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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.60 | -1.34% | 339.80 | 339.60 | 340.20 | 346.40 | 338.80 | 342.00 | 318,497 | 13:25:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Systems Service | 1.58B | 154.4M | 0.2681 | 12.68 | 1.96B |
From Apr 2019 to Apr 2024
TIDMQQ.
RNS Number : 9792B
QinetiQ Group plc
12 June 2019
QINETIQ GROUP PLC
12 June 2019
Availability of Annual Report and Accounts 2019 and Notice of 2019 Annual General Meeting
QinetiQ Group plc (the 'Company') has today published the following documents:
-- QinetiQ 2019 Annual Report and Accounts; -- Notice of 2019 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 2019 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 2019 Annual General Meeting will be held at 11.00 am on Wednesday, 24 July 2019 at the offices of Ashurst LLP, Fruit and Wool Exchange, 1 Duval Square, London E1 6PW.
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 23 May 2019 (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 2019 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
How we protect our business
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, supporting the successful delivery of our objectives and increasing our operational efficiency. Our Group Head of Enterprise Risk Management is responsible for designing and facilitating the risk management processes across the organisation, provides risk expertise and support to the businesses and reports risk information across the Group including to the Executive Committee, Audit and Risk & CSR Committees and the Board.
Our focus on commercial innovation and changes in our customers' approach to risk are business drivers shaping our application of risk management. We develop innovative business models and are taking more outputs-based approaches to contracts; taking on more risk to pursue.
Risk management and assurance activity
Three lines of defence model
Our risk management and assurance activity is formed of three lines of defence, each reporting to the Executive Committee, to the Board's Audit Committee in respect of financial risks, and the Board's Risk & CSR Committee in respect of non-financial risks. The first line of defence is performed by the businesses, through managing activities in accordance with established operating principles; the second line is performed by the oversight functions, including the enterprise risk management and safety and governance teams; and the third line is performed by the internal audit team and external providers.
Hot Features
Premium
Board
Responsible for effective risk management across the QinetiQ
Group. Sets risk appetite and assesses principal risks
Audit Committee/Risk & CSR Committee
* Receive reports from the assurance functions
* Risk deep dives
* The Audit Committee focuses primarily on risks with
financial impacts
* The Risk & CSR Committee focuses primarily on risks
with non-financial impacts
Executive Committee
Identifies and monitors the principal risks, as well as the
material risks (including operational) reported from the businesses
and Group functions
Risk owners Enterprise risk management Independent
* Managers identify and evaluate risks * Risk Management and other oversight functions with risk assurance
limited independence * Internal Audit and independent assurance providers
* Design and operation of internal controls to mitigate
risks * Design and facilitate the risk management processes * Review and evaluate risk management activity and
across the Group, provide risk expertise and suppor provide assurance of the effectiveness of the control
t environment to manage risks
* Application of delegated authorities, policies, to the businesses and functions
procedures and codes of practice
* Manage the external confidential reporting process
* Report to the Board and the Executive Committee 2nd
line of defence
1st line of defence * Report to the Board and the Executive Committee
3(rd) line of defence
--------------------------------------------------------------------- ------------------------------------------------------------
QinetiQ risk appetite
The Board identifies and reviews its tolerance of risk by establishing a clear risk appetite and setting appropriate delegations of authority to the executive and senior leaders. We focus on those critical risk areas necessary to achieve our strategic goals. Risk appetite is articulated by defining three categories which balance scrutiny and mitigation activity against likely benefit:
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 or 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
-------------------------
The Group Risk Register consists of material risks relating to effective delivery of our strategy. The Board and Executive Committee look to assess these principal risks from a number of different perspectives, including both individually and collectively. 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 and utilise lessons learned processes across the organisation such that we continuously strive for improvement.
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
we operate. This, and modernising of our control, such as
ways of evaluating capability, geo-political risks, or
results in a risk that our specific risks arising from
approaches/offerings may working in new markets and
not remain relevant. EU exit globalised operations.
causes a loss of market confidence
and reduction in collaborative
EU funding.
-----------------------------------
Impact Impact
A reduction in revenue and Unable to realise expected
associated profitability growth in the planned timeframes.
from the Group's government
and defence contracts.
-----------------------------------
Mitigation Mitigation
Our strategy is focused on Our international strategy
leading and modernising UK is focused on the markets
test and evaluation in support we feel we have the best
of our customers' objectives. routes to access with the
Proactive engagement with most appropriate products
our major customers enables or services.
us to support their objectives. Adopting a focused approach
Our investments into contracts ensures we can closely monitor
enhance our offerings that our progress, adapting and
support our customers with responding as necessary.
their efficiency challenges We undertake extensive due
as well as ensuring that diligence, taking the appropriate
we provide the right services professional advice to ensure
as the threat environment structural, regulatory,
continues to evolve. We are legal and political risks
delivering new types of evaluation are understood and minimised.
and increasingly moving towards We partner with or acquire,
modelling and synthetics. where appropriate, quality
We continue to grow our access local businesses to leverage
to international growth from their infrastructure and
test and evaluation and post de-risk local market access.
Brexit will maintain relationships
with the UK Government to Read more on page 24 - Strategic
support bilateral relationships progress International
within Europe.
Read more on page 24 - Strategic
progress UK T&E
-----------------------------------
Metrics Metrics
* Customer satisfaction - All financial KPIs
- International revenue
as a % of revenue
- All financial KPIs
-----------------------------------
Responsibility Responsibility
Group Director Business Development Managing Director International
-----------------------------------
Risk appetite Risk appetite
Eager Balanced to Eager
-----------------------------------
Likelihood/Impact Likelihood/Impact
Medium/High Medium/High
-----------------------------------
Proximity/Velocity Proximity/Velocity
1-2 years / medium 0 -1 years / medium
-----------------------------------
Innovation strategy A material element Single source contract
of the Group's regulations
revenue is derived
from one contract
Risk Risk Risk
Failure to create A significant part Group performance
a culture of innovation of the Group's is adversely affected
or to invest revenue is derived by application
adequately in, or from UK Government of regulations
create value from, contracts, the from the Single
our innovation Long Term Partnering Source Regulations
investment. As well Agreement (LTPA) Office (SSRO).
as the risks arising being an example
from the of this. Government
introduction of disruptive budget constraints
technologies/alternative could impact
business models our ability to
grow.
---------------------------------------- ---------------------------
Impact Impact Impact
Negative impact on Contracts we have The regulations
the Group's market with the UK Government could have an adverse
position, contribute a material impact on the Group's
competitiveness, proportion of the financial performance.
future growth and Group's revenue
failure to and earnings
deliver a return
on investment in
our Internal
Research and Development
(IRAD) fund.
---------------------------------------- ---------------------------
Mitigation Mitigation Mitigation
Our overall strategy Our aim is to provide Our strategy to
helps us to ensure our customer with lead and modernise
that we focus our the capabilities UK test and
innovation on areas they need to test evaluation and
with clear commercial and train against invest in our core
opportunities. current and future contracts allows
We have evolved our threats in a cost us to put a greater
approach to investment effective manner, volume of our work
to leading and modernising onto longer-term
place a greater focus UK test and evaluation. contracts, reducing
on routes to market As part of this the proportion
in order strategy, we are of our revenues
to drive a profitable putting more of exposed to changes
return. We have also our work onto longer-term in the SSRO rate.
further evolved our contracts. This Our growing international
partner eco-system provides higher business provides
to support indirect visibility for the
routes to market. us. For example, opportunity for
Our operating model, the recent us to win competitive
based on matrix working, amendments we have work which
helps to ensure that made to the LTPA helps mitigate
any internal barriers secure nine years SSRO margin pressure
to collaboration of revenue, and within the UK.
and knowledge sharing significantly increase We continue to
are removed. Group revenue visibility. support a joint
Our investment industry position
into key contracts in refining the
and innovative SSRO framework
delivery approaches and its
continues to ensure practical application
we meet the UK
Government customer's
expectations and
remain cost effective
and relevant in
an evolving threat
environment.
---------------------------------------- ---------------------------
Metrics Metrics Metrics
- Customer satisfaction * All financial KPIs except orders - Customer satisfaction
- Employee engagement - All financial
KPIs
- Customer satisfaction
---------------------------------------- ---------------------------
Responsibility Responsibility Responsibility
Group Director Business Group Director Chief Financial
Development Group Business Development Officer
Director Strategy Managing Director
and Planning Maritime, Land
and Weapons
---------------------------------------- ---------------------------
Risk Appetite Risk Appetite Risk Appetite
Balanced Balanced Cautious
---------------------------------------- ---------------------------
Likelihood/Impact Likelihood/Impact Likelihood/Impact
Medium/High Medium/low High/Medium
---------------------------------------- ---------------------------
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
We operate in many We operate in highly A breach of
specialised engineering, regulated environments physical
technical and scientific and non-compliance or data security,
domains where key has the potential cyber attacks or
capabilities and to compromise our IT systems' failure
competencies may ability to conduct could have an
be lost through business in certain adverse
failure to recruit, jurisdictions, impact on our
develop and retain potentially having customers'
our employees. an impact on a operations.
variety of stakeholders
----------------------------------------- --------------------
Impact Impact Impact
Delivery of business Failure to comply Significant
strategies, plans with particular reputational
and projects would regulations could damage, as well
be adversely impacted. result in a combination as the
of fines, penalties, possibility of
civil or criminal exclusion from
action, suspension some types of
or debarment from government
government contracts, contracts resulting
as well as reputational in reduced orders,
damage to our brand. revenue and profit.
----------------------------------------- --------------------
Mitigation Mitigation Mitigation
We have created Instilling the Data security is
a five-year skills right behaviours assured through
forecast and built and culture across a multi-layered
it into our overall the Group is a approach that
strategic workforce key part in minimising provides
plan. the risks. a hardened
Attraction through In addition to environment,
diverse and inclusive our robust policy, including robust
campaigns procedures and physical security
to ensure we meet mandatory training, arrangements
the changing needs the QinetiQ Code and data resilience
of the of Conduct defines strategies.
business but reflect clear expectations Information systems
the talent pools for the Group and are designed with
we hire from. its employees. consideration to
Ensuring we have Key areas of focus single points of
access to talent include the following: failure and
now and in the future Safety of product comply with
such as STEM outreach and services, health, relevant
and Early Careers safety & accreditation
development. environment, international standards.
Supporting our people trade controls Mandatory security
to recognise, develop and bribery and awareness training
and ethics, where the for all employees.
fulfil their potential company adopts Continuously
via the QinetiQ a zero tolerance reviewing
Talent approach, approach to bribery the threats and
career frameworks, and corruption. adapting our
Academy & Training. security
strategy and
Read more about mitigations
our people on page accordingly.
38.
----------------------------------------- --------------------
Metrics Metrics Metrics
* Strategic workforce planning - Apprentices and * Health and safety - Cyber dashboard
graduates - Security
dashboard
* Mandatory training compliance
* Voluntary employee turnover against planned
requirements
* Commercial intermediary monitoring
----------------------------------------- --------------------
Responsibility Responsibility Responsibility
Group Director Human Company Secretary/Group Chief Financial
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
A balanced risk approach to implementing output-based, multi-year engineering services Engineering services were historically procured by MOD Defence Equipment & Support (DE&S) through a variety of contractual approaches delivered by over 150 providers. This was inefficient for the MOD, had the potential to delay programmes and created considerable risk to managing within budget.
We have an eager commercial risk appetite for opportunities relating to increased market share where we have proven delivery, therefore will consider all delivery options, and are eager to be innovative despite greater inherent risk. With this in mind, through our Strategic Enterprise contract (SE) with DE&S in the air environment, we developed and successfully implemented a balanced risk method for packaging engineering outputs into multi-year programmes of work.
Focusing heavily on robust but proportionate project and programme risk management, our approach ensures right first time requirements, lean delivery using standardised outputs and a proprietary output acceptance, performance and contract system. Building on this success, this approach is now being implemented on the Engineering Delivery Partner (EDP) programme to bring together previously disparate tasks into a manageable delivery service. Our implementation plan is building an effective partnership supported by our joint risk management approach with the MOD, our top-tier partners, Atkins and BMT, and our provider network of 122 engineering specialist companies. This ensures the full breadth of capability and capacity to deliver is available to MOD, minimising the supply chain risk exposure, increasing delivery standards and achieving cost efficiencies.
Read more on Engineering Delivery Partner on page 27
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 33 to 35, 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 64 to 65, 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 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 five-year period to 31 March 2024. This is 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 95, 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 2024.
RELATED PARTY TRANSACTIONS
During the year ended 31 March 2019 there were sales to associates and joint ventures of GBP10.1m (2018: GBP10.4m). At the year-end there were outstanding receivables from associates and joint ventures of GBP1.4m (2018: GBP4.5m).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and 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). Under company law the 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 and company for that period. In preparing the financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements;
- make judgements and accounting estimates that are reasonable and prudent; and
- 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 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 and, as regards the group financial statements, Article 4 of the IAS Regulation.
The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS' CONFIRMATIONS
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group and company's position and performance, business model and strategy.
Each of the directors, whose names and functions are listed in pages 56 and 57 confirm that, to the best of their knowledge:
- the company financial statements, which have been prepared in accordance with 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 financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the group;
- the Directors' Report 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:
- so far as the director is aware, there is no relevant audit information of which the group and company's auditors are unaware; and
- they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the group and company's auditors are aware of that information.
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 2019. For the purposes of DTR 4.1.5R(2) and DTR 4.1.8 the Directors' Report, the Directors confirm that, so far as they are aware, there is no relevant audit information of which the Company's auditor is unaware, and that they have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
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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