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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 | |
---|---|---|---|---|---|---|---|---|---|---|
-0.40 | -0.11% | 348.00 | 347.20 | 347.80 | 349.20 | 341.00 | 341.00 | 1,020,546 | 16:35:07 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Security Systems Service | 1.58B | 154.4M | 0.2681 | 12.95 | 2B |
TIDMQQ.
RNS Number : 8278P
QinetiQ Group plc
12 June 2020
QINETIQ GROUP PLC
12 June 2020
Availability of Annual Report and Accounts 2020 and Notice of 2020 Annual General Meeting
QinetiQ Group plc (the 'Company') has today published the following documents:
-- QinetiQ 2020 Annual Report and Accounts; -- Notice of 2020 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 2020 Annual General Meeting, have been submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
These documents are today being posted or otherwise made available to shareholders.
The 2020 Annual General Meeting will be held at 11.00 am on Tuesday 14 July 2020 at the offices of the Company, Cody Technology Park, Ively Road, Farnborough, Hampshire GU14 0LX .
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 21 May 2020 (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 2020 Annual Report and Accounts.
Enquiries:
Jon Messent - Company Secretary +44 (0) 1252 392000 John Haworth - Group Head of Investor Relations +44 (0) 447920545841 Press Office +44 (0) 1252 393500
APPIX
PRINCIPAL RISKS
How we protect our business
Successful management of current and emerging risks is critical to achieving our company goals. 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 Global Leadership Team, Audit and Risk & CSR Committees and the Board.
We utilise the Group-wide risk management framework to inform our decision-making at both the strategic and operational levels, adopting a top-down/bottom-up process. This enables us to fully leverage its benefits and subsequently support the long-term
success of our business. Our application of risk management continues to evolve with our customers' approach to risk, the rapidly changing external environment in which we operate and internal changes, thus ensuring we are best placed to pursue opportunities and deliver results, whilst simultaneously innovating for our customers' advantage. Over the past 12 months, risk and opportunity management has been extensively supported by the roll-out of a new risk management tool.
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 Global Leadership Team and to the relevant Board Committees. The first line of defence is performed by our businesses and functions, through managing activities in accordance with established operating principles; the second line is performed by the assurance 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.
Board Responsible for effective risk management across the QinetiQ Group. Sets risk appetite and assesses principal and emerging risks Audit Committee and Risk & CSR Committee * Receive reports from the assurance functions * Monitor and review the principal and emerging risks * Risk deep dives * Monitor the effectiveness of internal controls Global Leadership Team Identifies and monitors the principal and emerging 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 assurance functions with risk assurance limited independence * Internal Audit and independent assurance providers * Design and operate internal controls and other mitigation measures * 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 * Responsible for continually improving the risk management process across the Group as a whole * Report risks through relevant reporting and * Report to the Board and the Global Leadership Team escalation processes * Report to the Board and the Global Leadership Team 2nd line of defence 3(rd) line of defence 1st line of defence --------------------------------------------------------------------- ------------------------------------------------------------
Emerging risk
The Group Risk Register consists of material risks relating to effective delivery of our strategy. The Board and Global Leadership Team look to assess these principal risks from a number of different perspectives, including both individually and collectively. We also actively consider emerging risks as part of the risk assessment process. The Board recognises that some risks may be affected by factors outside the control of the Company and also recognises that despite the robustness of the risk management processes they cannot provide absolute assurance and unknown risks may manifest without warning. We have proven processes in place to rapidly deploy appropriate management to such risks and utilise lessons learned across the organisation as part of our ongoing drive for continuous improvement.
Over the past 12 months our Group risk profile has changed owing to changes in our external environment, the ongoing development of our strategy and robust, focused mitigation. In light of this both the Single Source Regulations impacts on our revenue and the risk around recruitment and retention have been mitigated to a level such that they are no longer considered to pose principal risks to the organisation. However owing to the increased volume of M&A activity across our portfolio a new risk has been included. In addition, as the impact of COVID-19 has escalated we have included a risk that our operations are further disrupted by the pandemic.
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 -------------------------
Strategic Risks
UK Defence Test International strategy Innovation strategy and Evaluation strategy Risk Risk Risk UK Government budget Plans to grow our Failure to create constraints lead international business a culture of innovation, to reduced spending may be impacted develop relevant in the core markets by external influences technology and business in which we operate. outside of our control, models or to attract This, and modernising such as geo-political and retain the right ways of evaluating risks, or specific talent, to enable capability, results risks arising from the realisation in a risk that working in new markets of new ideas for our approaches/offerings and globalised operations. our customers and may not remain our organisation.Failure relevant. There to create a culture remains the of innovation or potential for this to invest risk to be exacerbated adequately in, or by the impact of create value from, COVID-19 on Government our innovation spending and the investment. As well EU exit should as the risks arising the UK experience from the a loss of market introduction of confidence and disruptive technologies/alternative further reduction business models in collaborative EU funding. ---------------------------- ------------------------------------- Impact Impact Impact A reduction in Unable to realise Negative impact revenue and associated expected growth on the Group's market profitability from in the planned timeframes. position, the Group's Government competitiveness, and Defence contracts. and future growth. and failure to deliver a return on investment in our Internal Research and Development (IRAD) fund. ---------------------------- ------------------------------------- Mitigation Mitigation Mitigation Our strategy is Our international Our overall strategy focused on leading strategy is focused helps us to ensure and modernising on the markets we that we focus our UK Test & Evaluation feel we have the innovation on areas in support of our best routes to access with clear commercial customers' objectives. with the most appropriate opportunities. This includes ongoing products or services. proactive engagement Adopting a focused We continue to mature with our major approach ensures our innovation approach, customers to enable we can closely monitor including clear us to support their our progress, adapting articulation across objectives. and responding as the organisation, Our focused investment necessary. to ensure the importance into contracts We undertake extensive of enhances our offerings due diligence, taking innovation to both that support our the appropriate our organisation customers with professional advice and our their efficiency to ensure structural, customers is clearly challenges as well regulatory, legal understood and initiatives as ensuring that and political risks are supported. we provide the are understood and right services minimised. Specific innovation as the threat environment We partner with activities in FY21 continues to evolve. or acquire, where will strengthen We continue to appropriate, quality and improve our deliver new types local businesses innovation approach of evaluation and to leverage their across the organisation.We are increasingly infrastructure and have evolved our moving towards de-risk local market approach to investment modelling and synthetics access. to as well as embracing place a greater the next generation focus on routes digital transformation. to market in order We are expanding to drive a profitable our global Test return. We have & Evaluation business also further evolved and post Brexit our partner eco-system will maintain relationships to support indirect with the UK Government routes to market. to support bilateral Our operating model, relationships within based on matrix Europe; there is working, helps to increased recognition ensure that any that T&E is an internal barriers enabler to military to collaboration capability and and knowledge sharing prosperity. are removed. ---------------------------- ------------------------------------- Metrics Metrics Metrics * Customer satisfaction - All financial - Customer satisfaction KPIs - Employee engagement - International - All financial revenue as a % of KPIs total revenue ---------------------------- ------------------------------------- Responsibility Responsibility Responsibility Group Director Group MD International Group Function Director Business Development Strategy and Planning Group Function Director Business Development Group Function Director Technical ---------------------------- ------------------------------------- Risk appetite Risk appetite Risk Appetite Eager Balanced to Eager Balanced ---------------------------- ------------------------------------- Likelihood/Impact Likelihood/Impact Likelihood/Impact Medium/Medium High/High High/High ---------------------------- ------------------------------------- Proximity/Velocity Proximity/Velocity Proximity/Velocity 1-2 years / Medium 0 -1 year / Medium 1 - 2 years / Low
---------------------------- ------------------------------------- A material element Mergers and Acquisitions Transformation of the Group's (M&A) revenue is derived from large contracts Risk Risk Risk The Long Term Partnering M&A activity forms The transformation Agreement (LTPA) a key element of programme does is a 25-year partnering our strategic growth not contract with the plans in order realise the expected MOD to provide to expand our customer benefits. test, evaluation, offerings. New and training acquisition selection services. UK Government and integration budget constraints is key to realising could lead to a the maximum potential material change benefits. to the contract. -------------------------- ----------------------------- Impact Impact Impact The LTPA directly Adverse impact The introduction contributes a material on the Group's of new ways of proportion of the financial working disrupts Group's revenue performance. business delivery. and earnings -------------------------- ----------------------------- Mitigation Mitigation Mitigation Our aim is to provide We have robust The programme is our customer with governance in place designed around the capabilities regarding this three they need to test risk including transformational and train against the M&A Committee themes (Performance current and future and relevant Integration culture, threats in a cost Steering Committees. Global & Digital) effective manner, to support the leading and modernising All planned acquisitions delivery of UK Test & Evaluation. are carefully considered our global strategy, Our increased customer to ensure good improve customer focus is evidenced strategic alignment, focus, in both the LTPA extensive due diligence competitiveness, and EDP programmes. is undertaken and and global collaboration Ensuring frameworks integrations are across the Company. such as the LTPA run as individual enable agility projects, Significant engagement and pace to the ensuring they receive with leaders across Front Line in a the focus and support the organisation rapidly changing necessary to facilitate to catalyse the threat environment a smooth transition. change strengthens the in behaviours necessary rationale for their to allow the transformation use. work to deliver Our investment benefit. into key contracts continues to ensure Assessment of "capacity they meet the our to change" and customers' expectations phased approach and remain cost to transformation effective and relevant in each in an evolving part of the business threat environment. to maximise effectiveness. -------------------------- ----------------------------- Metrics Metrics Metrics * All financial KPIs except orders Inorganic growth Customer satisfaction Revenue & profit Employee engagement All financial KPIs - Customer satisfaction -------------------------- ----------------------------- Responsibility Responsibility Responsibility Group MD Maritime Group Function Group Function & Land Director Strategy Director Business Group MD Air & & Planning Transformation Space Group Managing & Services Directors -------------------------- ----------------------------- Risk Appetite Risk Appetite Risk Appetite Balanced Balanced Eager -------------------------- ----------------------------- Likelihood/Impact Likelihood/Impact Likelihood/Impact Medium/High High/High Medium/Medium -------------------------- ----------------------------- Proximity/Velocity Proximity/Velocity Proximity/Velocity 0 - 1 year / Low 1 - 2 years / Low 0 - 1 year / Medium -------------------------- -----------------------------
Operational Risks
Significant breach Security and IT COVID-19 pandemic of relevant systems laws and regulations Risk Risk Risk We operate in highly A breach of physical The COVID-19 pandemic regulated environments or data security, disrupts QinetiQ and non-compliance cyber attacks or operations. has the potential IT systems' failure to compromise our could have an adverse ability to conduct impact on our customers' business in certain operations. jurisdictions, potentially having an impact on a variety of stakeholders -------------------------- --------------------------- Impact Impact Impact Failure to comply Significant reputational The disease and with particular damage, as well public health management regulations could as the strategies require result in a combination possibility of QinetiQ, our customers of fines, penalties, exclusion from and suppliers to civil or criminal some types of government stop or delay some action, suspension contracts resulting activities. or debarment from in reduced orders, government contracts, revenue and profit. as well as reputational damage to our brand. -------------------------- --------------------------- Mitigation Mitigation Mitigation Instilling the Data security is QinetiQ's crisis right behaviours assured through management process and culture across a multi-layered is well embedded, the Group is a approach that provides flexible and exercised. key part in minimising a hardened environment, It operates at the risks. including robust strategic, tactical In addition to physical security and operational our robust policy, arrangements levels across the procedures and and data resilience Group allowing mandatory training, strategies. the Company the QinetiQ Code Information systems to respond rapidly of Conduct defines are designed with to the pandemic clear expectations consideration to and governmental
for the Group and single points of requirements in its employees. failure and all the countries Key areas of focus comply with relevant in which it operates. include the following: accreditation standards. The process has - Safety of product Mandatory security been held under and services awareness training regular review - Health, Safety for all employees. and modification & Continuously reviewing enacted where required Environment, international the threats and to ensure an effective trade controls, adapting our security response to the bribery and ethics; strategy and mitigations pandemic. The Company where the Company accordingly. has engaged with adopts a zero tolerance all relevant stakeholders approach to bribery including government, and corruption. customers, suppliers and employees as the pandemic has progressed. Ways of working have been adapted to facilitate remote working from home where possible and to meet public health requirements where not. -------------------------- --------------------------- Metrics Metrics Metrics * Health, Safety and Environment - Cyber dashboard - Customer satisfaction - Security dashboard - Employee Engagement - All financial * Mandatory training compliance KPIs * Commercial intermediary monitoring -------------------------- --------------------------- Responsibility Responsibility Responsibility Company Secretary/Group Group Function CEO General Counsel Director Business Transformation & Services -------------------------- --------------------------- Risk Appetite Risk Appetite Risk Appetite Cautious Cautious Cautious -------------------------- --------------------------- Likelihood/Impact Likelihood/Impact Likelihood/Impact Medium/High Medium/High High/Medium -------------------------- --------------------------- Proximity/Velocity Proximity/Velocity Proximity/Velocity 0 - 1 year / High 0 - 1 year / High 0 - 1 year / High -------------------------- ---------------------------
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; and
5. The financial impact of principal risks (individually and cumulative), together with mitigating actions.
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 34 to 36, 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 73, 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 Global Leadership Team to the potential crystallisation of a key risk.
Subsequent to the standard planning activities noted above and in response to the COVID-19 crisis that started to escalate just prior to the Group's current year end, specific scenarios have been run to model a variety of potential impacts of COVID-19 on the Group. This has been informed by a further month of trading post year end whilst employees are working during social distancing restrictions and by revised financial forecasts for the 2021 fiscal year prepared by each business unit within the Group.
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 2025. 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 113, 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 2025.
RELATED PARTY TRANSACTIONS
During the year ended 31 March 2020 there were sales to associates and joint ventures of GBP5.7m (2019: GBP10.1m). At the year-end there were outstanding receivables from associates and joint ventures of GBP2.1m (2019: GBP1.4m).
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 on pages 60 and 61 confirm that, to the best of their knowledge:
- the Company's 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 2020. 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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