TIDMQQ.
RNS Number : 1713G
QinetiQ Group plc
25 May 2017
QinetiQ Group plc
Full year results for the year ended 31 March 2017
Good operational delivery and strategic progress
Statutory results Underlying* results
2017 2016 2017 2016
Revenue GBP783.1m GBP755.7m GBP783.1m GBP755.7m
Operating profit GBP132.7m GBP75.3m GBP116.3m GBP108.9m
Profit after tax GBP123.3m GBP106.1m GBP103.8m GBP95.9m
Earnings per share 21.5p 18.1p 18.1p 16.3p
Full year dividend per share 6.0p 5.7p 6.0p 5.7p
Total orders GBP1,676.7m GBP659.8m
Orders excluding LTPA amendment GBP675.3m GBP659.8m
Net cash inflow from operations GBP111.9m GBP133.4m
(pre-capex)
Net cash inflow from operations GBP79.0m GBP103.6m
(post-capex)
Cash conversion ratio (post-capex) 68% 95%
Net cash GBP221.9m GBP274.5m
Good operational delivery in FY17
-- High quality growth in total backlog from GBP1.3bn to GBP2.2bn
-- 4% year-on-year revenue growth; 1% increase on an organic basis(*) at constant currency
-- Solid operating profit enhanced by GBP7.4m of non-recurring trading items
-- Cash conversion included cGBP30m working capital unwind (half
related to non-recurring items)
-- 5% increase in dividend; GBP50m share buyback completed
Strategic progress
-- Secured GBP1bn amendment to the Long Term Partnering Agreement with the UK MOD
-- Established an International business and completed two
acquisitions - of Meggitt Target Systems and RubiKon Group in
Australia - to support international growth
-- Global agreement for next generation satellite receivers
-- Invested GBP20m in people, technology and campaigns, funded by operational efficiencies
Focus on delivery of FY18
-- Strategy implementation key to driving growth in a rapidly changing trading environment
-- 74% of FY18 revenue under contract, consistent with the previous year
-- Maintaining expectations for Group performance in FY18
Steve Wadey, Chief Executive Officer said:
"FY17 has been a year of building momentum for QinetiQ during
which we achieved both good operational performance and significant
progress in the implementation of our strategy. Operational
achievements included delivering organic revenue growth for the
first time for a number of years and the near doubling of the total
Group backlog. To support QinetiQ's future growth, we completed our
first two acquisitions and, with the LTPA amendment with the UK
Ministry of Defence, secured the largest and most significant
contract since privatisation.
"Rapidly changing dynamics in defence and security markets are
presenting both opportunities and challenges for our industry.
Although demanding, this environment is one in which QinetiQ has
the potential to thrive. As a result, we are looking forward to the
future with confidence and are maintaining expectations for Group
performance in FY18."
S
* Definitions of the Group's 'Alternative Performance Measures'
can be found in the glossary.
Other information:
There will be a presentation of the preliminary annual results
to analysts at 0900 hours UK time on 25 May 2017 at the London
Stock Exchange, 10 Paternoster Square, EC4M 7LS. Registration for
the webcast is available at: www.QinetiQ.com/investors where the
presentation will also be available. An audiocast of the event will
be available on +44 (0)20 3059 8125 (confirmation: QinetiQ).
About QinetiQ:
Listed on the London Stock Exchange (LSE: QQ.L), QinetiQ is a
leading science and engineering company operating primarily in the
defence, security and aerospace markets. Our customers are
predominantly government organisations in our home markets of the
UK, the US and Australia, with a growing international and
commercial presence. See www.QinetiQ.com | www.QinetiQ-blogs.com |
@QinetiQ.
For further information please contact:
Group Director Investor Relations and
David Bishop, Communications: +44 (0) 7920 108675
Ian Brown, Group Head of Investor Relations: +44 (0) 7908 251123
Jon Hay-Campbell, Group Head of External Communications: +44 (0) 7500 856953
Disclaimer
This document contains certain forward-looking statements
relating to the business, strategy, financial performance and
results of the Company and/or the industry in which it operates.
Actual results, levels of activity, performance, achievements and
events are most likely to vary materially from those implied by the
forward-looking statements. The forward-looking statements concern
future circumstances and results and other statements that are not
historical facts, sometimes identified by the words 'believes','
expects', 'predicts', 'intends', 'projects', 'plans', 'estimates',
'aims', 'foresees', 'anticipates', 'targets', 'goals', 'due',
'could', 'may', 'should', 'potential', 'likely' and similar
expressions, although these words are not the exclusive means of
doing so. These forward-looking statements include, without
limitation, statements regarding the Company's future financial
position, income growth, impairment charges, business strategy,
projected levels of growth in the relevant markets, projected
costs, estimates of capital expenditures, and plans and objectives
for future operations. Forward-looking statements contained in this
announcement regarding past trends or activities should not be
taken as a representation that such trends or activities will
continue in the future. Nothing in this document should be regarded
as a profit forecast.
The forward-looking statements, including assumptions, opinions
and views of the Company or cited from third party sources,
contained in this announcement are solely opinions and forecasts
which are uncertain and subject to risks. Although the Company
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these
expectations will prove to be correct. Actual results may differ
materially from those expressed or implied by these forward-looking
statements. A number of factors could cause actual events to differ
significantly and these are set out in the principal risks and
uncertainties section of this document.
Most of these factors are difficult to predict accurately and
are generally beyond the control of the Company. Any
forward-looking statements made by, or on behalf of, the Company
speak only as of the date they are made. Save as required by law,
the Company will not publicly release the results of any revisions
to any forward-looking statements in this document that may occur
due to any change in the Directors' expectations or to reflect
events or circumstances after the date of this document.
Chief Executive Officer's review
Market environment
FY17 was another year in which threats to global security from
both state and non-state actors increased. Governments are seeking
help with the rapid development of new capabilities to defeat
emerging threats and ensure they meet their primary responsibility
to protect and safeguard the lives of their citizens. Our expertise
in science and engineering is particularly relevant in this
context; we also play a vital role in making connections, be they
across technologies, domains, supply chains or internationally.
FY17 performance
During the year we successfully achieved both good operational
delivery and significant progress implementing our strategy. This
was evidenced by the delivery of organic revenue growth for the
first time in a number of years. Revenue and operating profit were
stable in EMEA Services and up in Global Products, driven by growth
in QinetiQ North America. We will continue to prioritise the
delivery of sustainable growth with ongoing capital discipline.
Strategy
Our vision is "to be the chosen partner around the world for
mission-critical solutions, innovating for our customers'
advantage." To realise our vision we are implementing our three
strategic priorities designed to grow the Company by focusing on
our primary UK customer, on international customers and on
innovation.
Our strategy is inherently outward looking, based on the needs
of our customers now and in the future, and I am encouraged that
our customer satisfaction scores increased this year. To meet
future customer needs, we are prioritising the rapid development of
new capabilities to defeat emerging threats by embracing
value-creating innovation. We are also driving greater
value-for-money for our customers, improving services and
delivering savings in parallel. To do this we connect supply chains
and choose the right strategic partners from across industry with
complementary capabilities to ours so that we can offer competitive
and market-leading solutions. As our total order intake and backlog
demonstrate, we have been building positive momentum with the
implementation of this strategy during the year.
UK Defence Test & Evaluation
Our first strategic priority is to lead and modernise UK Defence
Test & Evaluation (T&E). Delivering strong T&E
capability is critical to ensuring reliable, flexible and
affordable delivery of military capability to protect national
interests. By engaging with our customers, we have made positive
progress, signing new agreements which nearly double our order book
to more than GBP2bn and significantly improving revenue visibility
and therefore the risk profile of our Company.
In September 2016, we secured an 11-year, GBP109m extension to
the Ministry of Defence's (MOD's) Naval Combat System Integration
Support Services (NCSISS) contract under which we lead the T&E,
integration and development of mission systems that keep the UK's
surface warships at sea and fit to fight. This is an excellent
example of our strategy in action, with a focus on partnership with
our customers and across the broader supply chain as we look to
develop our Portsdown Technology Park site as the UK Centre of
Excellence for maritime mission systems across the entire supply
chain.
In December we signed an 11-year, GBP1bn amendment to the Long
Term Partnering Agreement (LTPA), the largest and most significant
contract since privatisation, which has significant mutual benefits
for the MOD and QinetiQ. For the MOD, it ensures the UK has
world-class competitive air ranges and training for test pilots and
aircrew, and delivers the capability at less cost. For us, it
provides the platform we need for growth by creating more relevant
and competitive T&E capability for the UK armed forces as well
as governments and commercial customers around the world. Our focus
during FY18 is to re-price the remaining LTPA contract, which is
due on 31 March 2018, and to work together with the MOD and
industry partners to develop a long-term vision for the UK's
T&E capabilities. The objective of this vision is to deliver
future military capability for the next decade and beyond,
addressing current and emerging threats. This will provide a
platform for growth in the UK T&E market, which we estimate to
be double that which we currently access, and improve our ability
to win work with customers outside the UK.
International
At the beginning of FY17, we established an International
business focused on developing and securing growth opportunities in
prioritised territories around the world. This new International
business has been established as an 'enabler' for the Group,
bringing greater coherence and focus to our activities
internationally in relation to both organic and inorganic efforts,
and encouraging a more global mind-set.
In December 2016 we acquired Meggitt's Target Systems business,
now renamed QinetiQ Target Systems (QTS), both to reinforce our
core T&E value proposition and accelerate the delivery of our
strategic priority to drive international growth. The business
generates 90% of its revenues from outside the UK and is well
aligned with our capabilities in the management of complex
exercises and provision of test, evaluation and training services,
thus expanding our core capability overseas. We are now uniquely
placed to meet growing demand for mid- and high-fidelity targets to
test defence capabilities against a greater diversity of threats.
The acquisition also opens up new routes to market to promote our
wider service offerings to QTS's international customer base.
A key element of our international strategy is to build our
presence and capability in our home markets outside the UK, notably
the US and Australia. QinetiQ North America delivered very good
orders and revenue performance in FY17. With growing defence
ambitions and close to the rapidly evolving Asia Pacific region,
Australia is a particularly attractive market and our business
there had a record year for orders. In January 2017, we also
acquired RubiKon Group which brings integrated logistics support
capabilities to QinetiQ Australia. RubiKon strengthens our ability
to offer integrated whole programme solutions that are often
required for 'strategic partner' style contracts which are being
used increasingly by the Australian Government.
In FY18 we intend to build on the progress we are making in our
existing home markets by increasing our sales presence in regions
such as the Middle East and Asia Pacific. Negotiations over the
UK's exit from the EU add complexity to our strategy for growth in
Europe. However many government relationships for defence and
security, particularly in Europe, are underpinned by bilateral and
multilateral agreements.
Innovation
As customers demand more capability, and as the boundaries
between defence and commercial technologies become increasingly
blurred, value-creating innovation is vital to maintaining our
distinctiveness in the marketplace. Technical innovation has been
at the heart of QinetiQ's success to date, and will remain a key
source of growth into the future. However, turning creativity and
technical innovation into tangible value for our customers
increasingly requires innovative thinking across the broader range
of activities.
In FY17, we established business winning campaigns supported by
Internal Research and Development (IRAD) to drive commercial
innovation, new processes, and innovative business models. For each
campaign we consider the people, investments and partnerships we
need to be successful. For example, to support the campaign to
exploit our world-class capability in secured navigation receivers,
we signed a global alliance agreement with Rockwell Collins, the
market leader in secure military GPS receivers.
We have identified more than 30 growth campaigns in pursuit of
material opportunities, all of which are worth tens of millions of
pounds and in some cases more. We are not going to win every
campaign, but the scale of the total opportunity is significant
over a five-to-ten-year time period. We will pursue these campaigns
with vigour in FY18, as well as extending our focus to more
international markets.
Transformation
We are on track to transform QinetiQ to improve customer focus
and competitiveness. During the year we successfully introduced a
new operating model based on matrix working to improve our
responsiveness and operational effectiveness. We have also driven
GBP20m of productivity savings that we have reinvested in business
winning and IRAD to support our future growth. I appreciate that
this period of significant change has been difficult for many of
our employees, and this is reflected in our engagement score which
fell last year although employee turnover remains low. Moving into
FY18, supporting and developing the culture required to deliver our
transformation is a particular goal.
Air accident
In July 2016, an air accident involving a contracted-in Yak
aircraft operating in support of the Empire Test Pilots' School
(ETPS) sadly resulted in the death of an RAF pilot and serious
injury to the contractor pilot. We are actively supporting the
subsequent official inquiries and will respond to all
recommendations made.
Outlook - FY18
In EMEA Services, revenue under contract for FY18 is in line
with the prior year, and the division is expected to deliver modest
revenue growth this year although the lower baseline profit rate
for single source contracts represents a continued headwind for
operating margins.
The Group's Global Products division has shorter order cycles
than EMEA Services and its performance is dependent on the timing
of shipments of key orders. As a result of its contracted orders
and pipeline of opportunities, as well as the anticipated full year
contribution from the Target Systems acquisition, the division is
expected to continue to grow in FY18.
FY18 cash flow will reflect increasing investment, with capital
expenditure of GBP80m to GBP100m, to support the amendment to the
Long Term Partnering Agreement announced in December 2016.
Overall for FY18, we are maintaining expectations for steady
progress excluding the non-recurring benefits in FY17, supported by
revenue growth and consistent with our strategy.
Outlook - longer term
Rapidly changing dynamics in defence and security markets are
presenting both opportunities and challenges for our industry. We
are well placed to help customers both develop capabilities to
defeat new threats and achieve greater value-for-money by improving
services and delivering savings in parallel. The initial progress
we have made, combined with our ongoing assessment of the market
environment, and, in particular, feedback from customers reinforce
that we have the right strategy in place to drive future
growth.
Over the longer term this strategy will create and sustain value
for all our stakeholders. Our customers will benefit from better
products and services, increased responsiveness, and improved
value-for-money. Our shareholders will benefit because we will
deliver sustainable growth in revenue, operating profit, and
high-quality earnings. And our employees will benefit because they
will be able to utilise their experience more widely across
QinetiQ, working in integrated teams and enhancing professional
satisfaction.
Steve Wadey, Chief Executive Officer, 25 May 2017.
Chief Financial Officer's review
Since joining QinetiQ from Rolls-Royce on 1 March 2017, I have
been very active in getting to know the Company. In doing so, I
have been impressed by the calibre of the people I have met and
their commitment to serving our customers.
Thanks to the hard work of QinetiQ's former CFO David Mellors,
supported by the finance team, and Dr Malcolm Coffin who acted as
Interim CFO, the financial position of the Group is strong and we
have a solid foundation for the future. I am excited about building
on this to help QinetiQ realise its potential.
Overview of full year results
Orders, excluding the GBP1bn amendment to the LTPA, grew 2% to
GBP675.3m (2016: GBP659.8m), and were stable on an organic basis at
constant currency. Key orders won in FY17 included the award of the
GBP109m, 11-year renewal from the UK Ministry of Defence (MOD) for
the Naval Combat System Integration Support Services (NCSISS),
GBP80m of additional orders added to the Air Strategic Enterprise
contract and $41m US aircraft carrier orders.
At the beginning of the new financial year, 74% of the Group's
FY18 revenue was under contract, in line with 74% a year ago.
Revenue was up 4% at GBP783.1m (2016: GBP755.7m), including
favourable foreign exchange movements and the acquisition of
QinetiQ Target Systems and RubiKon. Revenue grew by 1% on an
organic basis, after adjusting for foreign exchange movements,
acquisitions and the divestment of Cyveillance in the prior year,
due primarily to a strong performance in QinetiQ North America.
Underlying operating profit* was GBP116.3m (2016: GBP108.9m).
EMEA Services benefited from a non-recurring GBP5.2m credit
relating to the release of engine servicing obligations as we
invest in new aircraft for test aircrew training. Global Products
benefited from favourable foreign exchange movements and GBP2.2m of
credits relating to historical overseas contractual disputes. The
impact of the lower baseline profit rate in FY17 was in line with
our expectations and is outlined in further detail in the review of
EMEA Services financial performance.
Total operating profit was GBP132.7m (2016: GBP75.3m), including
a profit of GBP18.4m recognised on the disposal of property. 2016
included a GBP31.9m impairment of US goodwill.
Underlying profit before tax* increased 7% to GBP116.1m (2016:
GBP108.7m) in line with the increase in underlying operating
profit*, with underlying net finance costs* flat at GBP0.2m (2016:
GBP0.2m).
Total profit before tax from continuing operations increased to
GBP131.5m (2016: GBP90.2m) due to the higher underlying profit
before tax and GBP18.4m recognised on the disposal of property.
2016 included a profit of GBP16.2m recognised on the disposal of
Cyveillance and a GBP31.9m impairment of US goodwill.
Underlying basic earnings per share* were 18.1p (2016: 16.3p)
benefiting from the higher underlying profit before tax and the
reduced share count following the completion of the GBP50m share
buyback. Basic earnings per share for the total Group were 21.5p
(2016: 18.1p per share). The average number of shares in issue
during the year, as used in the basic earnings per share
calculations, was 573.9m (2016: 587.0m) and there were 564.3m
shares in issue at 31 March 2017 (all net of Treasury shares).
Specific adjusting items
Specific adjusting items, shown in the 'middle column', at the
profit after tax level amounted to a total credit of GBP19.5m (FY16
credit: GBP10.2m). This included a profit of GBP18.4m recognised on
the disposal of property and GBP4.1m of deferred tax movements,
predominantly relating to the recognition of a deferred tax asset
in respect of tax losses.
The prior year included a profit of GBP16.2m recognised on the
disposal of Cyveillance, a GBP7.5m gain following the closure of
certain US Services warranty issues and a GBP31.9m impairment of US
goodwill. There was also a net tax credit of GBP21.2m in the prior
year, which included the impact of the statutory change to the
research and development tax credits regime offset by the
associated surrender of previously capitalised tax losses and other
non-recurring deferred tax movements.
Acquisitions
On 21 December 2016, the Group acquired 100% of the issued share
capital of Meggitt Target Systems for GBP57.5m, or GBP60.3m
including price adjustments for working capital and net debt. The
business is an international provider of unmanned aerial, naval and
land-based target systems and services for T&E and operational
training and rehearsal. On the date of acquisition, its name was
changed to QinetiQ Target Systems and it was integrated into
QinetiQ's International business and is reported in Global
Products. Goodwill of GBP24.5m and intangible assets of GBP24.2m
were recognised on acquisition.
On 31 January 2017, the Group acquired 100% of the issued share
capital of RubiKon Group Pty Limited from its founder management
team for GBP7.4m (AUD$12.6m). This Australian company provides
solutions to complex logistics, supply chain management and
procurement projects. RubiKon was integrated into the Group's
Australia business and goodwill of GBP3.9m and intangible assets of
GBP3.1m were recognised on acquisition.
Net finance costs
Net finance costs were GBP1.2m (2016: GBP1.3m). The underlying
net finance costs* were GBP0.2m (2016: GBP0.2m), with an additional
GBP1.0m (2016: GBP1.1m) in respect of the pension net finance
expense reported within specific adjusting items*.
Taxation
The underlying effective tax rate of 10.6% (2016: 11.8%)
continues to be below the UK statutory rate, primarily as a result
of the benefit of research and development expenditure credits in
the UK. The effective tax rate is expected to remain below the UK
statutory rate in the medium term, subject to the impact of any tax
legislation changes, the geographic mix of profits and the
assumption that the benefit of net R&D expenditure credits
retained by the Group remains in the tax line.
At 31 March 2017, the Group had unused tax losses of GBP141.7m
(2016: GBP154.8m) which are available for offset against future
profits. A deferred tax asset of GBP3.7m has been recognised in the
year, with the income statement credit classified as a specific
adjusting item. This asset is in respect of GBP18.8m of UK losses
and GBP1.4m of Canadian losses. No deferred tax asset is recognised
in respect of the remaining GBP121.5m of losses due to the
uncertainty over the timing of their utilisation. The Group has
GBP66.5m of time-limited losses of which US capital losses of
GBP30.0m will expire in 2020. Of the remaining GBP36.5m
time-limited losses, GBP4.4m will expire in 2034, GBP22.7m in 2035
and GBP9.4m in 2036. Deferred tax has been calculated using the
enacted future statutory tax rates.
The current tax liability is GBP43.7m as at 31 March 2017 (31
March 2016: GBP39.9m). This includes a tax liability in the US
related to an unfavourable court decision in respect of the tax
treatment of the Group's acquisition of Dominion Technology
Resources, Inc. in 2008. An insurance policy was taken out by the
Group at the point of acquisition and, if the court's decision is
final, the funds required to settle this dispute will be provided
by the insurers. Hence, an offsetting receivable is reported on the
balance sheet as at 31 March 2017 (included within trade and other
receivables).
Cash flow, working capital and net cash
The underlying cash conversion* ratio, which is after capex and
pension deficit repair payments, was 68% (2016: 95%), delivering a
net cash flow from operations* of GBP79.0m (2016: GBP103.6m). The
working capital movements were in line with expectations and
include a GBP7m payment for a very old overseas dispute which had
been fully provided for in a previous year, the GBP5.2m
engine-servicing obligation release in EMEA Services and GBP2.2m of
releases relating to overseas contractual disputes in Global
Products. Excluding non-recurring items the underlying cash
conversion* ratio would have been 80%.
Net capex increased to GBP32.9m (2016: GBP29.8m) and is expected
to increase to GBP80m-GBP100m in FY18 as we invest in core
contracts including the LTPA following the contract amendment
announced in December 2016. The additional capex will be recovered
in full under existing LTPA terms and modernises capabilities as a
platform for growth.
At 31 March 2017, the Group had GBP221.9m net cash, compared to
GBP274.5m net cash at 31 March 2016. The reduction was primarily
due to a GBP65.7m outflow in respect of the two acquisitions, the
completion of the GBP50m share buyback and GBP33.4m of dividends.
In aggregate these exceeded the operating cash inflow for the
year.
Total committed facilities available to the Group at year end,
consisting of a revolving credit facility which is currently
undrawn, amounted to GBP245.7m (2016: GBP235.6m), the increase
being solely due to foreign exchange movements.
Capital allocation
Priorities for capital allocation are:
1. Organic investment complemented by bolt-on acquisitions where
there is a strong strategic fit;
2. The maintenance of balance sheet strength;
3. A progressive dividend; and
4. The return of excess cash to shareholders.
The GBP50m share repurchase, which was announced in November
2015, was completed by 31 March 2017.
Dividend
The Board proposes a final dividend of 4.0p (2016: 3.8p) making
the full-year dividend 6.0p (2016: 5.7p). Subject to approval at
the Annual General Meeting, the final dividend will be paid on 1
September 2017 to shareholders on the register at 4 August 2017.
The full year dividend represents an increase of 5% in line with
the Group's progressive dividend policy.
Pensions
The net pension asset under IAS19, before adjusting for deferred
tax, was GBP156.0m (31 March 2016: liability GBP37.7m). The market
value of the assets at 31 March 2017 was GBP1,926.3m (2016:
GBP1,410.4m) and the present value of scheme liabilities was
GBP1,770.3m (2016: GBP1,448.1m). The movement from a liability to
an asset was driven by an increase in asset prices and the benefit
of our continued strategy to reduce risk through hedging.
The key assumptions used in the IAS 19 valuation of the scheme
were:
Assumption 31 March 2017 31 March 2016
------------------------------------- -------------- --------------
Discount rate 2.60% 3.40%
CPI inflation 2.35% 2.10%
Life expectancy - male (currently
aged 40) 91 91
Life expectancy - female (currently
aged 40) 93 93
------------------------------------- -------------- --------------
Each assumption is selected by the Group in consultation with
the Company actuary and takes account of industry practice amongst
comparator listed companies. The sensitivity of each of the key
assumptions is shown in the following table.
Indicative effect on scheme
liabilities (before deferred
Assumption Change in assumption tax)
---------------------- --------------------- ------------------------------
Discount rate - small Increase / decrease Decrease / increase by
movement by 0.1% GBP35m
Discount rate - large Increase by 1.0% Decrease by GBP320m
movement
Discount rate - large Decrease by 1.0% Increase by GBP422m
movement
Inflation Increase / decrease Increase / decrease by
by 0.1% GBP34m
Life expectancy Increase by 1 year Increase by GBP46m
---------------------- --------------------- ------------------------------
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 2017, this hedges against 63% of the
interest rate risk and 100% of the inflation rate risk, as measured
on the Trustees' gilt-funded basis.
The last triennial valuation of the scheme, on a funding basis,
was a net surplus of GBP31.0m as at 30 June 2014, although if a
funding valuation was carried out today the valuation could be a
net deficit and may differ materially from the IAS19 accounting
valuation due to the inherent methodology differences. There has
been no change to the cash contributions required under the
recovery plan, which continues to require GBP13m of Company
contributions per annum until 31 March 2018. The next actuarial
valuation is due as at 30 June 2017.
David Smith, Chief Financial Officer, 25 May 2017.
Operating review
EMEA Services
2017 2016
GBPm GBPm
---------------------- ------- -------
Orders(1) 520.9 495.4
Total orders 1,522.3 495.4
Revenue 613.5 616.4
Underlying operating
profit* 92.7 93.8
Underlying operating
margin*(2) 15.1% 15.2%
Book to bill ratio(1) 1.3x 1.2x
Funded backlog(1) 813.6 719.1
Total funded backlog 2,019.8 1,123.8
---------------------- ------- -------
(1) Excludes the GBP998m third-term of the LTPA contract agreed
in 2013 and the GBP1bn contract amendment signed in December
2016.
B2B ratio is orders won divided by revenue recognised, excluding
the LTPA contract.
(2) The 2017 margin excluding the GBP5.2m non-recurring release
in respect of LTPA engine servicing obligations was 14.3%.
Overview
EMEA (Europe, Middle East and Australasia) Services combines
world-leading expertise with unique facilities to provide technical
assurance, test and evaluation and training services, underpinned
by long-term contracts that provide good visibility of revenues and
cash flows. The division is also a market leader in research and
advice in specialist areas such as C4ISR, weapons and energetics,
cyber security and procurement advisory services.
Financial performance
Orders, excluding the GBP1bn LTPA amendment, grew 5% to
GBP520.9m (2016: GBP495.4m) including the award of the GBP109m
11-year renewal from the MOD for the Naval Combat System
Integration Support Services (NCSISS), and GBP80m of additional
orders added to the Air Strategic Enterprise contract.
The GBP1bn amendment to the LTPA signed during the year has
significantly increased total EMEA Services backlog. The remaining
LTPA contract is due to be repriced on 31 March 2018.
Revenue was flat on both a reported basis and an organic
constant currency basis with a broadly consistent performance
across all business units within the division. The impact of the
RubiKon acquisition, which completed in January 2017, and
favourable foreign exchange movements were largely offset by the
Cyveillance disposal in the prior year.
At the beginning of the new financial year, 79% of EMEA
Services' FY18 revenue was under contract, compared with 77% at the
beginning of the prior year.
Underlying operating profit* reduced to GBP92.7m (2016:
GBP93.8m). FY17 underlying operating profit* included a GBP5.2m
credit relating to the release of engine servicing obligations as
we invest in new aircraft for test aircrew training. There were
other contract adjustments impacting on the results, but the
financial impact of these was not material in aggregate. Excluding
the GBP5.2m credit, a GBP3m credit in FY16 and the effect of
foreign exchange and acquisitions, underlying operating profit fell
by GBP4.6m, predominantly driven by the lower baseline profit rate
for single source contracts. The impact of the lower baseline
profit rate in FY17 was in line with our expectations.
As we anticipated, the baseline profit rate for new and renewed
single source contracts signed in FY18 will fall by 149 basis
points from the FY17 baseline rate. Including the LTPA contract,
76% of EMEA Services revenue (2016: 74%) is derived from single
source contracts, an increased proportion of which is now
contracted on a long-term basis. For example, the 11-year, GBP1bn
amendment to the LTPA, signed in December 2016, was contracted
using the FY17 single source profit formula.
FY17 review
Air & Space (30% of EMEA Services revenue)
The Air & Space business de-risks complex aerospace
programmes by testing systems and equipment, evaluating the risks
and assuring safety.
Modernising UK Test & Evaluation
-- The Strategic Enterprise model for aircraft engineering services
has now been in place for a year, delivering savings to the MOD.
GBP80m of additional contracts were added to the model during
the year to provide in-service support for eight aircraft including
the Apache, Puma and Merlin helicopters and Tornado fast jets,
as well as test and evaluation services for the Wildcat Future
Air to Surface Guided Weapon programme.
-- The business is focused on the modernisation of test aircrew training
provided by the Empire Test Pilots' School which achieved Approved
Training Organisation status during the year allowing it to train
civil test pilots. Investment in new aircraft and a revised syllabus
will allow it to pursue opportunities for growth.
-- During the year Boeing Defence UK identified MOD Boscombe Down,
which we operate and manage on behalf of the MOD, as the preferred
site for its future UK headquarters and European hub for maintenance,
repair and overhaul.
Investing in innovation
-- The business' relationship with the European Space Agency continues
with its transceiver operating successfully as part of the ExoMars
mission to Mars, despite the Schiaparelli lander on which it was
mounted being lost. The business is continuing to deploy significant
resources to develop the gridded ion engine electric propulsion
system for the flight module to be used on ESA's BepiColombo mission
to Mercury. This ambitious, multi-spacecraft mission is due to
launch in October 2018.
-- The business secured GBP2m of research funding to lead a team
to upgrade the scale models used in the Farnborough wind tunnel
using technology adapted from F1 motor racing, leading to improved
efficiency and increased capacity.
-- It unveiled an innovative material, Titan Weave, that reduces
the weight of aircraft and is three times stronger than current
materials used to protect against bird strikes and other impacts.
-- It entered a teaming agreement with Thales and Textron to provide
an innovative offer to the MOD for the Air Support to Defence
Operational Training Programme.
Maritime, Land & Weapons (45% of EMEA Services revenue)
The Maritime, Land & Weapons business delivers operational
advantage to customers by providing independent research,
evaluation and training services.
Modernising UK Test & Evaluation
-- The business delivered the successful trial of the new Spear 3
missile system planned for the UK's F-35 Lightning II stealth
fighter aircraft.
-- It secured an 11-year contract extension worth GBP109m for the
Naval Combat Systems Integration & Support Services based at Portsdown
Technology Park. Later in the year the site hosted the Royal Navy's
Information Warrior exercise designed to develop and test new
information warfare capabilities through a series of trials, including
defensive cyber operations, digital influence operations and artificial
intelligence.
-- The business led a team from across QinetiQ to deliver Unmanned
Warrior for the Royal Navy, a demonstration by 40 companies of
how autonomous vehicles under the water, on the surface and in
the air, can be used for future operations such as mine hunting.
-- Later in 2017, it will host another international exercise at
MOD Hebrides - Formidable Shield.
-- To enable similar exercises to take place, the business is modernising
the air ranges, with work beginning to upgrade facilities and
tracking radar at the Hebrides range.
Investing in innovation
-- The business is a member of a UK industrial consortium, called
Dragonfire, which won a GBP30m contract for a Capability Demonstrator
Programme for laser technology. The demonstration is reliant on
an innovative QinetiQ-developed technology, with the trials taking
place on LTPA sites.
-- It won an GBP8m contract to implement and evaluate vehicle survivability
for Dstl, including installing a Soft-Kill Defensive Aids System
on a Challenger 2 tank.
-- It also won a GBP5m contract to deliver a Real Time Simulation
System for the Sentry E-3D aircraft to enable effective operations
with NATO countries.
Cyber, Information & Training (CIT) (17% of EMEA Services
revenue)
The CIT business helps government and commercial customers
respond to fast-evolving threats based on its expertise in
training, secure communication networks and devices, intelligence
gathering and surveillance sensors, and cyber security.
Modernising UK Test & Evaluation
-- The business won a GBP10m contract to link existing Typhoon synthetic
training at RAF bases to the QinetiQ-run Distributed Synthetic
Air Land Training (DSALT) facility at RAF Waddington, building
towards the MOD's ambition to integrate all synthetic training
into one programme.
-- It delivered a cyber range for an Army exercise as part of a growing
capability to support customers in the test and evaluation of
cyber operations.
Building an international company
-- The business delivered its stand-off threat detection system,
SPO-NX, to the US Transportation Security Administration (TSA)
for use at several high-profile events, including the Presidential
inauguration.
Investing in innovation
-- The business leads research framework contracts for the UK MOD,
managing a network of more than 100 UK SMEs, as well as innovation
initiatives for local and regional governments to support local
business growth.
-- This includes bringing together expertise in technology horizon
scanning, human sciences, commercial-off-the-shelf exploitation
and experimentation as a service to help customers keep pace with
the rapidly evolving technical and social media landscape.
-- During the year the business secured contracts totalling GBP10m
for secured navigation, working with European and UK Government
customers to enable the effective exploitation by users of the
Galileo constellation of satellites - the European Union version
of GPS which goes live in FY21. This included the first demonstration
of accessing the encrypted Public Regulated Service (PRS) in real-life
applications. The business has built on this success by agreeing
a partnership to go to market with Rockwell Collins around the
globe.
International (8% of EMEA Services revenue)
On 1 April 2016 a new International business was established to
deliver our capabilties in international markets.
-- In January 2017, the Group acquired RubiKon Group, an Australian
integrated logistics support provider. The acquisition allows
QinetiQ Australia to provide a more comprehensive service offering
to customers and pursue 'strategic partner' opportunities with
the Australian Government.
-- QinetiQ Australia continued to develop its core capabilities,
extending contracts for the provision of integrated engineering
services at the Defence Science and Technology Group's Fishermen's
Bend workshop in Port Melbourne, and for Aircraft Structural Integrity
services. Through RubiKon, it also signed a new strategic support
partnering contract for the replacement of the AP-3C Orion fleet
with a combination of unmanned and manned aircraft.
-- Our business in Australia also grew order intake, including contracts
to support tanker aircraft, Navy guided weapons systems, ground-based
air defence, and the Australian Artillery Regiment.
-- QinetiQ Canada achieved its first home win with a contract to
provide advice to the Royal Canadian Coast Guard.
-- A new QinetiQ office is also being established in Malaysia to
support sales and marketing in South East Asia.
EMEA Services FY18 outlook
In EMEA Services revenue under contract for FY18 is in line with
the prior year, and the division is expected to deliver modest
revenue growth this year although the lower baseline profit rate
for single source contracts represents a headwind for operating
margins.
Global Products
2017 2016
GBPm GBPm
--------------------- ----- -----
Orders 154.4 164.4
Revenue 169.6 139.3
Underlying operating
profit* 23.6 15.1
Underlying operating
margin* 13.9% 10.8%
Book to bill ratio 0.9x 1.2x
Funded backlog 158.9 139.1
--------------------- ----- -----
Overview
Global Products delivers innovative solutions to meet customer
requirements and undertakes contract-funded research and
development, developing intellectual property in partnership with
key customers and through internal funding with potential for new
revenue streams. The division is technology-based and has shorter
order cycles than EMEA Services so can have a more lumpy revenue
profile.
Financial performance
Orders reduced to GBP154.4m (2016: GBP164.4m) as a result of a
strong comparative year which included a large pipeline contract in
OptaSense and a five-year GBP10m contract to provide materials
research and advice to the UK MOD. Order flow in QinetiQ North
America (QNA) was strong, including $41m of US aircraft carrier
orders during the year.
The Global Products division had 55% of its FY18 revenue already
under contract at the beginning of the new financial year compared
with 64% at the same time last year, reflecting the shorter
contract cycle of the division.
Revenue was up 22% on a reported basis at GBP169.6m (2016:
GBP139.3m) including the impact of the acquisition of QinetiQ
Target Systems and favourable foreign exchange movements. On an
organic constant currency basis revenue grew by 8% due to a strong
performance in QNA, driven by product shipments relating to the new
US aircraft carriers, together with growth in OptaSense.
Underlying operating profit* increased to GBP23.6m (2016:
GBP15.1m), including the impact of the acquisition of QinetiQ
Target Systems, favourable foreign exchange movements and GBP2.2m
of credits relating to historical overseas contractual disputes.
With these items removed, underlying operating profit increased by
GBP3.6m driven by QNA and OptaSense.
FY17 review
QinetiQ North America (41% of Global Products revenue)
QNA develops and produces innovative defence products
specialising in unmanned systems, survivability and maritime
systems along with products in related commercial markets.
-- QNA delivered very good orders and revenue performance in FY17
driven by the continued strength of its US military robot business,
sales of aircraft armour, and its continued role supporting the
next generation of US Navy aircraft carriers.
-- In total, the business was awarded more than $40m of orders for
unmanned ground vehicles principally for the reset of robots previously
used in operations and for capability upgrades such as detection
of CBRNE (chemical, biological, radiological, nuclear and explosives).
-- The business is bidding for multi-year Programs of Record, that
are under way now or will be under way this year. These Programs
of Record will be funded out of the Department of Defense's base
budget for TALON-class and Dragon Runner-class systems, robotic
applique kits for route clearance vehicles and squad mission equipment
transports.
-- In October 2016, it announced a strategic partnership with the
Estonian company Milrem for Titan, a modular, hybrid military
unmanned ground vehicle (UGV) for dismounted troop support.
-- QNA also confirmed a $41m contract with General Atomics which
follows the initial $16m announced in December 2015. The business
will deliver control hardware and software for the Electromagnetic
Aircraft Launch System and the Advanced Arresting Gear to be installed
on the US Navy's next aircraft carrier, the John. F. Kennedy (CVN
79).
-- In September, QNA launched a new meteorological sensing product,
iQ-3, that provides real-time atmospheric data in support of military
requirements such as artillery fire support, tactical weather
modelling, and air drop.
-- Its LineWatch product, which accurately measures the current and
voltage of power distribution lines, is being piloted by ten North
American utility companies following the delivery of its first
production unit in FY16.
-- In international markets, robots, vehicle protection, and soldier
protection systems, remain highly relevant as security challenges
and instability persist in the Middle East and elsewhere.
-- In addition to product sales, QNA is building its base of contract
R&D projects to drive technology development, explore new customer
problems and expand its competitive offerings. Progress continues
with awards for an airborne wind profiling radar, robotic enhancement
projects, a turbine-based power and thermal management system,
and a number of other commercial research and development projects.
OptaSense (15% of Global Products revenue)
OptaSense provides innovative fibre sensing solutions to deliver
decision-ready data in multiple vertical markets.
-- The OptaSense subsidiary grew last year, driven principally by
continued strength in its pipeline sensing business and some recovery
in the North American oil and gas market.
-- The business is delivering the system for the world's largest
distributed fibre sensing project for the 1,850km Trans-Anatolian
Natural Gas Pipeline (TANAP) that runs from Azerbaijan, through
Georgia and Turkey, to Europe.
-- Following the establishment of an advisory board to provide expertise
in key target markets, OptaSense has signed an agreement to work
together with Siemens to pursue new opportunities in the rail
sector.
-- The business is also undertaking collaborative research with Stanford
School of Earth, Energy and Environmental Sciences in California
that includes the installation of a fibre-optic seismic array
on the Stanford campus to better understand the complex geology
of the Bay Area.
Space Products (11% of Global Products revenue)
QinetiQ's Space Products business provides satellites, payload
instruments, sub-systems and ground station services.
-- The business secured a EUR2m contract with the European Space
Agency to develop the next generation computer and power management
system for its PROBA family of satellites, in addition to other
development funding.
-- Its P200 satellite, the latest evolution of the PROBA series,
was also listed in the NASA catalogue which will help facilitate
the procurement of spacecraft by US federal agencies and their
affiliates.
-- Under other contracts awarded during the year the business supported
the development of a spacecraft for the Argentinian space programme,
and a satellite for a joint European and Chinese solar wind programme.
-- It also secured further funding to continue the development of
its International Berthing and Docking Mechanism (IBDM) for spacecraft.
EMEA Products (33% of Global Products revenue)
EMEA Products provides research services and bespoke
technological solutions developed from intellectual property spun
out from EMEA Services.
-- In December 2016, the Group acquired the Target Systems business
from Meggitt PLC, adding aerial, land and maritime targets to
the portfolio of products and services offered by QinetiQ. Focus
to date has been on integration and realising synergies, with
early contract wins in the United Arab Emirates. In April 2017
QinetiQ Target Systems successfully completed its first commercial
flight of the Banshee Jet 110 aerial target.
-- During the year, the US Defense Advanced Research Projects Agency
(DARPA) invested a further $3m in QinetiQ's electric hub-drive
technology that will improve mobility and survivability of future
military ground vehicles. The new agreement builds on previous
contract awards and will take the technology from concept design
to the building and testing phase, including production of two
fully working units.
-- QinetiQ remains a leader in the research and development of stealth
technologies and advanced materials. We continue to support the
UK's sovereign capability in this area and deliver projects for
other allied nations.
-- Subsidiaries Boldon James and Commerce Decisions are reported
in EMEA Products. Boldon James further expanded its product portfolio
with the introduction of several new enhancements to its data
classification offering, which it provides to large military and
commercial organisations.
Global Products FY18 outlook
The Group's Global Products division has shorter order cycles
than EMEA Services and its performance is dependent on the timing
of shipments of key orders. As a result of its contracted orders
and pipeline of opportunities, as well as the anticipated full year
contribution from the Target Systems acquisition, the division is
expected to continue to grow in FY18.
Principal risks and uncertainties
The Group continues to be exposed to a number of risks and
uncertainties which management continue to assess, manage and
mitigate to minimise their potential impact on the reported
performance of the Group. An explanation of these risks, together
with details of risk management and mitigation, can be found in the
annual report which will be available for download at
https://www.qinetiq.com/investors/Pages/default.aspx. A summary of
the significant risks and uncertainties is set out below:
-- Reduced spending in the core markets in which the Group operates;
-- Failure to execute the international strategy or adequately to
mitigate specific risks arising from international business;
-- Failure to create a culture of innovation or to invest adequately
in, or create value from, our innovation investment;
-- The transformation programme does not result in change that embeds
and created value from increased innovation and competitiveness;
-- A future skills shortage;
-- Group performance is adversely affected by application of the
Single Source Contract Regulations;
-- A breach of data security, cyber attacks or IT systems failure
could have an adverse impact on our customers' operations;
-- The Group operates in highly regulated environments and recognises
that its operations have the potential to have an impact on a
variety of stakeholders; and
-- A material element of the Group's revenue is derived from one
contract (the LTPA contract).
Consolidated income statement
for the year ended 31 March
2017 2016
Specific Specific
all figures in GBP adjusting adjusting
million Note Underlying items(*) Total Underlying items(*) Total
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
Revenue 2 783.1 - 783.1 755.7 - 755.7
Operating costs excluding
depreciation, amortisation
and impairment (647.0) 17.4 (629.6) (630.5) 0.3 (630.2)
Other income 9.2 - 9.2 9.5 - 9.5
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
EBITDA (earnings before
interest, tax, depreciation
and amortisation) 145.3 17.4 162.7 134.7 0.3 135.0
Depreciation and impairment
of property, plant
and equipment 4 (26.4) - (26.4) (23.0) - (23.0)
Impairment of goodwill - - - - (31.9) (31.9)
Amortisation and impairment
of intangible assets (2.6) (1.0) (3.6) (2.8) (2.0) (4.8)
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
Operating profit/(loss) 116.3 16.4 132.7 108.9 (33.6) 75.3
Gain on business divestments - - - - 16.2 16.2
Finance income 6 1.0 - 1.0 1.0 - 1.0
Finance expense 6 (1.2) (1.0) (2.2) (1.2) (1.1) (2.3)
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
Profit/(loss) before
tax 4 116.1 15.4 131.5 108.7 (18.5) 90.2
Taxation (expense)/income 7 (12.3) 4.1 (8.2) (12.8) 21.2 8.4
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
Profit for the year
from continuing operations 103.8 19.5 123.3 95.9 2.7 98.6
Profit for the year
from discontinued operations - - - - 7.5 7.5
Profit for the year
attributable to equity
shareholders 103.8 19.5 123.3 95.9 10.2 106.1
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
Earnings per share
Basic - continuing
operations 8 18.1p 21.5p 16.3p 16.8p
Basic - total Group 8 18.1p 21.5p 16.3p 18.1p
Diluted - continuing
operations 8 17.9p 21.3p 16.2p 16.7p
Diluted - total Group 8 17.9p 21.3p 16.2p 18.0p
------------------------------ ---- ---------- ---------- ------- ---------- ---------- -------
* For details of 'specific adjusting items' refer to note 3
Consolidated statement of comprehensive income
for the year ended 31 March
all figures in GBP million 2017 2016
----------------------------------------------------- ------ ------
Profit for the year 123.3 106.1
Items that will not be reclassified to profit
or loss:
Actuarial gain/(loss) recognised in defined
benefit pension schemes 183.3 (10.6)
Tax on items that will not be reclassified
to profit and loss (31.2) 2.1
----------------------------------------------------- ------ ------
Total items that will not be reclassified to
profit or loss 152.1 (8.5)
Items that may be reclassified to profit or
loss:
Foreign currency translation differences for
foreign operations 12.2 3.2
Recycling of currency translation differences
to the income statement on disposal of foreign
subsidiary - 1.7
Decrease in fair value of hedging derivatives - (0.1)
Fair value losses on available-for-sale investments (0.4) (0.6)
Total items that may be reclassified to profit
or loss 11.8 4.2
----------------------------------------------------- ------ ------
Other comprehensive income/(expense) for the
year, net of tax 163.9 (4.3)
----------------------------------------------------- ------ ------
Total comprehensive income for the year 287.2 101.8
----------------------------------------------------- ------ ------
Consolidated statement of changes in equity
for the year ended 31 March
all figures in Issued Capital
GBP share redemption Share Hedge Translation Retained Non-controlling Total
million capital reserve premium reserve reserve earnings Total interest equity
----------------- -------- ----------- -------- -------- ----------- --------- ------ --------------- -------
At 1 April 2016 5.9 40.6 147.6 - (1.9) 132.4 324.6 0.2 324.8
Profit for the
year - - - - - 123.3 123.3 - 123.3
Other
comprehensive
income for the
year,
net of tax - - - - 12.2 151.7 163.9 - 163.9
Purchase of own
shares - - - - - (0.7) (0.7) - (0.7)
Purchase and
cancellation
of shares (0.2) 0.2 - - - (47.4) (47.4) - (47.4)
Share-based
payments - - - - - 2.1 2.1 - 2.1
Dividends - - - - - (33.4) (33.4) - (33.4)
----------------- -------- ----------- -------- -------- ----------- --------- ------ --------------- -------
At 31 March 2017 5.7 40.8 147.6 - 10.3 328.0 532.4 0.2 532.6
----------------- -------- ----------- -------- -------- ----------- --------- ------ --------------- -------
At 1 April 2015 6.1 40.4 147.6 0.1 (6.8) 110.6 298.0 0.1 298.1
Profit for the
year - - - - - 106.1 106.1 0.1 106.2
Other
comprehensive
income/(expense)
for the year,
net
of tax - - - (0.1) 4.9 (9.1) (4.3) - (4.3)
Purchase of own
shares - - - - - (0.7) (0.7) - (0.7)
Purchase and
cancellation
of shares (0.2) 0.2 - - - (46.9) (46.9) - (46.9)
Share-based
payments - - - - - 4.7 4.7 - 4.7
Dividends - - - - - (32.3) (32.3) - (32.3)
----------------- -------- ----------- -------- -------- ----------- --------- ------ --------------- -------
At 31 March 2016 5.9 40.6 147.6 - (1.9) 132.4 324.6 0.2 324.8
----------------- -------- ----------- -------- -------- ----------- --------- ------ --------------- -------
Consolidated balance sheet
as at 31 March
all figures in GBP million Note 2017 2016
-------------------------------------------------- ---- ------- -------
Non-current assets
Goodwill 10 107.8 73.1
Intangible assets 34.7 8.3
Property, plant and equipment 238.8 233.4
Other financial assets 0.5 0.6
Investments 1.5 0.9
Retirement benefit surplus 12 156.0 -
Deferred tax asset 5.4 4.1
-------------------------------------------------- ---- ------- -------
544.7 320.4
-------------------------------------------------- ---- ------- -------
Current assets
Inventories 28.9 19.0
Other financial assets 10.7 10.8
Trade and other receivables 175.6 156.2
Investments 1.3 1.7
Cash and cash equivalents 211.8 263.5
-------------------------------------------------- ---- ------- -------
428.3 451.2
-------------------------------------------------- ---- ------- -------
Total assets 973.0 771.6
-------------------------------------------------- ---- ------- -------
Current liabilities
Trade and other payables (322.1) (338.7)
Current tax (43.7) (39.9)
Provisions (6.2) (5.3)
Other financial liabilities (0.8) (0.2)
-------------------------------------------------- ---- ------- -------
(372.8) (384.1)
-------------------------------------------------- ---- ------- -------
Non-current liabilities
Retirement benefit obligation 12 - (37.7)
Deferred tax liability (37.0) -
Provisions (17.8) (13.8)
Other financial liabilities (0.3) (0.2)
Other payables (12.5) (11.0)
-------------------------------------------------- ---- ------- -------
(67.6) (62.7)
-------------------------------------------------- ---- ------- -------
Total liabilities (440.4) (446.8)
-------------------------------------------------- ---- ------- -------
Net assets 532.6 324.8
-------------------------------------------------- ---- ------- -------
Capital and reserves
Ordinary shares 5.7 5.9
Capital redemption reserve 40.8 40.6
Share premium account 147.6 147.6
Translation reserve 10.3 (1.9)
Retained earnings 328.0 132.4
-------------------------------------------------- ---- ------- -------
Capital and reserves attributable to shareholders
of the parent company 532.4 324.6
-------------------------------------------------- ---- ------- -------
Non-controlling interest 0.2 0.2
-------------------------------------------------- ---- ------- -------
Total shareholders' funds 532.6 324.8
-------------------------------------------------- ---- ------- -------
Consolidated cash flow statement
for the year ended 31 March
all figures in GBP million Note 2017 2016
---------------------------------------------------- ---- ------ ------
Net cash inflow from operations 14 111.9 133.4
Tax (paid)/received (3.0) 27.9
Interest received 1.0 0.9
Interest paid (0.6) (0.6)
---------------------------------------------------- ---- ------ ------
Net cash inflow from operating activities 109.3 161.6
---------------------------------------------------- ---- ------ ------
Purchases of intangible assets (2.2) (1.6)
Purchases of property, plant and equipment (30.7) (28.6)
Proceeds from sale of property, plant and equipment 14.3 0.4
Acquisition of businesses (net of cash acquired) (65.7) (0.6)
Sale of investment in subsidiary - 28.0
---------------------------------------------------- ---- ------ ------
Net cash outflow from investing activities (84.3) (2.4)
---------------------------------------------------- ---- ------ ------
Purchase of own shares (48.1) (48.6)
Dividends paid to shareholders (33.4) (32.3)
Capital element of finance lease rental payments - (1.4)
Capital element of finance lease rental receipts - 1.5
---------------------------------------------------- ---- ------ ------
Net cash outflow from financing activities (81.5) (80.8)
---------------------------------------------------- ---- ------ ------
(Decrease)/increase in cash and cash equivalents (56.5) 78.4
Effect of foreign exchange changes on cash
and cash equivalents 4.8 0.8
Cash and cash equivalents at beginning of year 263.5 184.3
---------------------------------------------------- ---- ------ ------
Cash and cash equivalents at end of year 11 211.8 263.5
---------------------------------------------------- ---- ------ ------
Reconciliation of movement in net cash
for the year ended 31 March
all figures in GBP million Note 2017 2016
------------------------------------------------------------ ---- ------ -------------------------
(Decrease)/increase in cash and cash equivalents in the
year (56.5) 78.4
Add back net cash flows not impacting net cash - (0.1)
------------------------------------------------------------ ---- ------ -------------------------
Change in net cash resulting from cash flows (56.5) 78.3
Other movements including foreign exchange 3.9 0.7
------------------------------------------------------------ ---- ------ -------------------------
(Decrease)/Increase in net cash as defined by the Group (52.6) 79.0
Net cash as defined by Group at the beginning of the period 274.5 195.5
------------------------------------------------------------ ---- ------ -------------------------
Net cash as defined by Group at the end of the period 11 221.9 274.5
Less: other financial assets and liabilities (10.1) (11.0)
------------------------------------------------------------ ---- ------ -------------------------
Total cash and cash equivalents 11 211.8 263.5
------------------------------------------------------------ ---- ------ -------------------------
1. Significant accounting policies
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 the financial information,
specific adjusting items need to be disclosed separately because of
their size and nature. Underlying measures of performance excludes
specific adjusting items.
Specific adjusting items include:
-- amortisation of intangible assets arising from acquisitions;
-- pension net finance expense;
-- gains/losses on business divestments and disposal of property and investments;
-- transaction costs in respect of business acquisitions;
-- impairment of goodwill and other intangible assets;
-- the tax impacts of the above; and
-- other significant non-recurring deferred tax movements.
Basis of preparation
The financial information in this preliminary announcement has
been extracted from the Group's consolidated financial statements
for the year ended 31 March 2017. The Group's financial statements
have been prepared on a going concern basis and in accordance with
International Financial Reporting Standards as adopted by the EU
('IFRS') and the Companies Act 2006 applicable to companies
reporting under IFRS.
The financial information included within the preliminary
announcement has been prepared using accounting policies consistent
with International Financial Reporting Standards (IFRSs) as
endorsed by the European Union. The accounting policies followed
are the same as those published by the Group within its Annual
Report for the year ended 31 March 2017 which will be available on
the Group's website, www.QinetiQ.com subject to the changes noted
below. The preliminary announcement was approved by the Board of
Directors on 25 May 2017. The financial information in this
preliminary announcement does not constitute the statutory accounts
of QinetiQ Group plc ('the Company') within the meaning of section
435 of the Act.
The statutory accounts for 2017 were approved by the Board of
Directors on 25 May 2017 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting on 19 July
2017. The financial information for 2016 is derived from the
statutory accounts for 2016 which have been delivered to the
Registrar of Companies. The auditors have reported on the 2017 and
2016 accounts. The reports were (i) unqualified; (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiary undertakings to 31
March 2017. 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 its power over the investee. This is
the IFRS 10 definition of 'control'.
The Group comprises certain entities that are operated under the
management of a Proxy Board. Details of the Proxy Board
arrangements and the powers of the proxy holders and QinetiQ
management are set out in the Corporate Governance section of the
Annual Report. IFRS 10 is the accounting standard now applicable in
respect of consolidation of entities. This does not specifically
deal with proxy situations. However, having considered the terms of
the proxy agreement, 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.
An associate is an undertaking over which the Group 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. Associates and joint ventures are accounted for using the
equity method from the date of acquisition to the date of disposal.
The Group's investments in associates and 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 associate
less any impairment to the recoverable amount. Where an associate
or joint venture has net liabilities, full provision is made for
the Group's share of liabilities where there is a constructive or
legal obligation to provide additional funding to the associate or
joint venture.
The financial statements of subsidiaries, joint ventures and
associates are adjusted where necessary to ensure compliance with
Group accounting policies.
On consolidation, all intra-Group income, expenses and balances
are eliminated.
Recent accounting developments
Developments adopted by the Group in 2017 with no material
impact on the financial statements
The following EU-endorsed Standards and amendments, improvements
and interpretations are effective for accounting periods beginning
on or after 1 January 2016 and have been adopted with no material
impact on the Group's financial statements:
-- IFRS 11 Joint arrangements - amendment to add guidance on how
to account for the acquisition of an interest in a joint operation
that constitutes a business.
-- IAS 16 Property, plant and equipment - amendments that change
the financial reporting for bearer plants such as grape vines and
rubber trees. Bearer plants should now be accounted for in the same
way as property, plant and equipment. The produce growing on bearer
plants will remain within the scope of IAS 41.
-- IAS 16 Property, plant and equipment and IAS 38 Intangible
assets - clarification of acceptable methods of depreciation and
amortisation.
-- IAS 27(R) Separate financial statements - amendment allowing
entities to use the equity method to account for investment in
subsidiaries, joint ventures and associates in their separate
financial statements.
-- IAS 1 Presentation of financial statements - amendment to
improve presentation and disclosure in financial reports.
-- IFRS 10 Consolidated financial statements and IAS 28
Investments in associates and joint ventures - amendments to both
applying the consolidation exemption and also on the sale or
contribution of assets (note not yet endorsed for use in the
EU).
-- Annual improvements 2012-2014 cycle:
o IFRS 5 Non-current assets held for sale and discontinued
operations - amendment regarding methods of disposal.
o IFRS 7 Financial instruments: Disclosures - amendment
regarding servicing contracts and the transfer of financial assets
to a third party under conditions which allow the transferor to
derecognise the asset but retain continuing involvement in them. A
second amendment clarifies that some interim disclosures in IFRS 7
are not required.
o IAS 19 Employee benefits - amendment regarding discount rates;
when determining the discount rate for post-employment benefit
obligations, it is the currency that the liabilities are
denominated in that is important and not the country where they
arise.
o IAS 34 Interim financial reporting - amendment requiring
'information disclosed elsewhere in the interim financial report'
to be cross-referenced from the interim financial statement to the
location of that information.
Developments expected in future periods of which the impact is
being assessed
IFRS 15 Revenue from Contracts with Customers: The final
Standard was published in May 2014 and the IASB has taken the
decision to defer the effective date of IFRS 15 to 1 January 2018
i.e. FY19 for QinetiQ. The new Standard introduces a five-step
model to the principle of revenue recognition. The framework
includes identifying the contract with the customer, identifying
the performance obligations in the contract, determining the
transaction price, allocating the transaction price to the
performance obligations in the contract and recognising revenue
when (or as) the entity satisfies a performance obligation.
QinetiQ is currently undertaking an assessment of the impact of
the new standard on its financial statements when adopted. At the
current time it is not possible to quantify the impact on revenue.
Issues being analysed on a contract-by-contract basis include
whether the current methodology for recognising revenue over time
remains appropriate, the treatment of contract modifications,
variable consideration, determination and distinction of
performance obligations, determination of agency and principal
relationships, collectability and licences. QinetiQ observes that
where services provided by QinetiQ are substantially the same over
the life of the contract, QinetiQ will apply the series guidance
stated in IFRS 15. This is not expected to affect the overall
amount of revenue recognised under a contract but it may affect the
phasing.
The Group's on-going IFRS 15 project includes development of new
internal revenue recognition accounting policies and guidance and
further training across the Group in order to apply the
requirements of IFRS 15 to all QinetiQ contracts and further work
is being undertaken to quantify the impact of the transition to
this new standard with effect from 2019.
QinetiQ is also undertaking an analysis of the transitional
guidance which allows for two different approaches; the
retrospective method (with optional practical expedients) or the
cumulative effect method. Under the retrospective method, QinetiQ
would need to restate prior year comparatives and recognise the
cumulative effect of applying the new standard in equity at the
start of the earliest presented comparative period. Under the
cumulative method, QinetiQ would apply the new standard as of the
date of initial application, with no restatement of comparative
period amounts. It would record the cumulative effect of initially
applying the new standard - which would affect revenue and costs -
as an adjustment to the opening balance of equity at the date of
initial application. Under the cumulative effect method, the
provisions of the new standard apply only to contracts that are
open (i.e. not complete) under previous GAAP at the date of initial
application. QinetiQ acknowledges that the disclosure requirements
under IFRS 15 are more prescriptive and extensive than under
current GAAP.
IFRS 16 Leases: The final Standard was published in January
2016. Under the new Standard, companies will recognise new assets
and liabilities, bringing added transparency to the balance sheet.
IFRS 16 eliminates the current dual accounting model for lessees,
which distinguishes between on-balance sheet finance leases and
off-balance sheet operating leases. Instead, there is a single,
on-balance sheet accounting model that is similar to current
finance lease accounting. Lessor accounting remains similar to
current practice - i.e. lessors continue to classify leases as
finance and operating leases. The Standard will be effective from 1
January 2019 subject to EU endorsement.
IFRS 9 Financial Instruments: This new Standard on accounting
for financial instruments will replace IAS 39 Financial
Instruments: Recognition and Measurement. It is effective for
accounting periods beginning on or after 1 January 2018.
2. Segmental analysis
Operating segments
For the year ended 31 March
all figures in GBP million 2017 2016
----------------------------- ------------------- -------------------
Underlying Underlying
operating operating
Revenue profit* Revenue profit*
----------------------------- ------- ---------- ------- ----------
EMEA Services 613.5 92.7 616.4 93.8
Global Products 169.6 23.6 139.3 15.1
------------------------------ ------- ---------- ------- ----------
Total operating segments 783.1 116.3 755.7 108.9
------------------------------ ------- ---------- ------- ----------
Underlying operating margin* 14.9% 14.4%
------------------------------ ------- ---------- ------- ----------
Reconciliation of total operating segments to total on an
organic, constant currency basis
For the year ended 31 March
all figures in GBP million 2017 2016
--------------------------------------------- ------------------- -------------------
Underlying Underlying
operating operating
Revenue profit* Revenue profit*
--------------------------------------------- ------- ---------- ------- ----------
Total operating segments 783.1 116.3 755.7 108.9
Less: divested business (Cyveillance) - - (8.0) 0.3
Less: acquired businesses (9.2) (1.2) - -
---------------------------------------------- ------- ---------- ------- ----------
Total operating segments on an organic
basis 773.9 115.1 747.7 109.2
Adjust to constant prior year exchange
rates (18.6) (2.5) - -
---------------------------------------------- ------- ---------- ------- ----------
Total operating segments on an organic,
constant currency basis 755.3 112.6 747.7 109.2
---------------------------------------------- ------- ---------- ------- ----------
Organic revenue growth at constant currency* 1% (1%)
---------------------------------------------- ------- ---------- ------- ----------
Reconciliation of segmental results to total profit
For the year ended 31 March
all figures in GBP million Note 2017 2016
------------------------------------------------- ---- ----- ------
Underlying operating profit(1) 116.3 108.9
Specific adjusting items operating profit/(loss) 3 16.4 (33.6)
Operating profit 132.7 75.3
Net finance expense 6 (1.2) (1.3)
Gain on business divestments - 16.2
------------------------------------------------- ---- ----- ------
Profit before tax 131.5 90.2
Taxation (expense)/income 7 (8.2) 8.4
------------------------------------------------- ---- ----- ------
Profit for the year from continuing operations 123.3 98.6
------------------------------------------------- ---- ----- ------
Discontinued operations
Profit from discontinued operations, net of
tax 3 - 7.5
------------------------------------------------- ---- ----- ------
Profit for the year attributable to equity
shareholders 123.3 106.1
------------------------------------------------- ---- ----- ------
(1) The measure of profit presented to the chief operating
decision maker is underlying operating profit (as defined in
glossary).
* Definitions of the Group's 'Alternative Performance Measures'
can be found in the glossary
3. 'Specific adjusting items'
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. 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 GBP million 2017 2016
--------------------------------------------------- ----- ------
Profit on disposal of property 18.4 0.3
Acquisition costs (1.0) -
Specific adjusting items before amortisation,
depreciation and impairment 17.4 0.3
Impairment of goodwill - (31.9)
Amortisation of intangible assets arising from
acquisition (1.0) (2.0)
--------------------------------------------------- ----- ------
Specific adjusting items operating profit/(loss) 16.4 (33.6)
Gain on business divestments (sale of Cyveillance) - 16.2
Defined benefit pension scheme net finance
expense (1.0) (1.1)
--------------------------------------------------- ----- ------
Specific adjusting items profit/(loss) before
tax 15.4 (18.5)
Specific adjusting items - tax 7 4.1 21.2
--------------------------------------------------- ----- ------
Total specific adjusting items profit after
tax - continuing operations 19.5 2.7
Profit on disposal of subsidiary - discontinued
operations - 7.5
Total specific adjusting items profit after
tax 19.5 10.2
--------------------------------------------------- ----- ------
Reconciliation of underlying profit for the
year to total profit for the year
all figures in GBP million 2017 2016
--------------------------------------------------- ----- ------
Underlying profit after tax - total Group 103.8 95.9
Total specific adjusting items profit after
tax (see above) 19.5 10.2
--------------------------------------------------- ----- ------
Total profit for the year attributable to equity
shareholders 123.3 106.1
--------------------------------------------------- ----- ------
4. Profit before tax
The following items have been charged in arriving at profit
before tax for continuing operations:
all figures in GBP million 2017 2016
------------------------------------------------------- ------- -------
Depreciation of property, plant and equipment:
Owned assets: depreciation (26.4) (23.4)
Owned assets: impairment reversal - 0.4
Foreign exchange (loss)/gain (0.2) 0.2
Research and development expenditure - customer funded
contracts (272.8) (277.6)
Research and development expenditure - Group funded (33.6) (23.2)
------------------------------------------------------- ------- -------
5. Business combinations
Acquisitions in the year to 31 March 2017
all figures
in Contribution
GBP million post-acquisition
--------------------------
Fair value
Date Cash of assets Operating
Company acquired acquired consideration(1) Goodwill acquired(2) Revenue profit
QinetiQ Target
Systems 21 December 2016 60.3 (24.5) 35.8 6.6 1.0
RubiKon Group Pty
Limited 31 January 2017 7.4 (3.9) 3.5 2.6 0.2
--------------------- ------------------- ------------------- ------------ ----------- --------- ---------------
Total current year
acquisitions 67.7 (28.4) 39.3 9.2 1.2
--------------------- ------------------- ------------------- ------------ ----------- --------- ---------------
Less: deferred
consideration (1.3)
Less: cash acquired (1.7)
Plus: transaction
costs(3) 1.0
--------------------- ------------------- -------------------
Net cash outflow
in the year 65.7
--------------------- ------------------- -------------------
(1) Initial cash consideration includes price adjustments for
working capital and net debt.
(2) Fair value of assets acquired are provisional.
(3) Transaction costs have been included in 'Operating costs
excluding depreciation and amortisation' as a specific adjusting
item.
QinetiQ Target Systems (formerly Meggitt Target Systems)
On 21 December 2016, the Group acquired 100% of the issued share
capital of Meggitt Target Systems for GBP60.3m. The company is a
provider of unmanned aerial, naval and land-based target systems
and services for test and evaluation ('T&E') and operational
training and rehearsal. On the date of acquisition, the company
changed its name to QinetiQ Target Systems and was integrated into
QinetiQ's international business.
QinetiQ Target Systems provides target systems to approximately
40 countries with operations in Alberta, Canada and Kent, UK. The
acquisition of Target Systems is to enhance QinetiQ's product
portfolio, market position and ability to deliver global test and
evaluation services. If the acquisition had occurred on the first
day of the financial year, Group revenue for the year would have
been GBP806.3m and the Group profit before tax would have been
GBP136.6m.
The following table summarises the recognised amounts of assets
acquired and liabilities assumed at the date of acquisition and the
adjustments required to the book values of the assets and
liabilities in order to present the net assets of these businesses
at fair value and in accordance with Group accounting policies. The
fair values remain provisional, but will be finalised within 12
months of acquisition.
Book Fair value Fair value
all figures in GBP million value adjustment at acquisition
------------------------------ ------ ----------- ---------------
Intangible assets - 24.2 24.2
Property, plant and equipment 1.9 - 1.9
Inventory 8.6 1.6 10.2
Trade and other receivables 6.8 - 6.8
Cash and cash equivalents 1.5 - 1.5
Trade and other payables (3.7) - (3.7)
Corporation tax 0.1 - 0.1
Deferred tax liability - (5.2) (5.2)
------------------------------- ------ ----------- ---------------
Net assets acquired 15.2 20.6 35.8
Goodwill 24.5
------------------------------- ------ ----------- ---------------
60.3
------------------------------ ------ ----------- ---------------
Consideration satisfied by:
Cash 60.1
Deferred consideration 0.2
------------------------------- ------ ----------- ---------------
Total consideration 60.3
------------------------------- ------ ----------- ---------------
The fair value adjustments include GBP24.2m in relation to the
recognition of acquired intangibles assets, of which GBP17.4m
relates to customer relationships and GBP6.8m relates to
intellectual property. The goodwill is attributable mainly to the
skills and technical talent of Target Systems' work force and the
synergies expected to be achieved from integrating the companies
into the Group's existing business.
RubiKon Group Pty Limited
On 31 January 2017, the Group acquired 100% of the issued share
capital of RubiKon Group Pty Limited from its founder management
team for GBP7.4m (AUD$12.6m). The company provides solutions to
complex logistics, supply chain management and procurement projects
in defence, aerospace, mining and government markets. RubiKon is
now subsumed into the Australia business.
RubiKon's integrated logistics support services are
complementary to the technical engineering advice and services that
the Group provide. The acquisition is also expected to provide the
Group with an increased share of "strategic partner" style
contracts in the growing Australian markets through access to
RubiKon's customer base. If the acquisition had occurred on the
first day of the financial year, Group revenue for the period would
have been GBP790.5m and the Group profit before tax would have been
GBP132.5m.
The following table summarises the recognised amounts of assets
acquired and liabilities assumed at the date of acquisition and the
adjustments required to the book values of the assets and
liabilities in order to present the net assets of these businesses
at fair value and in accordance with Group accounting policies. The
fair values remain provisional, but will be finalised within 12
months of acquisition
Book Fair value Fair value
all figures in GBP million value adjustment at acquisition
------------------------------ ------ ----------- ---------------
Intangible assets - 3.1 3.1
Property, plant and equipment - - -
Trade and other receivables 2.4 - 2.4
Cash and cash equivalents 0.2 - 0.2
Trade and other payables (1.0) - (1.0)
Other non-current liabilities (0.1) - (0.1)
Deferred tax liability (0.1) (1.0) (1.1)
------------------------------- ------ ----------- ---------------
Net assets acquired 1.4 2.1 3.5
Goodwill 3.9
------------------------------- ------ ----------- ---------------
7.4
------------------------------ ------ ----------- ---------------
Consideration satisfied by:
Cash 6.3
Deferred consideration 1.1
------------------------------- ------ ----------- ---------------
Total consideration 7.4
------------------------------- ------ ----------- ---------------
The fair value adjustments include GBP3.1m in relation to the
recognition of acquired intangibles assets (customer relationships)
less the recognition of deferred tax liability of GBP1.0m in
relation to these intangibles assets. The goodwill is attributable
mainly to the skills and technical talent of RubiKon's work force
and the synergies expected to be achieved from integrating the
company into the Group's existing business.
6. Finance income and expense
For the year ended 31 March
all figures in GBP million 2017 2016
--------------------------------------------------- ----- -----
Receivable on bank deposits 1.0 1.0
Finance income 1.0 1.0
--------------------------------------------------- ----- -----
Amortisation of recapitalisation fee (0.3) (0.3)
Payable on bank loans and overdrafts (0.6) (0.6)
Unwinding of discount on financial liabilities (0.3) (0.3)
--------------------------------------------------- ----- -----
Finance expense before specific adjusting items (1.2) (1.2)
Specific adjusting items:
Defined benefit pension scheme net finance expense (1.0) (1.1)
--------------------------------------------------- ----- -----
Total finance expense (2.2) (2.3)
--------------------------------------------------- ----- -----
Net finance expense (1.2) (1.3)
--------------------------------------------------- ----- -----
7. Taxation
2017 2016
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Before Before
specific Specific specific Specific
adjusting adjusting adjusting adjusting
all figures in GBP million items* items* Total items* items* Total
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Analysis of charge
Current UK tax expense/(income) 7.0 - 7.0 2.2 (35.6) (33.4)
Overseas corporation tax
Current year 2.0 - 2.0 2.4 - 2.4
Current tax expense/(income) 9.0 - 9.0 4.6 (35.6) (31.0)
Deferred tax expense/(income) 3.6 (4.1) (0.5) 7.7 20.0 27.7
Deferred tax impact of change
in rates (0.2) - (0.2) (0.2) - (0.2)
Deferred tax in respect of
prior years (0.1) - (0.1) 0.7 (5.6) (4.9)
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Deferred tax expense/(income) 3.3 (4.1) (0.8) 8.2 14.4 22.6
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Taxation expense/(income) 12.3 (4.1) 8.2 12.8 (21.2) (8.4)
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Factors affecting tax charge/(credit)
in year
Principal factors reducing
the Group's current year
tax charge below the UK statutory
rate are explained below:
Profit/(loss) before tax 116.1 15.4 131.5 108.7 (18.5) 90.2
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Tax on profit/(loss) before
tax at 20%
(2016: 20%) 23.2 3.1 26.3 21.7 (3.7) 18.0
Effect of:
Expenses not deductible for
tax purposes and non-taxable
items (0.2) (3.3) (3.5) 3.7 4.5 8.2
Research and development
expenditure credits (9.1) - (9.1) (13.7) (36.8) (50.5)
Tax in respect of an FY09
US acquisition - payable
to the tax authorities 1.5 - 1.5 16.2 - 16.2
Tax in respect of an FY09
US acquisition - recoverable
from insurers (1.5) - (1.5) (16.2) - (16.2)
(Recognition)/utilisation
of deferred tax asset in
respect of losses - (3.7) (3.7) - 25.2 25.2
Deferred tax impact of change
in rates (0.5) - (0.5) (0.2) - (0.2)
Deferred tax in respect of
prior years (0.1) - (0.1) 0.7 (5.6) (4.9)
Other deferred tax movements (0.3) (0.2) (0.5) - (4.8) (4.8)
Effect of different rates
in overseas jurisdictions (0.7) - (0.7) 0.6 - 0.6
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Taxation expense/(income) 12.3 (4.1) 8.2 12.8 (21.2) (8.4)
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
Effective tax rate 10.6% 6.2% 11.8% (9.3%)
-------------------------------------- ---------- ---------- ----- ---------- ---------- ------
* Details of specific adjusting items can be found in note
3.
At 31 March 2017 the Group had unused tax losses of GBP141.7m
(2016: GBP154.8m) which are available for offset against future
profits. A deferred tax asset of GBP3.7m has been recognised in the
year, with the income statement credit classified as a specific
adjusting item. This asset is in respect of GBP18.8m of UK losses
and GBP1.4m of Canadian losses. No deferred tax asset is recognised
in respect of the remaining GBP121.5m of losses due to the
uncertainty over the timing of their utilisation. The Group has
GBP66.5m of time limited losses of which US capital losses of
GBP30.0m will expire in 2020. The remaining GBP36.5m of losses are
time limited with GBP4.4m expiring in 2034, GBP22.7m in 2035 and
GBP9.4m in 2036. A reduction in the UK corporation tax rate from
20% to 19% (effective from 1 April 2017) and to 18% (effective 1
April 2020) had previously been substantively enacted on 26 October
2015, and an additional reduction to 17% (effective 1 April 2020)
was substantively enacted on 6 September 2016. This will reduce the
company's future current tax charge accordingly. The deferred tax
assets and liabilities at 31 March 2017 have been calculated based
on these rates.
Factors affecting future tax charges
The effective tax rate continues to be below the UK statutory
rate, primarily as a result of the benefit of research and
development expenditure credits in the UK. The effective tax rate
is expected to remain below the UK statutory rate in the medium
term, subject to the impact of any tax legislation changes, the
geographic mix of profits and the assumption that the benefit of
net R&D expenditure credits retained by the Group remains in
the tax line. Future recognition of unrecognised tax losses will
also affect future tax charges.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable 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. For diluted earnings 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.
For the year ended 31 March 2017 2016
---------------------------------- -------- ----- -----
Weighted average number of shares Million 573.9 587.0
Effect of dilutive securities Million 4.8 3.7
---------------------------------- -------- ----- -----
Diluted number of shares Million 578.7 590.7
---------------------------------- -------- ----- -----
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 3) and tax thereon.
Underlying EPS
For the year ended 31 March 2017 2016
---------------------------------------------------------------- ------------ ------ ------
Profit attributable to equity shareholders GBP million 123.3 106.1
Remove profit after tax in respect of specific adjusting items* GBP million (19.5) (10.2)
---------------------------------------------------------------- ------------ ------ ------
Underlying profit after taxation GBP million 103.8 95.9
---------------------------------------------------------------- ------------ ------ ------
Weighted average number of shares Million 573.9 587.0
---------------------------------------------------------------- ------------ ------ ------
Underlying basic EPS Pence 18.1 16.3
---------------------------------------------------------------- ------------ ------ ------
Diluted number of shares Million 578.7 590.7
---------------------------------------------------------------- ------------ ------ ------
Underlying diluted EPS Pence 17.9 16.2
---------------------------------------------------------------- ------------ ------ ------
Basic and diluted EPS - continuing
operations
For the year ended 31 March 2017 2016
------------------------------------------- ------------ ----- -----
Profit attributable to equity shareholders GBP million 123.3 98.6
Weighted average number of shares Million 573.9 587.0
-------------------------------------------- ----------- ----- -----
Basic EPS - continuing operations Pence 21.5 16.8
-------------------------------------------- ----------- ----- -----
Diluted number of shares Million 578.7 590.7
-------------------------------------------- ----------- ----- -----
Diluted EPS - continuing operations Pence 21.3 16.7
-------------------------------------------- ----------- ----- -----
Basic and diluted EPS - total Group
For the year ended 31 March 2017 2016
------------------------------------------- ------------ ----- -----
Profit attributable to equity shareholders GBP million 123.3 106.1
Weighted average number of shares Million 573.9 587.0
-------------------------------------------- ----------- ----- -----
Basic EPS - total Group Pence 21.5 18.1
-------------------------------------------- ----------- ----- -----
Diluted number of shares Million 578.7 590.7
-------------------------------------------- ----------- ----- -----
Diluted EPS - total Group Pence 21.3 18.0
-------------------------------------------- ----------- ----- -----
* For details of 'specific adjusting items' refer to note 3.
9. Dividends
An analysis of the dividends paid and proposed in respect of the
years ended 31 March 2017 and 2016 is provided below:
Pence Date paid/
per share GBPm payable
--------------------------------------- ---------- ---- ----------
Interim 2017 2.0 11.5 Feb 2017
Final 2017 (proposed) 4.0 22.6 Sept 2017
--------------------------------------- ---------- ---- ----------
Total for the year ended 31 March 2017 6.0 34.1
--------------------------------------- ---------- ---- ----------
Interim 2016 1.9 11.1 Feb 2016
Final 2016 3.8 21.9 Sept 2016
--------------------------------------- ---------- ---- ----------
Total for the year ended 31 March 2016 5.7 33.0
--------------------------------------- ---------- ---- ----------
The Directors propose a final dividend of 4.0p (2016: 3.8p) per
share. The dividend, which is subject to shareholder approval, will
be paid on 1 September 2017. The ex-dividend date is 3 August 2017
and the record date is 4 August 2017.
10. Goodwill
all figures in GBP million 2017 2016
--------------------------- ------- ------
Cost
At 1 April 171.5 183.3
Acquisitions 28.4 -
Disposals - (16.2)
Foreign exchange 20.5 4.4
---------------------------- ------- ------
At 31 March 220.4 171.5
---------------------------- ------- ------
Impairment
At 1 April (98.4) (76.1)
Disposals - 11.0
Impairment - (31.9)
Foreign exchange (14.2) (1.4)
---------------------------- ------- ------
At 31 March (112.6) (98.4)
---------------------------- ------- ------
Net book value at 31 March 107.8 73.1
---------------------------- ------- ------
Goodwill as at 31 March 2017 was allocated across two cash
generating units ('CGUs') within the EMEA Services segment and two
CGUs within the Global Products segment.
QinetiQ Target Systems Limited was acquired during the year (on
21 December 2016) and the goodwill arising of GBP24.5m was
allocated to the existing UK Global Products CGU. The Group
acquired RubiKon Group Pty Limited on 31 January 2017 and the
goodwill arising of AUD $6.7m (GBP3.9m) was allocated to the
existing Australia CGU.
Goodwill is attributable 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
judgments, particularly as they relate to the forecasting of future
cash flows, the discount rates selected and expected long-term
growth rates. Significant headroom exists in all CGUs with the
exception of US Global Products (see below) and management
considers that there are no likely variations in the key
assumptions which would lead to an impairment being recognised in
any of the other CGUs.
Key assumptions
Cash flows
The value-in-use calculations generally use discounted future
cash flows based on financial plans approved by the Board covering
a two-year period. Discounted cash flows for the US Global Products
CGU were based on a Board-approved three-year plan, reflecting
increases in revenue from new product lines. Cash flows for periods
beyond these periods are extrapolated based on the last year of the
plans, with a terminal growth-rate assumption applied.
Terminal growth rates
The specific plans for each of the CGUs have been extrapolated
using a terminal growth rate of 2.0% - 2.4% (2016: 2.0% - 2.4%).
The US terminal growth rate was 2.0% (2016: 2.4%). 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.
Discount rates
The Group's weighted average cost of capital was used as a basis
in determining the discount rate to be applied, adjusted for risks
specific to the market characteristics of CGUs, as appropriate on a
pre-tax basis. This is considered to appropriately estimate a
market participant discount rate. The pre-tax discount rates
applied for the two EMEA Services CGUs were 10.9% and 16.1%, for
the UK Global Products CGU was 10.8% and for the US Global Products
CGU was 11.2%.
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 flow.
Significant CGUs
US Global Products
The carrying value of the goodwill for the US Global Products
CGU, which had been written down in the prior year, was GBP43.4m as
at 31 March 2017 (2016: GBP37.9m). The recoverable amount of this
CGU as at 31 March 2017, based on value in use and calculated using
the assumptions noted above, is marginally higher than the carrying
value of net operating assets (of GBP49.5m) and no further
impairment is required in the year to 31 March 2017. The key
sensitivity impacting on the value in use calculations is the
terminal year cash flows. These cash flows include certain
assumptions about revenue and profit in respect of new product
lines still to be launched and the success of winning certain
government contracts. An increase in the discount rate or a
decrease in the terminal growth rate by 1% would not cause the net
operating assets to exceed their recoverable amount. However, a
reduction of GBP1.5m in the terminal year cash flows would lead to
the recoverable amount no longer exceeding the carrying value. Any
additional reduction in terminal year cash flows would
result in an impairment of the goodwill of this CGU.
Other CGUs
The UK Global Products CGU and the two individual CGUs within
EMEA Services all have significant headroom. An increase in the
discount rate or a decrease in the terminal growth rate by 1% would
not cause the net operating assets to exceed their recoverable
amount. The carrying value of goodwill for the UK Global Products
CGU as at 31 March 2017 was GBP30.3m (2016: GBP5.5m). The carrying
values of goodwill for the two EMEA Services CGUs as at 31 March
2017 were GBP27.5m and GBP6.6m (2016: GBP27.5m and GBP2.2m). The
Directors have not identified any other likely changes in other
significant assumptions between 31 March 2017 and the signing of
the financial statements that would cause the carrying value of the
recognised goodwill to exceed its recoverable amount.
11. Net cash
As at 31 March
2017 2016
--------------------------------------- ------ ----------- ----- ------ ----------- -----
all figures in GBP million Assets Liabilities Net Assets Liabilities Net
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Current financial assets/(liabilities)
Borrowings - deferred financing
costs 0.3 - 0.3 0.3 - 0.3
Available for sale investment(1) 10.4 - 10.4 9.9 - 9.9
Derivative financial instruments - (0.8) (0.8) 0.6 (0.2) 0.4
Total current financial
assets/(liabilities) 10.7 (0.8) 9.9 10.8 (0.2) 10.6
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Non-current assets/(liabilities)
Deferred financing costs 0.2 - 0.2 0.5 - 0.5
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Borrowings 0.2 - 0.2 0.5 - 0.5
Derivative financial instruments 0.3 (0.3) - 0.1 (0.2) (0.1)
Total non-current financial
assets/(liabilities) 0.5 (0.3) 0.2 0.6 (0.2) 0.4
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Cash(2) 88.9 - 88.9 68.4 - 68.4
Cash equivalents 122.9 - 122.9 195.1 - 195.1
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Total cash and cash equivalents 211.8 - 211.8 263.5 - 263.5
--------------------------------------- ------ ----------- ----- ------ ----------- -----
Total net cash as defined
by the Group 221.9 274.5
--------------------------------------- ------ ----------- ----- ------ ----------- -----
(1) The available for sale investment is a 'Libor-plus'
investment fund. The investment objective of the fund is to produce
an interest rate based return, primarily through investment in a
portfolio of AAA and AA-rated asset backed securities and corporate
floating rate notes.
(2) At 31 March 2017 the Group held GBP1.5m (2016: GBP0.1m) of
cash which is restricted in its use.
Reconciliation of net cash flow to movement in net cash
all figures in GBP million 2017 2016
----------------------------------------------------- ------ ------
(Decrease)/increase in cash and cash equivalents
in the year (56.5) 78.4
Capital element of finance lease payments - 1.4
Capital element of finance lease receipts - (1.5)
------------------------------------------------------ ------ ------
Change in net cash as defined by the Group resulting
from cash flows (56.5) 78.3
Amortisation of deferred financing costs (0.3) (0.3)
Foreign exchange and other non-cash movements 4.2 1.0
------------------------------------------------------ ------ ------
Movement in net cash as defined by the Group (52.6) 79.0
Net cash as defined by the Group at the beginning
of the year 274.5 195.5
------------------------------------------------------ ------ ------
Net cash as defined by the Group at the end of the
year 221.9 274.5
------------------------------------------------------ ------ ------
Less: other financial assets and liabilities (10.1) (11.0)
------------------------------------------------------ ------ ------
Total cash and cash equivalents 211.8 263.5
------------------------------------------------------ ------ ------
12. Post-retirement benefits
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 fair value of the QinetiQ Pension Scheme assets, which are
not intended to be realised in the short term and may be subject to
significant change before they are realised, and 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 GBP million 2017 2016
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
Quoted Not quoted Total Quoted Not quoted Total
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
Equities 284.0 71.4 355.4 347.9 66.1 414.0
Liability Driven Investments(1) 968.2 - 968.2 362.8 - 362.8
Corporate bonds 340.6 - 340.6 314.2 - 314.2
Alternative bonds(2) 132.3 - 132.3 176.6 - 176.6
Property fund 126.7 - 126.7 126.6 - 126.6
Cash and other 3.1 - 3.1 16.2 - 16.2
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
Total market value of assets 1,854.9 71.4 1,926.3 1,344.3 66.1 1,410.4
Present value of Scheme liabilities (1,770.3) (1,448.1)
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
Net pension asset/(liability)
before deferred tax 156.0 (37.7)
Deferred tax (liability)/asset (31.4) 1.5
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
Net pension asset/(liability)
after deferred tax 124.6 (36.2)
--------------------------------------- -------- ------------ ----------- ------- ---------- ---------
(1) As at 31 March 2017 the assets in the LDI portfolio hedge against
63% of the interest rate and 100% of the inflation rate risk, as measured
on the Trustee's gilt-funding basis. The increase in the year of GBP605.4m
is split between performance of the LDI funds, with valuation gains
of GBP355.2m, and asset reallocations of GBP250.2m, with GBP179.8m
switched out of equities and GBP70.4m out of alternative bonds.
(2) Includes allocations to high-yield
bonds, secured loans and emerging market
debt.
Changes to the fair value of Scheme assets
all figures in GBP million 2017 2016
-------------------------------------------- ------- -------
Opening fair value of Scheme assets 1,410.4 1,454.6
Interest income on Scheme assets 47.6 46.3
Re-measurement gain/(loss) on Scheme assets 492.0 (75.8)
Contributions by the employer 12.9 14.6
Net benefits paid out and transfers (35.1) (28.1)
Administrative expenses (1.5) (1.2)
-------------------------------------------- ------- -------
Closing fair value of Scheme assets 1,926.3 1,410.4
-------------------------------------------- ------- -------
Changes to the present value of the defined benefit
obligation
all figures in GBP million 2017 2016
------------------------------------------------------ --------- ---------
Opening defined benefit obligation (1,448.1) (1,494.0)
Interest cost (48.6) (47.4)
Actuarial (loss)/gain on Scheme liabilities based on:
Change in financial assumptions (329.4) 40.4
Experience gains 20.7 24.8
Net benefits paid out and transfers 35.1 28.1
------------------------------------------------------ --------- ---------
Closing defined benefit obligation (1,770.3) (1,448.1)
------------------------------------------------------ --------- ---------
Total expense recognised in the income statement
all figures in GBP million 2017 2016
-------------------------------------------------------- ---- ----
Net finance cost on the net pension asset/liability 1.0 1.1
Administrative expenses 1.5 1.2
-------------------------------------------------------- ---- ----
Total expense recognised in the income statement (gross
of deferred tax) 2.5 2.3
-------------------------------------------------------- ---- ----
Assumptions
The major assumptions used in IAS19 valuation of the Scheme
were:
2017 2016
--------------------------------------------- ----- -----
Discount rate applied to Scheme liabilities 2.60% 3.40%
CPI inflation assumption 2.35% 2.10%
--------------------------------------------- ----- -----
Assumed life expectancies in years:
Future male pensioners (currently aged 60) 89 89
Future female pensioners (currently aged 60) 91 91
Future male pensioners (currently aged 40) 91 91
Future female pensioners (currently aged 40) 93 93
--------------------------------------------- ----- -----
13. Contingent liabilities and assets
Subsidiary undertakings within the Group have given unsecured
guarantees of GBP46.1m at 31 March 2017 (2016: GBP32.8m) in the
ordinary course of business.
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 matters, 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 be resisted successfully and therefore the
possibility of any outflow in settlement is assessed as remote.
The Group has also not recognised contingent amounts receivable
relating to property impairments in prior years that may
potentially be recovered from the MOD. Recovery is subject to
future negotiations. It is not considered practicable to calculate
the value of this contingent asset.
14. Cash flows from operations
For the year ended 31 March
all figures in GBP million 2017 2016
------------------------------------------------------------ ------ ------
Profit after tax for the year 123.3 106.1
Adjustments for:
Tax expense/(income) 8.2 (8.4)
Net finance costs 1.2 1.3
Profit on business divestments and disposal of investments - (23.7)
Gain on sale of property (18.4) -
Transaction costs in respect of acquisition of businesses 1.0 -
Amortisation and impairment of purchased or internally
developed intangible assets 2.6 2.8
Amortisation of intangible assets arising from acquisitions 1.0 2.0
Impairment of goodwill - 31.9
Depreciation and impairment of property, plant and
equipment 26.4 23.0
Loss on disposal of property, plant and equipment 1.2 1.2
Share of post-tax profit of equity accounted entities (0.5) (0.5)
Share-based payments charge 2.1 4.7
Changes in retirement benefit obligations (11.4) (13.4)
Net movement in provisions 4.5 (0.3)
------------------------------------------------------------ ------ ------
141.2 126.7
------------------------------------------------------------ ------ ------
Increase in inventories - (0.2)
Decrease in receivables 2.9 13.8
Decrease in payables (32.2) (6.9)
------------------------------------------------------------ ------ ------
Changes in working capital (29.3) 6.7
------------------------------------------------------------ ------ ------
Net cash inflow from operations 111.9 133.4
Reconciliation of net cash inflow from operations to
net cash inflow from operations (post-capex)
all figures in GBP million 2017 2016
------------------------------------------------------------ ------ ------
Net cash inflow from operations 111.9 133.4
Purchases of intangible assets (2.2) (1.6)
Purchases of property, plant and equipment (30.7) (28.6)
Proceeds from sale of plant and equipment - 0.4
------------------------------------------------------------ ------ ------
Net cash inflow from operations (post-capex) 79.0 103.6
------------------------------------------------------------ ------ ------
Underlying Cash Conversion Ratio
2017 2016
------------------------------------------------------------ ------ ------
Underlying operating profit - GBP million 116.3 108.9
Net cash inflow from operations (post-capex) - GBP
million 79.0 103.6
------------------------------------------------------------ ------ ------
Underlying cash conversion ratio - % 68% 95%
------------------------------------------------------------ ------ ------
Glossary
C4ISR Command, control, communications, computers, intelligence,
surveillance and reconnaissance
CPI Consumer Price Index
EBITDA Earnings before interest, tax, depreciation and amortisation
EPS Earnings per share
IAS International Accounting Standards
IFRS International Financial Reporting Standards
LTPA Long Term Partnering Agreement: 25-year contract established
in 2003 to manage the MOD's test and evaluation ranges
MOD UK Ministry of Defence
SSRO Single Source Regulations Office
Alternative performance measures ('APM's)
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 reference
to calculation
or reconciliation
to statutory
measure
Organic revenue growth The level of year-on-year growth, Note 2
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
--------------------------------------- -------------------
Underlying operating Operating profit as adjusted Note 3
profit to exclude 'specific adjusting
items'
--------------------------------------- -------------------
Underlying operating Underlying operating profit expressed N/A
margin as a percentage of revenue
--------------------------------------- -------------------
Underlying net finance Net finance costs excluding net Note 6
costs pension finance costs
--------------------------------------- -------------------
Underlying profit Profit after tax as adjusted Note 3
after tax to exclude 'specific adjusting
items'
--------------------------------------- -------------------
Underlying effective The tax charge for the year excluding Note 7
tax rate the tax impact of 'specific adjusting
items' expressed as a percentage
of underlying profit before tax
--------------------------------------- -------------------
Underlying EPS Basic earnings per share as adjusted Note 8
to exclude 'specific adjusting
items'
--------------------------------------- -------------------
Orders The level of new orders (and N/A
amendments to existing orders)
booked in the year.
--------------------------------------- -------------------
Backlog, funded backlog The expected future value of N/A
or order book revenue from contractually committed
and funded customer orders
--------------------------------------- -------------------
Book to bill ratio Ratio of funded orders received N/A
in the year to revenue for the
year, adjusted to exclude revenue
from the 25-year LTPA contract
--------------------------------------- -------------------
Net cash flow from Net cash flow from operations Note 14
operations (post before cash flows of specific
capex) adjusting items, less cash outflow
on purchase of intangible assets
and plant and equipment, plus
proceeds from sale of plant and
equipment.
--------------------------------------- -------------------
Underlying operating The ratio of net cash from operations Note 14
cash conversion (post capex) to underlying operating
profit
--------------------------------------- -------------------
Amortisation of intangible assets Note 3
Specific adjusting arising from acquisitions; impairment
items of goodwill and intangible assets;
gains/losses on business divestments
and disposal of property and
investments; net pension finance
expense; transaction costs in
respect of business acquisitions;
tax impact of the preceding items;
and significant non-recurring
deferred tax movements
--------------------------------------- -------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPSLASAXEFF
(END) Dow Jones Newswires
May 25, 2017 02:01 ET (06:01 GMT)
Qinetiq (LSE:QQ.)
Historical Stock Chart
From Mar 2024 to Apr 2024
Qinetiq (LSE:QQ.)
Historical Stock Chart
From Apr 2023 to Apr 2024
