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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Qinetiq Group Plc | LSE:QQ. | London | Ordinary Share | GB00B0WMWD03 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.20 | 0.06% | 341.40 | 341.20 | 341.60 | 344.20 | 337.80 | 340.80 | 557,350 | 15:14:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Systems Service | 1.58B | 154.4M | 0.2681 | 12.61 | 1.95B |
From Apr 2019 to Apr 2024
TIDMQQ.
RNS Number : 2834R
QinetiQ Group plc
13 June 2018
QINETIQ GROUP PLC
13 June 2018
Availability of Annual Report and Accounts 2018 and Notice of 2018 Annual General Meeting
QinetiQ Group plc has today published the following documents:
-- QinetiQ 2018 Annual Report and Accounts; -- Notice of 2018 Annual General Meeting; and -- Chairman's Letter to Shareholders.
The documents are available to view or download from the Company's website at www.qinetiq.com/investors.
In compliance with Listing Rule 9.6.1, copies of the above documents, together with a copy of the Form of Proxy for the 2018 Annual General Meeting, have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM.
These documents are today being posted or otherwise made available to shareholders.
The 2018 Annual General Meeting will be held at 11.00 am on Wednesday, 25 July 2018 at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2AG.
In compliance with paragraph 6.3.5 of the Disclosure Guidance and Transparency Rules, the information in respect of Principal Risks, Related Party Transactions and the Directors' Responsibility Statement, contained in the Appendix, is extracted from the Annual Report and Accounts and should be read in conjunction with the Group's preliminary results announcement of 24 May 2018 (the 'Preliminary Results') which can be viewed on the Company's website at www.qinetiq.com/investors. The information in the Appendix and the Preliminary Results together constitute the material required by DTR 6.3.5 to be communicated in unedited full text through a Regulatory Information Service. This is not a substitute for reading the full Annual Report and Accounts. Page and note references in the Appendix refer to page numbers and notes in the 2018 Annual Report and Accounts.
Enquiries:
Jon Messent - Company Secretary +44 (0) 1252 392000 Ian Brown - Group Head of Investor Relations +44 (0) 7908 251123 Press Office +44 (0) 1252 393500
APPIX
PRINCIPAL RISKS
AN INTERGRATED APPROACH TO RISK MANAGEMENT
Risk management framework
Effective risk management plays an integral role in everything we do: ensuring we utilise the Group-wide risk management framework to inform our decision-making, support the successful delivery of our objectives and increase our operational efficiency.
Our strategic focus on commercial innovation and changes in our core customers' approach to risk are key business drivers shaping our application of risk management. Proposing innovative business models and taking a more outputs-based approach to existing and new contracts are examples of how we are taking on more risk to pursue opportunities, while simultaneously innovating for our customers' advantage.
Our risk management framework, including key responsibilities is shown to the right. The reports of the Audit Committee and Risk & CSR Committee can be found on pages 55 to 61. Details of the Group's system of risk management and internal control can be found in the corporate governance statement on pages 50 to 54.
Hot Features
Premium
Top Board of Directors
down Responsible for effective risk management across
QinetiQ Group. Sets risk appetite and assesses principal
risks.
Bottom
up
Risk & CSR Committee Audit Committee
Focuses on risks where the Focuses on risks where the
primary impact is non-financial. primary impact is financial.
---------------------------------- ---------------------------------
Executive Committee
Identifies and monitors the principal risks, as
well as the material risks (including operational)
reported from the Business and Group Functions.
---------------------------------------------------------------------
Risk Management Internal Audit
Designs and facilitates Provides assurance to senior
the risk management processes management and the Board
across the organisation, on the effective implementation
provides risk expertise of risk management processes
and support to the businesses and internal control systems,
and reports risk information through an ongoing programme
across the Group. of risk-based audits.
---------------------------------- ---------------------------------
Business and Operational Management
Own and review Business and Operational risks, operate
controls and implement mitigation actions.
---------------------------------------------------------------------
QinetiQ risk appetite
The Board defines and reviews its tolerance of risk through establishing a clear risk appetite and setting appropriate delegations of authority to the executive and senior leaders. QinetiQ focuses on those critical risk areas necessary to achieve our strategic goals. The risk appetite is articulated by defining three categories which describe the balance of scrutiny and mitigation activity against likely benefit or reward:
Cautious
Avoidance of uncertainty - with negligible or low residual risk. Applying innovation prudently where the risks are fully understood.
Balanced
Preference for delivery options that have a low or moderate degree of residual risk. Applying innovation only where successful delivery is likely.
Eager
Willing to consider all delivery options despite greater inherent risk and eager to be innovative.
Commercial
Opportunities relating to Eager
increased market share where
we have proven delivery
into existing markets
----------------------------
Opportunities that translate Balanced to Eager
proven delivery into new
markets
----------------------------
Opportunities that translate Balanced
new capability/delivery
into existing customers.
----------------------------
Opportunities that involve Cautious to Balanced
new capability or delivery
into new markets.
----------------------------
Operational
Operational delivery Cautious to Balanced
--------------------------
Compliance with legal and Cautious
regulatory requirements
--------------------------
Risk register
The Group risk register consists of material risks relating to effective delivery of our strategy. The Board recognises that some risks may be affected by factors outside the control of the Company and also recognises that however robust the risk management processes are, they cannot provide absolute assurance and unknown risks may manifest without warning. The Company has processes in place to deploy appropriate management to such risks.
Note: The Transformation Programme risk included in the 2017 Annual Report has been retired following the successful completion of the initial Programme. However, focus remains on ensuring subsequent changes are embedded.
Strategic risks
UK Defence Test and Evaluation International strategy
strategy
Risk Risk
UK Government budget constraints Plans to grow our international
lead to reduced spending business may be impacted
in the core markets in which by external influences outside
the Group operates. EU exit of our control, such as geopolitical
causes a loss of market risks, or specific risks
confidence and reduction arising from working in new
in collaborative EU funding. markets.
--------------------------------------
Impact Impact
A reduction in revenue and Unable to realise expected
associated profitability growth in the planned time-frames.
from the Group's government
and defence contracts.
--------------------------------------
Mitigation Mitigation
Our strategy is focused Our international strategy
on leading and modernising is focused on the markets
UK Test and Evaluation in we feel we have the best
support of our customers' routes to access with the
objectives. most appropriate products
or services.
Proactive engagement with
our major customers allows Adopting a focused approach
us to support their objectives ensures we can closely monitor
and our investment into our progress, adapting and
core contracts helps to responding as necessary.
ensure that we are able
to provide the right services We undertake extensive due
as the threat environment diligence, taking the appropriate
continues to evolve. professional advice to ensure
structural, regulatory, legal
Read more in the Strategic and political risks are understood
report on page 8. and minimised.
We partner, where appropriate,
with high-quality local businesses
to leverage their infrastructure
and de-risk the process.
Read more about our addressable
markets on page 16.
--------------------------------------
Metrics Metrics
* Customer satisfaction - All financial KPIs
- International revenue
- All financial KPIs
--------------------------------------
Responsibility Responsibility
Group Director Business Managing Director International
Development
--------------------------------------
Risk appetite Risk appetite
Eager Balanced to Eager
--------------------------------------
Likelihood/Impact Likelihood/Impact
Medium/High Medium/High
--------------------------------------
Proximity/Velocity Proximity/Velocity
0 -1 years / medium 0 -1 years / medium
--------------------------------------
Strategic risks
Innovation strategy A material element Single source contract
of the Group's revenue regulations
is derived from
one contract
Risk Risk Risk
Failure to create The Long Term Partnering Group performance
a culture of innovation Agreement (LTPA) is adversely affected
or to invest adequately is a 25-year partnering by application of
in, or create value relationship with regulations from
from, our innovation UK MOD to provide the Single Source
investment. As test, evaluation, Regulations Office
well as the risks and training services. (SSRO).
arising from the UK Government budget
introduction of constraints could
disruptive technologies/alternative lead to a material
business models. change to the contract.
---------------------------------------- ------------------------------
Impact Impact Impact
Negative impact The LTPA directly The regulations
on the Group's contributes a material could have an adverse
market position, proportion of the impact on the Group's
competitiveness, Group's revenue financial performance.
and future growth. and earnings.
---------------------------------------- ------------------------------
Mitigation Mitigation Mitigation
We have a strong Our aim is to provide Our strategy to
track record of our customer with lead and modernise
innovation. the capabilities UK T&E and invest
they need to test in our core contracts
Our overall strategy and train against allows us to put
helps us to ensure current and future a greater volume
that we focus our threats in a cost-effective of our UK single
innovation on areas manner - leading sourced work onto
with clear commercial and modernising longer-term firm-price
opportunities. UK T&E. contracts, reducing
the proportion of
We are focused As a business we our revenues exposed
on effective collaboration have become more to changes
to find the best customer focused in the SSRO rate.
routes to market and we are applying
for our technology, this to understanding Our growing international
such as our partnership requirements for business provides
with Rockwell Collins. the remainder of the opportunity
the LTPA which we for us to earn higher-margin
Our operating model, are in the process work which further
based on matrix of negotiating. mitigates SSRO margin
working, helps pressure on qualifying
to ensure that Our recent investment work within the
any internal barriers into a core part UK.
to collaboration of this contract
and knowledge sharing continues to ensure QinetiQ continues
are removed. it meets our customer's to support a joint
expectations and industry position
Read more about remains relevant in refining the
our approach to in an evolving threat SSRO framework and
innovation on page environment. its practical application.
15.
---------------------------------------- ------------------------------
Metrics Metrics Metrics
- Customer satisfaction * All financial KPIs except orders - Customer satisfaction
- Employee engagement - All financial
- IRAD investment KPIs
- Customer satisfaction
---------------------------------------- ------------------------------
Responsibility Responsibility Responsibility
Group Director Managing Director Chief Financial
Business Development Maritime, Land and Officer
Weapons Group Director
Test & Evaluation
---------------------------------------- ------------------------------
Risk Appetite Risk Appetite Risk Appetite
Balanced Balanced Cautious
---------------------------------------- ------------------------------
Likelihood/Impact Likelihood/Impact Likelihood/Impact
Medium/High Medium/High Medium/High
---------------------------------------- ------------------------------
Proximity/Velocity Proximity/Velocity Proximity/Velocity
1 - 2 years / low 1 - 2 years / low 0 - 1 years / medium
---------------------------------------- ------------------------------
Operational risks
Recruitment and Significant breach Security and IT
retention of relevant systems
laws and regulations
Risk Risk Risk
The Group operates The Group operates A breach of physical
in many specialised in highly regulated or data security,
engineering, technical environments and cyber- attacks or
and scientific recognises that IT systems failure
domains where key non-compliance has could have an adverse
capabilities and the potential to impact on our customers'
competencies may compromise our ability operations.
be lost through to conduct business
failure to recruit in certain jurisdictions
and retain employees and would potentially
or a lack of domain-specific have an impact on
graduates leads a variety
to a future skills of stakeholders.
shortage.
------------------------------------------ -----------------------------
Impact Impact Impact
Delivery of business Failure to comply Significant reputational
strategies, plans with particular damage, as well
and projects would regulations could as
be impacted negatively result in a combination the possibility
of fines, penalties, of exclusion from
civil or criminal some types of government
action, suspension contracts resulting
or debarment from in reduced orders,
government contracts, revenue and profit
as well as damage
to the QinetiQ brand.
------------------------------------------ -----------------------------
Mitigation Mitigation Mitigation
Ensuring regular Instilling the right Data security is
communication and behaviours and culture assured through
greater connectivity within QinetiQ is a multi-layered
for our people a key part in minimising approach that provides
via the Employee the risks. a hardened environment,
Engagement Group, including robust
face-to-face In addition, the physical security
communications, Group's robust policy, arrangements and
and the launch procedures and mandatory data resilience
of the Global Portal, training defines strategies.
our new intranet. clear expectations
for the Group and Information systems
Helping our people its employees. are designed with
to develop and consideration to
fulfil their potential Key areas of focus single points of
via the QinetiQ include: failure and comply
Academy and clear Safety of product with relevant accreditation
succession planning. and services, health, standards. Mandatory
safety & environment, security awareness
Ensuring we have international trade training for all
access to talent controls, bribery staff.
now and in the and ethics, where
future such as the Group adopts
the STEM outreach a zero tolerance
programme and as approach to bribery
founding members and corruption.
of The 5% Club.
Read more on page
Read more about 34.
our people on page
32.
------------------------------------------ -----------------------------
Metrics Metrics Metrics
- Employee engagement * Health and safety - Cyber dashboard
* Apprentices and graduates - Security dashboard
* Mandatory training compliance
* Voluntary employee turnover
* Commercial intermediary monitoring
------------------------------------------ -----------------------------
Responsibility Responsibility Responsibility
Group Director Company Secretary/Group Chief Financial
Human Resources General Counsel Officer
------------------------------------------ -----------------------------
Risk Appetite Risk Appetite Risk Appetite
Balanced Cautious Cautious
------------------------------------------ -----------------------------
Likelihood/Impact Likelihood/Impact Likelihood/Impact
Low/Medium Medium/High Medium/High
------------------------------------------ -----------------------------
Proximity/Velocity Proximity/Velocity Proximity/Velocity
2 + years / low 0 - 1 years / high 0 - 1 years / high
------------------------------------------ -----------------------------
RISK MANAGEMENT IN ACTION
Using our risk appetite to inform our approach to international business
Our international business growth targets are ambitious and in order to achieve these we need to be clear about the specific risks we face and the level of risk we are prepared to accept (see 'International strategy' risk). We have a Balanced to Eager approach to opportunities where we are able to translate proven capabilities into new markets; with a preference for delivery options that have a high chance of success but a low or moderate degree of residual delivery risk.
Our approach to developing our presence in new markets has been to amalgamate local knowledge, business capability, regulatory awareness and cultural values, with our proven capability and technology. The most advantageous approach to achieving this outcome has been to utilise partnerships which deliver a solid platform for growth, minimising our capital investment requirements and deliver an accretive low risk value proposition. Minimising our residual risk exposure in this way strengthens the realisation of sustainable and profitable revenue growth for the International business.
Investing into the Long Term Partnering Agreement (LTPA) - Considering risk in how we deploy our capital
Considering the balance between risk and reward is a key part of determining how and where we deploy our capital. We have an Eager risk appetite for opportunities which
increase market share where we have proven delivery into existing markets, ensuring we have considered all delivery options and are innovative.
The investment we are making into the LTPA is an example of how risk-based decision-making has been used to identify and progress an opportunity for the mutual benefit of our customer and our business, and is aligned to our strategy of leading and modernising UK T&E.
See risks 'UK Defence Test and Evaluation strategy' and 'A material element of the Group's revenue is derived from one contract'.
This approach made strategic sense: the long-term contractual revenues, margin and capital repayment profiles, which provide a reasonable rate of return, were complemented by the opportunities to attract a growing share of international work to our UK facilities.
LONGER-TERM VIABILITY ASSESSMENT
Assessing the prospects of the Group
The Group's corporate planning processes involve the following individual processes covering differing time frames:
1. An annual Integrated Strategic Business Plan (ISBP) process that looks at the financial outlook for the following five years. This process commences with an assessment of the orders pipeline producing an Order Intake Scenario. A review of the phased delivery profile and the cost base required to support this enables generation of base-case, high-case and low-case profit forecasts. Capex and working capital requirements are also collected, reviewed, approved and a cash flow produced for the Plan period;
2. An annual budget process that covers the first year of the five-year planning horizon in detail;
3. A bi-annual forecast process to update the view of the first budget year (the year which would be in progress);
4. A rolling monthly 'latest best estimate' process to assess significant changes 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 downside risk scenarios are designed to explore the resilience of the Group to the potential impact of all the significant risks set out on pages 22 to 25, or 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 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 60, is taken into account. It is assumed that existing, undrawn bank facilities could be re-financed before they mature in FY20.
Alongside the annual review of risk scenarios applied to the strategic plan, performance is rigorously monitored to alert the Board and Executive Committee 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 three-year period to
31 March 2021. This is within the period covered by our strategic planning process and is subject to stress-testing and scenario planning around potential risks. It
has been selected because it presents the Board and readers of the Annual Report with a reasonable degree of confidence whilst still providing an appropriate longer- term outlook.
Confirmation of longer-term viability
As noted on page 53, 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 2021.
RELATED PARTY TRANSACTIONS
This statement is extracted from note 16 in respect of equity accounted investments which can be found on page 111 of the Annual Reports and Accounts.
During the year ended 31 March 2018 there were sales to associates and joint ventures of GBP10.4m (2017: GBP3.4m). At the year-end there were outstanding receivables from associates and joint ventures of GBP4.5m (2017: GBP0.4m).
DIRECTORS' RESPONSIBILITY STATEMENT
This statement is in compliance with DTR 4.1.12 and relates to and is extracted from page 80 of the Annual Report and Accounts and is signed by order of the Board by Jon Messent, Company Secretary. Details of the Board of Directors of QinetiQ Group plc can be found on pages 48 and 49 of the Annual Report and Accounts. Responsibility is for the full Annual Report and Accounts and not the extracted information presented in this announcement or in the Preliminary Results.
Responsibility statement of the Directors in respect of the Annual Report
The Directors in office as at the date of this report confirm that to the best of their knowledge:
-- The Company financial statements, which have been prepared in accordance with the United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company
-- The Group's financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group
-- The management reporting (comprising the Directors' report and the Strategic report) includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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