect of capital management
• The effects of new but not yet effective IFRSs
• Disclosures in respect of the compensation of key management personnel
• IAS 24 in respect of related party transactions entered into between two or more members of a group
• IFRS 2 Share Based Payments in respect of Group-settled share-based payments
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7.
Investments
In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less any impairment in value.
Share-based payments
The cost of share-based payments in respect of employees of Group subsidiaries is charged to those subsidiary undertakings. In the Company
financial statements the recoverable from subsidiaries is credited directly to equity as a capital contribution. The fair value of equity-settled
awards for share-based payments is determined on grant and expensed in subsidiary undertakings (and credited to equity in the Company)
on a straight line basis over the period from grant to the date of earliest unconditional exercise. The charges for equity-settled share-based
payments are updated annually for non-market-based vesting conditions. Further details of the Group’s share-based payment charge are
disclosed in note 30 to the Group financial statements.
Current liabilities
Current liabilities include amounts due within the normal operating cycle of the Company. Costs associated with the arrangement of bank
facilities or the issue of loans are held net of the associated liability presented in the balance sheet.
Share capital
Ordinary share capital of the Company is recorded as the proceeds received. Company shares held by the employee benefit trusts are held at
the consideration paid. They are classified as own shares within equity. Any gain or loss on the purchase, sale or issue of Company shares is
recorded in equity.
2. Investments in subsidiary undertakings
The increase in investments in subsidiary undertakings in FY24 mainly relates to equity-settled schemes during the year.
A list of all subsidiary undertakings of QinetiQ Group plc is disclosed in note 35 to the Group financial statements.
All figures in £ million
31 March
2024
31 March
2023
Subsidiary undertaking – 100% of ordinary share capital of QinetiQ Group Holdings Limited 424.3
424.3
Capital contributions arising from share-based payments to employees of subsidiaries 92.7
83.3
Capital contributions arising from share-settled liabilities
13.6
13.6
Total investment in subsidiary undertakings
530.6
521.2
Notes to the Company Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024 195
Financial statementsFinancial statementsFinancial statements
Notes to the Company Financial Statements
QinetiQ Group plc Annual Report and Accounts 2024
196
3. Creditors: amounts falling due within one year
Amounts owed to Group undertakings are unsecured, repayable on demand and bear no interest, with the exception of a £16.2m
intercompany loan which bears interest at a margin of 1.10% over SONIA
4. Share capital
The Company’s share capital is disclosed in note 29 to the Group financial statements.
5. Share-based payments
The Company’s share-based payment arrangements are set out in note 30 to the Group financial statements.
6. Parent company guarantees
The Company has provided guarantees to various customers of subsidiaries to the value of £21.0m as at 31 March 2024 (2023: £21.0m) in
the ordinary course of business. The company has also provided a guarantee of £336.3m as at 31 March 2024 (2023: £337.6m) in respect
of the term loan.
7. Other information
Directors’ emoluments, excluding Company pension contributions for the year to 31 March 2024 were £4.4m (FY23: £4.9m). These
emoluments were all in relation to services provided on behalf of the QinetiQ Group with no amount specifically relating to their work for the
Company. Details of the Directors’ emoluments, share schemes and entitlements under money purchase pension schemes are disclosed on
page 112 in the Directors’ Remuneration Report.
The remuneration of the Company’s auditors for the year to 31 March 2024 was £0.6m (FY23: £0.4m), which was for audit of the Group
financial statements and Company financial statements and audit related assurance services. No other services were provided by the auditors
to the Company.
The monthly average number of employees for the year to 31 March 2024 was nil (FY23: nil).
All figures in £ million
31 March
2024
31 March
2023
Amounts owed to Group undertakings
97.3
78.0
Irrevocable share buyback liability
34.0
–
Creditors: amounts falling due within one year
131.3
78.0
Five year record
QinetiQ Group plc Annual Report and Accounts 2024
197
Financial Statements
1
Underlying measures are stated before specific adjusting items. Definitions of underlying measures of performance are provided on page 200. Underlying financial
measures are presented because the Board believes these provide a better representation of the Group’s long-term performance trend. For details of specific adjusting
items refer to note 4 and note 36 of the financial statements.
2
FY22 was restated in FY23 due to a change in accounting policy for Research and Development Expenditure Credits (RDEC).
3
FY21 was restated in FY22 due to a change in accounting policy in respect of software implementation costs.
For the years ended 31 March (unaudited)
FY24
FY23
FY22
2
FY21
3
FY20
EMEA Services
£m
1,417.4
1,179.3
1,059.2
939.9
797.4
Global Solutions
£m
494.7
401.4
261.2
338.3
275.5
Revenue
£m
1,912.1
1,580.7
1,320.4
1,278.2
1,072.9
EMEA Services
£m
163.4
137.1
135.6
118.6
100.6
Global Solutions
£m
51.8
41.8
1.8
33.2
32.6
Operating profit from segments
11
£m
215.2
178.9
137.4
151.8
133.2
Operating profit margin from segments
1
%
11.3
11.3
10.4
11.9
12.4
Statutory operating profit
£m
192.5
172.8
123.7
108.7
117.6
Underlying operating profit
1
£m
242.4
196.3
143.6
151.8
133.2
Underlying profit before tax
1
£m
227.0
189.7
142.2
149.9
132.2
Profit before tax
£m
182.7
192.0
125.9
142.6
123.1
Profit attributable to owners of the Company
£m
139.6
154.4
90.0
121.9
106.3
Underlying basic EPS
1
Pence
29.4
26.5
20.6
22.1
20.0
Basic EPS
Pence
24.2
26.8
15.7
21.4
18.7
Diluted EPS
Pence
23.8
26.5
15.5
21.1
18.6
Dividend per share
Pence
8.25
7.7
7.3
6.9
6.6
Underlying net cash flow from operations
1
£m
320.2
270.1
220.7
199.0
177.8
Net (debt)/cash
1
£m
(151.2)
(206.9)
225.1
164.1
84.7
Average number of employees
8,459
7,443
6,911
6,874
6,267
Orders excluding LTPA amendments
£m
1,740.4
1,724.1
1,226.6
1,149.4
961.7
Financial Statements
Notes to the Company Financial Statements
QinetiQ Group plc | Annual Report & Accounts 2024196
Notes to the Company Financial Statements continued
Five year record
QinetiQ Group plc Annual Report and Accounts 2024
197
Financial Statements
1
Underlying measures are stated before specific adjusting items. Definitions of underlying measures of performance are provided on page 200. Underlying financial
measures are presented because the Board believes these provide a better representation of the Group’s long-term performance trend. For details of specific adjusting
items refer to note 4 and note 36 of the financial statements.
2
FY22 was restated in FY23 due to a change in accounting policy for Research and Development Expenditure Credits (RDEC).
3
FY21 was restated in FY22 due to a change in accounting policy in respect of software implementation costs.
For the years ended 31 March (unaudited)
FY24
FY23
FY22
2
FY21
3
FY20
EMEA Services
£m
1,417.4
1,179.3
1,059.2
939.9
797.4
Global Solutions
£m
494.7
401.4
261.2
338.3
275.5
Revenue
£m
1,912.1
1,580.7
1,320.4
1,278.2
1,072.9
EMEA Services
£m
163.4
137.1
135.6
118.6
100.6
Global Solutions
£m
51.8
41.8
1.8
33.2
32.6
Operating profit from segments
1
1
£m
215.2
178.9
137.4
151.8
133.2
Operating
profit margin from segments
1
%
11.3
11.3
10.4
11.9
12.4
Statutory operating profit
£m
192.5
172.8
123.7
108.7
117.6
Underlying operating profit
1
£m
242.4
196.3
143.6
151.8
133.2
Underlying profit before tax
1
£m
227.0
189.7
142.2
149.9
132.2
Profit before tax
£m
182.7
192.0
125.9
142.6
123.1
Profit attributable to owners of the Company
£m
139.6
154.4
90.0
121.9
106.3
Underlying basic EPS
1
Pence
29.4
26.5
20.6
22.1
20.0
Basic EPS
Pence
24.2
26.8
15.7
21.4
18.7
Diluted EPS Pence 23.8
26.5
15.5
21.1
18.6
Dividend per share Pence 8.25
7.7
7.3
6.9
6.6
Underlying net cash flow from operations
1
£m 320.2
270.1
220.7
199.0
177.8
Net (debt)/cash
1
£m
(151.2)
(206.9)
225.1
164.1
84.7
Average number of employees
8,459
7,443
6,911
6,874
6,267
Orders excluding LTPA amendments
£m
1,740.4
1,724.1
1,226.6
1,149.4
961.7
Five year record
QinetiQ Group plc | Annual Report & Accounts 2024 197
Financial statementsFinancial statementsFinancial statements
Additional financial information
Foreign exchange
The principal exchange rates affecting the
Group were the Sterling to US Dollar exchange
rate and the Sterling to Australian Dollar rate.
12 months
to 31 March
2024
12 months to
31 March
2023
£/US$ – opening 1.24 1.31
£/US$ – average 1.26 1.21
£/US$ – closing 1.26 1.24
£/A$ – opening 1.85 1.75
£/A$ – average 1.91 1.76
£/A$ – closing 1.94 1.85
Treasury policy
The Treasury policy is approved by the Audit
Committee. There is a structured approach
to financial risk management, mitigating
exposures to currency, liquidity, counterparty
and credit risks as outlined in note 27. The
policy allows the use of financial instruments
to manage and hedge business operational
risks that arise on movements in financial,
credit or money markets. There is strict
control on the use of financial instruments.
Speculative trading in financial instruments
is not permitted.
– Currency risk – The Group’s income
and expenditure is largely settled in the
functional currency of the relevant entity.
Where cash flows are denominated in
currencies other than the functional
currency of the relevant trading entity, the
policy is to hedge all material transaction
exposure at the point of commitment to the
underlying transaction. Uncommitted future
transactions are not routinely hedged.
Where the timing of cash flows differ from
the original expectation, currency swaps will
be used to realign the hedge maturity. The
maximum permitted hedge period is five
years. Translation exposures arising from
the consolidation of overseas subsidiaries
in foreign currencies are not hedged.
– Interest rate risk – The Group’s funding is
largely in floating rate debt and subject to the
adverse effects of changes in interest rates.
The Group has a policy to fix no less than 30%
and no more than 80% of the debt and spread
the risk of fluctuations in interest rates. Options
and similar open-ended instruments are not
permitted to manage interest rate exposures.
– Financial credit and liquidity risk – Liquidity
risk is managed to ensure funds are available
to meet business needs and maximise return
subject to counterparty and credit risks.
Investments are permitted with institutions
on an Approved Counterparty list and must
not exceed the counterparty credit limit.
Investments must be held in the currency
of the reporting entity except currency
deposits or borrowings specifically placed to
hedge assets or liabilities with related hedge
documentation. Group funding is established
to meet the Group’s medium and long-term
financing requirements. Facilities are agreed
with a number of financial institutions
such that no single institution exerts undue
influence on the Group. At the year end
the Group had an undrawn revolving credit
facility of £275m and term loan of £336m
which mature on 27 September 2025 and
27 September 2026 respectively. The term
loan has a one-year extension option. The
Group refinanced the revolving credit facility
at £290m in April 2024 with a three year
maturity and two one-year extension options.
The policies manage and control treasury risk in
alignment with the Group strategy.
Tax risk management
QinetiQ’s tax strategy, as published on its
corporate website, is to ensure compliance
with all relevant tax legislation, wherever we
do business, while managing our effective tax
rates and tax cash flows. Tax is managed in
alignment with our corporate responsibility
strategy in that we strive to be responsible in
all our business dealings with a zero-tolerance
of tax evasion. These principles are applied in a
consistent and transparent manner in pursuing
the tax strategy and in all dealings with tax
authorities around the world.
– Tax planning – QinetiQ manages both effective
tax rate (ETR) and cash tax impacts in line
with the Board-endorsed tax strategy. External
advice and consultation are sought on potential
changes in tax legislation in the UK, the US and
elsewhere as necessary, enabling the Group to
plan for and mitigate potential changes. QinetiQ
does not make use of ‘off-shore’ entities
or tax structures to focus taxable profits in
jurisdictions that legislate for low tax rates.
QinetiQ has a low risk appetite for tax planning.
– Relationships with tax authorities – QinetiQ
is committed to building constructive
working relationships with tax authorities
based on a policy of full disclosure in order
to remove uncertainty in its business
transactions and allow the authorities to
review possible risks. In the UK, QinetiQ
seeks to be open and transparent in its
engagement with the tax authorities by
sharing with HMRC the methodologies
adopted in its tax returns.
– Transfer pricing – QinetiQ does not have a
significant level of cross-border activity but
this will increase as it pursues its policy of
expanding around the globe. Where there is
cross-border activity, controls are in place
to ensure pricing reflects ‘arm’s length’
principles in compliance with the OECD
Transfer Pricing Guidelines and the laws of
the relevant jurisdictions. The Group does
not, therefore, have a significant exposure
to transfer pricing legislation. QinetiQ
submits its ‘Country by Country’ report to
the UK tax authorities in line with the OECD
rules providing insight for tax authorities
into its global tax affairs.
– Governance – The Board has approved this
approach. The Audit Committee oversees
the tax affairs and risks through periodic
reviews. The governance framework is used
to manage tax risks, establish controls
and monitor their effectiveness. The Group
Director of Tax is responsible for ensuring
that appropriate policies, processes and
systems are in place and that the tax team
has the required skills and support to
implement this approach.
QinetiQ’s corporate tax contribution – QinetiQ
is liable to pay tax in its home countries.
Changes in tax legislation in these countries
would impact the level of tax paid on profits
generated by the Group. A significant majority
of the Group’s profit before tax is generated
in the UK where the majority of the Group’s
business is undertaken and employees are
based. Total corporation tax payments in
the year to 31 March 2024 were £36.9m
(2023: £30.2m).
The differential between the taxation expense
and the tax paid in the year relates primarily
to the impact of deferred tax movements,
whereby the income statement bears tax
charges and credits (e.g. on fixed assets or
losses) but for which there is no corporation
tax paid or recovered in the year. Together,
these result in the cash paid being £6.2m
less than the total expense charged to the
income statement.
Additional information
QinetiQ Group plc | Annual Report & Accounts 2024198
Glossary
AAG Advanced Arresting Gear
ABP Annual Bonus Plan
ACE Accelerated Capability Environment
ADPG Aerospace and Defence Procurement Group
ADS Aerospace, Defence and Security
AEIS All Employee Incentive Scheme
AGM Annual General Meeting
AUKUS A tri-lateral security agreement between Australia, United Kingdom
and the United States
BATCIS Battlefield and Tactical Communications & Information Systems
BBP Bonus Banking Plan
C5ISTAR Command, Control, Computers, Communications, Cyber,
Intelligence, Surveillance and Reconnaissance
CAGR Compound Annual Growth Rate
CBP Customs and Border Protection
CCSG Climate Change Steering Group
CDDC Combat Capabilities Development Command’s
CDP Carbon Disclosure Project
CGU Cash Generating Unit
CHACR Centre for Historical Analysis and Conflict Research
CMI Continuous Mortality Investigation
CPI Consumer Price Index
CR Corporate Responsibility
CRS-I Common Robotic system – Individual
DE&S MOD’s Defence, Equipment and Support organisation
DHS U.S. Department of Homeland Security
DIDS Defence Industry Development Strategy
DSEI Defence and Security Equipment International
DSF Defence Suppliers Forum
DSP Deferred Share Plan
DoD US Department of Defense
DRDC Defence Research and Development Canada
Dstl UK Defence Science and Technology Laboratories
EAP Employee Assistance Programmes
EBITDA Earnings before interest, tax, depreciation and amortisation
ECL Expected credit loss
ED&I Equality, diversity and inclusion
EDP Engineering Delivery Partner
EMALS Electromagnetic Aircraft Launch System
EMEA Europe, Middle East and Australasia
EPCC Electromechanical Actuator Power Conditioner and Controller
EPS Earnings per share
ERG Employee Resource Groups
ESG Environmental, Social, Governance
FCA Financial Conduct Authority
FCAS Future Combat Air system
FRC Financial Reporting Council
FY Financial year (ending 31 March)
GEV Global Employee Voice
GHG Greenhouse gas
GII Global Interoperable Infrastructure
GVSC Ground Vehicle Systems Centre
HPSA High Performance Share Award
HVO Hydrotreated Vegetable Oil
IAS International Accounting Standards
IFRIC International Financial Reporting Interpretations Committee
IFRS International Financial Reporting Standards
IRAD Internal research and development
ISBP Integrated Strategic Business Plan
JATTS Joint Adversarial Training and Testing Services
JOSCAR Joint Supply Chain Accreditation Register
KPI Key Performance Indicator
LDEW Laser Directed Energy Weapons
LPA Long-term Performance Award
LTI Lost time incident
LTPA Long Term Partnering Agreement – 25-year contract established
in 2003 to manage the UK MOD’s Test and Evaluation ranges
M&A Mergers and acquisitions
MOD UK Ministry of Defence
MSCA Maritime Strategic Capability Agreement
NGABS Next Generation Advanced Bomb Suits
NGCV CFT Next Generation Combat Vehicle Cross Functional Team
NGERS National Greenhouse and Energy Reporting Scheme
O&M Operations & Maintenance
OMFV Optionally Manned Fighting Vehicle
PBT Profit before tax
PV Photovoltaic
PPE Property, plant and equipment
PPS Prudential Platinum Scheme
QAA QinetiQ Air Affairs
QLT QinetiQ Leadership Team
QTEC QinetiQ Technology and Engineering Centre
QTS QinetiQ Target Systems
R&D Research and development
RCV Robotic Combat Vehicle
RDEC Research and development expenditure credit
RDT&E Research, Development, Test & Evaluation
REPMUS Robotic Experimentation Prototyping Augmented by Maritime
Unmanned Systems
ROCE Return on Capital Employed
RPI Retail price Index
RSP Restricted Share Plan
SAF Sustainable Aviation Fuel
SBTi Science Based Targets initiative
SECR Streamlined Energy and Carbon Reporting
SIP Share Incentive Plan
SME Small to medium sized enterprises
SONIA Single Source Regulations Office
SOFR Secured Overnight Financing Rate
SSA Special Security Arrangement
SSRO Single Source Regulations Office
SSSI Site of Special Scientific Interest
STEM Science, Technology, Engineering and Maths
T&E Test and Evaluation
T3E Test, Trials, Training & Evaluation
TARS Tethered Aerostat Radar System
TECSA Test and Evaluation, Certification and Systems Assurance
TCFD Taskforce on Climate-related Financial Disclosures
TMR Training, Mission and Rehearsal
TRIR Total Recordable Incident Rate
TSR Total shareholder return
VCP Value Creation Plan
UK
Corporate
Governance
Code
Guidelines of the Financial Reporting Council to address the
principal aspects of corporate governance in the UK
UK GAAP UK Generally Accepted Accounting Practice
QinetiQ Group plc | Annual Report & Accounts 2024 199
Financial statements
Alternative performance measures (APMs)
The Group uses various non-statutory measures of performance, or APMs. Such APMs are used by management internally to monitor and manage
the Group’s performance and also allow the reader to obtain a proper understanding of performance (in conjunction with statutory financial
measures of performance). The APMs used by QinetiQ are set out below:
Measure Explanation Note
Organic growth The level of year-on-year growth, expressed as a percentage, calculated at constant prior year foreign
exchange rates, adjusting for business acquisitions and disposals to reflect equivalent composition of
the Group
Note 2
Underlying operating profit Operating profit as adjusted to exclude ‘specific adjusting items’ Note 3
Underlying operating margin Underlying operating profit expressed as a percentage of revenue Note 3
Underlying operating profit
from operating segments
Total operating profit from segments which excludes ‘specific adjusting items’ and research and
development expenditure credits (‘RDEC’)
Note 3
Underlying operating margin
from operating segments
Operating profit from segments expressed as a percentage of revenue Note 3
Underlying net finance
income/expense
Net finance income/expense as adjusted to exclude ‘specific adjusting items’ Note 7
Underlying profit before/ after tax Profit before/after tax as adjusted to exclude ‘specific adjusting items’ Note 4
Underlying effective tax rate The tax charge for the year excluding the tax impact of ‘specific adjusting items’ expressed as a
percentage of underlying profit before tax
Note 9
Underlying basic and diluted EPS Basic and diluted earnings per share as adjusted to exclude ‘specific adjusting items’ Note 10
Orders The level of new orders (and amendments to existing orders) booked in the year N/A
Backlog, funded backlog or order book The expected future value of revenue from contractually committed and funded customer orders N/A
Book-to-bill ratio Ratio of funded orders received in the year to revenue for the year, adjusted to exclude revenue from
the 25-year LTPA contract due to significant size and timing differences of LTPA order and revenue
recognition which distort the ratio calculation
N/A
Underlying net cash flow from operations Net cash flow from operations before cash flows of specific adjusting items Note 25
Underlying operating cash
conversion or cash conversion ratio
The ratio of underlying net cash from operations to underlying EBITDA. Note 25
Free cash flow Underlying net cash flow from operations less net tax and interest payments less purchases of intangible
assets and property, plant and equipment plus proceeds from disposals of plant and equipment
Note 25
Net cash/(debt) Net (debt)/cash as defined by the Group combines cash and cash equivalents with borrowings, deferred
financing costs, derivative financial instruments and lease liabilities. Net (debt)/cash does not include
liabilities relating to irrevocable share buyback obligations.
Note 24
Return on capital employed Calculated as: Underlying EBITA / (average capital employed less net pension asset), where average
capital employed is defined as shareholders equity plus net debt (or minus net cash)
CFO
Review
Specific adjusting items Amortisation of intangible assets arising from acquisitions; impairment of property and goodwill; gains/
losses on disposal of property, investments and businesses; net pension finance income; transaction,
integration and acquisition-related remuneration costs in respect of business acquisitions and disposals;
digital investment; tax impact of the preceding items and significant non-recurring tax and RDEC
movements
Note 4
Additional information continued
QinetiQ Group plc | Annual Report & Accounts 2024200
Shareholder information
Registrar: Equiniti Limited
www.shareview.co.uk
Tel: 0371 384 2021
Shareholding enquiries
The Company’s registrar is Equiniti. Enquiries regarding your
shareholding, including the following administrative matters,
should be addressed to Equiniti:
– Change of personal details such as change of name or address
– Lost share certificates
– Dividend payment enquiries
– Direct dividend payments. You can have your dividends paid directly
into a UK bank or building society account by completing a dividend
mandate form. The associated dividend confirmation will still be sent
to your registered address. If you live outside the UK, Equiniti offers
a global payments service which is available in certain countries
and could enable you to receive your dividends direct into your
bank account in your local currency
Contact details for registrar
By post:
Equiniti Limited, Aspect House, Spencer Road Lancing,
West Sussex BN99 6DA
By telephone:
+44 0371 384 2021*
* Lines are open 8.30am to 5.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales).
By email:
You can send an email enquiry securely from Equiniti’s website,
at help.shareview.co.uk
Analysis of share register at 31 March 2024
By type of holder
Total number
of holdings
Percentage
of holders
Total number
of shares
Percentage issued
capital
Individual 5,198 89.65% 4,783,042 0.83%
Institutions and others 600 10.35% 569,612,849 99.17%
Total 5,798 100% 574,395,891 100%
By size of holding
1–500 3,865 66.66% 724,615 0.13%
501–1,000 460 7.9 3% 367,294 0.06%
1,001–2,500 544 9.38% 939,618 0.16%
2,501–5,000 306 5.28% 1,091,190 0.19%
5,001–10,000 167 2.88% 1,232,944 0.21%
10,001–100,000 199 3.43% 6,952,589 1.21%
Over 100,000 257 4.44% 563,087,641 98.03%
Total 5,798 100% 574,395,891 100%
Online:
Equiniti’s website at help.shareview.co.uk (Shareview) includes answers
to frequently asked questions and provides key forms for download.
Shareview also offers online access to your shareholding where you
can manage your account, register for electronic communications,
see details of balance movements and complete certain amendments
online, such as changes to dividend mandate instructions. You can
register at www.shareview.co.uk, click on ‘Register’ and follow the steps.
Electronic communications
The Company will now only make documentation and communication
available electronically via the Company’s website, unless direct requests
have been made otherwise. In addition, communications electronically,
via the wider use of electronic communications enables fast receipt of
documents, reduces the Company’s printing, paper and postal costs and
reduces the Company’s environmental impact. Shareholders canregister
for electronic communications at www.shareview.co.uk and may also
cast their vote for the 2024 Annual General Meeting online quickly and
easily using the Shareview service by visiting www.shareview.co.uk
Donating shares to charity – ShareGift
Small parcels of shares, which may be uneconomic to sell on their
own, can be donated to ShareGift, the share donation charity (registered
charity no. 1052686). ShareGift transfers these holdings into their name,
aggregates them, and uses the proceeds to support a wide range of UK
charities based on donor suggestion. If you would like further details
about ShareGift, please visit www.sharegift.org, email help@sharegift.org
or telephone them on 020 7930 3737.
Share price
Details of current and historical share prices can be found on the
Company’s website at www.QinetiQ.com/investors
QinetiQ Group plc | Annual Report & Accounts 2024 201
Financial statements
Share fraud reporting: www.fca.org.uk/scams
FCA Consumer Helpline: 0800 111 6768
Beware of share fraud
Fraudsters use persuasive and high-pressure tactics to lure investors
into scams. They may offer to sell shares that turn out to be worthless
or non-existent, or to buy shares at an inflated price in return for an
upfront payment. While high profits are promised, if you buy or sell
shares in this way you will probably lose your money.
How to avoid share fraud
1. Keep in mind that firms authorised by the FCA are unlikely to
contact you out of the blue with an offer to buy or sell shares.
2. Do not get into a conversation, note the name of the person and
firm contacting you and then end the call.
3. Check the Financial Services Register from www.fca.org.uk to see
if the person and firm contacting you is authorised by the FCA.
4. Beware of fraudsters claiming to be from an authorised firm,
copying its website or giving you false contact details.
5. Use the firm’s contact details listed on the Register if you
want to call it back.
6. Call the FCA on 0800 111 6768 if the firm does not have contact
details on the Register or you are told they are out of date.
7. Search the list of unauthorised firms to avoid at
www.fca.org.uk/scams.
8. Consider that if you buy or sell shares from an unauthorised firm
you will not have access to the Financial Ombudsman Service
or Financial Services Compensation Scheme.
9. Think about getting independent financial and professional
advice before you hand over any money.
10. Remember: if it sounds too good to be true, it probably is.
Report a scam
If you are approached by fraudsters please tell the FCA using the share
fraud reporting form at www.fca.org.uk/scams, where you can find out
more about investment scams. You can also call the FCA Consumer
Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact
Action Fraud on 0300 123 2040.
Key dates
18 July 2024 Trading update
18 July 2024 Annual General Meeting
30 September 2024 Half-year financial period-end
November 2024 Half-year results announcement
January 2025 Trading update
31 March 2025 Financial year-end
May 2025 Preliminary results announcement
Cautionary statement
All statements other than statements of historical fact included in
this Annual Report, including, without limitation, those regarding the
financial condition, results, operations and businesses of QinetiQ and
its strategy, plans and objectives and the markets and economies in
which it operates, are forward-looking statements. Such forward-looking
statements, which reflect management’s assumptions made on the
basis of information available to it at this time, involve known and
unknown risks, uncertainties and other important factors which could
cause the actual results, performance or achievements of QinetiQ or
the markets and economies in which QinetiQ operates to be materially
different from future results, performance or achievements expressed
or implied by such forward-looking statements. Nothing in this Annual
Report should be regarded as a profit forecast.
This Annual Report is intended to provide information to shareholders
and is not designed to be relied upon by any other party. The Company
and its Directors accept no liability to any other person other than under
English law.
Shareholder information continued
Additional information continued
QinetiQ Group plc | Annual Report & Accounts 2024202
Company information and advisers
Registered office
Cody Technology Park
Ively Road, Farnborough,
Hampshire, GU14 0LX, England
Tel: +44 (0) 1252 392000
Company Registration
Number: 4586941
Independent auditors
PricewaterhouseCoopers LLP,
Savannah House,
3 Ocean Way, Ocean Village,
Southampton, SO14 3TJ
Registrar
Equiniti, Aspect House,
Spencer Road, Lancing,
West Sussex, BN99 6DA
Corporate brokers
Barclays, 1 Churchill Place,
London, EC14 5HP
Numis, 45 Gresham St
London, EC2V 7BF
Principal legal adviser
Ashurst LLP, London Fruit and
Wool Exchange, 1 Duval Square,
London, E1 6PW
QinetiQ Group plc | Annual Report & Accounts 2024 203
Financial statements
Additional information continued
QinetiQ Group plc | Annual Report & Accounts 2024204
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QinetiQ Group plc
Tel: +44 (0) 1252 392000
Company Registration Number: 4586941
QinetiQ Group plc Annual Report & Accounts 2024