Foundations set for
sustainable growth
QinetiQ Group plc
Annual Report & Accounts 2026
STRATEGIC REPORT
Overview
4
Financial highlights
5
Investment case
6
QinetiQ at a glance
8
Group Chair's statement
10
Group Chief Executive Officer's review
Strategy
14
Our strategic approach
22
Segmental reporting
24
Sector review
32
Group Chief Financial Officer's review
38
Key performance indicators
Sustainability
40
Introduction
43
Environmental
53
Social
60
Governance
63
Non-financial and sustainability
information statement
Risk
65
Risk management
69
Viability statement
Section 172(1) statement
72
Key stakeholder groups and
Section 172 statement
CORPORATE GOVERNANCE
78
Corporate Governance statement
78
Group Chair's introduction
to Governance
96
Nominations Commiee Report
104
Audit Commiee Report
110
Risk & Security Commiee Report
115
Directors' Remuneration Report
142
Directors' Report and
statutory information
147
Independent auditor's report
FINANCIAL STATEMENTS
156
Consolidated income statement
158
Consolidated balance sheet
159
Consolidated cash flow statement
160
Notes to the Consolidated
Financial Statements
212
Company Financial Statements
ADDITIONAL INFORMATION
217
Five-year financial summary
218
Additional financial information
219
Glossary
220
Alternative performance measures (APMs)
221
Shareholder information
224
Company information and advisers
2
QinetiQ Group plc
Annual Report and Accounts 2026
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
UK MOD © Crown copyright 2026.
Foundations set for
sustainable growth
We have delivered a resilient performance in a challenging
market. Our record order intake and increased backlog
provide clear visibility and confidence in our future.
We remain focused on delivering for our customers,
driving higher-quality earnings and increasing returns
to shareholders.
An embedded, long-term partner on Typhoon,
delivering specialist test and assurance
services across upgrades, sustainment
and capability evolution.
3
Resilient performance in a challenging market
Financial
highlights
1
Organic constant currency.
2
Funded and unfunded.
*
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.
** Restated to include exceptional operating cash flows.
Record year end £4.8bn backlog
2
Resilient performance in a challenging market
FY24
FY25
FY26
£3,573m
£1,955m
£1,740m
83%
Orders
£3,573m
FY24
FY25
FY26
£1,923m
£1,932m
£1,912m
Revenue
£1,923m
1.3%
1
FY24
FY25
FY26
£218m
£185m
£215m
18%
Underlying
*
operating profit
£218m
FY24
FY25
FY26
31.5p
26.1p
29.4p
21%
Adjusted basic EPS
31.5p
FY24
FY25
FY26
£159.3m
£112.9m
**
£147.0m
**
42%
Free cash flow
£159.3m
24%
Dividend per share
11.00p
FY24
FY25
FY26
11.00p
8.85p
8.25p
RESILIENT
PERFORMANCE
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
4
STRATEGIC REPORT
Investment
case
Foundations set for sustainable growth
Exposure to structural
defence investment growth
Market-leading positions in
critical defence capabilities
Resilient business model
with strong margins,
ROCE and cash generation
Differentiated positions in engineering,
test and evaluation mission support
and technology roles embedded at the
heart of national defence programmes
Sustained increases in
defence budgets and urgent
readiness requirement
High revenue visibility underpinned
by long-term customer relationships,
multi-year programmes and robust
operational performance
Clear framework balancing investment
for growth with predictable,
strong returns to shareholders
Submarine operations at the British Underwater
Test and Evaluation Centre, a critical sovereign
capability supporting the Royal Navy's acoustic
and weapons testing.
Disciplined capital allocation
with strong shareholder returns
5
Our business
Our locations
Specialist capabilities supporting defence needs
the UK and its allies, protecting lives by supporting national security priorities.
Our innovative research and development, specialist engineering expertise,
unique test and training facilities and mission support and operations capabilities
7,500
people, with deep defence
and security expertise
4th
largest supplier to the
UK Ministry of Defence
Headquartered in the UK (see box),
our operations extend to Australia,
Canada, Germany and the US, where
we work closely with governments,
industry and academia to deliver
mission-critical solutions.
Headquartered in
Farnborough, our teams are
located at sites across the
UK supporting our customers
and local economies.
QinetiQ
at a glance
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
6
QinetiQ
at a glance
A unique, integrated defence and technology services company
By customer
Ministry of Defence
Government agencies
Defence, other
Department of Defense
Commercial
60%
15%
13%
10%
2%
UK
US
Australia
Other
74%
15%
5%
6%
By destination country
By capability
Engineering Services
Mission Support & Operations
Test & Training
Research & Development
34%
27%
26%
13%
Engineering
Services
High-value engineering
for complex systems,
supporting acquisition
and sustainment
Mission Support
& Operations
Supporting live defence
operations – building
readiness and resilience
Test & Training
Testing and evaluating
defence capabilities
– unique skills and
infrastructure for
national certification
Research &
Development
Developing advanced
technologies for next-
generation capability
Our capabilities
Revenue split
Photo of Typhoon jet, UK MOD © Crown copyright 2026.
7
£134.9m
Cash returned to shareholders via buyback
Maintaining strategic focus
and shareholder returns in
a complex environment.
As we report on the year, the defence and security
environment remains heightened, marked by conflict,
instability and continuing geopolitical uncertainty.
Political change, shifts in the international order and
broader economic pressures are reshaping the operating
context for governments and industry alike. Against this
backdrop, defence and security continue to be a top priority
for our governments, alongside the need to sustain
a strong and resilient defence industrial base.
QinetiQ plays a distinctive role within this ecosystem.
We are different from equipment primes: our strength
lies in deep customer intimacy and in delivering critical
national capability through engineering, testing, training,
mission-led services and market-leading technologies.
Group Chair’s
statement
FY22
FY23
FY24
FY25
FY26
11.0p
8.85p
8.25p
7.7p
7.3p
3.0p
8.0p
6.05p
5.65p
5.3p
5.0p
2.8p
2.6p
2.4p
2.3p
Ordinary dividend per share
11.00p
+2.15p
YoY increase
in FY26
Interim
Final
These capabilities are aligned to long-term structural
growth in defence, particularly across our core markets
for the UK, US and Australia and European NATO allies.
This positions us well to support warfighting readiness
through pace, agility, innovation and efficiency.
I want to recognise the work our people do every day in
support of our customers' missions. Their expertise,
commitment and professionalism underpin our
performance and give the Board confidence in the Group's
ability to deliver sustainable growth and aractive returns.
Performance
The Group delivered a resilient and much improved financial
and operational performance against the backdrop of
near-term budgeting challenges across our core markets.
Following last year's performance, we acted decisively to
strengthen delivery, sharpen strategic focus and improve
our performance. I would like to thank our teams, customers
and partners whose contribution has been instrumental to
the improvement in-year and to positioning the Group for a
return to sustainable growth, higher-quality earnings and
continued strong cash generation in the years ahead.
In the UK, a tough fiscal environment contributed to delays
in contract awards, but our relationship with customers
remains strong and our role as a strategic partner continues
to deepen. We were pleased to secure the Long Term
Partnering Agreement extension and a five-year Typhoon
contract under the Engineering Delivery Partner programme.
We delivered our restructuring programme in the US to
ensure the business is aligned to the national defence and
security priorities of the US administration and the evolving
market landscape. In-year performance was impacted
by disruption including a US Government shutdown and
by programme changes and cancellations, which we
responded to by simplifying the organisation and refocusing
resources. The US business has now stablised, however,
we recognise the need to enhance value for shareholders
with all options under active review.
Looking forward, we have clear growth visibility, supported
by demand in our core markets, the introduction of new
defence platforms and technologies and requirements
to upgrade existing platforms. The fundamentals of the
business remain strong, with a significant order backlog
and forward order pipeline, providing confidence in our
medium-term growth trajectory.
We remain focused on delivering higher-quality, more
predictable earnings and increased returns. QinetiQ is a
highly cash generative business, and the Board continues
to prioritise disciplined capital allocation: investing
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
8
organically where we see strong returns and returning
capital to shareholders. We have introduced a new dividend
policy with a payout ratio target of 35–40% of underlying
earnings per share, as well as extending our share buyback
programme by a further £200m through to March 2029.
Strategy and Board priorities
Our purpose is clear – protecting lives by serving the
national security interests of our customers – and it
continues to guide strategy and decision-making. During
the year, the Board undertook its annual review of strategy
which remains unchanged. To deliver growth, the Company
will sharpen its focus on six core areas of high-value
services and a number of innovative products. Together,
they account for the majority of revenue today and offer
the strongest growth potential over the next five years.
The growth strategy has two clear vectors. First, we will
grow in our core markets, investing in innovative ideas that
strengthen our offering, improve competitiveness and
increase predictability of delivery. Second, we will take
these strengths into new and adjacent markets, with a
strategic focus on European NATO where we see multiple
opportunities for sustainable growth.
The Board's priorities during the year included continued
focus on capital allocation, oversight of performance
against strategic milestones, and support for succession
planning within the senior leadership team. We maintained
strong engagement with strategy and operations through
dedicated sessions and regular operational reporting from
the business. An investor perception audit was conducted
to gain further understanding of shareholder views and
priorities and the Board increased engagement with other
external stakeholders to gain deeper insights into customer
and industry perspectives. This included engagements
with senior military and political leaders as well as dedicated
sessions on the adoption of AI tools and capability, and
climate resilience.
Our people
Employee engagement and a strong performance culture
are central to QinetiQ's long-term success. Over the year,
Board members and I met with many of our highly talented
colleagues across the Group through site visits, leadership
engagements and employee roadshows. We also hold
regular interactions with the Company's Global Employee
Voice, our network of employee volunteers who represent
their colleagues and champion their voices and views.
This provides valuable insight into how strategy is landing,
how we are supporting teams to deliver for customers
and where we must continue to improve.
In a sector of such national importance, we remain focused
on operating responsibly. Safety and the wellbeing of
our people are paramount, and strong governance is
an essential enabler of sustainable performance. Our
sustainability agenda is therefore tightly connected to
how we lead, how we manage risk and how we deliver
for customers and wider society.
Board and governance
The Board continued to strengthen its collective capability
during the year. Our Chief Financial Officer, Martin Cooper,
completed a full year in role, bringing a valuable depth
of experience in the defence sector and in investor
engagement. Ezinne Uzo-Okoro and Roger Krone also
completed their first full year on the Board, adding further
insight and expertise, particularly in relation to the US
market. Dina Knight began her first year as Chair of the
Remuneration Commiee and I would like to thank her for
the leadership and rigour she has brought to the role.
Throughout the year the Board has been involved in
reviewing the Company's risk framework and internal
controls, in response to the upcoming new requirements
under Provision 29 of the revised 2024 UK Corporate
Governance Code. This will give us confidence in the
effectiveness of the policies and processes that underpin it.
In closing, while this has been a challenging year in many
respects, the Board's focus has been on ensuring the
actions were taken to address last year's performance and
positioning the Group for the next phase of growth. We
remain confident in the fundamentals of the business,
the strategic direction we have set, the strength of the
balance sheet and cashflows and the vital role we have in
helping our customers meet their rapidly evolving needs.
While near-term headwinds persist, our services and
technologies are in demand and we expect them to be
increasingly required in the years ahead. Our priorities are
clear: delivering performance, driving sustainable growth,
and generating aractive returns for shareholders.
On behalf of the Board, I would like to thank Steve Wadey,
our Group CEO, the leadership team and all of the
colleagues across QinetiQ for their commitment, energy,
professionalism and contribution over the year.
Neil Johnson
Group Chair
21 May 2026
Group Chair’s
statement
9
Delivering resilient performance in
challenging markets as a trusted partner
providing mission-critical capabilities;
and well positioned to drive aractive,
sustainable shareholder returns.
Against a more challenging market backdrop, we delivered
a resilient financial performance while undertaking
substantial restructuring. Revenue was £1.9 billion, with
operating profit of £218 million and improved margins of
more than 11%. We also delivered significantly stronger cash
generation, with free cash flow of £159 million, reflecting
strong cash conversion and improved operational discipline.
During the year, we executed a comprehensive restructuring
programme, reducing costs, reshaping the portfolio and
simplifying operations, particularly in the US. As a result,
we finished the year as a higher-quality business, with
a lower cost base, an improved contract mix, stronger
cash generation and greater predictability of earnings.
We also continued to build commercial momentum and
forward visibility. Record order intake of £3.6 billion and a
year-end backlog of £4.8 billion, up more than 40%, provide
clear multi-year revenue visibility and underpin improved
earnings quality. With our mission critical capabilities
aligned to the structural trends of modern warfare, we're
confident of delivering growth over the coming years.
We entered the new financial year with a simpler, more
focused platform and strong foundations for sustainable
growth and increased shareholder returns.
Reflecting this confidence in our outlook, we will continue
to invest for organic growth while targeting more than
£550 million of free cash flow over FY27–29, supporting
a significant increase in our dividend payout ratio to
35–40% and a £200 million extension of our share buyback
programme. In total, we expect to return around £0.5 billion
of cash to shareholders over the next three years.
Aligned to the major trends shaping
defence and security
Our strategy is strongly aligned to the structural trends
defining modern defence and security. In an era of renewed
great-power competition, customers are prioritising
sovereign, mission-critical solutions that deliver operational
advantage and decision superiority. QinetiQ's heritage in
science, test and evaluation positions us at the centre
of this demand.
The threat environment continues to intensify,
spanning advanced weapons, drones, cyber and
electronic warfare. Customers are investing to deter
and defeat increasingly sophisticated threats, with
a growing emphasis on rapid innovation, resilience
and adaptability. We support this through our ability
to anticipate emerging risks, test responses and assure
performance in contested environments.
Group Chief Executive
Officer’s review
£134.9m
Cash returned via buyback
1.3%
Organic revenue growth
£4.8bn
Backlog
1
11.3%
Operating margin
34%
ROCE
1
Funded and unfunded.
Overview
This has been a year of significant change for QinetiQ.
We have taken decisive action to strengthen the Group
and have set the foundations for sustainable growth.
I would like to thank our highly skilled employees for their
dedication and hard work throughout the year, and our
customers and partners for their continued support.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
10
At the same time, autonomy is proliferating across
domains. Demand for uncrewed and autonomous
systems is accelerating, alongside the need to deploy
these capabilities safely, at pace and at scale. We enable
customers to de-risk, integrate and assure autonomous
solutions, supporting faster adoption while maintaining
safety, interoperability and operational effectiveness.
Digital technologies are also transforming defence.
Advances in artificial intelligence, data exploitation and
synthetic environments are reshaping how forces train,
test and operate. We continue to invest in these
capabilities, helping customers build readiness, reduce
cost, compress development timelines and scale.
Together, these trends are driving increased demand
for new platforms and technologies in the near term,
alongside growing demand for engineering, test, mission
assurance and the adoption of new technologies.
Customers are also placing greater emphasis on
interoperability across domains and nations.
These dynamics are driving sustained demand for our
capabilities, anchored in long-term programmes and
national security priorities, providing resilience and visibility.
What QinetiQ does and why it maers
QinetiQ is a unique, integrated defence and technology
services provider, playing a critical role in the modernisation
of defence platforms and technologies. We are not a
platform or hardware manufacturer. Our role is different,
we are a strategic partner to our customers working
across the capability lifecycle, supporting customers in
developing, integrating, testing and supporting defence
systems across all domains.
We provide high-value engineering, supporting
programmes from early design through to acquisition,
integration, and sustainment. Our work spans air, land, sea,
cyber and space domains, ensuring that critical capabilities
are designed, integrated and ready for deployment within
demanding operational environments. These capabilities
are embedded in mission-critical programmes aligned to
long-term defence priorities.
Test and evaluation is central to QinetiQ's proposition.
We operate nationally significant ranges and specialist
infrastructure across live and synthetic environments,
enabling the certification and assurance of defence
systems under realistic conditions. These nationally
significant assets are increasingly critical to assuring
defence capabilities as systems become more complex
and integrated.
QinetiQ also supports live defence operations, working
alongside customers in mission environments to ensure
that capabilities perform effectively in service. Through
the provision of mission data, embedded expertise
and secure communications, we enhance operational
readiness, resilience and decision-making in a heightened
threat environment.
Sustained investment in research and development
underpins long-term innovation in advanced technologies,
including autonomy, data, sensing, electronic warfare,
cyber and directed energy. This ensures our customers are
equipped to meet evolving and next-generation threats.
What differentiates QinetiQ is the combination of these
capabilities. We are embedded across programmes from
concept through to in-service support, helping customers
manage increasing technical complexity. As a result, our
work is mission-critical, high-barrier to entry and closely
aligned to long-term defence priorities, positioning us as
a trusted partner in delivering capabilities that are effective,
integrated and ready for use.
Our “right to win”
QinetiQ's “right to win” is centred on capabilities embedded
in long-term programmes, underpinned by clear competitive
advantages, strong customer positioning and a focused
approach to market opportunities.
Our competitive advantage is built on critical and unique
national infrastructure, deep technical skills and expertise
across domains, and our position as a trusted authority
with governments and industry. These aributes create
significant barriers to entry and support differentiated
delivery in complex, mission-critical environments.
QinetiQ's customer positioning is strengthened by
our ability to reduce customer risk through integrating
delivery across the programme lifecycle. We are a proven
collaborator, working in partnership to build capability
at pace, and we benefit from enduring relationships
developed over decades. This combination supports
consistent delivery and reinforces our role at the heart
of customers' most important missions.
Growth is focused on markets where we are best
positioned to win. In existing markets, particularly the
UK, we are focused on deepening our position through
market penetration and expanding the scope of work with
established customers. At the same time, we are developing
our offerings, including in areas such as the Engineering
Delivery Partner (EDP) programme, and pursuing targeted
market development in priority regions such as Europe.
This approach ensures growth is aligned to customer
demand and leverages existing strengths.
Group Chief Executive
Officer’s review
11
Together, these factors create defensible positions in
markets where QinetiQ can win, supporting repeat awards
and opportunities to expand the scope of work, and
providing strong long-term visibility. In turn, this underpins
sustainable margins, aractive returns and strong
cash generation.
Driving sustainable growth
QinetiQ is embedded in long-term, high-priority
programmes across the UK and allied markets,
providing strong multi-year revenue visibility and
a clear foundation for growth.
The portfolio combines programmes that deliver recurring,
growing revenue and those that will drive faster growth.
Examples of faster growing programmes include mission
data, persistent surveillance and next-generation weapon
technologies such as lasers. Investment in our major
programmes will continue to drive good revenue growth.
The LTPA will be driven by the transformation of testing
and evaluation capabilities and increased utilisation by
UK and NATO allies. The EDP and Space Development
Agency (SDA) programmes will be driven by the introduction
of new platforms and advanced technologies.
Together, these programmes provide strong visibility over
future revenues, with opportunities to expand scope and
deepen customer relationships, supporting both near-term
delivery and longer-term growth.
Significant defence customer
contract awards and extensions
During the year, we secured a number of significant
customer contract awards and extensions across our
defence portfolio. In the UK, a £1.7 billion contract extension
of the LTPA through to 2033 was signed, strengthening our
long-standing partnership with the Ministry of Defence
(MOD) and supporting continued investment in UK
sovereign capabilities. The MOD also awarded a five-year,
£205 million contract extension for critical engineering
services in support of the RAF's Typhoon fleet.
Further customer activity included a £67 million contract
from MBDA to support the production and delivery of the
UK's first laser-directed energy weapons (DragonFire)
for the Royal Navy, and a £70 million two-year OpNet
contract with the UK's Defence Digital to support the
transformation of deployed IT capability. Internationally,
an MoU between the UK and Belgium supports plans for
a new joint programme to establish a sovereign mission
data capability in Belgium.
In Australia, work continued with defence customers
on the development of laser-directed energy weapon
capability, combining DragonFire technology with an
established local partnership with the Defence Science
and Technology Group.
Investing in strategic capabilities
aligned to customer demand
During the year, we continued to invest selectively in
strategically important capabilities, aligned closely to
long-term customer demand. This included ongoing
investment in the LTPA, advanced technologies such
as directed energy weapons, and digital and mission
data capabilities supporting operational effectiveness.
We also continued to invest in next-generation target
systems, supporting the development of more advanced
and representative training environments, alongside
investment in resilient navigation capabilities to address
increasing requirements for assured positioning, navigation
and timing. In addition, we are expanding our capabilities
in artificial intelligence, with investment focused on
enhancing decision advantage, autonomy and data-driven
operational insights across customer missions.
We also made targeted investments to support growth
into Europe, while maintaining a disciplined approach to
capital allocation.
US business
The US defence services market remained challenging
during the year, reflecting a combination of budgetary
pressures, a shift in customer spending towards platform
and hardware programmes and slower contract awards.
These factors impacted performance across the market.
In response, we acted early and decisively to reshape and
stabilise the business. Key actions included the disposal
of the Fed IT business, a significant reduction in the cost
base and the exit of non-core and lower-return contracts.
At the same time, we repositioned the business to align
more closely with evolving US national security priorities
and to be beer positioned to pursue organic growth.
The US business is now a smaller, beer business, aligned to
market demand with current annual revenue approximately
$385 million. However, we recognise the need to deliver
enhanced value for shareholders and are actively assessing
the strategic fit of the US business within the Group,
including a review of all options.
Group Chief Executive
Officer’s review
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
12
Group Chief Executive
Officer’s review
Capital allocation and
shareholder returns
Shareholder returns remain a clear priority. We spent
£134m on share buybacks in FY26, and the Board has
approved a £200 million share buyback programme
extension through FY29, reflecting confidence in the
Group's cash-generative capabilities and outlook. In
addition, the Board is proposing a 24% increase in the
full-year dividend, underlining its confidence in the
Group's medium-term prospects. This increase reflects
the introduction of a new dividend policy, targeting
a 35–40% payout ratio, while maintaining balance sheet
strength and financial flexibility.
Investment case – positioned for
sustainable growth and strong
shareholder returns
QinetiQ is well positioned to deliver sustainable growth
and aractive shareholder returns, supported by exposure
to structural defence investment growth and increasing
readiness requirements. It holds market-leading positions in
critical defence capabilities, with differentiated roles across
engineering, test and evaluation, and mission support
embedded at the heart of national defence programmes.
Our resilient business model delivers strong margins,
returns on capital employed and cash generation. In
addition, we have a clear capital allocation framework
that balances investment for growth with predictable,
strong returns to shareholders.
FY27 outlook and summary
ɰ
Revenue growth 3–5% and operating margin 11.0–11.5%
ɰ
EPS growth 8–10% with cash conversion >90%
ɰ
>£550m of free cash flow targeted over FY27-29
The fundamentals of the Group remain strong, with a clear
strategy to create value across the business, positioning
QinetiQ at the centre of defence innovation for future
warfare. We benefit from a strong order backlog and
a well-developed pipeline of opportunities. This, combined
with the alignment of our mission-critical capabilities to
evolving customer needs, provides confidence and visibility
in delivering sustainable growth and compelling value
creation for shareholders.
Steve Wadey
Chief Executive Officer
21 May 2026
Throughout FY26, we engaged with senior
leaders across the Ministry of Defence and
Frontline Commands, increasing awareness
and understanding of QinetiQ's role delivering
mission critical capabilities.
The expansion of the successful QinetiQ,
AtkinsRéalis and BMT Aurora Engineering
Partnership to include Frazer-Nash
Consultancy combined with investment in
AI technology and a commitment to increase
the role of SMEs strengthens the Engineering
Delivery Partner (EDP) programme, which
provides mission critical engineering to
the Ministry of Defence (MOD).
13
Our strategic approach
Overview
Our strategy
is focused on driving innovation at the forefront of
defence technology, progressing entry into priority new markets
and expanding our service-led capabilities.
Our purpose
is protecting lives by serving the national security
interests of our customers.
Disciplined core business growth
Services & products
Markets
EXISTING
EXISTING
NEW
NEW
Market
penetration
Deepening presence in
core markets (e.g. UK)
Market
development
Targeted entry into priority
new markets (e.g. European
NATO countries)
Offerings
development
Expanding service-led
capabilities (e.g. AI-augmented
engineering)
Innovation, Partnering & Investment underpins sustainable growth
1
4
3
2
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
STRATEGIC REPORT
14
Progress against strategy
Co-creating innovative solutions
ɰ
Advanced technologies
ɰ
Digital transformation
ɰ
New business models
High-value and differentiated
Enabling critical national priorities
ɰ
United Kingdom
ɰ
Australia
ɰ USA
ɰ
Germany
ɰ
Canada
Deep multi-domain expertise
ɰ
Europe and NATO
ɰ
AUKUS partnership
ɰ
Leverage capabilities
Strengthening long-term customer relationships and accelerating innovation
to deliver enhanced defence capability and operational readiness:
ɰ
Secured multi-year technical
and engineering support
contracts with key UK defence
customers, reinforcing embedded,
long-term partnerships
ɰ
Expanded strategic partnerships
to combine cross-sector expertise
and deliver complex, mission-critical
defence capabilities
ɰ
Continued targeted investment
in research, digital and advanced
engineering to support next
generation systems and platforms
Engineering Services
34%
of revenue
Accelerating capability
Test & Training
26%
of revenue
Warfighting Readiness
Mission Support & Operations
27%
of revenue
For National Security
Research & Development
13%
of revenue
For technological superiority
Deepening our role as a leading sovereign partner across priority national
defence programmes:
ɰ
Continued delivery against Global
Combat Air Programme (GCAP)
ɰ
Awarded new and extended UK
Ministry of Defence contracts
supporting secure infrastructure,
testing and mission-critical systems
ɰ
Delivered specialist upgrades
and technical support enhancing
warfighting readiness and
operational assurance
Exporting specialist capabilities to priority allied markets where QinetiQ adds
differentiated value:
ɰ
Progressed delivery across
allied defence programmes
through long-term customer
and partner relationships
ɰ
Secured additional international
contracts for testing, evaluation
and assurance services utilising
QinetiQ’s UK sovereign capabilities
ɰ
Leveraged NATO and allied
defence relationships to
support repeat business and
follow-on opportunities
Our strategic approach
Driving innovation and partnering
Invest in core capabilities
Growing in our core markets
Expand across markets
1
2
3
4
15
Heightened geopolitical tensions and the evolving character of warfare are
reshaping defence priorities, reinforcing the importance of specialist providers.
Market themes
Our strategic approach
Global security volatility is
driving a renewed emphasis on
defence capability, resilience
and long-term preparedness.
For defence customers, this
translates into sustained
demand for specialist skills,
independent assurance and
long-term partnerships that
can support both current
operations and future
capability development.
Greater emphasis on
trusted suppliers with
the scale, expertise
and credentials to
support mission-critical
programmes over the
long term.
The pace of technological
change and the evolution
of modern warfare are
reducing the time available
to develop, test and field
new capabilities. Defence
customers increasingly
require rapid innovation,
safe experimentation and
accelerated transition from
concept to operational use.
Rising demand
for research-led
innovation, test and
evaluation, and the
ability to integrate
new technologies
quickly and safely into
complex systems.
As operational environments
become more complex,
defence organisations
are prioritising readiness,
assurance and sustained
performance across platforms,
systems and domains.
Confidence in capability,
safety and effectiveness is
increasingly critical.
Heightened requirement
for independent expertise,
sovereign test and
training capabilities,
and partners able to
support operational
effectiveness across
the lifecycle.
Sustained focus on defence investment
Compressed innovation timelines
Readiness, assurance and
operational advantage
Defence priorities
are evolving at pace
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
16
Across QinetiQ’s core markets, governments continue to prioritise investment
in sovereign capability, assurance and operational effectiveness.
Trading environment
Our strategic approach
United Kingdom
Australia
Stable underlying demand,
aligned to priority national
programmes, with
short-term budgetary
pressures affecting
the pacing of some
activities and a continued
requirement for trusted
technical partners across
the defence lifecycle.
Growing demand for
sovereign capability
support and specialist
skills, reflecting changes
in defence procurement
and supporting the
development of
longer-term customer
partnerships.
The UK remains QinetiQ’s
largest market, with
defence priorities
focused on sovereign
capability, safety and
operational readiness
across complex,
long-term programmes.
Australia is focused
on strengthening
defence capability,
resilience and domestic
industrial capacity, with
emphasis on assurance,
test and training.
>£7bn
Market opportunity
£1,416m
FY26 revenue
>£0.4bn
Market opportunity
£94m
FY26 revenue
United States
NATO allies and partners
Large, well-funded
programmes with
consistent medium-term
demand for specialist,
independent expertise
and long-term technical
support, with near-term
uncertainty driven primarily
by contract timing.
Expanding opportunity
for specialist capabilities
across NATO and
allied markets, driven
by increased allied
defence investment,
interoperability
requirements and
long-term cooperation.
The US defence market
is characterised by scale,
technical complexity and
sustained investment
across research,
development, testing
and evaluation.
Across NATO and allied
markets, defence
priorities remain
centred on readiness,
interoperability and
operational resilience.
>£24bn
Market opportunity
£288m
FY26 revenue
>£4bn
Market opportunity
£60m
FY26 revenue
Supportive medium-term conditions
across core defence markets
17
Business model
Our strategic approach
We enable defence customers to develop, prove and sustain advanced
capabilities through engineering expertise, sovereign test and evaluation,
digital systems and mission-readiness services.
How we generate returns
C
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A
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S
T
I
T
U
S
E
I
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Create it. Test it. Use it.
QinetiQ supports customers across
the full capability lifecycle – from concept
creation and engineering, through rigorous
test and evaluation, to operational use
and assurance.
How QinetiQ is differentiated
We are differentiated from traditional platform
manufacturers by our focus on science-based
insight, specialist engineering and unique test
and evaluation infrastructure. These capabilities
underpin our ability to support customers across
the full lifecycle, from concept through to
in-service assurance.
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s
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
18
Our mission-critical, high-barrier-to-entry capabilities
are embedded in long-term defence programmes.
What we do, and why it maers
High-value engineering
to support acquisition
and sustainment
Unique skills and
infrastructure
for certifying at
a national level
Building readiness and
resilience in a rising
threat environment
Long-term innovation
for next-generation
capability
Recurring revenue
through high-barrier
critical programmes
High-utilisation
specialist facilities with
strong barriers to entry
Stable recurring
revenues from
embedded roles and
ongoing operations
Customer-funded
and internally-funded
R&D transitioned into
defence programmes
Engineering for
complex systems
Test and
evaluate defence
capabilities
Support
live defence
operations
Develop
advanced
technologies
Capability
and examples
Why it
maers
How we
generate
returns
What we do
A key part of modernising
our T&E enterprise, our
Airborne Technology
Demonstrator is an agile,
dependable facility.
Our 5m pressurised,
low-speed wind tunnel
delivers high-quality data
valuable to UK aerospace.
Our specialist marine
infrastructure provides
hydrodynamic testing
for surface and
subsurface vessels.
We are using innovative
lifecycle techniques and
tailored testing to accelerate
weapons development.
Our strategic approach
Business model
Aircraft, ships, vehicles,
sensors, weapons and
mission systems
Land, sea, air, cyber
and space ranges and
virtual environments
Mission data,
embedded specialists,
secure communications
Autonomy, quantum,
AI, electronic warfare,
cyber, laser, simulation
Engineering
Services
Test &
Training
Mission Support &
Operations
Research &
Development
19
What differentiates us from our competitors and allows us to generate returns.
We create long-term value through mission-critical defence capabilities
that support national security and sustainable returns.
Our unique resources
The value we create
Our strategic approach
Business model
Specialist people
and deep defence
engineering expertise
Long-term, trusted
customer and
partner relationships
Sovereign test and
evaluation infrastructure
Secure digital
engineering platforms and
mission-critical tools
Government and society
Strengthening national security
and operational independence
Defence customers
Assured capability, increased
mission readiness, reduced risk
Shareholders
Resilient long-term growing
returns and cash generation
Employees
High-skill careers and
long-term development
Suppliers and partners
Stable, trusted relationships on
secure defence programmes
Environment
Lower-impact operations
30+ years
delivering sovereign
defence capability
Air, Land, Sea, Space
operating across the four domains
25+ years
of resilient cash generation
7,500 people
across engineering, science
and mission-critical roles
£1.0bn+
annual Group supplier spend,
of which £280m+ is with UK SMEs
36% reduction
in annual Scope 1 & 2 greenhouse
gas emissions since FY20
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
20
Financial value drivers
High revenue visibility
Backlog coverage provides strong visibility, with ~75% of
revenue for the next 12 months already under contract.
Margin expansion
Margin expansion from higher asset utilisation, disciplined
cost control and selective product growth, supported
by ongoing operational efficiency improvements.
Strong cash conversion
Consistently strong cash conversion, driven by
customer-funded R&D and capex, and a structurally
favourable (negative) working-capital profile.
Our business model is financially resilient, creating strong margins,
ROCE and cash generation.
High-barrier-to-entry assets
Above-sector-average returns on sales and capital,
supported by a differentiated, high-barrier operating model.
Recurring revenue
High levels of recurring revenue underpinned by multi-year
defence programmes, long-term service contracts and
embedded customer roles.
Structural and cyclical growth
Structural and cyclical growth – reflecting both long-term
funding trends and shorter-term spending cycles –
in government defence spending continues to
underpin multi-year demand for QinetiQ’s capabilities.
Our strategic approach
Business model
Air-deployed underwater sensing operations at
BUTEC, supporting high-barrier test, evaluation
and certification services for UK anti-submarine
warfare programmes.
21
UK Defence
£994m
FY26 revenue
UK Intelligence
£441m
FY26 revenue
Australia
£94m
FY26 revenue
EMEA Services
Overview
EMEA (Europe, Middle East and Australasia) Services
combines world-leading expertise with unique facilities
to generate and assure capability. We do this through
capability integration, operational readiness and threat
representation, underpinned by long-term contracts that
provide good revenue visibility and cash generation.
Financial performance
£1,529m
Total FY26 revenue
FY26
£m
FY25
£m
Order booked, excluding LTPA extension
1,469.6
1,441.7
Total orders booked
3,179.0
1,441.7
Revenue
1,529.2
1,477.7
Underlying operating profit
182.3
169.0
Underlying operating profit margin
11.9%
11.4%
Book-to-bill ratio
1
1.2x
1.2x
Backlog
4,142.3
2,470.6
1
Book-to-bill (B2B) ratio is orders won divided by revenue recognised,
excluding the LTPA non-tasking services revenue of £294m (FY25: £270m).
Financial performance
Total orders of £3,179.0m include the LTPA extension to
2033 which was announced in May 2025. Excluding the LTPA
extension, orders increased by 2%. EDP orders increased
by 20% to over £550m and included the £205m Typhoon
contract. The funded order backlog, excluding LTPA, ended
the year at £1.8bn, with a book-to-bill ratio of 1.2x (FY25: 1.2x).
Revenue increased by 3% to £1,529.2m (FY25: £1,477.7m), on both
a reported and organic basis, as a result of good growth in the UK
Defence sector, where growth was driven by new contracts and
growth in core contracts, including the LTPA and EDP.
As at 31 March 2026, we had £1.1bn of EMEA Services’
FY27 revenue under contract, the same level as for the
FY26 revenue at the equivalent point last year.
Underlying operating profit grew by 8% to £182.3m (FY25: £169.0m)
driven by both the revenue growth and cost efficiencies driving
an improved operating margin of 11.9% (FY25: 11.4%).
Approximately 68% of EMEA Services revenue is derived
from single-source contracts (FY25: approximately 66%).
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
highlights the unique capabilities that we bring and the
quality of earnings within the backlog.
Segmental
reporting
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.
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 computing, training and simulation,
secure communication networks and devices, intelligence
gathering, surveillance sensors and cyber security.
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.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
22
United States
£291m
FY26 revenue
Global Solutions
Overview
Global Solutions combines our world-leading technology-based
products and services. Our strategy is to focus the portfolio
of solutions in the US to win larger, longer-term programmes
providing good visibility of revenue and cash flows, and to grow
our product offerings in a number of targeted fields.
Financial performance
£393m
Total FY26 revenue
FY26
£m
FY25
£m
Orders booked
394.4
513.1
Revenue
393.4
453.9
Underlying operating profit
35.6
16.4
Underlying operating profit margin
9.0%
3.6%
Book-to-bill ratio
1
1.0x
1.1x
Backlog
279.1
374.6
US unfunded backlog
2
342.1
529.0
1
Book-to-bill (B2B) ratio is orders won divided by revenue recognised.
2
Unfunded orders represents the value of contract awards for which
funding has not yet been appropriated or authorised.
Financial performance
Orders of £394.4m (FY25: £513.1m) reflected a book to bill
of 1.0x. In a challenging US defence services market and
against the backdrop of US restructuring this was a 23%
decrease or 18% organically after adjusting for foreign
exchange and the impact of the US Federal IT disposal.
Revenue reduced 13% on a reported basis to £393.4m
(FY25: £453.9m). On an organic basis, revenue declined 7%,
primarily in the US, as we restructured the business and
exited some low-margin lines of business. Revenue in our
Targets business grew 6% on a constant currency basis.
As at 31 March 2026, we have 59% of Global Solutions’
FY27 revenue under contract, compared to 67% (of the
FY26 revenue) at the same point last year.
Underlying operating profit increased to £35.6m
(FY25: £16.4m), with an increased underlying operating
profit margin of 9.0% (FY25: 3.6%). The US business has
delivered a major restructuring programme and experienced
a more stable year in FY26, which has contributed to the
improved operating result of the Global Solutions segment.
The second half of the year saw no more material charges
in the US operations.
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 portfolio of our other Global Solutions products
provides research services and bespoke technological
solutions derived from EMEA Services, and includes
QinetiQ Target Systems (QTS).
Segmental
reporting
UK Defence,
UK Intelligence
and Australia
Products
£103m
FY26 revenue
23
Overview
UK Defence delivered a year of strong
operational progress, characterised by
major programme wins, delivery against
strategic priorities and continued
momentum in our transformation agenda.
The business strengthened its position
as a trusted partner to the UK Ministry
of Defence (MOD) and international
customers, supporting national security
at a time of increasing geopolitical
tension and evolving threats.
During the year, we advanced our role in high-power laser
systems, accelerated innovation in Test & Evaluation
(T&E), deepened collaborations with industry partners
and demonstrated the increasing value of our synthetic,
digital and autonomous capabilities. Our operational
achievements reflect both the breadth of our technical
expertise and our ability to integrate complex technologies
into mission-ready defence solutions.
At the same time, UK Defence made significant strides in
enabling new models of delivery, such as rapid additive
manufacturing, crewed–uncrewed teaming, and synthetic
mission rehearsal environments. These capabilities are
becoming essential across all domains of modern warfare,
and our contributions have helped shape customer thinking
on force structure, readiness and affordability.
Operational and order highlights
Long-Term Partnering Agreement (LTPA)
The £1.7bn five-year extension to the LTPA contract was
signed in H1 and secures our position of partnership with
the MOD and provides a firm foundation to invest in the
transformation of UK sovereign Test, Trials, Training &
Evaluation (T3E) capabilities.
Extension of Typhoon engineering services
We secured a five-year, £205m contract extension to
deliver engineering services for the RAF’s Typhoon fleet.
DroneWorks
Establishment of a sovereign T3E Capability designed
to support UK MOD and industrial partners accelerate
development of uncrewed aerial systems at wartime pace.
DroneWorks will establish QinetiQ as a key partner to
UK industry for uncrewed systems.
T&E Innovation Gateway
The launch of the Testing & Evaluation Innovation Gateway
created a new entry point for small and medium-sized
enterprises into our test facilities, reducing access
costs and increasing uptake.
Advancing laser directed energy weapons
A major highlight of the year was the award of a £67m
contract from MBDA to support the production and delivery
of the UK’s first laser directed energy weapons (DragonFire)
for the Royal Navy.
Royal Navy synthetic training
We won a £25m contract to deliver the Maritime Command
and Staff Trainer, an immersive synthetic environment
replicating complex naval operations.
Sector review
UK Defence
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
24
Outlook
UK Defence activity continues to be influenced in the near
term by uncertainty around levels of the UK MoD budget.
Whilst this affects the timing of some new programme
commitments, defence spending remains directed
towards operational requirements, with sustained
activity across priority capability areas and continued
emphasis on readiness, resilience and integration and we
see good growth again in FY27.
Over the medium term, UK Government policy supports
higher defence investment along with leveraging
capability into Europe. Within this environment, UK
Defence is targeting good, sustained levels of growth
in the medium term, reflecting exposure to areas of
sustained priority and ongoing programme activity.
Sharpshooter:
enhancing NATO readiness
through integrated testing
Challenge
Allied navies needed access to realistic,
high-fidelity test environments to rehearse
defence against complex aerial and maritime
swarm threats.
Solution
QinetiQ delivered Exercise Sharpshooter
from MOD Aberporth, integrating live Banshee
aerial targets, Hammerhead uncrewed
surface vehicles and synthetic threats.
Our T&E specialists designed and controlled
the scenario to safely replicate cruise missile,
drone and swarm behaviours in a single,
coherent environment.
Outcome
The Dutch Navy successfully detected, tracked
and neutralised multiple threats, validating
tactics and enhancing operational readiness.
The exercise marked the first NATO participation
in Sharpshooter and reinforced the UK and
QinetiQ as leading test and evaluation partners.
Sector review
UK Defence
IN ACTION
Pictured above:
Exercise Sharpshooter, delivering live
and synthetic training to the Royal Navy and UK allies for
operational advantage.
25
Overview
UK Intelligence delivered a year of
solid operational performance in FY26,
underpinned by strong order intake,
sustained delivery across critical
programmes, and continued progress
in aligning the business to the UK
Government’s digital modernisation
agenda. The sector supports defence,
national security and homeland security
customers through advanced C5ISTAR
integration, digital platforms, cyber
resilience and mission-critical science
and technology.
During the year, UK Intelligence secured c.£530m of
orders across its distinctive portfolio, reflecting continued
customer demand for capabilities that enable resilient
digital infrastructure, data-driven decision-making
and multi-domain integration. The business continued
to benefit from its strong positioning with key UK customers,
including Defence Equipment & Support, Defence
Digital, Defence Intelligence and Defence Science and
Technology Laboratory (DSTL), supporting long-term
transformation programmes alongside the delivery of
frontline operational capability.
FY26 also saw further progress in building scale and
coherence across the portfolio, with strengthened
collaboration across the Group – particularly with
UK Defence – enabling delivery of complex, integrated
solutions. Continued investment in priority areas, such
as resilient position, navigation and timing capabilities –
ensuring assured navigation in contested environments –
alongside mission data, quantum technologies,
digital intelligence and cyber assurance, reinforces
UK Intelligence’s role as a trusted partner for secure
digital change at pace.
Operational and order highlights
Sustained performance across
Defence Mission Systems
UK Intelligence delivered strongly across core Defence
Mission Systems programmes, securing multi-year
orders that underpin the delivery of critical frontline
capability. This included a £70m two-year OpNet contract
to transform Defence Digital’s deployed IT capability,
alongside a further five-year extension to support the
Typhoon programme, providing integrated avionics,
sensing, software, training and simulation services
essential to operational effectiveness.
Growth in next-generation capability areas
The sector continued to build capability in priority growth
areas, including multi-million-pound Future Combat Air
System support and progress in quantum technologies,
marked by delivery of a first large-scale vessel-based trial.
Resilient Position, Navigation and Timing
A key milestone was the award of the £6m Urgent Compass
contract. Continued development of micro receivers
supported future growth across defence, security and
critical national infrastructure markets.
Expansion of digital and
data-intelligence services
Digital Intelligence performed well, supported by a £34m
enterprise service management platform award and
solid programme delivery. Naimuri also delivered strong
performance, driven by continued demand across
defence, national security and law enforcement.
Mission data, laser and sensing innovation
UK Intelligence sustained momentum in mission
data services with UK and export customers and
achieved record order intake for multi-function laser
technologies supporting communications, sensing
and bale-damage assessment.
Mission cyber and homeland security delivery
The sector expanded its mission cyber role through delivery
of the Emergency Services Mobile Communications
Programme device-certification service, supporting the
Home Office, alongside continued progress in operational
technology delivery at the mission edge.
Sector review
UK Intelligence
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
26
Outlook
Sector demand continues to be underpinned by enduring
national security priorities, ongoing digital modernisation
and the need for assured, integrated capability. While
procurement processes are likely to remain competitive
and subject to affordability discipline, customers are
anticipated to continue to favour partners with a proven
track record of delivery, security and long term support.
Over the medium term, increasing operational complexity
and data intensity are likely to sustain requirements
across intelligence, security and defence domains.
In this context, UK Intelligence is well positioned to
support priority programmes and is aiming to deliver
higher year on year growth in FY27 and improvement
thereafter, while remaining mindful of policy, funding
and execution uncertainties inherent in the market.
Resilient navigation:
maintaining assured positioning
in contested environments
Challenge
Military and security operations rely on precise
location and timing information to operate safely and
effectively. Increasing disruption to satellite-based
navigation systems means these operations cannot
always rely on GPS alone, creating a risk to safety,
coordination and mission success.
Solution
UK Intelligence led delivery of the UK Government’s
Urgent Compass programme, providing an
alternative navigation capability that operates
independently of satellites. The solution uses proven
terrestrial technology to ensure location and timing
information remains available even when satellite
signals are unavailable or degraded.
Outcome
The programme delivered a credible, operationally
relevant back-up capability, strengthening
resilience in complex operating environments.
It also demonstrated QinetiQ’s ability to respond
rapidly to emerging operational risks and to deliver
assured, mission-critical capability at pace in
support of national security priorities.
Sector review
UK Intelligence
IN ACTION
Pictured above:
Defence-grade assured navigation
equipment, supporting resilient positioning and
timing as reliance on satellite navigation becomes
increasingly contested.
27
Overview
Our Australia sector comprises our
specialist advisory and engineering
business and our threat representation
business operating in the Australian
market. The sector operates as two
business units; Mission Support, Research
and Development, which includes flight
operations and threat representation,
and Engineering Services, which includes
our training capabilities.
FY26 was a year of transition and strategic evolution for our
Australian business. We remained focused on deepening
customer intimacy while ensuring our operations are
aligned to evolving Government priorities and budget
environments. This included continued changes to our
operating model to beer match customer ways of working
and to reduce overheads, supporting more agile and
responsive delivery.
Operational and order highlights
Progress on MSP
We are actively shaping the customer’s approach to the
next phase of the Major Service Provider (MSP) programme
– set to operate under a new model – drawing on our strong
experience of the UK Engineering Delivery Partner (EDP)
programme and deep customer engagement. Delivery of
current contracts continues under the existing model.
Advancement of laser weapon capability
Ongoing development of our laser directed energy
weapon capability, leveraging the UK’s DragonFire
technology alongside our established local laser
development partnership with the Defence Science
and Technology Group. This work strengthens our
position in delivering advanced directed-energy
solutions for future defence requirements.
JATTS contract extension
QinetiQ was awarded a two-year extension to the
Joint Adversarial Test and Training contract (JATTS).
This was a major business-winning achievement that
directly reflects customer confidence in QinetiQ’s
threat-representation capability.
Improved delivery model
Enhanced operational alignment with customer ways
of working, refining engagement models and delivery
processes to strengthen responsiveness and support
evolving customer requirements.
Readiness for major programmes
Built operational readiness for a substantial pipeline of
FY27 defence programmes, preparing capability and delivery
teams to support customer priorities across engineering
services, directed energy, makerspace infrastructure and
threat-representation solutions.
Sector review
Australia
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
28
Outlook
Australia’s defence sector is expected to remain in a
period of adjustment as government investment priorities,
processes and delivery timelines continue to evolve.
Changes associated with the National Defence Strategy,
workforce reforms and procurement system updates
support longer-term demand, but may also contribute
to near-term variability in project phasing and awards.
The Australia business is focusing on transitioning
from a subcontractor to a prime contractor and the
speed of that and associated growth will depend on
the timing of customer decisions and execution risk
across major programs.
Delivering efficient, secure
technical support during a
period of evolving priorities
Challenge
With defence organisations navigating
tighter budget seings and evolving programme
timelines, maintaining momentum on critical
sustainment tasks required efficient,
low-friction technical support.
Solution
QinetiQ facilitated the timely and secure
transfer of technical data from the UK to
Australia to support HMS Anson’s maintenance
period, enabling essential information to reach
engineers without delay and minimising the
need for more resource-intensive alternatives.
Outcome
The customer praised the responsiveness and
assurance of the process, which contributed
to maintaining programme progress while
supporting the focus on managing budgets
effectively. The activity also reinforced QinetiQ’s
role as a dependable partner in delivering
efficient, high-assurance technical support.
Sector review
Australia
IN ACTION
Pictured above:
© Commonwealth of Australia,
Department of Defence/The Astute-class submarine
HMS Anson comes alongside at HMAS Stirling in
Western Australia, for a scheduled Submarine
Maintenance Period (SMP).
29
Overview
Our US sector provides specialist
engineering, systems integration
and mission operations support to
defence and homeland security
customers across the United States,
operating across priority mission areas
including space and missile defence,
maritime systems, persistent surveillance,
sensing and autonomy.
FY26 was a year of transition for the US business.
The sector strengthened its position as a mid-tier
provider of differentiated, mission-critical capability,
while taking action to sharpen its portfolio and operating
model to support improved operational focus, financial
discipline and closer alignment with enduring US national
security priorities.
Operational and order highlights
Support to space and missile defence priorities
QinetiQ US continued to scale its support to the Space
Development Agency (SDA). In September 2025, the Agency
successfully launched 21 data-transport satellites for
Tranche 1 of the US Space Force’s Proliferated Warfighter
Space Architecture, supporting the development of
a resilient space-based threat detection capability.
Improved delivery in Defence Services
The Defence Services business delivered stronger
operational performance, underpinned by improved
delivery discipline.
Growth in solutions and sensor modernisation
The solutions business secured and delivered the first
phase of a multi-year acquisition supporting a significant
sensor modernisation programme.
Expansion in homeland security and
border surveillance
QinetiQ US expanded its persistent surveillance footprint
through the integration of two additional sites along
US borders.
Naval capability and autonomy
The sector secured key naval studies focused on
next-generation surface and sub-surface capabilities
and submied a long-term support plan for the future of
US Navy aircraft carriers.
Portfolio focus and discipline
As part of a comprehensive portfolio review, QinetiQ US
reduced exposure to lower-margin and more volatile
activities, including the disposal of its Federal IT
portfolio for approximately $31m in September 2025.
Sector review
United States
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
30
Outlook
Demand for mission-critical capability across the US
defence and homeland security market is expected to
remain supported by enduring national priorities and
long-term modernisation programmes and elevated
US Department of War budgets.
Spending is anticipated to remain aligned with our core
focus areas of space and missile defence, maritime
systems, persistent surveillance, sensing and
autonomy. While near-term outcomes remain subject
to competitive wins, phasing and disciplined delivery on
existing programmes and a selective approach to new
opportunities which support QinetiQ US’s positioning
across priority areas over the medium-term.
Enhancing space-based threat
detection through resilient
mission support
Challenge
The US Space Force required rapid, reliable
mission support to deploy resilient satellite-
based communications and data-transport
capability in a contested environment.
Solution
QinetiQ US supported the Space Development
Agency through specialist engineering and
systems integration activities, contributing
to the successful launch of Tranche 1
data-transport satellites.
Outcome
The successful launch enhanced space-based
threat detection capability and demonstrated
QinetiQ US’s ability to support complex,
mission-critical space programmes at pace.
Sector review
US
IN ACTION
Pictured above:
Continuing support to the Space
Development Agency’s efforts, focusing on developing,
testing and integrating space-related defense systems.
31
Group Chief Financial
Officer's Review
Overview of full-year results
The Group has delivered a resilient and improved financial
performance against the backdrop of near-term geopolitical
and market challenges. Funded order backlog closed at
£4.4bn following the LTPA extension in H1, and we delivered
organic revenue growth at an underlying operating profit
margin of 11.3%. Consistently strong cash generation of
100% has contributed to net debt to EBITDA remaining
consistent at 0.5x (FY25: 0.4x) and enabled us to continue
and extend our share buyback programme, enhancing
returns to shareholders. We have also continued to grow
the dividend to 11.0p per share (FY25: 8.85p). The year end
has seen a significant increase as we changed the dividend
policy to a payout ratio.
The Group achieved a strong order intake totalling
£3,573.2m (FY25: £1,954.8m), including the LTPA five-year
extension order intake of £1.7bn, with particularly strong
performance in EMEA Services, where the prior year
included the 10-year NGGATS contract in Germany.
The book-to-bill was again strong, at 1.1x excluding LTPA
non-tasking revenue. We have secured major orders
across both of our operating segments. Within EMEA
Services we secured £1,469.6m (FY25: £1441.7m) of orders,
representing organic growth of 2%. Within Global Solutions,
FY26 orders were £394.4m (FY25: £513.1m), representing
a book-to-bill of 1.0x and an 18% decrease on an organic
basis after adjusting for foreign exchange and the
disposal of the US Federal IT business.
A year of improved financial and
operational performance and
strong free cash flow.
£m
Underlying* results
Statutory results
FY26
FY25
FY26
FY25
Revenue
1,922.6
1,931.6
1,922.6
1,931.6
Operating profit/(loss)
1
217.9
185.4
169.8
(90.5)
Profit/(loss) after tax
168.5
147.0
107.5
(185.7)
Earnings/(loss) per share (p)
31.5
26.1
20.1
(33.0)
Full year dividend per share (p)
11.0
8.85
11.00
8.85
Funded order backlog
4,421.4
2,845.2
Orders
1,864.0
1,954.8
Net cash inflow from operations
343.2
316.2
291.6
286.7
Net debt
(159.1)
(133.2)
*
Definitions of the Group’s ‘Alternative Performance Measures’ can be found in the glossary.
1
Underlying operating profit relates to operating profit from segments. See note 3 to the financial statements for details.
100%
Operating cash conversion
34%
ROCE
24%
Dividend growth
£135m
Share buyback
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
32
Orders
FY25
FY26
EMEA
Services
1
LTPA
Extension
2
Global
Solutions
FX and
disposal
£m
1,955
33
1,709
3,573
(85)
(39)
85% organic growth
83% total growth
1
Excl. LTPA Extension.
2
£1.54bn LTPA extension plus award of £166m relating
to current investments.
Revenue
FY25
FY26
EMEA
Services
Global
Solutions
FX and
disposal
£m
1,932
55
1,923
(29)
(35)
1.3% organic growth
Operating profit
FY25
FY26
EMEA
Services
Global
Solutions
Foreign
Exchange
£m
185
Margin
11.3%
14
218
20
(1)
18% organic growth
Margin
9.6%
Margin
11.9%
Margin
9.0%
Group Chief Financial
Officer's Review
Funded order backlog has risen to a record high of £4.4bn,
or £4.8bn including US unfunded orders, providing good
visibility going forward:
ɰ
In EMEA Services the total funded order backlog was
£4.1bn (FY25: £2.5bn), with the increase driven by the
five-year LTPA contract extension to 2033. This is a
large multi-year contract and as we deliver, this will
naturally reduce the LTPA order backlog.
ɰ
In Global Solutions the total funded order backlog was
£279.1m (FY25: £374.6m). US unfunded order backlog
reduced from £529.0m to £342.1m as orders were
booked and traded in-year.
On 31 March 2026, approximately 67% (£1.3bn) of the
Group’s FY27 expected revenue was under contract,
compared to 70% (£1.4bn) of the forecast FY26 revenue
at the same point last year.
We delivered organic revenue growth of 1% to £1,922.6m
(FY25: £1,931.6m) in challenging near-term market
conditions. Reported revenue growth, which includes
the impacts of foreign exchange and the US Federal IT
disposal, was flat. We saw a 4% organic revenue increase
to £1,529.2m (FY25: £1,477.7m) in EMEA Services, primarily due
to good growth on UK Defence sector framework contracts.
Global Solutions revenue reduced 7% on an organic basis
to £393.4m (FY25: £453.9m), primarily in the US as we exited
some non-core business lines and were impacted by market
conditions in particular government services lines of work.
Operating profit from segments of £217.9m (FY25: £185.4m)
was up 18%. This represents an 11.3% operating margin
(FY25: 9.6%), consistent with historical levels following
the one-off profit impacts in FY25. EMEA Services
delivered a strong operating margin of 11.9% (FY25: 11.4%)
as we effectively executed on our order backlog and
controlled costs.
Operating margins in Global Solutions increased from 3.6%
in FY25 to 9.0% in FY26, driven by an increase in profitability
in the US and the absence of one-off charges.
The statutory operating result was a profit of £169.8m
(FY25: loss of £90.5m), including the impact of specific
adjusting items and recurring income on Research and
Development Expenditure Credits (RDEC), which was
£29.3m (FY25: £30.0m).
Underlying profit before tax increased 14% to £229.6m
(FY25: £198.6m), in line with the increase in underlying
operating profit, with underlying net finance expense in
line with the prior year at £17.6m (FY25: £16.8m).
33
Group Chief Financial
Officer's Review
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 cost of
£77.4m (FY25: cost of £305.9m). The improved position
reflects that FY25 included the goodwill impairment
charge of £143.9m relating to the US Sector and acquisition,
disposal and integration costs of £14.9m associated with
integrating the Avantus and Air Affairs acquisitions into
their respective sectors, while this year there are no
charges against these line items.
In FY26 the non-recurring cost of the discrete digital
investment programme is £23.6m (FY25: £20.8m).
We continue to roll out this project to modernise the IT
infrastructure to support our future growth ambitions.
The non-recurring costs are 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. This year is expected to be
the final year of digital investment.
Restructuring costs and other impacts were £30.2m
(FY25: £64.5m). This includes the costs of efficiency activity
in UK and Australia operations which is nearing completion,
as well as the further non-cash charges in the US. The
majority of these costs were reported within the first half of
FY26 and were a consequence of continued refinement of
the market-facing strategy and ongoing restructuring of
the US Sector against challenging market conditions.
Also included within specific adjusting items are net finance
income from pensions of £2.4m (FY25: £1.0m), amortisation
of acquisition intangibles of £23.1m (FY25: £24.2m) and the
£0.5m gain on disposal of the Federal IT business in the US,
which completed during the first half of the year.
Tax
The total tax charge was £47.6m (FY25: £79.4m). The
underlying tax charge was £61.1m (FY25: £51.6m), on a
higher underlying profit before tax, with an underlying
effective tax rate of 26.6% for the year ending 31 March 2026
(FY25: 26.0%). The underlying effective tax rate is above
the UK statutory rate of 25% (FY25: 25%) primarily as a
result of unrecognised tax deductions and 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 believes it qualifies for one
of the transitional safe harbours provided in the rules in all
territories in which it operates. The Group has not accrued
a Pillar Two top-up tax charge for FY26. The Group
has applied the temporary exemption issued by the
International Accounting Standards Board from the
accounting for deferred taxes under IAS 12 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.
FY26
£m
FY25
£m
Acquisition and disposal costs
–
(14.9)
Restructuring costs and other impacts
(30.2)
(64.5)
Digital investment
(23.6)
(20.8)
Loss on sale of property
–
(36.6)
Impairment of property
(0.5)
(1.0)
Impairment of goodwill
–
(143.9)
Amortisation of acquired intangibles
(23.1)
(24.2)
Disposal of business
0.5
–
Finance income – pensions
2.4
1.0
Total specific adjusting items loss before tax
(74.5)
(304.9)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
34
Group Chief Financial
Officer's Review
Cash management and
capital allocation policy
Working capital management and overall cash performance
have remained strong. Underlying net cash flow from
operations was £343.2m (FY25: £316.2m). 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. We achieved good underlying
cash conversion of 100% (FY25: 105%).
As at 31 March 2026, the Group had £159.1m net debt,
increased from £133.2m as at 31 March 2025, as the strong
operating cash conversion during the year and the proceeds
from the sale of the US Federal IT business, allowed for
record shareholder returns through £48.7m of dividends
and £146.9m of purchases of own shares (including c.£12.3m
for company share incentive schemes). Leverage remains
consistent at 0.5x (31 March 2025: 0.4x).
Through FY26 we have demonstrated our capital allocation
policy in action:
ɰ
Invested in our organic growth – net capital
expenditure of £72.5m (FY25: £108.4m, which included
one-off spend on aircraft in Germany), focused on
contractual commitments (51% relating to customer
funded contracts, including £37m into the LTPA),
sustainment of the portfolio and investment to
support future growth
ɰ
Provided a progressive dividend to shareholders
and changed the dividend policy to a pay-out ratio –
year-on-year growth rate of 24%
ɰ
Completed sale of the US Federal IT business,
with proceeds of £17.9m, and returned the cash to
shareholders through accelerating the buyback
programme in year
ɰ
Return of excess cash to shareholders – c.£135m share
buyback completed during the year. Approximately half
of the £200m share buyback extension announced in
March 2025 had been completed as at 31 March 2026
The Group is not subject to any externally imposed
capital requirements.
Net debt movements
Underlying
operating
profit from
Segments
Depreciation
&
amortisation
Underlying
EBITDA
Underlying
working
capital
movement
& other
Underlying
net cash
inflow from
operations
Exceptional
operating
cash flows
Net capex
Net interest
& taxation
Free cash
flow
Shareholder
return
Change in
net debt
Other
2
RDEC
1
£m
218
29
344
343
(52)
(72)
(60)
159
(183)
(2)
(26)
1
97
100% cash conversion
Net Debt: £158m
Leverage: 0.5x
1
Research and Development Expenditure Credit.
2
Other includes disposal of business £17.9m, purchase of own shares for incentive arrangements £(12.3)m, foreign exchange and lease related movements.
35
Group Chief Financial
Officer's Review
Commied facilities
The Group has a £333.6m Term Loan split into two tranches:
GBP Term Loan £273m (Tranche A); and, USD Term Loan
$80m (Tranche B), which will mature on 27 September 2027.
Participating banks have lent on a two-tier basis, three
banks at £67m and four banks at £35m. In line with Group
policy, £270m (c.80%) of the floating rate debt has been
fixed using SONIA interest rate swaps at a weighted average
rate of 3.46%, maturing on 27 September 2027.
The Group has a £290m bank revolving credit facility with
an ‘accordion’ facility to increase the limit up to £400m.
The facility, which will mature on 22 April 2029, was undrawn
at 31 March 2026.
We adopt a strict policy on managing counterparty risk
through a combination of diversification of investments and
regular reviews of counterparty limits using credit rating
assessments. Our debt sits with our key relationship banks,
who have strong credit ratings and diverse portfolios.
The banks have been selected for their capabilities in our
home countries to support our business.
Return on Capital Employed (ROCE)
ROCE at a group level uses the calculation of: operating
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).
FY26 ROCE was 34% (FY25: 22%) due to the stronger
profitability and the impact of the right-sizing and
restructuring activities across the Group. As we continue
to invest in the business to drive our organic growth
strategy and maintain the disciplined capital allocation
agenda, ROCE is expected to remain high, at or above
the 25-30% range.
Earnings per share
Underlying basic earnings per share increased by 21% to
31.5p (FY25: 26.1p), driven by the higher underlying profit
after tax and acceleration of the share buyback programme.
Basic earnings per share for the total Group (including
specific adjusting items) were 20.1p (FY25: loss of 33.0p).
The improvement is driven by FY25 including the impairment
of goodwill relating to the US, and higher restructuring costs
and other related items.
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 535.4m (FY25: 563.4m). There were 522.1m
shares in issue as at 31 March 2026, net of treasury shares,
reduced due to the ongoing share buyback.
Dividend
The Board proposes a final FY26 dividend per share of
8.0p (FY25: 6.05p), making the full-year dividend 11.0p
(FY25: 8.85p). The full-year dividend represents growth
of 24%, with the dividend policy being revised on a payout
ratio basis of c.35%-40% of basic underlying EPS.
Subject to approval at the Annual General Meeting, the final
FY26 dividend will be paid on 20 August 2026 to shareholders
on the register at 24 July 2026.
Pensions
The net pension asset under IAS 19, before adjusting
for deferred tax, was £54.4m (31 March 2025: £39.4m).
The key driver for the increase in the net pension asset
during the year relates to the net actuarial gain on the
net scheme assets.
The key assumptions used in the IAS 19 valuation of the
Scheme are set out in note 27 to the financial statements.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
36
Group Chief Financial
Officer's Review
Net finance income and expense
The underlying net finance expense was £17.6m
(FY25: £16.8m), increased due to a higher expense
relating to leases following completion of the sale and
leaseback transaction during the prior year. Net finance
income of £2.4m (FY25: £1.0m) in respect of the defined
benefit pension net surplus reduced due to the higher
opening net asset and is reported within specific
adjusting items.
Foreign exchange
The Group’s income and expenditure is largely seled
in the functional currency of the relevant Group entity,
mainly Sterling, US Dollar or Australian Dollar. The Group
has a policy to hedge all material transaction exposure at
the point of commitment to the underlying transaction.
Uncommied future transactions are not routinely hedged.
The Group does not hedge its exposure to translation of
the income statement.
The principal exchange rates affecting the Group were
the Sterling to US Dollar and Sterling to Australian Dollar
exchange rates.
12 months
to 31 March
2026
12 months
to 31 March
2025
£/US$ – opening
1.29
1.26
£/US$ – average
1.34
1.28
£/US$ – closing
1.32
1.29
£/A$ – opening
2.07
1.94
£/A$ – average
2.03
1.96
£/A$ – closing
1.92
2.07
Foreign exchange translation has provided a modest
headwind to revenue and operating profit in the year.
Most significantly, the US Dollar has strengthened,
with the average exchange rate to Sterling increasing
from 1.28 to 1.34. In FY26, 15% of our total Group revenue
was generated in the US. As a result of the strengthening
US Dollar and other FX movements in year, revenue
decreased by £17.8m and operating profit decreased by
£0.6m. For every 1 cent move in the USD FX rate, this would
impact Group revenue by c.£3m.
Martin Cooper
Group Chief Financial Officer
21 May 2026
37
Key performance
indicators
Financial KPIs
Description
This is the level of new orders and amendments
to existing orders, excluding the LTPA contract
extension, booked in the year.
Performance this year
Total orders, including the LTPA extension,
were £3.6bn, creating a record order backlog
as at 31 March 2026. Excluding the LTPA
extension, orders decreased by 4% against
a strong comparator which included the
long-term Germany contract.
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.
Description
The underlying earnings, net of interest and
tax, excluding all specific adjusting items,
expressed in pence per share.
Performance this year
Underlying basic earnings per share increased
by 21%, driven by the higher underlying profit
after tax and the impact of the ongoing share
buyback programme.
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.
Description
Calculated by taking the increase in revenue over
prior year, at constant exchange rates, excluding
the impact of acquisitions and disposals.
Performance this year
Grew 1% on an organic basis, with a 4%
increase in EMEA Services driven by the
UK Defence sector.
Link to strategy
Demonstrates the Group’s ability to
grow market share within its chosen
markets. Delivering long-term sustainable
growth reflects the successful execution
of our strategy.
Description
This represents net cash flow from operations
before cash flows of specific adjusting items
and capital expenditure.
Performance this year
Remained consistently strong, with an
operating cash conversion of 100%.
Link to strategy
A measure of the ability to generate cash
from operations. Gives an indication of the
ability to make discretionary investments
and pay dividends.
Description
The earnings before interest and tax,
excluding all specific adjusting items.
Performance this year
Profit was up 18%, driven by organic revenue
growth of 1% and a return to 11.3% operating
margin following the reduced profitability
in FY25.
Link to strategy
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.
Description
This represents the total future revenue
currently on contract.
Performance this year
Backlog grew to a record high of £4.4bn as at
31 March 2026, including the LTPA extension
contract to 2033.
Link to strategy
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.
FY23
FY24
FY25
FY26
£3,573.4m
£1,954.8m
£1,740.4m
Orders
£3,573.4m
FY23
FY24
FY25
FY26
31.5p
26.1p
29.4p
Underlying
earnings per share
31.5p
FY23
FY24
FY25
FY26
1%
2%
14%
Organic
revenue growth
1%
FY24
FY25
FY26
£343.2m
£316.2m
£320.2m
Underlying net cash
flow from operations
£343m
FY24
FY25
FY26
£4,421.4m
£2,845.1m
£2,873.0m
Backlog
£4,421m
FY23
FY24
FY25
FY26
£217.9m
£185.4m
£215.2m
Underlying operating profit
*
£218m
*
Definitions for the Group’s ‘Alternative Performance Measures’ can be found on page 220. Underlying operating profit refers to operating profit
from segments. See note 3 for details.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
38
Key performance
indicators
Non-financial KPIs
Description
The Lost Time Incident Rate (LTIR) 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.
Performance this year
Our LTIR increased slightly from 1.45 in FY25 to
1.82 in FY26, (due to the reduction in headcount
and some isolated lost time events) but safety
performance overall remained stable.
Link to strategy
We are commied to 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 underpins our business strategy.
Description
We use Workday Peakon to measure employee
engagement and gather regular feedback
on how our people feel about working at
QinetiQ. The engagement score is based on a
10-point scale. Feedback is collected through
four surveys during the year and aggregated
over a six-month period to ensure the score
provides a representative view of employee
engagement across the Group.
Performance this year
Participation rates remain strong across FY26.
In the final survey of the year, the aggregate
engagement score was 6.5, compared with
7.5 at the same time in FY25. The reduction
in engagement reflects the challenging
operating environment and restructuring.
Link to strategy
Employee engagement is a key enabler of our
business strategy. An engaged workforce
supports productivity and the delivery of
long-term performance.
Description
Our Climate Transition Action Plan (CTAP)
includes a near-term target of 50% reduction
of our combined Scope 1 and Scope 2
emissions by 2030, from a base year of FY20.
Near-term and long-term targets are shown
on page 43.
Performance this year
The figures shown above are restated
following the sale and leaseback of our
Farnborough site . We continue our downward
trajectory for our Scope 1 and 2 emissions:
36% since our FY20 baseline.
Link to strategy
Actively reducing our emissions is at the heart
of our CTAP and is a critical part of our wider
Sustainability strategy, which underpins and
supports wider business performance.
Read more on page 53
Read more on page 54
Read more on pages 43-45
FY23
FY24
FY25
FY26
1.82
1.45
1.69
Health and safety
1.82
LTIR
FY24
FY25
FY26
6.5
7.5
7.5
Employee engagement
6.5
Score out of 10
FY23
FY24
FY25
FY26
22,764
26,115
26,592
Greenhouse gas emissions
22,764
Scope 1 and 2, tonnes CO
₂
e
39
Sustainability:
Environmental,
Social & Governance
Additional information is provided in the sustainability
section of our website.
Signposting to ESG across the report
ESG strategy and framework
41
Environmental
43
Social
53
Governance
60
Key ESG disclosures
Taskforce for Climate-related Financial Disclosures
48
Streamlined Energy and Carbon Reporting
45
ESG across this report
Value creation
20
Non-financial KPIs
39
Risk management
65
Stakeholders/Section 172
72
Non-financial and sustainability information statement
63
Corporate Governance including ESG
78
ESG in leadership remuneration
123
FY26 Highlights
ɰ
AA rating from MSCI (Morgan Stanley
Capital International).
ɰ
Sustainalytics top-rated ESG Companies list
for fourth year
ɰ
36% reduction in Scope 1 and 2 greenhouse gas
emissions from our FY20 baseline (see page 45)
ɰ
Launch of a four-year partnership with Combat
Stress, the UK’s leading charity for veteran’s
mental health (see page 58)
ɰ
Innovative Social Value pilot for the National Cyber
Security Centre (NCSC) training
(see page 58)
ɰ
Improved support for Veterans and Cadets
(see page 59)
Delivering responsibly and sustainably
for the benefit of all our stakeholders.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
40
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Pictured above:
MOD Aberporth, located on the west coast
of Wales, provides a strategically significant, multi-domain
test and training environment, delivering high-quality data
and deployable capabilities that support mission-critical
defence programmes and long-term sovereign value.
Sustainability
Introduction
Strategy and materiality
It is important that we are focused on those environmental,
social and governance (ESG) elements of sustainability
that maer most to our business as it evolves and that we
meet the expectations and the needs of our stakeholders.
Delivering our sustainability strategy, based on key material
ESG 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, foster responsible procurement, protect the
environment and have a positive impact in our communities,
all underpinned by our values and strong governance.
Our ESG framework is driven by our business strategy,
the external landscape and stakeholder requirements,
and informed by best practice frameworks such as the
United Nations Sustainable Development Goals.
Throughout the year, we engage with shareholders,
customers and our people about ESG directly, and via
reporting, surveys and questionnaires, so we are able
to listen, understand, and identify what maers most to
them; a focus during FY26 was the importance of climate
and energy resilience.
The external landscape continues to evolve: 2025 was
another record year for global temperatures and extreme
weather events; it saw rapid advances in AI, a technology
whose role in society continues to develop; and there are
ongoing and new conflicts driving the geopolitical climate.
We know it is important for us to proactively monitor and
understand changes and trends so that we can ensure
that sustainability remains an enabler for our business.
Our ESG framework
Protecting lives by serving the national security interests of our customers.
Material factors
Our purpose
Themes
Environmental
43
ɰ
Climate change: decarbonisation
ɰ
Climate change: resilience
ɰ
Environmental management
ɰ
Resource use
ɰ
Biodiversity and conservation
ɰ
Solutions for customers
Social
53
ɰ
Safety and wellbeing
ɰ
Employee engagement
and inclusion
ɰ
Skills and development
ɰ
Reward and recognition
ɰ
Social and community impact
Governance
60
ɰ
Business ethics, Code
of Conduct and Speak Up
ɰ
Anti-bribery and corruption
ɰ
Human rights and modern slavery
ɰ
Responsible tax management
ɰ
Responsible procurement
Underpinned by our values, integrity, collaboration and performance, we deliver safely, responsibly
and sustainably for the benefit of all our stakeholders.
41
Sustainability
Introduction
ESG disclosures
We recognise that disclosing our ESG performance is an
essential part of building trust with our stakeholders by
demonstrating progress against our targets and plans.
QinetiQ Group plc is subject to a growing number of
regulatory reporting requirements, and we meet many of
those obligations within this Annual Report (for example,
the Task Force on Climate-related Financial Disclosures
– TCFD (page 48) – and Streamlined Energy and Climate
Reporting – SECR page 45).
Our goal is to provide information in this annual report
for our priority areas, supplemented by more detail on
our website
There have been developments in ESG reporting across all
of our geographies in FY26 and we will continue to monitor
these changes closely. We recognise the importance
of the International Sustainability Standards Board
(ISSB) disclosure standards. With the adoption by the UK
Government of the Sustainability Disclosure Standards as
part of the UK Sustainability Reporting Standards (UK SRS),
we have undertaken an initial evaluation and contributed to
the government consultation. In Australia, similar reporting
set by the Australian Auditing Standards Board (AASB) is
also required, but with some identified differences. Our
approach is to consider non-financial reporting holistically,
with an ethos of ‘capture once, use many times’ wherever
possible. We will evolve our reporting plan in readiness
for the first reporting aligned with the UK and Australian
standards, from FY28.
We will also be evaluating the UK Government’s proposed
Modernisation of Corporate Reporting and we have been
reviewing the Taskforce on Nature-related Financial
Disclosures (TNFD)
(see page 47).
We currently have below-threshold presence in Europe
and so reporting frameworks such as the Corporate
Sustainability Reporting Directive (CSRD) and Corporate
Sustainability Due Diligence Directive (CSDDD) do not apply.
As we prepare for implementation of Provision 29 of the
UK Corporate Governance Code, we have been reviewing
our material controls for non-financial reporting (see
pages 104 and 107 of the Audit Commiee Report).
Stakeholder engagement
on ESG maers
Employees
We know our employees are interested in and supportive of
sustainability and we want to ensure they feel informed to
be able play their part – be it saving energy or volunteering in
their local communities. We communicate regularly through
various channels, including campaigns on our intranet, our
dedicated online community of interest (the Sustainability
Knowledge NetworQ), our ‘Let’s Talk Sustainability’ events,
and resources and guides for our leaders.
We underpin our communications with a range of learning
options, including our mandatory training (on topics such as
ethics and conduct, and environment and safety), as well as
more targeted training, e.g. for Energy Champions or Ethics
Champions. We have training modules on modern slavery,
social value and a climate change e-learning module. During
FY26 we developed a training package tailored for our global
Project Management community, enabling those individuals
with direct responsibility for operational delivery to consider
sustainability within their planning and decision-making.
This will be rolled out in FY27.
Customers, partners and suppliers
We strive to be proactive in engaging our customers,
partners and suppliers on sustainability issues. We actively
collaborate with customers, peers, academic partners and
suppliers on topics such as climate change, ethics, modern
slavery and skills. We continue to be active within our sector,
chairing the Sustainability Network for our UK trade body,
ADS (Aerospace, Defence and Security) and acting as
Industry Chair of the JOSCAR ESG Working Group. We are
members of the MOD-Industry Sustainable Procurement
Working Group and the Tech UK Climate Council. We have
been actively involved in the new UK Regional Defence
Cluster and we run Collaborate events for our suppliers (see
page 61). We are also proactive in our professional body, the
Institute Of Corporate Responsibility and Sustainability
(ICRS). We are signatories to a number of key UK charters,
including the ADS ESG Defence Charter, The 5% Club, and
The Women in Defence Charter.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
42
Sustainability:
Environmental
We are commied to minimising our
impact on the environment and key to this
is our climate transition action plan and our
environmental stewardship programmes
Climate change
The changes we continue to see and experience within
the physical environment globally represent a growing
risk to business and to defence as a sector. Businesses
across all industry sectors are facing shared challenges;
the physical aspects of climate change impact their ability
to continue to operate successfully such as in the face of
unprecedented extremes of weather conditions. There are
also the transitional impacts of climate change, with the
need to meet evolving and complex regulatory reporting
requirements, planned cross-border carbon taxation
measures, and evolving customer needs. We recognise
that climate change is a risk to our business, and we remain
commied to decarbonising to reduce our greenhouse
gas (GHG) emissions, in parallel with working to ensure
our business remains resilient to a changing climate.
GHG emissions methodology
We measure our Scope 1, 2 and 3 emissions every year.
We use a Financial Control boundary approach, with a
methodology derived from the GHG Protocol Corporate
Accounting and Reporting Standard and best practice
outlined by the Science Based Targets initiative (SBTi),
alongside UK Government emission conversion factors.
We regularly review our methodology, and during FY26
applied a series of material improvements to our approach
to calculating Scope 3 emissions, which are, increasing
relevance and accuracy, and driving greater alignment with
the GHG Protocol. We are commied to being transparent
about our approach and we publish our methodology
documentation on the climate change pages of our website.
Additional information is provided on the climate change
page of our website.
GHG emissions targets
We have set near-term and Net-Zero GHG emissions targets,
against a baseline year of FY20 (April 2019 – March 2020),
which cover our full value chain, across all categories of
Scopes 1, 2 and 3 emissions. These targets have been
validated by the SBTi, which confirmed that they were
ambitious and aligned to a 1.5°C global temperature
pathway. We have made a commitment to reduce our
absolute emissions by at least 90% across our full value
chain by 2050 or sooner, recognising that there will be
elements of our carbon footprint that will be extremely
challenging to eliminate completely with the current pace
of development, availability and maturity of alternative
solutions. We will require investment in carbon offsets in the
future, to address these residual elements of our footprint,
in order to achieve our goal of Net-Zero emissions.
Targets
-50%
Absolute reduction of
Scopes 1 & 2 by FY30
Baseline year FY20
-30%
Absolute reduction of
Scope 3 by FY30
Baseline year FY20
Net-Zero
By FY50 or sooner
43
Sustainability
Environmental
Workstream 1
Jet fuel
Workstream 2
Operational
energy
DECARBONISATION
RISK MANAGEMENT
Workstream 3
Procurement
Workstream 4
Business travel
Workstream 5
Climate
resilience
Evolving workstreams driving reductions across
wider carbon footprint; increased resilience
50%
Reduction of Scope 1 and 2
GHG emissions by 2030
2050
Have achieved Net-Zero or sooner
30%
Reduction of Scope 3
GHG emissions by 2030
Resilience and TCFD
Climate Transition Action Plan
To achieve our targets, we have developed a Climate
Transition Action Plan (CTAP) – see diagram below. This
provides a clear pathway to address our most material
sources of GHG emissions, while maintaining a focus on
climate resilience. Our CTAP sponsor is our Chief Financial
Officer, and senior leaders from across the business are
responsible for the delivery of the key workstreams. We
regularly review progress against our CTAP and we perform
an annual assessment of the drivers of our footprint to
ensure we remain focused on the most material sources
of emissions. Collectively, the sources of emissions we are
currently targeting within our decarbonisation workstreams
are responsible for nearly 90% of our carbon footprint.
While our CTAP directs actions addressing specific sources
of emissions in order to reduce them, it also directly
supports business value creation by raising awareness and
driving behavioural change across the organisation linked to
improvements in efficiency, productivity and cost reduction.
There are also secondary business benefits and linkages
between workstreams; for example, by accelerating
the adoption of renewable power generation systems
across our estate, we are driving greater resilience to both
environmental and market forces, mitigating both physical
and transitionary climate risks while delivering cost savings
in the longer term.
Our focus on driving efficiency and reducing energy
consumption also extends to our research and development
activities, and to our delivery of customer solutions, to
support customers with their climate challenges, such as
climate resilience (see page 47).
Our CTAP workstreams are supported by our internal
ideation and collaboration platform, IdeaXchange, with
specific channels focused on the CTAP available to our
people across the organisation, enabling the sharing of
ideas and collaboration on solutions.
A summary of our Climate Transition Action Plan
Cross-cuing enabling programmes
Data and tools
Governance, policy and process
Skills, awareness, leadership and culture
A
B
C
Workstreams
Reducing
Scope 1 emissions:
ɰ
Operational
efficiency
ɰ Platform efficiency
ɰ
Sustainable
aviation fuel
Reducing
Scope 1 and 2
emissions:
ɰ
Behavioural change
ɰ
Building
consolidation
ɰ
Energy projects
Reducing
Scope 3 emissions:
ɰ Efficiency
programme
ɰ
Selection criteria
ɰ
Supplier
engagement
Reducing
Scope 3 emissions:
ɰ
Travel less
ɰ Travel differently
ɰ Policy and tools
Increasing
climate resilience:
ɰ
Financial modelling
ɰ
Business continuity
ɰ
Risk assessment
ɰ
Scenario analysis
QinetiQ Group plc
Annual Report and Accounts 2026
44
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
Progress against targets
Scope 1 and 2 emissions
We have consistently achieved year-on-year reductions
in Scope 1 and 2 emissions, and within FY26 we achieved
a 36% reduction against our FY20 baseline. The table
below outlines our Scope 1 and 2 emissions and energy
performance since our baseline year, indicating the
proportion for the UK. Within the table, three fields include
the symbol
, which indicates figures that have been
through independent assurance. PricewaterhouseCoopers
LLP (‘PwC’) carried out a limited assurance engagement on
selected Scope 1 and 2 emissions data for the year ended 31
March 2026, in accordance with International Standard on
Assurance Engagements 3000 (revised) and 3410, issued by
the International Auditing and Assurance Standards Board.
A copy of the assurance report is available on the climate
change page of our website.
The figures presented in the table below represent a full
restatement of our historic Scope 1 and 2 GHG emissions,
triggered by the sale and leaseback of our Farnborough site
in FY25. This site was a considerable source of Scope 1 and 2
emissions, so this structural change was material as defined
by our restatement policy, outlined in our methodology
document (see page 43). All remaining emissions have now
been moved into Scope 3.
QinetiQ Group Streamlined Energy and
Carbon Reporting (SECR) Data
We have undertaken a series of activities in FY26 as part of
our CTAP, aimed at increasing energy efficiency, reducing
consumption and growing our renewable power sources.
Key examples include:
ɰ
Formalisation and implementation of a comprehensive
Decarbonisation Strategy for our UK estate.
ɰ
Development of a new UK Site Strategy.
ɰ
Our ‘switch-off’ programme, which engages employees
to turn off lights, heating and equipment before
public holidays.
ɰ
Application of upgrades to our Building Management
Systems at various UK sites, optimisation of heating,
ventilation and air-conditioning systems.
ɰ
Delivery of a building consolidation pilot at our
Farnborough site, reducing heating, lighting and
power requirements by co-locating employees
during low-aendance periods.
ɰ
Implementation of a new Hydrotreated Vegetable
Oil (HVO) heating system at our Haslar site, as a
replacement for a legacy fossil fuel system.
ɰ
Installation of further roof-mounted photovoltaic (PV)
arrays at our Malvern site (see image on next page),
ground-mounted PV arrays at Portsdown Technology
Park and solar street lighting at both sites.
Sustainability
Environmental
Restated
As reported in FY25
Scope 1 & 2 emissions
Units
FY26
FY25
FY24
FY20
FY25
FY24
FY20
Total Scope 1 emissions
tCO
2
e
17,020
19,156
R
19,331
R
25,274
R
19,662
19,362
28,377
Total Scope 2 emissions
(location-based)
tCO
2
e
5,744
6,959
R
7,261
R
10,484
R
8,729
10,542
16,281
Total Scope 1 & 2 emissions
tCO
2
e
22,764
26,115
R
26,592
R
35,758
R
28,391
29,904
44,658
Intensity ratio
tCO
2
e/
£m Revenue
12
14
R
14
R
33
R
15
16
42
Energy consumption
kWh
104,936,271
113,474,688
R
116,047,322
R
137,058,515
R
124,902,749
132,659,501
176,376,247
Proportion of energy consumed by
UK operations
%
75%
70%
R
69%
R
71%
R
73%
73%
77%
Proportion of emissions from
UK operations
%
71%
68%
R
66%
R
72%
R
71%
70%
78%
R
signifies restated data, in line with our restatement policy (GHG emissions methodology, outlined on page 43).
indicates figures that have been through independent assurance.
A summary of Scope 1 and 2 emissions
45
Sustainability
Environmental
LOOKING AHEAD
In FY27, we plan to continue our
decarbonisation projects, increasing energy efficiency
and energy resilience; for example, the installation of
improved heating and lighting control systems across our
UK estate, and PV projects such as new solar canopies
across existing parking areas.
Scope 3 emissions
Access to granular Scope 3 data remains a challenge.
In comparison to Scope 1 and 2 data, the time required to
navigate the complexity of producing Scope 3 information
for the Financial Year means that we are currently unable
to include this within our Annual Report and Accounts.
During FY26, we published our Scope 3 data for FY25 on
our website, totalling 321,308 tonnes CO
2
e – nearly 92%
of our total emissions.
We saw a downward trend in most Scope 3 categories,
but our total FY25 Scope 3 emissions were higher than the
previous year, driven primarily by an increase in procurement
of goods and services, a reflection of the fact that the
current calculation methodology continues to be based
directly on spend. We recognise the challenges associated
with improvements, but progress has been made on the
steps we need to take. We have also seen an increase in
Scope 3 emissions associated with Leased Assets as a
direct result of the sale and leaseback of our Farnborough
site, with remaining emissions moving from Scopes 1 and 2
into Scope 3.
Within our CTAP, we remain focused on our two largest
sources of Scope 3 emissions, namely Workstream
3 – Procured Goods and Services/Capital Goods, and
Workstream 4 – Business Travel. During FY26 we completed
various activities to address these, for example:
ɰ
Engagement with our supply chain:
ɰ
Discussions with our top 50 suppliers by
spend-based emissions, around obtaining
product/service carbon footprints or some
other form of activity-based emissions data.
ɰ
Discussions with other suppliers that have
previously indicated their ability to provide a
product/service carbon footprint, to assess
the feasibility of adopting these.
ɰ
Developed a methodology to calculate the carbon
footprint of procured professional services, to be
used as an alternative to spend-based calculations
as part of hybrid emissions accounting, and to
be shared with our service providers to enable
vendor-specific customisation.
ɰ
Developed an energy management guide for
high-energy-intensive Small to Medium Enterprise
(SME)manufacturers, providing suggestions on
how to reduce energy consumption and emissions
from their operations.
ɰ
Rollout of a significant new Digital Workplace IT
architecture, providing teams with new global digital
collaboration toolsets and data sharing capabilities,
which provides alternatives to business travel.
LOOKING AHEAD
From FY27, we plan to increase our focus
on obtaining supplier product/service carbon footprints,
clearly communicating our expectations with our supply
chain (e.g. strengthening our climate contracting clauses),
and where possible implementing requirements for greater
visibility of activity-based data. As part of our adoption
of new global digital toolsets, we will also be working to
standardise systems and centralise data repositories, to
provide greater data analysis and forecasting capabilities
to identify further opportunities for improvement.
Environmental management
Our environmental management framework is structured
around defined Group Requirements aligned to the
principles of the ISO 14001:2015 Standard. During FY26,
these were updated and re-framed as the Environment and
Climate Change Group Requirements, maintaining 22 core
areas of environmental governance. Five requirements
were amended to explicitly incorporate climate-related
considerations within risk identification, design and
development control, operational control, procurement,
and awareness requirements.
ISO 14001 certification was maintained at 25 UK-based
locations and one Canadian-based location during the year.
External certification bodies completed sampling audits,
Roof-mounted PV at our Malvern site
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
46
Sustainability
Environmental
identifying a small number of minor non-conformities and
improvement opportunities. Corrective actions have been
implemented in response to the non-conformities. Our
internal second-line environmental evaluation programme
also undertook supporting audits during the reporting
period. We continued implementation of a regulatory
compliance evaluation system to improve visibility of
applicable environmental obligations across operationally
controlled locations. Preliminary screening has been
completed at the majority of sites worldwide, with further
validation activity planned.
Environmental concerns, reported by employees are
recorded through our internal reporting system and
investigated in accordance with established procedures.
No environmental enforcement actions, notices or financial
penalties were issued to the Group during FY26.
Resource use: waste and water
Our business activities are predominantly service-based
and do not involve significant product manufacturing
processes. Reported waste primarily comprises general and
inert solid waste streams. Waste data are compiled from
contracted service provider reports, site-level reporting
and, where necessary, some estimation. We recognise the
limitations associated with estimation and are reviewing
opportunities to improve primary data capture. Waste-
related emissions represent less than 1% of our global
Scope 3 greenhouse gas emissions. Water consumption is
associated primarily with routine occupation of facilities and
limited operational testing activities. Many of the sites we
occupy are leased properties or customer-owned facilities
where water use data is not directly controlled by the Group.
Biodiversity and conservation
Several UK locations at which we operate or provide
services are situated within or adjacent to nationally or
internationally designated areas for nature conservation.
These sites are generally owned by the UK MOD and
environmental responsibilities are defined within
contractual and regulatory frameworks. As the core work
undertaken on the sites consists of trials, activities are
typically temporary and project-specific and are undertaken
within aained consent and approval conditions. We help
deliver customer-funded nature conservation activities
across customer owned sites. Where contracted, we
provide services in accordance with agreed environmental
management plans. We do not undertake significant
land-use change as part of our core activities.
During FY26, we initiated a preliminary desktop screening
exercise across our principal UK locations to identify
potential nature-related interaction pathways. This
screening draws on conservation designation data and
considers factors including ecological sensitivity, business
criticality and activity intensity. The purpose of this work
is to assess whether nature-related constraints, such as
permiing requirements, seasonal restrictions or access
conditions, could give rise to financially material effects.
We are incorporating proportionate biodiversity
considerations into environmental risk management and
project planning processes and will continue to monitor
developments in emerging non-financial reporting
disclosures, for example TNFD (see page 42).
Although we divested our Farnborough site in 2025, we took
the opportunity to hold a celebration event to mark our
30-year partnership with Marwell Wildlife in the protection
and management of Eelmoor Marsh, a Site of Special
Scientific Interest (SSSI), which forms part of the estate.
We recognised the skill and dedication of the people
who contributed to the success of the programme.
Supporting our customers
Over the past year, we have been growing our portfolio to
support our customers in Defence in understanding the
impacts of Climate Change on Operations across the Land,
Maritime, Air and Space domains. In collaboration with
QinetiQ Training and Simulation, we have delivered several
projects into the MOD including; a broad analysis looking
at the impacts of climate change on military capabilities
and what can be done to combat those challenges and
a collection of 20 new climate security scenarios which
were developed to outline future potential climate change
related security challenges that could impact directly on
the UK Armed Forces. We have continued to spend internal
Innovation, Research and Development funding to further
explore and develop our collection of climate security
scenarios and their potential impact on Operations and
future conflict. Future investment could look at conducting
Pathway Analysis for specific scenarios to understand
a wider range of possibly outcomes to climate related
challenges and their impact on Defence and security.
In addition, we have aended numerous MOD and NATO
climate change focused working groups and conferences,
including studies on the future of Low Carbon Warfare and
the NATO Climate Change and Security Centre of Excellence
(CCASCOE) Climate Security Summit
(October 2025).
The Climate Security Summit explored the role of NATO
and its allies in preparing for, adapting to and mitigating
the challenges of climate change.
47
Describe the Board’s oversight of climate-related risks and opportunities
Describe management’s role in assessing and managing climate-related risks and opportunities
A
B
Taskforce on Climate-related
Financial Disclosures
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 & targets. In accordance with
section 414CB of the Companies Act and following the TCFD
all-sector guidance (there is no specific supplementary
guidance for our sector), we provide our disclosures here
(pages 48–52) aligned to the four themes, providing material
information against each requirement. We also outline our
approach in our non-financial information and sustainability
statement on page 63. We provide links to where further
information is provided in this Annual Report and Accounts.
Compliance statement
In accordance with the UK Listing Rule 6.6.6R(8) we confirm
we have considered the guidance and believe our approach
is consistent with the TCFD recommendations, save for, we
recognise we need to do more on quantitative modelling as
part of the strategy disclosures, and we continue to evolve
our financial models to progress our quantitative financial
assessment. We are commied to implementing this
approach, to provide investors and other stakeholders
with information on climate-related risks that are relevant
and material to our business.
Governance
Disclose the organisation's governance around climate-related risks and opportunities
Recommended disclosures and overview
Additional information
QinetiQ's Board sets the Company's
strategic priorities, including on
ESG and climate change, and has
regular oversight of and input into
our climate change programme.
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
climate change and our wider ESG
programme. The Group CFO and our
Group Director ESG provide regular
reports and briefings on ESG and
climate change to the Board and
Board Commiees.
ɰ
The Board reviews our Company
Strategic Plan, where climate
change is included in key
functional/sector plans, and
approves the annual budget
(which contains Net-Zero
targets and programmes).
ɰ
The Audit Commiee reviews
and monitors QinetiQ’s financial
and non-financial reporting
requirements, including TCFD.
During FY26, the commiee
received quarterly updates on
non-financial reporting provided
by the Group Director ESG.
ɰ
Updates on the CTAP were
provided as part of ESG updates
for the Board and papers for the
Audit Commiee.
ɰ
The Remuneration Commiee
oversees leadership incentives,
including ESG metrics, as part of
the Annual Bonus Plan.
ɰ
The Risk & Security Commiee
has oversight of and provides
assurance to the Board on
QinetiQ's risk management
system. This includes quarterly
monitoring and review and
regular deep dives of all QinetiQ's
principal risks, which includes
climate change as part of the
Environment principal risk.
Our 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.
The key Functional Council is
the Environment Council, chaired
by the Group Director ESG. The
climate change programme
includes leaders and subject
maer experts from across the
business, ensuring the necessary
multidisciplinary approach.
Climate change forms part of the
Environment principal risk and the
Group Director ESG is responsible
for identification, assessment
and oversight of the risk and
opportunities, undertaking regular
reviews of the programme and
capturing those risks through
the enterprise risk management
governance process.
The Group CFO has oversight of the
programme. Leadership and delivery
of the Climate Change Programme
is the responsibility of the Group
Director ESG, reporting to the Group
CFO. They conduct monthly review
meetings of the CTAP.
Our QinetiQ Leadership Team (QLT)
is responsible for managing
climate-related risks and
opportunities and delivering the
programmes through our operations
and across our value chain. ESG and
climate change form an integral part
of our strategic planning process.
The Annual Bonus Plan (ABP) rewards
non-financial performance through
the delivery of key ESG
goals, including those related
to environment (Net-Zero).
Board Directors
84
Board Commiees
87
Board
responsibilities
88
Audit Commiee
104
Remuneration
Commiee
115
Risk & Security
Commiee
110
ESG Governance
62
Non-financial
information and
sustainability
statement
63
Annual Bonus Plan
123
Sustainability
Environmental
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
48
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
Recommended disclosures and overview
We have reviewed and refined
our climate-related risks and
opportunities (see table) and
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
strategic planning approach over
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 evolve
over time, and refine our approach,
particularly focusing on quantifying
the impacts, and we will report
further information as this develops.
Table of risks and
opportunities
50
We recognise the importance of
integrating climate change and
wider ESG considerations into our
Company strategy and planning,
and our wider governance and
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 CTAP
plans and programmes). This is
illustrated as follows:
ɰ
Our commitment to sustainability
forms part of our investment case.
ɰ
Climate change forms part of
our Environment principal risk.
ɰ
Scope 1 and Scope 2 GHG emissions
are a core non-financial KPI.
ɰ
ESG metrics (including Net-Zero)
formed part of the performance
measures in the Annual
Bonus Plan.
ɰ
We have commied funding
to support our climate
change programme.
ESG and climate change are part
of our annual strategic planning
process. During FY25, we planned
for a number of actions which were
implemented in FY26, including:
ɰ
Allocation of budget to deliver
energy-saving projects.
ɰ
Investment in access to third-
party horizon scanning tools.
ɰ
A new suite of resources and
support for leaders.
In addition, as part of the broader
scenario impact assessment of our
strategic plan, 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.
The science is clear and it is
unequivocal that the climate is
changing. However, the precise
trajectory is dependent on:
ɰ
the influence of activities in
the past,
ɰ
the global action taken now and
in the coming years, and
ɰ
the rate at which that action
is taken.
To guide our strategy and planning,
we consider different scenarios:
ɰ
A: <2°C strongly declining
emissions: intensification
of decarbonisation action
resulting in increasing and rapid
transition, with more limited
physical impacts.
ɰ
B: 2–4°C stabilising/slowly
declining emissions: physical
risks continue and transition
risks continue to increase.
ɰ
C: >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) so that we
are able to evaluate risks as low,
medium or high. We review this
approach regularly.
We have made a qualitative
assessment of the financial impacts
(see table on the next page) and
are actively progressing our work on
modelling the quantitative impacts.
Investment case
5
Environment
principal risk
68
Non-financial KPIs
39
Annual Bonus Plan
123
ESG Framework
41
Climate transition
action plan
44
Viability statement
and going-concern
statement
69
Climate change
programme and
targets
43-46
Approach to risk
management
65
Sustainability
Environmental
Additional information
Describe the climate-related risks and opportunities the organisation has identified over the
short, medium and long term
Describe the impact of climate-related risks and opportunities on the organisation’s business strategy
and financial planning
Describe the resilience of the organisation’s strategy taking into consideration different climate-related scenarios,
including 2°C or lower scenario
A
B
C
49
Impact
Timescale
Low
Medium
High
Long term
Medium term
Short term
Sustainability
Environmental
Risk effect (unmitigated)
Financial impact
A: Declining
emissions
B: Stabilising
emissions
C: Rising
emissions
Mitigation/adaptation
Flooding
Type of Risk: Physical (acute)
Direct damage 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
Low impact
Short to
medium term
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
ɰ
Risk assessment
ɰ
Climate resilience business
continuity planning
ɰ
Customer and supplier
engagement
Extreme temperature fluctuations
Type of Risk: Physical (chronic)
Increased need for cooling
and heating to minimise
damage to high-value
equipment within buildings.
Increased costs
Low impact
Short to
medium term
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
ɰ
Risk assessment
ɰ
Climate resilience business
continuity planning
ɰ
Customer and supplier
engagement
Wind and storms
Type of Risk: Physical (acute)
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
costs
Low impact
Short to
medium term
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
ɰ
Risk assessment
ɰ
Climate resilience business
continuity planning
ɰ
Customer and supplier
engagement
Increased cost of energy
Type of Risk: Transition (market)
Energy costs, such as those related to
fossil fuels and electricity derived from
non-renewable sources, are expected
to increase. Cost of alternative fuels
such as sustainable aviation fuel and
HVO remain high.
Increased costs
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
ɰ
Improving forecasting
ɰ
Reduce reliance on fossil fuels
through climate programme
ɰ
Monitoring fuel costs
Carbon taxation
Type of Risk: Transition (policy and legal)
Current and emerging regulations on
carbon emissions may result in carbon
taxes, and increased resourcing
required to meet non-financial
reporting disclosures.
Increased costs
Medium impact
Medium to
long term
Medium impact
Short to medium
to long term
Medium impact
Short to medium
to long term
ɰ
Legislative monitoring
ɰ
Energy reduction programmes
ɰ
Improvements to data
capture and reporting
Cost of raw materials
Type of Risk: Transition (market)
Potential for exposure to increases
in prices of raw materials, directly
or in supply chain.
Increased costs
Low impact
Medium to
long term
Low impact
Medium term
Low impact
Medium term
ɰ
R&D investment
ɰ
Customer and supplier
engagement
Access to capital
Type of Risk: Transition (reputation)
Failure to meet shareholder
expectations of Net-Zero & resiliance
commitments, and resulting
access to, or cost of, capital.
Increased costs
Low impact
Long term
Low impact
Short to medium
to long term
Low impact
Medium to
long term
ɰ
Reporting of progress
ɰ
Investor advocacy
ɰ
Customer and supplier
engagement
Increased customer demand
Type of Risk: Opportunity (product and service)
Growth in customer demand for more
sustainable and resilient solutions
could result in increased sales/access
to new markets.
Increased revenue
Low impact
Long term
Low impact
Short to medium
to long term
Low impact
Medium to
long term
ɰ
R&D investment
ɰ
Customer and supplier
engagement
See page 49 for further information on
these scenarios.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
50
Sustainability
Environmental
Risk Management
Disclose how the organisation identified, assesses and manages climate-related risks
Recommended disclosures and overview
Identifying risk:
Our risk
assessment approach is in line
with TCFD recommendations and
addresses both physical risks, 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
risks are material to our business.
ɰ
For physical risks we considered
these primarily by site, as well as
the potential impact on our supply
chain and business delivery.
A variety of potential risks have
been identified (e.g. where there
may be increased flood risk or
exposure to storm events).
We recognise that this needs
to be a continuous process 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 have
a good understanding of the
physical risks posed and
suitable mitigations.
ɰ
To identify transition risks
(such as market or regulatory
changes) we undertake horizon
scanning to identify any
relevant changes. We work with
subject maer experts across
the business and our industry
networks and have invested in
a third-party tool to support our
horizon-scanning approach.
Assessing risk:
As the global
landscape changes and our
business evolves, we recognise the
need to review and update our risks
regularly. Risks and opportunities
are scored considering the potential
impact, the likelihood of occurrence,
and the velocity (proximity of
occurrence). Scenario analysis
has been undertaken on our most
material risks and opportunities, and
this has formed the foundation for
the development of financial models
to quantify financial impacts (taking
into account impact on revenue,
costs and asset value).
Environment
principal risk
68
Summary table
of risks
50
Enterprise risk
management
65
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
QinetiQ Leadership Team (QLT)
who are responsible for ensuring
the operational effectiveness of
internal control systems and for
implementing risk mitigation plans.
Climate change is recognised as part
of the Environment principal risk and
the Group CFO is accountable.
The Board Risk & Security Commiee
review and discuss principle risks
quarterly and the Board undertakes
a twice-yearly assessment
of the principal risks, including
risks associated with climate
change. The QLT is supported by
our Group Director Risk & Assurance
and our risk managers, who are
able to have more tactical and
operational oversight. All risks
are assigned owners.
We have based our approach to
climate risks on our enterprise risk
management methodology, to
ensure that we are embedding it
into our existing processes.
Managing transition risks requires
us to consider a range of factors.
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. We also engage
with key stakeholders such as
our Environment Council.
Our Business Management
System contains our Group policy,
requirements and instructions, to
ensure that we have established and
are maintaining robust and adequate
procedures, systems and controls.
Principal risks
66
Risk & Security
Commiee
110
Enterprise risk
management
65
Internal
stakeholder
engagement
42
Environment
Council
63
Additional information
Describe the organisation’s processes for identifying and assessing climate-related risks
Describe the organisation’s processes for managing climate-related risks
Describe how processes for identifying, assessing and managing climate related risks are integrated into the
organisation’s overall risk management
A
B
C
51
Sustainability
Environmental
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities
where such information is material
Recommended disclosures and overview
ɰ
GHG absolute Scope 1 emissions
ɰ
GHG absolute Scope 2 emissions
ɰ
Intensity ratio (tCO
2
e per £m
of revenue)
ɰ
Energy consumption
ɰ
GHG Scope 3 emissions
Non-financial KPIs
39
Summary of
emissions, intensity
and energy
consumption
45
Scope 3 emissions
46
We annually report our absolute GHG
Scope 1 and 2 emissions and data are
subject to independent third-party
limited assurance.
ɰ
Total FY26 Scope 1 emissions
were 17,020 tCO
2
e
ɰ
Total FY26 Scope 2 emissions
were 5,744 tCO
2
e
ɰ
Total FY26 Scope 1 and 2 emissions
were 22,764 tCO
2
e
We have reported our total Scope
3 emissions for FY25 in this Annual
Report and Accounts and are
finalising our FY26 scope 3 data,
which will be published on our
website during 2026:
ɰ
Total FY25 Scope 3 emissions
were 321,308 tCO
2
e
Climate change forms part of our
Environment principal risk.
We have commied to near-term
and long-term science based
targets across our value chain,
validated by SBTi in June 2022
(all from an FY20 baseline):
ɰ
50% absolute reduction of
Scope 1 and 2 by FY30
ɰ
30% absolute reduction of
Scope 3 by FY30
ɰ
33% absolute reduction by FY30
ɰ
Net-Zero by FY50 or sooner
Performance
: we
have achieved
progress against our Scope 1 & 2
target and by the end of FY26 we
have achieved a reduction of 36%
against our FY20 baseline. Scope 3 is
currently more challenging and
we saw an increase in FY25 compared
with the previous year, driven
primarily by an increase in purchased
goods and services. (Note we will be
reporting our FY26 Scope 3 data later
in 2026).
Scope 1 and Scope 2
GHG emissions
45
Scope 3 GHG
emissions
46
Environment
Principal risk
68
Net-Zero targets
43
SBTi validation
of targets
43
Scope 1 and 2
performance
45
Scope 3
performance
46
Additional information
Disclose metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and
risk management process
Disclose Scope 1, 2, and if appropriate, Scope 3 GHG emissions and the related risks
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance
against targets
A
B
C
Plans for FY27
Our focus for FY27 will be to continue to deliver our Climate Transition Action Plan. Under the four decarbonisation
workstreams, we will be delivering projects that focus on reducing our key GHG emissions. We will also be continuing to
improve our resilience to climate change through reviewing and managing our identified physical and transitional risks
(Workstream 5) and further progressing our cross-cuing workstreams, such as improving data and processes.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
52
Sustainability:
Social
Investing in our people, delivering for our
customers. Our aim is to create a safe,
secure and sustainable workplace where
our people can deliver the very best for
our customers in a working environment
in which they can thrive, realise their
potential and feel recognised for their
expertise and contribution.
Safety and wellbeing: Care and thrive
A safe and secure working environment is fundamental to
how we support our people, enabling them to deliver for
our customers and feel recognised for their contribution.
Our programme focuses across four thematic workstreams.
FY26 saw continued maturity within each area:
1.
Risk management:
We embedded improvements to
our risk control processes and strengthened reporting
discipline across all sites. Work to improve the visibility
of safety-critical information continued, enabling earlier
intervention and reinforcing line ownership of risk. The
three-year risk stabilisation programme completed with
>90% of actions achieved. A safety legal compliance
programme was completed and provides the foundation
of enhancements to how we manage our hazardous
activities planned for FY27.
2.
Culture:
We have continued to improve through the
cultural maturity model established in 2024, with this
year’s focus on leadership behaviours that support
a positive safety culture and encourage learning
rather than blame.
3.
People:
Our focus on wellbeing deepened, including
proactive occupational health and mental health
support for individuals following incidents and
continued roll-out of the Wellbeing Knowledge
NetworQ. In the UK we have developed trauma training.
4.
Technology:
We progressed our use of data and digital
tools to provide earlier insight into risk trends, improve
reporting consistency and enhance decision-making.
FY26 safety performance remained stable; we have seen an
overall reduction in number of incidents and also a reduction
in severity. The Total Recordable Incident Rate (TRIR)
remained steady and the Lost Time Incident Rate (LTIR) has
increased slightly due to a reduction in total headcount and
isolated lost time events.
LTIR is one of our non-financial KPI
(page 39).
Strengthened occupational health capability (both
external and internal) is supporting more proactive case
management and earlier return to work outcomes.
Measure
FY26
FY25
FY24
FY23
LTRI
1
1.82
1.45
1.69
1.89
TRIR
2
3.12
3.62
2.78
3.63
1
The number of lost time incidents where the employee is away from
work for one or more days, multiplied by 1,000 and divided by the
average number of employees.
2
The frequency of recordable workplace incidents per 100 full-time
employees, annually.
Case study: Optimising safety cases
Safety cases remain a critical mechanism for demonstrating
that operations and systems are safe, supported by
structured argument and evidence. Our approach, aligned
with practices in high hazard industries and defence,
ensures clear articulation of design and operational safety
and enables proportionate, risk-based assurance. We
continue to make strong progress on transforming our
safety case framework to deliver consistency, reduce
cost and provide the assurance needed across complex
facilities, systems and products. Building on the work trialled
and proven in the previous year, focus in FY26 has been on
embedding the new approach and a wider roll-out.
Wellbeing
Our wellbeing strategy provides direction and a common
approach to ensuring we have the mindset, skill sets and
toolsets for our people to take care of themselves and each
other. Formal support channels help ensure that support is
available when times are tough. These include our Employee
Assistance Programme, which offers a 24/7 support service,
including counselling. Employees are also encouraged to
talk to a Mental Health First Aider. One of the key deliverables
in FY26 was our sessions on navigating change. Working
through the restructuring programme and recognising the
impact of change on our people, we ran a series of sessions
aimed at providing support and advice. While predominantly
aimed at managers, the 13 sessions aracted nearly 900
employees. Recordings and materials from the sessions
have creating a lasting resource for continued learning.
OUR FOCUS IN FY27
A key objective for FY27 will be ensuring
that we maintain and continuously improve the high
standards of safety we have set in our hazardous activities,
which represent a core part of our culture. Specific work
will be undertaken to review the training and capability
necessary to grow and develop the specialist technical skills
that ensure we conduct our trials and activities safely.
53
Sustainability
Social
Employee engagement and inclusion:
Driving performance and enabling
sustainable growth
We are building a workplace based on engagement and
inclusion. When our people feel connected to their work and
valued for their contribution, they bring their best ideas,
energy and commitment. When we embrace different
ways of thinking, we drive performance, strengthen
decision-making and enable sustainable growth.
Listening to our people helps us improve our working
environment and we encourage feedback via:
ɰ
Global Employee Voice (GEV) representatives,
who act on behalf of our colleagues to shape ideas
and initiatives
ɰ
Workday Peakon, our employee engagement platform,
which delivers four surveys annually, informing our
decision-making at a Group, business and team level
ɰ
Two-way communication channels, such as our
intranet and Q-Talks, which encourage colleagues to
share thoughts, feedback and experiences. This year
we also introduced ‘Manager Talking Points’, equipping
UK managers with practical toolkits to support
meaningful conversations
ɰ
Global Employee Roadshows, which are held
group-wide twice a year, provide an opportunity to
hear from our leadership team about strategic
progress and priorities, as well as ask questions
ɰ
UK Site Champions and Heads of Site bring people
together, building communities at a local level
Employee engagement is tracked as a non-financial KPI
(see page 39). In FY26, we held two full employee
engagement surveys and two shorter pulse surveys
(via Peakon), with reported engagement scores reflecting
aggregate results over a six-month period. The final
full survey, completed in February 2026, recorded an
engagement score of 6.5 out of 10 (compared with 7.5
reported in FY25). This reduction reflects the challenging
operating environment during FY26 and the actions taken
to control costs, which required a number of difficult
decisions, including a restructuring programme that had a
direct impact on our people and their sense of engagement.
Through Peakon and other engagement channels, our
people provide valuable insight into what we do well and
where we can further improve their experience.
Our people express a deep commitment to our mission,
taking great pride in their work and valuing the supportive
teams and relationships that make our Company feel unique.
Flexible working continues to be recognised as a core
strength, with employee feedback consistently highlighting
the positive impact it has on how our people work and
collaborate. We offer a range of options, including
Compressed Working (a nine day fortnight) in the
QinetiQ Ltd business, with 28% of colleagues taking up
this option. This helps us to build an inclusive, collaborative
and customer-focused culture.
Listening to our people about what we could do beer, we
have prioritised improving our communication channels.
This has included reintroducing in-person Global
Employee Roadshows to complement the virtual sessions,
refreshing our approach to Q-Talks (our monthly discussion
communication channel), ensuring our leaders are more
visible on our sites and puing in place a forum for feedback
and improvement on our communications.
Throughout the year, we have continued to respond
directly to employee feedback by strengthening our
Digital Workplace programme and improving the tools
and support that our people rely on every day. As a result,
we have delivered weekly updates to provide transparent
progress, introduced new productivity tools and expanded
face-to-face and targeted support sessions to help teams
adapt with confidence. More than 6,000 colleagues in the
UK and Australia have now successfully transitioned to the
Digital Workplace.
OUR FOCUS IN FY27
Our people have told us they believe
in QinetiQ’s potential and want to help shape a stronger,
more aligned and more people-centred organisation. To
do so, they want greater clarity and increased investment
in modern tools and working environment, enabling them
to continue delivering meaningful, high-quality work. This
insight is being incorporated into our Engagement Working
Groups, where feedback from across our engagement
channels is brought together to strengthen understanding,
prioritise areas of focus and inform actions that will make
a tangible difference. This includes updating our Hybrid
Working approach to ensure colleagues are spending more
of their time on site, to take advantage of the benefits of
increased face-to-face collaboration and connection.
Our voluntary arition was 11.2%, compared with 10.7% in FY25.
As we strive to create an inclusive environment,
we continue to:
ɰ
Further embed inclusive recruitment into our hiring
practices to ensure merit-based, fair, consistent and
accessible hiring for all candidates
STRATEGIC REPORT
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FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
54
ɰ
Take part in the KPMG Cross Company Allyship
Programme, a mentoring initiative that connects
mentors with mentees from black heritage and ethnic
minority backgrounds
ɰ
Run our employee-led networks, which build
understanding of lived challenges and individual
strengths, creating a space for discussion, learning
and advocacy
ɰ
Support awareness-raising campaigns, such as
International Women’s Day, International Men’s Day,
International Women in Engineering Day, Pride Month
and Armed Forces Week
ɰ
Deliver our award-winning military spouses
programme, as part of our Social Value commitments
with UK customers (see page 55)
ɰ
Support UK Women in Defence as signatories to their
charter and long-term sponsors of the Innovation &
Sustainability Award, and provide resourcing support
through a part-time secondment
ɰ
Set a target to achieve 7% ethnic minority for Senior
Management (QLT and their direct reports) by 2027
QinetiQ Group conducts its employment practices
in relation to diversity and inclusion in compliance
with applicable local, state, provincial and federal law,
regulations and executive orders in the jurisdictions in
which it operates.
OUR FOCUS IN FY27
In FY27, we will publish an Engagement
and Inclusion plan, reaffirming our commitment and seing
out our priorities. While meaningful and sustainable change
will take time, we remain focused on progress. Through
continued action, we aim to build a QinetiQ that reflects
the communities we serve and ensure that our people can
contribute with confidence.
Last year, recognising the cultural change required to
successfully deliver our strategy and improve performance,
we commied to launching a Culture and Leadership
Programme of work. This will build on pre-established
cultural foundations, including the QinetiQ Values and
Behaviours and the Leadership Expectations introduced
in FY25.
In FY26, we undertook a culture diagnostic and defined
our aspirational ‘Culture North Star’. The introduction
of our new operating model was a critical enabler of this
transformation, most notably through the creation of the
Performance and Growth Functions. The Performance
Function drives accountability, operational excellence and
continuous improvement. The Growth Function modernises
our business-winning capability, enabling more integrated,
collaborative and sophisticated approaches to growth.
OUR FOCUS IN FY27
Moving into FY27, we will fully embed
our leadership expectations by prioritising leadership
capability. Our QLT and top 100 leaders will participate in
a bespoke development programme designed to equip
them for their critical role in driving and embedding further
culture change initiatives across the organisation.
Gender balance data
The table below shows the breakdown by gender of our Board, Senior Managers and all employees:
FY26
FY25
FY24
FY23
Female
Male
Female
Male
Female
Male
Female
Male
Board Directors
1
3 (33%)
6 (67%)
4 (36%)
7 (64%)
4 (44%)
5 (56%)
3 (33%)
6 (67%)
Senior Managers
2
59 (23%)
197 (77%)
65 (22%)
237 (78%)
69 (22%)
251 (78%)
57 (19%)
244 (81%)
Other employees
3
1,747 (25%)
5,366 (75%)
2,054 (25%)
6,036 (75%)
2,144 (26%)
6,152 (74%)
1,976 (25%)
5,989 (75%)
1
For more information on Board diversity, see page 81.
2
Senior Managers are defined (in accordance with section 414C of the Companies Act 2006) 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.
The proportion of women who are Senior Managers has increased in FY26 and the proportion of women across our overall
workforce has remained steady at 25%. We also participate annually in the FTSE Women Leaders Review, which focuses
on female representation at executive management level and their direct reports, which is a smaller population than the
Senior Managers. We reported 34.3% (at October 2025), compared with 27.6% in FY25 (and in line with Provision 23, we report
FY26 data on Page 100). In our latest UK Gender Pay Gap report (for the FY25 reporting period
), we report a mean gender pay
gap of 9.9%, which is an improvement compared with the previous year (11.6%, for the FY24 reporting period).
Sustainability
Social
55
Skills and development:
Growing future capability
As we strive to grow our business, we need to ensure we
are developing skills and capability aligned to customer
needs, both now and in the future.
In the context of the challenging operating environment,
we prioritised Health, Safety and Compliance training,
alongside business-critical requirements. Formal training
outside of these areas has been subject to review to
ensure we link professional development directly to
business priorities.
We continue to support and invest in our group-wide
Fellows scheme, which recognises technical, scientific and
engineering leaders. Our Fellows and Senior Fellows are
nationally or internationally renowned experts in fields such
as Avionic Systems, Lasers and Adaptive Optics, Target
Acquisition & Tracking and Sustainability. The scheme
helps us aract and retain leading experts, enabling us
to win work and invest in our capability.
To strengthen our professional development offering,
we launched a partnership for colleagues in the UK with
KPMG’s Learning Services practice. This provides high-
quality, relevant and cost-effective training that supports
individual development and organisational performance.
At the beginning of FY26, we put in place a new Performance
Framework, helping to ensure goals are relevant and
meaningful, fostering a culture of collaboration and
transparency. Through the framework, we are driving
collective performance by ensuring that Company goals
are cascaded through sectors and functions. It also
focuses on improving performance management as
well as engaging our people and role-modelling safety,
security and environmental leadership. All employees are
encouraged to have a development goal, ensuring a focus
on continuous learning and career growth.
OUR FOCUS IN FY27
We are internally developing training in
several specific areas, including; Leading in a Technical
Environment (to equip engineers and scientists with the
skills to lead within projects) and a Test and Evaluation
foundation programme, to set QinetiQ standards for the
skills required for the delivery of test and evaluation.
Career growth is an area clearly identified by our people
as important and we continue to build new resources to
enable learning and development. From FY27, building on the
new Performance Framework, we are increasing the focus
on development by incorporating it into our continuous
performance management cycle.
Early careers
With a commitment to investing in the next generation,
in FY26 we continued to provide a rage of early career
options, and also to ensure apprenticeships are both an
entry route and upskilling opportunity for professional
development later in our peoples’ career. Our early careers
community continue to make a meaningful contribution,
with deployment to customer work. The value of this
experience is reflected in the feedback we receive via
our employee engagement activities.
Commitment to The 5% Club
As a Patron and founding member of The 5% Club, we
remain commied to achieving 5% of our workforce being
either part of our Early Careers programmes or wider Earn
and Learn opportunities. The breakdown of our UK Earn
and Learn community is published each year (see table on
page 57), including the percentage they comprise of the
UK workforce. While we report a smaller number of Early
Careers roles in FY26, which reflects the difficult operating
environment, we maintain our longer-term ambition to
reach 5% of our UK workforce.
Sustainability
Social
Leadership engagement session for our
Early Careers people
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
56
Sustainability
Social
UK Earn and Learn
community
FY26
FY25
FY24
FY23
FY22
Apprentices
83
97
139
85
53
Graduate
programme
32
106
105
128
105
Sponsored students
(Year in Industry
and summer
placements)
2
21
16
26
24
Upskilling
apprenticeship
(within first five
years in QinetiQ)
30
64
48
25
8
Early Careers
as % of
UK workforce
2.1
3.7
4.2
4.2
3.4
Total Earn and
Learn as % of
UK workforce
2.6
4.7
5.0
4.7
3.5
An additional 24 colleagues who have been with QinetiQ for
more than five years are on an upskilling apprenticeship.
OUR FOCUS IN FY27
Looking ahead to FY27, we continue to
focus on building a group-wide learning capability within
our Early Careers community, ensuring we are developing
the skills needed across our Company. We will undertake a
strategic review of the programme, ensuring consistency
in our approach, while enabling more specific focus in areas
such as cyber, software, project management and ranges.
Rewarding for Performance:
Celebrating employee contribution
We offer a range of tangible rewards and benefits designed
to incentivise both collective performance and individual
contribution. Through our ‘Rewarding for Performance’
approach, we acknowledge and reward employee
contribution – individually and as a team – to our success.
In FY26, we:
ɰ
Awarded £500 to each employee as part of our AEIS
(All Employee Incentive Scheme) for their contribution
in FY26, with additional payments of up to 5% of salary
to high-performing employees
ɰ
Invested £700k, as part of our Pay & Progression
approach, on developing employees through in-year
role changes and grade progression
ɰ
Recognised 24 teams and individuals across eight
award categories as part of our Global Recognition
Gala, celebrating the aributes most important to
us at QinetiQ
ɰ
Continued to provide additional support to our
people who are experiencing challenging personal
circumstances through our Group Hardship fund and
Employee Assistance Programmes (EAP)
ɰ
Continued to be accredited as a Living Wage Employer
For colleagues in the UK and Canada, we launched a new
ThankQ recognition platform in FY26, with 1,791 recognition
awards. The platform enables employees to recognise
each other’s contribution across three new categories,
using four different levels of recognition, as well as to
celebrate milestones and events through a range of eCards.
Colleagues can also interact with recognition posts to
further acknowledge contributions and the platform
provides access to employee savings options.
Our communities
As a significant employer in most of the communities
where we operate, we are commied to giving back.
Our Social Impact strategy includes volunteering, charity
partnership and our ‘Science for Society’ programme.
We are closely aligned with our social value programmes
and our commitment to the armed forces.
Volunteering
Our employee volunteering programme is designed to
enable our skilled workforce to dedicate their time
and expertise to deliver social, environmental and
economic benefits within the communities where we
work. Through our social impact programme, we delivered
a series of high-impact initiatives with a focus on promoting
careers in defence and STEM (science, technology,
engineering, maths):
ɰ
Championing STEM inspiration across the UK
with our flagship events – the Power Boat Challenge,
marking International Women in Engineering Day,
our presence at the Royal International Air Taoo,
our ‘Hands on Science Day’ at Malvern, and our STEM
Exploration Day at Haslar – we aim to inspire the next
generation of scientists and engineers through
hands-on experiences and real-world role models.
Students participate in the 2026
Powerboat Challenge
57
Sustainability
Social
ɰ
Bringing innovation to life
by hosting the LEGO finals
at our Malvern site, giving children the opportunity to
showcase creativity, teamwork and engineering talent.
ɰ
Opening doors to maritime careers
through our
presence at HMS Collingwood (the RN’s largest training
establishment), where we highlighted the breadth of
opportunities available within the sector.
ɰ
Connecting communities to our work
through site
visits for schools, partners and youth groups, enabling
people to experience our facilities and expertise
first-hand.
ɰ
Optimising partnership
with non-profits and
companies such as The School Outreach Company,
to expand access to STEM inspiration and career
awareness, for example under-represented
groups including girls and those in receipt of
Free School Meals.
We have launched a new STEM Working Group,
created to drive and embed STEM volunteering
throughout the business in alignment with our wider
skills and growth strategy.
OUR FOCUS IN FY27
In FY27 we will continue to build our
STEM outreach programme, delivering key flagship
events, including having a presence at the Farnborough
Airshow Pioneers of Tomorrow exhibition, expanding our
engagement with cadet groups across the areas in which
we operate, creating stronger local connections and
broadening pathways into STEM- and defence-related
careers. We will be encouraging greater participation in
volunteering; for example, new skills-based volunteering
programmes.
Science for Society
Our Science for Society programme harnesses the
expertise of our people to address critical challenges. In
FY26, our team undertook a study on
support
for those who
are helping children exposed to extreme messaging online.
Charitable giving
In FY26, we launched a four-year partnership with
Combat Stress, a UK charity for veterans’ mental health.
This partnership reflects our commitment to supporting
positive mental wellbeing, both within our workforce and
in the communities connected to our sector. By working
with Combat Stress, we aim to raise awareness of the
importance of early intervention and sustained care.
This initiative aligns closely with our business strategy
and highlights our ongoing commitment to the Armed
Forces Covenant, supporting veterans, serving personnel
and their families. Through this partnership, our mental
health first aiders have completed the first of two training
sessions focused on how best to support individuals
experiencing post-traumatic stress disorder (PTSD ).
In addition to this partnership, we also donated to Legacy,
the Australia charity that supports the families of veterans.
OUR FOCUS IN FY27
We will continue to build awareness of
PTSD across the organisation and work with Combat Stress
to support our veterans and reservists directly. We also
plan to work with the charity’s experts to develop a suite of
resources to help both managers and wider employees in
effectively supporting colleagues impacted by PTSD.
Social Value
QinetiQ also delivers a range of ‘Social Value’ activities as
part of delivery for UK Government contracts. This activity
complements and supports our Group ESG strategy and
programmes, and sees project teams working with, and on
behalf of, our customers on a range of areas; from positively
growing the next generation of suitably qualified and
experienced personnel (SQEP), to volunteering for local
good causes or championing wellbeing. These projects
have not only met the expectations of our customers,
but have also contributed to the social and economic
wellbeing of the communities we are involved in, prioritising
initiatives that foster community job creation, inspiring
the next generation of STEM innovators and championing
sustainability. Examples include:
ɰ
Delivering a national first ‘hub-and-spoke’ version of
the CyberFirst Advanced course: the team piloted an
industry-leading approach in delivering the National
Cyber Security Centre’s (NCSC) CyberFirst Advanced
programme, with 70 students aending from four
sites across the UK. This model is going to grow in
the next FY, with plans to impact 300 young people in
collaboration with 12 Higher Education Institutions.
“We’re incredibly grateful to QinetiQ for their
innovative hub-and-spoke delivery model for
the CyberFirst Advanced courses. This exciting
approach not only expands access to high-quality
cyber education, but also sets a powerful example
of how collaboration and creativity can help
scale CyberFirst opportunities across the UK.
We hope others will be inspired to adopt and
build on this model in the future.”
Chris Ensor
Deputy Director Cyber Growth,
National Cyber Security Centre
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
58
ɰ
Employability skills for Military Spouses with our
charity partner ‘Recruit for Spouses’. This has
included delivering our targeted ‘Demystifying
Defence’ briefings to support spouses to identify
their transferable skills, find roles on LinkedIn,
prepare their CV and get ready for a mock interview
programme, alongside in-person support in Chepstow.
We have also provided paid work placements for
Military Spouses – designed to help them re-enter
the workforce by building skills, confidence and
experience. Throughout the placement, each
participant was supported by both a QinetiQ Buddy
and a Recruit for Spouses coach and had opportunities
to network with QinetiQ colleagues working in roles
they may wish to explore.
ɰ
Summer programme for BAME Students: as part of the
Sanderson-led ‘Strive’ programme, QinetiQ provided
a paid summer internship for a student from the
University of West of England.
ɰ
Skills donation to military charities: working with
military charities in the ‘Thrive Together’ network,
the team has provided pro-bono support to their
development, advising on everything from impact
reporting to their cyber security provisions.
ɰ
We launched a new partnership with the charity
Futures for All to deliver bespoke virtual work
experience, designed to inspire the next generation
and raise awareness of the wide variety of careers
available within the defence sector.
OUR FOCUS IN FY27
In FY27 We will focus on designing and
delivering projects to drive the skills agenda, support the
armed forces community, and provide meaningful support
to small and medium enterprises (SMEs) and Voluntary,
Community and Social Enterprises (VCSEs) in helping
them enter the defence supply chain.
Our commitment to the Armed Forces
QinetiQ is deeply commied to supporting veterans,
reservists and the wider Armed Forces community. In FY26,
we strengthened this commitment in accordance with our
formal commitment to the Armed Forces Covenant, through
targeted engagement, improved policies and deeper
partnerships designed to ensure that those who serve,
who have served and their family members are recognised,
supported and empowered to thrive within our organisation.
Achievements in FY26 include:
Community and Membership:
We enhanced engagement
and visibility across our Armed Forces through a number
of initiatives. We improved on-boarding guidance for
new employees with military backgrounds. We focused
on growing the membership of the QinetiQ Veteran and
Reservist Network (QVRN). We created veteran lanyards
to raise awareness and ran Breakfast & Brew sessions to
maintain engagement across the network. We represented
QinetiQ at Remembrance ceremonies across multiple
locations. We included Cadet and Cadet Force Adult
Volunteers in our policies and activities fully for the first
time, recognising their contribution to this community.
We focused on advocacy to other employers aimed at
encouraging them to take a positive Armed Forces
approach through a series of workshops.
Wellbeing, Mental Health and Charity Support:
Wellbeing remained a priority. Through our partnership
with Combat Stress, we supported increased access to
mental health services for veterans.
Policy, Governance and Operational Support:
We strengthened key policies and governance structures,
providing consistent support for reservist mobilisation and
reintegration. We updated the Reservist Policy to include
international reservists, began reviewing our Armed Forces
Covenant commitments, and continued supporting the
maintenance of our Employer Recognition Scheme Gold
Award status.
Recruitment and Transition Support:
To enhance
our position as an employer of choice for veterans and
reservists, we expanded collaboration with the Career
Transition Partnership, increased visibility of military-
friendly roles and improved our understanding of the
veteran and reservist population across QinetiQ.
OUR FOCUS IN FY27
In FY27, we will strengthen our presence
at the National Armed Forces Day event being hosted in
Aldershot and expand the network of QVRN site champions.
We will launch the QVRN Mentoring Scheme to support the
transition of new employees with military backgrounds
and introduce a comprehensive skills mapping initiative
to beer understand and utilise the capabilities of our
veteran and reservist community. We will also enhance line
manager training to support mobilised reservists, deepen
collaboration with our Armed Forces Charity Partner,
and fully embed the updated multinational Reservist
Policy across the organisation. We will continue our support
of the Cadet movement through offering unique work
experiences to cadets and we will enhance further our
support of Cadet Force Adult Volunteers. We will continue
to provide support to other organisations and employers
by helping them progress a positive stance on their own
Armed Forces community.
Sustainability
Social
59
Sustainability:
Governance
Effective governance is a critical pillar,
underpinning our ethical standards
and supporting how we work responsibly
and sustainably.
Business ethics: doing business
the right way
Our values
Our values of integrity, collaboration and performance
underpin all that we do. Our values form part of our
performance management framework, our leadership
expectations that are part of our reward and recognition
framework. As part of our FY25 Gala awards (page 57),
Living our Values was celebrated as an award category.
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 conduct and professional standards.
COLLABORATION
The chosen partner for customers and industry partners,
we are a 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 and breadth and depth in capability to our
work, driving innovation. We know that working together is
the best way to meet our stakeholders’ needs.
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 geing things right first time, safely, securely and in a
cost-effective way. Taking an innovative and responsive
approach to create an outstanding customer experience,
we try to go the extra mile and act with courage.
Code of Conduct
Our Group Code of Conduct defines our ethical standards,
providing clear direction and guidance on how we do
business and our expectations of all of our employees.
It contains information on ethical decision-making and
provides information on 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.
Our Code of Conduct is for our people but we also make it
available for customers, suppliers and other partners.
Our Code of Conduct is available on the business ethics
pages of our website
Conduct and ethics training
Annual business conduct and ethics training is mandatory
for employees and supports our people in understanding
and using the Code of Conduct. The training is undertaken
by our Board. 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
safe and 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. For third parties, we provide 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 Board
oversees our approach to confidential reporting (see page
95). 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 conduct and 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.
Anti-bribery and corruption
One of our values is Integrity and we operate a zero-
tolerance approach to bribery and corruption in any form.
We comply with applicable anti-bribery laws and regulations
in the jurisdictions around the world in which we operate.
Our anti-bribery and corruption framework seeks to ensure
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
60
Sustainability
Governance
the identification, assessment, monitoring and mitigation
of bribery and corruption risks. Anti-bribery and corruption
(ABC) forms part of our annual business conduct and ethics
training (see above), and we provide ABC training for our
people in certain high-risk roles, helping them to identify
and mitigate any potential bribery risks that they may
face. The prevention of bribery and corruption is a focus
within our third-party risk management and due diligence
processes, as well as our monitoring and audit programmes.
Human rights and modern slavery
We operate and manage an action plan across the Group
to address the risk of forced labour, child labour, migrant
workers, human trafficking and modern slavery. During FY26,
we have been aligning this plan with the UK Government
Transparency in Supply Chains (TISC) Guidance. Our annual
modern slavery statement is published on the homepage of
our QinetiQ Group website. We maintained our score of 82%
on the UK Government Modern Slavery Assessment Tool
in FY26. Our supplier Code of Conduct helps to ensure our
suppliers have clear guidance on their responsibilities on
human rights, forced labour, modern slavery and speaking
up. We provide tailored training to our people in key roles
and continue to provide supporting resources for all
employees and suppliers, including industry engagement
events through our Collaborate Series. Responsible
business practice underpins how we operate, and we are
commied to respecting human rights. We continue to
anticipate, prevent and mitigate potential negative human
rights impacts through our policy and processes. These are
monitored through our business and supplier assurance
processes and regular self-assessment, with oversight by
our Business Ethics Commiee. For example, we address
salient human rights issues through our Code of Conduct,
our ethical trading policy, international business risk
management process, supply chain due diligence,
export controls process and grievance mechanisms.
Our confidential reporting approach (see page 60) provides
routes for third parties to raise concerns).
Artificial intelligence
During FY26, we have been further developing our approach
to governance of AI, including the roll-out of an AI impact
assessment considering legality, ethicality, safety,
security and sustainability.
OUR FOCUS IN FY27
We will be reviewing and updating
our Modern Slavery action plan to reflect the evolving
external requirements. We will continue to evolve our
approach to ethical trading and further develop our
AI governance approach.
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 and have registered
to file our first OECD Pillar 2 GloBE Information Return 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 newsleer, regular presentations across
the business and bespoke tax training. Our Audit Commiee
oversees our approach to tax (see page 108).
Responsible procurement
We are commied to responsible procurement, both in how
we work with our suppliers and in our engagement on all
aspects of sustainability, from modern slavery to climate
change. As an extension of our Company, we expect our
suppliers to be commied to the same standards and
values of safety, security, sustainability and governance
as we are, which we articulate through our Supplier Code
of Conduct and Sustainable Procurement Guide (available
on our website). Through promoting inclusive procurement
and removing barriers to entry, we strive to enable access
to opportunities for diverse suppliers, including small and
medium-sized enterprises (SMEs) and minority-owned
and non-traditional defence suppliers. We maintain our
support to the SME community through our various trade
associations, events such as the Defence Procurement
Research and Technology Exportability (DPRTE) trade show,
and active engagement with the new UK Regional Defence
and Security Clusters. We have continued to enhance
our Supplier and SME Hub web pages to make it easier for
suppliers to engage and register their interest with us.
We are commied to paying suppliers promptly and we also
continue to work with our third-party subcontractors on UK
sites as they progress towards compliance with our Real
Living Wage commitment. In support of Workstream 3 of
our CTAP (page 44), we developed a new climate-conscious
clause and after successfully integrating this within our
UK supplier terms and conditions, we further rolled this
out to our Canadian business and QTS UK in FY26.
61
Sustainability
Governance
ESG Governance and leadership
Our approach to sustainability is sponsored by our Group
CFO and actively supported by our Board. Our Group Director
ESG leads our sustainability strategy and programmes,
working with leaders and subject maer experts across
the business. Regular briefings and papers are provided
to the Board and key Board Commiees. These cover
all material aspects of our sustainability programmes,
including sustainability strategy, climate change, non-
financial reporting, ethics and community impact, as well
as programmes such as ABC, confidential reporting, safety,
and engagement, which are reported to the Board by key
functional leaders (page 93). This ensures the necessary
oversight of our approach, progress and plans. Within the
organisation, key aspects of governance are overseen by
the Environment Council (chaired by our Group Director
ESG) and Business Ethics Commiee (Chaired by our
Group Director Legal and Company Secretary). These
multidisciplinary leadership groups provide governance and
oversight, and also the opportunity to collaborate across
functions and sectors. Policy and governance aspects of
key ESG programmes are described on pages 63 and 64.
The ABP rewards non-financial performance through the
delivery of ESG goals related to environment (Net-Zero),
employee engagement, safety and security (see page 123).
ESG information for shareholders
This section provides additional information in response to
ESG-related questions commonly raised by shareholders,
investors and ESG data providers when assessing
companies operating in the defence sector. It is intended
to summarise information, including disclosures made
elsewhere in the Annual Report. We recognise that some
investors apply sector-based exclusions to defence
companies. This disclosure is provided to support
shareholders and potential investors who assess QinetiQ
under their own ESG frameworks and methodologies.
Defence and ESG considerations:
We recognise the
importance of transparency for investors assessing our
shares through an ESG lens. QinetiQ operates in defence
and national security markets and provides services to
government customers, primarily in the UK, US, Australia,
Canada and Germany. In an increasingly complex and
uncertain global environment, the ability of democratic
nations to safeguard national security, protect civilian
populations and maintain strategic stability is an important
public policy objective. We believe that investment in
defence companies is compatible with ESG considerations,
when underpinned by strong governance, ethical business
practices and compliance with applicable laws and
regulations. Our activities are conducted within robust
governance frameworks, with oversight by the Board and
executive management, and subject to strict national and
international regulatory regimes, including export controls
and security requirements.
Our end markets and revenue profile:
In FY26 the
majority of Group revenue was derived from defence and
national security activities. QinetiQ is one of the largest
suppliers to the UK Ministry of Defence (ranking as 4th
largest by contract value during the year). The Group’s
activities are predominantly focused on test, evaluation,
training, systems integration, mission-critical services and
scientific and technical assurance. These services support
operational effectiveness, platform safety, regulatory
compliance and the protection of personnel. A small
percentage of Group revenue is associated with weapons
related programmes. The majority of this revenue relates
to test, evaluation and certification activities, rather than
the manufacture of complete weapons systems.
Controversial weapons:
QinetiQ is not engaged in,
nor exposed to the production, development,
manufacture or use of controversial weapons as
defined by applicable international conventions. All of
QinetiQ’s activities are conducted in compliance with
applicable national and international law, including
relevant international conventions.
Nuclear weapons and submarine activity:
QinetiQ is not
involved in the design, construction, testing, manufacture
or maintenance of nuclear weapons. The Group provides
test, training and evaluation services to the UK Royal Navy’s
fleet of vessels including submarines. These services are
focused on platform performance safety, training and
operational assurance and are provided irrespective of
payload. It is important to make a distinction between the
testing and assurance of vessels and the weapon systems
that may be deployed from them.
Governance, ethics and compliance:
QinetiQ operates
under robust governance and compliance frameworks and
internal controls, designed to ensure responsible business
conduct. These include Board-level oversight of ethics,
risk management and ESG maers; robust export controls
and security compliance processes, aligned to applicable
national licensing regimes; ethical standards governing
customer and supplier selection, contract acceptance
and delivery; and ongoing engagement with stakeholders,
including customers, regulators, investors and ESG
providers. Our governance process has oversight of how
we align our operations with relevant human rights
standards and international humanitarian law.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
62
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. 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
18
Environmental, social and governance maers
Sustainability
48-62
Policies
Non-financial and sustainability information statement
63
Principal risks and risk management
Risk management
64
Key performance indicators
Key performance indicators
39
Climate-related financial disclosures
Sustainability
48-52
Non-financial and sustainability
information statement
Environmental management
Climate-related financial disclosure requirements S414CB(2A)
Code of Conduct
Health and Safety
Our People Policy
Environmental maers
Our people
We are commied to embedding an environmentally sustainable
approach to business (see page 46 for more details). The
effectiveness of our Environmental Group Requirement is governed
through our assurance process including the six-monthly
Assurance Statement undertaken by functions and sectors.
Environmental issues are part of a regular governance timetable,
with oversight by the Environment Council and the Board Risk &
Security Commiee. We are certified to ISO 14001 in the UK and
Canada and so are subject to external audit as well as our internal
processes, which are overseen by the Risk and Assurance Director.
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 our statement on
TCFD (pages 48 to 52), climate-related governance (page 48), climate-
related risk management (page 51), climate-related strategy (page 49)
and climate-related metrics and targets (page 52).
Our Code of Conduct provides direction and guidance on how we
do business across the Company (page 60). There is guidance on
our standards, on ethical decision-making and on 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.
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 61), both available on our website. Speak up and
the Code of Conduct form part of the Business Ethics Commiee
agenda and updates are part of ESG papers for the Board.
Confidential reporting is overseen by the Board (page 95).
Our Safety Policy outlines our commitment to continually improving
standards of safety management and compliance. This is
supported by our Safety Strategy. The effectiveness of the policy is
monitored through a set of performance measures that are subject
to regular management review (internal and external) and our six-
monthly Assurance Statement.
We hold ISO 45001 certification for selected sites. Safety
performance is part of a regular governance timetable, reviewed
at least quarterly through the Group-level Operations Council,
through QLT meetings and as part of the Board Risk & Security
Commiee (see page 110). The Lost Time incident Rate is a key
non-financial KPI (page 39). Safety programmes are described on
page 53 and Safety is listed as one of our principal risks (page 68).
Our approach to supporting our employees is underpinned by our
suite of People policies, including reward & performance, resourcing
& learning, engagement & culture and governance & reporting.
Culture is listed in our principal risks (page 67).
The effectiveness of this approach is governed via our assurance
processes and KPIs (a key KPI is employee engagement –
page 39). Leadership oversight comes from the People
Council. Regular updates are provided to the Board (page 93).
63
Non-financial and sustainability
information statement
Community
Human rights
Anti-bribery and corruption
Tax
Modern slavery
Data protection
Community and society maers
Human rights
Anti-bribery and anti-corruption
Within our Business Management System we provide Instructions
for employees to use dedicated volunteering time to use their skills,
which enable us to make a positive difference in the community
(page 57). The effectiveness is monitored by the ESG team.
For our work with charities (page 58), we undertake review and due
diligence of donations and charity selection has oversight by
the Sponsorship and Donations Commiee, supported by
our assurance processes.
We seek to anticipate and prevent potential negative human rights
impacts through our policies and processes and address salient
human rights issues through our Code of Conduct, ethical trading
policy, international business risk management process and trade
compliance process. Our policies and processes 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 (Business Ethics Commiee and Board).
We believe that this integrated approach is effective in ensuring
our business acts responsibly and respects human rights (see
page 61). Our Supplier Code of Conduct helps ensure our suppliers
have clarity on our expectations on human rights issues. See
page 61 and our website for more details.
Our anti-bribery and corruption (ABC) policy and process sets out
our responsibilities in observing and upholding our zero-tolerance
approach to all forms of bribery and corruption. This ensures we
meet statutory requirements and has senior oversight at QLT and
Board level. It is managed via our assurance processes and QinetiQ
Assurance Statement and there are regular internal audits.
Details of our ABC programme are provided on page 60. This
is underpinned by a number of supporting requirements and
instructions, for example our approach to gifts and hospitality and
for managing Commercial intermediaries. The foundation for all of
this is our Code of Conduct, which lays out our ethical standards
and contains advice on anti-bribery and corruption (see page 60).
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
Commiee (page 108).
We recognise our responsibility to comply with all relevant legislation,
including the UK Modern Slavery Act 2015, Australian Modern
Slavery Act 2018 and Canadian Fighting Against Forced labour
and Child Labour in Supply Chains Act 2023 and in accordance the
modern slavery laws of other locations in which QinetiQ operates.
Our supporting policies and processes focus on management of the
supply chain and the requirements for due diligence.
In addition, we include modern slavery in our resourcing policy.
Our QinetiQ Group Modern Slavery 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 61 for more details.
Our Data Protection policy and process details how we manage the
privacy, holding and security of personal information.
The effectiveness is monitored via our assurance programme and
leadership oversight (QLT and Board).
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
64
Risk
management
The Group operates in an increasingly complex and
volatile global environment characterised by heightened
geopolitical tensions, evolving security threats, supply
chain pressures, technological acceleration and regulatory
change. Effective risk management is fundamental
to supporting the delivery of strategic objectives,
safeguarding the Group’s people and assets, maintaining
operational resilience and creating sustainable long-term
value for shareholders.
The Board recognises that risk is inherent in all business
activity and seeks to manage risk within clearly defined
appetite parameters, ensuring that risks are identified,
assessed, mitigated and actively monitored across
the Group.
Risk and assurance highlights
ɰ
Developed the maturity of our risk management
framework by enhancing the way we combine horizon
scanning with long-term planning and mitigation,
enabling beer management of emerging threats.
ɰ
Completed Commiee-level deep-dives on
our principal risks, focusing on mitigations and
exposure reduction.
ɰ
Refined the Group Assurance Framework and
rationalised assurance to align to risk and our
regulatory obligations (including Provision 29
of the UK Corporate Governance Code), creating
a more focused and efficient approach.
Our Enterprise Risk
Management Framework
Our annual cycle consists of comprehensive identification,
monitoring and review of current and emerging risks
material to the Group, which we conduct together with
our sectors and functions. We take into account industry
insights, competitor analyses, geopolitical, macro
and microeconomic developments and advancements
in technology.
Risk identification and management is conducted
within the Group’s Quality, Risk and Assurance Policy,
supported by the Operational Framework.
Key elements include:
ɰ
Risks identified and owned by sectors and
Group functions.
ɰ
Risks recorded in local and Group risk registers.
ɰ
Assessment of likelihood, impact and time horizon.
ɰ
Annual formal refresh of business risks.
ɰ
Regular review through Monthly sector and function
Performance Reviews.
ɰ
Aggregation and escalation of material risks to
Group level.
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 Risk & Security Commiee
quarterly, ensuring adequate monitoring to maintain the
effectiveness of the Group’s risk management activities
and internal control processes.
Ongoing communication and feedback process
1
Seing and
periodic review
of risk appetite
2
Risk
identification
and ownership
4
Risk response
and action
tracking
3
Risk assessment
5
Monitoring and
reporting
This diagram illustrates a continuous five-part cycle
that supports effective enterprise risk management
throughout the year.
65
Risk
management
Governance and Responsibilities
The Board retains overall responsibility for determining
the nature and extent of the risks the Group is willing to
accept in pursuit of its strategic objectives. Risk is reviewed
regularly through Board and Commiee activity and
is embedded within strategy, business planning and
making processes.
Oversight of risk management is delegated as follows:
Board
ɰ
Sets risk appetite and reviews principal and
emerging risks
ɰ
Oversees the effectiveness of the risk management
and internal control framework
Audit Commiee
ɰ
Oversees the framework of internal controls
addressing the main risks faced by the Company
Risk & Security Commiee
ɰ
Monitors key risks and material controls
ɰ
Reviews the effectiveness of the risk management
and internal control framework
ɰ
Reports to the Board at least twice annually
QinetiQ Leadership Team
ɰ
Reviews and challenges business risks
ɰ
Assigns executive ownership for principal risks
Risk management and
assurance activity
We use a Three Lines Model for our risk management
and assurance activities. The first line is performed
by operational management, who are responsible for
managing risks and report to the QinetiQ Leadership
Team. 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
reporting through the Group Director Risk and Assurance
to the QinetiQ Leadership Team and the Risk & Security
Commiee. The third line is performed by internal or
external teams, such as Internal Audit, that provide
independent, objective assurance reporting to the
QinetiQ Leadership Team and the Audit Commiee.
Further reading
Board of Directors
84
Audit Commiee Report
104
Risk & Security Commiee Report
110
Principal and emerging risks FY26
During FY26 the Board carried out a robust assessment of the material and emerging risks relevant to the Group’s business.
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.
As part of our continual cycle of review and improvement in risk management, we completed an annual identification of
risks to our strategic objectives, followed by activities in sizing and handling those risks. The results were shared with
the Risk and Security Commiee, who reviewed and agreed the principal risks for the year.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
66
Risk
management
Potential for our security to be breached by
insiders, state-sponsored actors, criminals
or activists; resulting in the loss, theft,
denial or compromise of critical assets
(including people, facilities, information
or technology). This would subsequently
damage our reputation, competitive edge,
and/or ability to win/deliver work, trigger
regulatory sanctions, and harm our people.
QinetiQ may lose market share
(and therefore revenue) due to the
volatility of global defence and national
security markets, driven by shifting
geopolitical landscapes, evolving
threat environments and fluctuating
government defence budgets.
QinetiQ may lose market share
(and therefore revenue) due to the
volatility of global defence and national
security markets, driven by shifting
geopolitical landscapes, evolving threat
environments and fluctuating government
defence budgets. Rapid changes in policy,
international relations and economic
conditions may impact demand for defence
capabilities, disrupt supply chains and
affect long-term strategic planning.
Failure to define and build a single, inclusive
and high-performing organisational culture
and leadership behaviour could impact
achieving our strategic goals and ambition.
Failure to appropriately leverage adequate
functional skills, processes and tools
to meet regulatory requirements and
standards, deliver consistent performance
and enable growth. Failure to adapt the skills
and aligned capacity required to deliver
future business and keep pace with the
evolved offerings of the Company.
Information is protected through a comprehensive framework of policy, procedural,
physical and digital security controls, significantly strengthened in the past year through
the deployment of our Digital Workplace environment. These controls are reinforced by
ongoing assurance activities, organisation-wide awareness initiatives and mandatory
annual security training. We maintain a robust programme for the deployment, testing
and continual enhancement of our cyber security detection and protective technologies,
including routine network testing and technical assessments. The evolving and
increasingly sophisticated threat landscape is continuously monitored through our
Security Council and Risk & Security Commiee, ensuring an appropriate balance
between security, cost and operational flexibility.
We are strengthening our competitive position as an established provider in the defence
and technology sector through a customer-centric approach to the digital transformation
of our offerings. Performance is expected to benefit from enhanced win strategies that
support improved through-life delivery and more efficient business operations. A renewed
focus on growth opportunities aligned to the evolving priorities of our customers is
expected to deliver strong returns in a challenging environment.
We are strengthening our competitive position as an established defence and technology
provider through a customer-centric approach, including active engagement with the UK
Government in support of our UK first strategy. We are reviewing the strategic positioning
of our German business within the evolving EU and NATO defence landscape, alongside
a broader assessment of changing market dynamics across these regions.
We continue to selectively develop and broaden our product portfolio and distinctive mix
of skills, capabilities and resources to beer align with customer requirements in our home
and priority markets. These actions are expected to mitigate contract risk, optimise project
execution and deliver improved efficiency and customer satisfaction across the capture
and delivery lifecycle.
The maturing of the QinetiQ Operating Model is supporting investment in our culture and
the embedding of our approach to inclusion, diversity and effective people management.
We continue to review the competitiveness of reward, pay and progression, to ensure
we aract and retain top talent, and develop supporting tools and processes that drive
performance in the way we work. Regular Peakon employee engagement reviews are
used to test engagement and develop focused action plans to improve. We set and
communicate clear behavioural values at all levels to embed a cohesive, high-performing
organisational culture.
Building on the introduction of a joint strategy and people-focused approach to strategic
capability planning, supported by enhanced talent and demand management systems,
we are implementing further actions to drive performance excellence. This approach allows
us to plan for new skills and support to new technologies in a rapidly changing environment.
We have continued investment in our people, with a focus on strengthening management
and leadership capability across the Group and ensuring a competitive performance and
reward framework to beer incentivise individual and team outcomes. We are making
progress in implementing a common set of tools and processes across the Group to
support a standardised, high-performing and consistent way of working.
Risk and Impacts
Mitigation
Security
Business Winning
Markets
Culture
Capability
1
2
3
4
5
67
Risk
management
Failure to select and integrate
value-accretive businesses to enable
strategic ambition and realise the
maximum potential benefits, from
acquisition to integration into the business.
QinetiQ may lose market share due to
changes in market competitiveness in
the external environment – both from a
customer and competitor perspective.
Failure to keep pace with evolving
requirements and technologies may
reduce growth and impact performance.
Inconsistent and suboptimal contract
execution due to lack of ability to leverage
appropriate competency and capability
across our Engineering, P3M and Supply
Chain Management functions.
Rapidly shifting macroeconomic
uncertainty, failure to meet our published
climate change targets and outbreak
of diseases could impact stakeholder
expectations and resilience needs,
resulting in operational disruption, loss
of new business, reduced investor
confidence and compromised reputation.
Failure to effectively implement health,
safety or wellbeing strategies resulting
in 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. Significant impact
to the brand and long-term delivery
performance could be realised as a
consequence of a major safety failure.
Effectiveness and stability of our IT
infrastructure and business tools could
affect broader Company business
operations and ability to support
revenue-generating services. Inability
to realise the value of and/or manage
the change programme associated
with the introduction of a new
integrated ERP system.
The focus has been on realising the value of acquisitions and enhancing the overall
Group offerings, using our capabilities through appropriate integration. Alignment of
the QinetiQ Operating Model and agreement of management system processes is being
used to improve efficiency while maintaining the unique selling and delivery capabilities of
subsidiary units. Work continues to enhance due diligence process and associated policies,
including ESG, to ensure a strong acquisition framework is in place for the future.
The Group has defined a set of technical capability priorities to shape our skills
requirements for future customer needs, including plans to embed and exploit emerging
technologies. As part of this approach, we have established an ethical framework for the
development and use of artificial intelligence, designed to align with current regulatory
and legal requirements and to anticipate future regulatory developments. We continue
to monitor this rapidly evolving area closely. In parallel, we are strengthening our diverse
product portfolio and distinctive mix of skills, capabilities and resources to align more
closely with customer requirements in our home and priority markets. These actions
are intended to mitigate contract risk, optimise project execution and deliver efficient,
high-quality outcomes across the capture and delivery lifecycle.
Focused actions are in place to ensure we have a robust system of aligning competence
with project complexity, ensuring we apply our skills to reduce risk and meet customer
demands. Several enhancements have been delivered to increase the efficiency and agility
of the core project lifecycle, to enable us to rapidly shape, bid for and deliver technical work
for our customers. We continue to evolve our contractual framework approach and embrace
new business models to increase pace of delivery, maintaining the high levels of quality that
our customers expect.
The Group has a mature and well established framework of policies and controls to manage
and respond to volatile economic and financial conditions. We have developed a Climate
Transition Action Plan and are commied to SBTi validated targets, with the ambition to
achieve Net-Zero emissions by 2050 or sooner. A range of initiatives is in place across
the Group to embed our plan, including investment in energy efficiency projects and
programmes to reduce Scope 3 emissions, plus underpinning projects on data and skills.
We recognise the important of climate resilience within the plan. We are active in our
sector and seek to support our customers’ focus on resilience.
A global Safety Improvement Programme continues to deliver as planned, enabling
measurable improvements in the safety culture maturity. A focus on high-hazard activity is
driving more effective global safety processes to achieve overall risk reduction and ensure
our core business is delivered safely, protecting our employees and our brand. We continue
to develop the competence of our leaders and managers to role-model safe behaviours
and educate our staff on the use of new technology as an enabler for safety. We have
established a robust legislative map across all of our operating countries, to ensure we
meet all of our safety requirements across the Group, and this is being integrated into our
Safety Management System.
The new Digital Workspace has been established in the UK, and is deploying across the
group in early FY27, to enhance our collaboration, enable the leverage of our skills globally,
and allow the use of modern, fit-for-purpose toolsets across the Group. Aligned to our
Security risk, we have a robust programme of continual upgrade of our cyber security
detection and protective capabilities and technologies, including routine exercising
and technical assessment of our networks, IT architecture and security. Focused risk
management time and competence has been invested into the scoping and planning
of the future ERP solution, to ensure a smooth and managed transition in FY27.
Risk and Impacts
Mitigation
Acquisition and Integration
Competition
Delivery
Environment
Safety
Business Platforms
6
7
8
9
10
11
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
68
Viability
statement
Assessing the prospects of the Group
This viability statement should be read in conjunction
with the Group’s growth strategy on pages 14 and 15.
The Group’s corporate planning processes involve the
following individual processes covering differing time frames:
ɰ
An annual Integrated Strategy-to-Perform Plan (ISP)
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 a base-case profit forecast. 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 and funding metrics;
ɰ
An annual budget process that covers the first year of
the five-year planning horizon in detail;
ɰ
A rolling monthly ‘latest best estimate’ process to assess
significant changes, as well as risks and opportunities,
to the budget/forecast 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 67 to 68, and a combination of those risks.
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 67 and
68) 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 110, 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 2031. This period
is deemed appropriate as the Group has good visibility
of revenue out to 2031, driven by long-term contracts
and frameworks. 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
while still providing an appropriate longer-term outlook.
The five-year extension to the LTPA contract was signed
by the UK MOD in May 2025, which provides cover for this
contract out to 31 March 2033.
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 70. These include:
ɰ
Sensitivities on growth metrics in the plan, such as
margin achievement and revenue growth
ɰ
Sensitivities based on our cash position, including
increased working capital burden and the availability
of debt financing beyond the currently agreed periods
for the term loan and revolving credit facility
ɰ
An environmental risk focusing on a severe flooding
event at the Shoeburyness site
ɰ
Sensitivities linked to the economic environment,
including revenue reduction and foreign exchange 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
a combined stress-test covering both financial
pressures and poor trading performance.
The Group has significant contracted backlog, pipeline
visibility and forecast growth over the plan period.
Significant levels of free cash flow are expected to be
generated and deployed in accordance with the Group’s
capital allocation policy. The sensitivities assume that the
Group continues to have access to revolving credit facilities
of £290m (expiring April 2029 after the one-year extension
option). A sensitivity scenario has been modelled on the
basis that the term loan of c.£333.6m expires in September
2027 and is not renewed.
69
Viability
statement
The financial impacts are inherently subjective and highly variable, but have provided an indicative assessment to the
Board. None of the risks, applied individually, have a material impact on long-term viability (in terms of breaching our
available facility headroom or associated covenants). Despite the risks being unlikely, the Directors have considered
mitigations that could be put in place to offset them. The Group has a number of cost-control levers that could immediately
be drawn on to control cash outflows. In addition, it continues to review its portfolio of assets to ensure they remain relevant
to the strategic ambition (through disposal of non-core assets). The revolving credit facility has the option to increase
further by an additional £110m, with agreement from the lenders, prior to considering the reduction of dividends or reduction
of the in-flight share buyback programme. 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 65, 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 2031.
Scenario 1 – Profit margin downgrade
Scenario 2 – Reduction in revenue growth
Scenario 3 – Reduced operating cash conversion
Scenario 4 – Major environmental event
Scenario 5 – Increased FX rates
Scenario 6 – Term loan not renewed in September 2027
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.
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 skill set needed.
Assumptions:
A 5% per annum reduction in revenue compared to the ISP base plan.
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 90%.
For the purposes of this scenario we have assumed a failure 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 people impacted.
Macroeconomic 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, CAD, EUR and AUD) rates.
Macroeconomic trends and global events may result in a reduction in the availability
or aractiveness of financing such that it may not be possible or desirable to
extend the term loan when it expires in September 2027.
Assumptions:
Term loan of c.£333.6m repaid in cash in September 2027.
ɰ Markets
ɰ
Business Winning
ɰ
Delivery
ɰ
Business Platforms
ɰ Security
ɰ
Environment
ɰ Safety
ɰ Markets
ɰ
Competition
ɰ
Business Winning
ɰ Security
ɰ
Environment
ɰ
Delivery
ɰ
Capability
ɰ
Business Platforms
ɰ
Environment
ɰ
Delivery
ɰ Safety
ɰ Security
ɰ Markets
ɰ
Environment
Scenarios modelled
Links to Principal Risks
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
70
Viability
statement
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 to 31. The Group
meets its day-to-day working capital requirements
through its available cash funds and its bank facilities.
The Chief Financial Officer’s review on pages 32 to 37
sets out details of the financial position of the Group,
the cash flows, drawn and commied 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 further increased unrest and
growing conflict across many regions of the world.
The defence and security context continues to elevate
the market needs for our mission-critical capabilities.
Both our addressable market and our confidence in
capitalising on that market opportunity continue to
grow. The Group enters the new financial year with
a healthy balance sheet and leverage position, and
a 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
and uncertainties’ section on pages 67 to 68. 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 the
period to 30 September 2027. This period is considered
an appropriate timeframe to assess going concern as it
considers the Group’s short and medium-term cash flow
forecasts and available liquidity, including the upcoming
refinancing its term loan.
71
Section 172(1)
statement
Key stakeholder groups and
Section 172 statement
Section 172 Statement
We are commied 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 maers 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.
In large and complex organisations such as QinetiQ, the
Directors discharge their duties through an established
governance framework that delegates day-to-day
decision-making to employees. The Board recognises that
this delegation must operate within a robust structure
that reflects our values, supports effective stakeholder
engagement, and provides assurance that governance
systems of controls remain strong.
This statement and the relevant disclosures referenced
in this section summarise how the Board has upheld and
discharged its duties to consider:
(a)
The likely consequences of any decision in the
long term;
(b)
The interests of the Company’s employees;
(c )
The need to foster the Company’s business
relationships with suppliers, customers and others;
(d)
The impact of the Company’s operations on the
community and the environment;
(e)
The desirability of the Company maintaining a
reputation for high standards of business conduct; and
(f)
The need to act fairly as between members of
the Company.
See page 75 for relevant disclosures.
Our stakeholders and
engagement approach
To deliver responsibly and for the benefit of our
stakeholders we must understand what maers 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 these relationships if they are beer-placed
to facilitate meaningful engagement.
We consider our respective stakeholders and relevant
issues to ensure that engagement is led by those
best-placed to affect any necessary change and therefore
expect that, to best benefit our stakeholders, our approach
to how we engage will continue to evolve as we pursue
further growth.
Board activity and principal decisions in FY26
Board activity during the year is set out on page 93 and the
principal decisions taken by the Board in FY26 are detailed
on pages 91 and 92. Due to the nature of these decisions,
a variety of stakeholders are considered as part of the
Board’s discussions.
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Primary
Other
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
72
Section 172(1)
statement
How we engage with our key stakeholder groups
Customers
People
ɰ
We regularly invest time listening and understanding
customer views and needs through our formal
customer research systems.
ɰ
Ongoing engagement enables close collaboration
throughout programme delivery.
ɰ
Executive Director aendance at stakeholder events
including DSEI and RIAT.
ɰ
Every QinetiQ customer has a dedicated delivery team.
ɰ
Regular executive engagement with senior leaders of
our major customers.
ɰ
The introduction of the T&E Innovation Gateway.
ɰ
Customers are a central part of our Company and
the Board takes formal feedback from customers
which allows us to respond and adapt our approach to
achieving their objectives.
ɰ
Feedback is reviewed at all levels of the organisation
to support continuous improvement of business
processes and delivery solutions.
ɰ
Customers benefit from a responsive and agile
approach, the ability to innovate at pace and
delivery of value for money.
ɰ
Employee shareholders are able to aend the AGM.
ɰ
The business holds regular Global Employee
Roadshows to enable employees to engage directly
with the QLT and members of the Board.
ɰ
The Board regularly engages with employees through
site visits in the UK and the Group Chair visited sites in
the UK, US and Australia.
ɰ
Continuing insights from employee feedback
mechanisms supported the Board’s understanding
of workforce thoughts and culture.
ɰ
The Group Chair is the dedicated Non-Executive
Director for gathering the views of employees.
ɰ
Employees are able to openly and directly engage with
senior leaders, including QLT and Board members.
ɰ
Employees receive regular updates from leadership
through various different communications channels,
such as ‘Q-Talk’ briefings, email broadcasts and
intranet updates.
ɰ
A workplace culture that promotes trust, inclusion and
psychological safety, where employees feel confident
raising concerns including having a meaningful voice
and being listened to through engagement channels,
including the Global Employee Voice Group, Peakon,
and the ‘Speak Up’ programme.
How the Board engaged
What we believe is most important to them
Shareholders
ɰ
The Board engaged with Shareholders via roadshows
and results presentations and at the AGM.
ɰ
The Group Chair and Executive Directors have engaged
directly with a number of shareholders during the year.
ɰ
The Chair of the Remuneration Commiee has
consulted with shareholders this year regarding the
renewal of the Remuneration Policy. See page 121.
ɰ
A investor perception audit was carried out during
the year and the Board considered proposals for an
enhanced Investor Relations programme.
ɰ
Maintaining open and transparent dialogue between
the Company and its shareholders remains a priority.
ɰ
Clear communication regarding the long-term strategy
of the Company.
ɰ
Understanding the views of its shareholders short and
longer term priorities.
73
Community
Environment
Regulators
ɰ
Our Community Impact Strategy guides our
engagement with local communities, focused on
delivering positive environmental and socio-economic
outcomes where we operate.
ɰ
The CFO is board sponsor for this programme and is
updated regularly by the Group Director ESG, who is
responsible for delivery. The full Board was briefed in
May and November 2025.
ɰ
Corporate Responsibility, community and volunteering
programmes are discussed at Board meetings.
ɰ
Our approach focuses on employee volunteering such
as STEM outreach and support for our partner charity
(see pages 57-58).
ɰ
Our communities expect us to be a good neighbour
and to deliver positive environment and
socio-economic outcomes.
ɰ
Support for the long-term strengthening of
science and engineering pipelines in communities
in our local area.
ɰ
The Board engages with the Group’s environmental
programmes and receives regular updates with
a key area of focus on CTAP (see page 44).
ɰ
The Board recognises the importance of value in
training on climate change and has been working
with the Group Director ESG with Board training
scheduled for FY27.
ɰ
At the Board dinner in November, the Board welcomed
a Director from a peer defence company to hear their
perspective on climate-related maers.
ɰ
Ensuring our business and infrastructure is resilient
to the impact of climate change.
ɰ
Understanding opportunities to improve our
sustainability in a way that brings value to our business.
ɰ
Obtaining a deeper understanding of the current and
emerging issues relevant to the business.
ɰ
Regulatory maers are considered by the Board and
the Company Secretary regularly delivers important
updates as appropriate.
ɰ
The Company focuses on how non-financial reporting
regulations can be used as a driver to strengthen
sustainability performance and improve resilience
to climate-related risks.
ɰ
The Board sought assurance that the Company’s
critical business controls were robust, coherent and
aligned with Provision 29, supporting effective risk
management and regulatory compliance.
ɰ
Open engagement with regulators relevant to our
operations in our core jurisdictions, including UK,
US and Australia.
ɰ
Internal controls and processes that ensure robust
regulatory compliance are effectively maintained.
ɰ
A strong culture of effective and proportionate
compliance within our businesses.
Section 172(1)
statement
Suppliers
ɰ
The Group engaged with its suppliers across the
defence and emerging sectors through a range of
structured engagement activities.
ɰ
Engagement with the supply chain provided insight
into how industry partners can work together to
effectively support our customers.
ɰ
Commercial performance is discussed at each
Board meeting.
ɰ
Increased focus on sustainability and climate-related
requirements within contracting processes
(see page 46).
ɰ
A shared understanding of customer needs and how
suppliers can collectively support delivery outcomes.
ɰ
Our updated Supplier Code of Conduct sets out the
standards we expect from our suppliers and reflects
the standards we set for our own employees and
Directors. Acceptance of our supplier code of conduct
forms part of our supplier due diligence assessment.
How the Board engaged
What we believe is most important to them
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
74
Section 172(1)
statement
Section 172 relevant disclosures
Considering long-term consequences
s172 link (a)
The Board holds annual strategy meetings to assess the
long-term sustainable success of the Group and our impact
on our investors, customers, people, and local communities
over a five and ten-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 our
annual budget for the following year and both medium and
long-term (five and ten-year) financial planning informed
by strategic assessments such as SWOT analysis. These
arrangements are supported by external political, industrial
and customer inputs. There are also risk management
processes 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.
Relevant S172(a) disclosures
Strategy
14
Business model
18
CFO Review
32
Climate Transition Action Plan (CTAP)
44
Viability statement
69
Governance Section
77
Integrated Strategic Planning
69
Frameworks for risk management and internal control
114
Fostering stakeholder relationships
s172 links (b, c)
To encourage mutually beneficial stakeholder relationships,
Directors and senior managers receive tailored training
to support effective stakeholder engagement, alongside
independent assurance through audits, stakeholder
surveys and reports from brokers and other advisers.
The Board is regularly informed of stakeholder maers
through structured presentations and reports on customer
engagement, risk, health and safety, confidential reporting,
defence process reviews, dividend policy, people and
culture strategy, and operational business updates.
During the year the Board reviewed progress against
previously identified themes and continued to develop
a more integrated approach to employee engagement.
This approach will integrate existing feedback channels
to create realistic, actionable and locally deliverable
engagement plans, aligned across the wider business.
Relevant S172 (b, c) disclosures
Sustainability: Environmental, Social & Governance
40
Sustainability: Social
53
Skills and development: Growing future capability
56
Employee engagement and inclusion
54
Rewarding for performance: celebrating
employee contribution
57
Non-financial information statement
63
Stakeholder engagement
42
Governance Section
77
75
Protecting communities and environment
s172 link (d)
The Group is commied to robust 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 include formal
consideration of these factors where relevant as well
as regular reviews through the Board risk management
process and the Audit, Risk and Security and
Remuneration Commiees.
Relevant S172 (d) disclosures
Sustainability: Environmental, Social & Governance
40
Environmental
43
TCFD disclosures
48
Sustainability: Social
53
Sustainability: Governance
60
Non-financial and sustainability information statement
63
Seing 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 compliance
with section 172 of the Companies Act, stakeholder factors
are addressed through maers in Board papers, and
through standing agenda items at each Board meeting
including updates from the Group CEO on the financial
overview, strategic progress, investor relations, business
development, and operational progress. The Company
Secretary presents updates on relevant corporate
governance and compliance maers.
Relevant S172 (e, f) disclosures
Sustainability: Social
53
Employee engagement and Inclusion
54
Risk Management
65
Annual General Meeting
80
Governance Structure
87
Governance Section
77
Frameworks for risk management and internal controls
114
Section 172(1)
statement
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
76
Corporate
governance
78
Corporate Governance statement
78
Group Chair’s introduction
to Governance
81
Board at a glance
82
QinetiQ Culture:
How we embed and monitor
84
Board of Directors
87
Governance structure
88
Division of responsibilities
89
Composition, succession
and evaluation
91
Board decision-making
93
Board activity
94
Management and control
of US subsidiaries
94
Employee engagement
96
Nominations Commiee Report
104
Audit Commiee Report
110
Risk & Security Commiee Report
115
Directors’ Remuneration Report
118
Remuneration at a glance
121
Directors’ Remuneration Policy
129
Annual Report on Remuneration
142
Directors’ Report and
statutory information
145
Statement of Directors’ responsibilities
in respect of the financial statements
147
Independent auditor’s report
QinetiQ’s independent test, trials and safety
assurance supporting the introduction of
Sky Sabre into UK Army service.
77
Against a backdrop of accelerating
technical innovation in the warfighting
environment, it is more critical than ever
that Board and governance processes
are as efficient as possible, enabling our
business to combine proportionate and
effective corporate governance with
agility in how it delivers for our customers,
partners and shareholders.
Introduction to Governance
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 the Principles and Provisions of the 2024
UK Corporate Governance Code have been applied and/or
complied with for the year ended 31 March 2026.
Key Board activities
During this reporting year, the critical areas that the
Board played a highly active role in were:
Input and guidance to the actions taken by the Company,
and the evolution of its growth strategy, in response to
the performance challenges it faced in the current
economic climate.
The ongoing stewardship of the Company’s capital
allocation policy, including the delivery of its share
buyback programme and the enablement of returning
value to its shareholders.
Oversight of the review of and update to the Company’s
risk framework and internal controls in response to the
requirements of Provision 29 of the 2024 UK Corporate
Governance Code.
Board succession planning, including the role of
Remuneration Commiee Chair, strengthening the C-suite
experience with the non-executives; and the ongoing
induction and onboarding of our two most recent board
appointments, all of which I say more about below.
A fuller summary of the Board’s activity during the year
can be found on page 93 and further information about
the Group’s stakeholder engagement can be found on
page 42.
Environmental, Social and
Governance (ESG)
QinetiQ is commied to responsible and sustainable
business practice, as we recognise that it is an enabler
for our business and meets the expectations of our
stakeholders. We are proud of the progress made on our
ESG programmes. Through FY26, the Board and Commiees
have regularly discussed the different facets of ESG, with
a particular focus on the Climate Transition Action Plan and
on the evolving landscape of sustainability/non-financial
reporting. Through our ongoing business review,
we are able to oversee and monitor the management of
key ESG programmes such as safety, ethics and culture.
We continue to support the business in its ambition to
ensure the consideration of ESG supports our corporate
strategy and decision-making.
Group Chair’s
introduction to Governance
Neil Johnson
Non-executive Group Chair
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
78
GOVERNANCE
STRATEGIC REPORT
Health, safety and wellbeing
Health, safety and wellbeing are a priority for the Company
and its leadership teams, across the breadth of its varied
operations and in all territories in which it carries out its
business. We remain commied to ensuring the physical
and mental wellbeing of all our people, customers and
associated third parties, including the public. This year,
we have created an integrated Safety and Quality function
under renewed leadership, to ensure we can deliver our
hazardous activities safely and efficiently, and to further
strengthen our safety culture. Further information on
health, safety and wellbeing can be found on page 53.
Culture
Promoting a culture of transparency, robust debate and
effective challenge in the Boardroom is one of my key
responsibilities as Group Chair. As a Board, we have an
important role in leading and promoting the desired culture
and identity of the organisation. As described on pages
53-55 of this report, the Company has made considerable
efforts to ensure its culture is well aligned to its strategy
going forward; its purpose and values are meaningful and
clearly articulated to its employees; and it is investing in the
quality of its culture leadership. The Board has been well
involved in supporting and shaping these actions, which
are a critical enabler to the success of the Company. This
involvement has been facilitated through engagement
with leaders in the boardroom; through conversation
with employees, during site visits and GEV engagements
for example; and taking direct feedback from investors.
The Company remains highly commied to delivering the
best support it can to its customers, to secure their vital
interests and ultimately protect lives.
Further reading:
Board decision-making
91-92
Sustainability: Environmental, Social and Governance
40
Group Chair’s
introduction to Governance
Application of the provisions of the
2024 UK Corporate Governance Code
(the ‘Code’)
The Board is accountable to shareholders for its standards of
governance, and as a UK-listed company, in respect of the year
ended 31 March 2026, the Company was subject to the Code,
with the exception of the changes to Provision 29, which relate
to the effectiveness of the risk management and internal control
framework. The changes to Provision 29 will apply to the financial
year beginning on 1 April 2026. The Board confirms that it applied
the Principles and complied with the Provisions of the Code
throughout the year.
Significant time has been spent during the year planning for the
upcoming changes relating to Provision 29. See page 107 for
more information.
Further information on compliance with the Code can be found as follows:
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
72
Board of Directors
84
Sustainability: Social
53
Stakeholder engagement
42
Employee engagement
94
Division of responsibilities
Governance structure
87
Division of responsibilities
88
Board of Directors
84
Time commitment
89
Board and Commiee processes
89
Composition, succession and evaluation
Nominations Commiee Report
96
Board of Directors
84
Director effectiveness
102
Audit, risk and internal control
Audit Commiee Report
104
Risk & Security Commiee Report
110
Remuneration
Directors’ Remuneration Commiee Report
115
Directors’ Remuneration Policy
121
79
Board succession and evaluation
of the Board’s performance
I have overseen a significant evolution of the Board over the
previous two years, with succession designed to build depth
and strength in the key skills and experience needed to help
guide and support the Company to successfully deliver its
reset growth strategy. This year we have seen Dina Knight
step into the role of Remuneration Commiee Chair, and
Ezinne Uzo-Okoro and Roger Krone fully contribute their
respective experience in relation to the US market. Roger’s
involvement has also brought the depth of his experience
as a former CEO in the US defence sector, in addition to the
considerable C-suite-level defence sector experience we
already have on the Board through our Senior Independent
Director, Steve Mogford.
The Board has maintained its focus on effectiveness
through an ongoing review of its progress against
recommendations from the external assessment carried
out by Bendon Advisory in FY25, including a further internal
effectiveness review undertaken in FY26 by the Company’s
Secretariat team. Please see page 102 for details of the
outcome of that activity. The Board has also been guided
by the outputs of a further investor perception audit
undertaken this year, by Bendon Advisory, which built
upon the last review undertaken two years ago.
Remuneration
During the year, the Board’s Remuneration Commiee has
focused on ensuring that its current Remuneration Policy
continues to operate effectively, to appropriately reward,
retain and incentivise the Executive Directors who are
driving the Company’s success. This has been managed
through ensuring the Company’s remuneration schemes,
and the outcomes they are designed to achieve, are
transparent and aligned with the Company’s strategy,
as well as with the interests of our shareholders and
the value we deliver to them. This year, the Company
will propose a renewed Remuneration Policy, for which
shareholder approval will be sought at our upcoming 2026
Annual General Meeting. The development of the Policy
has been led by a dedicated sub-commiee of the Board,
headed by the Chair of the Remuneration Commiee,
and this has involved consultation and active engagement
with our major shareholders during this process.
Please see page 121 for further details on the proposed
Remuneration Policy.
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 16 July 2026 at the office of Ashurst LLP,
London Fruit and Wool Exchange, Duval Square,
London E1 6PW. 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.
Neil Johnson
Non-executive Group Chair
21 May 2026
Group Chair’s
introduction to Governance
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
80
GOVERNANCE
STRATEGIC REPORT
Board
at a glance
Number of years
Age
Gender balance
Gender balance
Ethnicity
Independence
Non-executive Director tenure
*
Neil Johnson (Chair)
Steve Mogford
Shonaid Jemme-Page
Dina Knight
Roger Krone
Gordon Messenger
Ezinne Uzo-Okoro
Average (3.6 years)
1
2
3
4
5
6
7
8
Board members
41-50
51-60
61-70
71-80
11.11%
22.22%
55.56%
11.11%
Board members
Women
Men
33.33%
66.67%
Board members
White
Asian
Not disclosed
77.78%
11.11%
11.11%
Board members
Independent
Not Independent
77.78%
22.28%
Direct Reports to QLT
Women
Men
29.30%
70.70%
QLT
Women
Men
44.44%
55.56%
*
As at 20 May 2026.
81
Alignment with our strategy
As a growing business, we have a significant opportunity
to be part of a truly integrated global defence and security
company. Our strategy is designed to deliver significant
long-term growth and stability, so we can be confident we
are working as part of an organisation with strong ambition,
focus and direction.
Our people are uniquely placed to help our customers
respond to national and global defence and security
needs. While we have an exciting future ahead of us,
we are commied to finding beer ways to work more
closely together. Improving teamwork, creativity and
our performance, and unlocking the enormous potential
in our people.
We want ours to be a company where we put:
ɰ
People at our heart; an engaging and inclusive culture
where we enjoy working together, have opportunities
to grow our skills, are recognised for our contribution
and feel proud of the work we do.
ɰ
Customers at our centre; partnering to drive, at pace,
innovative and cost-effective solutions that have an
impact on the world around us.
ɰ
Excellence at our core; improving how we work by
streamlining our processes and systems, removing
unnecessary barriers and empowering us all to
operate more efficiently and effectively.
Our purpose and our values
Everything we do is about delivering on our purpose,
protecting lives and securing the vital interests of our
customers. It connects everyone who works for QinetiQ
around the world together, giving us all focus, direction
and a sense of pride.
Our values and behaviours support our high-performance,
inclusive culture and we are commied to delivering
responsibly and sustainably for the benefit of all:
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
conduct and professional standards.
COLLABORATION
The chosen partner for customers and industry partners,
we are a 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 and breadth and depth in capability to
our work, driving innovation. We know that working together
is the best way to meet our stakeholders’ needs.
PERFORMANCE
Customer focused and highly responsive, providing
operational excellence and assuring safe and secure delivery.
Leadership Expectations
55
Our Leadership Expectations
The QinetiQ Leadership Expectations are designed to provide
a collective view of leadership in QinetiQ, so that our leaders
and managers know what is expected of them, can focus their
efforts where they maer the most, hold themselves and
each other to account and, ultimately, create an environment
in which our customers, our people and our stakeholders
can succeed. This year, we are refreshing the expectations
to beer align to our growth mindset and are launching
a leadership competency framework which will further
operationalise and embed the Leadership Expectations
into core systems and processes across the Company.
QinetiQ Culture:
How we embed and monitor
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
82
GOVERNANCE
STRATEGIC REPORT
Embedding and
monitoring our culture
How we monitor culture
Risk management
As we respond to rapidly changing geopolitical context and
customer expectations, we recognise the importance of the
health of our culture on our future success. To ensure we are
managing it effectively, we have highlighted it as a principal
risk in our risk management system and it is now included
in the quarterly risk updates, as well as an annual deep dive
review, in the Risk & Security Commiee.
Risk Management
65
Workday Peakon
The Workday Peakon employee engagement survey tool
has been well embedded at QinetiQ since 2019. The survey
runs four times a year and the results are routinely reported
to the Board, together with core themes and action plans.
Following each survey, we encourage action based on
company, sector/function and team results, ensuring
we are making improvements at all levels.
Employee engagement and inclusion
54
Global Employee Voice (GEV)
The Global Employee Voice (GEV) is a collective of
employees who participate on a voluntary basis to
represent the employee population on various business
topics and issues. Since its inception in 2013 (originally
as the Employee Engagement Group), the GEV has been
running effectively, with representation across all parts
of the Company globally. Each geography is represented
by a Chair. The Global Chair collates a dashboard of key
themes quarterly. Four times a year, the Global Chair
meets with the CEO to discuss key themes and business
context. Twice a year, the Global Chair meets with a number
of Board members, including the Chairman, to discuss these
themes. In early FY27, we will appoint a new Global Chair of
the GEV and refresh the Terms of Reference to drive an even
greater level of focus for the GEV in supporting culture and
business change.
Planned culture interventions
In September 2025, the Board asked the Chief People
Officer and Director of Culture & Learning to join them for
a deep dive on culture. The key topics were: our culture
aspiration; how culture change links to our strategy; and
what priority interventions would support achievement
of our desired culture.
Culture North Star
The Board was presented with a current state diagnostic,
together with the Culture North Star (an articulation of our
cultural change aspiration). Following robust discussion of
how this change will serve to deliver the QinetiQ strategy
and achieve future growth, it endorsed this approach and
approved the high-level plan based on: People at our heart;
Customer at our centre; Business Excellence at our Core.
Integrated Change Programme
Culture change is recognised as a critical programme and
a key enabler for the portfolio of transformation projects
within the Integrated Change Programme (ICP). These
programmes require dedicated focus and funding to
achieve the benefits realisation and business change
planned, including modernising our performance, business
development and project management capabilities as
well as improving some of our operating systems, such as
finance, assurance and shared services. The Board receives
regular progress updates on the ICP.
Leadership development
It is well understood that leadership capability is the strong
foundation for a healthy culture and that investment in
leadership development is a priority to support culture
change. A programme of work has been designed as a
cascaded approach, with development starting at the
QLT and senior leader level first to ensure role-modelling.
The programme is bespoke for QinetiQ, to ensure it meets
the specific requirements of the business, with pragmatism
and pace as key principles. Key metrics are under
development to ensure reporting to the Board on
successful outcomes is delivered.
83
Board of
Directors
Skills, competence
and experience
Neil’s former CEO experience and
current roles as a plc Group Chair
and Non-executive Director bring
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 Baalion
The Royal Green Jackets. He
returned to industry with British
Aerospace, initially with Land Rover
and then running all of its European
automotive operations. Neil was
later CEO of the RAC and is a former
Director General of the EEF and
was 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.
Skills, competence
and experience
Martin has more than
25 years’ experience leading
multi-disciplinary teams in senior
finance roles. He brings valuable
global experience, particularly
in the UK, US and Australia,
coupled with deep financial
and operational expertise and
significant experience in the
capital markets. His detailed
understanding of our sector
and the markets we operate in
is instrumental in helping the
Group perform and grow.
Martin is a Chartered
Accountant, having qualified at
PricewaterhouseCoopers. He
subsequently moved to Credit
Suisse and then to BAE Systems,
where he held numerous finance
roles over a 22-year career. These
included Finance Controller, M&A,
Divisional Finance Director and
Head of Investor Relations roles.
Skills, competence
and experience
Steve’s proven track record of
driving growth and his in-depth
experience of the 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.
Skills, competence
and experience
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 equips 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.
Nationality
British
Nationality
British
Nationality
British
Nationality
British
Appointed
April 2019
Appointed
April 2015
Appointed
September 2024
Appointed
August 2022
Other appointments
Chair of Dialight plc, Trustee and Council
Member – National Army Museum.
Other appointments
Co-Chair of UK Defence Growth
Partnership with HM Government
and a Member of UK MOD’s Defence
Industry Joint Council.
Other appointments
N/A
Other appointments
Chair of Intertek Group plc and
Independent Non-executive
Director of Costain Group PLC .
Neil Johnson
Group Chair
Martin Cooper
Group Chief
Financial Officer
Steve Wadey
Group Chief
Executive Officer
Steve Mogford
Senior Independent
Non-executive Director
N
R
RS
RS
RS
N
R
A
RS
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
84
GOVERNANCE
STRATEGIC REPORT
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 Commiee. Shonaid
is a Fellow of the ICAEW.
Shonaid’s previous Board-level
experience includes serving as
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, laerly as a partner. She
also held roles as Non-executive
Chair of Greencoat Wind plc,
MSAmlin plc and Non-executive
Director at GKN plc.
Audit
Nominations
Remuneration
Risk & Security
Commiee Chair
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.
His unique experience enables
him to provide invaluable insight
in his role as the Chair of the Risk &
Security Commiee.
Skills, competence
and experience
Dina is a highly experienced
Chief People Officer and
Non-executive Director with
over 35 years’ experience gained
across both private and PLC
business environments. She has a
strong track record of working with
international workforces, building
high-performing teams, leading
organisational transformation
and delivering sustained business
performance, while ensuring that
strategic outcomes are balanced
with a continued focus on people,
culture and wellbeing.
She brings deep expertise in
executive remuneration, talent
governance and succession
planning at board level. Dina read
Business Studies and gained
a Post Graduate Diploma in
Personnel Management from
Teesside University. Dina is
Chief People Officer of global
technology provider Datatec
Group and Logicalis International,
where she is 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.
Nationality
British
Nationality
British
Nationality
British
Appointed
May 2020
Appointed
March 2024
Appointed
October 2020
Other appointments
Non-executive Chair of Cordiant
Digital Infrastructure Limited and
ClearBank Limited and Non executive
Director of Aviva plc.
Other appointments
Chief People Officer of Datatec Group.
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 King’s Foundation, and Constable
of His Majesty’s Tower of London.
Shonaid Jemme-Page
Independent
Non-executive Director
Dina Knight
Independent
Non-executive Director
A
N
R
RS
Board of
Directors
General Sir
Gordon Messenger
Independent
Non-executive Director
N
N
N
R
R
R
A
A
A
RS
RS
RS
85
Skills, competence
and experience
Roger served as the Chairman
and CEO of Leidos Holdings, Inc.
from 2014 until his retirement in
2023. Previously, he served as a
Director of BorgWarner Inc. and
of Mercury Systems Inc., and as
President of Network and Space
Systems for The Boeing Company
from 2006 to 2014. He also held
various senior programme
management and finance
positions at Boeing, McDonnell
Douglas Corporation and
General Dynamics Corporation.
Roger is a Certified Public
Accountant and has a bachelor’s
degree in Aerospace Engineering
from the Georgia Institute of
Technology, a master’s degree in
Aerospace Engineering from the
University of Texas at Arlington
and a Master of Business
Administration from the Harvard
Graduate School of Business.
Skills, competence
and experience
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. James was appointed as
Company Secretary in July 2022.
Prior to QinetiQ, James worked
as in-house Legal Counsel at
Transport for London, and has
a background in London-based
private legal practice.
Skills, competence
and experience
Ezinne brings over 20 years of
experience at the intersection
of space systems, defence
technology, government
procurement and national security
policy. From 2021 to 2024 she
served as Assistant Director
at the White House Office of
Science and Technology Policy,
with responsibility for US Space
Policy, authoring the national
space economy strategy, and
leading development of the ISAM
framework. Earlier in her career
she contributed to more than 60
NASA missions and programmes
valued at over US$9bn.
Her board-relevant expertise
spans space and autonomous
systems, dual-use technology
assessment, sovereign capability
architecture, and transatlantic and
Gulf defence market dynamics.
She holds an undergraduate
degree in Computer Science from
Rensselaer Polytechnic Institute
and master’s degrees in Aerospace
Systems, Space Robotics and
Science & Technology Policy from
Johns Hopkins University, MIT and
Harvard University, respectively.
She also earned a doctorate
degree in Aeronautics and
Astronautics from MIT.
James Field
Company Secretary
Ezinne Uzo-Okoro
Independent
Non-executive Director
Board of
Directors
Roger Krone
Independent
Non-executive Director
Other appointments
Director of Lear Corporation and the
President and Chief Executive Officer
of Scouting America.
Other appointments
Senior Fellow, Belfer Center for Science
and International Affairs, Harvard
University; General Partner, Calthorp
Group, Senior Partner AzurX, a space
and defence investment firm, and
a Member of Portal Global Council.
Other appointments
N/A
Nationality
USA
Nationality
USA
Nationality
British
Appointed
January 2025
Appointed
November 2024
Appointed
July 2022
N
N
R
R
A
A
RS
RS
hps://www.qinetiq.com/
en/who-we-are/board-of-
directors
hps://www.qinetiq.com/
en/who-we-are/qinetiq-
leadership-team
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
86
GOVERNANCE
STRATEGIC REPORT
Governance
structure
The structure through which the Company is managed is
detailed below. It continues to evolve to meet the needs
of the business and the Company’s stakeholders, and
day-to-day management and decision-making has been
delegated 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. The Board has reserved
certain maers for its own consideration so that it can
exercise its own judgement when making major decisions to
promote the success of the Company for its stakeholders.
For further info please see:
www.qinetiq.com/en/who-we-are/corporate-governance
Audit Commiee
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.
104-109
Nominations
Commiee
Considers the structure,
size and composition
of the Board and
Commiees, and
succession planning.
It identifies and
proposes individuals
to be Directors and
Executive Management
and establishes the
criteria for any
new positions.
96-103
Remuneration
Commiee
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.
115-120
Risk & Security
Commiee
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.
110-114
Disclosure Commiee
Considers and acts on
the need for disclosures
to be made to the market
under the requirements
of the Market Abuse
Regulations. The
Commiee 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 Commiee Chairs.
Shareholders
Group Chair
QinetiQ Leadership
Team (QLT)
Group Chief
Executive Officer
Board of
Directors
Commiees
Responsible for the leadership of the Board and for ensuring that it operates effectively through dynamic discussions
and constructive challenge.
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 on a monthly basis. It is responsible for the day-to-day management of the Group’s
activities. 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.
Responsible for the day-to-day running of the Group’s business, Group performance, and the development and
implementation of the Group strategy.
The Board is responsible for leading the Group, by seing 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.
87
Role of the Board
Underpinned by good corporate governance, the Board is focused on
delivering an effective and entrepreneurial Board which:
ɰ
Provides challenge, advice and support to management
ɰ
Drives informed, collaborative and accountable decision-making
ɰ
Creates long-term sustainable success and value for our
shareholders, having regard to the interests of all our stakeholders
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.
Division of
responsibilities
Neil Johnson
Steve Wadey
Martin Cooper
Steve Mogford
Shonaid Jemme-Page,
Dina Knight,
Roger Krone,
General Sir Gordon Messenger,
Steve Mogford,
Ezinne Uzo-Okoro
James Field
ɰ
Provides overall leadership and ensures
effectiveness of the Board
ɰ
Sets the agenda, character and tone of the
Board meetings and discussions
ɰ
Maintains an effective working relationship with
the Group CEO
ɰ
Leads the annual performance evaluation
of the Board and its Commiees and ensures
that each Non-executive Director makes an
effective contribution
ɰ
Develops the Group’s strategy for consideration
and approval by the Board and provides effective
leadership of the QinetiQ Leadership Team (QLT)
in its delivery of strategy
ɰ
Develops the Group’s business model and
manages the Group’s operations
ɰ
Overseas the QLT’s development and
implementation of corporate, safety and
environmental policies and standards
ɰ
Directs Legal & Governance functions
ɰ
Establishes and services relationships with
key stakeholders
ɰ
Reinforces the Group’s values and sets expected
employee behaviours
ɰ
Communicates (alongside the Group CFO) the
Group’s financial performance and strategic
progress to investors and analysts
ɰ
Ensures the Board is kept fully appraised of the
Group’s operational and safety performance,
risks and opportunities
ɰ
Responsible for the financial stewardship of the
Group’s resources through appropriate accounting,
financial and other internal controls
ɰ
Directs and manages the Group’s finance,
tax, treasury, risk management, ESG and
insurance functions
ɰ
Communicates (alongside the Group CEO)
the Group’s financial performance and strategic
progress to investors and analysts
ɰ
Acts as sounding board for the Group Chair and
a trusted intermediary for the other Directors
ɰ
Available to shareholders to discuss any concerns
that cannot be resolved through the normal Group
Chair or Group CEO channels
ɰ
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
ɰ
Meets with the Non-executive Directors without
the Group Chair present at least annually, and as
required, to discuss Board maers
ɰ
Monitor and scrutinise the Group’s performance
against its strategic goals and financial plans
ɰ
Provide an objective perspective on the Board’s
deliberations and decision-making, drawing
on their own broad collective experience and
individual expertise and insights
ɰ
Monitor and assess the Group’s culture, use
appropriate and effective means to engage with
employees and acquire an understanding of other
stakeholders’ views
ɰ
Assess the effectiveness of, provide support to, and
constructively challenge, the Executive Directors
ɰ
Play a lead role in the functioning of the
Board’s Commiees
ɰ
Provides advice and support to the Board, its
Commiees, the Group Chair and other Directors
individually as required, primarily in relation to
corporate governance maers, and Non-executive
Directors’ training and development needs
ɰ
Responsible, with the Group and Commiee Chairs,
for seing the agenda for Board and Commiee
meetings and for high-quality and timely information
and communication between the Board and its
Commiees, and between the Directors and senior
management as required
ɰ
Ensures that Board and Commiee policies and
procedures are complied with
Group Chair
Group CEO
Group CFO
Senior Independent Non-executive Director
Independent Non-executive Directors
Company Secretary
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
88
GOVERNANCE
STRATEGIC REPORT
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
The majority of Board members are independent
Non-executive Directors. The independence of the
Non-executive Directors is considered annually by the
Nominations Commiee, 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.
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 aending and preparing for formal Board and
Commiee 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.
Board and Commiee processes
The Board has a formal schedule of maers 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 maers; financial
results and budgets; key policies; Board and Commiee
membership; and governance.
Other maers, responsibilities and authorities have
been delegated by the Board to its standing Commiees,
comprising Nominations, Audit, Risk & Security,
Remuneration and Disclosure. Any maers outside of the
schedule and the responsibility of the Commiees fall
within the authority of the Group CEO. The schedule of
maers reserved for the Board and the terms of reference
of each Commiee, 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 Commiees, for maintaining a scheduled
12-month programme of business for the Board and its
Commiees, with flexibility for additional business to be
discussed as required. The programme ensures that all
necessary maers 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 and 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 major contract bids and capital allocation), integrated
change programmes, risk management, people and
culture updates (including on employee relations, talent
development and diversity promotion), and stakeholder
engagement. Senior management and external advisers
regularly aend both Board and Commiee meetings,
which allows for detailed and informed discussions on
specific maers 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.
Composition, succession
and evaluation
89
In advance of each Board and Commiee 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 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 Commiee
procedures. If a Director is unable to aend 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 Commiee
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
Commiee 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.
Conflicts 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.
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 biannually by the Nominations Commiee,
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 Commiee Meetings
During the year, the Board has seven meetings, each
scheduled over one or two days, for Board and Commiee
business. Additional Board sub-Commiee meetings
and conference calls are held between the scheduled
meetings as required. The table below sets out the Board
and Commiee membership and aendance by members
at meetings held in FY26.
1
In compliance with the UK Corporate Governance Code,
and the Commiee Terms of Reference, Steve Wadey and
Martin Cooper are not members of the Audit, Nominations,
and Remuneration Commiees, and Neil Johnson is not
a member of the Audit Commiee.
2
Ross McEwan resigned from the Board on 17 July 2025.
Absences were due to unavoidable prior commitments. Directors
who are unable to aend meetings continue to receive the papers in
advance of the meeting and have the opportunity to discuss with the
relevant Chair or the Company Secretary.
Composition, succession
and evaluation
Director meeting aendance FY26
Board and Commiee meeting aendance – 1 April 2025 to 31 March 2026
Members
Board
Audit
Commiee
Nominations
Commiee
Remuneration
Commiee
Risk & Security
Commiee
Martin Cooper
1
7/7
–
–
–
4/4
Shonaid Jemme-Page
7/7
4/4
2/2
4/4
4/4
Neil Johnson
7/7
–
2/2
4/4
4/4
Dina Knight
7/7
4/4
2/2
4/4
4/4
Roger Krone
7/7
3/4
2/2
4/4
3/4
Ross McEwan
2
2/2
1/1
2/2
2/2
2/2
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
Ezinne Uzo-Okoro
7/7
4/4
2/2
4/4
3/4
Steve Wadey
1
7/7
–
–
–
3/4
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
90
GOVERNANCE
STRATEGIC REPORT
In making decisions, the Board of Directors is conscious
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 in
Section 172(1); see pages 72 to 76 for more information.
Examples of some important decisions taken by the Board
during the year, and the factors which the Board had regard
to when reaching those decisions, are set out below.
Board
decision-making
Short- to Medium-Term
Performance Milestones
Background
In response to performance challenges faced by the
Company in its previous financial year, it was determined
that a number of strategic actions were required to drive
improvements in performance.
Board discussion
The Board considered, debated and identified the defined
set of milestones that the Company needed to meet over
the short to medium term, to successfully deliver the
actions required in response to the performance challenges
faced. The Board agreed a set of measures against each
strategic action, which would be reported on at each
meeting, enabling the Board to monitor the Company’s
progress. These discussions were informed by the in-depth
review of the business and its strategy undertaken at the
FY26 October Strategy Board meeting.
Board stakeholder considerations and impact
Ensuring the Company’s business and strategy are
optimally positioned and enabled to achieve consistent
operational and financial performance for the benefit of
effective delivery for its customers; maximising returns
for its investors; and retaining and aracting its key
employee talent.
Outcome
Clear alignment between the Board and the Company
leadership on the critical actions to be undertaken to deliver
against its growth strategy; oversight of progress against
defined performance measures through regular reporting
to the Board; and enhanced Board input into critical actions
being taken by the Company to improve performance.
Equity Market
Narrative
Background
The Company, with the Board, has given considerable
consideration to the effectiveness of the narrative its uses
to present itself to shareholders and the investment market.
Board discussion
The directors discussed shareholder perceptions of the
Company’s current equity narrative and opportunities to
make improvements in it; ways in which its Investor Relations
programme could be strengthened; and the effectiveness
of quality of earnings reviews facilitated by the Company.
The Board also reviewed the Company’s current capital
allocation policy and how that had performed over the
preceding year, including by reference to a comparable
FTSE peer group.
Board stakeholder considerations and impact
The Board had regard to direct feedback from shareholders
given in response to an investor perception audit
commissioned by the Group Chair and facilitated by the
external consultancy, Bendon Advisory. The Board also
considered proposals to develop an enhanced Investor
Relations programme; improve and simplify quality of
earnings reviews for the benefit of investors; and ensure
the Company’s capital allocation policy and actions
remained strongly aligned to shareholder interests.
Outcome
An enhanced equity market narrative, beer aligned to
shareholder interests, that can be utilised as part of the
Company’s engagements with its shareholders and the
investor market.
1
2
91
Board
decision-making
Triennial Remuneration
Policy Renewal
Background
In compliance with its UK Corporate Governance Code
obligations, the Company has developed a renewed
Directors’ Remuneration Policy, to be presented for
shareholder approval at the Company’s 2026 AGM.
Board discussion
A dedicated sub-commiee of the Remuneration
Commiee was established, led by the Remuneration
Commiee Chair, to oversee and give guidance to the
development of the Policy. The sub-commiee considered
the effectiveness of existing incentive schemes in driving
the successful delivery of the Company’s performance,
and alignment with the Company’s strategy; the interests
of shareholders; and current market best practice.
Board stakeholder considerations and impact
Potential changes to the Policy were evaluated to assess
whether the outcomes they are designed to achieve are
transparent, and remain aligned to the interests of the
Company’s shareholders and the value we deliver to
them. This assessment has been informed by direct
consultation and engagements with a number of the
Company’s largest shareholders, whose feedback has
been taken into consideration.
Outcome
A refreshed Directors’ Remuneration Policy has been
developed, taking into account key stakeholder inputs
and views, ready for presentation to shareholders at the
2026 AGM.
Business Systems
Finance Programme
Background
The Company has established a programme to deliver an
upgraded IT system for managing its business finances,
enabling a consistent toolset and fully aligned processes
across its global business. The programme is delivered
in defined phases, with each key phase requiring Board
approval for the investment required.
Board discussion
A dedicated Board sub-commiee has been established
to oversee progress of the programme. During the course
of the year, the sub-commiee has reviewed and approved
the investment required for two key phases; ‘Design to Build’
and ‘Test & Deploy’. Consideration and guidance was given
on progress against key gating milestones; management
and mitigation of material risks; understanding of key
dependencies; cost versus budget; implementation
planning and communication; and ensuring that
the identified benefits of the new system could be
effectively realised.
Board stakeholder considerations and impact
The sub-commiee considered the impact of
implementation of the new system on employees,
and how effective communications could be used to
ensure the benefits of the systems were fully realised by
key user communities within the business. The system will
also be an enabler of improved business budgeting and
forecasting across the organisation, which will support
improved delivery and value returns performance for
customers and shareholders.
Outcome
Approval for investment in the programme, allowing it to
be delivered on target against time and budgeted cost.
3
4
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
92
GOVERNANCE
STRATEGIC REPORT
Board
activity
The key business and activities of the Board during the year were as follows:
Strategy and operations
Financial performance
Internal control and risk management
Leadership, people and culture
Engagement, environment and community
Governance and legal
ɰ
Reviewed and approved the Company’s
reset purpose, values and strategy
ɰ
Approved the Group’s five-year Integrated
Strategic Plan (ISP). See more on page 69
ɰ
Undertook in-depth reviews of business
performance against defined short- to
medium-term milestones
ɰ
Reviewed and approved material bids
and significant investments in
improvement programmes
ɰ
Received updates from each of the Group’s
sectors and functions on their performance
vs strategy and budget, and their priorities
and initiatives
ɰ
Reviewed the Group’s capital allocation policy
ɰ
Reviewed progress of the Group’s Digital
& Data improvement programme
ɰ
Monitored the economic, environmental,
legislative and geopolitical landscape,
particularly as regards the ongoing conflicts
in Ukraine and Gaza and the emerging
dynamic in the Middle East
ɰ
Approved the Company’s annual budget,
business plan and KPIs, and monitored
performance against them. See more on
page 38
ɰ
Reviewed and approved the Group’s
full and half-year results and interim
trading updates
ɰ
Approved the full-year and
half-year dividends
ɰ
Approved the Company’s Annual Report,
including its fair, balanced
and understandable nature
ɰ
Reviewed and confirmed the Group’s viability
statement and going-concern status
ɰ
Reviewed the Group’s capital, debt and
other liquidity arrangements
ɰ
Approved the Group’s tax strategy and
treasury policy
ɰ
Considered and approved expenditure
related to material bids and internal
investment programmes
ɰ
Reviewed and approved the Group’s risk
appetite and reviewed the Group’s principal
and key risks, the processes for identifying
them, and actions to mitigate those
ɰ
Received reports from the Chair of the
Risk & Security Commiee on its activities
ɰ
Received reports from the Chair of the Audit
Commiee on its activities and assessments
ɰ
Reviewed and assessed the effectiveness of
the Group’s system of internal controls and
preparedness for Provision 29
ɰ
Regularly monitored confidential reporting
reports and actions made within the
Company (the process of which is described
further on page 60)
ɰ
Received recommendations from the
Nominations Commiee on the re-election
of Directors and advice regarding the
structure, size and composition of the Board
ɰ
Reviewed and actioned succession plans for
the Board and senior management, having
regard to skills, experience and diversity
ɰ
Reviewed and approved amendments to the
Board Diversity Policy
ɰ
Received reports from the Chair of the
Remuneration Commiee on its activities,
recommendations regarding remuneration
strategy and decisions regarding the Group
Chair’s, Executive Directors’ and senior
management’s pay, and reviewed and
approved Non-executive Directors' fees
ɰ
Reviewed people reports, including updates
on talent development, retention and
acquisition programmes and engagement
and inclusion programmes
ɰ
Assessed and monitored culture,
how it aligns to strategy and how it has
been embedded
ɰ
Engaged with the Company, its advisers
and shareholders on the development of the
triennial Director Remuneration Policy
ɰ
Undertook an annual review of the Group’s
stakeholders – who they are, methods of
engagement, outcomes and feedback.
See more on page 42
ɰ
Reviewed feedback from investors and
analysts and the output of engagement with
major shareholders and other stakeholders,
including commissioning an external investor
perception audit
ɰ
Reviewed workforce engagement activities
and outcomes, including the results
of the Peakon surveys, and received
reports on the Group Chair’s workforce
engagement activities
ɰ
Reviewed regular reports on our approach to
ESG issues. See more on page 40
ɰ
Reviewed the activities of, and approved
a financial commitment to, the Company’s
Climate Transition Action Plan, environmental
programmes, ethics programmes and
charitable and community initiatives
ɰ
Approved the Group’s Section 172(1)
statement. See page 72
ɰ
Approved the Notice of the AGM
ɰ
Undertook an annual compliance review
of the UK Corporate Governance Code
and DTR7
ɰ
Undertook an annual review of
the Group's defence process and
vulnerability position
ɰ
Reviewed the results of the internal Board
and Commiee effectiveness evaluations
ɰ
Reviewed and approved maers reserved
for the Board and its Commiees’ terms
of reference
ɰ
Reviewed and approved the Group’s
annual Modern Slavery and Human
Trafficking statement
ɰ
Through the Audit Commiee, regularly
reviewed and monitored the Company’s
activity in preparation for compliance
with Provision 29
93
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 the
QinetiQ Group and the US Government, which governs how
the rest of the Group interfaces, collaborates and works
with the companies in the US sector. The controls contained
in the SSA are required by the US National Industry Security
Program Operating Manual Rule, governing contractor
access to classified information, to appropriately mitigate
certain aspects of foreign ownership, control and influence
to the extent they might otherwise adversely affect the
interests of US national security. The SSA 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
US Government. These are Outside Directors, Inside
Directors and Officer Directors of QinetiQ Inc.
Through the Inside Directors, QinetiQ maintains appropriate
visibility of the management and operations of the
companies in the US sector. These positions are typically
held by the Group CEO and Group CFO of QinetiQ Group
plc. To ensure there is no undue control or influence on
the actions of the US sector by QinetiQ Group plc as the
foreign owner, Inside Directors occupy a minority of seats
on the QinetiQ Inc Board of Directors. 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.
Officer Directors are responsible for the day-to-day
operations of the US sector, and serve as a liaison with the
wider QinetiQ Group. The Chief Executive & President of
the US sector is the appointed Officer Director of QinetiQ
Inc. 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 currently John Hillen,
Chair of the QinetiQ Inc Board, John Kavanaugh and Brad
Feldmann. The number of Outside Directors must exceed
the number of Inside Directors. The Outside Directors also
form the Government Security Commiee, which is in place
to ensure US national security interests are respected.
Management and control
of US subsidiaries
Employee
engagement
We have experienced, diverse and dedicated people
who are recognised as key assets to our business and
who are critical to our success, and 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 list of engagement channels set out below describes
how the Board continued to be able to effectively gain the
views of employees throughout the year.
How does it work?
ɰ
By using a number of different employee engagement
mechanisms and accessibility, ensuring flexibility
ɰ
By having a direct link to the Board via the designated
Non-executive Director
ɰ
By way of a dedicated forum to relay the voice
of the employees
ɰ
By regularly reporting to the Board on culture, people
strategy and employee engagement
ɰ
By drawing on each individual Board member’s
accessibility and unique experience as business leaders
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
94
GOVERNANCE
STRATEGIC REPORT
Employee
engagement
Dedicated Non-executive Director
The Group Chair, Neil Johnson, is the dedicated Non-
executive Director for gathering the views of employees.
ɰ
At least two meetings with the Global Employee Voice
(GEV) each year
ɰ
Aends the Global Recognition Gala and also Global
Employee Roadshows
ɰ
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.
ɰ
Two meetings annually with Dina Knight, the Chair of
the Remuneration Commiee
ɰ
Regular meetings with the Group Chief Executive
Officer and Chief People Officer, who reports to the
Board on culture, employee and people strategy,
and employee engagement
Monthly Q-Talks
Delivered by members of the QinetiQ Leadership Community
(QLC) to their teams, with the purpose of keeping employees
up to date with what is currently important across QinetiQ.
ɰ
A mechanism accessible for employees to get a
thorough understanding of what is happening in the
Company, and also to provide individual feedback
Global Employee Roadshows
Delivered biannually by the QLT, 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.
ɰ
Non-executive Directors are able to aend when available
ɰ
Employees have the opportunity to ask questions,
either in person or through a number of online mediums
ɰ
Reported to the Board by the Group CEO
Regular QLC events
Delivered by the QLT and providing updates to the direct
reports of the QLT on latest operational, financial,
strategic and key stakeholder issues.
ɰ
The members of the QLC feed back to their teams
at team meetings, sharing key messages on
Company strategy
Workday 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 54.
ɰ
After each survey, the Group Director Employee
Experience has a meeting with the Group CEO where they
discuss the results, trends and any maers for concern
ɰ
The Group CEO feeds back to his fellow Board members
at each Board meeting
ɰ
QLC members interact directly with their team to identify
tangible actions in response to feedback from each survey
Global Portal – our intranet
ɰ
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
ɰ
Enables employees to ask questions and discuss
topics internally
Confidential reporting
QinetiQ has in place a Group-wide ‘Speak Up’ programme,
which includes an externally provided confidential reporting
process, as detailed on the Company’s intranet and in its Code
of Conduct. 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.
ɰ
Reports on confidential reporting activity and
outcomes of investigations are reported to the Board
at each of its meetings
ɰ
The Board annually reviews the effectiveness of the
Group’s confidential reporting process, provides
challenge and advice on the issues raised, and remains
satisfied that the process in place is fit for purpose
More information on the Group’s 'Speak Up' programme
can be found on page 60.
How we engage with our people
95
QinetiQ values a diverse and highly skilled
workforce, supporting our delivery of
world-class technology and engineering
to our customers for the benefit of
national defence and security, and
helping to protect lives, in the countries
we work with.
Year in review
This year saw a continued evolution of the Board, with our
two most recent Non-executive Director appointments
becoming well embedded. We have built expertise to
support the Company’s evolved growth strategy,
including increasing the Board’s C-suite experience
in the Defence sector.
We have also supported Dina Knight’s transition into the
Remuneration Commiee Chair role, which brings the
benefit of her current external experience as a senior
people leader at executive level. This will help support
the Company’s programme to enhance leadership skills
throughout the organisation.
The Commiee has maintained its focus on gender
and diversity in its leadership Commiees and throughout
the organisation.
The Nominations Commiee undertook its usual
assessment of Directors’ continued independence for the
year in review, and further information on the Commiee’s
effectiveness can be found on page 101 and 102.
Nominations Commiee
Report
On the Commiee’s agenda:
ɰ
Overseeing changes to the senior leadership team
ɰ
Review of Board and Senior Management succession
plans – improved internal succession bench strength
in Senior Leadership team
ɰ
Updates to Board Diversity Policy and the Company’s
inclusion initiatives
ɰ
Ensuring leadership succession plans are enabled
ɰ
Overseeing the seing of Parker Review targets for
diversity balance within Senior Management of the
Company by 2027
Priorities going forward:
ɰ
Progress towards meeting diversity targets under
UK Listing Rules
ɰ
Building the experience of the Board in its leadership
of achieving the Company’s climate change targets
and goals
ɰ
Board succession planning
ɰ
Further embedding the Board’s assessment of culture
FY26
FY27
Neil Johnson
Nominations Commiee Chair
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
96
GOVERNANCE
STRATEGIC REPORT
Skills and experience
Our Board offers the obvious, expected strengths in governance, risk management and financial reporting. Equally
impressive, however, are the coverage and deep knowledge held by the Directors in various industrial fields and markets
globally, particularly in defence and security, government services, and aerospace and aviation. This strength, when
coupled with a broad diversity of age, gender, ethnicity and geographic balance, affords our Company a robust and
strategic influence to match our high delivery standards.
Principal responsibilities
ɰ
Keeping the structure, size and composition of
the Board under review
ɰ
Succession planning for Directors and
Senior Executives
ɰ
Reviewing the leadership needs of the organisation,
both Executive and Non-executive, to ensure the
continued ability of the organisation to compete
effectively in its core markets
ɰ
In accordance with the Board Diversity Policy,
identifying and nominating for Board approval
appropriately diverse candidates to fill Board and
Commiee vacancies when they arise
ɰ
Reviewing the time required from Non-executive
Directors to sufficiently discharge their duties
ɰ
Evaluating the skills and experience of the Directors,
to assess the Board’s capability to support the
execution of the Company’s strategy and delivery
of its operations
ɰ
Evaluating and monitoring the Company’s culture and
how this has been embedded
ɰ
Reviewing the independence of the Non-executive
Directors and any potential conflict of interest for
all Directors
The Commiee’s detailed responsibilities are
set out in the Terms of Reference, available at:
www.qinetiq.com/en/who-we-are/corporate-governance
Nominations Commiee
Report
Corporate governance
8
8
8
8
7
7
9
9
9
9
9
9
9
9
Finance and financial reporting
Risk management
ESG (including safety)
People (e.g. culture, D&I, succession, talent, reward)
Cyber security
Technology/digital
Transformation
M&A
Strategy
International business
Government services market
Aerospace and aviation market
Defence and security market
Director skills and experience
97
The effectiveness of the Commiee’s succession plans is demonstrated by the successful succession of Dina Knight into
the Remuneration Commiee Chair role, and the increased depth of knowledge and experience, relevant to the current
strategic actions and needs of the Company, developed through changes to the Board over the previous two years.
Identifying current and future needs and skills gaps
Ensuring accountability and success of the Board’s performance
The Commiee maintains and regularly reviews a matrix of the Directors’ experience
and skills to ensure that the Board and its Commiees 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:
ɰ
Diversity, including age, gender and ethnicity.
ɰ
Background, professional skills and experience.
ɰ
The number and balance of Executive and Non-executive Directors.
ɰ
Length of tenure.
ɰ
Independence.
Annual Board effectiveness and performance evaluation, using an external provider,
at least every three years.
ɰ
Annual review of the Group Chair’s performance led by the
Senior Independent Director.
ɰ
Annual independence review of the Non-executive Directors.
ɰ
Continued assessment of the Non-executive Directors’ time commitment.
ɰ
Policy on Board members’ appointments to other Boards.
ɰ
Annual performance review of the CEO and CFO, supplemented by the Group
Chair’s and Non-executive Directors’ continual assessment of their performance.
ɰ
A thorough and tailored induction programme for new Directors.
ɰ
Annual training for the Board as a whole and on an individual basis.
ɰ
Enhancing the C-suite experience in the defence
sector with the appointment of Roger Krone in
addition to Steve Mogford.
ɰ
Deeper experience of US Government and
the US defence and security market.
ɰ
Dina Knight’s succession as Chair of the
Remuneration Commiee and the planned
induction spanning the first year as
Commiee Chair.
ɰ
The FY26 Board effectiveness review concluded
that the Board has been effective, engaged with
and was helpful to the organisation.
ɰ
A summary of the Board’s decision-making,
considering Section 172(1), can be found on
pages 72 to 76.
Action
Outcome/impact
Succession planning
Board and Commiees
The Commiee annually reviews the composition of the Board and its Commiees, and the Nominations Commiee
expects to continue to implement its succession plans for the Board and its Commiees in FY27 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 appropriately
experienced and skilled Board, yet maintaining a fresh perspective.
After this year’s review, the Commiee is satisfied that we have an appropriate mix of skills, knowledge and experience
to operate effectively.
Nominations Commiee
Report
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
98
GOVERNANCE
STRATEGIC REPORT
Sub-Commiee appointed
A sub-Commiee of the Nominations Commiee
is appointed to oversee the recruitment and
appointment process
Tender process
A tender process identifies the most suitable
recruitment agency to conduct the search and
prepare candidate specifications
Recommendation
Nominations Commiee recommends to the Board
which of the preferred candidates best fulfils the
Board’s and its Commiees’ needs
Interviews
The sub-Commiee conducts initial interviews
with the candidates on the shortlist and identifies
preferred candidates
Other Board members, including the Group CEO and
Group CFO, interview the preferred candidates
Review
The sub-Commiee reviews the list of candidates and
narrows down to a shortlist of those who best meet the
Company’s requirements, considering the following:
ɰ
Background, skills and experience
ɰ
Independence and other commitments
ɰ
Diversity
ɰ
Other individual aributes to widen the Board’s
overall knowledge, providing challenge and
further support
Senior management succession
planning programme
The Commiee 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 Commiee 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 Commiee 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 enables the Commiee
to identify any gaps in the senior management succession
pipeline which may need to be met externally, and any
requirements for senior managers’ further development.
The new operating model was brought into effect in July
2025 and included new appointments to the QLT, including
Chief Growth Officer and Chief Corporate Affairs Officer.
Nominations Commiee
Report
The process that the Commiee has established,
together with the particular considerations it takes
into account, in identifying and nominating Director
candidates, is set out below:
Ongoing Director training
The Directors have the opportunity to participate
in an ongoing training programme organised by
the Company Secretary. This includes the Board
being briefed on relevant regulatory changes, and
aending external training sessions on topics
including climate change and ethics.
99
Nominations Commiee
Report
Board and Company commitment
to diversity
The Board believes that a broad range of skills, experiences
and perspectives is fundamental to strong performance
and long-term success. A diverse workforce enhances our
collective capability, strengthens decision-making, and
enables the Company to adapt and thrive in a changing
environment. Accordingly, the Board is commied to
fostering diversity across all levels of the organisation,
including at Board and senior management level and
throughout the workforce, including gender, ethnic and
social backgrounds. This commitment is driven by our
belief that diversity of skills and perspectives:
ɰ
Enhances decision-making
through the combination
of different skills, insights and expertise, supporting
well-rounded and effective outcomes.
ɰ
Enables us to aract, develop and retain the best
talent
by creating an inclusive environment where
individuals are empowered to apply and grow their
skills to their full potential.
ɰ
Strengthens our ability to serve customers
and stakeholders
by drawing on a wide range of
capabilities and experiences that reflect the needs
of diverse communities in which we operate.
This focus on diverse skills and perspectives aligns with
our values and supports our strategy for sustainable
growth, by ensuring we build, develop and retain the talent
needed to deliver high-quality outcomes for our customers.
Board Diversity Policy
Our commitment is confirmed in the Board’s Diversity Policy,
which has been updated and strengthened again this year,
and which applies to the Board and all of its Commiees –
the main objectives of which are:
ɰ
To achieve and maintain targets on gender and ethnic
diversity on the Board and its Commiees.
ɰ
To ensure that the membership of the Board and its
Commiees reflect the diversity of the geographies
and communities we operate in, and the customers
that the Group serves.
ɰ
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:
ɰ
At least one member of the Board identify as coming
from an ethnic minority background.
ɰ
The Audit and Remuneration Commiee Chairs are
female, with Shonaid Jemme-Page as Chair of the
Audit Commiee and Dina Knight as Chair of the
Remuneration Commiee.
ɰ
Female representations of the direct reports to the
QLT has increased to 29.3% (28.9% in 2025), and
remains a key area of focus.
ɰ
The seing during FY26 of an ethnic minority target
of 7% for the Senior Management team working in
the UK, to be achieved by 2027, as required by the
Parker Review
The Company has, as at 31 March 2026, met the following
target, as referenced in Listing Rule 6.6.6(9): that there
should be a Director from a minority ethnic background on
the Board. The remaining targets – that at least 40% of the
Board are women, and that at least one of the senior Board
positions is held by a woman – have not been met this year.
Female representation on our Board is currently 33.3%
(2025: 36%), and in line with Provision 23, 31.3% at senior
management level (which comprises the QLT and their
direct reports) (2025: 28.2%). This will remain an important
consideration in future appointments. Disclosures relating
to gender diversity within the Company and further
information on our engagement and inclusion plan can
be found on page 55.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
100
GOVERNANCE
STRATEGIC REPORT
A performance evaluation of the Board, its Commiees and the individual Directors is conducted annually, with an externally
facilitated review required at least once every three years. As illustrated by the chart above, FY25 was the first in our current
three-year review cycle, when an external evaluation was undertaken by Emma Bendon of Bendon Advisory. Neither Emma,
nor Bendon Advisory, has any other connection to the Group aside from the consultancy services they provide. In FY26, an
internal evaluation has been undertaken by the Company’s Secretariat team, the key outcomes of which are summarised
here. In FY27, it is anticipated that a further internal evaluation will be carried out.
The principal sources of data used to assess the effectiveness of the Board and its Commiees were questionnaires which
were completed by each Board member, a selection of members of the senior management team, and the Company’s lead
auditor at PwC.
Director effectiveness three-year cycle
FY25
External
Evaluation by selected
independent consultants
Bendon Advisory, with an
agreed scope of review
and approach
FY26
Internal
Evaluation to focus on
reviewing core effectiveness
and areas identified for
development from the
Year 1 external evaluation
FY27
Internal
Evaluation to focus on reviewing
progress made on areas
identified for development from
the Year 2 internal evaluation and
identify any gaps where further
action is required to improve
YEAR 1
YEAR 2
YEAR 3
Nominations Commiee
Report
Voluntary disclosures required under Listing Rule 6.6.6(10)R as at 31 March 2026
(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
6
66.7%
4
7
55.56%
Women
3
33.3%
0
2
44.44%
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)
7
77.78%
4
5
55.56%
Mixed/multiple ethnic groups
N/A
N/A
N/A
N/A
N/A
Asian/Asian British
1
11.11%
N/A
N/A
N/A
Black/African/Caribbean/Black British
N/A
N/A
N/A
N/A
N/A
Other ethnic group
N/A
N/A
N/A
1
11.11%
Not specified/prefer not to say
1
11.11%
N/A
3
33.33%
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. In compiling the data
required in order to fulfil its legal obligations under Listing Rule 6, the Group has acted in compliance with applicable local,
state, provincial, and federal law, regulations, and executive orders in the jurisdictions in which it carries out its operations.
During FY26, we set a target of 7% ethnic minority for Senior Management in the UK, to be achieved by 2027, as required by
the Parker Review. As part of our refreshed Engagement and Inclusion strategy, we are focusing on achieving this target
by the end of 2027, through diverse recruitment and talent pipelines. The delivery of our culture change programme will
continue to support an inclusive culture where everyone can feel they belong and thrive.
Director effectiveness
101
The Company Secretary, in consultation with the Group Chair and Commiee Chairs, reviewed and analysed the results
of the questionnaires by reference to scores given against a defined rating system; qualitative feedback provided; and
specific observations, based on which, recommendations for improvements in Board effectiveness were formulated.
This output was then discussed and considered by the Board and its Commiees, to agree actions to be taken as a result.
FY26 Internal Review
A summary of key actions taken by the Board and its Commiees during the course of this year in response to the output
of its effectiveness review is shown below:
Areas for focus
Action taken during the year
Increase time allocated to
strategic and risk-orientated
topics, especially emerging
technologies and policy
trends, allowing more time for
non-executive directors to
share their own experience.
ɰ
Reset Board Annual Planner and agenda scheduling to allow more time for strategically focused topics
ɰ
Dedicated time in each meeting to review Company performance against defined short- to
medium-term milestones
ɰ
Reduced levels of data and detail in Board papers to allow greater focus on presentation of
strategic issues
ɰ
Increased opportunities to receive valuable customer, shareholder and industry perspectives on
strategic issues relevant to the Company through allowing greater time for guest speakers to aend
planned Board events
Improved non-executive
director experience, in
relation to training and depth
of understanding of the
Company’s operations and
technical capabilities.
ɰ
Reinvigorated director site visit programme introduced up to FY28, to give all non-executives greater
opportunities to visit key facilities, increase direct engagement with a range of employees, and gain
greater insights into the Company’s innovative technical capabilities
ɰ
New training programme introduced, tailored to targeted areas of experience, which have
included external presentations on non-financial reporting; climate resilience; and
AI implementation in business
More regular updates on
shareholder engagements
and increased insight into key
investor relations issues and
considerations relevant to
the Company.
ɰ
Investor Perception Audit undertaken, facilitated through an external consultancy (Bendon Advisory),
to gain greater insight into the views of both current shareholders and prospective investors
ɰ
Increased time at Board meetings allocated for feedback on shareholder engagements; updates
on the Company’s investor relations activity; and discussion of maers important to shareholders,
for example, capital allocation policy and delivery of shareholder value
ɰ
Identifying opportunities for the Board to collectively have greater direct engagement with
shareholders as part of planned Board events
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 and Company Secretary, assessed the Group
Chair’s ability to effectively fulfil his role. It was concluded
that he had showed effective leadership of the Board; had
strong levels of engagement with shareholders, customers
and employees; and his actions continued to positively
influence the Board and the wider organisation. It was also
recognised that, in response to feedback from the prior
year’s review, the Group Chair had delivered increased levels
of briefings to the Board on his engagements with external
stakeholders, to provide deeper and highly valuable context
to Board discussions and decision-making.
Director induction
On joining the Board, whether in an Executive or
Non-executive role, each Director undertakes a tailored
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.
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. After these meetings,
Neil Johnson confirmed to the Nominations Commiee that,
during the year, all Directors have demonstrated a clear
commitment to their roles.
Board meetings and 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
London, as well as some Board meetings that continue
to be held virtually.
Nominations Commiee
Report
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
102
GOVERNANCE
STRATEGIC REPORT
Background reading material, including previous
Board and Commiee packs, investor and strategy
presentations, relevant Company procedures and
Board policies
Meetings with the Group Chair, Executive Directors
and members of senior management
Meetings with the Chairs of the Commiees, external
auditors and external remuneration advisers
Visits to Company sites, meetings with senior
local management
Guidance on corporate governance arrangements,
including the Board and Commiee agendas and
procedures, Board succession planning and Board
evaluation – provided by the Company Secretary
Details of the induction programme, organised by the
Company Secretary in conjunction with the Group Chair,
for new Non-executive Directors, are illustrated by the
following diagram:
The Annual Board Strategy meeting was held in October
2026, at the Company’s London office. This event
provides dedicated time for the Board to engage with
senior leadership on the macro political, industry and
economic environment affecting the Company and its
strategic priorities, assessed against both its short- and
longer-term priorities across an up to 10-year outlook.
During this year’s meeting, key topics included the critical
actions required and being progressed in response to the
performance challenges experienced in the prior financial
year; the changes that were required to effectively reset
the Company’s growth strategy; and defining the short- to
medium-term measures against which the Board would
monitor the Company’s strategic performance over the
present and future years. The Board’s deliberations were
also informed by valuable key customer insights given by
a senior-level guest speaker, as part of the event.
Nominations Commiee
Report
Meetings and Director site visits
In March 2026, four of our Non-executive
Directors, Shonaid Jemme-Page, Ezinne
Ozo-Ukoro, Steve Mogford and Roger Krone,
visited the Company’s headquarters in
Farnborough to see the labs and facilities in
which our laser directed energy weapons
(LDEW) capability is housed, and to meet
and engage with the talented scientists
and engineers who have developed this
groundbreaking technology. The visit included
a tour of the newly refurbished DragonFire
MDC AIT facility, which will see the production
of advanced laser technology which has the
potential to play a central role in protecting
our Armed Forces and critical assets and
infrastructure from airborne threats. The visit
also included a presentation and Q&A on the
Company’s current technology partnership
with MBDA and Leonardo; future plans for
development of the LDEW capability; and
opportunities for further partnering to
advance the technology in new domains.
These engagements help to enhance the
Board’s understanding of this key capability
area, and to create increased opportunity
for the Board to more actively engage in and
contribute to its future success.
103
Dear Shareholder,
I am pleased to present this report which sets out the
work carried out by the Audit Commiee during the year,
including the key topics it has considered and how it has
discharged its responsibilities.
The Commiee provides oversight of the system of internal
controls and risk management across the business. This
includes considering both financial and non-financial risks.
A particular area of focus for the year has been helping the
Company prepare for the upcoming Provision 29 changes to
the UK Corporate Governance Code and declaration on the
effectiveness of controls. The Audit Commiee has spent
significant time during the year guiding the ongoing work
to finalise the list of material controls and plan the scope
of the testing and assurance strategy.
The Commiee also continues to ensure the integrity
of reporting, including the Annual Report and Accounts.
For FY26, the Commiee has reviewed and challenged
the key accounting estimates and judgements inherent
within the financial results, particularly the assumptions
relating to the goodwill impairment testing, the allocation
of underlying results from specific adjusting items, and
long-term contract accounting.
The Group’s ESG credentials continue to be strong and the
Commiee supports the evolving sustainability agenda,
including target-seing, assurance and reporting. Its work
during the year in this area has included the embedding of
existing requirements and the preparation and planning
for future requirements.
Shonaid Jemme-Page
Audit Commiee Chair
Audit Commiee
Report
The US sector has experienced a more stable year in FY26,
now refocused with a refreshed strategic clarity reflecting
market dynamics and pipeline opportunities. The US sector
continues to be an area of focus for the business, and
therefore for the Commiee. As the business continues
to evolve and mature, the Commiee will ensure that
there is continuous improvement in the system of internal
control and risk management. The Commiee maintains
regular dialogue with the US Special Security Arrangement
(SSA) Audit Commiee, and I was pleased to spend time
welcoming and onboarding the new Chair of the SSA Audit
Commiee during the second half of the financial year.
The Internal Audit function continues to be effective and
collaborative. It has been instrumental in informing the
Commiee’s work on a range of topics, including cash flow
forecasting and the associated target seing.
The key areas of focus for the Commiee are addressed
by the internal audit plan, the scope of work of the external
auditors and scheduled deep-dive review sessions.
The focus areas are set and evolve based on the
changing needs of the business and the risks it faces,
as it simplifies its strategy and investment case and
seeks to deliver more effectively for all stakeholders.
The Commiee’s detailed responsibilities are
set out in the Terms of Reference, available at:
www.qinetiq.com/en/who-we-are/corporate-governance.
The Commiee is content that it meets the relevant
responsibilities set out in the FRC’s External Audit:
Minimum Standard.
Looking ahead, the Audit Commiee is keen to oversee
further improvements and enhancements to the Group’s
control environment. The Provision 29 material controls
effectiveness declaration within the FY27 annual report
will be a key area of focus during the coming financial year.
I hope you find the information in this report about the
Commiee’s work helpful and I will be pleased to answer
any questions you have about it at this year’s AGM.
Shonaid Jemme-Page
Audit Commiee Chair
Providing oversight and challenge
through proportionate governance
and effective controls.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
104
GOVERNANCE
STRATEGIC REPORT
Audit Commiee
Report
Activities during the year
Financial reporting
During the year, the Commiee spent significant time
reviewing the most critical accounting estimates and
judgements inherent within the annual and interim financial
results. These include the assumptions within the goodwill
impairment testing, judgements relating to the future
costs and risks within long-term contracts, the quality of
income and the allocation between underlying performance
and specific adjusting items. The quality of income review
includes considering one-off items within the underlying
results and their consequence on the overall sustainability
of earnings. This assessment informs the Commiee’s work
on determining whether the accounts are fair, balanced and
understandable, and whether any adjustments should be
considered in remuneration calculations.
During the year, the Commiee held deep-dive sessions
into various topics, including the status and future
strategy of the pension scheme, debt financing and
covenant management, and tax strategy, including
OECD Pillar II compliance.
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 Commiee was requested to provide
advice to the Board on whether the FY26 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 Commiee
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 FY26 Annual Report
and Accounts, taken as whole, are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Company’s position,
and its performance, business model and strategy.
Rigour over non-financial reporting
(TCFD and other sustainability metrics)
The Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022 place requirements
on QinetiQ to incorporate climate disclosures in the
Annual Report and Accounts. Since FY22, we have included
a section in this report which addresses the four TCFD
recommendation pillars (Governance, Strategy, Risk and
Metrics) and 11 disclosures. We are commied to continuous
improvement as guidance and methodologies mature.
The Commiee has reviewed the proposed disclosures
and endorsed the assumptions and judgements applied
by management.
With the growing and evolving body of non-financial
reporting requirements, the Audit Commiee charter
includes non-financial reporting, to ensure that the
Audit Commiee has oversight of non-financial reporting
(including TCFD). The Commiee has a standing agenda
item and is briefed quarterly. The Commiee is provided
with a reporting tracker providing progress on all current
reporting, an update on how new requirements are being
prepared for, and a horizon-scanning summary to look
further ahead. The TCFD reporting, on page 48,
has been reviewed and endorsed by the Commiee.
Internal financial controls
Internal financial controls are the systems that the
Group employs to support the Board in discharging its
responsibilities for financial maers and the financial
reporting process.
During the year, the Audit Commiee spent significant
time progressing management’s roadmap to the upcoming
required declaration relating to the effective operation of
material controls. The Commiee reviewed and challenged
the assessment of material controls and the proposed
scope for effectiveness testing and assurance strategy.
The Commiee maintains regular dialogue with the
US Special Security Arrangement (SSA) Audit Commiee,
regarding scope and coverage and the sharing of best
practice. The Commiee takes a keen interest in the
ongoing evolution of the US sector’s control environment
under the newly appointed SSA Audit Commiee Chair.
105
Audit Commiee
Report
Key issues and judgements impacting FY26 accounts
Issue
Key uncertainties and judgements
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
to assess the level of headroom (the
difference between the net present value of
future cash flows and the carrying value of
net operating assets) in respect of all CGUs.
The impairment testing resulted in
headroom in all CGUs, and as such,
no impairments are required.
The Commiee 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 Commiee 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 US
impairment test, which is
very sensitive to outer year
cash flows. On challenging
management, the
Commiee concluded that
management’s estimates
were reasonable and that
the associated disclosures
within the financial
statements are appropriate.
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 Commiee 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 Commiee concluded
that management’s best
estimates were reasonable.
Specific
adjusting
items
The Group reports underlying performance,
which excludes the impact of specific
adjusting items.
The Commiee receives an update on the
nature and quantum of specific adjusting
items, as well as management assessment
as to their appropriate use.
The Commiee agreed with
management’s assessment
that the restructuring costs
and other such items are
distorting in nature and it
is therefore consistent
and helpful to the reader
to separate their impact.
Restructuring
costs
Specific adjusting items for FY26 includes
the costs of restructuring and a number
of associated impacts in the US.
Digital
investment
The ongoing one-off period of digital
investment continues to be included
as a specific adjusting item.
Provisions
and
contingent
liabilities
The Group holds provisions in respect of
legal, regulatory and environmental issues.
Judgement is required in determining
whether provisions are required.
The key judgements considered by the
Commiee were the quantum of the
potential costs involved, probability of
economic outflow, disclosure requirements,
and in relation to the Pendine incident,
that insurance will cover the cost of any
civil damages (with a provision of c£10.7m
being recorded together with an equally
offseing Other Receivable).
The Commiee concluded
that management’s best
estimates were reasonable.
Restructuring
and other
provisions
A residual provision is held in respect of the
restructuring, various obligations relating
to the sale and leaseback transaction, and
the incident at the MOD range at Pendine
in a previous financial year.
Pensions
Net pension
asset valuation
The Group’s net pension asset increased
during the year. The key assumptions relate
to inflation, discount rates, demographic
assumptions and liability experience data.
The Commiee 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 Commiee concluded
that the assumptions
and outputs made by
management and the
external advisers
were reasonable.
Taxation
Key judgements
including
recoverability
of losses
The key accounting assumptions relating
to tax include tax and RDEC provisioning
and the recoverability of deferred tax
balances relating to historical losses.
During the prior year, the Group
derecognised the deferred tax balance
in respect of historical losses in the US.
The Commiee reviewed and challenged
the key judgements 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
and has linkages to the testing of goodwill
for impairment.
The Commiee concluded
that the judgements
made by management
were reasonable.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
106
GOVERNANCE
STRATEGIC REPORT
Audit Commiee
Report
Going concern and long-term viability statements
The acquisition of Avantus during FY23 took the Group
into a net debt position and the ongoing share buyback
programme has meant that the Group has maintained a net
debt position through FY26, with leverage as at 31 March
2026 of 0.5x. The Audit Commiee continues to pay close
aention to the Group’s net debt and leverage positions and
their underlying drivers, including free cash flow generation,
capital allocation including the ongoing share buyback
extension, and the availability of external debt financing.
The Commiee has again reviewed the annual going
concern and long-term viability assessments, in particular
considering the renewal dates of financing facilities and
key long-term customer contracts, forecast covenant
compliance, debt capacity and the implications of the
ongoing share buyback programme.
After review of the available information and challenge
of the underlying assumptions, the Commiee has
concluded that the Group will be able to continue in
operation and meet its liabilities as they become due
through the going concern period of 12 months from
21 May 2026, and that it agrees with the longer-term
viability statement. The Commiee considered it
appropriate that the long-term viability statement
continues to cover a five-year period. In reaching its
conclusion, the Commiee reviewed the budget for
the next financial year, the five-year business plan, the
stress-testing scenarios applied and the mitigating actions
available. The viability statement and the going concern
statement can be found in full on page 69, including the
detail on how the assessments were conducted.
Internal Audit
The Group Internal Audit function operates independently
as part of QinetiQ’s adoption of the Three Lines Model
(see page 66 for further details). The function continues
to provide 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
Commiee four times during the year, with the Commiee
approving the annual audit plan, reviewing findings from
the audit reviews, and assessing the overall effectiveness
of the internal audit process. The audit plan for the year
was developed using a robust risk assessment, informed
by the Group’s strategic objectives, enterprise risk profile,
emerging risks, prior audit results, regulatory requirements
and management input.
The plan aims to ensure that significant financial and
non-financial risks are reviewed on a rolling basis, with the
plan built around a number of priorities including business
change and system implementations, overseas entities’
business controls, trade controls and compliance, and
project management processes and controls. Fraud risk
management was also a priority following the new
Economic Crime & Corporate Transparency Act that
includes an offence of failure to prevent fraud, with
further enhancements made to ensure the fraud risk
management framework is robust and effective.
The overall assessment following the audit and
assurance activity is that the control environment is
considered effective, with a culture conducive to
continual improvement of internal controls and risk
management processes.
As we progress into the next financial year, the Audit
Commiee recognises the importance of addressing the
new Provision 29 reporting requirements from the updated
UK Corporate Governance Code, while allowing sufficient
time to provide assurance over other important internal
projects, such as the new ERP system due to go live in the UK
and Australian businesses in the year. Other priority areas
include business resilience and project management.
The core UK-based audit team has remained stable in the
year, with the global reach enhanced by the recruitment of
an Internal Audit Manager in the US business. This will help
the delivery of a Group audit plan, with the function planning
to utilise the Group-wide resources across Group and
US-specific audits where possible.
107
Audit Commiee
Report
Risk management
The Group Risk Management function operates
independently within the business, as part of the
second-line assurance under QinetiQ’s adoption of
the Three Lines Model (see page 66 for further details).
The function works closely and collaboratively with the
business, providing an independent input to help develop
a robust system of risk management and internal control,
and is fully engaged with the ongoing work to prepare for
the upcoming required declaration relating to the effective
operation of material controls. The Commiee 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, managing intra-Group
loans and financing arrangements, meeting our covenant
compliance and legal requirements for our banking
partners, and managing our financial exposures to foreign
exchange and interest rate fluctuations. The Commiee
continues to challenge and review this framework to ensure
that it is fit for purpose and robust enough to meet the
changing nature of financial and counterparty risks, the
interest rate environments and other macroeconomic
factors, 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 Commiee reviews the
Group’s tax affairs annually, which includes considering
the Group Tax Strategy, status of any tax audits and filings,
tax accounting judgements (including the recoverability of
deferred tax assets and any judgements relating to RDEC
income) and associated disclosures, the structuring of
key transactions, and important regulatory changes, such
as the adoption of global Pillar 2 compliance. The UK tax
authorities tested the Group Tax policies and procedures
during last year’s business risk review and provided an
overall low risk rating across all measures of systems and
delivery, governance and approach to tax compliance.
External audit
PwC audit scope
QinetiQ Limited, QinetiQ Australia Pty Ltd and QinetiQ’s
US sector (comprising the Foster Miller Inc, MTEQ and
Avantus entities) are ‘full scope’. Consistent with the
prior year, QinetiQ Target Systems Limited is also in scope
for inventory and intangible assets only. The Commiee
considers that the audit scope provides adequate audit
coverage over the consolidated financial statements.
Non-audit work and auditors’ independence
The Commiee 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 FRC’s 2024 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 limits
these to audit-related services such as reporting to lenders
and grant providers, or 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 standard and in compliance
with the Group’s own policy.
The Commiee approves the terms of all audit services,
as well as permied 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 Commiee, and any services exceeding
£50,000 in value require the prior consent of the Commiee
as a whole.
For work that is permissible by type, the Commiee 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.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
108
GOVERNANCE
STRATEGIC REPORT
Audit Commiee
Report
Review of non-audit work during the year
The Commiee 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 Commiee 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 165.
Non-audit related fees paid to the auditors during the year
were £0.17m (FY25: £0.17m), representing 9% (FY25: 9%) of
the audit fee. This included £0.12m (FY25: £0.12m) 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 Commiee discussed
the effectiveness of the external audit for FY25. PwC
continues to perform its audit work to a high standard,
with a deep understanding of the Company’s business,
key contracts, control processes and the maers on
which significant accounting judgements or estimates are
required. The Commiee is of the view that PwC provides
a well-considered validation and robust challenge of
management’s views as appropriate. Following several
recommendations made in previous years, the audit
process is now in a stable cycle of continuous improvement,
with no significant changes made during FY25 or FY26.
Audit appointment and partner succession
PwC was appointed as auditors of the Group at the 2017
Annual General Meeting (AGM) following a tender process.
PwC is now in its ninth year as auditors, with the external
audit engagement partner, John Ellis, in his fourth 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. During FY26, the Commiee has started planning
for an external audit tender to take place in FY27, to ensure
that PwC is reappointed or new auditors are appointed
for the FY28 audit cycle. The Commiee is of the view
that the timing for the audit tender strikes an appropriate
balance between continuity for the current audit firm and
consideration of alternative firms.
The Commiee and the Board will be recommending
PwC’s reappointment at the 2026 AGM for the FY27 cycle.
Governance
Audit Commiee structure
The Audit Commiee is comprised entirely of independent
Non-executive Directors and is chaired by Shonaid
Jemme-Page, who is considered by the Board to fulfil
the Code requirement of having recent and relevant
experience from the financial sector.
The Board considers the members of the Audit Commiee
to be independent and, in accordance with the Code, the
Board concludes that the Commiee 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 Group Chief Executive Officer, Group Chief Financial
Officer, Group Financial Controller, Group Director Internal
Audit, Group Director Risk & Assurance and representatives
of the external auditors aended all Commiee meetings
by invitation during the year. Twice a year we also welcome
the Chair of the US SSA Audit Commiee to update us
specifically on the internal controls and risk management
across the US business. The Commiee 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,
auditors independence and objectivity.
Audit Commiee effectiveness review
The evaluation of the effectiveness of the Commiee
was conducted alongside the Board effectiveness
review. See more on pages 101 and 102. The outcome
of the evaluation confirmed that the Commiee continues
to operate highly effectively and determined that
Commiee members have good oversight of, and are able
to raise appropriate challenges in respect of, important
financial maers, 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 seing of a policy on the provision of
non-audit services.
109
Risk & Security Commiee
Report
We will never stand still, we’ve improved
our processes, we have demonstrated
our willingness to invest to mitigate, and
we continue to horizon scan future risk.
Dear Shareholder,
I am pleased to present our Risk & Security Commiee
report for FY26, which describes our activities and areas
of focus during the year.
Key responsibilities
The Commiee’s primary functions are:
ɰ
To oversee the sound operation of the Group’s risk
management systems
ɰ
The ongoing review of the Group’s principal and
emerging risks (see pages 66 to 68)
ɰ
To oversee the Group’s physical and non-physical
security systems, including monitoring security
exposures and security culture, and considering
emerging security issues
ɰ
To ensure that health and safety risks are being
effectively managed across the Group
ɰ
To oversee the Group’s second-line assurance activity
over the first-line compliance activity taking place
across the Group’s functions and businesses
ɰ
To monitor adherence to the generic MOD
compliance system
ɰ
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.
ɰ
Rationalised the QinetiQ Assurance Model, ensuring
we meet all legal, regulatory and compliance
requirements, delivering risk-based assurance in
an efficient and effective manner
ɰ
Enhanced and embedded the Business Management
System, the single source for all policies and
requirements, to ensure an appropriate balance
of Group governance standards and locally
tailored implementation
ɰ
Upgraded the Enterprise Risk Management Framework,
improving the processes, governance and metrics and
competency across the organisation
ɰ
Developed the Security Management System to stay
ahead of the increasing threat profile, enhancing the
robustness of deployed operations and the tracking
and management of internal and external information
security threats
ɰ
Specific improvements to physical security measures
at key sites to proactively address growing threats,
identified through close working relationships with
our in-country security services
ɰ
Delivered a robust and assured new working
environment in the form of the Digital Workplace,
enabling first-class security protections and creating a
secure platform for collaborative work across our Group
ɰ
Focus on a strategic mix of oversight, resilience
and adaptability
ɰ
Further enhance our visibility of medium- to long-term
threats, embracing AI-enabled horizon-scanning tools
to scenario-plan risks to the business
ɰ
Increase the competency of first-line compliance
activities to create further efficiency
ɰ
Integrate project and enterprise risk to align
appetite and mitigation strategies fully throughout
the business
ɰ
Drive proactive continuous improvement through
embedding of the assurance model and associated
leading indicators
ɰ
Complete aligned activity to confirm compliance with
FRC UK Corporate Governance Code changes
ɰ
Drive a risk culture that ensures a predictable,
planned business with smooth performance
FY26 key highlights:
FY27 priorities:
General Sir Gordon Messenger
Risk & Security Commiee Chair
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
110
GOVERNANCE
STRATEGIC REPORT
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.
The Commiee’s detailed responsibilities are
set out in the Terms of Reference, available at:
www.qinetiq.com/en/who-we-are/corporate-governance.
Risk profile of the Group
In my view, risk management continues to be vital and
ever-improving within the organisation, as it needs to be
with the evolving threat landscape we face. We have robust
reviews and regular progress updates throughout the year
and conducted deep-dive workshops across each of our
principal risks, to ensure the alignment of our risk appetite
and mitigation strategies. The quarterly review of the Group
Risk Register, which is described further on page 65, has
evolved to focus on risk performance metrics, enabling the
Commiee to undertake its duties and make real progress in
understanding our risk profile, the true impact on the Group
and the mitigation strategies.
Geostrategic challenges
Ongoing challenges have been dominated by the increasing
threat landscape, with active war and heightened levels of
aggressive state actors emphasising that at no point can
the business be complacent in its approach to managing
and mitigating risk. Our role is to ensure that potential
threats are anticipated, mitigated and transformed into
opportunities for resilience and growth, of both the
Company and the customers we serve. QinetiQ continues
to do hazardous work safely, and has robust risk processes
to manage our activities on our sites and where we deploy
globally, to minimise risk and ensure safety.
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
Commiee members and I have, together with the Chief
Enterprise Services Officer, Group Director Security, and
Group Director Risk and Assurance, ensured that security
remains a focus area, and that the Commiee continues
to be able to oversee this key pillar. The Commiee
continues to be curious and is kept aware of the evolving
risks to QinetiQ as a defence, technology and engineering
Company by the notable experts employed by the business.
This ensures the commiee can actively engage with our
executives on leveraging tools, processes, systems and
people to address increasing risks arising from changing
cyber threats, climate change, and technological and
geopolitical instability.
The Risk & Security Commiee
risk management responsibilities
The Risk & Security Commiee has a close relationship
with the Audit Commiee which enhances the efficiency
and effectiveness of Board oversight. The Commiee
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 seing the risk appetite and reviewing and
assessing the Group’s risk management systems.
Risk & Security Commiee structure
All Directors are members of the Risk & Security Commiee,
which is chaired by General Sir Gordon Messenger. The Chief
Operating Officer, the Chief Enterprise Services Officer, the
Group Director Security, the Chief Information Officer, the
Chief Information Security Officer, the Group Director Risk
and Assurance and the Group Director Internal Audit aend
Commiee meetings by invitation to provide competent
input and periodic updates on maers of interest.
To ensure the Commiee has 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 Commiee by
employees who have first-hand knowledge of such
maers, 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.
I hope you find the information in this report about the
Commiee’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 Commiee Chair
Risk & Security Commiee
Report
111
The risk management and risk monitoring processes are
divided as following:
Risk management
ɰ
Review risk management structures
and reporting lines (i.e. effectiveness
of control environment)
ɰ
Evaluate the effectiveness of risk
reporting processes, including risk
control assessment
ɰ
Review the effectiveness of risk
identification processes
ɰ
Consideration of any security issues
relating to the appointment of
external auditors
Risk monitoring
ɰ
Review of risk register and key exposures
ɰ
Monitor Health, Safety and
Environmental performance
ɰ
Scrutinise Internal Audit reports with
respect to risk and security issues
ɰ
Oversee international business governance
ɰ
Oversee application of applied anti-bribery
and corruption measures
Further reading
Risk management
65
Principal risks
66
Security management
The business employs a proactive threat assessment
process, with effective horizon-scanning for future and
emerging threats to the business to manage and mitigate
risk. Security Incident Management is achieved through
a 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 & Security
Commiee, to ensure visibility of current and emerging
risks and their management.
The Commiee is assured by the progress made by the
Group in the year, although, with the volatility of critical
regions globally, continued increasing incidence and
sophistication of cyber-aacks and the consequent need
for the Group to remain vigilant, the Commiee expects
security to remain one of its key areas of focus. 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 – once again proved
invaluable in identifying areas for focus.
Cyber security
Given the nature of our business and emergent security
threats such as the adoption of artificial intelligence and
the broader geopolitical landscape, we continue to invest
in our Digital and Cyber Security programmes. This is most
visible through the roll-out of the Digital Workplace secure
working environment, which represents a significant
modernising of our IT infrastructure.
In combination with our wider education and culture
initiatives, we continued to strengthen our policies,
procedures, education and tooling to ensure we can
appropriately identify, assess and manage cyber security
risks. Our strategy remains under constant review and our
Cyber and Information Security Operating Model ensures
we best utilise our technical expertise and knowledge
across all business areas.
The Commiee 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.
Digital Transformation
At a time when cyber threats loom ever larger
and interconnectivity of information is vital to
keep pace with our customer expectations,
QinetiQ is delivering a secure cloud-based
IT environment across all of its territories. The
change programme encompasses the technical
tools, training and interconnectivity to provide
a state-of-the-art, secure digital environment
for our workforce to accelerate the way we
operate both internally and with our partners
while reducing overheads and mitigating cyber
threats as well as our delivery and growth risks.
Risk & Security Commiee
Report
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
112
GOVERNANCE
STRATEGIC REPORT
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. Our Security
professionals augment their already excellent competence
with select specialist advice from third parties, to ensure
we apply current best practice in all we do.
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 FY27, including the effective exercising of our plans. We
continue to work with our customers, partners and suppliers
to ensure we have appropriate resilience on shared sites, in
our programmes and throughout our extended supply chain.
Self-certification process
An annual process of self-certification on the effectiveness
of internal controls is well established and embedded
across the Group, and has been enhanced in FY26 to ensure
we are identifying potential vulnerabilities as well as known
risks. 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, with personal
accountability, 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.
Each Sector and Functional Chief Officer are required to
make a declaration that their system of internal controls
is effective, is fit for purpose and is 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 & Security Commiee by the Group
Director Risk and Assurance.
Generic MOD compliance system
A key aspect of the Commiee’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 a senior manager within the
business to act as Compliance Implementation Director
(CID) for the programme, with assurance provided as an
integrated part of the Company’s assurance framework.
Anti-bribery and corruption
The Commiee 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 our 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 60.
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.
Any risks or exceptions to GDPR compliance are presented
to the Commiee at each Commiee meeting.
Risk & Security Commiee
Report
113
Effectiveness review
A performance evaluation of the Commiee is conducted
annually. This process is described further on page 101.
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 66), and reserves for itself the seing of the Group’s
risk appetite. In-depth monitoring of the establishment
and operation of prudent and effective controls to assess
and manage risks associated with the Group’s operations
is delegated to the Audit Commiee, complemented by the
work of the Risk & Security Commiee. 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 Commiee and the
Risk & Security Commiee, the Board conducts a robust
six-monthly assessment of the Group’s emerging and
principal risks and this year specifically considered the
principal risks facing the Company, including the impacts
to the Group’s business model and future performance,
which 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 Commiee 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.
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 page 66. There are strong working
relationships between the Board Commiees, which enable
robust oversight of internal controls and risk management.
Commiees provide regular reports to the Board on
their activities and escalate significant maers where
appropriate. The responsibilities and activities of each
Board Commiee are set out in the Commiee reports.
Rapid Performance Improvement
Agility and pace continue to drive the defence
domain, and have been brought into sharp
focus with developing conflicts globally.
QinetiQ underwent a rapid transformation project
to simplify how we govern and release bids to
our customers, to increase the speed at which
we can turn customer requirements into outputs.
This project reduced our average bid phase time
by over 30%, with work underway to replicate these
improvements in the delivery phase. By increasing
the pace of delivery and maintaining our high
levels of quality, we are mitigating our growth
and competitor risks.
Risk & Security Commiee
Report
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
114
GOVERNANCE
STRATEGIC REPORT
Directors’
Remuneration Report
Reward decisions for FY26
Our resilient financial performance has delivered orders and
cash flow above target, with revenue and profit out-turns
between threshold and target. The formulaic FY26 Annual
Bonus Plan (ABP) ouurn was 70.7% of the maximum for both
Steve Wadey (CEO) and Martin Cooper (CFO). The payment
for FY26 will be structured as 70% in cash and 30% in shares,
deferred for two years.
The third grant under the Long-term Performance Award
(LPA) was made in July 2025, with the same scorecard of
performance metrics as the July 2024 award, comprising:
cumulative underlying operating profit; Return on Capital
Employed (ROCE); and total revenue growth. Stretch targets
remain aligned to the Company’s growth ambitions.
The final contingent share award under the legacy Deferred
Share Plan (DSP), which was granted in FY23, based on
performance in that year, will vest in June 2026, as the
profit underpin set at grant was met. There will be no
further awards vesting under the DSP.
Having concluded its three-year performance period,
the first grant under the LPA, made in September 2024,
will vest at 42.3% of the maximum award, recognising
partial achievement of the stretching performance targets.
The award will vest in September 2026 and be subject to
a two-year hold period.
The FY26 CEO single figure shown on page 119 reports a
252.5% increase against the ouurn achieved in FY25.
This movement reflects the Commiee’s decision, at the
recommendation of the CEO, to reduce the FY25 annual
bonus to zero as well as the inclusion of the vested value of
the legacy FY23 DSP and FY24 LPA in this year’s single figure,
as required by the regulations. It should be noted that the
FY26 annual bonus is lower than the equivalent award in FY24,
when the bonus paid out at 87.5%. Given the strong progress
in challenging geopolitical and market environments, the
Commiee believes that the FY26 CEO compensation fairly
reflects the performance achieved by the Company.
In assessing the remuneration outcomes, the Commiee
has continued to carefully assess the potential impact on
incentive targets of the ongoing share buyback programme,
which commenced in June 2025 and involves the gradual
purchase and cancellation of up to £200m of shares over
24 months.
The Commiee confirms that no current incentive plans
measure performance on a ‘per share’ basis and that there
has been no direct financial performance boost from the
share buyback. Therefore, the Commiee concluded that
no adjustment to incentive outcomes was required.
Dear Shareholder,
FY26 has been a transitional year as we navigated tough
near-term market conditions across our key markets in
a heightened global threat environment.
Despite these conditions, the Group has delivered a record
order backlog and strengthened its forward order pipeline,
providing confidence in the long-term fundamentals of
the business.
The decisive actions taken by management last year,
supported by the Board, have improved operational
discipline, driven efficiencies and contributed to
a recovery in Group margins to expected levels.
Dina Knight
Remuneration Commiee Chair
Strengthening performance and
aligning reward to deliver long term
sustainable growth.
115
Directors’ remuneration policy
The existing Policy was introduced in 2023 after an
extensive review by the Commiee, incorporating broad
consultation with shareholders. The Policy received an
84.3% ‘For’ vote at the 2023 AGM.
Over the last 12 months we have been reviewing the Policy
and further consulting with major shareholders to ensure
it remains effective and aligned with our strategy.
The current Policy represented a fundamental shift in our
approach to Executive Director remuneration when it was
introduced and the Commiee’s starting assumption was
that major changes would not be appropriate until the
Policy had been in place for further cycles. Substantive
feedback indicated that the Policy was performing in line
with expectations, although two areas were identified for
further improvement:
ɰ
In order to strengthen alignment of the long-term
reward outcomes with earnings growth and
sustainable shareholder value creation, the
LPA’s current underlying operating profit metric
will be replaced by a cumulative earnings per share
(EPS) metric.
ɰ
The Commiee also received feedback that the
existing tapered post-employment guidelines were
behind market practice. We have therefore taken the
decision to increase the post-employment share
ownership requirements to 200% of salary for two
years post termination of employment (from 100% in
year one and 50% in year two). This higher requirement
will apply to any shares acquired from grants made
under the Company’s share plans after the approval
of the new Policy at the 2026 AGM.
Salary review
As disclosed in last year’s report, in light of the below
expectations performance in FY25 and the trading update
issued in March 2025, the Remuneration Commiee took
a number of actions, including exercising its discretion
to reduce the FY25 ABP ouurn to zero and, at the CEO’s
request, to defer its decision on the level of his July 2025
salary increase until the end of FY26. Having carefully
considered and reviewed FY26 performance, which saw
strong delivery and improved operational discipline
resulting in greater efficiencies and improved margins,
the Commiee was satisfied that a 3% increase should be
awarded, effective from 1 April 2026. This increase is below
the level of the workforce increase and also slightly below
the increase awarded to the CFO in respect of FY26.
For FY27, the overall salary review budget for UK employees
is 4%, with new salaries effective from 1 July 2026 in-line with
the Group’s normal practice. The Commiee has determined
that the increase for the CEO will be 3.5% effective from
1 July 2026. For the CFO, the Commiee has reviewed the
level of his salary in light of his strong performance and
development in the role since his appointment in September
2024. Following its review the Commiee determined that
his salary should be increased to a level consistent with
other CFO roles in comparable UK listed companies and has
therefore awarded an increase of 6.4%. This is moderately
above the wider workforce increase, but is consistent with
increases awarded to other high performing employees
within the business with salaries positioned below the
median of the benchmark for their role.
Implementation for FY27
For FY27, Revenue has been included as an additional
financial metric within the ABP, alongside the existing
metrics of orders, profit and cash as in FY26. Stretch targets
are aligned with the FY31 Integrated Strategy-to-perform
Plan (ISP) with half-year and full-year targets to drive
consistent operational performance. Each financial
metric will have an equal weighting of 20%, with a total
weighting of 80% (increased from 75%) and non-financial
targets reducing to 20% (from 25%). As in prior years,
the non-financial targets are a combination of personal
and strategic goals, including selected ESG metrics.
The Commiee has reviewed the performance metrics
for the FY27 LPA three-year performance period and has
decided to simplify the plan to two metrics. Following
shareholder feedback, for FY27, these will be EPS, measured
cumulatively over three years, which will replace cumulative
profit, and ROCE. The revenue metric used in prior plans
has been removed from the LPA going forward following
its inclusion in the annual incentive.
While consideration was given to introducing a relative
Total Shareholder Return (TSR) metric, a detailed review
has concluded that it is not currently suitable for QinetiQ.
TSR remains heavily driven by market sentiment and
external factors and analysis provided to the Commiee
found no peer group with sufficiently comparable business
fundamentals to ensure payouts would align with Company
performance and shareholder value creation. Similarly,
broad equity indices such as the FTSE 250 showed
weak correlation with QinetiQ’s share price, meaning
these would likely produce outcomes misaligned with
underlying performance.
Directors’
Remuneration Report
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
116
GOVERNANCE
STRATEGIC REPORT
Employee engagement and reward
The Group CEO and the Chief People Officer have held
regular discussions with our Global Employee Voice (GEV)
representatives on reward maers. Members of the Board
also met with the GEV representatives twice in FY26. The
social section on page 53 details our employee engagement
activity.
The expertise, pride and values of our people are key to
the delivery of our strategy. Their commitment to our
customers over the year has enabled us to deliver improving
performance despite the challenging external environment
and the need to control our costs.
The Company operates a range of incentive and reward
programmes throughout the organisation that align our
people with our goals. These arrangements are tailored to
reflect employee levels and specific market conditions.
This includes an All Employee Incentive Scheme (AEIS)
under which every eligible employee can earn a payment
if the Company achieves a level of operating profit within
a predetermined range from target to stretch.
The AEIS is a key element of the Company’s Rewarding
for Performance framework, aligning employees with
shareholder interests by incentivising and rewarding
profitable growth. The potential lump-sum payment
ranges from £500 to £1,250 per employee. In addition,
high-performing employees can earn up to an additional
5% of salary based on personal performance rating.
For FY26, a £500 payment was awarded to all employees
in recognition of their contribution towards the
performance of the business.
Our Group Hardship Fund and Employee Assistance
Programme (EAP) continue to provide vital support to our
people experiencing personal challenges. We also continue
to uphold our commitment to paying above the UK Real
Living Wage and supporting employees with an income
that enables meaningful retirement contributions.
Conclusion
The Commiee remains focused on ensuring that executive
remuneration is aligned with performance, supports
delivery of the Group’s strategy, and reflects the interest
of shareholders and the wider workforce.
As we look ahead, our priorities remain clear: to support
the delivery of sustainable growth, maintain strong
performance discipline, and ensure that reward outcomes
remain appropriately aligned to both financial performance
and long-term value creation.
I hope that we can rely on your vote in support for
the Directors’ remuneration report at the AGM on
16 July 2026. I would welcome comments and questions
from shareholders in relation to this Directors’
remuneration report and I can be contacted through
companysecretariat@qinetiq.com.
Dina Knight
Remuneration Commiee Chair
21 May 2026
QinetiQ’s Gender Pay Gap data can be found on our website
at www.qinetiq.com
Directors’
Remuneration Report
117
Fixed pay
Annual Bonus Plan
ABP
Long-term Performance Award
LPA
Remuneration
at a glance
FY26 Annual Bonus Plan performance metrics
FY26 Long-term Performance Award performance metrics
Components of executive remuneration
Orders
Organic underlying operating
profit on a three-year cumulative basis
Underlying operating profit
Return on Capital Employed (ROCE)
Underlying net cash flow from operations
Total revenue growth
Personal goals
Incentive
Incentive
Weighting
Weighting
Link to strategy
Link to strategy
Enables us to assess the execution of our
strategy to grow the Group.
Ensures consistent and sustained
financial performance.
Used for performance analysis as a measure
of operating profitability.
Captures how investments are converted
into sustainable financial returns.
Gives an indication of the ability to make
discretionary investments and pay dividends.
Demonstrates ability to grow market share
and deliver long-term sustainable growth.
Aligning personal performance to core
metrics around safety, engagement and
the environment.
25.0%
35.0%
25.0%
35.0%
25.0%
30.0%
25.0%
Competitively designed to aract and
retain the talent required to lead our
business. Set on appointment and
regularly reviewed and aligned with
the wider employees of the Group.
Revised policy changes
No change in prior-year
implementation.
The ABP rewards strong financial and
non-financial business performance,
aligning with shareholders to promote
longer-term sustainable focus.
Revised policy changes
No change in prior-year
implementation.
The LPA incentivises long-term
performance and growth, with
share-based payouts held for two
years to reinforce sustainable,
shareholder-aligned performance.
Revised policy changes
No change in prior-year implementation.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
118
GOVERNANCE
STRATEGIC REPORT
Remuneration
at a glance
To create strong alignment between executive
remuneration and the long-term interests of our
shareholders, the ABP is paid partly 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.
The FY26 CEO single figure shown above includes the vested value of the legacy FY23 DSP
and FY24 LPA, as required by the regulations. The FY25 single figure reflects the Commiee’s
decision, at the recommendation of the CEO, to reduce the FY25 annual bonus to zero.
The FY26 CFO single figure includes the vested value of the first part of the Compensation
Share Plan (CSP) awarded in part for share awards which were forfeited on resigning from
his former employer. The FY25 single figure for the CFO is lower as it is pro-rated based on
a mid-year start date.
Timing
Single figure FY26
Core elements of our employee reward offering include:
ɰ
A fair base salary for employees, recognising individual
performance and contribution
ɰ
Support for career growth and progression
ɰ
Incentives aligned with role seniority, including
the All Employee Incentive Scheme recognising
Company performance
ɰ
A recognition scheme celebrating the contribution
of individuals and teams
ɰ
Living wage employer accreditation
Wider workforce remuneration
67:1
ratio of the CEO’s to the pay
of UK employees (FY25 25:1)
46.9%
of employees are in the
Share Incentive Plan
+4.7%
increase in employee
remuneration in FY26
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Fixed pay
ABP
LPA
Fixed pay
Pay at risk subject to performance conditions
Shares held, not subject to performance conditions
Fixed pay
Annual Variable Pay
Long-term Variable Pay
£880 £861
£917
£917
£1,454
£4,006
£1,028
£2,451
Steve Wadey
Group Chief Executive
£6,376
£4,396
£1,740
F
Y26
F
Y26 MAX
F
Y25
(£’000)
£304
£541
£541
£933
£624
£659
£624
Martin Cooper
Group Chief Financial Officer
£2,097
£1,824
£304
F
Y26
F
Y26 MAX
F
Y25
(£’000)
119
Ensuring executive pay is closely linked to the
Company’s strategy, long-term value creation
and shareholder interests.
ɰ
A significant proportion of remuneration is variable
and equity-based, with bonuses partly deferred
into shares and long-term incentives vesting over
several years.
ɰ
Share-ownership guidelines requiring leaders
to build and maintain a meaningful equity stake,
aligning executive financial interests with
shareholders over the long term.
Ensuring executives are incentivised to deliver results
within a robust governance and risk framework.
ɰ
Incentive outcomes are subject to clearly defined
financial and non-financial performance conditions,
with the Remuneration Commiee retaining
discretion to adjust payouts where outcomes do
not reflect underlying performance.
ɰ
Deferral, malus and clawback provisions further
reinforce accountability over time.
Driving strong, sustained financial and operational
performance over both short and long-term time periods.
ɰ
The structure balances annual incentives
(short-term delivery) with long-term awards
(multi-year performance) using stretching targets
such as orders, profit, revenue, cash, EPS and ROCE.
This ensures consistent focus on both short-term
execution and long-term growth.
Encouraging behaviours that support teamwork,
shared goals and a positive organisational culture.
ɰ
The Annual Bonus Plan incorporates non-financial
metrics in the form of personal objectives,
including ESG-related measures, to reward not
only the delivery of critical outcomes but also
how they are achieved. The definition of goals and
targets promotes cross-functional collaboration,
responsible decision-making and alignment with
Company values.
Our remuneration philosophy
How our approach to remuneration creates alignment with our key stakeholders.
Alignment
Accountability
Performance
Collaboration
Our approach
Our key principles
Remuneration
at a glance
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
120
GOVERNANCE
STRATEGIC REPORT
Directors’
Remuneration Policy
Introduction
Having substantially revised and simplified the Policy in
2023, the Commiee concluded that the Policy remains
effective, with outcomes that align with the Company’s
performance and shareholder experience, supports the
delivery of our strategy, maintains leadership focus during
a period of operational momentum, and remains
appropriately competitive within the market.
Therefore, the Commiee is not proposing any changes
to the incentive structures or maxima; however, they have
used the review as an opportunity to take a comprehensive
look at the Long-term Performance Award (LPA) plan
metrics, to ensure the metrics continue to support the
Company’s strategic objectives, and to update the share
ownership requirements to ensure executives continue
to be aligned with shareholders following the end of their
employment at QinetiQ.
The review process
The Commiee led the review process throughout, taking
account of market practice and the views of executives
and external advisers, as appropriate, to help shape our
thinking. No individual is involved in the decision-making
on their own remuneration.
We engaged with our largest shareholders representing
over 54% of the register to explain the Policy and the positive
impact it will have on Company performance and culture and
revised the initial proposals to reflect the input received.
The Remuneration Commiee therefore seeks approval
for the Policy at the AGM on 16 July 2026.
Scope of Policy
The Policy applies to Executive Directors, the Group Chair
and Non-executive Directors. Reference may also be made
to the QinetiQ Leadership Team who, while not Directors,
fall within the Remuneration Commiee’s remit, although
the Policy is not binding for these individuals.
Changes to the Policy
The post-employment share ownership requirement will
be increased from 100% of salary for the first year after
termination and 50% for the second year to 200% of salary
for two years post termination, to align more closely with UK
governance best practice and shareholder expectations.
This higher requirement will apply to any shares acquired
from grants made under the Company’s share plans after
the approval of the new policy at the 2026 AGM.
For future new hires at Executive Director level, flexibility
will be included in relation to in-employment share-
ownership requirements, to ensure that the level of holding
requirement is appropriate in the circumstances and is
appropriately stretching based on the ability of a new hire to
comply with the requirement within an expected five-year
time period. Therefore, in future, the Commiee will set the
level at appointment of any new Executive Director, taking
into account the role, market practice at that time, any
on-hire awards (e.g. buy-outs) delivered in shares and the
annual award maxima under the LPA, with the requirement
being not less than 200% of salary.
No further changes are proposed for the future Policy other
than minor changes to the text to improve clarity or reflect
the passage of time.
Discretion
The Commiee has discretions in several areas of Policy as
set out in this report or as provided in the relevant plan rules.
The Commiee commits to communicating to shareholders
when discretion is used.
121
Base salary
Pension allowance
Benefits
To aract and retain
the talent needed to
lead our business.
To ensure that
Executive Directors’
total remuneration
remains aractive
and competitive.
To ensure that
Executive Directors’
total remuneration
remains aractive
and competitive.
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 Commiee considers:
ɰ
General salary rises to employees;
ɰ
Remuneration practices within the Group;
ɰ
Any change in scope, role and responsibilities;
ɰ
The general performance of the Group;
ɰ
The experience of the relevant Director;
ɰ
The economic environment; and
ɰ
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.
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 allowance is non-consolidated and does not
impact any incentive calculations.
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 (the Executive Directors will also
be eligible to participate in any other all-employee
plan operated by the Company from time to time).
The Commiee recognises the need to maintain
suitable flexibility in the benefits provided to ensure
it is able to support the objective of aracting and
retaining personnel to deliver the Group strategy.
Additional benefits may therefore be offered
such as relocation allowances on recruitment
or where new benefits are introduced for the
wider employee population.
Typically, the base salaries of Executive Directors in
post at the start of the policy period and who remain
in the same role throughout the policy period 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:
ɰ
An individual is below market level and a decision
is taken to increase base pay to reflect proven
competence in the role; or
ɰ
There is a material increase in scope or
responsibility to the Executive Director’s role.
The Commiee 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.
The Commiee intends to review the comparators
periodically and may add or remove companies from
the Group as it considers appropriate.
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).
The maximum is the cost of providing the
relevant benefits.
Executive Directors’ Remuneration Policy
The Policy will be put forward for approval at the AGM on 16 July 2026. This Policy covers the three-year period commencing
1 April 2026 and complies with the Large and Medium-sized Companies and Groups (Accounting and Reports) (Amendment)
Regulations 2013.
Purpose and link to strategy
Operation and performance measures
Maximum opportunity
Directors’
Remuneration Policy
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
122
GOVERNANCE
STRATEGIC REPORT
Annual incentive: Annual Bonus Plan (ABP)
Long-term incentive: Long-term Performance Award (LPA)
The ABP provides an incentive
for the Executive Directors
to achieve targets that are
entirely aligned to the
Company’s strategy.
The ABP rewards strong
sustainable financial
performance through an 80%
weighting for FY27 on core
financial metrics, driven by the
implementation of our strategy.
The ABP also rewards non-
financial performance through
the delivery of key goals related
to environment (Net-Zero
roadmap), employee engagement
and inclusion and safety in
addition to 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.
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.
With regard to the FY27 targets:
Cumulative earnings per share
(50% weighting): Replacing
the cumulative profit metric
used in previous cycles, to
deliver consistent operational
performance over the longer
term. Understood, relevant
and actionable for QinetiQ
senior leaders.
Returns (50% weighting):
To drive robust investment
selection and delivery.
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.
The ABP is an annual incentive plan with a one-year performance
measurement period, with any award paid partly in deferred shares:
ɰ
A maximum award of 200% of salary is available each year.
ɰ
At the end of the first year 70% of the award is paid as
a cash bonus.
ɰ
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.
ɰ
Dividend equivalents will be paid on the deferred shares.
ɰ
The financial metrics will normally not be less than 60% of
the overall weighting.
In exceptional circumstances the Commiee retains the
discretion to:
ɰ
Change the performance measures and targets and the
weighting aached to the performance measures and targets
part way through a performance year if there is a significant
and material event which causes the Commiee to believe
the original measures, weightings and targets are no longer
appropriate; for example adjustments for: acquisitions and
disposals; restructuring costs; business structure changes;
restated corporate allocations; foreign currency exchange
rates; and Board-approved budget adjustments; and
ɰ
Make downward or upward adjustments to the amount
of incentive earned resulting from the application of the
performance measures, if the Commiee believes that the
incentive outcomes are not a fair and accurate reflection of
business performance.
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 Commiee will normally provide dividend equivalents on
vested shares under the LPA.
In exceptional circumstances the Commiee retains the
discretion to:
ɰ
Change the performance measures and targets and the
weighting aached to the performance measures and targets
part way through a performance year if there is a significant
and material event which causes the Commiee to believe
the original measures, weightings and targets are no longer
appropriate; for example adjustments for: acquisitions and
disposals; restructuring costs; business structure changes;
restated corporate allocations; foreign currency exchange
rates; and Board-approved budget adjustments;
ɰ
Make downward or upward adjustments to the amount
of incentive earned resulting from the application of the
performance measures, if the Commiee believes that the
incentive outcomes are not a fair and accurate reflection of
business performance; and
ɰ
Scale back incentive awards at grant if there were to be
a substantial Company share price fall.
Maximum = 200% of salary.
Target = 100% of salary.
Threshold = 0% of salary.
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.
Directors’
Remuneration Policy
Purpose and link to strategy
Operation and performance measures
Maximum opportunity
123
Directors’
Remuneration Policy
Notes to the policy table
Performance measures and targets
The performance measures and targets, financial and non-financial, are determined annually based on the Company’s
strategy. Targets are set taking into account a variety of inputs including but not limited to the strategic plan, the annual
plan and brokers’ forecasts. The measures and, where possible, the targets will be disclosed after the end of the relevant
financial year in that year’s remuneration report.
Remuneration policy for all employees
All employees of QinetiQ are eligible for base salary, benefits
and pension.
The link between performance and reward cascades down
from the Executive incentive plans with the Leadership
and Business Development Communities typically
invited to participate in the Company’s formal annual
incentive arrangements. All other employees may receive
a discretionary bonus based on Company and individual
performance. Participation in long-term incentive plans is
available to Executive Directors, QinetiQ Leadership Team
members, Leadership Community and selected other
employees. Share ownership is further encouraged via
the QinetiQ Share Incentive Plan.
The Remuneration Commiee is made aware of pay,
incentives and benefits by grade across the Company and
the relevant costs. This is actioned by an annual report to
the Commiee which also includes details of any changes
in remuneration policy for all employees during the year.
Recruitment policy
The Company’s principle is that the remuneration of any new
recruit will be assessed in line with the current Executive
Directors. The Commiee is mindful that it wishes to
avoid paying more than it considers necessary to secure
a preferred candidate with the appropriate calibre and
experience needed for the role. In seing the remuneration
for new recruits, the Commiee will have regard to guidelines
and shareholder sentiment regarding one-off or enhanced
short-term or long-term incentive payments as well as giving
consideration for the appropriateness of any award. The
Company’s detailed policy when seing remuneration for
the appointment of new Directors is summarised below.
Salary, benefits and pension
These will be set in line with the policy for existing
Executive Directors.
Incentive Plans
Maximum annual participation will be set in line with the
Company’s policy for existing Executive Directors and
will not exceed 450% of salary in aggregate.
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 current CEO.
200% of base salary for the current CFO.
For new appointments, no less than 200% of base
salary for Executive Directors.
For share grants or purchases made before the
2026 AGM:
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.
For shares acquired from grants made after the
2026 AGM:
Executive Directors will have a post-employment
shareholding requirement of 200% of salary for
two years post cessation of employment.
The Commiee has adopted formal shareholding
requirements to encourage the Executive Directors to
build up over a five-year period and then subsequently
hold a shareholding equivalent to a percentage of
base salary. Adherence to these requirements is a
condition of continued participation in the equity
incentive arrangements. This policy ensures that
the interests of Executive Directors and those of
shareholders are closely aligned.
Executive Directors are required to retain at least
50% of the post-tax amount of vested shares from
the Company incentive plans until the minimum
shareholding requirement is met and maintained.
Vested awards under the LPA must be retained
by the participant for two years post vesting to
further support the post-employment shareholding
requirement where an Executive Director leaves
the Company.
The Commiee retains the discretion to increase
the shareholding requirements.
Purpose and link to strategy
Requirement
Operation
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
124
GOVERNANCE
STRATEGIC REPORT
Directors’
Remuneration Policy
Depending on the timing of the appointment, the
performance measures and targets used for the first award
may differ to those of the existing Executive Directors.
If different, they will be explained in detail in the following
relevant Directors’ Remuneration Report.
Maximum variable remuneration
The maximum variable remuneration which may be granted
is 450% of salary (excluding any buy-outs).
Relocation policies
In instances where the new Executive Director is required
to relocate or spend significant time away from their normal
residence, the Company may provide one-off compensation
to reflect the cost of relocation for the Executive Director.
The level of the relocation package will be assessed on a
case-by-case basis but will take into consideration any cost
of living differences/housing allowance and schooling.
Buy-out awards
Where the Commiee determines that it is necessary to
buy out previous entitlements forfeited on cessation of
an Executive Director’s previous employment, the value
of such a buy-out award will be calculated taking into
account the following:
ɰ
The proportion of the vesting period completed on the
date of cessation of employment;
ɰ
The performance conditions aached to the vesting
of the entitlements and the probability of them being
satisfied; and
ɰ
Any other terms and conditions having a material effect
on their value.
The Commiee may then agree to compensate for the value
forfeited using, where possible, existing incentive plans.
To the extent that it is not possible or practical to provide
the buy-out within the terms of existing incentive plans,
a bespoke arrangement would be used, using any flexibility
provided under the Listing Rules.
Where an existing employee is promoted to the Board,
the policy set out above would apply from the date of
promotion but there would be no retrospective application
of the policy in relation to subsisting incentive awards or
remuneration arrangements.
Service contracts
Current Executive Directors have open-ended service
contracts terminable by the Company immediately without
notice upon breach by the individual or by the Company
giving to the individual 12 months’ wrien notice or, at its
discretion, payment in lieu of salary, pension and benefits
only during that notice. The payment in lieu of notice may be
made in staged payments and may either reduce or cease
completely where the departing Executive Director gains
new employment. The Executive Director may terminate
their contract by giving the Company 12 months’ wrien
notice. Contracts for new Executive Directors will be limited
to 12 months’ notice by both parties (or payment in lieu of
notice in respect of the Company).
Copies of the service contracts are available for inspection
at the Company’s registered address.
The Group Chair and the Non-executive Directors have
leers of appointment and are appointed for initial fixed
terms of three years, subject to re-election at each Annual
General Meeting. The Group Chair and the Non-executive
Directors are not entitled to any payment in lieu of notice or
any compensation for loss of office.
The dates of the service contracts, leers of appointment
and unexpired term periods are set out in the Annual Report
on Remuneration (page 139).
Loss of office and change of
control policy
When determining any loss of office payment for a departing
Executive Director the Commiee will always seek to
minimise the cost to the Company while complying with the
contractual terms and seeking to reflect the circumstances
in place at the time. The Commiee reserves the right to
make additional payments where such payments are made
in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation);
or by way of selement or compromise of any claim arising
in connection with the termination of an Executive Director’s
office or employment.
‘Good leaver’ is a person whose cessation of employment is
for one of the following reasons:
ɰ
Death; ill-health; injury or disability; redundancy;
retirement; employing Company ceasing to be a Group
Company; transfer of employment to a Company
which is not a Group Company; and where the person
is designated a good leaver at the discretion of the
Commiee (as described above).
A person who ceases employment in circumstances other
than those set out above is designated as an ‘other leaver’.
125
Directors’
Remuneration Policy
The Commiee has a number of discretions, including in relation to the determination of a good leaver. Any exercise of the
Commiee’s discretions will be disclosed in full to shareholders.
Salary, benefits (on cessation of employment)
Pension (on cessation of employment)
Annual Bonus Plan (on cessation of employment)
Annual Bonus Plan (on change of control)
Long-term Performance Award (on cessation of employment)
Long-term Performance Award (on change of control)
Other contractual obligations (on change of control)
In the event of termination by the Company, there will be
no compensation for loss of office due to misconduct or
normal resignation.
In other circumstances, Executive Directors may be entitled
to receive compensation for loss of office which will be
a maximum of 12 months’ salary and benefits.
Such payments will be equivalent to the monthly salary and
benefits that the Executive Director would have received if still in
employment with the Company. These will be paid over the notice
period. Executive Directors will be expected to mitigate their loss.
Pension contributions or payments in lieu of pension contribution
will be made during the notice period.
For the year of cessation
Good leavers: Performance conditions will be measured at the
normal measurement date. The Company incentive payment
will be pro-rated for the period worked during the financial year
of cessation.
Unvested deferred shares will vest in line with the normal vesting
cycle of the award.
Other leavers: No Company incentive cash payment or deferred
shares awarded for the year of cessation. Any unvested deferred
shares awarded in prior years will lapse on cessation.
For the year of the change of control performance conditions
will be measured to the date of the change of control. The Company
incentive payment will be pro-rated to the date of the change
of control.
Unvested deferred shares will vest immediately on the change
of control.
Good leavers: Performance conditions will be measured at the
normal measurement date and vest on their original vesting dates
and remain subject to the sale restrictions. The LPA will normally be
pro-rated for the part of the three-year performance period worked.
Vested LPA awards will remain subject to the holding restrictions.
Other leavers: LPA awards lapse immediately on cessation and
no award for the year of cessation or if serving notice at the time
of the award.
Performance conditions will be measured at the date of the change
of control and the award will normally be pro-rated to the date of the
change of control.
There are no other contractual provisions other than those set out
above that could impact quantum of the payment.
The Company has discretion to make a payment in lieu of notice,
either as a lump sum or as a series of phased payments.
The Company has discretion to make a lump sum payment in lieu
or a series of phased payments.
For the year of cessation
Any payment will normally be made as a mix of cash and shares.
However, the Commiee has the discretion (e.g. in the event of
death or ill-heath retirement of a participant) to pay the entire
amount in cash.
Deferred shares
The Commiee may decide to accelerate the vesting (e.g. in the
event of death or ill-heath retirement of a participant) so that
these vest at cessation of employment.
The Commiee has discretion to make a payment entirely in cash.
The Commiee may decide to accelerate the vesting of LPA
awards and measure performance up to the date of cessation in
circumstances where there is an appropriate business case.
The Commiee may also waive or shorten the holding restrictions
applicable to an award on compassionate grounds (e.g. due to
death or ill-health retirement).
The Commiee may waive pro-rating in circumstances where it
feels it is in the interests of shareholders to do so.
None.
Approach
Application of Commiee discretion
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
126
GOVERNANCE
STRATEGIC REPORT
Directors’
Remuneration Policy
Malus and clawback
Malus provisions apply to both the ABP and the LPA. Malus is
the adjustment of ABP or LPA ouurns or awards which have
not vested or been paid due to the occurrence of one or
more circumstances. The adjustment may result in the
value being reduced to nil.
Clawback is the recovery of payments made or vested
shares as a result of the occurrence of one or more
circumstances. Clawback may apply to all or part of a
participant’s payment or share award under the ABP or
LPA and may be effected, among other means, by requiring
the transfer of shares, payment of cash or reduction of
awards or bonuses.
The circumstances in which malus and clawback could apply
are as follows:
ɰ
Discovery of a material misstatement resulting in an
adjustment in the audited accounts of the Group or
any Group Company;
ɰ
The assessment that any performance condition
or condition in respect of a payment or award under
the ABP or LPA was based on error, or inaccurate or
misleading information;
ɰ
The discovery that any information used to determine
the ABP or LPA award was based on error, or inaccurate
or misleading information;
ɰ
Action or conduct of a participant which amounts to
fraud or gross misconduct; or
ɰ
Events or the behaviour of a participant have led to the
censure of a Group Company by a regulatory authority
or have had a significant detrimental impact on the
reputation of any Group Company provided that the
Board is satisfied that the relevant participant was
responsible for the censure or reputational damage
and that the censure or reputational damage is
aributable to the participant.
The following table sets out the periods during which malus
and clawback may be effected.
Annual Bonus Plan
Long-term
Performance Award
Malus
Up to the date of
a payment/award
Any time before vesting
Clawback
Three years post
the date of any
payment/award
Three years from the
date of vesting
Pay and performance scenario analysis
The proposed Directors’ Remuneration Policy is illustrated
in the following charts showing what each Director could
expect to receive in FY27 under different performance
scenarios, based on the following definitions:
Scenario
Linked to performance
50% share price
appreciation
Stretch plus 50% share price growth
(on 100% of LPA)
Stretch
100% of ABP opportunity (200% of salary)
100% of LPA opportunity (250% of salary)
Target
50% of ABP opportunity (100% of salary)
50% of LPA opportunity (125% of salary)
Minimum
No variable pay
Salary, Pension and Benefits
Annual Variable Pay
Long-term Variable Pay
35%
100%
29%
36%
22%
17%
32%
51%
35%
44%
Steve Wadey
CEO (£’000)
£5,599
£4,408
£2,679
£950
Stretch
+50%
Target
Fixed
34%
100%
29%
37%
20%
16%
32%
52%
35%
44%
Martin Cooper
CFO (£’000)
£3,549
£2,786
£1,677
£569
Stretch
+50%
Target
Fixed
127
Directors’
Remuneration Policy
Policy for the Chairman and the Non-executive Directors
Fees for the appointment of a new Group Chair or Non-executive Directors will be aligned with the Policy for
existing incumbents.
Chairman and Non-executive Directors
Element: Fees
To aract and retain
Non-executive Directors
of the calibre required to
assist the Company in
seing and delivering
its strategy.
The Executive Directors and the Group Chair are
responsible for seing the remuneration of the
Non-executive Directors.
The Board, minus the Chair, is responsible for seing
the Chair’s fees.
Non-executive Directors are paid an annual fee and
additional fees for chairmanship of Commiees and
any other additional duties, and the Company retains
the flexibility to pay fees for the membership of
Commiees. The Chair does not receive any additional
fees for membership of Commiees.
Fees are reviewed annually based on equivalent roles
in the comparator group used to review salaries paid
to the Executive Directors.
An additional fee is payable to those Non-executive
Directors aending meetings outside of their country
of residence.
Non-executive Directors and the Group Chair do not
participate in any variable remuneration or benefits
arrangements.
Fee levels may be increased on a temporary basis
for a significant increase in time commitments (e.g.
assuming an executive position for an interim period).
The fees for Non-executive Directors and the
Group Chair are broadly set at a competitive level
against the comparator group.
In general the level of fee increase for the
Non-executive Directors and the Group Chair will
be set taking account of any change in responsibility
and the general rise in salaries across employees.
The Company will pay reasonable expenses
incurred by the Non-executive Directors and
Group Chair and may sele any tax incurred in
relation to these.
Purpose and link to strategy
Operation and performance measures
Maximum opportunity
Consideration of shareholder and
employee views
The Chair of the Commiee and the Group Chair consult
with key shareholders on remuneration maers from time
to time, and particularly in seeking views on the Directors’
Remuneration Policy in preparation for the triennial vote
at the AGM. Any concerns expressed by shareholders
are reported to the Commiee and these are taken into
account as the Commiee develops and implements its
Policy. Any comments received from shareholders outside
these consultation exercises are also reported to the
Commiee, and the Commiee takes account of general
views on remuneration expressed by shareholders and
their representative bodies.
The Remuneration Commiee is grateful for shareholders’
comments and engagement during the Directors’
Remuneration Policy consultation process. At the end of
this process, the Remuneration Commiee was pleased
that the majority of the shareholders consulted expressed
support for the new Policy.
The Commiee has not formally consulted with employees
in developing this Policy. However, our Global Employee
Voice (GEV) is deeply engaged across the Company to
provide an employee voice at the table on all relevant issues,
including remuneration (regular interactions are held
with the Group Chair, Remuneration Commiee Chair,
CEO and the Chief People Officer). The Company takes
the views of employees very seriously and we monitor
this through a quarterly survey using a market-leading
dynamic tool (Peakon).
The Commiee is cognisant of employment conditions
when determining Executive Director pay. In particular,
the annual salary increase available to the rest of the
workforce is an important factor in determining any salary
increase for the Executive Directors. The Commiee
reviews the CEO pay ratio and considers it in the broader
context of pay trends within the business.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
128
GOVERNANCE
STRATEGIC REPORT
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 2026. In the interests of clarity, CEO refers to Steve Wadey, CFO to Martin Cooper and Former CFO
to Carol Borg.
Executive Directors’ single total figure of remuneration (audited):
Executive Director
Year
Salary
£’000
Benefits
£’000
Pension
£’000
Total
fixed pay
£’000
Annual
Bonus
Plan
£’000
Deferred
Share
Plan
£’000
Compensation
Share Plan
£’000
Long-term
Performance
Award
£’000
Total
variable
pay
£’000
Total
remuneration
£’000
Steve Wadey (CEO)
FY26
727
113
76
917
1,028
1,312
–
1,139
3,480
4,396
FY25
719
85
76
880
0
861
–
–
861
1,740
Martin Cooper (CFO)
FY26
466
25
49
541
659
–
624
–
1,284
1,824
FY25
265
11
28
304
0
–
–
–
0
304
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 seles the Director’s tax, the value disclosed is not
grossed up for tax.
Salary (audited)
Salaries are reviewed effective 1 July, which is the same
timing as for the rest of the UK employee population. The
decision on the salary increase for the CEO was deferred
until the end of FY26 at the CEO’s request to allow the
Commiee to consider the appropriate level of any increase
in light of the progress made by the Group following the
March 2025 trading statement. Following this review the
Commiee determined that the CEO’s FY26 increase should
proceed but that this would be implemented from 1 April
2026. This results in the effective increase for the CEO in
FY26 being nil, with his FY26 bonus and LPA grant being
determined based on the FY25 salary.
Salary as
1 April 2025
£'000
Increase in
the year
Salary as
1 July 2025
£'000
FY26
salary
actually
paid
£'000
CEO
727
0.0%
727
727
CFO
455
3.3%
470
466
Benefits (audited)
Benefits comprise a car allowance, travel allowance, private
medical insurance, life assurance, income protection and
taxable expenses.
Taxable
expenses
£'000
Travel
& car
allowance
£’000
Insurance
benefit
£’000
Total
benefits
£’000
CEO
63
19
32
113
CFO
0
13
12
25
Pensions (audited)
The Executive Directors did not participate in the QinetiQ
pension scheme for FY26. The pension figure is cash in lieu
of pension equating to 10.5% of base salary.
Cash in
lieu of
pension
£’000
Total in lieu
of pension
£’000
CEO
76
76
CFO
49
49
129
Annual Report
on Remuneration
FY26 Annual Bonus Plan (audited)
The Annual Bonus Plan (ABP) is an annual incentive 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 2026
payment in cash
(70% value £’000)
Value of share
payment
(30% value £’000)
30-day average
share price to
31 March 2026
(p)
Estimated
deferred shares
awarded
June 2026
CEO
1,028
720
308
490.1p
62,934
CFO
659
462
198
490.1p
40,362
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 2026, the CEO and CFO were measured against financial objectives of orders, profit and cash
and a non-financial objective based on their personal performance; all with an equal weighting of 25%. To drive consistent
cash collection, 30% of the cash financial objective was based on the achievement of H1 performance. The target payment
was 50% of maximum for financial and non-financial objectives.
When seing performance targets the Remuneration Commiee takes into account the budget and the Company’s
strategy set in relation to the Integrated Strategy-to-perform Plan (ISP), shareholder expectations an 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.
FY26 performance outcomes (audited)
Weighting
%
Threshold
0%
payment
Target
50%
payment
Stretch
100%
payment
Actual
% of
maximum
reward
achieved
CEO
ouurn
CFO
ouurn
CEO/CFO financial
performance measures
Orders
1
25.0%
£1,700.0m
£1,800.0m
£2,000.0m
£1,876.8m
69.2%
£251,542
£161,326
Underlying operating profit
1
25.0%
£210.0m
£220.0m
£240.0m
£218.9m
44.5%
£161,758
£103,743
Underlying H1 net cash flow
from operations
7.5%
£95.0m
£113.0m
£135.0m
£128.0m
84.1%
£91,701
£58,812
Underlying full-year net cash flow
from operations
17.5%
£235.0m
£277.0m
£331.0m
£313.9m
84.2%
£214,162
£137,353
CEO non-financial measures
Personal goals: performance
against stretching objectives
25.0%
40%
50%
100%
85.0%
£308,975
CFO non-financial measures
Personal goals: performance
against stretching objectives
25.0%
40%
50%
100%
85.0%
£198,161
CEO overall result
70.7%
£1,028,138
CFO overall result
70.7%
£659,394
1
Orders and underlying operating profit have been adjusted to account for the disposal of the non-core Federal IT Services business, as part of the
US restructuring programme, as described in note 12 to the financial statements (page 168).
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
130
GOVERNANCE
STRATEGIC REPORT
FY26 Personal goals (25% weighting)
(audited)
FY26 performance
Measure
Outcome
Ouurn
(% maximum)
CEO
Deliver performance
Achieving consistent operational
performance through improving discipline
in our execution, controls and forecasting
Organic revenue growth of 1.3% at 11.3%
operating margin, against a challenging
external market
Achieved
Develop capability
Improving our organisation ability to
ensure we operate with greater efficiency
and effectiveness, professionalising
how we work
Comprehensive restructuring programme
completed, reducing costs, reshaping the
portfolio and simplifying the organisation
Achieved
Drive growth
Driving strategic growth by shaping and
winning larger long-term programmes
aligned to our customers’ mission
Record order intake of £3.6bn and year-end
backlog of £4.8bn
Exceeded
Enterprise leadership
Role model visible and responsible
(safety, security and environmental)
leadership to inspire and engage our
people to enable a high performing
inclusive culture
Demonstrated strong leadership through
a challenging external environment,
strengthening QinetiQ leadership team
with internal and external appointments
Continued good progress on safety, security,
and environmental goals
Achieved
Total
85.0%
CFO
Deliver performance
Instil Company-wide discipline and
integrity on financial control, governance
and accounting
Implemented stricter and clearer reporting and
financial review processes
Achieved
Develop capability
Lead reorganisation of Supply Chain
to deliver indirect savings and a change
in procurement and cost aitude in
the Group
Reorganisation started and successful delivery
of indirect savings targets
Achieved
Drive growth
Deliver improvements in finance and
business analysis and forecasting
Lead improvements in cash forecasting that
enabled more accurate decision making
across the Group
Achieved
Enterprise leadership
Role model visible and responsible
(safety, security and environmental)
leadership to inspire and engage our
people to enable a high performing
inclusive culture
Maintained high levels of engagement with
the Board and QinetiQ Leadership Team
Demonstrated strong leadership within the
Group by engaging with key employee groups
during a period of uncertainty and change
Continued good progress on safety, security,
and environmental goals
Exceeded
Total
85.0%
Annual Report
on Remuneration
131
FY24 Annual Bonus Plan (audited)
In accordance with the scheme rules, 30% of the FY24 ABP was awarded on 1 July 2024 as deferred shares, at a share price
of 448.8p. These shares must be held for two years and vest in July 2026.
FY24 Shares awarded
Vesting
Shares vesting
Estimated value
£’000
CEO
78,911
100%
78,911
406
Former CFO
49,765
100%
49,765
256
The value of this award is calculated as CEO £405,603 and Former CFO £255,792 based on the three-month average to
31 March 2026 (496.5p). The estimated value includes CEO £13,809 and Former CFO £8,709 as dividend equivalent payments
based on an aggregate dividend of 17.5p paid in FY25 to FY26 and a share price appreciation between grant and vesting of
£87,306 and £55,059 respectively.
Deferred Share Plan (audited)
The DSP figures shown in the FY25 single figure has been
updated in accordance with the regulations to show the
actual vesting of the FY22 award replacing the estimate
provided last year. The share price at vesting was 517.1p
and the FY25 figure includes £37,180 and £8,904 paid to
the CEO and Former CFO respectively as income in respect
of a dividend equivalent payments.
The FY23 legacy DSP award achieved the performance
underpin and, therefore, the shares ceased to be
contingent. These will vest in June 2026 and are disclosed
in the single figure for FY26. These values will be restated
in the FY27 report based on the actual share price and
dividend equivalents at vesting.
FY23
Shares
awarded
Vesting
Shares
vesting
Estimated
value
£’000
CEO
251,444
100%
251,444
1,312
Former CFO
163,256
100%
83,360
435
The FY23 DSP award performance underpin required the
FY26 profit to exceed that in FY23 (£169.5m). Adjusting for
the disposal of the non-core Federal IT Services business,
as described in note 12 to the financial statements, profit
for FY26 was £218.9m and, therefore, the shares will be
released on 20 June 2026. The 100% vesting refers to the
shares which have passed the underpin of those initially
granted based on FY23 performance, which was 100% of
the maximum available. If the underpin had not been met,
50% of the DSP award would have lapsed.
For the Former CFO, the shares vesting were pro-rated
based on her leaving arrangements, with 79,896 shares of
the original award having lapsed. The net shares vesting
from the FY23 DSP must be retained for a further two years.
The value of this award is calculated as CEO £1,312,286 and
Former CFO £435,056 based on the share amounts due to
vest of 251,444 and 83,360 (pro-rata) respectively based
on the three-month average to 31 March 2026 (496.5p).
The estimated value includes CEO £63,867 and Former
CFO £21,173 as dividend equivalent payments based on an
aggregate dividend of 25.4p paid in FY24 to FY26 and a share
price appreciation between grant and vesting of £378,080
and £125,343 respectively (for the Former CFO this is based
on her pro-rata award).
After the approval of the new Directors’ Remuneration
Policy at the 2023 AGM, the DSP was terminated with this
FY23 award being the final award, with no further awards
having been made.
Compensation Share Plan (audited)
The Compensation Share Plan (CSP) was awarded to Martin
Cooper in part compensation for share awards which were
forfeited on resigning from his former employer as disclosed
at the time of his appointment and in the FY24 Directors’
Remuneration Report. This award comprises of two parts,
both granted on 18 December 2024, at a share price of
410.4p, with the first part, detailed below, vesting in
March 2026 and the second part vesting in March 2027.
The value of the first part of the award is calculated as
£624,305 based on the actual share price on 31 March 2026,
the date of vesting (454.0p). The value includes a dividend
equivalent payment of £15,881 based on an aggregate
dividend of 11.85p paid between date of grant and vesting
and a share price appreciation of £148,251.
Shares
awarded
Vesting
Shares
vesting
Value
£’000
CFO
134,015
100%
134,015
624
Annual Report
on Remuneration
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
132
GOVERNANCE
STRATEGIC REPORT
FY24 Long-term Performance Award outcome (audited)
The FY24 Long-term Performance Award (LPA) was measured against three metrics, with a clear link to Company strategy
and incentivising growth (20% of each element vests at Threshold):
Measure
Weighting
%
Threshold
20%
payment
Target
50%
payment
Stretch
100%
payment
Actual
% of
maximum
reward
achieved
FY24 Shares
awarded
Shares
vesting
Estimated
value
£’000
Cumulative underlying
operating profit
(FY24 to FY26)
35%
£630m
£660m
£710m
£620.6m
0.0%
ROCE (FY24 to FY26)
35%
15.0%
17.5%
20.0%
25.5%
100.0%
Revenue (FY26)
1
30%
£1,900m
£2,200m
£2,700m
£1,943.1m
24.3%
CEO overall result
42.3%
521,352
220,495
1,139
1
Revenue has been adjusted to account for the disposal of the non-core Federal IT Services business, as part of the US restructuring programme,
as described in note 12 to the financial statements (page 168).
The value of this award is calculated as £1,139,077 based on the share amounts due to vest of £1,094,758 based on the three-month
average to 31 March 2026 (496.5p). The estimated value includes £44,319 as dividend equivalent payments based on an aggregate
dividend of 20.1p paid in FY24 to FY26 and a share price appreciation between grant and vesting of £340,749 respectively.
FY26 Long-term Performance Award targets for grant in July 2025 (audited)
The Commiee maintained the same set of performances measures and weightings used in FY25 for the FY26 Long-term
Performance Award (LPA). These have a clear link to Company strategy and incentivising growth:
Measure
Weighting
%
Threshold
Stretch
Rationale
Cumulative underlying
operating profit
(FY26 to FY28)
35%
TBA
1
TBA
1
ɰ
Designed to deliver consistent operational performance over
the longer term
ɰ
Understood, relevant and actionable for QinetiQ senior leaders
ROCE (FY26 to FY28)
35%
20.0%
25.0%
ɰ
Average EBITA for the three-year period divided by average
capital employed
ɰ
Designed to drive robust investment selection and delivery
Revenue (FY28)
30%
£2.2bn
£2.7bn
ɰ
Designed to drive value creation through collaboration and
market leverage
1
Cumulative earnings targets are deemed commercially sensitive at this time but are consistent with our growth ambition at 11–12% margin.
The FY26 LPA 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. 20% of each element vests at threshold. Subject to the targets no
longer being commercially sensitive they will be disclosed in full at the time of vesting.
FY26 LPA conditional share awards were granted based on a maximum of 250.0% of base salary at a share price of 502.5p
for the CEO and CFO in July 2025 determined over a five-day period before grant, in line with the scheme rules. The three-
year performance period for the FY26 award ends on 31 March 2028. Any shares which vest must then be held until fifth
anniversary after grant.
FY26 Long-term Performance Award
Participant
Date of grant
Number
of shares
granted
Share price
used to
determine
grant
Exercise price
Face value of
shares
% of salary
granted
Vest date
Performance
period end
CEO
3 Jul 25
361,720
502.5
–
£1,817,500
250.0%
3 Jul 28
31 Mar 28
CFO
3 Jul 25
226,386
502.5
–
£1,137,500
250.0%
3 Jul 28
31 Mar 28
Annual Report
on Remuneration
133
Statement of Directors’ shareholding
and share interests (audited)
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 711% of base salary
using a share price of 496.5p (three-month average to
31 March 2026).
The CFO does not currently meet the minimum shareholding
requirement, with a current holding equivalent to 110%
of base salary using a share price of 496.5p (three-month
average to 31 March 2026). This reflects his relatively recent
appointment as CFO.
The Remuneration Commiee 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 March
2026
Steve Wadey
1,040,105
1,600,883
446
2,641,434
Martin Cooper
104,030
588,836
–
692,866
Shonaid
Jemme-Page
7,000
–
–
7,000
Neil Johnson
100,000
–
–
100,000
Dina Knight
–
–
–
–
Roger Krone
–
–
–
–
Ross McEwan
1
20,000
–
–
20,000
General
Sir Gordon
Messenger
11,958
–
–
11,958
Steve Mogford
–
–
–
–
Ezinne
Uzo-Okoro
–
–
–
–
1
Ross McEwan – Resigned 17 July 2025.
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 2026 Steve Wadey purchased
31 shares, then on 11 May 2026 he purchased a further
36 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 133.
There have been no other changes to the shares shown
above between 31 March 2026 and 21 May 2026.
Payments to past Directors and
payment for loss of office (audited)
No payments were made to past Directors for loss of office
during the year.
As disclosed in last year’s report, Carol Borg stepped
down from the role of CFO by mutual agreement. Her FY24
ABP will vest in July 2026 (shown in table on page 132) at
an estimated value of £255,792. Additionally her FY23 DSP
award (shown in table on page 133), which was adjusted
pro-rata for time served, will vest in June 2026 at an
estimated vale of £435,056, with the vested shares
remaining subject to a two-year holding period.
Full details of Carol Borg’s termination agreements were
disclosed in accordance with s.430(2B) of the Companies
Act 2006 in the FY24 Directors’ Remuneration Report.
Annual Report
on Remuneration
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
134
GOVERNANCE
STRATEGIC REPORT
Total scheme interests summary (audited)
Total scheme interests, including those awarded during the financial year ended 31 March 2026, are as follows.
Plan name
Date of grant
Number
1 April 2025
Granted in year
(maximum
potential of
awards)
Vested in year
1
Lapsed in year
Number
31 March 2026
Share price on
date of grant
Vest date
Steve Wadey
DSP 2022
14 Jun 22
159,198
—
159,198
—
0
302.1
10 Jun 25
DSP 2023
20 Jun 23
251,444
—
—
—
251,444
330.2
20 Jun 26
LPA 2024
28 Sep 23
521,352
—
—
—
521,352
321.3
28 Sep 26
ABP 2024
1 Jul 24
78,911
—
—
—
78,911
448.8
1 Jul 26
LPA 2025
1 Jul 24
387,456
—
—
—
387,456
448.8
1 Jul 27
LPA 2026
3 Jul 25
—
361,720
—
—
361,720
502.5
3 Jul 28
1,398,361
361,720
159,198
—
1,600,883
Martin Cooper
CSP Tranche 1
18 Dec 24
134,015
—
134,015
—
0
410.4
31 Mar 26
CSP Tranche 2
18 Dec 24
85,282
—
—
—
85,282
410.4
31 Mar 27
LPA 2025
18 Dec 24
277,168
—
—
—
277,168
410.4
18 Dec 27
LPA 2026
3 Jul 25
—
226,386
—
—
226,386
502.5
3 Jul 28
496,465
226,386
134,015
—
588,836
Carol Borg
DSP 2022
14 Jun 22
37,489
—
37,489
—
0
302.1
10 Jun 25
DSP 2023
20 Jun 23
83,360
—
—
—
83,360
330.2
20 Jun 26
ABP 2024
1 Jul 24
49,765
—
—
—
49,765
448.8
1 Jul 26
170,614
—
37,489
—
133,125
1
Vested shares include shares sold to cover tax and National Insurance contributions.
There have been no other changes to the interests shown above between 31 March 2026 and 21 May 2026.
Performance review
The 10-year chart shows the Company’s Total Shareholder Return (TSR) over the period from 31 March 2016 to 31 March 2026
compared with the FTSE 250 (excluding investment trusts) over the same period based on spot values. The Commiee has
chosen to demonstrate the Company’s performance against this index as it is the index in which the Company is listed.
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
0
50
100
150
200
250
300
TSR – Value of £100 investment
made on 31 March 2016
As at 31 March
10-year comparator chart
QinetiQ
FTSE 250
Annual Report
on Remuneration
135
CEO remuneration
The table below shows the CEO’s remuneration over the same performance period 31 March 2016 to 31 March 2026 as the
TSR chart:
Financial year ended 31 March
CEO
Salary/fees
Single figure
Annual bonus
(% of maximum)
Long-term incentives
(% of maximum vesting)
FY26
Steve Wadey
727,000
4,396,185
70.7%
61.1%
FY25
Steve Wadey
719,147
1,740,459
—
100.0%
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%
—
CEO pay ratio
The calculation below is based on the FY26 single figure
for the CEO of £4,396,185 and similar calculations for the
UK workforce (i.e. ‘Option A’ as defined by the Companies
(Miscellaneous Reporting) Regulations 2018
). The
Remuneration Commiee 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 2026, with all calculations made using full-
time equivalent pay.
Total remuneration
Ratio of the CEO’s to the pay of UK employees
Year
25th percentile
Median
75th percentile
FY26
88: 1
67: 1
53: 1
FY25
33: 1
25: 1
20: 1
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 FY25 and
FY26 as a result of the higher CEO single figure for FY26
due to zero annual bonus being paid in FY25 as well as the
inclusion, in accordance with the regulations, of the vested
value of the FY23 DSP in addition to the FY24 LPA in this
year’s single figure.
The Company believes that the median pay ratio for FY26 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 Commiee
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 Commiee does
note the ratio and will monitor long-term trends.
Total pay of UK employees
25th percentile
Median
75th percentile
Total pay
and benefits
£49,835
£65,369
£82,718
Salary
component
£45,151
£52,686
£69,386
The Remuneration Commiee welcomes the opportunity to
provide this information to shareholders. The Company aims
to reward all employees fairly for the success and growth
they create.
Annual Report
on Remuneration
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
136
GOVERNANCE
STRATEGIC REPORT
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 Company.
The All Employee Incentive Scheme (AEIS) provides every
eligible employee the opportunity to earn a cash bonus
based on Company and personal performance. For FY26 the
Company performance element of the AEIS was awarded
at the target award level of £500. The AEIS will be operated
again in FY27 and thereafter.
The Commiee 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.
The CEO and the Chief People Officer have held regular
discussions with our Global Employee Voice (GEV)
representatives on reward maers. Members of the Board
also met with the GEV representatives twice in FY26.
Among other things, these meetings have discussed
how executive remuneration is aligned to the broader
employee offering in support of Group strategy.
Single figure total remuneration for the Chairman and each Non-executive
Director (audited)
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 2026 and the preceding year.
Non-executive Directors
Fees
£’000
Benefits
£’000
Single figure
£’000
FY26
FY25
FY26
FY25
FY26
FY25
Shonaid Jemme-Page
1
78
76
3
1
81
77
Neil Johnson
290
281
5
2
295
283
Dina Knight
1
78
62
3
2
81
64
Roger Krone
76
18
16
3
93
21
Ross McEwan
2
22
74
9
24
31
98
General Sir Gordon Messenger
1
78
76
2
1
80
77
Steve Mogford
76
74
5
3
81
77
Ezinne Uzo-Okoro
64
26
21
5
85
31
1
Fees include Commiee Chair fees.
2
Ross McEwan – Resigned 17 July 2025.
The fees for Steve Mogford, Roger Krone and Ross McEwan include £12,500 as Senior Independent Director, Senior US
and Australia resident Non-executive Director (pro-rated based on resignation date) respectively.
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. Aendance fees are also included in this number.
Roger Krone and Ezinne Uzo-Okoro as US residents received a $4,000 fee for aending UK meetings; as an Australian
resident Ross McEwan received a UK meeting fee of AU$8,000.
Annual Report
on Remuneration
137
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 (4,635 employees) in the UK business in service
between 1 April 2025 and 31 March 2026. The analysis only includes Directors who served for FY26.
Fees
Benefits
Annual bonus
FY26
FY25
FY24
FY23
FY22
FY26
FY25
FY24
FY23
FY22
FY26
FY25
FY24
FY23
FY22
Executive
Directors
Steve Wadey
1.1%
4.4%
3.8%
3.9%
24.9%
33.3%
-1.2%
9.2%
21.5%
-4.3%
— -100.0%
-10.5%
43.0%
-22.7%
Martin Cooper
75.9%
—
—
—
—
139.9%
—
—
—
—
—
—
—
—
—
Non-
executive
Directors
Shonaid
Jemme-Page
3.3%
4.8%
8.2%
1.5%
—
168.1%
123.9%
-62.1%
0%
—
—
—
—
—
—
Neil Johnson
3.2%
4.2%
4.2%
3.6%
14.3%
168.5%
103.2%
-77.2%
33.3%
100%
—
—
—
—
—
Dina Knight
26.7% 1,140%
—
—
—
39.7%
—
—
—
—
—
—
—
—
—
Roger Krone
350.8%
—
—
—
—
429.6%
—
—
—
—
—
—
—
—
—
Ross McEwan
-70.0% 1,133%
—
—
—
-61.0%
422.3%
—
—
—
—
—
—
—
—
General
Sir Gordon
Messenger
3.3%
4.8%
4.3%
—
—
103.4%
173.6%
-76.8%
—
—
—
—
—
—
—
Steve Mogford
3.4%
9.6%
82.4%
—
—
93.8%
589.5%
-52.7%
—
—
—
—
—
—
—
Ezinne
Uzo-Okoro
147.5%
—
—
—
—
324.3%
—
—
—
—
—
—
—
—
—
Employees
Average UK
employee
1
4.3%
6.0%
7.8%
4.4%
2.9%
34.7%
-1.0%
-22.2%
5.7%
10.9%
391.6%
-76.7%
3.0% 96.2%
-38.2%
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 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.
Relative importance of spend on pay
The graph below shows actual spend on all employee remuneration, shareholder dividends and buybacks and any other
significant use of profit and cash within the previous two financial years.
Total employee remuneration
£676.2m
£707.1m
2025
2026
£195.5m
£122.8m
2025
2026
Share-based profit distribution
Other significant profit distribution
There were no other significant
profit distributions in 2025 or 2026.
Dividend cash payment plus purchase of
own shares (see CFO Review page 32).
Difference
-4.4%
Difference
+59.2%
Annual Report
on Remuneration
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
138
GOVERNANCE
STRATEGIC REPORT
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/leers of appointment
The Company’s policy is that Executive Directors have rolling contracts which can be terminated by either party giving
12 months’ notice.
The Group Chairman and the Non-executive Directors do not have service contracts but are appointed under leers of
appointment. All service contracts and leers 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 Commiee report on page 96).
Director
Date appointed
Arrangement
Notice period
Steve Wadey
27 April 2015
Service contract
12 months
Martin Cooper
2 September 2024
Service contract
12 months
Shonaid Jemme-Page
19 May 2020
Initial term of three years from date of appointment, subject
to annual reappointment at the AGM
—
Neil Johnson
2 April 2019
Initial term of three years from date of appointment, subject
to annual reappointment at the AGM
—
Dina Knight
1 March 2024
Initial term of three years from date of appointment, subject
to annual reappointment at the AGM
—
Roger Krone
8 January 2025
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
1 August 2022
Initial term of three years from date of appointment, subject
to annual reappointment at the AGM
—
Ezinne Uzo-Okoro
1 November 2024
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 2026
The Remuneration Policy operated as intended for the
year ended 31 March 2026. Non-executive Directors’ fees
reviewed effective 1 July 2025 were set as follows:
ɰ
Basic fee £64,500 (was £62,500)
ɰ
Commiee Chair fee £14,500 (was £14,000)
ɰ
Senior Independent Director fee £12,500 (was £12,000)
The fee increase was based on a Non-executive Directors’
fee benchmarking report provided by Mercer, with increases
in line with increases applied to the UK workforce in FY26.
The Non-executive Group Chair receives a fee of
£292,500 per annum which was increased by 3.0% effective
1 July 2025, less than the increases applied to the
UK workforce in FY26.
Fees are reviewed in line with Policy.
Executive Directors are permied 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.
Fees effective
1 July 2025
£
Group Chairman
292,500
Basic fee for UK Non-executive Director
64,500
Additional fee for chairing a Commiee
14,500
Additional fee to Deputy Chair/Senior
Independent Non-executive Director
12,500
Additional fee for aendance at a Board meeting
held in US by UK resident Non-executive Director
2,500
Additional fee for aendance at a Board meeting
held in UK by US resident Non-executive Director
$4,000
Additional fee for aendance at a Board
meeting held in UK by Australia resident
Non-executive Director
AU$8,000
Annual Report
on Remuneration
139
Implementation of Policy for the year
ending 31 March 2027
At the 13 May 2026 meeting of the Remuneration Commiee,
the Commiee considered the CEO’s FY26 increase which
had been deferred until this time at the CEO’s request. It
was agreed that a 3.0% increase (to £748,800) would be
implemented from 1 April 2026. This increase is below the
4% budget for the workforce in FY26 and also slightly below
the 3.3% increase awarded to the CFO from 1 July 2025.
For FY27, the salary review will operate on the normal
timetable, with increases becoming effective from 1 July.
Having considered the 4% budget awarded for increases to
the wider workforce, the Commiee has determined that
the CEO’s salary should be increased by 3.5% (to £775,000).
For the CFO, a 6.4% increase (to £500,000) was approved
in recognition of his strong performance and development
since joining the Company in September 2024 as well as the
below market position of his current salary. This increase
is in-line with increases awarded to other high performing
employees who are below the market median.
Incentives for Executives
The table below shows the measures and relative weighting
for the Annual Bonus Plan for the CEO and CFO:
Performance measure
Relative
weighting
(%)
Orders
20.0%
Revenue
20.0%
Underlying operating profit
20.0%
Underlying net cash flow from operations
20.0%
Personal and strategic goals, including selected
ESG metrics
20.0%
For FY27 the Remuneration Commiee adjusted the
financial metrics for FY27 including revenue alongside the
same three financial metrics as in FY26 (orders, profit and
cash) each with an equal weighting of 20%. Building on the
changes made in FY26 to drive consistent performance, 30%
of all financial elements will be based on the achievement
of meeting H1 performance targets, with 70% based on
performance over the full financial year. The personal and
strategic goals will continue to provide greater emphasis
on personal leadership, performance standards and ESG
metrics (safety, security and environmental leadership).
In line with the Directors' Remuneration Policy, target
performance results in 100% of base salary being paid, with
stretch performance resulting in 200% of base salary being
paid. 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.
After the inclusion of revenue within the annual plan, the
Commiee has removed it from FY27 LPA, focusing on
two core measures of:
ɰ
Earnings:
cumulative earnings per share (EPS) on
a three-year basis (50% weighting) has replaced
organic underlying operating profit
ɰ
Designed to strengthen alignment between
long-term reward outcomes, earnings growth and
sustainable shareholder value creation
ɰ
Returns:
ROCE (50% weighting)
ɰ
Average EBITA for the three-year period divided by
average capital employed
ɰ
Designed to drive robust investment selection
and delivery
Threshold
Stretch
Cumulative 3-year EPS (FY27 to FY29)
110p
120p
3-year average ROCE (FY27 to FY29)
20.0%
30.0%
The FY27 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.
Subject to the targets no longer being commercially
sensitive they will be disclosed in full at the time of vesting.
Annual Report
on Remuneration
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
140
GOVERNANCE
STRATEGIC REPORT
141
Annual Report
on Remuneration
Remuneration Commiee meetings, activities and decisions FY26
The following table provides a summary of all the key activities during the year. The aendance at each meeting is detailed
on page 90.
The membership of the Remuneration Commiee for the whole of FY26 was Dina Knight (Chair), Neil Johnson, General Sir
Gordon Messenger, Shonaid Jemme-Page, Roger Krone, Steve Mogford and Ezinne Uzo-Okoro. Ross McEwan joined the
Commiee on 14 May 2025 and 16 July 2026 respectively.
Date | Incentives | Share awards | Governance | Salaries and resourcing |
May 2025 | Review of | Review FY25 | Approve FY26 Directors’ | QLT base salary reviews |
FY25 Company | LPA performance | Remuneration Report | ||
performance | Confirm FY26 | 2026 Directors’ | ||
LPA targets | Remuneration Policy | |||
Review share plan equity dilution | ||||
July 2025 | AGM preparation | |||
Review shareholder feedback | ||||
November 2025 | FY26 half-year forecast | Review of QLT shareholdings | ||
Review of all-employee | ||||
remuneration to ensure, | ||||
inter alia, alignment of incentives | ||||
and reward with culture | ||||
March 2026 | FY26 provisional results | Mercer review of independence | Preliminary 2025 CEO | |
FY27 target seing | salary review |
Remuneration Commiee
effectiveness review
A performance evaluation of the Commiee is conducted
annually. This process is described further on page 101.
Remuneration consultants
Mercer was appointed as independent adviser to the
Commiee to provide advice on market practice, corporate
governance and investors’ views. Mercer was selected by
the Commiee after providing ad-hoc advice in support of
the design of the Directors’ Remuneration Policy and prior
experience of working with it. Fees paid to Mercer during
the year for services provided were £92,723 calculated on
a time-spent basis at pre-agreed rates.
Statement of voting
Directors’ Remuneration | |
Report – 2025 | |
Votes for | 410,589,945 (97.7%) |
Votes against | 9,873,611 (2.3%) |
Total votes cast | 420,463,556 (77.4% of share capital) |
Abstained | 1,647,962 |
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 2026 AGM
will be announced via the RNS and posted on the QinetiQ
website after the AGM.
Directors’ Remuneration Report 2025 % of votes
(%)
Votes for
Votes against
97.7%
2.3%
Directors’ Remuneration Report 2023 % of votes
(%)
Votes for
Votes against
84.3%
15.7%
Dina Knight
Remuneration Commiee Chair
21 May 2026
Directors’ report
In accordance with Section 415 of the Companies Act 2006
(the 'Act'), the Directors present their report together with
the audited consolidated financial statements for the year
ended 31 March 2026. Other sections of the Annual Report
and Accounts have been deemed to be incorporated into
the Directors’ report by reference, and the table below
details where the required disclosures can be found.
Corporate governance statement
78
Culture
82
Board of Directors
84
Directors’ conflicts of interest
90
Directors’ interests in shares
134
Dividends
35
Engagement with employees
94
Engagement with suppliers, customers and others
60
Employment of disabled people
144
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
179
Future developments
1-76
Greenhouse gas emissions
43-52
Results
32-39
Section 172 Statement
72
Subsidiaries, joint ventures and associates
199
Publication of the ratio of the CEO’s remuneration to
the median, 25th and 75th quartile pay remuneration
of the Company’s UK employees in the Directors’
Remuneration Report
136
Illustration of the effect of future share price
increases on executive pay outcomes in the
Directors’ Remuneration Report
127
Management report
The Strategic report, Corporate Governance statement
and Directors’ Report together are the management
report for the purposes of DTR 4.1.5(2) and DTR 4.1.8R.
Corporate Governance statement
The Corporate governance statement, including the
Directors’ Remuneration Report, fulfils the requirement
of a corporate governance statement under DTR 7.2.1.
Disclosures in accordance with Listing Rule 6.6.1
For the purposes of the UK Listing Rules, the information
required to be disclosed by UKLR 6.6.1R can be found
as follows:
Section
Information
Page
(1)
Interest capitalised
n/a
(2)
Publication of unaudited
financial information
n/a
(3)
Details of long-term incentive schemes
123
(4)
Waiver of emoluments by a Director
n/a
(5)
Waiver of future emoluments
by a Director
n/a
(6)
Non pre-emptive issues of equity for cash
n/a
(7)
Non pre-emptive issue by major
subsidiary undertakings
n/a
(8)
Listed subsidiary
n/a
(9)
Contracts of significance
n/a
(10)
Provision of services by
a controlling shareholder
n/a
(11)
Shareholder waivers of dividends
n/a
(12)
Shareholder waivers of future dividends
n/a
(13)
Compliance with controlling
shareholder rules
n/a
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 £341.2m
(FY25: £344.9m) of total R&D-related expenditure, of which
£330.6m (FY25: £332.9m) was customer-funded work and
£10.6m (FY25: £12.0m) was internally funded. Additionally,
£1.7m (FY25: £3.7m) of late-stage development costs
were capitalised and £11.8m (FY25: £6.2m) 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 maers 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.
Directors’ Report
and statutory information
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
142
GOVERNANCE
STRATEGIC REPORT
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 2026, the Company had an alloed and
fully paid-up share capital of 524,757,317 ordinary shares
of 1p each with an aggregate nominal value of £5.2m and
one Special Share with a nominal value of £1.
Details of the shares in issue during the financial year are
shown in note 28 on page 194.
Acquisition of own shares
On 5 June 2025, the Company announced an extension of its
share buyback programme for an additional £200m over two
years. The first two tranches for an aggregate £100 million
completed on 24 March 2026. In total 20,677,403 ordinary
shares of £0.01 were repurchased and subsequently
cancelled in the first two tranches of this programme.
The third £50m tranche of the extension commenced on
25 March 2026 and is expected to complete by the end
of September 2026. As at 20 May 2026, the Company has
repurchased 4,624,033 ordinary shares of £0.01 under
this programme.
Pursuant to the above-mentioned buyback programmes,
in the year ended 31 March 2026, the Company repurchased,
and subsequently cancelled, 28,623,138 Ordinary Shares
of £0.01, which represents approximately 5.45% of the
Company’s issued share capital.
Further details on the share buyback programme can be
found on our website www.qinetiq.com.
Rights of ordinary shareholders
The holders of ordinary shares are entitled to receive the
Company’s Reports and Accounts, to aend and speak
at general meetings of the Company, to exercise voting
rights in person or by appointing a proxy in accordance
with the deadlines set out in the relevant Notice of Meeting,
and to receive a dividend (where declared) or paid out of
profits available for that purpose.
Each ordinary share carries one vote. There are no
restrictions on voting rights or limits on the number of votes
a shareholder may exercise. Voting rights may be restricted
if a shareholder fails to comply with a notice issued under
section 793 of the Companies Act 2006. Shares may be
held through nominee arrangements where voting rights
are exercised in line with the arrangements between the
beneficial owner and the registered holder.
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:
ɰ
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
ɰ
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
ɰ
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
ɰ
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 aached to the Special Share
requires the wrien approval of the MOD. Further details
can be found in note 28 on page 194.
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.
Directors’ Report
and statutory information
143
Directors’ Report
and statutory information
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
2026, the Trust held 2,684,125 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.
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.
Major shareholdings
In accordance with DTR 5, the following disclosures have
been notified to the Company from holders representing 3%
or more of the issued ordinary share capital of the Company.
Name of shareholder
As at 31 March
2026 % of issued
share capital*
As at 20 May 2026
% of issued share
capital*
Klear Kite LLC
14.02%
15.08%
BlackRock, Inc.
5.14%
5.14%
Franklin Mutual Advisers LLC
4.99%
4.99%
Schroders Plc
9.98%
4.96%
*
As notified by the shareholder and based on the issued ordinary share
capital at the time of the notification.
Employees
The Group is commied 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
aached 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.
Articles of Association
Changes to the Articles must be submied to shareholders
for approval save in respect of the rights aaching 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.
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:
ɰ
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.
ɰ
The Long Term Partnering Agreement (LTPA) is
a 30-year contract (its original term being 25 years
but having been extended in 2025), 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 permied under the Shareholders
Agreement to which the MOD is a party.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
144
GOVERNANCE
STRATEGIC REPORT
ɰ
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.
ɰ
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.
ɰ
The Group is party to funding agreements, provided
by a consortium of banks: a £290m multi-currency
revolving credit facility which is due to mature on
22 April 2029; a multi-currency floating rate term
loan of £333.6m which matures on 27 September
2027, and interest rate derivative contracts maturing
on 27 September 2027 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.
Appointment and replacement
of Directors
According to the Articles of Association, all Directors
are subject to election by shareholders at the first AGM
after 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 2025, the shareholders
passed resolutions which authorised the Directors to allot
relevant securities up to an aggregate nominal value of
£1,822,873 (£3,645,746 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 2026 AGM.
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 2026 AGM.
Annual General Meeting
The Company’s AGM will be held on Thursday 16 July 2026 at
11:00 at the office of Ashurst LLP, London Fruit and
Wool Exchange, Duval Square, London E1 6PW.
Independent auditors
A resolution to confirm the reappointment of
PricewaterhouseCoopers ('PwC') as auditor of the Company
will be proposed at the 2026 AGM. The reappointment has
been recommended to the Board by the Audit Commiee
and PwC has expressed its willingness to continue in office.
Statement of Directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing the Annual
Report and Accounts including the Directors’ Remuneration
Report and the Financial Statements in accordance with
applicable law and regulations.
UK 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.
Directors’ Report
and statutory information
145
Directors’ Report
and statutory information
Under UK 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:
ɰ
Select suitable accounting policies and apply
them consistently;
ɰ
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;
ɰ
Make reasonable and prudent judgements and
accounting estimates; and
ɰ
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 UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors of the Company who served during the
financial year ending 31 March 2026:
Neil Johnson
Steve Wadey
Martin Cooper
Steve Mogford
Shonaid Jemme-Page
Dina Knight
Roger Krone
Ross McEwan (resigned on
17 July 2025)
General Sir Gordon
Messenger
Ezinne Uzo-Okoro
Each of the Directors confirm that, to the best of
their knowledge:
ɰ
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;
ɰ
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; and
ɰ
The going-concern statement on page 71 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 2026.
For the purposes of DTR 4.1.5R(2) and DTR 4.1.8 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
21 May 2026
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
146
GOVERNANCE
STRATEGIC REPORT
Report on the audit of the
financial statements
Opinion
In our opinion:
ɰ
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 2026 and of the group’s profit and the
group’s cash flows for the year then ended;
ɰ
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;
ɰ
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
ɰ
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 2026 (the “Annual Report”),
which comprise:
ɰ
the Consolidated balance sheet as at 31 March 2026;
ɰ
the Company balance sheet as at 31 March 2026;
ɰ
the Consolidated income statement for the year
then ended;
ɰ
the Consolidated statement of comprehensive income
for the year then ended;
ɰ
the Consolidated statement of changes in equity for
the year then ended;
ɰ
the Company statement of changes in equity for the
year then ended;
ɰ
the Consolidated cash flow statement for the year
then ended; and
ɰ
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 Commiee.
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
ɰ
We conducted full scope audit work in the United
Kingdom over QinetiQ Limited, in the United States
over QinetiQ US, and in Australia over QinetiQ Pty Ltd
based on their size. This provides significant coverage
over all financial statement balances, except inventory
and intangible assets;
ɰ
We performed an audit of the inventory and intangible
assets financial statement line items at QinetiQ
Target Systems Limited to provide sufficient overall
group coverage;
ɰ
We performed procedures over goodwill, acquired
intangible assets, share-based payments, the defined
benefit pension scheme, IFRS 16 lease accounting,
taxation, borrowings and the consolidation at
a group level.
Key audit maers
ɰ
Long-term contract accounting (group)
ɰ
Valuation of goodwill related to the US CGU (group)
ɰ
Valuation of investment in subsidiary
undertakings (parent)
Independent auditors’ report
to the members of QinetiQ Group plc
147
Independent auditors’ report
to the members of QinetiQ Group plc
Report on the audit of the financial statements (continued)
Overview continued
Materiality
ɰ
Overall group materiality: £11,500,000
(2025: £10,000,000) based on 5% of underlying
profit before tax.
ɰ
Overall company materiality: £5,520,000
(2025: £5,400,000) based on 1% of total assets.
ɰ
Performance materiality: £8,600,000
(2025: £7,500,000)
(group) and £4,140,000
(2025: £4,050,000)
(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 maers
Key audit maers are those maers 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 maers, 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 maers.
This is not a complete list of all risks identified by our audit.
The key audit maers below are consistent with last year.
Key audit maer
How our audit addressed the key audit maer
Long-term contract accounting (group)
Refer to page 106 (Audit Commiee report)
and page 202 (note 35, Basis of preparation
and material accounting policies – Revenue
from contracts with customers) and page 160
(note 2, Revenue from contracts with
customers and other income). The group
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 (Revenue from
Contracts with Customers). 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.
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. For long term contracts within the UK, the Group team
performed risk assessment procedures over the portfolio of contracts to identify
contracts to subject to detailed audit procedures. 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 the estimates taken on each selected contract in the
financial statements.
Specifically, our procedures included the following:
ɰ
We assessed the basis of revenue recognition to ensure it is in line with applicable
accounting standards.
ɰ
We agreed overall anticipated revenue to the underlying contract and validated a
sample of customer invoices through to cash receipt.
ɰ
We recalculated revenue recognised and agreed revenue, costs and associated
balance sheet positions to the underlying general ledger.
ɰ
We obtained evidence to corroborate management estimates and judgements,
particularly around forecast costs to complete and risk contingencies, including:
ɰ
Performing risk assessment sensitivity to identify those cost categories that
are most sensitive and require further assessment;
ɰ
Comparing forecasts to established run rates obtaining evidence for movements
outside of our expectation, where applicable; and
ɰ
Obtaining contract risk registers and obtaining support for significant movements.
ɰ
We validated the allocation of costs incurred to contracts during the year to
supporting documentation. For the remaining population of 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. Component audit teams in the
US and Australia stratify their contracts into risk categories and perform the above
procedures as relevant which were subject to oversight by the Group engagement
team. No material exceptions were found.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
148
GOVERNANCE
STRATEGIC REPORT
Independent auditors’ report
to the members of QinetiQ Group plc
Key audit maer
How our audit addressed the key audit maer
Valuation of goodwill related to the US CGU (group)
Refer to page 106 (Audit Commiee report),
page 206 (note 35, Basis of preparation and
material accounting policies – Impairment of
goodwill and tangible, intangible and held for
sale assets), page 168 (note 13, Goodwill).
The group has a material amount of goodwill
amounting to £236.9m at 31 March 2026
with £167.5m of this relating to the US cash-
generating unit (‘CGU’). As required by IAS
36, management performed an impairment
assessment, determining the recoverable
amount of each CGU as the higher of the
value in use or fair value less cost to sell.
This assessment is underpinned by the
Board-approved five-year strategic plan.
This annual impairment review was performed
as at 31 March 2026. The carrying value of
the US CGU is material and hence there is
a significant estimate as to the value held
on the balance sheet.
Our audit focused on the risk that the carrying value of goodwill in the US CGU could
be materially misstated. 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 reviewed management’s assessment of value in use and
fair value less cost to sell for the US CGU to verify that the recoverable amount reflected
the higher of the two measures. We tested the principles and mathematical integrity of
the group’s discounted cash flow model. With the assistance of our valuation experts,
we assessed the long-term growth rate and discount rate used in the impairment
calculation, by comparing the group’s assumptions to external data. We confirmed that
cash flows for the next 5 years were consistent with internal budgeting and strategic
planning processes and the long term viability assessment and that the underlying
budgets and strategic plans have been approved by the Board. Within the US CGU, we
challenged the cash flow projections of future revenue growth used within the model
by reference to future market growth and contract opportunities, obtaining third
party evidence where possible. We held discussions with financial and non-financial
personnel, corroborating explanations to supporting evidence. We challenged
assumptions regarding forecast margin with reference to historical performance and
evidence of strategic plans supported by external advisors. We concluded that the
group’s assumptions were reasonable and supportable, and we did not identify any
indication of management bias. We assessed the related disclosures in the annual
report, including the sensitivity of the impairment calculations to changes in the
underlying assumptions and the dependency of the valuation on securing key contract
renewals and significant pipeline opportunities, and consider them to be appropriate.
Valuation of investment in subsidiary undertakings (parent)
Refer to page 214 (Accounting policies –
Investments and note 2, Investments in
subsidiary undertakings). The company
has investments of £551.6m 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. 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
were identified in the year ended 31 March 2026.
We have evaluated management’s consideration of impairment triggers through
performing our own independent assessment, which has included;
ɰ
Considering the market capitalisation of the group at year end and comparing this
to the carrying value of the investment.
ɰ
Assessing the overall financial performance of the group to identify any indicators
of impairment as a result of poor financial performance.
ɰ
Considering other information gathered during the course of our audits of
components and assessing whether there were any other indicators of impairment.
ɰ
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
investment in subsidiaries carrying value, was reasonable.
149
Independent auditors’ report
to the members of QinetiQ Group plc
Report on the audit of the financial statements (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,
QinetiQ US and QinetiQ Pty Ltd, with QinetiQ Limited being
the only component considered significant to the group.
The audit of QinetiQ Limited is performed in the United
Kingdom and the audits of QinetiQ US and QinetiQ Pty Ltd
are performed by component audit teams based in the
United States and Australia, respectively. This provides
sufficient coverage over all financial statement line items,
except inventory, intangible assets and central balances
audited by the group team.
We performed an audit of inventory and intangible assets
balances at QinetiQ Target Systems Limited to ensure
sufficient coverage over those financial statement line
items. QinetiQ Target Systems Limited is located within the
UK and the work was performed by the group audit team.
In addition to the above, we performed risk assessment
analytical procedures on the remaining entities, other
than those considered inconsequential, to understand
key balances and transactions in the year. This was
performed by the group audit team and did not identify
any balances requiring additional testing.
The audit procedures performed over the financial
information of full scope components, QinetiQ Limited,
QinetiQ US and QinetiQ Pty Ltd, accounted for 85% of
consolidated group revenue and 84% 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 and intangible assets in QinetiQ Target
Systems Limited, resulted in coverage of 83% 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, goodwill, acquired 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 component teams and the local
management teams in the United States and Australia 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.
The audit of the company financial statements was
performed by the group audit team. The 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.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
150
GOVERNANCE
STRATEGIC REPORT
Independent auditors’ report
to the members of QinetiQ Group plc
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
£11,500,000 (2025: £10,000,000).
£5,520,000 (2025: £5,400,000).
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 group 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 company only, as the
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
£11,000,000. 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% (2025: 75%) of overall materiality, amounting
to £8,600,000 (2025: £7,500,000) for the group financial
statements and £4,140,000 (2025: £4,050,000) 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 Commiee that we would report
to them misstatements identified during our audit above
£575,000 (group audit)
(2025: £500,000) and £276,000
(company audit)
(2025: £270,000) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
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:
ɰ
Obtaining the board-approved strategic plan. We held
discussions with management to understand the
budgeting process and the key assumptions made
over management’s going concern assessment period;
ɰ
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;
ɰ
Assessing whether the stress testing performed by
management appropriately considered the principal
risks facing the business, and was adequate;
ɰ
Using our own knowledge from the audit and
assessment of previous forecasting accuracy we
assessed management’s sensitivities applied to the
cash flow forecasts. These procedures confirmed
liquidity and covenant headroom in management’s
forecasts when performing severe but plausible
downside sensitivities;
ɰ
Evaluating the feasibility of management’s mitigating
actions in response to the severe but plausible
downside scenarios; and
ɰ
Assessing the adequacy of disclosures in the
Going Concern statement on page 107 of the
Audit Commiee report and on page 201 in
Note 35 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.
151
Independent auditors’ report
to the members of QinetiQ Group plc
Report on the audit of the financial statements (continued)
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw aention 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 maers 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 2026 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.
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 aention to in relation to:
ɰ
The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
ɰ
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;
ɰ
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;
ɰ
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
ɰ
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 aention
to any necessary qualifications or assumptions.
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
152
GOVERNANCE
STRATEGIC REPORT
Independent auditors’ report
to the members of QinetiQ Group plc
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:
ɰ
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;
ɰ
The section of the Annual Report that describes
the review of effectiveness of risk management
and internal control systems; and
ɰ
The section of the Annual Report describing the work
of the Audit Commiee.
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 in respect of the financial statements,
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, maers 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. 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:
153
Independent auditors’ report
to the members of QinetiQ Group plc
Report on the audit of the financial statements (continued)
ɰ
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;
ɰ
Evaluation of management’s controls designed to
prevent and detect irregularities, in particular their
anti-bribery controls;
ɰ
Assessment of maers reported on the group’s
whistleblowing helpline and the results of
management’s investigation of such maers;
ɰ
Reviewing correspondence with and reporting to
relevant regulatory authorities;
ɰ
Challenging assumptions and judgements made by
management in their significant accounting estimates
and judgements, particularly in relation to the key audit
maers above;
ɰ
Designing risk filters to search for journal entries, such
as those posted with unusual account combinations,
and testing those journals highlighted (if any); and
ɰ
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:
ɰ
we have not obtained all the information and
explanations we require for our audit; or
ɰ
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
ɰ
certain disclosures of directors’ remuneration
specified by law are not made; or
ɰ
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
We were first appointed by the company for the financial
year ended 31 March 2018. Our uninterrupted engagement
covers 9 financial years.
Other maer
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
21 May 2026
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
154
GOVERNANCE
STRATEGIC REPORT
Financial
statements
156
Consolidated income statement
157
Consolidated statement of
comprehensive income
157
Consolidated statement of
changes in equity
158
Consolidated balance sheet
159
Consolidated cash flow statement
159
Reconciliation of movements in net debt
160
Notes to the Consolidated
Financial Statements
212
Company balance sheet
213
Company statement of
changes in equity
214
Notes to the Company
Financial Statements
Specialist marine test infrastructure
generating high-quality data that
underpins trusted engineering decisions
and long-term customer programmes.
155
All figures in £ million
Note
FY26
FY25
Underlying*
Specific
adjusting
Items*
Total
Underlying*
Specific
adjusting
Items*
Total
Revenue
2, 3
Operating costs excluding depreciation
and amortisation
(1,609.0 )
(53.8 )
(1,662.8 )
(1,669.1 )
(136.8 )
(1,805.9 )
Other income
2
EBITDA (earnings before interest, tax,
depreciation and amortisation)
(53.8 )
(136.8 )
Depreciation and impairment of property,
plant and equipment
3, 15
(76.6 )
(0.5 )
(77.1 )
(70.6 )
(1.0 )
(71.6 )
Impairment of goodwill
13
(143.9 )
(143.9 )
Amortisation and impairment of other
intangible assets
3, 4, 14
(19.9 )
(23.1 )
(43.0 )
(15.7 )
(24.2 )
(39.9 )
Operating profit/(loss)
3
(77.4 )
(305.9 )
(90.5 )
Finance income
7
Finance expense
7
(22.8 )
(22.8 )
(23.4 )
(23.4 )
Gain on business divestment
12
Profit/(loss) before tax
8
(74.5 )
(304.9 )
(106.3 )
Taxation (expense)/income
9
(61.1 )
(47.6 )
(51.6 )
(27.8 )
(79.4 )
Profit/(loss) for the year
(61.0 )
(332.7 )
(185.7 )
Earnings/(loss) per share for profit/(loss) aributable to the owners of the parent company
All figures in pence
Note
FY26
FY25
Underlying*
Total
Underlying*
Total
Basic
10
(33.0 )
Diluted
10
(33.0 )
*
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 220. Also refer to note 4 for details of ‘specific
adjusting items’.
Consolidated
income statement
For the year ended 31 March
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
156
STRATEGIC REPORT
FINANCIAL STATEMENTS
GOVERNANCE
All figures in £ million
Note
FY26
FY25
Profit/(loss) for the year
(185.7 )
Items that will not be reclassified to profit or loss:
Actuarial gain recognised in defined benefit pension schemes
27
Tax on items that will not be reclassified to profit and loss
17
(2.6 )
(4.4 )
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
(5.4 )
(11.6 )
Movement in deferred tax on foreign currency translation
Movement in the fair value of hedging derivatives
(4.3 )
Movement in deferred tax on hedging derivatives
(0.2 )
Total items that may be reclassified to profit or loss
(4.7 )
(14.1 )
Other comprehensive income/(expense) for the year, net of tax
(0.8 )
Total comprehensive income/(expense) for the year
(186.5 )
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
Note
28
At 1 April 2025
(27.6 )
Total comprehensive expense
Profit for the year
Other comprehensive income/(expense) for the
year, net of tax
(5.2 )
Total comprehensive income/(expense) for
the year
(5.2 )
Purchase of own shares
(0.3 )
(146.9 )
(146.9 )
Share-based payment
Tax on share-based payments (note 9)
Dividends
(48.7 )
(48.7 )
At 31 March 2026
(32.8 )
At 1 April 2024
(16.7 )
Total comprehensive expense
Loss for the year
(185.7 )
(185.7 )
Other comprehensive (expense)/income for the
year, net of tax
(3.2 )
(10.9 )
(0.8 )
Total comprehensive expense for the year
(3.2 )
(10.9 )
(172.4 )
(186.5 )
Purchase of own shares
(0.2 )
(74.9 )
(74.9 )
Share-based payments
Tax on share-based payments (note 9)
Dividends
(47.9 )
(47.9 )
At 31 March 2025
(27.6 )
Consolidated statement
of
comprehensive income
For the year ended 31 March
157
All figures in £ million
Note
31 March
2026
31 March
2025
Non-current assets
Goodwill
13
Other intangible assets
14
Property, plant and equipment
15
Other financial assets
23
Equity accounted investments
16
Net pension asset
27
Deferred tax asset
17
Current assets
Inventories
19
Other financial assets
23
Trade and other receivables
20
Current tax asset
18
Cash and cash equivalents
23
Total assets
Current liabilities
Trade and other payables
21
(585.6 )
(597.5 )
Current tax payable
18
(13.4 )
(3.6 )
Provisions
22
(34.1 )
(56.2 )
Other financial liabilities
23
(13.5 )
(15.1 )
(646.6 )
(672.4 )
Non-current liabilities
Deferred tax liability
17
(102.2 )
(101.0 )
Provisions
22
(16.6 )
(3.5 )
Borrowings and other financial liabilities
23
(410.4 )
(416.6 )
Other payables
21
(9.6 )
(8.4 )
(538.8 )
(529.5 )
Total liabilities
(1,185.4 )
(1,201.9 )
Net assets
Equity
Ordinary shares
28
Capital redemption reserve
Share premium account
Hedging reserve
Translation reserve
(32.8 )
(27.6 )
Retained earnings
Total equity
2026 and were signed on its behalf by:
Steve Wadey
Martin Cooper
Group Chief Executive Officer
Consolidated balance sheet
As at 31 March
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
158
STRATEGIC REPORT
FINANCIAL STATEMENTS
GOVERNANCE
All figures in £ million
Note
FY26
FY25
Underlying net cash inflow from operations
24
Less: specific adjusting items
24
(51.6 )
(29.5 )
Net cash inflow from operations
24
Tax paid
(44.4 )
(48.6 )
Interest received
Interest paid
(21.6 )
(23.4 )
Net cash inflow from operating activities
Purchases of intangible assets
14
(12.9 )
(12.7 )
Purchases of property, plant and equipment
15
(59.6 )
(96.1 )
Proceeds from sale of property
Proceeds from sale of plant and equipment
Dividends from joint ventures and associates
Disposal of businesses
12
Net cash (outflow)/inflow from investing activities
(54.6 )
Purchase of own shares
(146.9 )
(108.9 )
Dividends paid to shareholders
11
(48.7 )
(47.9 )
Capital element of lease payments
(12.6 )
(10.8 )
Cash flow relating to intercompany loan hedges
Net cash outflow from financing activities
(208.2 )
(158.4 )
(Decrease)/increase in cash and cash equivalents
(31.0 )
Effect of foreign exchange changes on cash and cash equivalents
(0.4 )
(3.7 )
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
23
Reconciliation of movements in net debt
For the year ended 31 March
All figures in £ million
Note
FY26
FY25
(Decrease)/increase in cash and cash equivalents in the year
(31.0 )
Add back net cash flows not impacting net debt
Movement in net debt resulting from cash flows
(18.1 )
Net increase in lease obligations
(7.3 )
(50.8 )
Net movement in derivative financial instruments
(4.7 )
Other movements including foreign exchange
(0.6 )
(2.2 )
Movement in net debt as defined by the Group
(25.9 )
Net debt as defined by Group at the beginning of the year
(133.2 )
(151.2 )
Net debt as defined by the Group at the end of the year
23
(159.1 )
(133.2 )
Less: borrowings
23
Less: total net derivative financial instruments, capitalised borrowing costs and lease liabilities
23
Total cash and cash equivalents
23
Consolidated cash flow statement
For the year ended 31 March
159
Notes to the Consolidated Financial Statements
For the year ended 31 March
160
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The financial position and performance of the Group was particularly affected by the following events and transactions
during the reporting period:
1) A £146.9m (FY25: £74.9m
) reduction in equity due to the ongoing purchase to acquire own shares as part of the share
buyback programme
2) A reduction in Goodwill and Other intangible assets in the US CGU following completion of the Fed IT disposal in H1 which
resulted in a modest gain on disposal
Revenue and other income is analysed as follows:
Revenue by category
For the year ended 31 March
All figures in £ million |
FY26 |
FY25 |
Services contracts with customers |
1,842.3 |
1,810.9 |
Sale of goods contracts with customers |
78.6 |
110.6 |
Royalties and licences |
1.7 |
10.1 |
Total revenue |
1,922.6 |
1,931.6 |
Adjust for disposed businesses |
(9.7) |
(25.8) |
Adjust to constant prior year exchange rates |
18.8 |
– |
Total revenue on an organic, constant currency basis* |
1,931.7 |
1,905.8 |
Organic revenue growth at constant currency* |
1% |
2% |
*
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 220.
Other income
All figures in £ million |
FY26 |
FY25 |
Share of joint ventures’ (loss)/profit after tax |
(1.0) |
0.3 |
Research and development expenditure credits (RDEC) |
29.3 |
30.0 |
Other income |
1.8 |
8.9 |
Total other income |
30.1 |
39.2 |
Revenue and loss after tax of associates and joint ventures was £1.3m and £1.2m respectively (FY25: revenue of £5.9m and
profit after tax of £0.3m). The figures in the table above represent the Group share of this profit after tax.
Other income is in respect of property rentals and the recovery of other related property costs.
All figures in £ million |
FY26 |
FY25 |
United Kingdom (UK) |
1,416.4 |
1,311.0 |
United States of America (US) |
288.0 |
348.4 |
Australia |
93.5 |
147.9 |
Home countries |
1,797.9 |
1,807.3 |
Europe |
61.6 |
64.7 |
Rest of world |
63.1 |
59.6 |
Total revenue |
1,922.6 |
1,931.6 |
Home countries revenue % |
94% |
94% |
International (non-UK) revenue % |
26% |
32% |
161
Notes to the Consolidated
Financial Statements
2. Revenue from contracts with customers and other income (continued)
All figures in £ million |
FY26 |
FY25 |
UK government |
1,290.4 |
1,205.3 |
US government |
248.8 |
338.1 |
Other |
383.4 |
388.2 |
Total revenue |
1,922.6 |
1,931.6 |
‘Other’ does not contain any customers with revenue in excess of 10% of total Group revenue.
The following table shows the aggregate amount of revenue allocated to performance obligations that are unsatisfied (or
partially satisfied) as at the end of the reporting period:
All figures in £ million |
FY27 |
FY28 |
FY29 |
FY30+ |
Total |
Total forecast revenue allocated to unsatisfied performance obligations |
1,347.2 |
744.7 |
458.0 |
1,871.5 |
4,421.4 |
Management expects that 30% (£1,347.2m) of revenue allocated to unsatisfied performance obligations as of 31 March
2026 will be recognised as revenue during the next reporting period. The amount disclosed above does not include variable
consideration which is constrained.
The following table shows the aggregate amount of revenue allocated to performance obligations that were unsatisfied (or
partially satisfied) as at the end of the prior reporting period:
All figures in £ million |
FY26 |
FY27 |
FY28 |
FY29+ |
Total |
Total forecast revenue allocated to unsatisfied performance obligations |
1,393.3 |
645.8 |
453.0 |
353.0 |
2,845.1 |
Revenue of £195.2m was recognised during the year that was previously unrecognised as at the previous year end and
The analysis by business segment is presented in accordance with IFRS 8 Operating Segments, on the basis of those
reportable segments whose operating results are regularly reviewed by the Board (the Chief Operating Decision Maker
as defined by IFRS 8) and are aligned with the Group’s strategic direction, determined with reference to the products and
services they provide, as follows:
EMEA Services provides technical assurance, test and evaluation and training services, underpinned by long-term
contracts. EMEA Services comprises the following business units which are not considered reportable segments as defined
by IFRS 8: UK Defence, UK Intelligence and the Australia sector.
Global Solutions combines all other business units not aggregated within EMEA Services, including the QinetiQ US Sector
and Other Products (which includes QinetiQ Target Systems). Generally these business units (which are not considered
reportable segments as defined by IFRS 8) deliver innovative solutions and products which include contract-funded
research and development and developing intellectual property in partnership with key customers and through internal
funding with potential for new revenue streams.
Operating segments
FY26 |
FY25 |
|||
Revenue |
Underlying |
Revenue |
Underlying |
|
from external |
operating |
from external |
operating |
|
All figures in £ million |
customers |
profit 1,2 |
customers |
profit 1,2 |
EMEA Services |
1,529.2 |
182.3 |
1,477.7 |
169.0 |
Global Solutions |
393.4 |
35.6 |
453.9 |
16.4 |
Revenue/Operating profit from segments 1,2 |
1,922.6 |
217.9 |
1,931.6 |
185.4 |
Research and development expenditure credits (RDEC) |
29.3 |
30.0 |
||
Underlying operating profit 2 |
247.2 |
215.4 |
||
Operating profit margin from segments 2 |
11.3% |
9.6% |
||
1
The measure of profit presented to the Chief Operating Decision Maker is Operating profit from segments, stated before specific adjusting items
and research and development expenditure credits. The specific adjusting items are detailed in note 4.
2
Definitions of the Group’s ‘Alternative performance measures’ can be found on page 220.
Notes to the Consolidated
Financial Statements
3. Segmental analysis (continued)
162
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
No measure of segmental assets and liabilities is reported as this information is not regularly provided to the Chief Operating
Decision Maker. Transactions between segments are included within the operating profit and revenue of each segment
as appropriate.
Reconciliation of segmental results to total profit/(loss)
All figures in £ million |
Note |
FY26 |
FY25 |
Underlying operating profit from segments 1,2 |
217.9 |
185.4 |
|
Research and development expenditure credits (RDEC) |
29.3 |
30.0 |
|
Underlying operating profit 2 |
247.2 |
215.4 |
|
Specific adjusting items operating loss |
4 |
(77.4) |
(305.9) |
Operating profit/(loss) |
169.8 |
(90.5) |
|
Net finance expense |
7 |
(15.2) |
(15.8) |
Gain on business divestment |
12 |
0.5 |
– |
Profit/(loss) before tax |
155.1 |
(106.3) |
|
Taxation expense |
9 |
(47.6) |
(79.4) |
Profit/(loss) for the year |
107.5 |
(185.7) |
1
The measure of profit presented to the Chief Operating Decision Maker is Operating profit from segments, stated before specific adjusting items
and research and development expenditure credits. The specific adjusting items are detailed in note 4.
2
Definitions of the Group’s ‘Alternative performance measures’ can be found on page 220.
Non-current assets* by geographic location
Rest of |
||||||
All figures in £ million |
UK |
US |
Australia |
Germany |
world |
Total |
As at year ended 31 March 2026 |
483.1 |
340.6 |
36.4 |
63.9 |
6.9 |
930.9 |
As at year ended 31 March 2025 |
508.3 |
392.1 |
39.8 |
65.8 |
11.0 |
1,017.0 |
*
Excluding deferred tax, financial instruments, equity accounted investments and net pension asset.
Depreciation and amortisation by business segment – excluding specific adjusting items
For the year ended 31 March 2026
EMEA |
Global |
||
All figures in £ million |
Services |
Solutions |
Total |
Underlying depreciation and impairment of property, plant and equipment |
69.7 |
6.9 |
76.6 |
Underlying amortisation and impairment of purchased or internally developed intangible assets |
19.6 |
0.3 |
19.9 |
89.3 |
7.2 |
96.5 |
For the year ended 31 March 2025
EMEA |
Global |
||
All figures in £ million |
Services |
Solutions |
Total |
Underlying depreciation and impairment of property, plant and equipment |
63.1 |
7.5 |
70.6 |
Underlying amortisation and impairment of purchased or internally developed intangible assets |
7.5 |
8.2 |
15.7 |
70.6 |
15.7 |
86.3 |
163
Notes to the Consolidated
Financial Statements
In the income statement, the Group presents specific adjusting items separately. In the judgement of the Directors, for
the reader to obtain a proper understanding of the financial information, specific adjusting items need to be disclosed
separately because of their size and nature. Further explanation of this rationale is provided in note 35 (Accounting Policies).
Underlying measures of performance exclude specific adjusting items. The following specific adjusting items have been
(charged)/credited in the consolidated income statement:
All figures in £ million |
Note |
FY26 |
FY25 |
One-off period of digital investment |
(23.6) |
(20.8) |
|
Restructuring costs and associated impacts |
(30.2) |
(64.5) |
|
Acquisition and disposal related costs |
– |
(14.9) |
|
Loss on sale of property |
– |
(36.6) |
|
Specific adjusting items loss before interest, tax, depreciation and amortisation |
(53.8) |
(136.8) |
|
Impairment of property |
(0.5) |
(1.0) |
|
Impairment of goodwill |
13 |
– |
(143.9) |
Amortisation of intangible assets arising from acquisitions |
(23.1) |
(24.2) |
|
Specific adjusting items operating loss |
(77.4) |
(305.9) |
|
Defined benefit pension scheme net finance income |
27 |
2.4 |
1.0 |
Gain on business divestment |
12 |
0.5 |
– |
Specific adjusting items loss before tax |
(74.5) |
(304.9) |
|
Tax impact of the above specific adjusting items |
9 |
13.5 |
17.2 |
Derecognition of US deferred tax asset |
9 |
– |
(45.0) |
Total specific adjusting items loss after tax |
(61.0) |
(332.7) |
Reconciliation of underlying profit for the year to total profit/(loss) for the year
All figures in £ million |
FY26 |
FY25 |
Underlying profit after tax |
168.5 |
147.0 |
Total specific adjusting items loss after tax |
(61.0) |
(332.7) |
Total profit/(loss) for the year |
107.5 |
(185.7) |
The total impact of specific adjusting items (which are excluded from underlying performance due to their distorting nature)
on operating profit was a cost of £77.4m (FY25: cost of £305.9m). The improved position reflects that FY25 included the
goodwill impairment charge of £143.9m relating to the US Sector and acquisition, disposal and integration costs of £14.9m
associated with integrating the Avantus and Air Affairs acquisitions into their respective sectors, while this year there are
no charges against these line items.
In FY26 the non-recurring cost of the discrete digital investment programme is £23.6m (FY25: £20.8m). We continue to
roll out this project to modernise the IT infrastructure to support our future growth ambitions. The non-recurring costs
are 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. This year is expected to be the final year of digital investment.
Restructuring costs and other impacts were £30.2m (FY25: £64.5m). This includes the costs of efficiency activity in UK and
Australia operations which is nearing completion, as well as the further non-cash charges in the US. The majority of these
costs were reported within the first half of FY26 and were a consequence of continued refinement of the market-facing
strategy and ongoing restructuring of the US Sector against challenging market conditions.
Also included within specific adjusting items are net finance income from pensions of £2.4m (FY25: £1.0m), amortisation
of acquisition intangibles of £23.1m (FY25: £24.2m) and the £0.5m gain on disposal of the Federal IT business in the US,
Notes to the Consolidated
Financial Statements
164
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The largest component of operating expenses is employee costs. The year-end and average monthly number of persons
employed by the Group, including Executive Directors, analysed by business segment, were:
As at 31 March |
Monthly average |
|||
2026 |
2025 |
FY26 |
FY25 |
|
Number |
Number |
Number |
Number |
|
EMEA Services |
6,213 |
6,903 |
6,448 |
6,955 |
Global Solutions |
1,165 |
1,500 |
1,274 |
1,575 |
Total employees |
7,378 |
8,403 |
7,722 |
8,530 |
The aggregate payroll costs of these persons were as follows:
All figures in £ million |
Note |
FY26 |
FY25 |
Wages and salaries |
533.9 |
569.4 |
|
Social security costs |
60.1 |
54.5 |
|
Other pension costs |
70.7 |
73.4 |
|
Share-based payments costs |
29 |
11.5 |
9.8 |
Total employee costs |
676.2 |
707.1 |
The key management personnel of the Group during the year to 31 March 2026 comprise the Board of Directors and the
QinetiQ Leadership Team. Their remuneration and benefits are summarised below:
All figures in £ million |
FY26 |
FY25 |
Short-term employee remuneration including benefits |
8.4 |
6.9 |
Post-employment benefits |
0.1 |
0.1 |
Share-based payments costs |
3.3 |
3.3 |
Total |
11.8 |
10.3 |
Short-term employee remuneration and benefits include salary, bonus and benefits. Post-employment benefits relate to
pension amounts.
The highest paid director is the Group Chief Executive Officer, details of whose remuneration are provided on page 129 of the
165
Notes to the Consolidated
Financial Statements
All figures in £ million |
FY26 |
FY25 |
Bank interest receivable |
5.2 |
6.6 |
Finance income before specific adjusting items |
5.2 |
6.6 |
Amortisation of deferred financing costs |
(1.2) |
(1.4) |
Bank interest and commitment fees |
(16.2) |
(17.8) |
Lease expense |
(5.4) |
(4.2) |
Finance expense |
(22.8) |
(23.4) |
Underlying net finance expense |
(17.6) |
(16.8) |
Specific adjusting item: defined benefit pension scheme net finance income |
2.4 |
1.0 |
Net finance expense |
(15.2) |
(15.8) |
The following auditors’ remuneration has been charged in arriving at profit/(loss) before tax:
All figures in £ million |
FY26 |
FY25 |
Fees payable to the auditors and its associates: |
||
Audit of the Group’s annual accounts |
1.0 |
1.0 |
Audit of the accounts of subsidiaries of the Company |
0.9 |
0.9 |
Total audit fees |
1.9 |
1.9 |
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 |
2.1 |
2.1 |
The following items have also been charged in arriving at profit/(loss) before tax:
All figures in £ million |
FY26 |
FY25 |
Cost of inventories expensed – underlying |
43.5 |
53.8 |
Cost of inventories wrien down – specific adjusting item (restructuring costs and associated impacts) |
– |
18.5 |
Owned assets: depreciation |
59.7 |
57.2 |
Leased assets: depreciation |
11.6 |
10.9 |
Foreign exchange (gain)/loss |
(0.6) |
0.4 |
Research and development expenditure – customer funded contracts |
330.6 |
332.9 |
Research and development expenditure – Group funded |
10.6 |
12.0 |
Notes to the Consolidated
Financial Statements
166
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
| FY26 |
FY25 |
|||||
Specific |
Specific |
|||||
adjusting |
adjusting |
|||||
All figures in £ million |
Underlying |
items |
Total |
Underlying |
Items |
Total |
Analysis of charge |
||||||
Current UK tax expense/(income) |
65.1 |
(6.2) |
58.9 |
51.0 |
(6.2) |
44.8 |
Current UK tax in respect of prior years |
0.9 |
(2.5) |
(1.6) |
2.2 |
– |
2.2 |
Overseas corporation tax |
||||||
Current year |
0.2 |
– |
0.2 |
3.5 |
(0.9) |
2.6 |
In respect of prior years |
(2.0) |
– |
(2.0) |
1.0 |
– |
1.0 |
Current tax expense/(income) |
64.2 |
(8.7) |
55.5 |
57.7 |
(7.1) |
50.6 |
Deferred tax (income)/expense |
(5.5) |
(4.8) |
(10.3) |
(5.0) |
5.3 |
0.3 |
Deferred tax impact of derecognition of prior year |
||||||
US deferred tax asset |
– |
– |
– |
– |
29.6 |
29.6 |
Deferred tax in respect of prior years |
2.4 |
– |
2.4 |
(1.1) |
– |
(1.1) |
Deferred tax (income)/expense |
(3.1) |
(4.8) |
(7.9) |
(6.1) |
34.9 |
28.8 |
Taxation expense/(income) |
61.1 |
(13.5) |
47.6 |
51.6 |
27.8 |
79.4 |
Factors affecting tax expense in the year |
||||||
Principal factors reducing the Group’s current year tax charge |
||||||
below the UK statutory rate are explained below: |
||||||
Profit/(loss) before tax |
229.6 |
(74.5) |
155.1 |
198.6 |
(304.9) |
(106.3) |
Tax on profit/(loss) before tax at 25% (FY25: 25%) |
57.4 |
(18.6) |
38.8 |
49.7 |
(76.2) |
(26.5) |
Effect of: |
||||||
Expenses not deductible for tax purposes and |
||||||
non-taxable items |
– |
– |
– |
0.8 |
1.2 |
2.0 |
Derecognition of US deferred tax asset |
2.4 |
4.6 |
7.0 |
– |
45.0 |
45.0 |
Non-deductible US goodwill impairment |
– |
– |
– |
– |
36.0 |
36.0 |
Non-recognition of deductible restructuring impacts |
– |
4.6 |
4.6 |
– |
13.1 |
13.1 |
Non-deductible loss on sale of property |
– |
– |
– |
– |
9.1 |
9.1 |
Tax in respect of prior years |
1.3 |
(2.5) |
(1.2) |
2.0 |
– |
2.0 |
Different tax rates in overseas jurisdictions |
– |
(1.6) |
(1.6) |
(0.9) |
(0.4) |
(1.3) |
Taxation expense/(income) |
61.1 |
(13.5) |
47.6 |
51.6 |
27.8 |
79.4 |
Effective tax rate |
26.6% |
30.7% |
26.0% |
(74.7)% |
||
The total tax charge was £47.6m (FY25: £79.4m). The underlying tax charge was £61.1m (FY25: £51.6m), on a higher underlying
profit before tax, with an underlying effective tax rate of 26.6% for the year ended 31 March 2026 (FY25: 26.0%). The
underlying effective tax rate is above the UK statutory rate of 25% (FY25: 25%), primarily as a result of unrecognised tax
deductions and prior year adjustments to returns.
Tax on specific adjusting items
The total specific adjusting items tax credit was £13.5m (FY25 charge: £27.8m). The tax credit arises primarily due to the
deductible restructuring and digital investment costs, amortisation of acquired intangibles and offset by a prior year
adjustment to the non-deductible loss on sale of Cody Technology Park.
Amounts recognised directly in equity
Current and deferred tax not recognised in net profit or loss or other comprehensive income but directly credited to equity
was £0.7m (FY25: £0.8m).
167
Notes to the Consolidated
Financial Statements
9. Taxation charge (continued)
Factors affecting future tax charges
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
believes it qualifies for one of the transitional safe harbours provided in the rules in all territories in which it operates. The
Group has not accrued a Pillar Two top-up tax charge for FY26. The Group has applied the temporary exemption issued by
the International Accounting Standards Board from the accounting for deferred taxes under IAS 12 and neither recognises
nor discloses information about deferred taxes related to Pillar Two income taxes. The Group does not expect a material
quantitative impact from Pillar Two legislation; however, there are expected to be significant compliance obligations.
Tax risk management and tax cash
For details of the Group’s approach to tax risk management and discussion of tax cash flows in the year, see ‘Additional
Basic earnings/(loss) per share
(EPS) is calculated by dividing the profit aributable to equity shareholders by the weighted
average number of ordinary shares in issue during the year. The weighted average number of shares used excludes those
shares bought by the Group and held as own shares (see note 28). For diluted earnings (but not losses
) per share the
weighted average number of shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares
arising from unvested share-based awards including share options.
Weighted average and diluted number of shares
FY26 |
FY25 |
||
Weighted average number of shares |
Million |
535.4 |
563.4 |
Effect of dilutive securities |
Million |
7.9 |
7.4 |
Diluted number of shares |
Million |
543.3 |
570.8 |
Underlying basic earnings per share figures are presented below, in addition to the basic and diluted earnings per share,
because the Directors consider this gives a more relevant indication of underlying business performance and reflects the
adjustments to basic earnings per share for the impact of specific adjusting items (see note 4) and tax thereon.
Underlying EPS
FY26 |
FY25 |
||
Profit/(loss) aributable to the owners of the Company |
£ million |
107.5 |
(185.7) |
Remove loss after tax in respect of specific adjusting items |
£ million |
61.0 |
332.7 |
Underlying profit after taxation |
£ million |
168.5 |
147.0 |
Weighted average number of shares |
Million |
535.4 |
563.4 |
Underlying basic EPS |
Pence |
31.5 |
26.1 |
Diluted number of shares |
Million |
543.3 |
570.8 |
Underlying diluted EPS |
Pence |
31.0 |
25.8 |
Basic and diluted EPS
FY26 |
FY25 |
||
Proft/(loss) aributable to the owners of the Company |
£ million |
107.5 |
(185.7) |
Weighted average number of shares |
Million |
535.4 |
563.4 |
Basic EPS |
Pence |
20.1 |
(33.0) |
Diluted number of shares |
Million |
543.3 |
563.4 |
Diluted EPS |
Pence |
19.8 |
(33.0) |
Notes to the Consolidated
Financial Statements
168
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
An analysis of the dividends paid and proposed in respect of the years ended 31 March 2026 and 31 March 2025 is
provided below:
Pence | Date paid/ | ||
per share | £m | payable | |
Interim 2026 | 3.00 | 15.9 | Feb 2026* |
Final 2026 (proposed) | Aug 2026 | ||
Total for the year ended 31 March 2026 | 56.6 | ||
Interim 2025 | 2.80 | 15.7 | Feb 2025 |
Final 2025 | 6.05 | 32.8 | Aug 2025* |
Total for the year ended 31 March 2025 | 48.5 |
*
Total cash paid in the year to 31 March 2026 was £48.7m (FY25: £47.9m).
The proposed final dividend in respect of the year ended 31 March 2026 will be paid on 20 August 2026. The ex-dividend date
The gain on business divestment of £0.5m (FY25: £nil) relates to the disposal of the non-core Federal IT Services business,
as part of the US restructuring programme, in the first half of the year. Proceeds received in the period, net of transaction
related costs of £2.5m, were £17.9m. The carrying value of the business was £17.4m. All consideration received was in cash
31 March | 31 March | |
All figures in £ million | 2026 | 2025 |
Cost | ||
At 1 April | 541.0 | 551.7 |
Disposals | (22.3) | – |
Foreign exchange | (7.4) | (10.7) |
At 31 March | 511.3 | 541.0 |
Accumulated impairment | ||
At 1 April | (291.2) | (150.3) |
Disposals | 12.9 | – |
Impairment charge | – | (143.9) |
Foreign exchange | 3.9 | 3.0 |
At 31 March | (274.4) | (291.2) |
Net book value at 31 March | 236.9 | 249.8 |
Goodwill analysed by cash-generating unit (CGU)
Goodwill is allocated across five cash-generating units within the EMEA Services segment and two CGUs within the Global
Solutions segment. During the year, the Group determined that the Australia CGU is more appropriately defined at the
Sector level. This avoids the need to allocate goodwill on an increasingly arbitrary basis and represents the lowest level
at which business performance is now monitored by management. This followed the completion of the Air Affairs post-
acquisition integration activities and the cash inflows no longer being independently generated.
169
Notes to the Consolidated
Financial Statements
13. Goodwill (continued)
The full list of CGUs that have goodwill allocated to them is as follows:
31 March | 31 March | ||
All figures in £ million | Primary reporting segments | 2026 | 2025 |
US Sector | Global Solutions | 167.5 | 181.1 |
Target Systems | Global Solutions | 24.0 | 24.0 |
Naimuri | EMEA Services | 14.8 | 14.8 |
Inzpire | EMEA Services | 11.7 | 11.7 |
Australia Sector (previously QinetiQ Australia PTY and Air Affairs Australia) | EMEA Services | 8.4 | 7.8 |
QinetiQ Training & Simulation | EMEA Services | 7.8 | 7.8 |
Germany | EMEA Services | 2.7 | 2.6 |
Net book value at 31 March | 236.9 | 249.8 |
Goodwill is aributable to the excess of consideration over the fair value of net assets acquired and includes expected
synergies, future growth prospects and employee knowledge, expertise and security clearances. The Group tests each
CGU for impairment annually, or more frequently if there are indications that goodwill might be impaired. Impairment testing
is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future cash
flows, the discount rates selected and expected long-term growth rates.
During the prior year an impairment charge was recognised in respect of the combined US Sector CGU. Given that this reset
the amount of headroom to nil, the headroom remains tight and downward revisions to the key assumptions (which would be
reasonably possible) could result in a further impairment. There are no likely variations in the key assumptions used for any
of the other CGUs which would lead to an impairment being recognised.
Key assumptions
Cash flows
The value in use and fair value less costs to dispose calculations use discounted future cash flows based on financial plans
approved by the Board covering a five-year period (aligned with the Group’s Integrated Strategic Plan process and the
longer-term viability assessment period). These are ‘boom-up’ forecasts based on detailed analysis by contract for the
revenue under contract and by opportunity for the pipeline, or with growth rates assumed based on market benchmarks.
Pipeline opportunities are categorised as ‘base case’ and ‘high case’ by management and only ‘base case’ opportunities are
included in the financial plans used for the value in use calculations.
Cash flows beyond these periods are extrapolated based on the last year of the plans, with a terminal growth-rate
assumption applied. While the Group will likely be impacted by climate change in the future to an extent, the impacts on
future cash flows used in the value in use calculations are not considered to be material.
Terminal growth rates and discount rates
The specific plans for each of the CGUs have been extrapolated using the terminal growth rates as detailed in the following
table. Growth rates are based on management’s estimates which take into consideration the long-term nature of the
industry in which the CGUs operate and external forecasts as to the likely growth of the industry in the longer term. The
discount rates used are calculated based on the weighted average cost of capital of a portfolio of comparable companies,
adjusted for risks specific to the market characteristics of each CGU, and converted to a pre-tax basis where relevant. This
is considered an appropriate estimate of a market participant discount rate.
QinetiQ | |||||||
All figures % | Target | Australia | QinetiQ | Training & | |||
31 March 2026: (2025) | US Sector* | Systems | Inzpire | Sector | Germany | Simulation | Naimuri |
Terminal growth rate | 2.5 (2.3) | 2.3 (2.3) | 2.3 (2.3) | 2.5 (2.4) | 2.0 (2.1) | 2.3 (2.3) | 2.3 (2.3) |
Discount rate* | 9.5 (9.4) | 11.9 (12.2) | 11.7 (12.1) | 12.4 (13.8) | 10.3 (9.4) | 11.8 (12.2) | 11.7 (12.1) |
*
All discount rates stated are on a pre-tax basis, except for the US which is on a post-tax basis per the fair value less costs to dispose calculation.
Notes to the Consolidated
Financial Statements
13. Goodwill (continued)
170
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Sensitivity analysis shows that the value of the terminal year cash flow, the discount rate and the terminal growth rates have
a significant impact on the value of the discounted cash flows. Sensitivities are provided below for each of the CGUs.
Results of impairment testing by CGU
US Sector
The carrying value of the goodwill for the US Sector CGU as at 31 March 2026 was £167.5m (2025: £181.1m). The recoverable
amount of this CGU as at 31 March 2026 is based on a fair value less costs to dispose calculation which is derived from the
latest cash flow projections. This beer reflects the transaction structure and tax treatment of the historical acquisitions
and hence gives a higher value than the equivalent value in use calculation. The calculation uses the assumptions noted
above and is higher than the carrying value of the net operating assets (of £395.0m). Our US operations have had a more
stable year and successfully completed a major restructuring programme.
The key assumption underpinning the recoverable amount is the revenue growth applied over the period of the calculation
which is required to achieve the terminal year cash flows. The growth is based on market growth rates for the high growth
segments in which the business operates, as well as reflecting the expectation of securing a number of key contract
renewals and significant pipeline opportunities. In the event that assumed contract renewals and significant pipeline
opportunities are not secured in line with the plan, this will result in a future significant impairment charge. A 400 basis
point reduction in the compound annual revenue growth rate or a 100 basis point reduction in operating margins over
the plan period, which are considered reasonably possible changes, would reduce the recoverable amount and result in
an impairment of £47.9m and £30.6m respectively. A decrease in the terminal growth rate of 0.5% would not result in an
impairment however an increase in the discount rate of 1%, which is considered a reasonably possible change, would cause
Acquired intangibles |
Other |
||||
Customer |
Other |
Development |
internally |
||
All figures in £ million |
relationships |
acquired |
costs |
generated 1 |
Total |
Cost |
|||||
At 1 April 2025 |
297.9 |
90.9 |
61.9 |
75.3 |
526.0 |
Reclassifications from PPE |
– |
– |
5.8 |
0.5 |
6.3 |
Reclassifications between categories |
– |
– |
4.2 |
(4.2) |
– |
Additions – internally developed 2 |
– |
– |
1.7 |
4.5 |
6.2 |
Additions – purchased 2 |
– |
– |
– |
6.7 |
6.7 |
Disposals |
– |
– |
(3.6) |
(9.7) |
(13.3) |
Disposal divestments |
(15.3) |
– |
– |
– |
(15.3) |
Foreign exchange |
(3.2) |
(0.4) |
– |
– |
(3.6) |
At 31 March 2026 |
279.4 |
90.5 |
70.0 |
73.1 |
513.0 |
Accumulated amortisation and impairment |
|||||
At 1 April 2025 |
(96.6) |
(69.8) |
(33.6) |
(32.1) |
(232.1) |
Amortisation charge for year |
(18.1) |
(5.1) |
(11.1) |
(2.6) |
(36.9) |
Disposals |
– |
– |
1.2 |
4.0 |
5.2 |
Disposal divestments |
6.4 |
– |
– |
– |
6.4 |
Impairment |
– |
– |
– |
(6.1) |
(6.1) |
Foreign exchange |
(0.3) |
– |
0.2 |
– |
(0.1) |
At 31 March 2026 |
(108.6) |
(74.9) |
(43.3) |
(36.8) |
(263.6) |
Net book value at 31 March 2026 |
170.8 |
15.6 |
26.7 |
36.3 |
249.4 |
1
Includes Assets In Course Of Construction of closing net book value of £36.4m as at 31 March 2026 (2025: £31.7m).
2
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.
171
Notes to the Consolidated
Financial Statements
14. Other intangible assets (continued)
‘Other acquired’ consists primarily of intellectual property and existing technology arising on past acquisition of
businesses. Significant individual assets from past acquisitions include: customer relationships associated with US
Avantus, US C5ISR, Germany and QinetiQ Training & Simulation Limited (NBV: £142.8m; £7.4m; £14.7m; £1.8m respectively)
with remaining amortisation periods of approximately 13 years, 4 years, 7 years and 5 years respectively, and acquired
technology associated with US Avantus, US C5ISR, Germany and QinetiQ Training & Simulation Limited (£0.7m; £6.3m; £2.5m;
£1.0m respectively) all with remaining amortisation periods of approximately five years.
Acquired intangibles |
Other |
||||
Customer |
Other |
Development |
internally |
||
All figures in £ million |
relationships |
acquired |
costs |
generated |
Total |
Cost |
|||||
At 1 April 2024 |
303.8 |
92.6 |
51.1 |
80.4 |
527.9 |
Reclassifications from PPE |
– |
– |
8.1 |
0.6 |
8.7 |
Reclassifications between categories |
– |
– |
0.1 |
(0.1) |
– |
Additions – internally developed* |
– |
– |
2.5 |
9.0 |
11.5 |
Additions – purchased* |
– |
– |
1.2 |
0.4 |
1.6 |
Disposals |
– |
– |
(0.7) |
(14.3) |
(15.0) |
Foreign exchange |
(5.9) |
(1.7) |
(0.4) |
(0.7) |
(8.7) |
At 31 March 2025 |
297.9 |
90.9 |
61.9 |
75.3 |
526.0 |
Accumulated amortisation and impairment |
|||||
At 1 April 2024 |
(79.6) |
(65.6) |
(24.1) |
(36.8) |
(206.1) |
Amortisation charge for year |
(18.6) |
(5.6) |
(6.2) |
(5.5) |
(35.9) |
Disposals |
– |
– |
0.6 |
10.2 |
10.8 |
Impairment |
– |
– |
(4.0) |
– |
(4.0) |
Foreign exchange |
1.6 |
1.4 |
0.1 |
– |
3.1 |
At 31 March 2025 |
(96.6) |
(69.8) |
(33.6) |
(32.1) |
(232.1) |
Net book value at 31 March 2025 |
201.3 |
21.1 |
28.3 |
43.2 |
293.9 |
*
Additions per the table above are different to the capital expenditure included in the cash flow statement due to the relative timing of cash
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 2025 |
169.9 |
345.2 |
155.7 |
129.4 |
99.9 |
5.7 |
0.4 |
906.2 |
Reclassifications to intangibles |
– |
0.8 |
– |
(7.1) |
– |
– |
– |
(6.3) |
Reclassifications between categories |
37.5 |
13.2 |
5.4 |
(56.1) |
– |
– |
– |
– |
Additions – purchased* |
0.3 |
5.4 |
1.3 |
47.9 |
13.2 |
0.4 |
– |
68.5 |
Disposals |
(7.7) |
(18.7) |
(11.0) |
(4.4) |
(8.2) |
– |
– |
(50.0) |
Business divestment |
– |
– |
– |
– |
(5.5) |
– |
– |
(5.5) |
Foreign exchange |
(0.1) |
3.0 |
0.3 |
0.5 |
(0.1) |
0.1 |
– |
3.7 |
At 31 March 2026 |
199.9 |
348.9 |
151.7 |
110.2 |
99.3 |
6.2 |
0.4 |
916.6 |
Accumulated depreciation and |
||||||||
impairment |
||||||||
At 1 April 2025 |
(91.3) |
(202.1) |
(94.9) |
– |
(40.7) |
(3.5) |
(0.4) |
(432.9) |
Charge |
(13.3) |
(23.4) |
(23.0) |
– |
(11.0) |
(0.6) |
– |
(71.3) |
Disposals |
7.1 |
15.4 |
9.7 |
– |
4.1 |
– |
– |
36.3 |
Business divestment |
– |
– |
– |
– |
2.0 |
– |
– |
2.0 |
Impairment |
(3.3) |
(2.0) |
– |
– |
(0.5) |
– |
– |
(5.8) |
Foreign exchange |
0.1 |
(0.5) |
– |
– |
– |
0.1 |
– |
(0.3) |
At 31 March 2026 |
(100.7) |
(212.6) |
(108.2) |
– |
(46.1) |
(4.0) |
(0.4) |
(472.0) |
Net book value at 31 March 2026 |
99.2 |
136.3 |
43.5 |
110.2 |
53.2 |
2.2 |
– |
444.6 |
*
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.
Notes to the Consolidated
Financial Statements
15. Property, plant and equipment (continued)
172
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
During the prior year a £36.6m loss was recognised on the sale and leaseback of Cody Technology Park; this was included
within operating costs as a specific adjusting item (see note 4). While the Group will likely be impacted by climate change in
the future to an extent, the impact on the carrying value of property, plant and equipment is not considered to be material.
| 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 2024 |
375.7 |
324.4 |
140.9 |
142.3 |
92.4 |
3.4 |
0.4 |
1,079.5 |
Reclassifications to intangibles |
– |
– |
(0.9) |
(7.8) |
– |
– |
– |
(8.7) |
Reclassifications/transfers |
29.7 |
23.7 |
15.4 |
(68.8) |
– |
– |
– |
– |
Additions – purchased* |
5.9 |
24.8 |
5.6 |
67.5 |
23.9 |
2.3 |
– |
130.0 |
Disposals |
(240.6) |
(25.0) |
(4.7) |
(3.6) |
(14.5) |
– |
– |
(288.4) |
Foreign exchange |
(0.8) |
(2.7) |
(0.6) |
(0.2) |
(1.9) |
– |
– |
(6.2) |
At 31 March 2025 |
169.9 |
345.2 |
155.7 |
129.4 |
99.9 |
5.7 |
0.4 |
906.2 |
Accumulated depreciation and |
||||||||
impairment |
||||||||
At 1 April 2024 |
(227.0) |
(194.3) |
(78.4) |
– |
(44.4) |
(3.2) |
(0.4) |
(547.7) |
Charge |
(13.7) |
(22.7) |
(20.8) |
– |
(10.6) |
(0.3) |
– |
(68.1) |
Disposals |
149.3 |
16.5 |
4.0 |
– |
14.5 |
– |
– |
184.3 |
Impairment |
– |
(2.5) |
– |
– |
(1.0) |
– |
– |
(3.5) |
Foreign exchange |
0.1 |
0.9 |
0.3 |
– |
0.8 |
– |
– |
2.1 |
At 31 March 2025 |
(91.3) |
(202.1) |
(94.9) |
– |
(40.7) |
(3.5) |
(0.4) |
(432.9) |
Net book value at 31 March 2025 |
78.6 |
143.1 |
60.8 |
129.4 |
59.2 |
2.2 |
– |
473.3 |
*
Additions per the table above are different to the capital expenditure included in the cash flow statement due to the relative timing of cash
31 March 2026 | 31 March 2025 | |||
Joint | Joint | |||
Ventures’ | Group net | Ventures’ | Group net | |
financial | share of Joint | financial | share of Joint | |
All figures in £ million | position | Ventures | position | Ventures |
Non-current assets | 0.5 | 0.4 | 0.9 | 0.5 |
Current assets | 2.5 | 2.1 | 3.4 | 2.4 |
3.0 | 2.5 | 4.3 | 2.9 | |
Current liabilities | (0.3) | (0.2) | (0.3) | (0.1) |
Non-current liabilities | (1.6) | (1.2) | (1.5) | (0.7) |
(1.9) | (1.4) | (1.8) | (0.8) | |
Net assets of joint ventures | 1.1 | 1.1 | 2.5 | 2.1 |
173
Notes to the Consolidated
Financial Statements
For the year ended 31 March 2026
Deferred tax asset
Carried |
|||||
Short-term |
forward |
||||
timing |
interest |
Lease |
|||
All figures in £ million |
differences |
expense |
liabilities |
Tax losses |
Total |
At 1 April 2025 |
12.1 |
2.1 |
8.8 |
4.8 |
27.8 |
Credited/(charged) to income statement |
(2.7) |
2.3 |
(0.9) |
4.7 |
3.4 |
Credited to other comprehensive income |
– |
– |
– |
– |
– |
Credited to equity |
0.2 |
– |
– |
– |
0.2 |
Foreign exchange |
0.5 |
0.2 |
– |
0.5 |
1.2 |
Gross deferred tax asset at 31 March 2026 |
10.1 |
4.6 |
7.9 |
10.0 |
32.6 |
Less: liability available for offset |
(14.4) |
||||
Net deferred tax asset at 31 March 2026 |
18.2 |
Deferred tax liability
Owned |
|||||
property, |
|||||
Pension |
plant & |
Right-of-use |
Acquisition |
||
All figures in £ million |
surplus |
equipment |
assets |
intangibles |
Total |
At 1 April 2025 |
(14.6) |
(82.8) |
(7.8) |
(12.9) |
(118.1) |
Credited/(charged) to income statement |
(0.7) |
1.0 |
1.6 |
2.6 |
4.5 |
Charged to other comprehensive income |
(2.6) |
– |
– |
– |
(2.6) |
Foreign exchange |
– |
– |
– |
(0.4) |
(0.4) |
Gross deferred tax liability at 31 March 2026 |
(17.9) |
(81.8) |
(6.2) |
(10.7) |
(116.6) |
Less: asset available for offset |
14.4 |
||||
Net deferred tax liability at 31 March 2026 |
(102.2) |
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 2026 the Group had unused tax losses and carried forward interest expenses of £383.1m (2025: £305.3m) which
are available for offset against future taxable profits.
During FY25, with our US operations performing below expectations, the change in the Administration and the change in
US Sector CEO, re-alignment of strategy and required restructuring, there was a material impact on the future projections
of the US business. As a result, in FY25 the Group derecognised the deferred tax assets previously recognised in respect
of net operating losses in FY25. There is continued derecognition in FY26 due to the uncertainty over future taxable profits
for the US business. No deferred tax asset is recognised in respect of £236.8m (2025: £183.8m) of US net operating losses
and £86.2m (2025: £85.9m) of US excess interest. There is also no deferred tax asset recognised in respect of £9.5m
(2025: £8.8m) of UK capital losses due to uncertainty over the timing and extent of their utilisation. Full recognition of the
US and UK losses would increase the deferred tax asset by £92.4m. Of the £236.8m (2025: £183.8m) of US net operating
losses, £30.3m (2025: £31.1m) are time-limited of which £21.4m will expire in 2035 and £8.9m in 2036.
Deferred tax assets in respect of losses and excess interest are recognised on the balance sheet of £14.6m (2025: £6.9m),
being £3.6m in respect of £15.7m of Canadian net operating losses and excess interest, £7.2m in respect of £22.3m of German
trade losses and excess interest, and £3.8m in respect of £12.7m of Australian trade losses and excess interest.
The Group made overseas losses in the year ended 31 March 2026 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 five-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 US and UK, will be fully utilised over the next 3–10 years. A 10% change in the forecast profits would
alter the utilisation period by 2 years.
Notes to the Consolidated
Financial Statements
17. Deferred tax (continued)
174
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
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 2025
Deferred tax asset
Carried |
|||||
Short-term |
forward |
||||
timing |
interest |
Lease |
Tax |
||
All figures in £ million |
differences |
expense |
liabilities |
losses |
Total |
At 1 April 2024 |
20.1 |
1.0 |
8.9 |
35.9 |
65.9 |
Credited to income statement |
(8.8) |
1.1 |
– |
(30.7) |
(38.4) |
Charged to other comprehensive income |
1.8 |
– |
– |
– |
1.8 |
Foreign exchange |
(1.0) |
– |
(0.1) |
(0.4) |
(1.5) |
Gross deferred tax asset at 31 March 2025 |
12.1 |
2.1 |
8.8 |
4.8 |
27.8 |
Less: liability available for offset |
(17.1) |
||||
Net deferred tax asset at 31 March 2025 |
10.7 |
Deferred tax liability
Owned |
|||||
property, |
|||||
Pension |
plant & |
Right-of-use |
Acquisition |
||
All figures in £ million |
surplus |
equipment |
assets |
intangibles |
Total |
At 1 April 2024 |
(9.6) |
(80.4) |
(7.6) |
(26.0) |
(123.6) |
Charged to income statement |
(0.6) |
(2.4) |
– |
12.6 |
9.6 |
Credited to other comprehensive income |
(4.4) |
– |
– |
– |
(4.4) |
Foreign exchange |
– |
– |
(0.2) |
0.5 |
0.3 |
Gross deferred tax liability at 31 March 2025 |
(14.6) |
(82.8) |
(7.8) |
(12.9) |
(118.1) |
Less: asset available for offset |
17.1 |
||||
Net deferred tax liability at 31 March 2025 |
(101.0) |
18. Current tax
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Current tax receivable |
0.4 |
1.6 |
Current tax payable |
(13.4) |
(3.6) |
Net current tax payable |
(13.0) |
(2.0) |
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Raw materials |
28.1 |
28.7 |
Work in progress |
7.1 |
8.7 |
Finished goods |
38.5 |
33.3 |
Total inventories |
73.7 |
70.7 |
175
Notes to the Consolidated
Financial Statements
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Trade receivables |
143.3 |
148.9 |
Contract assets |
178.2 |
154.5 |
Other receivables |
44.2 |
48.1 |
Prepayments |
29.2 |
36.9 |
Total trade and other receivables |
394.9 |
388.4 |
amounts of £12.1m (2025: £nil) that are not expected to be realised within 12 months of the year end. Credit risk is limited as
a result of the high percentage of revenue derived from UK and US government agencies. Accordingly, the Directors believe
that no credit provision in excess of the allowance for doubtful debts is required. As at 31 March 2026 the Group carried a loss
allowance in respect of expected credit risk of £1.6m (2025: £1.4m).
Contract assets decreased during the year due to the timing of invoicing. Contract assets represents unbilled amounts
recoverable under customer contracts (refer to accounting policies, note 35).
Ageing of receivables and associated loss allowance for expected credit risk
As at 31 March 2026
Up to 30 days |
30-120 days |
>120 days |
|||
Current |
past due |
past due |
past due |
Total |
|
Gross carrying amount – trade receivables (£m) |
126.1 |
11.1 |
4.7 |
3.0 |
144.9 |
Gross carrying amount – contract assets (£m) |
178.2 |
– |
– |
– |
178.2 |
Expected loss rate (%) |
0.0% |
0.0% |
0.0% |
53.3% |
0.5% |
Loss allowance (£m) |
– |
– |
– |
1.6 |
1.6 |
As at 31 March 2025
Up to 30 days |
30-120 days |
>120 days |
|||
Current |
past due |
past due |
past due |
Total |
|
Gross carrying amount – trade receivables (£m) |
120.1 |
23.1 |
2.4 |
4.7 |
150.3 |
Gross carrying amount – contract assets (£m) |
154.5 |
– |
– |
– |
154.5 |
Expected loss rate (%) |
0.0% |
0.0% |
0.0% |
29.8% |
0.5% |
Loss allowance (£m) |
– |
– |
– |
1.4 |
1.4 |
Movements in the provision for expected credit loss
FY26 |
FY25 |
|||
Trade |
Contract |
Trade |
Contract |
|
All figures in £ million |
receivables |
assets |
receivables |
assets |
At 1 April |
1.4 |
– |
1.7 |
– |
Increase in loss allowance recognised in income statement |
0.3 |
– |
0.2 |
– |
Unutilised amount reversed through income statement |
(0.1) |
– |
(0.1) |
– |
Utilised (receivables wrien off) |
– |
– |
(0.4) |
– |
At 31 March |
1.6 |
– |
1.4 |
– |
The maximum exposure to credit risk in relation to trade and other receivables at the reporting date is the fair value of trade
Notes to the Consolidated
Financial Statements
176
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Trade payables |
184.2 |
152.1 |
Other tax and social security |
54.6 |
56.7 |
Contract liabilities |
158.3 |
207.0 |
Accrued expenses and other payables |
188.5 |
181.7 |
Total current trade and other payables |
585.6 |
597.5 |
Contract liabilities |
5.6 |
6.4 |
Other payables |
4.0 |
2.0 |
Total non-current trade and other payables |
9.6 |
8.4 |
Total trade and other payables |
595.2 |
605.9 |
Trade payables include £59.4m (2025: £38.0m) of goods received not invoiced accruals where invoices had not been
processed as at the year end. Contract liabilities, which are influenced by the timing of revenue recognition and invoicing on
For the year ended 31 March 2026
All figures in £ million |
Property |
Other |
Total |
At 1 April 2025 |
24.8 |
34.9 |
59.7 |
Created in year |
0.6 |
15.9 |
16.5 |
Released in year |
(0.1) |
(1.6) |
(1.7) |
Utilised in year |
(2.4) |
(21.5) |
(23.9) |
Foreign exchange |
– |
0.1 |
0.1 |
At 31 March 2026 |
22.9 |
27.8 |
50.7 |
Current liability |
20.1 |
14.0 |
34.1 |
Non-current liability |
2.8 |
13.8 |
16.6 |
At 31 March 2026 |
22.9 |
27.8 |
50.7 |
For the year ended 31 March 2025
All figures in £ million |
Property |
Other |
Total |
At 1 April 2024 |
2.5 |
17.0 |
19.5 |
Created in year |
24.3 |
21.7 |
46.0 |
Released in year |
– |
(1.2) |
(1.2) |
Utilised in year |
(2.0) |
(2.5) |
(4.5) |
Foreign exchange |
– |
(0.1) |
(0.1) |
At 31 March 2025 |
24.8 |
34.9 |
59.7 |
Current liability |
23.0 |
33.2 |
56.2 |
Non-current liability |
1.8 |
1.7 |
3.5 |
At 31 March 2025 |
24.8 |
34.9 |
59.7 |
Property provisions relate to obligations relating to the sale and leaseback transaction, dilapidations and under-utilised
properties. The under-utilised property provision is affected by the timing of when properties can be sub-let and the
proportion of space that can be sub-let. Other provisions includes £10.7m (2025: £12.1m) in respect of a civil liability for the
Pendine incident. There is an equivalent balance in Other Receivables for an insurance recoverable. There is uncertainty
around the timing of the utilisation of this balance although this will not impact cash or the P&L. Other provisions also
includes £8.4m (31 March 2025: £14.3m) relating to the group-wide restructuring programme, the cost of which is included
as a specific adjusting item. The remaining balance consists of liabilities relating to legal, regulatory and other maers,
177
Notes to the Consolidated
Financial Statements
| 31 March 2026 |
31 March 2025 |
|||||
All figures in £ million |
Assets |
Liabilities |
Net |
Assets |
Liabilities |
Net |
Current financial assets/(liabilities) |
||||||
Deferred financing costs |
1.2 |
– |
1.2 |
1.3 |
– |
1.3 |
Lease liabilities |
– |
(12.4) |
(12.4) |
– |
(13.3) |
(13.3) |
Derivative financial instruments |
2.1 |
(1.1) |
1.0 |
3.6 |
(1.8) |
1.8 |
Total current financial assets/(liabilities) |
3.3 |
(13.5) |
(10.2) |
4.9 |
(15.1) |
(10.2) |
Non-current assets/(liabilities) |
||||||
Deferred financing costs |
0.3 |
– |
0.3 |
1.0 |
– |
1.0 |
Borrowings – Term loan |
– |
(333.6) |
(333.6) |
– |
(335.0) |
(335.0) |
Lease liabilities |
– |
(76.7) |
(76.7) |
– |
(80.6) |
(80.6) |
Derivative financial instruments |
2.0 |
(0.1) |
1.9 |
2.0 |
(1.0) |
1.0 |
Total non-current financial assets/(liabilities) |
2.3 |
(410.4) |
(408.1) |
3.0 |
(416.6) |
(413.6) |
Total financial assets/(liabilities) |
5.6 |
(423.9) |
(418.3) |
7.9 |
(431.7) |
(423.8) |
Cash |
91.8 |
– |
91.8 |
120.2 |
– |
120.2 |
Cash equivalents |
167.4 |
– |
167.4 |
170.4 |
– |
170.4 |
Total cash and cash equivalents |
259.2 |
– |
259.2 |
290.6 |
– |
290.6 |
Total net debt as defined by the Group |
(159.1) |
(133.2) |
||||
At 31 March 2026 the Group held £0.6m (2025: £0.7m) of cash which is restricted in its use. The term loan was issued at
floating rates as Tranche A £273.3m and Tranche B USD 79.6m. A proportion of Tranche A has been converted to fixed rate
All figures in £ million |
FY26 |
FY25 |
Profit/(loss) after tax for the year |
107.5 |
(185.7) |
Adjustments for: |
||
Taxation expense |
47.6 |
79.4 |
Net finance expense |
15.2 |
15.8 |
Impairment of goodwill |
– |
143.9 |
Gain on business divestment |
(0.5) |
– |
Loss on sale of property |
– |
36.6 |
Loss on disposal of plant and equipment |
8.4 |
4.6 |
Loss on disposal of intangibles |
7.7 |
4.2 |
Impairment of property |
0.5 |
1.0 |
Amortisation of purchased or internally developed intangible assets |
19.9 |
15.7 |
Amortisation of intangible assets arising from acquisitions |
23.1 |
24.2 |
Depreciation of property, plant and equipment |
76.6 |
70.6 |
Share of post-tax loss/(profit) of equity accounted entities |
1.0 |
(0.3) |
Share-based payments charge |
11.5 |
9.8 |
Retirement benefit contributions in excess of income statement expense |
(2.4) |
(2.3) |
Net movement in provisions |
(9.0) |
19.4 |
307.1 |
236.9 |
|
(Increase)/decrease in inventories |
(3.2) |
16.5 |
(Increase)/decrease in receivables |
(4.9) |
56.3 |
Decrease in payables |
(7.4) |
(23.0) |
Changes in working capital |
(15.5) |
49.8 |
Net cash inflow from operations |
291.6 |
286.7 |
The working capital movements in the cash flow statement do not agree directly to the balance sheet due to impact of
foreign exchange movements, accrued interest and the timing of capex payments.
Notes to the Consolidated
Financial Statements
24. Cash flows from operations (continued)
178
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Reconciliation of net cash flow from operations to underlying net cash flow from operations
All figures in £ million |
FY26 |
FY25 |
Net cash flow from operations |
291.6 |
286.7 |
Specific adjusting items*: |
||
Add back specific adjusting item: digital investment |
23.6 |
20.8 |
Add back specific adjusting item: restructuring costs |
24.8 |
3.4 |
Add back specific adjusting item: sale and leaseback obligations |
1.0 |
– |
Add back specific adjusting item: acquisition and disposal related items |
2.2 |
5.3 |
Total specific adjusting items |
51.6 |
29.5 |
Underlying net cash flow from operations* |
343.2 |
316.2 |
Reconciliation of net cash flow from operations to free cash flow
All figures in £ million |
FY26 |
FY25^ |
Net cash flow from operations |
291.6 |
286.7 |
Less: tax and net interest payments |
(59.8) |
(65.4) |
Less: net purchases of intangible assets and property plant and equipment |
(72.5) |
(108.4) |
Free cash flow* |
159.3 |
112.9 |
Underlying cash conversion ratio
FY26 |
FY25 |
|
Underlying EBITDA* – £ million |
343.7 |
301.7 |
Underlying net cash flow from operations* – £ million |
343.2 |
316.2 |
Underlying cash conversion ratio* – % |
100% |
105% |
*
Definitions of the Group’s ‘Alternative performance measures’ can be found on page 220.
^
The free cash flow definition has been revised to include the cash flow impact of specific adjusting items within operating profit as this is
considered to be a more appropriate reflection of the Group’s cash generation prior to shareholder return. The prior year comparative has been
Group as a lessor
The Group receives rental income on certain properties. Primarily these are properties partially occupied by Group
companies, with vacant space sub-let to third-party tenants. There was £0.3m (FY25: £0.7m) of sublease income which
related to right-of-use assets. The Group had contracted with tenants for the following future minimum lease payments:
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Within one year |
1.1 |
1.0 |
In the second to fifth years inclusive |
2.6 |
2.3 |
Greater than five years |
0.5 |
0.4 |
Total future minimum lease payments |
4.2 |
3.7 |
Group as a lessee
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use assets (included within Property, Plant & Equipment – see note 15)
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Land and buildings |
53.2 |
59.2 |
Plant, machinery and vehicles |
2.2 |
2.2 |
Total right-of-use assets net book value |
55.4 |
61.4 |
179
Notes to the Consolidated
Financial Statements
25. Leases (continued)
Lease liabilities (included within Net debt – see note 23)
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Current |
12.4 |
13.3 |
Non-current |
76.7 |
80.6 |
Total lease liabilities |
89.1 |
93.9 |
Additions to the right-of-use assets during FY26 were £13.6m (FY25: £26.2m). The total cash outflow for leases in FY26 was
£18.0m (FY25: £15.0m). The Group had no expense relating to variable lease payments not included in the measurement of
lease liabilities.
Amounts recognised in the consolidated income statement
The consolidated income statement includes the following amounts relating to leases:
All figures in £ million |
FY26 |
FY25 |
Depreciation charge |
||
Land and buildings |
11.0 |
10.6 |
Plant, machinery and vehicles |
0.6 |
0.3 |
Total depreciation charge (see note 15) |
11.6 |
10.9 |
Interest expense (included in finance cost – see note 7) |
5.4 |
4.2 |
Expense relating to short-term leases (included in operating costs) |
0.8 |
0.8 |
Expense relating to low value leases (included in operating costs) |
0.3 |
0.4 |
Total lease expense charged to profit before tax |
18.1 |
16.3 |
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 218.
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 aributable 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 2026, the ratio of Net Debt to EBITDA
was 0.5:1 and the ratio of EBITDA to net finance charges was 22:1. The revolving credit facility is undrawn at the year end and
matures in 2029. The floating rate term loan is repayable in 2027.
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
180
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
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 through the P&L as at
31 March 2026:
All figures in £ million |
Note |
Level 1 |
Level 2 |
Level 3 |
Total |
Assets |
|||||
Current derivative financial instruments |
23 |
– |
2.1 |
– |
2.1 |
Cash equivalents |
– |
167.4 |
– |
167.4 |
|
Non-current derivative financial instruments |
23 |
– |
2.0 |
– |
2.0 |
Liabilities |
|||||
Current derivative financial instruments |
23 |
– |
(1.1) |
– |
(1.1) |
Non-current derivative financial instruments |
23 |
– |
(0.1) |
– |
(0.1) |
Total |
– |
170.3 |
– |
170.3 |
The following table presents the Group’s assets and liabilities that are measured at fair value through the P&L as at
31 March 2025:
All figures in £ million |
Note |
Level 1 |
Level 2* |
Level 3 |
Total* |
Assets |
|||||
Current derivative financial instruments |
– |
3.6 |
– |
3.6 |
|
Cash equivalents |
– |
170.4 |
– |
170.4 |
|
Non-current derivative financial instruments |
– |
2.0 |
– |
2.0 |
|
Liabilities |
|||||
Current derivative financial instruments |
– |
(1.8) |
– |
(1.8) |
|
Non-current derivative financial instruments |
– |
(1.0) |
– |
(1.0) |
|
Total |
– |
173.2 |
– |
173.2 |
*
Restated to include cash equivalent balances which relate to money market fund investments which are held at fair value through the profit and
loss account.
181
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
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. 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 2026 and 31 March 2025, other
than lease liabilities where the book value is not reflective of changes in interest rates. Detailed analysis is provided in the
following tables:
As at 31 March 2026
Financial | Financial | Financial | |||||
assets at fair | assets at | liabilities at | Derivatives | Total 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 | 23 | – | – | – | 2.0 | – | 2.0 |
Deferred financing costs | 23 | – | 0.3 | – | – | – | 0.3 |
Current | |||||||
Trade receivables and similar items | – | 154.0 | – | – | – | 154.0 | |
Derivative financial instruments | 23 | – | – | – | 2.1 | – | 2.1 |
Deferred financing costs | 23 | – | 1.2 | – | – | – | 1.2 |
Cash and cash equivalents | 23 | 167.4 | 91.8 | – | – | – | 259.2 |
Total financial assets | 167.4 | 247.3 | – | 4.1 | – | 418.8 | |
Financial liabilities | |||||||
Non-current | |||||||
Bank borrowings | 23 | – | – | (333.6) | – | – | (333.6) |
Derivative financial instruments | 23 | – | – | – | (0.1) | – | (0.1) |
Lease liabilities | 23 | – | – | – | – | (76.7) | (76.7) |
Current | |||||||
Trade payables and similar items | – | – | (347.4) | – | – | (347.4) | |
Derivative financial instruments | 23 | – | – | – | (1.1) | – | (1.1) |
Lease liabilities | 23 | – | – | – | – | (12.4) | (12.4) |
Total financial liabilities | – | – | (681.0) | (1.2) | (89.1) | (771.3) | |
Total | 167.4 | 247.3 | (681.0) | 2.9 | (89.1) | (352.5) |
182
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
As at 31 March 2025
Financial |
Financial |
Financial |
|||||
assets at fair |
assets at |
liabilities at |
Derivatives |
Total carrying |
|||
value profit |
amortised |
amortised |
used as |
value and fair |
|||
All figures in £ million |
Note |
and loss |
cost |
cost |
hedges |
Other |
value |
Financial assets |
|||||||
Non-current |
|||||||
Derivative financial instruments |
23 |
– |
– |
– |
2.0 |
– |
2.0 |
Deferred financing costs |
23 |
– |
1.0 |
– |
– |
– |
1.0 |
Current |
|||||||
Trade receivables and similar items |
– |
161.0 |
– |
– |
– |
161.0 |
|
Derivative financial instruments |
23 |
– |
– |
– |
3.6 |
– |
3.6 |
Deferred financing costs |
23 |
– |
1.3 |
– |
– |
– |
1.3 |
Cash and cash equivalents* |
23 |
170.4 |
120.2 |
– |
– |
– |
290.6 |
Total financial assets |
170.4 |
283.5 |
– |
5.6 |
– |
459.5 |
|
Financial liabilities |
|||||||
Non-current |
|||||||
Bank borrowings |
23 |
– |
– |
(335.0) |
– |
– |
(335.0) |
Derivative financial instruments |
23 |
– |
– |
– |
(1.0) |
– |
(1.0) |
Lease liabilities |
23 |
– |
– |
– |
– |
(80.6) |
(80.6) |
Current |
|||||||
Trade payables and similar items |
– |
– |
(302.5) |
– |
– |
(302.5) |
|
Derivative financial instruments |
23 |
– |
– |
– |
(1.8) |
– |
(1.8) |
Lease liabilities |
23 |
– |
– |
– |
– |
(13.3) |
(13.3) |
Total financial liabilities |
– |
– |
(637.5) |
(2.8) |
(93.9) |
(734.2) |
|
Total |
170.4 |
283.5 |
(637.5) |
2.8 |
(93.9) |
(274.7) |
*
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 requires 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 2026, the Group had 81% (2025: 80%) of fixed rate debt and 19% (2025: 20%) of floating rate debt based on gross
debt of £333.6m (2025: £335.0m) after including the impact of debt-related derivative financial assets
(interest rate swaps).
The table below shows the debt-related derivative financial assets as fixed rate and the gross debt as floating rate.
Financial assets/(liabilities)
As at 31 March 2026
| Financial assets |
Financial liabilities |
|||||
Fixed or |
Non-interest |
Fixed or |
Non-interest |
|||
All figures in £ million |
capped |
Floating |
bearing |
capped |
Floating |
bearing |
Sterling |
3.3 |
192.3 |
0.8 |
(58.9) |
(273.3) |
(1.2) |
US dollar |
– |
44.6 |
– |
(21.0) |
(60.3) |
– |
Euro |
– |
6.9 |
– |
(1.5) |
– |
– |
Australian dollar |
– |
7.6 |
– |
(7.7) |
– |
– |
Other |
– |
7.8 |
– |
– |
– |
– |
Total |
3.3 |
259.2 |
0.8 |
(89.1) |
(333.6) |
(1.2) |
183
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
As at 31 March 2025
| Financial assets | Financial liabilities | |||||
Fixed or | Non-interest | Fixed or | Non-interest | |||
All figures in £ million | capped | Floating | bearing | capped | Floating | bearing |
Sterling | 4.2 | 226.9 | 1.4 | (63.8) | (273.3) | (2.6) |
US dollar | – | 45.2 | – | (19.5) | (61.7) | – |
Euro | – | 3.0 | – | (1.8) | – | – |
Australian dollar | – | 13.2 | – | (8.8) | – | – |
Other | – | 2.3 | – | (0.2) | – | – |
Total | 4.2 | 290.6 | 1.4 | (94.1) | (335.0) | (2.6) |
Floating rate financial assets aract 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:
| 31 March 2026 | 31 March 2025 | |||||
Weighted | Weighted | |||||
Fixed or | average | Weighted | Fixed or | average | Weighted | |
capped | interest rate | average years | capped | interest rate | average years | |
£m | % | to maturity | £m | % | to maturity | |
Financial assets: | ||||||
Sterling | 3.3 | 3.5 | 1.5 | 4.2 | 3.5 | 2.4 |
Financial liabilities: | ||||||
Sterling | (58.9) | 7.0 | 7.6 | (63.8) | 7.0 | 8.0 |
US dollar | (21.0) | 5.3 | 4.2 | (19.5) | 5.1 | 5.1 |
Euro | (1.5) | 2.6 | 4.3 | (1.8) | 2.6 | 4.7 |
Australian dollar | (7.7) | 4.8 | 4.1 | (8.8) | 4.7 | 4.4 |
Other | – | 5.3 | 0.7 | (0.2) | 4.6 | 1.9 |
Total financial liabilities | (89.1) | 6.5 | 6.7 | (94.1) | 6.3 | 7.0 |
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 26E) is floating rate and undrawn as at 31 March 2026.
As at 31 March 2026, 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 2026 is £270m (2025: £310m). The swaps have the economic effect of converting
floating rate borrowings into fixed rate borrowings and are accounted for as cash flow hedges.
C) Currency risk
Transactional currency exposure
The Group is exposed to foreign currency risks arising from sales or purchases by businesses in currencies other than their
functional currency. It is Group policy that when such a sale or purchase is certain, the net foreign exchange exposure
is hedged using forward foreign exchange contracts. Hedge accounting documentation and effectiveness testing are
undertaken for all the Group’s transactional hedge contracts.
The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the
transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in
opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the
hedged items, an economic relationship can be demonstrated on an ongoing basis.
184
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal
amount of the foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of
items with offseing risk positions as hedged items.
The Group considers the potential sources of hedge ineffectiveness to be:
ɰ
Valuation adjustments for credit risk made to derivative hedging instruments at each hedge effectiveness
measurement date;
ɰ
Changes to the timing and amount of transactions; and
ɰ
Non-occurrence of the designated hedged items.
Ineffectiveness due to foreign currency basis was highly immaterial.
The table below shows the Group’s currency exposures (based on functional currency of the operating company), being
exposures on currency transactions that give rise to net currency gains and losses recognised in the income statement.
Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional
currency of the operating company involved.
| Net foreign currency monetary assets/(liabilities) |
|||||
All figures in £ millions |
US$ |
Euro |
A$ |
Other |
Total |
31 March 2026 – Sterling |
9.0 |
(0.5) |
2.1 |
2.8 |
13.4 |
31 March 2025 – Sterling |
14.4 |
(2.3) |
2.8 |
7.6 |
22.5 |
The amounts shown in the table take into account the effect of the forward contracts entered into to manage these
currency exposures. The Group enters into forward foreign currency contracts to hedge the currency exposures that arise
on sales and purchases denominated in foreign currencies, as the transaction occurs. The principal contract amounts
of the outstanding forward currency contracts as at 31 March 2026 against Sterling are net US dollars bought of £5.3m
(USD 7.4m), net Euros sold of £113.6m (EUR 128.3m), net Canadian dollars sold of £8.0m (CAD 15.6m), net Swiss Francs bought
of £46.9m (CHF 44.9m) and net Australian dollars sold of £39.5m (AUD 83.4m).
Translational currency exposure
The Group has significant investments in overseas operations, particularly in the US. As a result, the Sterling value of the
Group’s balance sheet can be affected by movement in exchange rates. The Group does not hedge against translational
The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments,
but does not currently expect any counterparties to fail to meet their obligations. Credit risk is mitigated by a Board-approved
policy of only selecting counterparties with a strong investment grade long-term credit rating for cash deposits and
seing a utilisation credit limit based on the credit rating. The cash and cash equivalents of the Group are invested in
non-speculative financial instruments which are usually highly liquid, such as short-term deposits. Therefore, the Group
believes it has reduced its exposure to counterparty credit risk through this process.
The cash and cash equivalents balance is subject to review for impairment, and due to the high credit ratings of the
counterparties set out below, no impairment has been recognised within the year:
31 March |
31 March |
|
Counterparty credit rating |
2026 |
2025 |
AAA to AA- |
88% |
78% |
A+ to A- |
12% |
22% |
BBB+ to BBB- |
– |
– |
The Group uses three-year cumulative default rate metrics to determine the estimated credit-rated losses on our financial
instruments. Based on the expected default rates, the financial instruments have an immaterial risk of credit impairment.
In the normal course of business the Group operates notional cash pooling systems and master neing agreements for
derivatives, where a legal right of set-off applies.
185
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
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 £263.2m (2025: £296.2m). This balance includes cash and cash equivalents
and derivative financial assets. The cash and cash equivalents of £259.2m at 31 March 2026 (2025: £290.6m) 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 beer. Cash equivalents comprise £167.4m (2025: £170.4m) 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
Borrowing facilities
As at 31 March 2026 the Group had a revolving credit facility (RCF) of £290.0m (2025: £290.0m
) and a floating rate term
loan of £333.6m (2025: £335.0m). The RCF, which is unutilised, will mature on 22 April 2029. The term loan will mature on
27 September 2027. Total available funds, comprising the RCF, term loan and the Group’s freely available cash and cash
equivalents, are shown in the table below:
Interest rate: |
||||
Reference |
Total |
Drawn |
Undrawn |
|
rate* plus |
£m |
£m |
£m |
|
As at 31 March 2026 |
||||
Commied facilities – RCF |
0.58% |
290.0 |
– |
290.0 |
Commied facilities – term loan |
1.00% |
333.6 |
333.6 |
– |
Freely available cash and cash equivalents |
– |
– |
– |
258.6 |
Available funds 31 March 2026 |
548.6 |
|||
As at 31 March 2025 |
||||
Commied facilities – RCF |
0.60% |
290.0 |
– |
290.0 |
Commied facilities – term loan |
1.00% |
335.0 |
335.0 |
– |
Freely available cash and cash equivalents |
– |
– |
– |
289.9 |
Available funds 31 March 2025 |
579.9 |
*
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 £333.6m term loan is repayable on 27 September 2027, 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 2026
Contractual |
1 year |
More than |
||||
All figures in £ million |
Book value |
cash flows |
or less |
1–2 years |
2–5 years |
5 years |
Non-derivative financial liabilities |
||||||
Term loan |
(333.6) |
(357.9) |
(15.2) |
(342.7) |
– |
– |
Revolving credit facility |
– |
– |
– |
– |
– |
– |
Trade payables and similar items |
(347.4) |
(347.4) |
(347.4) |
– |
– |
– |
Leases |
(89.1) |
(110.6) |
(17.5) |
(16.3) |
(52.0) |
(24.8) |
Derivative financial liabilities |
||||||
Forward foreign currency contracts – cash flow hedges |
(1.2) |
(1.2) |
(1.1) |
(0.1) |
– |
– |
Interest rate swaps |
– |
– |
– |
– |
– |
– |
Total |
(771.3) |
(817.1) |
(381.2) |
(359.1) |
(52.0) |
(24.8) |
186
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
As at 31 March 2025
Contractual |
1 year |
More than |
||||
All figures in £ million |
Book value |
cash flows |
or less |
1–2 years |
2–5 years |
5 years |
Non-derivative financial liabilities |
||||||
Term loan |
(335.0) |
(375.8) |
(15.7) |
(15.7) |
(344.4) |
– |
Revolving credit facility |
– |
– |
– |
– |
– |
– |
Trade payables and similar items |
(302.5) |
(302.5) |
(302.5) |
– |
– |
– |
Leases |
(93.9) |
(120.0) |
(18.7) |
(18.1) |
(39.6) |
(43.6) |
Derivative financial liabilities |
||||||
Forward foreign currency contracts – cash flow hedges |
(2.6) |
(2.6) |
(1.8) |
(0.6) |
(0.2) |
– |
Interest rate swaps |
(0.2) |
(0.2) |
– |
(0.1) |
(0.1) |
– |
Total |
(734.2) |
(801.1) |
(338.7) |
(34.5) |
(384.3) |
(43.6) |
The Group has the following derivative financial instruments on the balance sheet, reported within the ‘Other financial
assets’ line items.
| 31 March 2026 |
31 March 2025 |
|||||
Liability |
Liability |
|||||
All figures in £ million |
Asset gains |
losses |
Net |
Asset gains |
losses |
Net |
Forward foreign currency contracts – cash flow hedges |
0.8 |
(1.2) |
(0.4) |
1.4 |
(2.6) |
(1.2) |
Interest rate swaps |
3.3 |
– |
3.3 |
4.2 |
(0.2) |
4.0 |
Derivative assets/(liabilities) at the end of the year |
4.1 |
(1.2) |
2.9 |
5.6 |
(2.8) |
2.8 |
The maturity of these derivative financial instruments is as follows:
| 31 March 2026 |
31 March 2025 |
|||||
Liability |
Liability |
|||||
All figures in £ million |
Asset gains |
losses |
Net |
Asset gains |
losses |
Net |
Expected to be recognised: |
||||||
In one year or less |
2.1 |
(1.1) |
1.0 |
3.6 |
(1.8) |
1.8 |
Between one and two years |
1.5 |
(0.1) |
1.4 |
1.3 |
(0.7) |
0.6 |
More than two years |
0.5 |
– |
0.5 |
0.7 |
(0.3) |
0.4 |
Derivative assets/(liabilities) at the end of the year |
4.1 |
(1.2) |
2.9 |
5.6 |
(2.8) |
2.8 |
The effects of these derivatives on the Group’s financial position and performance are as follows:
| 31 March 2026 |
31 March 2025 |
|||||
Cash flow |
Interest rate |
Cash flow |
Interest rate |
|||
All figures in £ million |
hedges |
swaps |
Total |
hedges |
swaps |
Total |
Notional amount (gross) |
368.4 |
270.0 |
638.4 |
515.8 |
310.0 |
825.8 |
Carrying value (current and non-current assets |
||||||
and (liabilities)) |
(0.4) |
3.3 |
2.9 |
(1.2) |
4.0 |
2.8 |
Maturity date |
2026-2029 |
2026-2027 |
2026-2029 |
2025-2028 |
2025-2027 |
2025-2028 |
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 |
0.8 |
(0.7) |
0.1 |
(0.2) |
(4.5) |
(4.7) |
Change in value of hedged item used to determine |
||||||
hedge effectiveness |
0.8 |
(0.7) |
0.1 |
(0.2) |
(4.5) |
(4.7) |
Weighted average hedged rate for the year* |
1.33% |
3.5% |
1.29% |
3.5% |
||
*
The weighted average hedged rate for the year for cash flow hedges is based on GBP:USD, being the most significant currency pair. The Group also
187
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
The contractual maturity of the Group’s financial liabilities is shown below:
As at 31 March 2026
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 |
347.4 |
– |
1.1 |
12.4 |
365.3 |
Due in more than one year but not more than two years |
– |
– |
0.1 |
11.9 |
11.9 |
Due in more than two years but not more than five years |
– |
333.6 |
– |
43.3 |
376.6 |
Due in five years or more |
– |
– |
– |
21.5 |
21.5 |
Total |
347.4 |
333.6 |
1.2 |
89.1 |
771.3 |
As at 31 March 2025
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 |
302.5 |
– |
1.8 |
13.3 |
317.6 |
Due in more than one year but not more than two years |
– |
– |
0.7 |
13.5 |
14.2 |
Due in more than two years but not more than five years |
– |
335.0 |
0.3 |
41.3 |
376.6 |
Due in five years or more |
– |
– |
– |
25.8 |
25.8 |
Total |
302.5 |
335.0 |
2.8 |
93.9 |
734.2 |
The Group’s sensitivity to changes in foreign exchange rates and interest rates on financial assets and liabilities as at
31 March 2026 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 2026
1% decrease |
10% weakening |
|||
in interest rates |
in Sterling |
|||
Profit |
Profit |
|||
All figures in £ million |
Equity* |
before tax |
Equity |
before tax |
Sterling |
– |
0.8 |
– |
– |
US dollar |
– |
0.2 |
0.3 |
0.9 |
Other |
– |
(0.2) |
0.4 |
– |
1% increase |
10% strengthening |
|||
in interest rates |
in Sterling |
|||
Profit |
Profit |
|||
All figures in £ million |
Equity* |
before tax |
Equity |
before tax |
Sterling |
– |
(0.8) |
– |
– |
US dollar |
– |
(0.2) |
(0.1) |
0.2 |
Other |
– |
0.2 |
(0.3) |
– |
*
This relates to the impact on items charged directly to equity and excludes the impact on profit/loss for the year flowing into equity.
188
Notes to the Consolidated
Financial Statements
26. Financial risk management (continued)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
As at 31 March 2025
1% decrease |
10% weakening |
|||
in interest rates |
in Sterling |
|||
Profit |
Profit |
|||
All figures in £ million |
Equity* |
before tax |
Equity |
before tax |
Sterling |
– |
0.5 |
– |
– |
US dollar |
– |
0.2 |
(4.0) |
0.9 |
Other |
– |
(0.2) |
0.7 |
– |
1% increase |
10% strengthening |
|||
in interest rates |
in Sterling |
|||
Profit |
Profit |
|||
All figures in £ million |
Equity* |
before tax |
Equity |
before tax |
Sterling |
– |
(0.5) |
– |
– |
US dollar |
– |
(0.2) |
3.2 |
0.1 |
Other |
– |
0.2 |
(0.4) |
– |
*
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 2026, 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 2026, 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
The Group operates a number of defined contribution pension arrangements, the largest of which is in the UK and provided
by the Mercer Master Trust. A defined contribution plan is a pension plan under which the Group and employees pay
fixed contributions to a third-party financial provider. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service
in the current and prior periods. The contributions are recognised as an employee benefit expense when they are due.
The expense incurred during the year was £70.7m (FY25: £73.4m). Prepaid contributions are recognised as an asset to the
In the UK the Group operates the QinetiQ Pension Scheme (‘the Scheme’) for approximately 10% of its UK employees.
The Scheme closed to future accrual on 31 October 2013 and there is no ongoing service cost. After this date, defined active
benefit members transferred to a defined contribution section of the Scheme. The Scheme is a final salary plan, which
provides benefits to members in the form of a guaranteed level of pension payable for life.
The level of benefits provided depends on the members’ length of service and their final pensionable earnings at closure
to future accrual. In the Scheme, pensions in payment are generally updated in line with the Consumer Price Index (CPI).
The benefit payments are made from Trustee-administered funds.
189
Notes to the Consolidated
Financial Statements
27. Post-retirement benefits (continued)
Plan assets held in trusts are governed by UK regulations as is the nature of the relationship between the Group and the
Trustees and their composition. Responsibility for the governance of the Scheme – including investment decisions and
contribution schedules – lies with the Scheme Trustee with consultation with the Company as needed. Dalriada, one of
the largest professional trustee firms in the UK, act as Professional Corporate Sole Trustee (PCST) for the Scheme. Being
governed by a PCST is well suited to an ever-changing and highly regulated pension landscape.
The asset recognised in the balance sheet in respect of the defined benefit pension plan is the fair value of plan assets
less the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is
calculated bi-annually by independent actuaries using the projected unit credit method. Future cash flows of the Scheme
which are subject to inflation are calculated using a CPI inflation assumption for the majority of the cash flows, with a
small proportion of cash flows linked to RPI. IAS 19 requires the inflation assumptions to be market-based assumptions,
as opposed to being based on economic forecasts.
The present value of the defined benefit obligation is determined by discounting the estimated, inflated future cash
outflows using interest rates of high quality corporate bonds that have terms to maturity approximating to the terms of the
related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in the period in which they arise.
Triennial funding valuation
The most recent completed full actuarial valuation of the Scheme was undertaken as at 30 June 2023 and resulted in an
actuarially assessed surplus of £11.4m (relative to the technical provisions, i.e. the level of assets agreed by the Trustee
and the Company as being appropriate to meet member benefits, assuming the Scheme continues as a going concern).
The next triennial valuation will be performed as at 30 June 2026. Under the new schedule of contributions agreed at the
conclusion of the recent triennial valuation, and reflecting the Scheme being in surplus, there are no employer contributions
required. Separately to the schedule of contributions the Company does have a cash commitment to the Scheme in respect
of an asset-backed funding arrangement established in 2012; see QinetiQ Pension Funding Partnership below.
QinetiQ’s Pension Funding Partnership (PFP) structure
On 26 March 2012 QinetiQ established the QinetiQ PFP Limited Partnership (‘the Partnership’) with the Scheme. Under
this arrangement, properties to the capitalised value of £32.3m were transferred to the Partnership. The transfers were
effected through a 20-year sale and leaseback agreement. The Scheme’s interest in the Partnership entitles it to annual
distributions from 2012. The annual distribution in the year to 31 March 2027 will be £3.7m, which will increase thereafter,
indexed by reference to CPI, until 2032.
The Partnership is controlled by QinetiQ and its results are consolidated by the Group. Under IAS 19, the interest held by
the Scheme in the Partnership does not qualify as a plan asset for the purposes of the Group’s consolidated financial
statements and is, therefore, not included within the fair value of plan assets. As a result, the Group’s consolidated financial
statements are unchanged by the Partnership. In addition, the value of the property transferred to the Partnership and
leased back to QinetiQ remains on the balance sheet. QinetiQ retains the operational flexibility to substitute properties of
equivalent value within the Partnership and has the option to sele outstanding amounts due under the interest before
2032 if it so chooses.
Other UK schemes
In the UK the Group has a small number of employees for whom benefits are secured through the Prudential Platinum
Scheme (‘the PPS’). The PPS scheme is always fully funded and has a very small surplus at year end. QinetiQ also
offers employees access to a Group Self Invested Personal Pension Plan, but no Company contributions are paid to
this arrangement.
190
Notes to the Consolidated
Financial Statements
27. Post-retirement benefits (continued)
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
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.
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Total market value of assets – see table below for analysis by category of asset |
1,208.0 |
1,176.7 |
Present value of Scheme liabilities |
(1,153.6) |
(1,137.3) |
Net pension asset before deferred tax |
54.4 |
39.4 |
Deferred tax liability |
(17.9) |
(14.6) |
Net pension asset after deferred tax |
36.5 |
24.8 |
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 193.
The key driver for the increase in the net pension asset since 31 March 2025 was a net actuarial gain on the net pension asset.
Total net income/(expense) recognised in the income statement
All figures in £ million |
FY26 |
FY25 |
Net finance income |
2.4 |
1.0 |
Administrative expenses |
(1.2) |
(1.2) |
Total net income/(expense) recognised in the income statement (excluding tax) |
1.2 |
(0.2) |
Movement in the net pension asset
The movement in the net pension asset (before deferred tax) is set out below:
All figures in £ million |
FY26 |
FY25 |
Opening net pension asset |
39.4 |
18.4 |
Net finance income |
2.4 |
1.0 |
Net actuarial gain and asset re-measurement gain/(loss) |
10.2 |
17.7 |
Administrative expenses |
(1.2) |
(1.2) |
Contributions by the employer |
3.6 |
3.5 |
Closing net pension asset |
54.4 |
39.4 |
191
Notes to the Consolidated
Financial Statements
27. Post-retirement benefits (continued)
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:
| 31 March 2026 | 31 March 2025* | |||||
Not quoted | Not quoted | |||||
in an active | in an active | |||||
All figures in £ million | Quoted | market | Total | Quoted | market | Total |
Equities | – | 7.5 | 7.5 | – | 11.2 | 11.2 |
Liability driven investment | 223.3 | – | 223.3 | 351.1 | – | 351.1 |
Asset backed security investments | 118.4 | – | 118.4 | 75.0 | – | 75.0 |
Alternative bonds 1 | – | 185.4 | 185.4 | – | 228.1 | 228.1 |
Corporate bonds 2 | 135.7 | 73.1 | 208.8 | – | 98.6 | 98.6 |
Cash and cash equivalents | 9.8 | – | 9.8 | 46.1 | – | 46.1 |
Equity derivative financial instruments | – | – | – | (0.9) | – | (0.9) |
Corporate credit derivative financial instruments 3 | (1.0) | – | (1.0) | 1.8 | – | 1.8 |
Other derivatives (forward FX contracts) 4 | (1.4) | – | (1.4) | 10.0 | – | 10.0 |
Insurance buy-in policies | – | 457.2 | 457.2 | – | 450.7 | 450.7 |
Borrowings 5 | – | – | – | – | (95.0) | (95.0) |
Total market value of assets | 484.8 | 723.2 | 1,208.0 | 483.1 | 693.6 | 1,176.7 |
*
The comparative cash and cash equivalents balance has been presented as quoted, to reflect the observable nature of its fair value.
1
Primarily private market debt investments.
2
Includes unlisted corporate bonds with commercial property held as security.
3
The fair value of corporate credit derivative financial instruments is recognised as a liability of £1.0m. This is in respect of various credit default
swap financial instruments held by the Scheme. These instruments provide the Scheme with significantly greater exposure to corporate bonds.
The notional value of the credit default swap contracts was £229.6m as at 31 March 2026. The economic exposure (notional exposure +MTM)
was £228.6m as at 31 March 2026.
4
The fair value of other derivative financial instruments is recognised as a liability of £1.4m. This is in respect of various foreign exchange contracts
held by the Scheme. The exposure to foreign exchange risk is significantly greater than the £10.0m marked to market value of the forward
contracts. The notional value of these financial instruments was £114.5m as at 31 March 2026, with a total economic exposure value of £113.1m.
5
The £95m loan as at 31 March 2025 (originally arranged in September 2023 to facilitate an increase in liquidity to support increased levels of
hedging) was repaid during the year.
The Scheme’s assets do not include any of the Group’s own transferable financial instruments, property occupied by the
Group or other assets used by the Group.
The insurance policies obtained by the pension scheme can only be used to pay or fund employee benefits under the
Company’s defined benefit plan. They are not available to the Company’s own creditors and cannot be paid to another
entity. These are the requirements of IAS 19 paragraph 7 and hence the Company’s determination is that the insurance
policies are qualifying insurance policies and require classification as a plan asset. The policies were issued by insurers that
are not a related party.
Per the Scheme rules the Company has an unconditional right to a refund of any surplus, assuming gradual selement of
all liabilities over time. Such surplus may arise on cessation of the Scheme in the context of IFRIC 14 paragraphs 11(b) and 12
and therefore the full net pension asset can be recognised on the Group’s balance sheet and the Group’s minimum funding
commitments to the Scheme do not give rise to an additional balance sheet liability.
Changes to the fair value of Scheme assets
All figures in £ million | FY26 | FY25 |
Opening fair value of Scheme assets | 1,176.7 | 1,316.2 |
Interest income on Scheme assets | 65.9 | 62.0 |
Re-measurement gain/(loss) on Scheme assets | 21.2 | (149.0) |
Contributions by the employer | 3.6 | 3.5 |
Net benefits paid out and transfers | (58.2) | (54.8) |
Administrative expenses | (1.2) | (1.2) |
Closing fair value of Scheme assets | 1,208.0 | 1,176.7 |
Notes to the Consolidated
Financial Statements
27. Post-retirement benefits (continued)
192
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Changes to the present value of Scheme liabilities
The present value of the Scheme’s liabilities, which are derived from cash flow projections over long periods, and thus
inherently uncertain, were:
All figures in £ million | FY26 | FY25 |
Opening present value of Scheme liabilities | (1,137.3) | (1,297.8) |
Interest cost | (63.5) | (61.0) |
Actuarial gain/(loss) on Scheme liabilities based on: | ||
Change in demographic assumptions | (4.5) | 17.4 |
Change in financial assumptions | 2.4 | 149.6 |
Experience losses | (8.9) | (0.3) |
Net benefits paid out and transfers | 58.2 | 54.8 |
Closing present value of Scheme liabilities | (1,153.6) | (1,137.3) |
Assumptions
The major assumptions used in the IAS 19 valuation of the Scheme’s liabilities were:
31 March 2026 | 31 March 2025 | |||
Insured | Uninsured | Insured | Uninsured | |
All figures in £ million | members | members | members | members |
Discount rate applied to Scheme liabilities | 5.85% | 6.15% | 5.70% | 5.75% |
CPI inflation assumption | 2.80% | 2.80% | 2.45% | 2.50% |
Net rate (discount rate less inflation) | 3.05% | 3.35% | 3.25% | 3.25% |
Assumed life expectancies in years: | ||||
At 60 for males currently aged 40 | n/a | 28.2 | n/a | 27.8 |
At 60 for females currently aged 40 | n/a | 30.5 | n/a | 30.3 |
At 60 for males currently aged 60 | n/a | 26.9 | n/a | 26.5 |
At 60 for females currently aged 60 | n/a | 29.2 | n/a | 28.9 |
At 65 for males currently aged 65 | 22.6 | n/a | 22.1 | n/a |
At 65 for females currently aged 65 | 24.9 | n/a | 24.6 | n/a |
The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions
which, because of the timescale covered, may not necessarily be borne out in practice. It is important to note that these
assumptions are long term and, in the case of the discount rate and the inflation rate, are measured by reference to external
market indicators.
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 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 seing CPI inflation
is not acceptable under accounting standards.
The mortality assumptions for both the current and prior year were based on the SAPS Normal S3 ‘All Lives’ base tables,
with various scaling factors based on sex and status. Allowance was made for improvements in mortality in line with
CMI_2025 core projections (31 March 2025: CMI_2023 projections) and a long-term rate of improvement of 1.0% per
annum (31 March 2025: 1.0%).
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 14 years for non-insured liabilities and 9 years for
insured liabilities.
193
Notes to the Consolidated
Financial Statements
27. Post-retirement benefits (continued)
The sensitivity of the Scheme liabilities to each of the key assumptions is shown in the following table.
Sensitivity analysis of the principal assumptions
Indicative impact on |
Indicative impact on |
Indicative impact on |
|
Assumption |
Scheme assets |
Scheme liabilities |
net pension asset |
Decrease discount rate by 0.25% |
Increase by £10.6m |
Increase by £34.5m |
Decrease by £23.9m |
Increase rate of inflation by 0.25% |
Increase by £9.7m |
Increase by £32.7m |
Decrease by £23.0m |
Increase life expectancy by one year |
Increase by £14.0m |
Increase by £24.8m |
Decrease by £10.8m |
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 2026 this portfolio hedged against
approximately 100% of the interest rate risk and also approximately 100% of the inflation rate risk, as measured on the
actuarial funding valuation 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 £185.4m, the unquoted corporate bonds of £73.1m and the unquoted
equities of £7.5m are the assets with most uncertainty as to valuation as at 31 March 2026.
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, while the IAS 19 accounting basis valuation uses
Risks
Through its defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are
detailed below:
Volatility in | Results under IAS 19 can change dramatically depending on market conditions. The present value of |
market conditions | 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 | The calculation of the present value of Scheme liabilities involves projecting future cash flows from the Scheme |
assumptions | 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. |
In June 2023, in Virgin Media Limited v NTL Pension Trustees II Limited, the UK High Court ruled that specific historical
amendments to contracted-out defined benefit schemes in the period from 6 April 1997 to 5 April 2016 were invalid as they
lacked a confirmation under section 37 of the Pension Schemes Act 1993 from the scheme’s actuary. Following a review of
the equivalent documentation by the Scheme’s lawyers, we consider that there is no need for any further investigation at
Notes to the Consolidated
Financial Statements
194
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Ordinary shares of 1p each |
Special Share of £1 |
|||||
(equity) |
(non-equity) |
Total |
||||
£ |
Number |
£ |
Number |
£ |
Number |
|
As at 1 April 2025 |
5,535,305 |
553,530,455 |
1 |
1 |
5,535,306 |
553,530,456 |
Cancellation of shares |
(287,731) |
(28,773,138) |
– |
– |
(287,731) |
(28,773,138) |
At 31 March 2026 |
5,247,574 |
524,757,317 |
1 |
1 |
5,247,575 |
524,757,318 |
During the year, the Group continued its share buyback programme. £134.6m was completed in cash in FY26 (FY25: £102.9m),
which is shown in the table above as the 28,773,138 cancelled shares (FY25: 20,865,436).
Ordinary shares of 1p each |
Special Share of £1 |
|||||
(equity) |
(non-equity) |
Total |
||||
£ |
Number |
£ |
Number |
£ |
Number |
|
As at 1 April 2024 |
5,743,959 |
574,395,891 |
1 |
1 |
5,743,960 |
574,395,892 |
Cancellation of shares |
(208,654) (20,865,436) |
– |
– |
(208,654) (20,865,436) |
||
At 31 March 2025 |
5,535,305 |
553,530,455 |
1 |
1 |
5,535,306 553,530,456 |
|
QinetiQ carries out activities which are important to UK defence and security interests. To protect these interests in
the context of the ongoing commercial relationship between the MOD and QinetiQ, and to promote and reinforce the
Compliance Principles, the MOD holds a Special Share in QinetiQ. QinetiQ obtained MOD consent to changes in its Special
Shareholder rights, which were approved by shareholders at the 2012 AGM. The changes to the Special Share were disclosed
in the 2012 Annual Report. Subsequent to the changes approved at the 2012 AGM the Special Share confers certain rights on
the holder:
a)
To require the Group to implement and maintain the Compliance System (as defined in the Articles of Association) so as
to make at all times effective its and each member of QinetiQ Controlled Group’s application of the Compliance Principles,
in a manner acceptable to the Special Shareholder;
b)
To refer maers to the Board for its consideration in relation to the application of the Compliance Principles;
c)
To require the Board to obtain Special Shareholder’s consent:
i)
If at any time when the chairman is not a British citizen, it is proposed to appoint any person to the office of chief
executive, who is not a British citizen; and
ii)
If at any time when the chief executive is not a British citizen, it is proposed to appoint any person to the office of
chairman, who is not a British citizen;
d)
To require the Board to take action to rectify any omission in the application of the Compliance Principles, if the
Special Shareholder is of the opinion that such steps are necessary to protect the defence or security interests of
the United Kingdom; and
e)
To demand a poll at any of QinetiQ’s meetings (even though it may have no voting rights except those specifically set out
in the Articles).
The Special Shareholder has an option to purchase defined Strategic Assets of the Group in certain circumstances. The
Special Shareholder has, inter alia, the right to purchase any Strategic Assets which the Group wishes to sell. Strategic
Assets are normally testing and research facilities (see note 30 for further details).
The Special Share may only be issued to, held by and transferred to HM Government (or as it directs). At any time the Special
Shareholder may require QinetiQ to redeem the Special Share at par. If QinetiQ is wound up the Special Shareholder will be
entitled to be repaid the capital paid up on the Special Share before other shareholders receive any payment. The Special
Shareholder has no other right to share in the capital or profits of QinetiQ and the Special Shareholder must give consent to
a general meeting held on short notice.
195
Notes to the Consolidated
Financial Statements
28. Share capital and other reserves (continued)
The Special Share entitles the Special Shareholder to require certain persons who hold (together with any person acting
in concert with them) a material interest in QinetiQ to dispose of some or all of their ordinary shares in certain prescribed
circumstances on the grounds of national security or conflict of interest. The Directors must register any transfer of the
The translation reserve includes the cumulative foreign exchange difference arising on translation. Movements on hedging
instruments, where the hedge is effective, are recorded in the hedge reserve until the hedge ceases.
The capital redemption reserve, which was created following the redemption of preference share capital and the bonus
issue of shares, cannot be distributed.
Own shares represent shares in the Company that are held by independent trusts and include treasury shares and
shares held by the employee share ownership plan. Included in retained earnings at 31 March 2026 are 4,315,670 shares
The Group operates a number of share-based payment plans for employees. The total share-based payment expense
in the year was £11.5m, all relating to equity-seled schemes (FY25: £9.8m, all relating to equity-seled schemes). The
share-based payment amount recognised in equity was £11.0m, reflecting an £11.5m expense recorded in the income
statement, partly offset by £0.5m relating to dividends accrued on unvested awards.
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-seled.
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.
FY26 |
FY25 |
|
Number of |
Number of |
|
matching |
matching |
|
shares |
shares |
|
Outstanding at start of the year |
707,834 |
753,447 |
Awarded during the year |
44,645 |
256,966 |
Exercised during the year |
(51,854) |
(262,526) |
Forfeited during the year |
(37,001) |
(40,053) |
Outstanding at end of the year |
663,624 |
707,834 |
SIP matching shares are equity-seled awards; those outstanding at 31 March 2026 had an average remaining life of 1.5
years (2025: 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 (2025: nil).
Bonus Banking Plan (BBP)
During previous years the Group granted BBP awards to certain senior executives in the UK and US.
FY26 |
FY25 |
|
Number of |
Number of |
|
awards |
awards |
|
Outstanding at start of the year |
– |
892,416 |
Granted during the year |
– |
– |
Exercised during the year |
– |
(833,623) |
Forfeited during the year |
– |
(58,793) |
Outstanding at end of the year |
– |
– |
Notes to the Consolidated
Financial Statements
29. Share-based payments (continued)
196
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The legacy BBP was a remuneration scheme that ran until the change in remuneration policy in 2023, with the final
payment under the scheme made in 2024. The BBP operated in three-year performance cycles, with each cycle vesting
over a four-year period. Under the BBP a contribution was 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 was 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
was at risk of forfeiture. Refer to the 2024 Directors’ Remuneration Report for further details.
At 31 March 2026 the awards had a weighted average remaining life of nil year (2025: nil year). There is no exercise price
for these awards. The fair value of the awards at 31 March 2026 was £nil (2025: £nil) being the Group’s 30-day average
on 31 March. The weighted average share price at date of exercise was £nil (2025: £nil). 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.
FY26 | FY25 | |
Number of | Number of | |
awards | awards | |
Outstanding at start of the year | 3,760,387 | 6,274,618 |
Granted during the year | – | 9,795 |
Lapsed during the year | (125,658) | (502,662) |
Exercised during the year | (1,372,007) | (2,021,364) |
Outstanding at end of the year | 2,262,722 | 3,760,387 |
The number of awards is dependent on the Group’s performance during the year (specifically with respect to the Group
revenue growth). This is provisionally quantified at year end based on Group performance and also the number of eligible
employees in employment as at 31 March. Actual awards are made in the following June and the final number awarded will
be slightly different to the number provisionally calculated.
Awards are then subject to a three-year vesting period and a further two-year holding period. Vesting of the awards is
contingent upon Group operating profit in the year before vesting being maintained at the level reported during the year
before award. Refer to the Directors’ Remuneration Report for further details.
At 31 March 2026 the awards had a weighted average remaining life of 0.2 years (2025: 0.6 years). There is no exercise price
for these awards. The weighted average share price at date of exercise was £5.18 (2025: £4.47). Of the awards outstanding at
the end of the year nil were exercisable.
Long Term Incentive Plan (LTIP)
During the year the Group granted LTIP awards to replace the DSP awards.
FY26 | FY25 | |
Number of | Number of | |
awards | awards | |
Outstanding at start of the year | 12,131,756 | 7,306,172 |
Granted during the year | 4,879,515 | 6,519,447 |
Exercised during the year | – | – |
Lapsed during the year | (1,539,937) | (1,693,863) |
Outstanding at end of the year | 15,471,334 | 12,131,756 |
At 31 March 2026 the awards had a weighted average remaining life of 1.3 years (2025: 2.0 years). There is no exercise price for
these awards. The weighted average fair value of grants made during the year was £4.97 (2025: £4.44). The weighted average
share price at date of exercise was nil. Of the options outstanding at the end of the year nil were exercisable.
197
Notes to the Consolidated
Financial Statements
29. Share-based payments (continued)
Restricted share plan (RSP)
RSP is a share award made to senior executives on a discretionary basis. For example, to offset a new senior executive joiner
on a loss of stock options from their previous employer and it is a fixed number of shares. During the year the Group granted
RSP awards to certain senior executives in the UK and US.
FY26 |
FY25 |
|
Number of |
Number of |
|
awards |
awards |
|
Outstanding at start of the year |
474,056 |
797,371 |
Granted during the year |
868,651 |
263,186 |
Exercised during the year |
(89,153) |
(488,374) |
Lapsed during the year |
(23,813) |
(98,127) |
Outstanding at end of the year |
1,229,741 |
474,056 |
At 31 March 2026 the awards had a weighted average remaining life of 1.0 years (2025: 0.7 years). There is no exercise price for
these awards. The weighted average fair value of grants made during the year was £4.93 (2025: £4.11). The weighted average
share price at date of exercise was £4.49 (2025: £4.02). Of the options outstanding at the end of the year nil were exercisable
(2025: nil).
Annual Bonus Plan (ABP)
ABP is a share award made to senior executives. This award replaced the BBP.
FY26 |
FY25 |
|
Number of |
Number of |
|
awards |
awards |
|
Outstanding at start of the year |
227,176 |
292,067 |
Granted/awarded during the year |
15 |
– |
Difference between actual awards in year and amount provisionally awarded in prior year |
– |
(64,891) |
Lapsed during the year |
– |
– |
Exercised during the year |
– |
– |
Provisionally awarded during the year |
213,723 |
– |
Outstanding at end of the year |
440,914 |
227,176 |
At 31 March 2026 the awards had an average remaining life of 0.3 years (2025: 1.3 years). There is no exercise price for these
awards. The weighted average fair value of grants made during the year was £4.49 (2025: £4.49). The weighted average share
Notes to the Consolidated
Financial Statements
198
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The MOD continues to own its Special Share in QinetiQ which conveys certain rights as set out in note 28. Transactions
between the Group and the MOD are disclosed as follows:
Freehold land and buildings and surplus properties
Under the terms of the Group’s acquisition of part of the business and certain assets of DERA from the MOD on 1 July 2001,
the MOD retained certain rights in respect of the freehold land and buildings transferred.
Restrictions on transfer of title
The title deeds of those properties with strategic assets (see below) include a clause that prevents their transfer without
the approval of the MOD. The MOD also has the right to purchase any strategic assets in certain circumstances.
MOD’s generic compliance regime
Adherence to the generic compliance system is monitored by the Risk & Security Commiee. Refer to the Commiee’s
report within the Corporate Governance Statement on page 110.
Strategic assets
Under the Principal Agreement with the MOD, the QinetiQ controlled Group is not permied without the wrien consent
of the MOD, to:
i)
Dispose of or destroy all or any part of a strategic asset; or
ii)
Voluntarily undertake any closure of, or cease to provide a strategic capability by means of, all or any part of
a strategic asset.
The net book value of assets identified as being strategic assets as at 31 March 2026 was £1.1m (2025: £1.3m).
Long Term Partnering Agreement
On 27 February 2003 QinetiQ Limited entered into a Long Term Partnering Agreement (LTPA) to provide test and evaluation
(T&E) facilities and training support services to the MOD. This is a 25-year contract with a total revenue value of up to £5.6bn,
dependent on the level of usage by the MOD, under which QinetiQ Limited is commied to providing T&E services with
increasing efficiencies through cost saving and innovative service delivery. Following an amendment to the LTPA contract
on 5 April 2019 this contract is no longer subject to re-pricing every five years and is now contracted at a fixed price to
31 March 2028. A £1.7bn five-year extension to the LTPA contract was signed in H1 and secures our position of partnership
with the MOD and provides a firm foundation to invest in the transformation of UK sovereign Test, Trials, Training & Evaluation
(T3E) capabilities.
Other contracts with MOD
The LTPA is the most significant contract QinetiQ has with the MOD. In total approximately 60% (FY25: 57%) of the Group’s
Subsidiary undertakings within the Group have given unsecured guarantees of £53.7m at 31 March 2026 (2025: £49.7m) in
the ordinary course of business, typically in respect of performance bonds and rental guarantees. The Company has on
occasion been required to take legal action to protect its intellectual property rights, to enforce commercial contracts or
otherwise and similarly to defend itself against proceedings brought by other parties, including in respect of environmental
and regulatory issues. Provisions are made for the expected costs associated with such maers, based on past experience
of similar items and other known factors, taking into account professional advice received, and represent management’s
best estimate of the likely outcome. The timing of utilisation of these provisions is uncertain pending the outcome of
various court proceedings, ongoing investigations and negotiations. However, no provision is made for proceedings which
have been or might be brought by other parties unless management, taking into account professional advice received,
assesses that it is more likely than not that such proceedings may be successful. Contingent liabilities associated with such
proceedings have been identified but the Directors are of the opinion that any associated claims that might be brought can
199
Notes to the Consolidated
Financial Statements
The Group had the following capital commitments for which no provision has been made:
31 March |
31 March |
|
All figures in £ million |
2026 |
2025 |
Total contracted |
30.2 |
51.3 |
Capital commitments at 31 March 2026 include £26.7m (2025: £47.2m) in relation to property, plant and equipment that will
be wholly funded by a third-party customer under long-term contract arrangements. These primarily relate to investments
During the year ended 31 March 2026 there were sales to joint ventures of nil (FY25: £0.2m). At the year-end there were
outstanding receivables from joint ventures of nil (31 March 2025: £0.2m). Details of the remuneration of Directors and
In accordance with section 409 of the Companies Act 2006, a full list of subsidiaries and other related undertakings
as at 31 March 2026 is detailed below. Unless stated otherwise, the Group’s holding comprises ordinary shares which
are held indirectly by QinetiQ Group plc, with the exception of QinetiQ Group Holdings Limited which is held directly by
QinetiQ Group plc.
Name of company |
Country of incorporation |
Registered office |
Subsidiaries 1,6 |
||
QinetiQ Training Australia Pty Ltd * |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Air Affairs (Australia) Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Air Affairs Aviation Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Air Target Services Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Astra Aerospace Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Avantus Federal LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Avantus Federal Services LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Avantus National Security Solutions LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
E3 Federal Solutions PR LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Far Ridgeline Engagements LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Foster-Miller Inc. 2 |
USA |
358 2nd Ave, Waltham, Massachuses, MA 02451-1104, USA |
Hirose Holdings Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, Australia |
||
Inzpire Group Limited |
England & Wales |
C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, |
Bristol, BS2 0HQ |
||
Inzpire Holdings Limited |
England & Wales |
C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street, |
Bristol, BS2 0HQ |
||
Inzpire Limited |
England & Wales |
Landmark House West Unit 1b, Alpha Court, Kingsley Road, |
Lincoln, Lincolnshire, LN6 3TA |
||
Lucid Perspectives LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Naimuri Limited |
England & Wales |
Farnborough 3 |
Occam’s Razor Technologies LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Operational Intelligence LLC |
USA |
10440 Furnace Road Lorton, VA 22079 |
Qinetic Limited |
England & Wales |
Farnborough 3 |
Notes to the Consolidated
Financial Statements
34. Subsidiaries and other related undertakings (continued)
200
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Name of company |
Country of incorporation |
Registered office |
QinetiQ Australia Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, 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 |
10440 Furnace Road Lorton, VA 22079 |
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 |
Tower 4, Level 10, 727 Collins Street, Melbourne, |
VIC 3008, 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 |
22nd Floor Corporate Centre, 139 Valero Street, Salcedo Village, |
Makati City, Philippines |
||
QinetiQ Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, VIC 3008, |
Australia |
||
QinetiQ Services Holdings Pty Ltd |
Australia |
Tower 4, Level 10, 727 Collins Street, Melbourne, VIC 3008, |
Australia |
||
QinetiQ Solutions Sdn. Bhd. |
Malaysia |
Suite 6.01, 6th Floor, Plaza See Hoy Chan, Jalan Raja Chulan |
50200, Kuala Lumpur, W.P. Kuala Lumpur, Malaysia |
||
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 |
Level 33, 101 Collins Street, Melbourne, Victoria 3000, Australia |
TSG International LLC |
USA |
358 2nd Ave, Waltham, Massachuses MA 02451-1104, USA |
Name of company |
Country of incorporation |
Registered office |
Joint ventures 6 |
||
Avantus CTA, LLC 5 |
USA |
10440 Furnace Road Lorton, VA 22079 |
Federal Mission Solutions, LLC 5 |
USA |
58 W Main Street, Suite B, Luray, VA 22835, 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 Fayeeville, NC 28306 |
*
Aerospace Training Services Pty Ltd was renamed QinetiQ Training Australia Pty Ltd on 30 April 2025.
1
As at 31 March 2026 the Group owned 100% of the ordinary shares of all subsidiary undertakings.
2
The class of shares is ‘common share’.
3
Cody Technology Park, Ively Road, Farnborough, Hampshire, GU14 OLX.
4
Limited partnership. The partners are all wholly-owned Group companies.
5
As at 31 March 2026 the Group owned 90% of Avantus CTA, LLC, 49% of Federal Mission Solutions, LLC, 49% of Houbara Defence & Security LLC,
49% of QinetiQ Dar Massader QDM Limited, and 49% of Quick Services LLC.
6
The financial year end of each undertaking is 31 March other than Houbara Defence & Security LLC (31 December) and QinetiQ Dar Massader QDM
201
Notes to the Consolidated
Financial Statements
incorporated and domiciled in England, United Kingdom
Accounting policies
The following accounting policies have been applied consistently to all periods presented in dealing with items that are
considered material in relation to the Group’s financial statements. In the income statement, the Group presents ‘specific
adjusting items’ separately. In the judgement of the Directors, for the reader to obtain a proper understanding of business
performance, specific adjusting items need to be disclosed separately. Underlying measures of performance exclude
specific adjusting items.
Specific adjusting items include the following:
Does not reflect |
|||
Distorting due to |
Distorting due to |
in-year operational |
|
irregular nature |
fluctuating nature |
performance of |
|
Item |
year on year |
(size and sign) |
continuing business |
Amortisation of intangible assets arising from acquisitions |
|
||
Pension net finance income |
|
|
|
Gains/losses on disposal of businesses, property and investments |
|
|
|
Transaction, integration and on-off remuneration costs in respect of business |
|||
acquisitions and disposals |
|
|
|
Impairment of property and goodwill |
|
||
One-off period of digital investment |
|
|
|
Costs and other impacts of group-wide restructuring programmes |
|
|
|
The tax impact of the above |
|
|
|
Other significant non-recurring tax and RDEC movements |
|
|
|
The financial impact of each item is reported in note 4 to these financial statements.
These ‘specific adjusting items’ are of a ‘non-operational’ nature and do not include all significant, irregular items that are of
in the Strategic Report on page 71 in accordance with UK-adopted International Accounting Standards and with the
elected to prepare its parent company financial statements in accordance with UK GAAP (FRS 101); these are presented on
page 212. The financial statements have been prepared under the historical cost convention, except for certain financial
assets and liabilities (such as derivative financial instruments) measures at fair value. The Group’s reporting currency is
to 31 March 2026. The purchase method of accounting has been adopted. Those subsidiary undertakings acquired or
disposed of in the period are included in the consolidated income statement from the date control is obtained to the date
that control is lost (usually on acquisition and disposal respectively). An investor controls an investee when it is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through
The Group comprises certain entities that are operated within the terms of a Special Security Arrangement (‘SSA’). Details
of the SSA and QinetiQ’s management of US subsidiaries are set out in the Corporate Governance section of this Annual
Report (on page 94). IFRS 10 is the accounting standard applicable in respect of consolidation of entities. This does not
specifically deal with SSAs. However, having considered the terms of the SSA, the Directors consider that the Group meets
the requirements of IFRS 10 in respect of control over such affected entities and, therefore, consolidates these entities in
the consolidated accounts. The impact of this specific judgement is full consolidation as opposed to treatment as a 100%
associated undertaking.
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
202
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
exercises significant influence, usually from 20–50% of the
equity voting rights, in respect of financial and operating
policy. A joint venture is an undertaking over which the
Group exercises joint control. Joint ventures are accounted
for using the equity method from the date of acquisition
to the date of disposal. The Group’s investments in joint
ventures are held at cost including goodwill on acquisition
and any post-acquisition changes in the Group’s share
of the net assets of the joint venture less any impairment
to the recoverable amount. Where a joint venture has net
liabilities, full provision is made for the Group’s share of
liabilities where there is a constructive or legal obligation
The financial statements of subsidiaries, joint ventures
and associates are adjusted where necessary to ensure
In preparing the financial statements, the Board has
considered the impact to the Company and its activities
of climate change, particularly those risks highlighted
on page 63 in line with the recommendations by the Task
Force for Climate-related Disclosures (TCFD). The Board
recognises its responsibilities for oversight of climate-
related risks and opportunities. The QinetiQ Leadership
Team support the Board through the implementation of
a strategic led approach to monitor, assess and address
climate transition risks and opportunities, which includes
refining our capability to quantify, forecast and model
financial statement impacts due to climate change.
Specific aspects of the financial statements that could
potentially be impacted by climate change are the carrying
value and useful economic lives of tangible assets and
goodwill, future capability development and the financial
performance of customer contracts.
While the Group will likely be impacted by climate change
in the future, the impacts on the financial statements as
with no material impact on the Group’s financial statements
The following standards, interpretations and amendments
to existing standards became effective on 1 January 2025
and have not had a material impact on the Group:
ɰ
Amendments to IAS 21 Lack of Exchangeability,
(effective for annual periods beginning on or after 1 January 2027)
IFRS 18 will replace IAS 1 Presentation of financial
statements, introducing new requirements that will help
to achieve comparability of the financial performance of
similar entities and provide more relevant information and
transparency to users. Even though IFRS 18 will not impact
the recognition or measurement of items in the financial
statements, its impacts on presentation and disclosure
are expected to be pervasive, in particular those related
to the statement of financial performance and providing
management-defined performance measures within the
financial statements.
We are currently assessing the detailed implications of
applying the new standard on the group’s consolidated
financial statements.
The group will apply the new standard from its mandatory
effective date of 1 January 2027. Retrospective application
is required, and so the comparative information for the
financial year ending 31 March 2027 will be restated in
accordance with IFRS 18.
Developments expected in future periods of which are not expected to
have a material impact on the Group’s financial statements
The following other standards, interpretations and
amendments to existing standards have been issued but
were not mandatory for accounting periods beginning on
1 April 2025. These either have been, or are expected to
be endorsed by, the UK Endorsement Board and are not
expected to have a material impact on the Group:
ɰ
Amendments to the Classification and Measurement
of Financial Instruments – amendments to IFRS 9
and IFRS 7, effective from 1 January 2026;
ɰ
Annual improvements 2024, effective from
1 January 2026; and
ɰ
Contracts Referencing Nature-dependent
Electricity – amendment to IFRS 9 and IFRS 7,
Material accounting policies
The Group recognises revenue primarily from the following
major sources:
ɰ
Through combining world-leading expertise with
unique facilities to provide technical assurance, test
and evaluation and training services underpinned by
long-term contracts; and
ɰ
Through delivering innovative solutions and products
to meet customer requirements by undertaking
contract-funded research and development,
developing intellectual property and by internal
funding with potential for new revenue streams.
203
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
Revenue is measured based on the consideration specified
in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group recognises
revenue when it transfers control of a product or service to
a customer. The Group’s revenue contracts are accounted
for under IFRS 15 Revenue from Contracts with Customers
taking into account the requirement to distinguish between
the various performance obligations within a contract
and treating these separately. The Group’s methodology
applies IFRS 15 on a contract-by-contract basis which
includes considerations for contract modifications, variable
consideration, the determination of distinct performance
obligations, determination of agency and principal
relationships and licences.
Service contracts
The Group’s long-term service contracts are generally
‘test and evaluation’ or advice-based contracts where
control of the service is transferred over a period of time
as the Group performs. At contract inception the Group
undertakes an assessment to determine how many distinct
performance obligations exist within a contract. As part of
the assessment the Group obtains an understanding of the
overall deliverable to the customer through discussions
with business units and project leads. Each individual
deliverable in the contract is then assessed to determine if
it is an input into the overall deliverable, and therefore part
of a single performance obligation, or if it is a stand-alone
separable deliverable with its own transaction price and
therefore a distinct performance obligation in its own right.
Each distinct performance obligation identified within a
contract is accounted for separately.
Certain service contracts have a similar paern of transfer
of control to the customer where each year is effectively
the same from a performance obligation perspective. The
Group has applied the series guidance as permied within
the Standard to these contracts and accounts for these
as a series of distinct service performance obligations
satisfied annually over the contract term.
The transaction price for a contract is determined at contract
inception based on a fixed-margin applied to the total
forecast costs to complete the deliverable. Some long-term
contracts include an excess profit clause which is a variable
consideration factor that could impact the transaction price.
Excess profits are estimated at contract inception and at the
end of each reporting period to ensure that the transaction
price is not under or over stated. Any required adjustment will
be made against the transaction price in the period in which
it occurred. The Group does not offer any right of return or
refunds which could impact transaction price at inception.
Certain contracts aract bonuses and/or penalties
which are variable and will have an impact on transaction
price at contract inception. The Group assesses variable
consideration in relation to bonuses and penalties at
contract inception using the most-likely method and this
forms part of the transaction price and recognised over time
as costs are incurred. The Group only includes bonuses and
penalties into the transaction price to the extent that it is
highly probable that a significant reversal of revenue will not
occur in future periods. Historical evidence and experience
show that even where a reduction has been required, that
reduction has been immaterial to the Group.
The transaction price is allocated between each distinct
performance obligation identified in a contract based
on the stand-alone selling price of each performance
obligation. Each performance obligation will be costed and
the transaction price will be cost plus margin. This amount
would be the stand-alone selling price of each performance
obligation if contracted with a customer separately.
Long-term service contracts allow for modifications to the
original order. If a contract modification is determined to
be distinct and the price of the contract increases by an
amount of consideration that reflects the entity’s stand-
alone selling prices for the additional promised goods
or services, the Group accounts for this as a separate
contract. If a contract modification is not distinct, the
Group accounts for this as if it were part of the existing
contract. A cumulative catch-up adjustment to revenue is
then recognised to disclose the effect that the contract
modification has on the transaction price and the Group’s
measure of progress towards complete satisfaction of the
performance obligation.
Long-term service contracts also sometimes allow for
extensions to the original order. A contract extension is
determined to include either additional goods or services or
no additional goods or service. If a contract extension with
additional goods or services is determined to be distinct
and the price of the contract increases by an amount of
consideration that reflects the entity’s stand-alone selling
prices for the additional promised goods or services, the Group
accounts for this as a separate performance obligation.
If a contract extension with additional goods or services is
not distinct, the Group accounts for this as if it were part of
the existing contract. A cumulative catch-up adjustment to
revenue is then recognised to disclose the effect that the
contract extension has on the transaction price and the
Group’s measure of progress towards complete satisfaction
of the performance obligation.
When the outcome of a distinct performance obligation
in delivering services can be reliably estimated, revenue
associated with the performance obligation is recognised
over time using the input method. The input method
recognises revenue over time on the basis of costs incurred
to date to the satisfaction of a performance obligation
relative to the total forecast costs to complete the
performance obligation.
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
204
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The Group has determined the input method to be
appropriate as it best depicts the Group’s performance
in transferring control of the service to the customer as it
incurs costs on a particular contract.
No profit is recognised on contracts until the outcome of the
contract can be reliably estimated. When it is probable that
total contract costs will exceed total contract revenue, the
expected loss is recognised immediately as an expense.
Goods sold
The Group recognises revenue on the sale of products at
a point in time once control has been transferred to the
customer. Control is generally transferred to customers
on delivery of products or when the customer has the
significant risks and rewards of ownership of the product.
Payment is typically due within 30 days of invoice (within the
UK) and customers typically do not have a right of return or
refund. The transaction price for sale of products is agreed
at contract inception. When the Group develops a bespoke
product for a customer with no alternative use to the Group,
revenue is recognised over time using the input method.
Licence revenue
Licence revenue is aributed to either ‘right to use’ or
‘right to access’ licences. ‘Right to use’ licence revenue is
recognised at a point in time when the Group sells a licence
to a customer and does not undertake significant further
activities or involvement in developing the licence after
the sale. ‘Right to access’ licence revenue is recognised
over time when the Group maintains a significant level of
involvement in developing and enhancing the licence after
the sale. The level of involvement goes beyond general
support, bug-fixing and upgrades which generally only
maintain the current operating level. The transaction price
for intellectual property is agreed at contract inception.
The Group does not offer any right of return or refunds
which could impact transaction price at inception.
The Group recognises licence revenue through the supply
of a range of security, messaging and connectivity software
products. A licence fee is paid for each computer that
uses the software and the customer can also purchase
a support service contract for a fixed period. The sale of
these types of licences is recognised at a point in time as a
distinct performance obligation because the Group does not
undertake any further activities in developing the licence after
the sale. The support service contract is recognised over time
as a separate performance obligation as this is an optional
extra and is not integral to the functionality of the licence.
The support service contract offers general support and
maintenance of the licence to the customer over a fixed period.
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 before 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
205
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
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
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 commied 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
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 selement 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 leers of credit are also charged to finance expense.
Exchange differences on financial assets and liabilities and
the income or expense from interest hedging instruments
that are recognised in the income statement are included
within finance income and finance expense. Financing also
includes the net finance income or expense in respect of
The income tax expense or credit for the period is the tax
payable on the current period’s taxable income, based
on the applicable income tax rate for each jurisdiction,
adjusted by changes in deferred tax assets and liabilities
aributable to temporary differences and to unused tax
losses. The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the
Company and its subsidiaries and associates operate and
generate taxable income.
Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable
tax regulation is subject to interpretation and considers
whether it is probable that a taxation authority will accept
an uncertain tax treatment. The Group measures its tax
balances either based on the most likely amount or the
expected value, depending on which method provides a
beer prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the consolidated financial statements. However, deferred
tax liabilities are not recognised if they arise from the initial
recognition of goodwill.
Deferred income tax is also not accounted for if it arises
from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the
transaction, affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by
the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the
deferred income tax liability is seled.
Deferred tax assets are recognised only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
206
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Deferred tax assets are derecognised when that probability
assessment changes. Deferred tax liabilities and assets
are not recognised for temporary differences between
the carrying amount and tax bases of investments in
foreign operations where the Company is able to control
the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the
foreseeable future.
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. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to
offset and intends either to sele on a net basis or to realise
the asset and sele the liability simultaneously.
The Group has applied the temporary exemption issued
by the International Accounting Standards Board from the
accounting for deferred taxes under IAS 12 and neither
recognises nor discloses information about deferred taxes
related to OECD’s Global Anti-Base Erosion Model Rules
(Pillar Two) income taxes.
Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Research and Development Expenditure Credits (RDEC) are
Goodwill on acquisitions of subsidiaries is included in non-
current assets. Goodwill on acquisitions of joint ventures
is included in the carrying value of equity accounted
investments. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Gains
and losses on the disposal of an entity include the carrying
Other intangible assets arising from business combinations
are recognised at fair value and are amortised over their
expected useful lives, typically between 1 and 16 years.
Internally generated intangible assets are recorded at
cost, including labour, directly aributable costs and any
third-party expenses.
The ‘multi-period excess earnings’ method and the ‘relief-
from-royalty’ method are both used for fair valuing intangible
assets arising from acquisitions. The multi-period excess
earnings method considers the present value of net cash
flows expected to be generated by customer relationships,
by excluding any cash flows related to contributory assets.
The relief-from-royalty method considers the discounted
estimated royalty payments that are expected to be avoided
as a result of the patents or trademarks being owned.
Purchased intangible assets are recognised at cost less
amortisation. Intangible assets are amortised over their
respective useful lives on a straight-line basis as follows:
Intellectual property rights |
2–10 years |
Customer relationships |
1–16 years |
Development costs |
1–5 years |
Other |
1–14 years |
depreciation. Freehold land is not depreciated. Other
tangible non-current assets are depreciated on
a straight-line basis over their useful economic lives
to their estimated residual value as follows:
Freehold buildings |
20–25 years |
Leasehold land and buildings |
Shorter of useful |
economic life and the |
|
period of the lease |
|
Plant and machinery |
3–15 years |
Motor vehicles |
3–5 years |
Aircraft (vehicles) |
10–20 years |
Computers |
3–5 years |
Office equipment |
5–10 years |
and equipment on the basis of expenditure incurred at the
balance sheet date. In the case of assets constructed by the
Group, the value includes the cost of own work completed,
lives, depreciation methods and residual values applied to
property, plant and equipment are reviewed annually and,
for sale assets
At each reporting date the Group assesses whether there is
an indication that an asset may be impaired. If the carrying
amount of any asset exceeds its recoverable amount an
impairment loss is recognised immediately in the income
statement. In addition, goodwill is tested for impairment
annually irrespective of any indication of impairment. If the
carrying amount exceeds the recoverable amount, the
respective asset or the assets in the cash-generating unit
(CGU) are wrien down to their recoverable amounts. The
recoverable amount of an asset or CGU is the higher of its
fair value less costs to sell and its value in use. The value in
use is the present value of the future cash flows expected
to be derived from an asset or CGU calculated using an
appropriate pre-tax discount rate. Impairment losses are
207
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
Leases – as a lessor
Lease income from operating leases where the Group is a
lessor is recognised in income on a straight-line basis over the
lease term (note 25). Initial direct costs incurred in obtaining
an operating lease are added to the carrying amount of the
underlying asset and recognised as expense over the lease
term on the same basis as lease income. The respective leased
assets are included in the balance sheet based on their nature.
Leases – as a lessee
The Group leases various offices, aircraft, equipment and
vehicles. Rental contracts are typically made for fixed
periods of 6 months to 25 years, but may have extension
options as described below.
Contracts may contain both lease and non-lease
components. The Group allocates the consideration in the
contract to the lease and non-lease components based
on their relative stand-alone process. Lease terms are
negotiated on an individual basis and contain a wide range
of different terms and conditions. The lease agreements do
not impose any covenants other than the security interests
in the leases assets that are held by the lessor. Leased
assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and
corresponding liability at the date at which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
ɰ
Fixed payments (including in-substance fixed
payments), less any lease incentives receivable;
ɰ
Variable lease payments based on an index or a rate,
initially measured using the index or rate as at the
commencement date;
ɰ
Amounts expected to be payable by the Group under
residual value guarantees;
ɰ
The exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
ɰ
Payments of penalties for terminating the lease, if the
lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If the rate cannot be readily determined,
which is generally the case for leases in the Group, the
lessee’s incremental borrowing rate is used, being the
rate the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the
right-of-use asset in a similar economic environment with
similar terms, security and conditions. To determine the
incremental borrowing rate, the Group:
ɰ
Where possible, uses recent third-party financing
received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions
since third party financing was received;
ɰ
Uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held by
QinetiQ Plc, which does not have recent third-party
financing; and
ɰ
Makes adjustments specific to the lease, for example
to term, country, currency and security.
The exposure by the Group to potential future increases in
variable lease payments based on an index or rate, which are
not included in the lease liability until they take effect, is not
considered material. When adjustments to lease payments
based on an index or rate take effect, the lease liability is
reassessed and adjusted against the right-of-use asset. Lease
payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising
the following:
ɰ
The amount of the initial measurement of lease liability;
ɰ
Any lease payments made at or before the
commencement date less any lease incentives received;
ɰ
Any initial direct costs; and
ɰ
Restoration costs.
shorter of the asset’s useful life and lease term on a straight-
line basis. If the Group is reasonably certain to exercise
a purchase option, the right-of-use asset is depreciated
over the underlying asset’s useful life. The Group does not
revalue its land and buildings that are presented within
property, plant and equipment and has chosen to do the
same for right-of-use buildings by the Group. Payments
associated with short-term leases of offices, equipment and
vehicles and all leases of low-value assets are recognised
on a straight-line basis as an expense in profit or loss. Short-
term leases are leases with a lease term of 12 months or less.
Lease extension and termination options
Extension and termination options are included in a number of
property and equipment leases across the Group. These are
used to maximise operational flexibility in terms of managing
the assets used in the Group’s operations. The majority of
extension and termination options held are exercisable only
by the Group and not by the respective lessor.
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
208
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
Judgements in determining the lease term
In determining the lease term, management considers all
facts and circumstances that create an economic incentive
to exercise an extension option or not exercise a termination
option. Extension options (or periods after termination
options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated).
For leases of offices and equipment, the following factors
are normally the most relevant:
ɰ
If there are significant penalties to terminate (or
extend), the Group is typically reasonably certain to
end (or not to terminate).
ɰ
If any leasehold improvements are expected to have
a significant remaining value, the Group is typically
reasonably certain to extend (or not terminate).
Otherwise, the Group considers other factors including
historical lease durations and the costs and business
disruptions required to replace the leased asset.
Most extension options in office and vehicles leases
have not been included in the lease liability, because the
Group could replace the assets without significant cost or
business disruption.
As at 31 March 2026 no (undiscounted) potential future
cash outflows have been included in the lease liability for
extension or termination.
The lease term is reassessed if an option is actually
exercised (or not exercised) or the Group becomes
obliged to exercise (or not exercise) it. The assessment of
reasonable certainty is only revised if a significant event of
significant change in circumstance occurs, which affects
this assessment, and that is within the control of the
lessee. During the current financial year, the financial effect
of revising lease terms to reflect the effect of exercising
extension or termination options was nil (FY25: nil) in
Inventory and work-in-progress are stated at the lower
of cost and net realisable value, using the first-in-first-
out cost formula. Work-in-progress and manufactured
finished goods are valued at production cost. Production
cost includes direct production costs and an appropriate
proportion of production overheads. A provision is
established when the net realisable value of any inventory
item is lower than its cost. A ‘market comparison’ technique
is used to fair value inventories acquired through a business
combination. The fair value is determined based on the
estimated selling price in the ordinary course of business
less the estimated costs of completion and sale, and a
reasonable profit margin based on the effort required to
Trade and other receivables are measured at amortised
cost less any impairment losses. Amounts recoverable
on contracts are included in trade and other receivables
and represent revenue recognised in excess of amounts
invoiced. Other receivables will also include insurance
recoveries where we are virtually certain of recovery.
The Group applies the simplified approach when using the
expected credit loss (ECL) impairment model for trade and
other receivables. Under the simplified approach the Group
always measures the loss allowance at an amount equal to
the lifetime expected credit losses for trade receivables.
The Group measures the expected credit losses of trade
and other receivables in a way that reflects a probability-
weighted amount that is determined by evaluating a range of
possible outcomes, the time value of money and supportable
information that is readily available at each reporting date
about past events, current condition and forecasts of future
economic conditions. The ECLs are updated each reporting
Cash and cash equivalents comprise cash at bank and
short-term, highly liquid investments that are readily
convertible into a known amount of cash and which are
subject to an insignificant risk of changes in value. The
Group holds various short-maturity money market funds
(see note 23) across numerous financial institutions which
meet the IAS 7 criteria to be classified as cash equivalents.
In the cash flow statement overdraft balances are included
in cash and equivalents. Cash and cash equivalents includes
Current liabilities include amounts due within the normal
operating cycle of the Group. Deferred income, or ‘contract
liabilities’, is included in trade and other payables and
represents amounts invoiced in excess of revenue
recognised. Interest-bearing current and non-current
liabilities are initially recognised at fair value and then
stated at amortised cost with any difference between the
cost and redemption value being recognised in the income
statement over the period of the borrowings on an effective
interest rate basis. 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.
Capitalised issue costs are released over the estimated
life of the facility or instrument to which they relate using
the effective interest rate method. If it becomes clear
that the facility or instrument will be redeemed early,
209
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event which can be reliably estimated, and it is probable
that an outflow of economic benefits will be required to sele
the obligation. Where appropriate, provisions are determined
by discounting the expected cash flows at an appropriate
discount rate reflecting the level of risk and the time value of
money. Where an exposure is highly likely to be covered by
the Group’s balance sheet when the Group becomes a party
to the contractual provisions of the instrument at the trade
date. The derecognition of a financial instrument takes
place when the Group no longer controls the contractual
right that comprises the financial instrument, when
the instrument expires, or when the instrument is sold,
Financial assets are classified on the Group’s balance sheet
as subsequently measured at amortised cost, fair value
through other comprehensive income or fair value through
profit or loss. This classification is made on the basis of
both the Group’s business model for managing the financial
assets and the contractual cash flow characteristics of the
financial asset.
Financial liabilities are classified on the Group’s balance
sheet as subsequently measured at amortised cost except
for financial liabilities at fair value through profit and loss.
The Group may at initial recognition irrevocably designate
a financial liability as measured at fair value through profit
or loss if a contract contains one or more embedded
derivatives and the host is not an asset within the scope of
Derivative financial instruments are initially recognised
and thereafter held at fair value, being the market value
for quoted instruments or valuation based on models and
The Group’s activities expose it primarily to the financial risks of
changes in foreign currency exchange rates and interest rates.
The Group uses foreign exchange contracts and interest rate
swap contracts to hedge these exposures. The use of financial
derivatives is governed by the Group’s Treasury Policies as
approved by the Board of Directors, which provides wrien
principles on the use of derivatives. The Group does not use
derivative instruments for speculative purposes.
Certain derivative instruments do not qualify for hedge
accounting. These are categorised as ‘fair value through
profit or loss’ and are stated at fair value, with any resultant
gain or loss recognised in the income statement.
The Group designates certain hedging instruments in
respect of foreign currency risk as cash flow hedges. At the
inception of the hedge relationship, the Group documents
the relationship between the hedging instrument and the
hedged item, along with its risk management objectives
and strategy for undertaking various hedging transactions.
The Group also documents, both at hedge inception and on
an ongoing basis, whether the hedging instrument that is
used in a hedging relationship is highly effective in offseing
changes in fair values or cash flows of the hedged item.
For the Group’s cash flow hedges of highly probable
forecast transactions in foreign currencies, the hedge
ratio is 100%, subject to a £100k de Minimis threshold. If
the underlying exposure changes over time, either due
to commercial factors or timing differences, the hedging
instruments will be rebalanced to ensure that the hedge
ratio of 100% is maintained.
Cash flow hedging
Changes in the fair value of derivatives designated as a
cash flow hedge that are regarded as highly effective are
recognised in equity. The ineffective portion is recognised
immediately in the income statement. Where a hedged item
results in an asset or a liability, gains and losses previously
recognised in equity are included in the cost of the asset or
liability. Gains and losses previously recognised in equity
are removed and recognised in the income statement at the
Transactions in foreign currencies are recorded using
the rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are
translated at period-end rates. Any resulting exchange
differences are taken to the income statement. Gains and
losses on designated forward foreign exchange hedging
contracts are matched against the foreign exchange
movements on the underlying transaction.
The individual financial statements of each Group company
are presented in its functional currency. On consolidation,
assets and liabilities of overseas subsidiaries, associated
undertakings and joint ventures, including any related
goodwill, are translated to Sterling at the rate of exchange
at the balance sheet date. The results and cash flows of
overseas subsidiaries, associated undertakings and
joint ventures are translated to Sterling using the
average rates of exchange during the period. Exchange
adjustments arising from the re-translation of the opening
net investment and the results for the period to the
period-end rate are taken directly to equity and reported
Notes to the Consolidated
Financial Statements
35. Basis of preparation and material accounting policies
(continued)
210
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
The Group provides both defined contribution and defined
benefit pension arrangements. The liabilities of the Group
arising from defined benefit obligations are determined using
the projected unit credit method. Valuations for accounting
purposes are carried out bi-annually. Actuarial advice is
provided by external consultants. For the funded defined
benefit plans, the excess or deficit of the fair value of plan
assets less the present value of the defined benefit obligation
are recognised as an asset or a liability respectively.
Per the Scheme rules the Company has an unconditional
right to a refund of any surplus that may arise on cessation
of the Scheme in the context of IFRIC 14 paragraphs 11(b)
and 12 and, therefore, the full net pension asset can be
recognised on the Group’s balance sheet and the Group’s
minimum funding commitments to the Scheme do not give
rise to an additional balance sheet liability.
For defined benefit plans the cost charged to the income
statement consists of administrative expenses and the net
interest income. There is no service cost due to the fact the
plans are closed to future accrual. The net interest income
is reported within finance income and the administration
cost element is charged as a component of operating costs
in the income statement. Actuarial gains and losses and
re-measurement gains and losses are recognised
immediately in full through the statement of comprehensive
income. Contributions to defined contribution plans are
The Group operates share-based payment arrangements
with employees. The fair value of equity-seled awards
for share-based payments is determined on grant and
expensed straight line over the period from grant to
end of the service period. The charges for equity-seled
share-based payments are updated annually for
Where any member of the Group purchases the Company’s
own equity instruments, including pursuant to a share
buy-back programme, the consideration paid, together
with any directly aributable incremental transaction
costs (net of related income tax effects), is recognised as
a deduction from equity aributable to the shareholders of
the Group and presented within treasury shares until such
shares are cancelled or reissued.
Where treasury shares are subsequently cancelled, the
cost of the shares is transferred from treasury shares to the
appropriate reserves within equity. Where treasury shares
are subsequently reissued, any consideration received, net
of any directly aributable incremental transaction costs
and related income tax effects, is recognised within equity
Investments held by the Group are classified as either
a current asset or as a non-current asset. These are
investments in debt and equity instruments that are
classified as at fair value through other comprehensive
income. When these investments are derecognised, the
cumulative gain or loss previously recognised directly in
equity is recognised in the income statement.
The fair value of quoted financial instruments is their bid
price at the balance sheet date. The fair value of unquoted
equity investments is based on the price of the most recent
investment by the Group or a third party, if available, or
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
211
Notes to the Consolidated
Financial Statements
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.
Carrying value of goodwill relating to the US Sector CGU
The Group tests annually whether goodwill has suffered any
impairment. This process relies on the use of estimates of
the future profitability and cash flows of its cash-generating
units which may differ from the actual results delivered. In
addition, the Group reviews whether identified intangible
assets have suffered any impairment. Further details on the
sensitivity of the carrying value of goodwill to changes in the
key assumptions are set out in note 13.
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 27.
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 27 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 £185.4m, the unquoted
corporate bonds of £73.1m and the unquoted equities of
£7.5m are the assets with most uncertainty as to valuation
as at 31 March 2026.
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 ouurn 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
higher or lower than 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
year’s 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.
Critical accounting judgements
Specific, material judgements made by the Directors in
applying the Group’s accounting policies are set out below:
Basis of consolidation
The Group comprises certain entities that are operated
within the terms of a Special Security Arrangement
(‘SSA’). Details of the SSA and QinetiQ’s management of
US subsidiaries are set out in the Corporate Governance
section of this Annual Report. IFRS 10 is the accounting
standard applicable in respect of consolidation of entities.
This does not specifically deal with SSAs. However, having
considered the terms of the SSA, the Directors consider
that the Group meets the requirements of IFRS 10 in respect
of control over such affected entities and, therefore,
consolidates these entities in the consolidated accounts.
The impact of this specific judgement is full consolidation
as opposed to treatment as a 100% associated undertaking.
Treatment as a 100% associated undertaking would reduce
Group revenue by a material amount (c.£300m per annum)
but would have no impact on reported profit, which would
include an equivalent amount of profit reported within
All figures in £ million
Note
31 March
2026
31 March
2025
Non-current assets
Investments in subsidiary undertakings
2
551.6
540.1
551.6
540.1
Current liabilities
Creditors: amounts falling due within one year
3
(127.3)
(107.8)
Net current liabilities
(127.3)
(107.8)
Total assets less current liabilities
424.3
432.3
Net assets
424.3
432.3
Equity
Share capital
4
5.2
5.5
Capital redemption reserve
41.3
41.0
Share premium
147.6
147.6
Retained earnings
230.2
238.2
Total equity
424.3
432.3
The profit for the year ended 31 March 2026 was £176.6m (FY25: profit of £146.9m).
The financial statements of QinetiQ Group plc (company number 4586941) on pages 212 to 215 were approved by the Board of
Directors and authorised for issue on 21 May 2026 and signed on its behalf by:
Steve Wadey
Martin Cooper
Group Chief Executive Officer
Group Chief Financial Officer
Company balance sheet
As at 31 March
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
212
STRATEGIC REPORT
FINANCIAL STATEMENTS
GOVERNANCE
All figures in £ million
Share
capital
Capital
redemption
reserve
Share
premium
Retained
earnings
Total
equity
At 1 April 2025
5.5
41.0
147.6
238.2
432.3
Profit for the year
–
–
–
176.6
176.6
Purchase of own shares
(0.3)
0.3
–
(146.9)
(146.9)
Dividend paid
–
–
–
(48.7)
(48.7)
Share-based payments
–
–
–
11.0
11.0
At 31 March 2026
5.2
41.3
147.6
230.2
424.3
At 1 April 2024
5.7
40.8
147.6
205.2
399.3
Profit for the year
–
–
–
146.9
146.9
Purchase of own shares
(0.2)
0.2
–
(74.9)
(74.9)
Dividend paid
–
–
–
(47.9)
(47.9)
Share-based payments
–
–
–
8.9
8.9
At 31 March 2025
5.5
41.0
147.6
238.2
432.3
The capital redemption reserve is not distributable and was created following redemption of preference share capital.
Company statement of changes in equity
For the year ended 31 March
213
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 permied 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.
ɰ
A cash flow statement and related notes
ɰ
Disclosures in respect of capital management
ɰ
The effects of new but not yet effective IFRSs
ɰ
Disclosures in respect of the compensation of key management personnel
ɰ
IAS 24 in respect of related party transactions entered into between two or more members of a group
ɰ
IFRS 2 Share Based Payments in respect of Group-seled share-based payments
ɰ
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-seled 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-seled 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 29 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
All figures in £ million
31 March
2026
31 March
2025
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
113.7
102.2
Capital contributions arising from share-seled liabilities
13.6
13.6
Total investment in subsidiary undertakings
551.6
540.1
The increase in investments in subsidiary undertakings in FY26 mainly relates to equity-seled schemes during the year.
A list of all subsidiary undertakings of QinetiQ Group plc is disclosed in note 34 to the Group financial statements.
Notes to the Company Financial Statements
ADDITIONAL INFORMATION
QinetiQ Group plc
Annual Report and Accounts 2026
214
STRATEGIC REPORT
FINANCIAL STATEMENTS
GOVERNANCE
3. Creditors: amounts falling due within one year
All figures in £ million
31 March
2026
31 March
2025
Amounts owed to Group undertakings
127.3
107.8
Creditors: amounts falling due within one year
127.3
107.8
Amounts owed to Group undertakings are unsecured, repayable on demand and bear no interest, with the exception of a
£39.7m intercompany loan which bears interest at a margin of 1.44% over SONIA.
4. Share capital
The Company’s share capital is disclosed in note 28 to the Group financial statements.
5. Share-based payments
The Company’s share-based payment arrangements are set out in note 29 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 2026
(2025: £21.0m) in the ordinary course of business. The Company has also provided a guarantee of £333.6m as at 31 March 2026
(2025: £332.7m) in respect of the term loan.
7. Other information
Directors’ emoluments, excluding Company pension contributions for the year to 31 March 2026, were £4.9m (FY25: £4.1m).
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 118 in the Directors’ Remuneration Report.
The remuneration of the Company’s auditors for the year to 31 March 2026 was £0.6m (FY25: £0.6m), 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 2026 was nil (FY25: nil).
Notes to the Company
Financial Statements
215
Additional
information
217
Five-year financial summary
218
Additional financial information
219
Glossary
220
Alternative performance
measures (APMs)
221
Shareholder information
224
Company information and advisers
Highly skilled scientists at QinetiQ’s
Farnborough site delivering specialist
engineering biology capability.
QinetiQ Group plc
Annual Report and Accounts 2026
216
STRATEGIC REPORT
GOVERNANCE
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS
FY26
FY25
FY24
FY23
FY22
2
EMEA Services
£m
1,529.2
1,477.7
1,417.4
1,179.3
1,059.2
Global Solutions
£m
393.4
453.9
494.7
401.4
261.2
Revenue
£m
1,922.6
1,931.6
1,912.1
1,580.7
1,320.4
EMEA Services
£m
182.3
169.0
163.4
137.1
135.6
Global Solutions
£m
35.6
16.4
51.8
41.8
1.8
Operating profit from segments
1
£m
217.9
185.4
215.2
178.9
137.4
Operating profit margin from segments
1
%
11.3
9.6
11.3
11.3
10.4
Statutory operating profit/(loss)
£m
169.8
(90.5)
192.5
172.8
123.7
Underlying operating profit
1
£m
247.2
215.4
242.4
196.3
143.6
Underlying profit before tax
1
£m
229.6
198.6
227.0
189.7
142.2
Profit/(loss) before tax
£m
155.1
(106.3)
182.7
192.0
125.9
Profit/(loss) aributable to owners of the Company
£m
107.5
(185.7)
139.6
154.4
90.0
Underlying basic EPS
1
Pence
31.5
26.1
29.4
26.5
20.6
Basic EPS
Pence
20.1
(33.0)
24.2
26.8
15.7
Diluted EPS
Pence
19.8
(33.0)
23.8
26.5
15.5
Dividend per share
Pence
11.00
8.85
8.25
7.7
7.3
Underlying net cash flow from operations
1
£m
343.2
316.2
320.2
270.1
220.7
Net (debt)/cash
1
£m
(159.1)
(133.2)
(151.2)
(206.9)
225.1
Average number of employees
7,722
8,530
8,459
7,443
6,911
Orders excluding LTPA amendments and extensions
£m
1,864.0
1,954.8
1,740.4
1,724.1
1,226.6
1
Underlying measures are stated before specific adjusting items. Definitions of underlying measures of performance are provided on
page 220. Underlying financial measures are presented because the Board believes these provide a beer representation of the Group’s
long-term performance trend. For details of specific adjusting items refer to note 4 and note 35 of the financial statements.
2
FY22 was restated in FY23 due to a change in accounting policy for Research and Development Expenditure Credits (RDEC).
Five-year financial summary
217
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
2026
12 months
to 31 March
2025
£/US$ – opening
1.29
1.26
£/US$ – average
1.34
1.28
£/US$ – closing
1.32
1.29
£/A$ – opening
2.07
1.94
£/A$ – average
2.03
1.96
£/A$ – closing
1.92
2.07
Treasury policy
The Treasury policy is approved by the Audit Commiee. There is
a structured approach to financial risk management, mitigating
exposures to currency, liquidity, counterparty and credit risks as
outlined in note 26. 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 permied.
ɰ
Currency risk – The Group’s income and expenditure is largely seled
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.
Uncommied 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
permied hedge period is five years. Translation exposures arising
from the consolidation of overseas subsidiaries in foreign currencies
are not hedged.
ɰ
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 permied to
manage interest rate exposures.
ɰ
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 permied
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 £290m,with
an with an accordion option to increase the facility size to £400m,
maturing on 22 April 2029 and a term loan of £333.6m maturing on
27 September 2027.
ɰ
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.
ɰ
Tax planning – QinetiQ manages both effective tax rate (ETR) and
cash tax 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.
ɰ
Relationships with tax authorities – QinetiQ is commied 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.
ɰ
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.
ɰ
Governance – The Board has approved the strategy. The Audit
Commiee 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 2026 were £44.4m (FY25: £48.6m).
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
£3.2m less than the total expense charged to the income statement.
QinetiQ Group plc
Annual Report and Accounts 2026
218
STRATEGIC REPORT
GOVERNANCE
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS
Glossary
ABP
Annual Bonus Plan
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
BBP
Bonus Banking Plan
C5ISTAR
Command, Control, Computers,
Communications, Cyber, Intelligence,
Surveillance and Reconnaissance
CCASCOE
Climate Change and Security Centre
of Excellence
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CGU
Cash Generating Unit
CMI
Continuous Mortality Investigation
COO
Chief Operating Officer
CPI
Consumer Price Index
CR
Corporate Responsibility
CSDDD
Corporate Sustainability Due Diligence Directive
CSRD
Corporate Sustainability Reporting Directive
CTAP
Climate Transition Action Plan
DSEI
Defence and Security Equipment International
DSP
Deferred Share Plan
DSTL
UK Defence Science and
Technology Laboratories
EAP
Employee Assistance Programmes
EBITDA
Earnings before interest, tax,
depreciation and amortisation
ECL
Expected credit loss
EDP
Engineering Delivery Partner
eLoran
Enhanced Long-Range Navigation
EMEA
Europe, Middle East and Australasia
EPS
Earnings per share
ESG
Environmental, Social, Governance
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
FTSE
The UK Main Market Stock Exchange
FY
Financial year (ending 31 March)
GC100
The Association of General Counsel
and Company Secretaries
GEV
Global Employee Voice
GHG
Greenhouse Gas
HMRC
His Majesty’s Revenue and Customs
HVO
Hydrotreated Vegetable Oil
IAS
International Accounting Standards
ICRS
Institute of Corporate Responsibility
and Sustainability
IFRIC
International Financial Reporting
Interpretations Commiee
IFRS
International Financial Reporting Standards
ISP
Integrated Strategy-to-perform Plan
ISSB
International Sustainability Standards Board
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
NATO
North Atlantic Treaty Organisation
OECD
Organisation for Economic Co-operation
and Development
PPS
Prudential Platinum Scheme
PTSD
Post Traumatic Stress Disorder
PV
Photovoltaic
QLC
QinetiQ Leadership Community
QLT
QinetiQ Leadership Team
QTS
QinetiQ Target Systems
QVRN
QinetiQ Veterans and Reservists Network
R&D
Research and Development
RCP
Representative Concentration Pathways
RDEC
Research and Development Expenditure Credit
ROCE
Return on Capital Employed
RSP
Restricted Share Plan
SBTi
Science Based Targets initiative
SCO
Strategic Capabilities Office
SDA
Space Development Agency
SECR
Streamlined Energy and Carbon Reporting
SID
Senior Independent Director
SIP
Share Incentive Plan
SME
Small to Medium Sized Enterprises
SOFR
Secured Overnight Financing Rate
SONIA
Sterling Overnight Index Average
SQEP
Suitably Qualified and Experienced Personnel
SSA
Special Security Agreement
SSSI
Site of Special Scientific Interest
STEM
Science, Technology, Engineering and Maths
T3E
Test, Trials, Training & Evaluation
T&E
Test and Evaluation
TARS
Tethered Aerostat Radar System
TCFD
Taskforce on Climate-related
Financial Disclosures
The Code
2024 UK Corporate Governance Code
Guidelines of the Financial Reporting
Council to address the principal aspects
of corporate governance in the UK
TISC
Transparency in Supply Chains
TNFD
Taskforce on Nature-related
Financial Disclosures
TRIR
Total Recordable Incident Rate
TSR
Total shareholder return
UAS
Unmanned Aerial System
UK GAAP
UK Generally Accepted Accounting Practice
UKLR
UK Listing Rules govern how companies list
securities on the London Stock Exchange
UK SRS
UK Sustainability Reporting Standards
219
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 commied 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 24
Underlying operating
cash conversion or
cash conversion ratio
The ratio of underlying net cash from operations to underlying EBITDA
Note 24
Free cash flow
Net cash flow from operations, including exceptional operating cash flows,
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 24
Net debt
Net debt as defined by the Group combines cash and cash equivalents with
borrowings and other financial assets and liabilities, primarily deferred financing
costs, derivative financial instruments and lease liabilities.
Note 23
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
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 and integration costs in respect of business
acquisitions and disposals; costs and associated impacts of group-wide restructuring
programmes, digital investment; tax impact of the preceding items and significant
non-recurring tax and RDEC movements
Note 4
Alternative performance
measures (APMs)
QinetiQ Group plc
Annual Report and Accounts 2026
220
STRATEGIC REPORT
GOVERNANCE
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS
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
maers, should be addressed to Equiniti:
ɰ
Change of personal details such as change of name
or address
ɰ
Lost share certificates
ɰ
Dividend payment enquiries
ɰ
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, Highdown House, Yeoman Way, Worthing,
BN99 6DA
By telephone:
+44 0371 384 2021*
By email:
You can send an email enquiry securely from
Equiniti’s website, at help.shareview.co.uk
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.
*
Lines are open 8.30am to 5.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales).
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 can register for electronic
communications at www.shareview.co.uk and may
also cast their vote for the 2026 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.
221
Shareholder
information
Share price
Details of current and historical share prices can be found on the Company’s website at www.qinetiq.com/investors
Analysis of share register at 31 March 2026
By type of holder
Total number
of holdings
Percentage
of holders
Total number
of shares
Percentage
issued Capital
Individual
5,000
87.55%
4,382,456
0.84%
Institutions and others
711
12.45%
520,374,861
99.16%
Total
5,711
100.00%
524,757,317
100%
By size of holding
1–500
3,846
67.34%
703,341
0.13%
501–1,000
418
7.32%
331,544
0.06%
1,001–2,500
515
9.02%
900,451
0.17%
2,501–5,000
283
4.96%
1,017,944
0.19%
5,001–10,000
152
2.66%
1,101,885
0.21%
10,001–100,000
244
4.27%
8,734,598
1.67%
Over 100,000
253
4.43%
511,967,554
97.57%
Total
5,711
100.00%
524,757,317
100%
Share fraud reporting:
www.fca.org.uk/consumers/report-scam
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/consumers/protect-yourself-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 geing 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/consumers/report-scam 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.
QinetiQ Group plc
Annual Report and Accounts 2026
222
STRATEGIC REPORT
GOVERNANCE
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS
Shareholder
information
Key dates
For a list of upcoming key dates, please visit:
www.qinetiq.com/en/investors
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.
223
Company information
and advisers
Registered office
Ively Road
Farnborough
Hampshire
GU14 0LX
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 Limited
Highdown House
Yeoman Way
Worthing
BN99 3HH
Corporate brokers
Barclays
1 Churchill Place
London
EC14 5HP
Deutsche Bank 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 and Accounts 2026
224
STRATEGIC REPORT
GOVERNANCE
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS
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QinetiQ Group plc
Cody Technology Park
Ively Road
Farnborough
Hampshire
GU14 0LX
Tel: +44 (0) 1252 392000
www.QinetiQ.com
Company Registration Number: 4586941