QinetiQ Group PLC - Annual Report 2026

QinetiQ Group Plc

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Foundations set for

sustainable growth

QinetiQ Group plc

Annual Report & Accounts 2026

STRATEGIC REPORT

Overview

Financial highlights

Investment case

QinetiQ at a glance

Group Chair's statement

Group Chief Executive Oﬀicer's review

Strategy

Our strategic approach

Segmental reporting

Sector review

Group Chief Financial Oﬀicer's review

Key performance indicators

Sustainability

Introduction

Environmental

Social

Governance

Non-ﬁnancial and sustainability

information statement

Risk

Risk management

Viability statement

Section 172(1) statement

Key stakeholder groups and

Section 172 statement

CORPORATE GOVERNANCE

Corporate Governance statement

Group Chair's introduction

to Governance

Nominations Commiee Report

104

Audit Commiee Report

110

Risk & Security Commiee Report

115

Directors' Remuneration Report

142

Directors' Report and

statutory information

147

Independent auditor's report

FINANCIAL STATEMENTS

156

Consolidated income statement

158

Consolidated balance sheet

159

Consolidated cash ﬂow statement

160

Notes to the Consolidated

Financial Statements

212

Company Financial Statements

ADDITIONAL INFORMATION

217

Five-year ﬁnancial summary

218

Additional ﬁnancial information

219

Glossary

220

Alternative performance measures (APMs)

221

Shareholder information

224

Company information and advisers

QinetiQ Group plc

Annual Report and Accounts 2026

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

Foundations set for

sustainable growth

We have delivered a resilient performance in a challenging

market. Our record order intake and increased backlog

provide clear visibility and conﬁdence in our future.

We remain focused on delivering for our customers,

driving higher-quality earnings and increasing returns

to shareholders.

An embedded, long-term partner on Typhoon,

delivering specialist test and assurance

services across upgrades, sustainment

and capability evolution.

Resilient performance in a challenging market

Financial

highlights

Organic constant currency.

Funded and unfunded.

Deﬁnitions for the Group's ‘Alternative Performance Measures'

can be found in the glossary. Underlying operating proﬁt refers

to operating proﬁt from segments. See note 2 for details.

** Restated to include exceptional operating cash ﬂows.

Record year end £4.8bn backlog

Resilient performance in a challenging market

FY24

FY25

FY26

£3,573m

£1,955m

£1,740m

83%

Orders

£3,573m

FY24

FY25

FY26

£1,923m

£1,932m

£1,912m

Revenue

£1,923m

1.3%

FY24

FY25

FY26

£218m

£185m

£215m

18%

Underlying

operating proﬁt

£218m

FY24

FY25

FY26

31.5p

26.1p

29.4p

21%

Adjusted basic EPS

31.5p

FY24

FY25

FY26

£159.3m

£112.9m

£147.0m

42%

Free cash ﬂow

£159.3m

24%

Dividend per share

11.00p

FY24

FY25

FY26

11.00p

8.85p

8.25p

RESILIENT

PERFORMANCE

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

STRATEGIC REPORT

Investment

case

Foundations set for sustainable growth

Exposure to structural

defence investment growth

Market-leading positions in

critical defence capabilities

Resilient business model

with strong margins,

ROCE and cash generation

Diﬀerentiated positions in engineering,

test and evaluation mission support

and technology roles embedded at the

heart of national defence programmes

Sustained increases in

defence budgets and urgent

readiness requirement

High revenue visibility underpinned

by long-term customer relationships,

multi-year programmes and robust

operational performance

Clear framework balancing investment

for growth with predictable,

strong returns to shareholders

Submarine operations at the British Underwater

Test and Evaluation Centre, a critical sovereign

capability supporting the Royal Navy's acoustic

and weapons testing.

Disciplined capital allocation

with strong shareholder returns

Our business

Our locations

Specialist capabilities supporting defence needs

We are a leading provider of mission-critical defence and security solutions to

the UK and its allies, protecting lives by supporting national security priorities.

Our innovative research and development, specialist engineering expertise,

unique test and training facilities and mission support and operations capabilities

deliver sustained warﬁghting readiness and operational advantage.

7,500

people, with deep defence

and security expertise

4th

largest supplier to the

UK Ministry of Defence

Headquartered in the UK (see box),

our operations extend to Australia,

Canada, Germany and the US, where

we work closely with governments,

industry and academia to deliver

mission-critical solutions.

Headquartered in

Farnborough, our teams are

located at sites across the

UK supporting our customers

and local economies.

QinetiQ

at a glance

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

QinetiQ

at a glance

A unique, integrated defence and technology services company

By customer

Ministry of Defence

Government agencies

Defence, other

Department of Defense

Commercial

60%

15%

13%

10%

Australia

Other

74%

15%

By destination country

By capability

Engineering Services

Mission Support & Operations

Test & Training

Research & Development

34%

27%

26%

13%

Engineering

Services

High-value engineering

for complex systems,

supporting acquisition

and sustainment

Mission Support

& Operations

Supporting live defence

operations – building

readiness and resilience

Test & Training

Testing and evaluating

defence capabilities

– unique skills and

infrastructure for

national certiﬁcation

Research &

Development

Developing advanced

technologies for next-

generation capability

Our capabilities

Revenue split

£134.9m

Cash returned to shareholders via buyback

Maintaining strategic focus

and shareholder returns in

a complex environment.

As we report on the year, the defence and security

environment remains heightened, marked by conﬂict,

instability and continuing geopolitical uncertainty.

Political change, shifts in the international order and

broader economic pressures are reshaping the operating

context for governments and industry alike. Against this

backdrop, defence and security continue to be a top priority

for our governments, alongside the need to sustain

a strong and resilient defence industrial base.

QinetiQ plays a distinctive role within this ecosystem.

We are diﬀerent from equipment primes: our strength

lies in deep customer intimacy and in delivering critical

national capability through engineering, testing, training,

mission-led services and market-leading technologies.

Group Chair’s

statement

FY22

FY23

FY24

FY25

FY26

11.0p

8.85p

8.25p

7.7p

7.3p

3.0p

8.0p

6.05p

5.65p

5.3p

5.0p

2.8p

2.6p

2.4p

2.3p

Ordinary dividend per share

11.00p

+2.15p

YoY increase

in FY26

Interim

Final

These capabilities are aligned to long-term structural

growth in defence, particularly across our core markets

for the UK, US and Australia and European NATO allies.

This positions us well to support warﬁghting readiness

through pace, agility, innovation and eﬀiciency.

I want to recognise the work our people do every day in

support of our customers' missions. Their expertise,

commitment and professionalism underpin our

performance and give the Board conﬁdence in the Group's

ability to deliver sustainable growth and aractive returns.

Performance

The Group delivered a resilient and much improved ﬁnancial

and operational performance against the backdrop of

near-term budgeting challenges across our core markets.

Following last year's performance, we acted decisively to

strengthen delivery, sharpen strategic focus and improve

our performance. I would like to thank our teams, customers

and partners whose contribution has been instrumental to

the improvement in-year and to positioning the Group for a

return to sustainable growth, higher-quality earnings and

continued strong cash generation in the years ahead.

In the UK, a tough ﬁscal environment contributed to delays

in contract awards, but our relationship with customers

remains strong and our role as a strategic partner continues

to deepen. We were pleased to secure the Long Term

Partnering Agreement extension and a ﬁve-year Typhoon

contract under the Engineering Delivery Partner programme.

We delivered our restructuring programme in the US to

ensure the business is aligned to the national defence and

security priorities of the US administration and the evolving

market landscape. In-year performance was impacted

by disruption including a US Government shutdown and

by programme changes and cancellations, which we

responded to by simplifying the organisation and refocusing

resources. The US business has now stablised, however,

we recognise the need to enhance value for shareholders

with all options under active review.

Looking forward, we have clear growth visibility, supported

by demand in our core markets, the introduction of new

defence platforms and technologies and requirements

to upgrade existing platforms. The fundamentals of the

business remain strong, with a signiﬁcant order backlog

and forward order pipeline, providing conﬁdence in our

medium-term growth trajectory.

We remain focused on delivering higher-quality, more

predictable earnings and increased returns. QinetiQ is a

highly cash generative business, and the Board continues

to prioritise disciplined capital allocation: investing

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

organically where we see strong returns and returning

capital to shareholders. We have introduced a new dividend

policy with a payout ratio target of 35–40% of underlying

earnings per share, as well as extending our share buyback

programme by a further £200m through to March 2029.

Strategy and Board priorities

Our purpose is clear – protecting lives by serving the

national security interests of our customers – and it

continues to guide strategy and decision-making. During

the year, the Board undertook its annual review of strategy

which remains unchanged. To deliver growth, the Company

will sharpen its focus on six core areas of high-value

services and a number of innovative products. Together,

they account for the majority of revenue today and oﬀer

the strongest growth potential over the next ﬁve years.

The growth strategy has two clear vectors. First, we will

grow in our core markets, investing in innovative ideas that

strengthen our oﬀering, improve competitiveness and

increase predictability of delivery. Second, we will take

these strengths into new and adjacent markets, with a

strategic focus on European NATO where we see multiple

opportunities for sustainable growth.

The Board's priorities during the year included continued

focus on capital allocation, oversight of performance

against strategic milestones, and support for succession

planning within the senior leadership team. We maintained

strong engagement with strategy and operations through

dedicated sessions and regular operational reporting from

the business. An investor perception audit was conducted

to gain further understanding of shareholder views and

priorities and the Board increased engagement with other

external stakeholders to gain deeper insights into customer

and industry perspectives. This included engagements

with senior military and political leaders as well as dedicated

sessions on the adoption of AI tools and capability, and

climate resilience.

Our people

Employee engagement and a strong performance culture

are central to QinetiQ's long-term success. Over the year,

Board members and I met with many of our highly talented

colleagues across the Group through site visits, leadership

engagements and employee roadshows. We also hold

regular interactions with the Company's Global Employee

Voice, our network of employee volunteers who represent

their colleagues and champion their voices and views.

This provides valuable insight into how strategy is landing,

how we are supporting teams to deliver for customers

and where we must continue to improve.

In a sector of such national importance, we remain focused

on operating responsibly. Safety and the wellbeing of

our people are paramount, and strong governance is

an essential enabler of sustainable performance. Our

sustainability agenda is therefore tightly connected to

how we lead, how we manage risk and how we deliver

for customers and wider society.

Board and governance

The Board continued to strengthen its collective capability

during the year. Our Chief Financial Oﬀicer, Martin Cooper,

completed a full year in role, bringing a valuable depth

of experience in the defence sector and in investor

engagement. Ezinne Uzo-Okoro and Roger Krone also

completed their ﬁrst full year on the Board, adding further

insight and expertise, particularly in relation to the US

market. Dina Knight began her ﬁrst year as Chair of the

Remuneration Commiee and I would like to thank her for

the leadership and rigour she has brought to the role.

Throughout the year the Board has been involved in

reviewing the Company's risk framework and internal

controls, in response to the upcoming new requirements

under Provision 29 of the revised 2024 UK Corporate

Governance Code. This will give us conﬁdence in the

eﬀectiveness of the policies and processes that underpin it.

In closing, while this has been a challenging year in many

respects, the Board's focus has been on ensuring the

actions were taken to address last year's performance and

positioning the Group for the next phase of growth. We

remain conﬁdent in the fundamentals of the business,

the strategic direction we have set, the strength of the

balance sheet and cashﬂows and the vital role we have in

helping our customers meet their rapidly evolving needs.

While near-term headwinds persist, our services and

technologies are in demand and we expect them to be

increasingly required in the years ahead. Our priorities are

clear: delivering performance, driving sustainable growth,

and generating aractive returns for shareholders.

On behalf of the Board, I would like to thank Steve Wadey,

our Group CEO, the leadership team and all of the

colleagues across QinetiQ for their commitment, energy,

professionalism and contribution over the year.

Neil Johnson

Group Chair

21 May 2026

Group Chair’s

statement

Delivering resilient performance in

challenging markets as a trusted partner

providing mission-critical capabilities;

and well positioned to drive aractive,

sustainable shareholder returns.

Against a more challenging market backdrop, we delivered

a resilient ﬁnancial performance while undertaking

substantial restructuring. Revenue was £1.9 billion, with

operating proﬁt of £218 million and improved margins of

more than 11%. We also delivered signiﬁcantly stronger cash

generation, with free cash ﬂow of £159 million, reﬂecting

strong cash conversion and improved operational discipline.

During the year, we executed a comprehensive restructuring

programme, reducing costs, reshaping the portfolio and

simplifying operations, particularly in the US. As a result,

we ﬁnished the year as a higher-quality business, with

a lower cost base, an improved contract mix, stronger

cash generation and greater predictability of earnings.

We also continued to build commercial momentum and

forward visibility. Record order intake of £3.6 billion and a

year-end backlog of £4.8 billion, up more than 40%, provide

clear multi-year revenue visibility and underpin improved

earnings quality. With our mission critical capabilities

aligned to the structural trends of modern warfare, we're

conﬁdent of delivering growth over the coming years.

We entered the new ﬁnancial year with a simpler, more

focused platform and strong foundations for sustainable

growth and increased shareholder returns.

Reﬂecting this conﬁdence in our outlook, we will continue

to invest for organic growth while targeting more than

£550 million of free cash ﬂow over FY27–29, supporting

a signiﬁcant increase in our dividend payout ratio to

35–40% and a £200 million extension of our share buyback

programme. In total, we expect to return around £0.5 billion

of cash to shareholders over the next three years.

Aligned to the major trends shaping

defence and security

Our strategy is strongly aligned to the structural trends

deﬁning modern defence and security. In an era of renewed

great-power competition, customers are prioritising

sovereign, mission-critical solutions that deliver operational

advantage and decision superiority. QinetiQ's heritage in

science, test and evaluation positions us at the centre

of this demand.

The threat environment continues to intensify,

spanning advanced weapons, drones, cyber and

electronic warfare. Customers are investing to deter

and defeat increasingly sophisticated threats, with

a growing emphasis on rapid innovation, resilience

and adaptability. We support this through our ability

to anticipate emerging risks, test responses and assure

performance in contested environments.

Group Chief Executive

Oﬀicer’s review

£134.9m

Cash returned via buyback

1.3%

Organic revenue growth

£4.8bn

Backlog

11.3%

Operating margin

34%

ROCE

Funded and unfunded.

Overview

This has been a year of signiﬁcant change for QinetiQ.

We have taken decisive action to strengthen the Group

and have set the foundations for sustainable growth.

I would like to thank our highly skilled employees for their

dedication and hard work throughout the year, and our

customers and partners for their continued support.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

At the same time, autonomy is proliferating across

domains. Demand for uncrewed and autonomous

systems is accelerating, alongside the need to deploy

these capabilities safely, at pace and at scale. We enable

customers to de-risk, integrate and assure autonomous

solutions, supporting faster adoption while maintaining

safety, interoperability and operational eﬀectiveness.

Digital technologies are also transforming defence.

Advances in artiﬁcial intelligence, data exploitation and

synthetic environments are reshaping how forces train,

test and operate. We continue to invest in these

capabilities, helping customers build readiness, reduce

cost, compress development timelines and scale.

Together, these trends are driving increased demand

for new platforms and technologies in the near term,

alongside growing demand for engineering, test, mission

assurance and the adoption of new technologies.

Customers are also placing greater emphasis on

interoperability across domains and nations.

These dynamics are driving sustained demand for our

capabilities, anchored in long-term programmes and

national security priorities, providing resilience and visibility.

What QinetiQ does and why it maers

QinetiQ is a unique, integrated defence and technology

services provider, playing a critical role in the modernisation

of defence platforms and technologies. We are not a

platform or hardware manufacturer. Our role is diﬀerent,

we are a strategic partner to our customers working

across the capability lifecycle, supporting customers in

developing, integrating, testing and supporting defence

systems across all domains.

We provide high-value engineering, supporting

programmes from early design through to acquisition,

integration, and sustainment. Our work spans air, land, sea,

cyber and space domains, ensuring that critical capabilities

are designed, integrated and ready for deployment within

demanding operational environments. These capabilities

are embedded in mission-critical programmes aligned to

long-term defence priorities.

Test and evaluation is central to QinetiQ's proposition.

We operate nationally signiﬁcant ranges and specialist

infrastructure across live and synthetic environments,

enabling the certiﬁcation and assurance of defence

systems under realistic conditions. These nationally

signiﬁcant assets are increasingly critical to assuring

defence capabilities as systems become more complex

and integrated.

QinetiQ also supports live defence operations, working

alongside customers in mission environments to ensure

that capabilities perform eﬀectively in service. Through

the provision of mission data, embedded expertise

and secure communications, we enhance operational

readiness, resilience and decision-making in a heightened

threat environment.

Sustained investment in research and development

underpins long-term innovation in advanced technologies,

including autonomy, data, sensing, electronic warfare,

cyber and directed energy. This ensures our customers are

equipped to meet evolving and next-generation threats.

What diﬀerentiates QinetiQ is the combination of these

capabilities. We are embedded across programmes from

concept through to in-service support, helping customers

manage increasing technical complexity. As a result, our

work is mission-critical, high-barrier to entry and closely

aligned to long-term defence priorities, positioning us as

a trusted partner in delivering capabilities that are eﬀective,

integrated and ready for use.

Our “right to win”

QinetiQ's “right to win” is centred on capabilities embedded

in long-term programmes, underpinned by clear competitive

advantages, strong customer positioning and a focused

approach to market opportunities.

Our competitive advantage is built on critical and unique

national infrastructure, deep technical skills and expertise

across domains, and our position as a trusted authority

with governments and industry. These aributes create

signiﬁcant barriers to entry and support diﬀerentiated

delivery in complex, mission-critical environments.

QinetiQ's customer positioning is strengthened by

our ability to reduce customer risk through integrating

delivery across the programme lifecycle. We are a proven

collaborator, working in partnership to build capability

at pace, and we beneﬁt from enduring relationships

developed over decades. This combination supports

consistent delivery and reinforces our role at the heart

of customers' most important missions.

Growth is focused on markets where we are best

positioned to win. In existing markets, particularly the

UK, we are focused on deepening our position through

market penetration and expanding the scope of work with

established customers. At the same time, we are developing

our oﬀerings, including in areas such as the Engineering

Delivery Partner (EDP) programme, and pursuing targeted

market development in priority regions such as Europe.

This approach ensures growth is aligned to customer

demand and leverages existing strengths.

Group Chief Executive

Oﬀicer’s review

Together, these factors create defensible positions in

markets where QinetiQ can win, supporting repeat awards

and opportunities to expand the scope of work, and

providing strong long-term visibility. In turn, this underpins

sustainable margins, aractive returns and strong

cash generation.

Driving sustainable growth

QinetiQ is embedded in long-term, high-priority

programmes across the UK and allied markets,

providing strong multi-year revenue visibility and

a clear foundation for growth.

The portfolio combines programmes that deliver recurring,

growing revenue and those that will drive faster growth.

Examples of faster growing programmes include mission

data, persistent surveillance and next-generation weapon

technologies such as lasers. Investment in our major

programmes will continue to drive good revenue growth.

The LTPA will be driven by the transformation of testing

and evaluation capabilities and increased utilisation by

UK and NATO allies. The EDP and Space Development

Agency (SDA) programmes will be driven by the introduction

of new platforms and advanced technologies.

Together, these programmes provide strong visibility over

future revenues, with opportunities to expand scope and

deepen customer relationships, supporting both near-term

delivery and longer-term growth.

Signiﬁcant defence customer

contract awards and extensions

During the year, we secured a number of signiﬁcant

customer contract awards and extensions across our

defence portfolio. In the UK, a £1.7 billion contract extension

of the LTPA through to 2033 was signed, strengthening our

long-standing partnership with the Ministry of Defence

(MOD) and supporting continued investment in UK

sovereign capabilities. The MOD also awarded a ﬁve-year,

£205 million contract extension for critical engineering

services in support of the RAF's Typhoon ﬂeet.

Further customer activity included a £67 million contract

from MBDA to support the production and delivery of the

UK's ﬁrst laser-directed energy weapons (DragonFire)

for the Royal Navy, and a £70 million two-year OpNet

contract with the UK's Defence Digital to support the

transformation of deployed IT capability. Internationally,

an MoU between the UK and Belgium supports plans for

a new joint programme to establish a sovereign mission

data capability in Belgium.

In Australia, work continued with defence customers

on the development of laser-directed energy weapon

capability, combining DragonFire technology with an

established local partnership with the Defence Science

and Technology Group.

Investing in strategic capabilities

aligned to customer demand

During the year, we continued to invest selectively in

strategically important capabilities, aligned closely to

long-term customer demand. This included ongoing

investment in the LTPA, advanced technologies such

as directed energy weapons, and digital and mission

data capabilities supporting operational eﬀectiveness.

We also continued to invest in next-generation target

systems, supporting the development of more advanced

and representative training environments, alongside

investment in resilient navigation capabilities to address

increasing requirements for assured positioning, navigation

and timing. In addition, we are expanding our capabilities

in artiﬁcial intelligence, with investment focused on

enhancing decision advantage, autonomy and data-driven

operational insights across customer missions.

We also made targeted investments to support growth

into Europe, while maintaining a disciplined approach to

capital allocation.

US business

The US defence services market remained challenging

during the year, reﬂecting a combination of budgetary

pressures, a shift in customer spending towards platform

and hardware programmes and slower contract awards.

These factors impacted performance across the market.

In response, we acted early and decisively to reshape and

stabilise the business. Key actions included the disposal

of the Fed IT business, a signiﬁcant reduction in the cost

base and the exit of non-core and lower-return contracts.

At the same time, we repositioned the business to align

more closely with evolving US national security priorities

and to be beer positioned to pursue organic growth.

The US business is now a smaller, beer business, aligned to

market demand with current annual revenue approximately

$385 million. However, we recognise the need to deliver

enhanced value for shareholders and are actively assessing

the strategic ﬁt of the US business within the Group,

including a review of all options.

Group Chief Executive

Oﬀicer’s review

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Group Chief Executive

Oﬀicer’s review

Capital allocation and

shareholder returns

Shareholder returns remain a clear priority. We spent

£134m on share buybacks in FY26, and the Board has

approved a £200 million share buyback programme

extension through FY29, reﬂecting conﬁdence in the

Group's cash-generative capabilities and outlook. In

addition, the Board is proposing a 24% increase in the

full-year dividend, underlining its conﬁdence in the

Group's medium-term prospects. This increase reﬂects

the introduction of a new dividend policy, targeting

a 35–40% payout ratio, while maintaining balance sheet

strength and ﬁnancial ﬂexibility.

Investment case – positioned for

sustainable growth and strong

shareholder returns

QinetiQ is well positioned to deliver sustainable growth

and aractive shareholder returns, supported by exposure

to structural defence investment growth and increasing

readiness requirements. It holds market-leading positions in

critical defence capabilities, with diﬀerentiated roles across

engineering, test and evaluation, and mission support

embedded at the heart of national defence programmes.

Our resilient business model delivers strong margins,

returns on capital employed and cash generation. In

addition, we have a clear capital allocation framework

that balances investment for growth with predictable,

strong returns to shareholders.

FY27 outlook and summary

Revenue growth 3–5% and operating margin 11.0–11.5%

EPS growth 8–10% with cash conversion >90%

>£550m of free cash ﬂow targeted over FY27-29

The fundamentals of the Group remain strong, with a clear

strategy to create value across the business, positioning

QinetiQ at the centre of defence innovation for future

warfare. We beneﬁt from a strong order backlog and

a well-developed pipeline of opportunities. This, combined

with the alignment of our mission-critical capabilities to

evolving customer needs, provides conﬁdence and visibility

in delivering sustainable growth and compelling value

creation for shareholders.

Steve Wadey

Chief Executive Oﬀicer

21 May 2026

Throughout FY26, we engaged with senior

leaders across the Ministry of Defence and

Frontline Commands, increasing awareness

and understanding of QinetiQ's role delivering

mission critical capabilities.

The expansion of the successful QinetiQ,

AtkinsRéalis and BMT Aurora Engineering

Partnership to include Frazer-Nash

Consultancy combined with investment in

AI technology and a commitment to increase

the role of SMEs strengthens the Engineering

Delivery Partner (EDP) programme, which

provides mission critical engineering to

the Ministry of Defence (MOD).

Our strategic approach

Overview

Our strategy

is focused on driving innovation at the forefront of

defence technology, progressing entry into priority new markets

and expanding our service-led capabilities.

Our purpose

is protecting lives by serving the national security

interests of our customers.

Disciplined core business growth

Services & products

Markets

EXISTING

NEW

Market

penetration

Deepening presence in

core markets (e.g. UK)

Market

development

Targeted entry into priority

new markets (e.g. European

NATO countries)

Oﬀerings

development

Expanding service-led

capabilities (e.g. AI-augmented

engineering)

Innovation, Partnering & Investment underpins sustainable growth

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

STRATEGIC REPORT

Progress against strategy

Co-creating innovative solutions

Advanced technologies

Digital transformation

New business models

High-value and diﬀerentiated

Enabling critical national priorities

United Kingdom

Australia

ɰ USA

Germany

Canada

Deep multi-domain expertise

Europe and NATO

AUKUS partnership

Leverage capabilities

Strengthening long-term customer relationships and accelerating innovation

to deliver enhanced defence capability and operational readiness:

Secured multi-year technical

and engineering support

contracts with key UK defence

customers, reinforcing embedded,

long-term partnerships

Expanded strategic partnerships

to combine cross-sector expertise

and deliver complex, mission-critical

defence capabilities

Continued targeted investment

in research, digital and advanced

engineering to support next

generation systems and platforms

Engineering Services

34%

of revenue

Accelerating capability

Test & Training

26%

of revenue

Warﬁghting Readiness

Mission Support & Operations

27%

of revenue

For National Security

Research & Development

13%

of revenue

For technological superiority

Deepening our role as a leading sovereign partner across priority national

defence programmes:

Continued delivery against Global

Combat Air Programme (GCAP)

Awarded new and extended UK

Ministry of Defence contracts

supporting secure infrastructure,

testing and mission-critical systems

Delivered specialist upgrades

and technical support enhancing

warﬁghting readiness and

operational assurance

Exporting specialist capabilities to priority allied markets where QinetiQ adds

diﬀerentiated value:

Progressed delivery across

allied defence programmes

through long-term customer

and partner relationships

Secured additional international

contracts for testing, evaluation

and assurance services utilising

QinetiQ’s UK sovereign capabilities

Leveraged NATO and allied

defence relationships to

support repeat business and

follow-on opportunities

Our strategic approach

Driving innovation and partnering

Invest in core capabilities

Growing in our core markets

Expand across markets

Heightened geopolitical tensions and the evolving character of warfare are

reshaping defence priorities, reinforcing the importance of specialist providers.

Market themes

Our strategic approach

Global security volatility is

driving a renewed emphasis on

defence capability, resilience

and long-term preparedness.

For defence customers, this

translates into sustained

demand for specialist skills,

independent assurance and

long-term partnerships that

can support both current

operations and future

capability development.

Greater emphasis on

trusted suppliers with

the scale, expertise

and credentials to

support mission-critical

programmes over the

long term.

The pace of technological

change and the evolution

of modern warfare are

reducing the time available

to develop, test and ﬁeld

new capabilities. Defence

customers increasingly

require rapid innovation,

safe experimentation and

accelerated transition from

concept to operational use.

Rising demand

for research-led

innovation, test and

evaluation, and the

ability to integrate

new technologies

quickly and safely into

complex systems.

As operational environments

become more complex,

defence organisations

are prioritising readiness,

assurance and sustained

performance across platforms,

systems and domains.

Conﬁdence in capability,

safety and eﬀectiveness is

increasingly critical.

Heightened requirement

for independent expertise,

sovereign test and

training capabilities,

and partners able to

support operational

eﬀectiveness across

the lifecycle.

Sustained focus on defence investment

Compressed innovation timelines

Readiness, assurance and

operational advantage

Defence priorities

are evolving at pace

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Across QinetiQ’s core markets, governments continue to prioritise investment

in sovereign capability, assurance and operational eﬀectiveness.

Trading environment

Our strategic approach

United Kingdom

Australia

Stable underlying demand,

aligned to priority national

programmes, with

short-term budgetary

pressures aﬀecting

the pacing of some

activities and a continued

requirement for trusted

technical partners across

the defence lifecycle.

Growing demand for

sovereign capability

support and specialist

skills, reﬂecting changes

in defence procurement

and supporting the

development of

longer-term customer

partnerships.

The UK remains QinetiQ’s

largest market, with

defence priorities

focused on sovereign

capability, safety and

operational readiness

across complex,

long-term programmes.

Australia is focused

on strengthening

defence capability,

resilience and domestic

industrial capacity, with

emphasis on assurance,

test and training.

>£7bn

Market opportunity

£1,416m

FY26 revenue

>£0.4bn

Market opportunity

£94m

FY26 revenue

United States

NATO allies and partners

Large, well-funded

programmes with

consistent medium-term

demand for specialist,

independent expertise

and long-term technical

support, with near-term

uncertainty driven primarily

by contract timing.

Expanding opportunity

for specialist capabilities

across NATO and

allied markets, driven

by increased allied

defence investment,

interoperability

requirements and

long-term cooperation.

The US defence market

is characterised by scale,

technical complexity and

sustained investment

across research,

development, testing

and evaluation.

Across NATO and allied

markets, defence

priorities remain

centred on readiness,

interoperability and

operational resilience.

>£24bn

Market opportunity

£288m

FY26 revenue

>£4bn

Market opportunity

£60m

FY26 revenue

Supportive medium-term conditions

across core defence markets

Business model

Our strategic approach

We enable defence customers to develop, prove and sustain advanced

capabilities through engineering expertise, sovereign test and evaluation,

digital systems and mission-readiness services.

How we generate returns

Create it. Test it. Use it.

QinetiQ supports customers across

the full capability lifecycle – from concept

creation and engineering, through rigorous

test and evaluation, to operational use

and assurance.

How QinetiQ is diﬀerentiated

We are diﬀerentiated from traditional platform

manufacturers by our focus on science-based

insight, specialist engineering and unique test

and evaluation infrastructure. These capabilities

underpin our ability to support customers across

the full lifecycle, from concept through to

in-service assurance.

Tra

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Our mission-critical, high-barrier-to-entry capabilities

are embedded in long-term defence programmes.

What we do, and why it maers

High-value engineering

to support acquisition

and sustainment

Unique skills and

infrastructure

for certifying at

a national level

Building readiness and

resilience in a rising

threat environment

Long-term innovation

for next-generation

capability

Recurring revenue

through high-barrier

critical programmes

High-utilisation

specialist facilities with

strong barriers to entry

Stable recurring

revenues from

embedded roles and

ongoing operations

Customer-funded

and internally-funded

R&D transitioned into

defence programmes

Engineering for

complex systems

Test and

evaluate defence

capabilities

Support

live defence

operations

Develop

advanced

technologies

Capability

and examples

Why it

maers

How we

generate

returns

What we do

A key part of modernising

our T&E enterprise, our

Airborne Technology

Demonstrator is an agile,

dependable facility.

Our 5m pressurised,

low-speed wind tunnel

delivers high-quality data

valuable to UK aerospace.

Our specialist marine

infrastructure provides

hydrodynamic testing

for surface and

subsurface vessels.

We are using innovative

lifecycle techniques and

tailored testing to accelerate

weapons development.

Our strategic approach

Business model

Aircraft, ships, vehicles,

sensors, weapons and

mission systems

Land, sea, air, cyber

and space ranges and

virtual environments

Mission data,

embedded specialists,

secure communications

Autonomy, quantum,

AI, electronic warfare,

cyber, laser, simulation

Engineering

Services

Test &

Training

Mission Support &

Operations

Research &

Development

What diﬀerentiates us from our competitors and allows us to generate returns.

We create long-term value through mission-critical defence capabilities

that support national security and sustainable returns.

Our unique resources

The value we create

Our strategic approach

Business model

Specialist people

and deep defence

engineering expertise

Long-term, trusted

customer and

partner relationships

Sovereign test and

evaluation infrastructure

Secure digital

engineering platforms and

mission-critical tools

Government and society

Strengthening national security

and operational independence

Defence customers

Assured capability, increased

mission readiness, reduced risk

Shareholders

Resilient long-term growing

returns and cash generation

Employees

High-skill careers and

long-term development

Suppliers and partners

Stable, trusted relationships on

secure defence programmes

Environment

Lower-impact operations

30+ years

delivering sovereign

defence capability

Air, Land, Sea, Space

operating across the four domains

25+ years

of resilient cash generation

7,500 people

across engineering, science

and mission-critical roles

£1.0bn+

annual Group supplier spend,

of which £280m+ is with UK SMEs

36% reduction

in annual Scope 1 & 2 greenhouse

gas emissions since FY20

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Financial value drivers

High revenue visibility

Backlog coverage provides strong visibility, with ~75% of

revenue for the next 12 months already under contract.

Margin expansion

Margin expansion from higher asset utilisation, disciplined

cost control and selective product growth, supported

by ongoing operational eﬀiciency improvements.

Strong cash conversion

Consistently strong cash conversion, driven by

customer-funded R&D and capex, and a structurally

favourable (negative) working-capital proﬁle.

Our business model is ﬁnancially resilient, creating strong margins,

ROCE and cash generation.

High-barrier-to-entry assets

Above-sector-average returns on sales and capital,

supported by a diﬀerentiated, high-barrier operating model.

Recurring revenue

High levels of recurring revenue underpinned by multi-year

defence programmes, long-term service contracts and

embedded customer roles.

Structural and cyclical growth

Structural and cyclical growth – reﬂecting both long-term

funding trends and shorter-term spending cycles –

in government defence spending continues to

underpin multi-year demand for QinetiQ’s capabilities.

Our strategic approach

Business model

Air-deployed underwater sensing operations at

BUTEC, supporting high-barrier test, evaluation

and certiﬁcation services for UK anti-submarine

warfare programmes.

UK Defence

£994m

FY26 revenue

UK Intelligence

£441m

FY26 revenue

Australia

£94m

FY26 revenue

EMEA Services

Overview

EMEA (Europe, Middle East and Australasia) Services

combines world-leading expertise with unique facilities

to generate and assure capability. We do this through

capability integration, operational readiness and threat

representation, underpinned by long-term contracts that

provide good revenue visibility and cash generation.

Financial performance

£1,529m

Total FY26 revenue

FY26

£m

FY25

£m

Order booked, excluding LTPA extension

1,469.6

1,441.7

Total orders booked

3,179.0

1,441.7

Revenue

1,529.2

1,477.7

Underlying operating proﬁt

182.3

169.0

Underlying operating proﬁt margin

11.9%

11.4%

Book-to-bill ratio

1.2x

Backlog

4,142.3

2,470.6

Book-to-bill (B2B) ratio is orders won divided by revenue recognised,

excluding the LTPA non-tasking services revenue of £294m (FY25: £270m).

Financial performance

Total orders of £3,179.0m include the LTPA extension to

2033 which was announced in May 2025. Excluding the LTPA

extension, orders increased by 2%. EDP orders increased

by 20% to over £550m and included the £205m Typhoon

contract. The funded order backlog, excluding LTPA, ended

the year at £1.8bn, with a book-to-bill ratio of 1.2x (FY25: 1.2x).

Revenue increased by 3% to £1,529.2m (FY25: £1,477.7m), on both

a reported and organic basis, as a result of good growth in the UK

Defence sector, where growth was driven by new contracts and

growth in core contracts, including the LTPA and EDP.

As at 31 March 2026, we had £1.1bn of EMEA Services’

FY27 revenue under contract, the same level as for the

FY26 revenue at the equivalent point last year.

Underlying operating proﬁt grew by 8% to £182.3m (FY25: £169.0m)

driven by both the revenue growth and cost eﬀiciencies driving

an improved operating margin of 11.9% (FY25: 11.4%).

Approximately 68% of EMEA Services revenue is derived

from single-source contracts (FY25: approximately 66%).

By investing in our core contracts and extending their

duration, the high proportion of single-source revenue

contracted on a long-term basis provides visibility and

highlights the unique capabilities that we bring and the

quality of earnings within the backlog.

Segmental

reporting

Our UK Defence sector provides test & evaluation,

engineering assurance services, science & technology

solutions, and enables training and mission rehearsal for

our air, maritime and land customers in the UK. It is a trusted

partner throughout the acquisition lifecycle and provides

services to international allies via our UK base capabilities.

The UK Intelligence sector helps government and

commercial customers respond to fast-evolving threats

based on its expertise in data and digital engineering

(including Artiﬁcial Intelligence

(AI)/Machine Learning

(ML)

), quantum computing, training and simulation,

secure communication networks and devices, intelligence

gathering, surveillance sensors and cyber security.

Our Australia sector delivers advisory and engineering

services, threat representation and capability assurance

services to customers in Australia and the rest of the world.

This includes target services used for live-ﬁre training and

weapon systems test and evaluation, operational air to air

training and special mission service delivery.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

United States

£291m

FY26 revenue

Global Solutions

Overview

Global Solutions combines our world-leading technology-based

products and services. Our strategy is to focus the portfolio

of solutions in the US to win larger, longer-term programmes

providing good visibility of revenue and cash ﬂows, and to grow

our product oﬀerings in a number of targeted ﬁelds.

Financial performance

£393m

Total FY26 revenue

FY26

£m

FY25

£m

Orders booked

394.4

513.1

Revenue

393.4

453.9

Underlying operating proﬁt

35.6

16.4

Underlying operating proﬁt margin

9.0%

3.6%

Book-to-bill ratio

1.0x

1.1x

Backlog

279.1

374.6

US unfunded backlog

342.1

529.0

Book-to-bill (B2B) ratio is orders won divided by revenue recognised.

Unfunded orders represents the value of contract awards for which

funding has not yet been appropriated or authorised.

Financial performance

Orders of £394.4m (FY25: £513.1m) reﬂected a book to bill

of 1.0x. In a challenging US defence services market and

against the backdrop of US restructuring this was a 23%

decrease or 18% organically after adjusting for foreign

exchange and the impact of the US Federal IT disposal.

Revenue reduced 13% on a reported basis to £393.4m

(FY25: £453.9m). On an organic basis, revenue declined 7%,

primarily in the US, as we restructured the business and

exited some low-margin lines of business. Revenue in our

Targets business grew 6% on a constant currency basis.

As at 31 March 2026, we have 59% of Global Solutions’

FY27 revenue under contract, compared to 67% (of the

FY26 revenue) at the same point last year.

Underlying operating proﬁt increased to £35.6m

(FY25: £16.4m), with an increased underlying operating

proﬁt margin of 9.0% (FY25: 3.6%). The US business has

delivered a major restructuring programme and experienced

a more stable year in FY26, which has contributed to the

improved operating result of the Global Solutions segment.

The second half of the year saw no more material charges

in the US operations.

Our US sector provides design, development,

rapid prototyping, systems engineering and

integration and manufacture of speciality defence

mission products and solutions related to robotics,

autonomy, maritime and sensors.

The portfolio of our other Global Solutions products

provides research services and bespoke technological

solutions derived from EMEA Services, and includes

QinetiQ Target Systems (QTS).

Segmental

reporting

UK Defence,

UK Intelligence

and Australia

Products

£103m

FY26 revenue

Overview

UK Defence delivered a year of strong

operational progress, characterised by

major programme wins, delivery against

strategic priorities and continued

momentum in our transformation agenda.

The business strengthened its position

as a trusted partner to the UK Ministry

of Defence (MOD) and international

customers, supporting national security

at a time of increasing geopolitical

tension and evolving threats.

During the year, we advanced our role in high-power laser

systems, accelerated innovation in Test & Evaluation

(T&E), deepened collaborations with industry partners

and demonstrated the increasing value of our synthetic,

digital and autonomous capabilities. Our operational

achievements reﬂect both the breadth of our technical

expertise and our ability to integrate complex technologies

into mission-ready defence solutions.

At the same time, UK Defence made signiﬁcant strides in

enabling new models of delivery, such as rapid additive

manufacturing, crewed–uncrewed teaming, and synthetic

mission rehearsal environments. These capabilities are

becoming essential across all domains of modern warfare,

and our contributions have helped shape customer thinking

on force structure, readiness and aﬀordability.

Operational and order highlights

Long-Term Partnering Agreement (LTPA)

The £1.7bn ﬁve-year extension to the LTPA contract was

signed in H1 and secures our position of partnership with

the MOD and provides a ﬁrm foundation to invest in the

transformation of UK sovereign Test, Trials, Training &

Evaluation (T3E) capabilities.

Extension of Typhoon engineering services

We secured a ﬁve-year, £205m contract extension to

deliver engineering services for the RAF’s Typhoon ﬂeet.

DroneWorks

Establishment of a sovereign T3E Capability designed

to support UK MOD and industrial partners accelerate

development of uncrewed aerial systems at wartime pace.

DroneWorks will establish QinetiQ as a key partner to

UK industry for uncrewed systems.

T&E Innovation Gateway

The launch of the Testing & Evaluation Innovation Gateway

created a new entry point for small and medium-sized

enterprises into our test facilities, reducing access

costs and increasing uptake.

Advancing laser directed energy weapons

A major highlight of the year was the award of a £67m

contract from MBDA to support the production and delivery

of the UK’s ﬁrst laser directed energy weapons (DragonFire)

for the Royal Navy.

Royal Navy synthetic training

We won a £25m contract to deliver the Maritime Command

and Staﬀ Trainer, an immersive synthetic environment

replicating complex naval operations.

Sector review

UK Defence

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Outlook

UK Defence activity continues to be inﬂuenced in the near

term by uncertainty around levels of the UK MoD budget.

Whilst this aﬀects the timing of some new programme

commitments, defence spending remains directed

towards operational requirements, with sustained

activity across priority capability areas and continued

emphasis on readiness, resilience and integration and we

see good growth again in FY27.

Over the medium term, UK Government policy supports

higher defence investment along with leveraging

capability into Europe. Within this environment, UK

Defence is targeting good, sustained levels of growth

in the medium term, reﬂecting exposure to areas of

sustained priority and ongoing programme activity.

Sharpshooter:

enhancing NATO readiness

through integrated testing

Challenge

Allied navies needed access to realistic,

high-ﬁdelity test environments to rehearse

defence against complex aerial and maritime

swarm threats.

Solution

QinetiQ delivered Exercise Sharpshooter

from MOD Aberporth, integrating live Banshee

aerial targets, Hammerhead uncrewed

surface vehicles and synthetic threats.

Our T&E specialists designed and controlled

the scenario to safely replicate cruise missile,

drone and swarm behaviours in a single,

coherent environment.

Outcome

The Dutch Navy successfully detected, tracked

and neutralised multiple threats, validating

tactics and enhancing operational readiness.

The exercise marked the ﬁrst NATO participation

in Sharpshooter and reinforced the UK and

QinetiQ as leading test and evaluation partners.

Sector review

UK Defence

IN ACTION

Pictured above:

Exercise Sharpshooter, delivering live

and synthetic training to the Royal Navy and UK allies for

operational advantage.

Overview

UK Intelligence delivered a year of

solid operational performance in FY26,

underpinned by strong order intake,

sustained delivery across critical

programmes, and continued progress

in aligning the business to the UK

Government’s digital modernisation

agenda. The sector supports defence,

national security and homeland security

customers through advanced C5ISTAR

integration, digital platforms, cyber

resilience and mission-critical science

and technology.

During the year, UK Intelligence secured c.£530m of

orders across its distinctive portfolio, reﬂecting continued

customer demand for capabilities that enable resilient

digital infrastructure, data-driven decision-making

and multi-domain integration. The business continued

to beneﬁt from its strong positioning with key UK customers,

including Defence Equipment & Support, Defence

Digital, Defence Intelligence and Defence Science and

Technology Laboratory (DSTL), supporting long-term

transformation programmes alongside the delivery of

frontline operational capability.

FY26 also saw further progress in building scale and

coherence across the portfolio, with strengthened

collaboration across the Group – particularly with

UK Defence – enabling delivery of complex, integrated

solutions. Continued investment in priority areas, such

as resilient position, navigation and timing capabilities –

ensuring assured navigation in contested environments –

alongside mission data, quantum technologies,

digital intelligence and cyber assurance, reinforces

UK Intelligence’s role as a trusted partner for secure

digital change at pace.

Operational and order highlights

Sustained performance across

Defence Mission Systems

UK Intelligence delivered strongly across core Defence

Mission Systems programmes, securing multi-year

orders that underpin the delivery of critical frontline

capability. This included a £70m two-year OpNet contract

to transform Defence Digital’s deployed IT capability,

alongside a further ﬁve-year extension to support the

Typhoon programme, providing integrated avionics,

sensing, software, training and simulation services

essential to operational eﬀectiveness.

Growth in next-generation capability areas

The sector continued to build capability in priority growth

areas, including multi-million-pound Future Combat Air

System support and progress in quantum technologies,

marked by delivery of a ﬁrst large-scale vessel-based trial.

Resilient Position, Navigation and Timing

A key milestone was the award of the £6m Urgent Compass

contract. Continued development of micro receivers

supported future growth across defence, security and

critical national infrastructure markets.

Expansion of digital and

data-intelligence services

Digital Intelligence performed well, supported by a £34m

enterprise service management platform award and

solid programme delivery. Naimuri also delivered strong

performance, driven by continued demand across

defence, national security and law enforcement.

Mission data, laser and sensing innovation

UK Intelligence sustained momentum in mission

data services with UK and export customers and

achieved record order intake for multi-function laser

technologies supporting communications, sensing

and bale-damage assessment.

Mission cyber and homeland security delivery

The sector expanded its mission cyber role through delivery

of the Emergency Services Mobile Communications

Programme device-certiﬁcation service, supporting the

Home Oﬀice, alongside continued progress in operational

technology delivery at the mission edge.

Sector review

UK Intelligence

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Outlook

Sector demand continues to be underpinned by enduring

national security priorities, ongoing digital modernisation

and the need for assured, integrated capability. While

procurement processes are likely to remain competitive

and subject to aﬀordability discipline, customers are

anticipated to continue to favour partners with a proven

track record of delivery, security and long term support.

Over the medium term, increasing operational complexity

and data intensity are likely to sustain requirements

across intelligence, security and defence domains.

In this context, UK Intelligence is well positioned to

support priority programmes and is aiming to deliver

higher year on year growth in FY27 and improvement

thereafter, while remaining mindful of policy, funding

and execution uncertainties inherent in the market.

Resilient navigation:

maintaining assured positioning

in contested environments

Challenge

Military and security operations rely on precise

location and timing information to operate safely and

eﬀectively. Increasing disruption to satellite-based

navigation systems means these operations cannot

always rely on GPS alone, creating a risk to safety,

coordination and mission success.

Solution

UK Intelligence led delivery of the UK Government’s

Urgent Compass programme, providing an

alternative navigation capability that operates

independently of satellites. The solution uses proven

terrestrial technology to ensure location and timing

information remains available even when satellite

signals are unavailable or degraded.

Outcome

The programme delivered a credible, operationally

relevant back-up capability, strengthening

resilience in complex operating environments.

It also demonstrated QinetiQ’s ability to respond

rapidly to emerging operational risks and to deliver

assured, mission-critical capability at pace in

support of national security priorities.

Sector review

UK Intelligence

IN ACTION

Pictured above:

Defence-grade assured navigation

equipment, supporting resilient positioning and

timing as reliance on satellite navigation becomes

increasingly contested.

Overview

Our Australia sector comprises our

specialist advisory and engineering

business and our threat representation

business operating in the Australian

market. The sector operates as two

business units; Mission Support, Research

and Development, which includes ﬂight

operations and threat representation,

and Engineering Services, which includes

our training capabilities.

FY26 was a year of transition and strategic evolution for our

Australian business. We remained focused on deepening

customer intimacy while ensuring our operations are

aligned to evolving Government priorities and budget

environments. This included continued changes to our

operating model to beer match customer ways of working

and to reduce overheads, supporting more agile and

responsive delivery.

Operational and order highlights

Progress on MSP

We are actively shaping the customer’s approach to the

next phase of the Major Service Provider (MSP) programme

– set to operate under a new model – drawing on our strong

experience of the UK Engineering Delivery Partner (EDP)

programme and deep customer engagement. Delivery of

current contracts continues under the existing model.

Advancement of laser weapon capability

Ongoing development of our laser directed energy

weapon capability, leveraging the UK’s DragonFire

technology alongside our established local laser

development partnership with the Defence Science

and Technology Group. This work strengthens our

position in delivering advanced directed-energy

solutions for future defence requirements.

JATTS contract extension

QinetiQ was awarded a two-year extension to the

Joint Adversarial Test and Training contract (JATTS).

This was a major business-winning achievement that

directly reﬂects customer conﬁdence in QinetiQ’s

threat-representation capability.

Improved delivery model

Enhanced operational alignment with customer ways

of working, reﬁning engagement models and delivery

processes to strengthen responsiveness and support

evolving customer requirements.

Readiness for major programmes

Built operational readiness for a substantial pipeline of

FY27 defence programmes, preparing capability and delivery

teams to support customer priorities across engineering

services, directed energy, makerspace infrastructure and

threat-representation solutions.

Sector review

Australia

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Outlook

Australia’s defence sector is expected to remain in a

period of adjustment as government investment priorities,

processes and delivery timelines continue to evolve.

Changes associated with the National Defence Strategy,

workforce reforms and procurement system updates

support longer-term demand, but may also contribute

to near-term variability in project phasing and awards.

The Australia business is focusing on transitioning

from a subcontractor to a prime contractor and the

speed of that and associated growth will depend on

the timing of customer decisions and execution risk

across major programs.

Delivering eﬀicient, secure

technical support during a

period of evolving priorities

Challenge

With defence organisations navigating

tighter budget seings and evolving programme

timelines, maintaining momentum on critical

sustainment tasks required eﬀicient,

low-friction technical support.

Solution

QinetiQ facilitated the timely and secure

transfer of technical data from the UK to

Australia to support HMS Anson’s maintenance

period, enabling essential information to reach

engineers without delay and minimising the

need for more resource-intensive alternatives.

Outcome

The customer praised the responsiveness and

assurance of the process, which contributed

to maintaining programme progress while

supporting the focus on managing budgets

eﬀectively. The activity also reinforced QinetiQ’s

role as a dependable partner in delivering

eﬀicient, high-assurance technical support.

Sector review

Australia

IN ACTION

Pictured above:

Department of Defence/The Astute-class submarine

HMS Anson comes alongside at HMAS Stirling in

Western Australia, for a scheduled Submarine

Maintenance Period (SMP).

Overview

Our US sector provides specialist

engineering, systems integration

and mission operations support to

defence and homeland security

customers across the United States,

operating across priority mission areas

including space and missile defence,

maritime systems, persistent surveillance,

sensing and autonomy.

FY26 was a year of transition for the US business.

The sector strengthened its position as a mid-tier

provider of diﬀerentiated, mission-critical capability,

while taking action to sharpen its portfolio and operating

model to support improved operational focus, ﬁnancial

discipline and closer alignment with enduring US national

security priorities.

Operational and order highlights

Support to space and missile defence priorities

QinetiQ US continued to scale its support to the Space

Development Agency (SDA). In September 2025, the Agency

successfully launched 21 data-transport satellites for

Tranche 1 of the US Space Force’s Proliferated Warﬁghter

Space Architecture, supporting the development of

a resilient space-based threat detection capability.

Improved delivery in Defence Services

The Defence Services business delivered stronger

operational performance, underpinned by improved

delivery discipline.

Growth in solutions and sensor modernisation

The solutions business secured and delivered the ﬁrst

phase of a multi-year acquisition supporting a signiﬁcant

sensor modernisation programme.

Expansion in homeland security and

border surveillance

QinetiQ US expanded its persistent surveillance footprint

through the integration of two additional sites along

US borders.

Naval capability and autonomy

The sector secured key naval studies focused on

next-generation surface and sub-surface capabilities

and submied a long-term support plan for the future of

US Navy aircraft carriers.

Portfolio focus and discipline

As part of a comprehensive portfolio review, QinetiQ US

reduced exposure to lower-margin and more volatile

activities, including the disposal of its Federal IT

portfolio for approximately $31m in September 2025.

Sector review

United States

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Outlook

Demand for mission-critical capability across the US

defence and homeland security market is expected to

remain supported by enduring national priorities and

long-term modernisation programmes and elevated

US Department of War budgets.

Spending is anticipated to remain aligned with our core

focus areas of space and missile defence, maritime

systems, persistent surveillance, sensing and

autonomy. While near-term outcomes remain subject

to competitive wins, phasing and disciplined delivery on

existing programmes and a selective approach to new

opportunities which support QinetiQ US’s positioning

across priority areas over the medium-term.

Enhancing space-based threat

detection through resilient

mission support

Challenge

The US Space Force required rapid, reliable

mission support to deploy resilient satellite-

based communications and data-transport

capability in a contested environment.

Solution

QinetiQ US supported the Space Development

Agency through specialist engineering and

systems integration activities, contributing

to the successful launch of Tranche 1

data-transport satellites.

Outcome

The successful launch enhanced space-based

threat detection capability and demonstrated

QinetiQ US’s ability to support complex,

mission-critical space programmes at pace.

Sector review

IN ACTION

Pictured above:

Continuing support to the Space

Development Agency’s eﬀorts, focusing on developing,

testing and integrating space-related defense systems.

Group Chief Financial

Oﬀicer's Review

Overview of full-year results

The Group has delivered a resilient and improved ﬁnancial

performance against the backdrop of near-term geopolitical

and market challenges. Funded order backlog closed at

£4.4bn following the LTPA extension in H1, and we delivered

organic revenue growth at an underlying operating proﬁt

margin of 11.3%. Consistently strong cash generation of

100% has contributed to net debt to EBITDA remaining

consistent at 0.5x (FY25: 0.4x) and enabled us to continue

and extend our share buyback programme, enhancing

returns to shareholders. We have also continued to grow

the dividend to 11.0p per share (FY25: 8.85p). The year end

has seen a signiﬁcant increase as we changed the dividend

policy to a payout ratio.

The Group achieved a strong order intake totalling

£3,573.2m (FY25: £1,954.8m), including the LTPA ﬁve-year

extension order intake of £1.7bn, with particularly strong

performance in EMEA Services, where the prior year

included the 10-year NGGATS contract in Germany.

The book-to-bill was again strong, at 1.1x excluding LTPA

non-tasking revenue. We have secured major orders

across both of our operating segments. Within EMEA

Services we secured £1,469.6m (FY25: £1441.7m) of orders,

representing organic growth of 2%. Within Global Solutions,

FY26 orders were £394.4m (FY25: £513.1m), representing

a book-to-bill of 1.0x and an 18% decrease on an organic

basis after adjusting for foreign exchange and the

disposal of the US Federal IT business.

A year of improved ﬁnancial and

operational performance and

strong free cash ﬂow.

£m

Underlying* results

Statutory results

FY26

FY25

FY26

FY25

Revenue

1,922.6

1,931.6

1,922.6

1,931.6

Operating proﬁt/(loss)

217.9

185.4

169.8

(90.5)

Proﬁt/(loss) after tax

168.5

147.0

107.5

(185.7)

Earnings/(loss) per share (p)

31.5

26.1

20.1

(33.0)

Full year dividend per share (p)

11.0

8.85

11.00

8.85

Funded order backlog

4,421.4

2,845.2

Orders

1,864.0

1,954.8

Net cash inﬂow from operations

343.2

316.2

291.6

286.7

Net debt

(159.1)

(133.2)

Deﬁnitions of the Group’s ‘Alternative Performance Measures’ can be found in the glossary.

Underlying operating proﬁt relates to operating proﬁt from segments. See note 3 to the ﬁnancial statements for details.

100%

Operating cash conversion

34%

ROCE

24%

Dividend growth

£135m

Share buyback

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Orders

FY25

FY26

EMEA

Services

LTPA

Extension

Global

Solutions

FX and

disposal

£m

1,955

1,709

3,573

(85)

(39)

85% organic growth

83% total growth

Excl. LTPA Extension.

£1.54bn LTPA extension plus award of £166m relating

to current investments.

Revenue

FY25

FY26

EMEA

Services

Global

Solutions

FX and

disposal

£m

1,932

1,923

(29)

(35)

1.3% organic growth

Operating proﬁt

FY25

FY26

EMEA

Services

Global

Solutions

Foreign

Exchange

£m

185

Margin

11.3%

218

(1)

18% organic growth

Margin

9.6%

Margin

11.9%

Margin

9.0%

Group Chief Financial

Oﬀicer's Review

Funded order backlog has risen to a record high of £4.4bn,

or £4.8bn including US unfunded orders, providing good

visibility going forward:

In EMEA Services the total funded order backlog was

£4.1bn (FY25: £2.5bn), with the increase driven by the

ﬁve-year LTPA contract extension to 2033. This is a

large multi-year contract and as we deliver, this will

naturally reduce the LTPA order backlog.

In Global Solutions the total funded order backlog was

£279.1m (FY25: £374.6m). US unfunded order backlog

reduced from £529.0m to £342.1m as orders were

booked and traded in-year.

On 31 March 2026, approximately 67% (£1.3bn) of the

Group’s FY27 expected revenue was under contract,

compared to 70% (£1.4bn) of the forecast FY26 revenue

at the same point last year.

We delivered organic revenue growth of 1% to £1,922.6m

(FY25: £1,931.6m) in challenging near-term market

conditions. Reported revenue growth, which includes

the impacts of foreign exchange and the US Federal IT

disposal, was ﬂat. We saw a 4% organic revenue increase

to £1,529.2m (FY25: £1,477.7m) in EMEA Services, primarily due

to good growth on UK Defence sector framework contracts.

Global Solutions revenue reduced 7% on an organic basis

to £393.4m (FY25: £453.9m), primarily in the US as we exited

some non-core business lines and were impacted by market

conditions in particular government services lines of work.

Operating proﬁt from segments of £217.9m (FY25: £185.4m)

was up 18%. This represents an 11.3% operating margin

(FY25: 9.6%), consistent with historical levels following

the one-oﬀ proﬁt impacts in FY25. EMEA Services

delivered a strong operating margin of 11.9% (FY25: 11.4%)

as we eﬀectively executed on our order backlog and

controlled costs.

Operating margins in Global Solutions increased from 3.6%

in FY25 to 9.0% in FY26, driven by an increase in proﬁtability

in the US and the absence of one-oﬀ charges.

The statutory operating result was a proﬁt of £169.8m

(FY25: loss of £90.5m), including the impact of speciﬁc

adjusting items and recurring income on Research and

Development Expenditure Credits (RDEC), which was

£29.3m (FY25: £30.0m).

Underlying proﬁt before tax increased 14% to £229.6m

(FY25: £198.6m), in line with the increase in underlying

operating proﬁt, with underlying net ﬁnance expense in

line with the prior year at £17.6m (FY25: £16.8m).

Group Chief Financial

Oﬀicer's Review

Speciﬁc adjusting items

The total impact of speciﬁc adjusting items (which are

excluded from underlying performance due to their

distorting nature) on operating proﬁt was a cost of

£77.4m (FY25: cost of £305.9m). The improved position

reﬂects that FY25 included the goodwill impairment

charge of £143.9m relating to the US Sector and acquisition,

disposal and integration costs of £14.9m associated with

integrating the Avantus and Air Aﬀairs acquisitions into

their respective sectors, while this year there are no

charges against these line items.

In FY26 the non-recurring cost of the discrete digital

investment programme is £23.6m (FY25: £20.8m).

We continue to roll out this project to modernise the IT

infrastructure to support our future growth ambitions.

The non-recurring costs are reported as speciﬁc adjusting

items in the P&L, with ongoing recurring operating costs

(such as licence costs and overheads) remaining within

underlying operating costs. This year is expected to be

the ﬁnal year of digital investment.

Restructuring costs and other impacts were £30.2m

(FY25: £64.5m). This includes the costs of eﬀiciency activity

in UK and Australia operations which is nearing completion,

as well as the further non-cash charges in the US. The

majority of these costs were reported within the ﬁrst half of

FY26 and were a consequence of continued reﬁnement of

the market-facing strategy and ongoing restructuring of

the US Sector against challenging market conditions.

Also included within speciﬁc adjusting items are net ﬁnance

income from pensions of £2.4m (FY25: £1.0m), amortisation

of acquisition intangibles of £23.1m (FY25: £24.2m) and the

£0.5m gain on disposal of the Federal IT business in the US,

which completed during the ﬁrst half of the year.

Tax

The total tax charge was £47.6m (FY25: £79.4m). The

underlying tax charge was £61.1m (FY25: £51.6m), on a

higher underlying proﬁt before tax, with an underlying

eﬀective tax rate of 26.6% for the year ending 31 March 2026

(FY25: 26.0%). The underlying eﬀective tax rate is above

the UK statutory rate of 25% (FY25: 25%) primarily as a

result of unrecognised tax deductions and prior year

adjustments to returns.

The underlying eﬀective tax rate is expected to remain

marginally above the UK statutory rate, subject to the

impact of any tax legislation changes and the geographic

mix of proﬁts. The Group has engaged with advisers to

assess any potential impact on the tax charge by the UK’s

enactment of the OECD’s Global Anti-Base Erosion Model

Rules (Pillar Two). The Group performed an assessment of

the potential exposure to Pillar Two income taxes based on

current period data. The Group believes it qualiﬁes for one

of the transitional safe harbours provided in the rules in all

territories in which it operates. The Group has not accrued

a Pillar Two top-up tax charge for FY26. The Group

has applied the temporary exemption issued by the

International Accounting Standards Board from the

accounting for deferred taxes under IAS 12 and neither

recognises nor discloses information about deferred taxes

related to Pillar Two income taxes. The Group does not

anticipate a material quantitative impact from Pillar Two

legislation; however, there are expected to be signiﬁcant

compliance obligations.

FY26

£m

FY25

£m

Acquisition and disposal costs

–

(14.9)

Restructuring costs and other impacts

(30.2)

(64.5)

Digital investment

(23.6)

(20.8)

Loss on sale of property

–

(36.6)

Impairment of property

(0.5)

(1.0)

Impairment of goodwill

–

(143.9)

Amortisation of acquired intangibles

(23.1)

(24.2)

Disposal of business

0.5

–

Finance income – pensions

2.4

1.0

Total speciﬁc adjusting items loss before tax

(74.5)

(304.9)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Group Chief Financial

Oﬀicer's Review

Cash management and

capital allocation policy

Working capital management and overall cash performance

have remained strong. Underlying net cash ﬂow from

operations was £343.2m (FY25: £316.2m). Our cash

conversion deﬁnition reﬂects our pre-capital expenditure

cash ﬂows as a proportion of EBITDA to demonstrate how we

convert our proﬁt (excluding interest, tax, depreciation and

amortisation) into cash ﬂow. We achieved good underlying

cash conversion of 100% (FY25: 105%).

As at 31 March 2026, the Group had £159.1m net debt,

increased from £133.2m as at 31 March 2025, as the strong

operating cash conversion during the year and the proceeds

from the sale of the US Federal IT business, allowed for

record shareholder returns through £48.7m of dividends

and £146.9m of purchases of own shares (including c.£12.3m

for company share incentive schemes). Leverage remains

consistent at 0.5x (31 March 2025: 0.4x).

Through FY26 we have demonstrated our capital allocation

policy in action:

Invested in our organic growth – net capital

expenditure of £72.5m (FY25: £108.4m, which included

one-oﬀ spend on aircraft in Germany), focused on

contractual commitments (51% relating to customer

funded contracts, including £37m into the LTPA),

sustainment of the portfolio and investment to

support future growth

Provided a progressive dividend to shareholders

and changed the dividend policy to a pay-out ratio –

year-on-year growth rate of 24%

Completed sale of the US Federal IT business,

with proceeds of £17.9m, and returned the cash to

shareholders through accelerating the buyback

programme in year

Return of excess cash to shareholders – c.£135m share

buyback completed during the year. Approximately half

of the £200m share buyback extension announced in

March 2025 had been completed as at 31 March 2026

The Group is not subject to any externally imposed

capital requirements.

Net debt movements

Underlying

operating

proﬁt from

Segments

Depreciation

amortisation

Underlying

EBITDA

Underlying

working

capital

movement

& other

Underlying

net cash

inﬂow from

operations

Exceptional

operating

cash ﬂows

Net capex

Net interest

& taxation

Free cash

ﬂow

Shareholder

return

Change in

net debt

Other

RDEC

£m

218

344

343

(52)

(72)

(60)

159

(183)

(2)

(26)

100% cash conversion

Net Debt: £158m

Leverage: 0.5x

Research and Development Expenditure Credit.

Other includes disposal of business £17.9m, purchase of own shares for incentive arrangements £(12.3)m, foreign exchange and lease related movements.

Group Chief Financial

Oﬀicer's Review

Commied facilities

The Group has a £333.6m Term Loan split into two tranches:

GBP Term Loan £273m (Tranche A); and, USD Term Loan

$80m (Tranche B), which will mature on 27 September 2027.

Participating banks have lent on a two-tier basis, three

banks at £67m and four banks at £35m. In line with Group

policy, £270m (c.80%) of the ﬂoating rate debt has been

ﬁxed using SONIA interest rate swaps at a weighted average

rate of 3.46%, maturing on 27 September 2027.

The Group has a £290m bank revolving credit facility with

an ‘accordion’ facility to increase the limit up to £400m.

The facility, which will mature on 22 April 2029, was undrawn

at 31 March 2026.

We adopt a strict policy on managing counterparty risk

through a combination of diversiﬁcation of investments and

regular reviews of counterparty limits using credit rating

assessments. Our debt sits with our key relationship banks,

who have strong credit ratings and diverse portfolios.

The banks have been selected for their capabilities in our

home countries to support our business.

Return on Capital Employed (ROCE)

ROCE at a group level uses the calculation of: operating

proﬁt from segments less underlying amortisation/(average

capital employed less net pension asset), where average

capital employed is deﬁned as shareholders’ equity plus

net debt (or minus net cash).

FY26 ROCE was 34% (FY25: 22%) due to the stronger

proﬁtability and the impact of the right-sizing and

restructuring activities across the Group. As we continue

to invest in the business to drive our organic growth

strategy and maintain the disciplined capital allocation

agenda, ROCE is expected to remain high, at or above

the 25-30% range.

Earnings per share

Underlying basic earnings per share increased by 21% to

31.5p (FY25: 26.1p), driven by the higher underlying proﬁt

after tax and acceleration of the share buyback programme.

Basic earnings per share for the total Group (including

speciﬁc adjusting items) were 20.1p (FY25: loss of 33.0p).

The improvement is driven by FY25 including the impairment

of goodwill relating to the US, and higher restructuring costs

and other related items.

The average number of shares in issue during the year, net of

treasury shares and as used in the basic earnings per share

calculations, was 535.4m (FY25: 563.4m). There were 522.1m

shares in issue as at 31 March 2026, net of treasury shares,

reduced due to the ongoing share buyback.

Dividend

The Board proposes a ﬁnal FY26 dividend per share of

8.0p (FY25: 6.05p), making the full-year dividend 11.0p

(FY25: 8.85p). The full-year dividend represents growth

of 24%, with the dividend policy being revised on a payout

ratio basis of c.35%-40% of basic underlying EPS.

Subject to approval at the Annual General Meeting, the ﬁnal

FY26 dividend will be paid on 20 August 2026 to shareholders

on the register at 24 July 2026.

Pensions

The net pension asset under IAS 19, before adjusting

for deferred tax, was £54.4m (31 March 2025: £39.4m).

The key driver for the increase in the net pension asset

during the year relates to the net actuarial gain on the

net scheme assets.

The key assumptions used in the IAS 19 valuation of the

Scheme are set out in note 27 to the ﬁnancial statements.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Group Chief Financial

Oﬀicer's Review

Net ﬁnance income and expense

The underlying net ﬁnance expense was £17.6m

(FY25: £16.8m), increased due to a higher expense

relating to leases following completion of the sale and

leaseback transaction during the prior year. Net ﬁnance

income of £2.4m (FY25: £1.0m) in respect of the deﬁned

beneﬁt pension net surplus reduced due to the higher

opening net asset and is reported within speciﬁc

adjusting items.

Foreign exchange

The Group’s income and expenditure is largely seled

in the functional currency of the relevant Group entity,

mainly Sterling, US Dollar or Australian Dollar. The Group

has a policy to hedge all material transaction exposure at

the point of commitment to the underlying transaction.

Uncommied future transactions are not routinely hedged.

The Group does not hedge its exposure to translation of

the income statement.

The principal exchange rates aﬀecting the Group were

the Sterling to US Dollar and Sterling to Australian Dollar

exchange rates.

12 months

to 31 March

2026

12 months

to 31 March

2025

£/US$ – opening

1.29

1.26

£/US$ – average

1.34

1.28

£/US$ – closing

1.32

1.29

£/A$ – opening

2.07

1.94

£/A$ – average

2.03

1.96

£/A$ – closing

1.92

2.07

Foreign exchange translation has provided a modest

headwind to revenue and operating proﬁt in the year.

Most signiﬁcantly, the US Dollar has strengthened,

with the average exchange rate to Sterling increasing

from 1.28 to 1.34. In FY26, 15% of our total Group revenue

was generated in the US. As a result of the strengthening

US Dollar and other FX movements in year, revenue

decreased by £17.8m and operating proﬁt decreased by

£0.6m. For every 1 cent move in the USD FX rate, this would

impact Group revenue by c.£3m.

Martin Cooper

Group Chief Financial Oﬀicer

21 May 2026

Key performance

indicators

Financial KPIs

Description

This is the level of new orders and amendments

to existing orders, excluding the LTPA contract

extension, booked in the year.

Performance this year

Total orders, including the LTPA extension,

were £3.6bn, creating a record order backlog

as at 31 March 2026. Excluding the LTPA

extension, orders decreased by 4% against

a strong comparator which included the

long-term Germany contract.

Link to strategy

Enables us to assess the execution of our

strategy to grow the Group. Order intake is

used as a metric for the Annual Bonus Plan.

Description

The underlying earnings, net of interest and

tax, excluding all speciﬁc adjusting items,

expressed in pence per share.

Performance this year

Underlying basic earnings per share increased

by 21%, driven by the higher underlying proﬁt

after tax and the impact of the ongoing share

buyback programme.

Link to strategy

Provides a measure of the earnings generated

by the Group after deducting tax and interest.

Speciﬁc adjusting items are excluded because

their size and nature mask the true underlying

performance year-on-year.

Description

Calculated by taking the increase in revenue over

prior year, at constant exchange rates, excluding

the impact of acquisitions and disposals.

Performance this year

Grew 1% on an organic basis, with a 4%

increase in EMEA Services driven by the

UK Defence sector.

Link to strategy

Demonstrates the Group’s ability to

grow market share within its chosen

markets. Delivering long-term sustainable

growth reﬂects the successful execution

of our strategy.

Description

This represents net cash ﬂow from operations

before cash ﬂows of speciﬁc adjusting items

and capital expenditure.

Performance this year

Remained consistently strong, with an

operating cash conversion of 100%.

Link to strategy

A measure of the ability to generate cash

from operations. Gives an indication of the

ability to make discretionary investments

and pay dividends.

Description

The earnings before interest and tax,

excluding all speciﬁc adjusting items.

Performance this year

Proﬁt was up 18%, driven by organic revenue

growth of 1% and a return to 11.3% operating

margin following the reduced proﬁtability

in FY25.

Link to strategy

Used for performance analysis as a measure

of operating proﬁtability. Speciﬁc adjusting

items are excluded because their size and

nature mask the true underlying performance.

Description

This represents the total future revenue

currently on contract.

Performance this year

Backlog grew to a record high of £4.4bn as at

31 March 2026, including the LTPA extension

contract to 2033.

Link to strategy

Backlog allows us to assess the eﬀectiveness

and execution of the Group strategy to

move towards larger, longer-term contracts,

increasing conﬁdence in our long-term

revenue guidance.

FY23

FY24

FY25

FY26

£3,573.4m

£1,954.8m

£1,740.4m

Orders

£3,573.4m

FY23

FY24

FY25

FY26

31.5p

26.1p

29.4p

Underlying

earnings per share

31.5p

FY23

FY24

FY25

FY26

14%

Organic

revenue growth

FY24

FY25

FY26

£343.2m

£316.2m

£320.2m

Underlying net cash

ﬂow from operations

£343m

FY24

FY25

FY26

£4,421.4m

£2,845.1m

£2,873.0m

Backlog

£4,421m

FY23

FY24

FY25

FY26

£217.9m

£185.4m

£215.2m

Underlying operating proﬁt

£218m

Deﬁnitions for the Group’s ‘Alternative Performance Measures’ can be found on page 220. Underlying operating proﬁt refers to operating proﬁt

from segments. See note 3 for details.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Key performance

indicators

Non-ﬁnancial KPIs

Description

The Lost Time Incident Rate (LTIR) is calculated

using the total number of accidents resulting

in at least one day taken oﬀ work, multiplied

by 1,000, divided by the average number of

employees in that year.

Performance this year

Our LTIR increased slightly from 1.45 in FY25 to

1.82 in FY26, (due to the reduction in headcount

and some isolated lost time events) but safety

performance overall remained stable.

Link to strategy

We are commied to the highest level of safety.

This is the right thing to do for our people and

for our customers, who entrust us with safety-

critical work. The safety, health and wellbeing

of our people underpins our business strategy.

Description

We use Workday Peakon to measure employee

engagement and gather regular feedback

on how our people feel about working at

QinetiQ. The engagement score is based on a

10-point scale. Feedback is collected through

four surveys during the year and aggregated

over a six-month period to ensure the score

provides a representative view of employee

engagement across the Group.

Performance this year

Participation rates remain strong across FY26.

In the ﬁnal survey of the year, the aggregate

engagement score was 6.5, compared with

7.5 at the same time in FY25. The reduction

in engagement reﬂects the challenging

operating environment and restructuring.

Link to strategy

Employee engagement is a key enabler of our

business strategy. An engaged workforce

supports productivity and the delivery of

long-term performance.

Description

Our Climate Transition Action Plan (CTAP)

includes a near-term target of 50% reduction

of our combined Scope 1 and Scope 2

emissions by 2030, from a base year of FY20.

Near-term and long-term targets are shown

on page 43.

Performance this year

The ﬁgures shown above are restated

following the sale and leaseback of our

Farnborough site . We continue our downward

trajectory for our Scope 1 and 2 emissions:

36% since our FY20 baseline.

Link to strategy

Actively reducing our emissions is at the heart

of our CTAP and is a critical part of our wider

Sustainability strategy, which underpins and

supports wider business performance.

Further reading

Risk management

Principal risks

Security management

The business employs a proactive threat assessment

process, with eﬀective horizon-scanning for future and

emerging threats to the business to manage and mitigate

risk. Security Incident Management is achieved through

a Security and Information Governance process with

a deﬁned structure and escalation process through

sectors, Group, Security and Information Council,

Security Steering Group and on to the Risk & Security

Commiee, to ensure visibility of current and emerging

risks and their management.

The Commiee is assured by the progress made by the

Group in the year, although, with the volatility of critical

regions globally, continued increasing incidence and

sophistication of cyber-aacks and the consequent need

for the Group to remain vigilant, the Commiee expects

security to remain one of its key areas of focus. The Security

Culture Survey conducted by the Group Security team,

covering the whole Group and aimed at understanding the

security maturity levels across four areas – information,

physical, cyber and personnel security – once again proved

invaluable in identifying areas for focus.

Cyber security

Given the nature of our business and emergent security

threats such as the adoption of artiﬁcial intelligence and

the broader geopolitical landscape, we continue to invest

in our Digital and Cyber Security programmes. This is most

visible through the roll-out of the Digital Workplace secure

working environment, which represents a signiﬁcant

modernising of our IT infrastructure.

In combination with our wider education and culture

initiatives, we continued to strengthen our policies,

procedures, education and tooling to ensure we can

appropriately identify, assess and manage cyber security

risks. Our strategy remains under constant review and our

Cyber and Information Security Operating Model ensures

we best utilise our technical expertise and knowledge

across all business areas.

The Commiee continues to receive regular reports from

the CIO and CISO on our cyber and information security

risks, the performance of protective controls and the

progress of any ongoing security improvement activities.

Digital Transformation

At a time when cyber threats loom ever larger

and interconnectivity of information is vital to

keep pace with our customer expectations,

QinetiQ is delivering a secure cloud-based

IT environment across all of its territories. The

change programme encompasses the technical

tools, training and interconnectivity to provide

a state-of-the-art, secure digital environment

for our workforce to accelerate the way we

operate both internally and with our partners

while reducing overheads and mitigating cyber

threats as well as our delivery and growth risks.

Risk & Security Commiee

Report

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

112

GOVERNANCE

STRATEGIC REPORT

All employees must complete mandatory cyber, information,

physical and personnel security training each year,

which focuses on our policies, procedures, culture and

behaviours, aligned to known threats. Our Group intranet

also includes a comprehensive Security Knowledge

Library which is used both individually and by leaders for

regular security engagements at team level. Our Security

professionals augment their already excellent competence

with select specialist advice from third parties, to ensure

we apply current best practice in all we do.

Business continuity and

crisis management

Our business continuity and crisis management procedures

have been designed for ﬂexible arrangements when

responding to incidents and emergencies. They are

scalable and can be adapted to work in a wide range of

speciﬁc scenarios. We focus on resilience, informed by our

risk identiﬁcation and assessment rather than individual

emergency scenarios. Our Crisis Management Plan sets

out a decision-making model and overarching management

response which supports the Leadership Team, and

ultimately the Board, in making eﬀective decisions during an

incident. This has proved to be an eﬀective approach, with

incidents managed well without causing adverse eﬀects on

the business. Supplementary training has been provided to

the Leadership Team and we will continue with this approach

in FY27, including the eﬀective exercising of our plans. We

continue to work with our customers, partners and suppliers

to ensure we have appropriate resilience on shared sites, in

our programmes and throughout our extended supply chain.

Self-certiﬁcation process

An annual process of self-certiﬁcation on the eﬀectiveness

of internal controls is well established and embedded

across the Group, and has been enhanced in FY26 to ensure

we are identifying potential vulnerabilities as well as known

risks. This process provides a documented and auditable

trail of accountability for the operation of the system of

internal controls and continues to be our preferred tool to

tangibly assess the eﬀectiveness of those controls in all

functions and sectors across the Group. It is informed by

a rigorous and structured self-assessment, with personal

accountability, that addresses compliance with Group

policies and processes, and provides a comprehensive level

of assurance to be given at higher levels of management

and, ﬁnally, to the Board.

Each Sector and Functional Chief Oﬀicer are required to

make a declaration that their system of internal controls

is eﬀective, is ﬁt for purpose and is being monitored

throughout the year. Any material risks, control failures or

non-compliance with the Group’s risk policies, legislation

and/or local delegations of authority must be highlighted as

part of this process. The outcomes of the self-certiﬁcation

process, which is carried out at the full and half-year,

is reported to the Risk & Security Commiee by the Group

Director Risk and Assurance.

Generic MOD compliance system

A key aspect of the Commiee’s work is the oversight of the

UK Ministry of Defence’s (MOD) generic compliance system.

This is integral to the work of QinetiQ in its relationship with

the UK Government. The system is designed to give the

MOD customer conﬁdence that QinetiQ is able to provide

impartial advice during any competitive evaluation of

a procurement opportunity where the Group wishes to

operate on both the ‘buy’ and the ‘supply’ sides.

The aim is to achieve a balance between meeting the needs

of the procurement customers in the MOD (principally

defence equipment & support) and the need to allow

QinetiQ the ﬂexibility to commercialise research into the

supply chain and pursue its planned business activities,

without compromising the defence or security interests of

the UK. The Board nominates a senior manager within the

business to act as Compliance Implementation Director

(CID) for the programme, with assurance provided as an

integrated part of the Company’s assurance framework.

Anti-bribery and corruption

The Commiee oversees a zero-tolerance approach to

bribery and corruption, as conﬁrmed by the Company’s

anti-bribery and corruption policy and the supporting local

policies that apply to members of its Group. The Group also

has in place a range of procedures, including regular training

targeted at potentially risk-exposed roles of our employees,

Group and local gifts and hospitality policies, and Group

and divisional procurement, contracting and partnering

practices, which are designed to prevent bribery. See more

on page 60.

Data privacy

The Company respects the personal data privacy of its

customers, employees and other individuals in respect

of whom it and members of its Group process personal

information. The Group therefore has in place policies which

mandate the lawful processing and protection of such

personal information in accordance with applicable laws

and procedures which are designed to achieve the same.

Any risks or exceptions to GDPR compliance are presented

to the Commiee at each Commiee meeting.

Risk & Security Commiee

Report

113

Eﬀectiveness review

A performance evaluation of the Commiee is conducted

annually. This process is described further on page 101.

Frameworks for risk management

and internal control

The Board is responsible for promoting the long-term

success of the Company for the beneﬁt of shareholders,

as well as taking account of other stakeholders, including

employees and customers. To discharge this responsibility,

the Board has established frameworks for risk management

and internal controls using the Three Lines Model (see

page 66), and reserves for itself the seing of the Group’s

risk appetite. In-depth monitoring of the establishment

and operation of prudent and eﬀective controls to assess

and manage risks associated with the Group’s operations

is delegated to the Audit Commiee, complemented by the

work of the Risk & Security Commiee. However, the Board

retains ultimate responsibility for the Group’s systems of

internal controls and risk management and has reviewed

their eﬀectiveness during the year. The frameworks

are regularly reviewed for prudency. They were in place

throughout the ﬁnancial year under review and up to the

date of this report. They help ensure the Group complies

with the Financial Reporting Council’s (FRC) guidance on

Risk Management, Internal Controls and related ﬁnancial

and business reporting.

After discussions with the Audit Commiee and the

Risk & Security Commiee, the Board conducts a robust

six-monthly assessment of the Group’s emerging and

principal risks and this year speciﬁcally considered the

principal risks facing the Company, including the impacts

to the Group’s business model and future performance,

which therefore require management prioritisation and

action when approving the Group business plan.

During the year, as part of the oversight process, the Board

and the Risk & Security Commiee received updates on

risks and associated mitigating actions. Principal risks were

also taken into account in the design of scenarios which

are intended to stress-test the Group’s ﬁve-year strategic

business plan, recovery plan, climate change impacts,

decisions on the return of capital to shareholders and

operational resilience.

Our risk management framework is designed to consistently

identify, evaluate, manage, monitor and report the

principal risks to the achievement of the Group’s strategic

objectives and is embedded throughout the Group. It is

codiﬁed through risk policy and associated processes and

procedures which set out the risk appetite, requirements

and controls for the Group’s worldwide operations.

The Group maintains a manual of ﬁnancial reporting policies

which is compliant with International Financial Reporting

Standards (IFRS). An internal control framework is in place

across the Group which covers Group ﬁnancial reporting

and local statutory reporting activity. The process follows

a risk-based approach, with management identiﬁcation of

key ﬁnancial reporting-related controls.

Board oversight of risk management

The Board’s delegated responsibilities regarding

oversight of risk management and the approach to internal

controls are set out on page 66. There are strong working

relationships between the Board Commiees, which enable

robust oversight of internal controls and risk management.

Commiees provide regular reports to the Board on

their activities and escalate signiﬁcant maers where

appropriate. The responsibilities and activities of each

Board Commiee are set out in the Commiee reports.

Rapid Performance Improvement

Agility and pace continue to drive the defence

domain, and have been brought into sharp

focus with developing conﬂicts globally.

QinetiQ underwent a rapid transformation project

to simplify how we govern and release bids to

our customers, to increase the speed at which

we can turn customer requirements into outputs.

This project reduced our average bid phase time

by over 30%, with work underway to replicate these

improvements in the delivery phase. By increasing

the pace of delivery and maintaining our high

levels of quality, we are mitigating our growth

and competitor risks.

Risk & Security Commiee

Report

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

114

GOVERNANCE

STRATEGIC REPORT

Directors’

Remuneration Report

Reward decisions for FY26

Our resilient ﬁnancial performance has delivered orders and

cash ﬂow above target, with revenue and proﬁt out-turns

between threshold and target. The formulaic FY26 Annual

Bonus Plan (ABP) ouurn was 70.7% of the maximum for both

Steve Wadey (CEO) and Martin Cooper (CFO). The payment

for FY26 will be structured as 70% in cash and 30% in shares,

deferred for two years.

The third grant under the Long-term Performance Award

(LPA) was made in July 2025, with the same scorecard of

performance metrics as the July 2024 award, comprising:

cumulative underlying operating proﬁt; Return on Capital

Employed (ROCE); and total revenue growth. Stretch targets

remain aligned to the Company’s growth ambitions.

The ﬁnal contingent share award under the legacy Deferred

Share Plan (DSP), which was granted in FY23, based on

performance in that year, will vest in June 2026, as the

proﬁt underpin set at grant was met. There will be no

further awards vesting under the DSP.

Having concluded its three-year performance period,

the ﬁrst grant under the LPA, made in September 2024,

will vest at 42.3% of the maximum award, recognising

partial achievement of the stretching performance targets.

The award will vest in September 2026 and be subject to

a two-year hold period.

The FY26 CEO single ﬁgure shown on page 119 reports a

252.5% increase against the ouurn achieved in FY25.

This movement reﬂects the Commiee’s decision, at the

recommendation of the CEO, to reduce the FY25 annual

bonus to zero as well as the inclusion of the vested value of

the legacy FY23 DSP and FY24 LPA in this year’s single ﬁgure,

as required by the regulations. It should be noted that the

FY26 annual bonus is lower than the equivalent award in FY24,

when the bonus paid out at 87.5%. Given the strong progress

in challenging geopolitical and market environments, the

Commiee believes that the FY26 CEO compensation fairly

reﬂects the performance achieved by the Company.

In assessing the remuneration outcomes, the Commiee

has continued to carefully assess the potential impact on

incentive targets of the ongoing share buyback programme,

which commenced in June 2025 and involves the gradual

purchase and cancellation of up to £200m of shares over

24 months.

The Commiee conﬁrms that no current incentive plans

measure performance on a ‘per share’ basis and that there

has been no direct ﬁnancial performance boost from the

share buyback. Therefore, the Commiee concluded that

no adjustment to incentive outcomes was required.

Dear Shareholder,

FY26 has been a transitional year as we navigated tough

near-term market conditions across our key markets in

a heightened global threat environment.

Despite these conditions, the Group has delivered a record

order backlog and strengthened its forward order pipeline,

providing conﬁdence in the long-term fundamentals of

the business.

The decisive actions taken by management last year,

supported by the Board, have improved operational

discipline, driven eﬀiciencies and contributed to

a recovery in Group margins to expected levels.

Dina Knight

Remuneration Commiee Chair

Strengthening performance and

aligning reward to deliver long term

sustainable growth.

115

Directors’ remuneration policy

The existing Policy was introduced in 2023 after an

extensive review by the Commiee, incorporating broad

consultation with shareholders. The Policy received an

84.3% ‘For’ vote at the 2023 AGM.

Over the last 12 months we have been reviewing the Policy

and further consulting with major shareholders to ensure

it remains eﬀective and aligned with our strategy.

The current Policy represented a fundamental shift in our

approach to Executive Director remuneration when it was

introduced and the Commiee’s starting assumption was

that major changes would not be appropriate until the

Policy had been in place for further cycles. Substantive

feedback indicated that the Policy was performing in line

with expectations, although two areas were identiﬁed for

further improvement:

In order to strengthen alignment of the long-term

reward outcomes with earnings growth and

sustainable shareholder value creation, the

LPA’s current underlying operating proﬁt metric

will be replaced by a cumulative earnings per share

(EPS) metric.

The Commiee also received feedback that the

existing tapered post-employment guidelines were

behind market practice. We have therefore taken the

decision to increase the post-employment share

ownership requirements to 200% of salary for two

years post termination of employment (from 100% in

year one and 50% in year two). This higher requirement

will apply to any shares acquired from grants made

under the Company’s share plans after the approval

of the new Policy at the 2026 AGM.

Salary review

As disclosed in last year’s report, in light of the below

expectations performance in FY25 and the trading update

issued in March 2025, the Remuneration Commiee took

a number of actions, including exercising its discretion

to reduce the FY25 ABP ouurn to zero and, at the CEO’s

request, to defer its decision on the level of his July 2025

salary increase until the end of FY26. Having carefully

considered and reviewed FY26 performance, which saw

strong delivery and improved operational discipline

resulting in greater eﬀiciencies and improved margins,

the Commiee was satisﬁed that a 3% increase should be

awarded, eﬀective from 1 April 2026. This increase is below

the level of the workforce increase and also slightly below

the increase awarded to the CFO in respect of FY26.

For FY27, the overall salary review budget for UK employees

is 4%, with new salaries eﬀective from 1 July 2026 in-line with

the Group’s normal practice. The Commiee has determined

that the increase for the CEO will be 3.5% eﬀective from

1 July 2026. For the CFO, the Commiee has reviewed the

level of his salary in light of his strong performance and

development in the role since his appointment in September

2024. Following its review the Commiee determined that

his salary should be increased to a level consistent with

other CFO roles in comparable UK listed companies and has

therefore awarded an increase of 6.4%. This is moderately

above the wider workforce increase, but is consistent with

increases awarded to other high performing employees

within the business with salaries positioned below the

median of the benchmark for their role.

Implementation for FY27

For FY27, Revenue has been included as an additional

ﬁnancial metric within the ABP, alongside the existing

metrics of orders, proﬁt and cash as in FY26. Stretch targets

are aligned with the FY31 Integrated Strategy-to-perform

Plan (ISP) with half-year and full-year targets to drive

consistent operational performance. Each ﬁnancial

metric will have an equal weighting of 20%, with a total

weighting of 80% (increased from 75%) and non-ﬁnancial

targets reducing to 20% (from 25%). As in prior years,

the non-ﬁnancial targets are a combination of personal

and strategic goals, including selected ESG metrics.

The Commiee has reviewed the performance metrics

for the FY27 LPA three-year performance period and has

decided to simplify the plan to two metrics. Following

shareholder feedback, for FY27, these will be EPS, measured

cumulatively over three years, which will replace cumulative

proﬁt, and ROCE. The revenue metric used in prior plans

has been removed from the LPA going forward following

its inclusion in the annual incentive.

While consideration was given to introducing a relative

Total Shareholder Return (TSR) metric, a detailed review

has concluded that it is not currently suitable for QinetiQ.

TSR remains heavily driven by market sentiment and

external factors and analysis provided to the Commiee

found no peer group with suﬀiciently comparable business

fundamentals to ensure payouts would align with Company

performance and shareholder value creation. Similarly,

broad equity indices such as the FTSE 250 showed

weak correlation with QinetiQ’s share price, meaning

these would likely produce outcomes misaligned with

underlying performance.

Directors’

Remuneration Report

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

116

GOVERNANCE

STRATEGIC REPORT

Employee engagement and reward

The Group CEO and the Chief People Oﬀicer have held

regular discussions with our Global Employee Voice (GEV)

representatives on reward maers. Members of the Board

also met with the GEV representatives twice in FY26. The

social section on page 53 details our employee engagement

activity.

The expertise, pride and values of our people are key to

the delivery of our strategy. Their commitment to our

customers over the year has enabled us to deliver improving

performance despite the challenging external environment

and the need to control our costs.

The Company operates a range of incentive and reward

programmes throughout the organisation that align our

people with our goals. These arrangements are tailored to

reﬂect employee levels and speciﬁc market conditions.

This includes an All Employee Incentive Scheme (AEIS)

under which every eligible employee can earn a payment

if the Company achieves a level of operating proﬁt within

a predetermined range from target to stretch.

The AEIS is a key element of the Company’s Rewarding

for Performance framework, aligning employees with

shareholder interests by incentivising and rewarding

proﬁtable growth. The potential lump-sum payment

ranges from £500 to £1,250 per employee. In addition,

high-performing employees can earn up to an additional

5% of salary based on personal performance rating.

For FY26, a £500 payment was awarded to all employees

in recognition of their contribution towards the

performance of the business.

Our Group Hardship Fund and Employee Assistance

Programme (EAP) continue to provide vital support to our

people experiencing personal challenges. We also continue

to uphold our commitment to paying above the UK Real

Living Wage and supporting employees with an income

that enables meaningful retirement contributions.

Conclusion

The Commiee remains focused on ensuring that executive

remuneration is aligned with performance, supports

delivery of the Group’s strategy, and reﬂects the interest

of shareholders and the wider workforce.

As we look ahead, our priorities remain clear: to support

the delivery of sustainable growth, maintain strong

performance discipline, and ensure that reward outcomes

remain appropriately aligned to both ﬁnancial performance

and long-term value creation.

I hope that we can rely on your vote in support for

the Directors’ remuneration report at the AGM on

16 July 2026. I would welcome comments and questions

from shareholders in relation to this Directors’

remuneration report and I can be contacted through

[email protected].

Dina Knight

Remuneration Commiee Chair

21 May 2026

QinetiQ’s Gender Pay Gap data can be found on our website

at www.qinetiq.com

Directors’

Remuneration Report

117

Fixed pay

Annual Bonus Plan

ABP

Long-term Performance Award

LPA

Remuneration

at a glance

FY26 Annual Bonus Plan performance metrics

FY26 Long-term Performance Award performance metrics

Components of executive remuneration

Orders

Organic underlying operating

proﬁt on a three-year cumulative basis

Underlying operating proﬁt

Return on Capital Employed (ROCE)

Underlying net cash ﬂow from operations

Total revenue growth

Personal goals

Incentive

Weighting

Link to strategy

Enables us to assess the execution of our

strategy to grow the Group.

Ensures consistent and sustained

ﬁnancial performance.

Used for performance analysis as a measure

of operating proﬁtability.

Captures how investments are converted

into sustainable ﬁnancial returns.

Gives an indication of the ability to make

discretionary investments and pay dividends.

Demonstrates ability to grow market share

and deliver long-term sustainable growth.

Aligning personal performance to core

metrics around safety, engagement and

the environment.

25.0%

35.0%

25.0%

35.0%

25.0%

30.0%

25.0%

Competitively designed to aract and

retain the talent required to lead our

business. Set on appointment and

regularly reviewed and aligned with

the wider employees of the Group.

Revised policy changes

No change in prior-year

implementation.

The ABP rewards strong ﬁnancial and

non-ﬁnancial business performance,

aligning with shareholders to promote

longer-term sustainable focus.

Revised policy changes

No change in prior-year

implementation.

The LPA incentivises long-term

performance and growth, with

share-based payouts held for two

years to reinforce sustainable,

shareholder-aligned performance.

Revised policy changes

No change in prior-year implementation.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

118

GOVERNANCE

STRATEGIC REPORT

Remuneration

at a glance

To create strong alignment between executive

remuneration and the long-term interests of our

shareholders, the ABP is paid partly in deferred shares

vesting two years after the award was earned.

The LPA has a three-year performance period,

after which any vested shares must be retained

by the Executive for a further two years.

The FY26 CEO single ﬁgure shown above includes the vested value of the legacy FY23 DSP

and FY24 LPA, as required by the regulations. The FY25 single ﬁgure reﬂects the Commiee’s

decision, at the recommendation of the CEO, to reduce the FY25 annual bonus to zero.

The FY26 CFO single ﬁgure includes the vested value of the ﬁrst part of the Compensation

Share Plan (CSP) awarded in part for share awards which were forfeited on resigning from

his former employer. The FY25 single ﬁgure for the CFO is lower as it is pro-rated based on

a mid-year start date.

Timing

Single ﬁgure FY26

Core elements of our employee reward oﬀering include:

A fair base salary for employees, recognising individual

performance and contribution

Support for career growth and progression

Incentives aligned with role seniority, including

the All Employee Incentive Scheme recognising

Company performance

A recognition scheme celebrating the contribution

of individuals and teams

Living wage employer accreditation

Wider workforce remuneration

67:1

ratio of the CEO’s to the pay

of UK employees (FY25 25:1)

46.9%

of employees are in the

Share Incentive Plan

+4.7%

increase in employee

remuneration in FY26

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Fixed pay

ABP

LPA

Fixed pay

Pay at risk subject to performance conditions

Shares held, not subject to performance conditions

Fixed pay

Annual Variable Pay

Long-term Variable Pay

£880 £861

£917

£1,454

£4,006

£1,028

£2,451

Steve Wadey

Group Chief Executive

£6,376

£4,396

£1,740

Y26

Y26 MAX

Y25

(£’000)

£304

£541

£933

£624

£659

£624

Martin Cooper

Group Chief Financial Oﬀicer

£2,097

£1,824

£304

Y26

Y26 MAX

Y25

(£’000)

119

Ensuring executive pay is closely linked to the

Company’s strategy, long-term value creation

and shareholder interests.

A signiﬁcant proportion of remuneration is variable

and equity-based, with bonuses partly deferred

into shares and long-term incentives vesting over

several years.

Share-ownership guidelines requiring leaders

to build and maintain a meaningful equity stake,

aligning executive ﬁnancial interests with

shareholders over the long term.

Ensuring executives are incentivised to deliver results

within a robust governance and risk framework.

Incentive outcomes are subject to clearly deﬁned

ﬁnancial and non-ﬁnancial performance conditions,

with the Remuneration Commiee retaining

discretion to adjust payouts where outcomes do

not reﬂect underlying performance.

Deferral, malus and clawback provisions further

reinforce accountability over time.

Driving strong, sustained ﬁnancial and operational

performance over both short and long-term time periods.

The structure balances annual incentives

(short-term delivery) with long-term awards

(multi-year performance) using stretching targets

such as orders, proﬁt, revenue, cash, EPS and ROCE.

This ensures consistent focus on both short-term

execution and long-term growth.

Encouraging behaviours that support teamwork,

shared goals and a positive organisational culture.

The Annual Bonus Plan incorporates non-ﬁnancial

metrics in the form of personal objectives,

including ESG-related measures, to reward not

only the delivery of critical outcomes but also

how they are achieved. The deﬁnition of goals and

targets promotes cross-functional collaboration,

responsible decision-making and alignment with

Company values.

Our remuneration philosophy

How our approach to remuneration creates alignment with our key stakeholders.

Alignment

Accountability

Performance

Collaboration

Our approach

Our key principles

Remuneration

at a glance

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

120

GOVERNANCE

STRATEGIC REPORT

Directors’

Remuneration Policy

Introduction

Having substantially revised and simpliﬁed the Policy in

2023, the Commiee concluded that the Policy remains

eﬀective, with outcomes that align with the Company’s

performance and shareholder experience, supports the

delivery of our strategy, maintains leadership focus during

a period of operational momentum, and remains

appropriately competitive within the market.

Therefore, the Commiee is not proposing any changes

to the incentive structures or maxima; however, they have

used the review as an opportunity to take a comprehensive

look at the Long-term Performance Award (LPA) plan

metrics, to ensure the metrics continue to support the

Company’s strategic objectives, and to update the share

ownership requirements to ensure executives continue

to be aligned with shareholders following the end of their

employment at QinetiQ.

The review process

The Commiee led the review process throughout, taking

account of market practice and the views of executives

and external advisers, as appropriate, to help shape our

thinking. No individual is involved in the decision-making

on their own remuneration.

We engaged with our largest shareholders representing

over 54% of the register to explain the Policy and the positive

impact it will have on Company performance and culture and

revised the initial proposals to reﬂect the input received.

The Remuneration Commiee therefore seeks approval

for the Policy at the AGM on 16 July 2026.

Scope of Policy

The Policy applies to Executive Directors, the Group Chair

and Non-executive Directors. Reference may also be made

to the QinetiQ Leadership Team who, while not Directors,

fall within the Remuneration Commiee’s remit, although

the Policy is not binding for these individuals.

Changes to the Policy

The post-employment share ownership requirement will

be increased from 100% of salary for the ﬁrst year after

termination and 50% for the second year to 200% of salary

for two years post termination, to align more closely with UK

governance best practice and shareholder expectations.

This higher requirement will apply to any shares acquired

from grants made under the Company’s share plans after

the approval of the new policy at the 2026 AGM.

For future new hires at Executive Director level, ﬂexibility

will be included in relation to in-employment share-

ownership requirements, to ensure that the level of holding

requirement is appropriate in the circumstances and is

appropriately stretching based on the ability of a new hire to

comply with the requirement within an expected ﬁve-year

time period. Therefore, in future, the Commiee will set the

level at appointment of any new Executive Director, taking

into account the role, market practice at that time, any

on-hire awards (e.g. buy-outs) delivered in shares and the

annual award maxima under the LPA, with the requirement

being not less than 200% of salary.

No further changes are proposed for the future Policy other

than minor changes to the text to improve clarity or reﬂect

the passage of time.

Discretion

The Commiee has discretions in several areas of Policy as

set out in this report or as provided in the relevant plan rules.

The Commiee commits to communicating to shareholders

when discretion is used.

121

Base salary

Pension allowance

Beneﬁts

To aract and retain

the talent needed to

lead our business.

To ensure that

Executive Directors’

total remuneration

remains aractive

and competitive.

To ensure that

Executive Directors’

total remuneration

remains aractive

and competitive.

An Executive Director’s base salary is set on

appointment and reviewed annually or when there

is a change in position or responsibility.

When determining an appropriate level of salary,

the Commiee considers:

General salary rises to employees;

Remuneration practices within the Group;

Any change in scope, role and responsibilities;

The general performance of the Group;

The experience of the relevant Director;

The economic environment; and

Pay levels for similar roles among

appropriate comparators.

Individuals who are recruited or promoted to the Board

may, on occasion, have their salaries set below the

targeted policy level until they become established

in their role. In such cases subsequent increases

in salary may be higher than the general rises for

employees until the target positioning is achieved.

The Company provides a pension contribution

allowance in line with practice relative to its

comparators to enable the Company to recruit and

retain Executive Directors with the experience

and expertise to deliver the Group’s strategy.

The allowance is non-consolidated and does not

impact any incentive calculations.

Beneﬁts include car allowance, health insurance,

life assurance, income protection, expenses incurred

which HMRC may deem taxable and membership of the

Group’s employee Share Incentive Plan which is open

to all UK employees (the Executive Directors will also

be eligible to participate in any other all-employee

plan operated by the Company from time to time).

The Commiee recognises the need to maintain

suitable ﬂexibility in the beneﬁts provided to ensure

it is able to support the objective of aracting and

retaining personnel to deliver the Group strategy.

Additional beneﬁts may therefore be oﬀered

such as relocation allowances on recruitment

or where new beneﬁts are introduced for the

wider employee population.

Typically, the base salaries of Executive Directors in

post at the start of the policy period and who remain

in the same role throughout the policy period will be

increased by a similar percentage to the average

annual percentage increase in salaries of all other

employees in the Group. The exceptions to this rule

may be where:

An individual is below market level and a decision

is taken to increase base pay to reﬂect proven

competence in the role; or

There is a material increase in scope or

responsibility to the Executive Director’s role.

The Commiee ensures that maximum salary levels

are positioned in line with companies of a similar size

to QinetiQ and validated against other companies

in the industry, so that they are competitive against

the market.

The Commiee intends to review the comparators

periodically and may add or remove companies from

the Group as it considers appropriate.

The maximum policy pension allowance is aligned

with the Company pension contribution paid to

the majority of UK pension scheme members

(which is currently 10.5% of salary).

The maximum is the cost of providing the

relevant beneﬁts.

Executive Directors’ Remuneration Policy

The Policy will be put forward for approval at the AGM on 16 July 2026. This Policy covers the three-year period commencing

1 April 2026 and complies with the Large and Medium-sized Companies and Groups (Accounting and Reports) (Amendment)

Regulations 2013.

Purpose and link to strategy

Operation and performance measures

Maximum opportunity

Directors’

Remuneration Policy

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

122

GOVERNANCE

STRATEGIC REPORT

Annual incentive: Annual Bonus Plan (ABP)

Long-term incentive: Long-term Performance Award (LPA)

The ABP provides an incentive

for the Executive Directors

to achieve targets that are

entirely aligned to the

Company’s strategy.

The ABP rewards strong

sustainable ﬁnancial

performance through an 80%

weighting for FY27 on core

ﬁnancial metrics, driven by the

implementation of our strategy.

The ABP also rewards non-

ﬁnancial performance through

the delivery of key goals related

to environment (Net-Zero

roadmap), employee engagement

and inclusion and safety in

addition to the achievement

of personal goals.

The partial deferral of any ABP

payment into shares drives

a long-term and sustainable

focus aligned to the interests

of shareholders.

The LPA provides an incentive

for the Executive Directors to

achieve long-term ﬁnancial

targets that are entirely aligned to

the Company’s strategy and the

creation of shareholder value.

With regard to the FY27 targets:

Cumulative earnings per share

(50% weighting): Replacing

the cumulative proﬁt metric

used in previous cycles, to

deliver consistent operational

performance over the longer

term. Understood, relevant

and actionable for QinetiQ

senior leaders.

Returns (50% weighting):

To drive robust investment

selection and delivery.

The delivery of any LPA in shares

which must be held for a further

two years drives a long-term and

sustainable focus aligned to the

interests of shareholders.

The ABP is an annual incentive plan with a one-year performance

measurement period, with any award paid partly in deferred shares:

A maximum award of 200% of salary is available each year.

At the end of the ﬁrst year 70% of the award is paid as

a cash bonus.

The remaining 30% is deferred as an award of deferred shares

that must be held for two years, and are subject to malus and

clawback for up to three years from the payment date.

Dividend equivalents will be paid on the deferred shares.

The ﬁnancial metrics will normally not be less than 60% of

the overall weighting.

In exceptional circumstances the Commiee retains the

discretion to:

Change the performance measures and targets and the

weighting aached to the performance measures and targets

part way through a performance year if there is a signiﬁcant

and material event which causes the Commiee to believe

the original measures, weightings and targets are no longer

appropriate; for example adjustments for: acquisitions and

disposals; restructuring costs; business structure changes;

restated corporate allocations; foreign currency exchange

rates; and Board-approved budget adjustments; and

Make downward or upward adjustments to the amount

of incentive earned resulting from the application of the

performance measures, if the Commiee believes that the

incentive outcomes are not a fair and accurate reﬂection of

business performance.

Vesting of the LPA award will be determined by performance

against a scorecard of three-year performance measures, the

majority of which will be ﬁnancial (which will not duplicate those for

the ABP). Any vested shares must be held for a further two years.

Malus and clawback provisions apply to the LPA.

The Commiee will normally provide dividend equivalents on

vested shares under the LPA.

In exceptional circumstances the Commiee retains the

discretion to:

Change the performance measures and targets and the

weighting aached to the performance measures and targets

part way through a performance year if there is a signiﬁcant

and material event which causes the Commiee to believe

the original measures, weightings and targets are no longer

appropriate; for example adjustments for: acquisitions and

disposals; restructuring costs; business structure changes;

restated corporate allocations; foreign currency exchange

rates; and Board-approved budget adjustments;

Make downward or upward adjustments to the amount

of incentive earned resulting from the application of the

performance measures, if the Commiee believes that the

incentive outcomes are not a fair and accurate reﬂection of

business performance; and

Scale back incentive awards at grant if there were to be

a substantial Company share price fall.

Maximum = 200% of salary.

Target = 100% of salary.

Threshold = 0% of salary.

Maximum = 250% of salary.

Target = 125% of salary.

Threshold = 50% of salary.

No more than 20% of each

element of the LPA may vest at

threshold levels of performance.

Directors’

Remuneration Policy

Purpose and link to strategy

Operation and performance measures

Maximum opportunity

123

Directors’

Remuneration Policy

Notes to the policy table

Performance measures and targets

The performance measures and targets, ﬁnancial and non-ﬁnancial, are determined annually based on the Company’s

strategy. Targets are set taking into account a variety of inputs including but not limited to the strategic plan, the annual

plan and brokers’ forecasts. The measures and, where possible, the targets will be disclosed after the end of the relevant

ﬁnancial year in that year’s remuneration report.

Remuneration policy for all employees

All employees of QinetiQ are eligible for base salary, beneﬁts

and pension.

The link between performance and reward cascades down

from the Executive incentive plans with the Leadership

and Business Development Communities typically

invited to participate in the Company’s formal annual

incentive arrangements. All other employees may receive

a discretionary bonus based on Company and individual

performance. Participation in long-term incentive plans is

available to Executive Directors, QinetiQ Leadership Team

members, Leadership Community and selected other

employees. Share ownership is further encouraged via

the QinetiQ Share Incentive Plan.

The Remuneration Commiee is made aware of pay,

incentives and beneﬁts by grade across the Company and

the relevant costs. This is actioned by an annual report to

the Commiee which also includes details of any changes

in remuneration policy for all employees during the year.

Recruitment policy

The Company’s principle is that the remuneration of any new

recruit will be assessed in line with the current Executive

Directors. The Commiee is mindful that it wishes to

avoid paying more than it considers necessary to secure

a preferred candidate with the appropriate calibre and

experience needed for the role. In seing the remuneration

for new recruits, the Commiee will have regard to guidelines

and shareholder sentiment regarding one-oﬀ or enhanced

short-term or long-term incentive payments as well as giving

consideration for the appropriateness of any award. The

Company’s detailed policy when seing remuneration for

the appointment of new Directors is summarised below.

Salary, beneﬁts and pension

These will be set in line with the policy for existing

Executive Directors.

Incentive Plans

Maximum annual participation will be set in line with the

Company’s policy for existing Executive Directors and

will not exceed 450% of salary in aggregate.

Minimum shareholding requirements – during and after employment

To align Executive

Directors’ interests with

those of shareholders

through the build-up and

retention of a personal

holding in QinetiQ shares.

Executives have ﬁve years to accumulate the

required shareholding.

300% of base salary for the current CEO.

200% of base salary for the current CFO.

For new appointments, no less than 200% of base

salary for Executive Directors.

For share grants or purchases made before the

2026 AGM:

Executive Directors will have a post-employment

shareholding requirement of 100% of salary for the

ﬁrst year post cessation, then 50% of salary for the

second year post cessation of employment.

For shares acquired from grants made after the

2026 AGM:

Executive Directors will have a post-employment

shareholding requirement of 200% of salary for

two years post cessation of employment.

The Commiee has adopted formal shareholding

requirements to encourage the Executive Directors to

build up over a ﬁve-year period and then subsequently

hold a shareholding equivalent to a percentage of

base salary. Adherence to these requirements is a

condition of continued participation in the equity

incentive arrangements. This policy ensures that

the interests of Executive Directors and those of

shareholders are closely aligned.

Executive Directors are required to retain at least

50% of the post-tax amount of vested shares from

the Company incentive plans until the minimum

shareholding requirement is met and maintained.

Vested awards under the LPA must be retained

by the participant for two years post vesting to

further support the post-employment shareholding

requirement where an Executive Director leaves

the Company.

The Commiee retains the discretion to increase

the shareholding requirements.

Purpose and link to strategy

Requirement

Operation

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

124

GOVERNANCE

STRATEGIC REPORT

Directors’

Remuneration Policy

Depending on the timing of the appointment, the

performance measures and targets used for the ﬁrst award

may diﬀer to those of the existing Executive Directors.

If diﬀerent, they will be explained in detail in the following

relevant Directors’ Remuneration Report.

Maximum variable remuneration

The maximum variable remuneration which may be granted

is 450% of salary (excluding any buy-outs).

Relocation policies

In instances where the new Executive Director is required

to relocate or spend signiﬁcant time away from their normal

residence, the Company may provide one-oﬀ compensation

to reﬂect the cost of relocation for the Executive Director.

The level of the relocation package will be assessed on a

case-by-case basis but will take into consideration any cost

of living diﬀerences/housing allowance and schooling.

Buy-out awards

Where the Commiee determines that it is necessary to

buy out previous entitlements forfeited on cessation of

an Executive Director’s previous employment, the value

of such a buy-out award will be calculated taking into

account the following:

The proportion of the vesting period completed on the

date of cessation of employment;

The performance conditions aached to the vesting

of the entitlements and the probability of them being

satisﬁed; and

Any other terms and conditions having a material eﬀect

on their value.

The Commiee may then agree to compensate for the value

forfeited using, where possible, existing incentive plans.

To the extent that it is not possible or practical to provide

the buy-out within the terms of existing incentive plans,

a bespoke arrangement would be used, using any ﬂexibility

provided under the Listing Rules.

Where an existing employee is promoted to the Board,

the policy set out above would apply from the date of

promotion but there would be no retrospective application

of the policy in relation to subsisting incentive awards or

remuneration arrangements.

Service contracts

Current Executive Directors have open-ended service

contracts terminable by the Company immediately without

notice upon breach by the individual or by the Company

giving to the individual 12 months’ wrien notice or, at its

discretion, payment in lieu of salary, pension and beneﬁts

only during that notice. The payment in lieu of notice may be

made in staged payments and may either reduce or cease

completely where the departing Executive Director gains

new employment. The Executive Director may terminate

their contract by giving the Company 12 months’ wrien

notice. Contracts for new Executive Directors will be limited

to 12 months’ notice by both parties (or payment in lieu of

notice in respect of the Company).

Copies of the service contracts are available for inspection

at the Company’s registered address.

The Group Chair and the Non-executive Directors have

leers of appointment and are appointed for initial ﬁxed

terms of three years, subject to re-election at each Annual

General Meeting. The Group Chair and the Non-executive

Directors are not entitled to any payment in lieu of notice or

any compensation for loss of oﬀice.

The dates of the service contracts, leers of appointment

and unexpired term periods are set out in the Annual Report

on Remuneration (page 139).

Loss of oﬀice and change of

control policy

When determining any loss of oﬀice payment for a departing

Executive Director the Commiee will always seek to

minimise the cost to the Company while complying with the

contractual terms and seeking to reﬂect the circumstances

in place at the time. The Commiee reserves the right to

make additional payments where such payments are made

in good faith in discharge of an existing legal obligation

(or by way of damages for breach of such an obligation);

or by way of selement or compromise of any claim arising

in connection with the termination of an Executive Director’s

oﬀice or employment.

‘Good leaver’ is a person whose cessation of employment is

for one of the following reasons:

Death; ill-health; injury or disability; redundancy;

retirement; employing Company ceasing to be a Group

Company; transfer of employment to a Company

which is not a Group Company; and where the person

is designated a good leaver at the discretion of the

Commiee (as described above).

A person who ceases employment in circumstances other

than those set out above is designated as an ‘other leaver’.

125

Directors’

Remuneration Policy

The Commiee has a number of discretions, including in relation to the determination of a good leaver. Any exercise of the

Commiee’s discretions will be disclosed in full to shareholders.

Salary, beneﬁts (on cessation of employment)

Pension (on cessation of employment)

Annual Bonus Plan (on cessation of employment)

Annual Bonus Plan (on change of control)

Long-term Performance Award (on cessation of employment)

Long-term Performance Award (on change of control)

Other contractual obligations (on change of control)

In the event of termination by the Company, there will be

no compensation for loss of oﬀice due to misconduct or

normal resignation.

In other circumstances, Executive Directors may be entitled

to receive compensation for loss of oﬀice which will be

a maximum of 12 months’ salary and beneﬁts.

Such payments will be equivalent to the monthly salary and

beneﬁts that the Executive Director would have received if still in

employment with the Company. These will be paid over the notice

period. Executive Directors will be expected to mitigate their loss.

Pension contributions or payments in lieu of pension contribution

will be made during the notice period.

For the year of cessation

Good leavers: Performance conditions will be measured at the

normal measurement date. The Company incentive payment

will be pro-rated for the period worked during the ﬁnancial year

of cessation.

Unvested deferred shares will vest in line with the normal vesting

cycle of the award.

Other leavers: No Company incentive cash payment or deferred

shares awarded for the year of cessation. Any unvested deferred

shares awarded in prior years will lapse on cessation.

For the year of the change of control performance conditions

will be measured to the date of the change of control. The Company

incentive payment will be pro-rated to the date of the change

of control.

Unvested deferred shares will vest immediately on the change

of control.

Good leavers: Performance conditions will be measured at the

normal measurement date and vest on their original vesting dates

and remain subject to the sale restrictions. The LPA will normally be

pro-rated for the part of the three-year performance period worked.

Vested LPA awards will remain subject to the holding restrictions.

Other leavers: LPA awards lapse immediately on cessation and

no award for the year of cessation or if serving notice at the time

of the award.

Performance conditions will be measured at the date of the change

of control and the award will normally be pro-rated to the date of the

change of control.

There are no other contractual provisions other than those set out

above that could impact quantum of the payment.

The Company has discretion to make a payment in lieu of notice,

either as a lump sum or as a series of phased payments.

The Company has discretion to make a lump sum payment in lieu

or a series of phased payments.

For the year of cessation

Any payment will normally be made as a mix of cash and shares.

However, the Commiee has the discretion (e.g. in the event of

death or ill-heath retirement of a participant) to pay the entire

amount in cash.

Deferred shares

The Commiee may decide to accelerate the vesting (e.g. in the

event of death or ill-heath retirement of a participant) so that

these vest at cessation of employment.

The Commiee has discretion to make a payment entirely in cash.

The Commiee may decide to accelerate the vesting of LPA

awards and measure performance up to the date of cessation in

circumstances where there is an appropriate business case.

The Commiee may also waive or shorten the holding restrictions

applicable to an award on compassionate grounds (e.g. due to

death or ill-health retirement).

The Commiee may waive pro-rating in circumstances where it

feels it is in the interests of shareholders to do so.

None.

Approach

Application of Commiee discretion

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

126

GOVERNANCE

STRATEGIC REPORT

Directors’

Remuneration Policy

Malus and clawback

Malus provisions apply to both the ABP and the LPA. Malus is

the adjustment of ABP or LPA ouurns or awards which have

not vested or been paid due to the occurrence of one or

more circumstances. The adjustment may result in the

value being reduced to nil.

Clawback is the recovery of payments made or vested

shares as a result of the occurrence of one or more

circumstances. Clawback may apply to all or part of a

participant’s payment or share award under the ABP or

LPA and may be eﬀected, among other means, by requiring

the transfer of shares, payment of cash or reduction of

awards or bonuses.

The circumstances in which malus and clawback could apply

are as follows:

Discovery of a material misstatement resulting in an

adjustment in the audited accounts of the Group or

any Group Company;

The assessment that any performance condition

or condition in respect of a payment or award under

the ABP or LPA was based on error, or inaccurate or

misleading information;

The discovery that any information used to determine

the ABP or LPA award was based on error, or inaccurate

or misleading information;

Action or conduct of a participant which amounts to

fraud or gross misconduct; or

Events or the behaviour of a participant have led to the

censure of a Group Company by a regulatory authority

or have had a signiﬁcant detrimental impact on the

reputation of any Group Company provided that the

Board is satisﬁed that the relevant participant was

responsible for the censure or reputational damage

and that the censure or reputational damage is

aributable to the participant.

The following table sets out the periods during which malus

and clawback may be eﬀected.

Annual Bonus Plan

Long-term

Performance Award

Malus

Up to the date of

a payment/award

Any time before vesting

Clawback

Three years post

the date of any

payment/award

Three years from the

date of vesting

Pay and performance scenario analysis

The proposed Directors’ Remuneration Policy is illustrated

in the following charts showing what each Director could

expect to receive in FY27 under diﬀerent performance

scenarios, based on the following deﬁnitions:

Scenario

Linked to performance

50% share price

appreciation

Stretch plus 50% share price growth

(on 100% of LPA)

Stretch

100% of ABP opportunity (200% of salary)

100% of LPA opportunity (250% of salary)

Target

50% of ABP opportunity (100% of salary)

50% of LPA opportunity (125% of salary)

Minimum

No variable pay

Salary, Pension and Beneﬁts

Annual Variable Pay

Long-term Variable Pay

35%

100%

29%

36%

22%

17%

32%

51%

35%

44%

Steve Wadey

CEO (£’000)

£5,599

£4,408

£2,679

£950

Stretch

+50%

Target

Fixed

34%

100%

29%

37%

20%

16%

32%

52%

35%

44%

Martin Cooper

CFO (£’000)

£3,549

£2,786

£1,677

£569

Stretch

+50%

Target

Fixed

127

Directors’

Remuneration Policy

Policy for the Chairman and the Non-executive Directors

Fees for the appointment of a new Group Chair or Non-executive Directors will be aligned with the Policy for

existing incumbents.

Chairman and Non-executive Directors

Element: Fees

To aract and retain

Non-executive Directors

of the calibre required to

assist the Company in

seing and delivering

its strategy.

The Executive Directors and the Group Chair are

responsible for seing the remuneration of the

Non-executive Directors.

The Board, minus the Chair, is responsible for seing

the Chair’s fees.

Non-executive Directors are paid an annual fee and

additional fees for chairmanship of Commiees and

any other additional duties, and the Company retains

the ﬂexibility to pay fees for the membership of

Commiees. The Chair does not receive any additional

fees for membership of Commiees.

Fees are reviewed annually based on equivalent roles

in the comparator group used to review salaries paid

to the Executive Directors.

An additional fee is payable to those Non-executive

Directors aending meetings outside of their country

of residence.

Non-executive Directors and the Group Chair do not

participate in any variable remuneration or beneﬁts

arrangements.

Fee levels may be increased on a temporary basis

for a signiﬁcant increase in time commitments (e.g.

assuming an executive position for an interim period).

The fees for Non-executive Directors and the

Group Chair are broadly set at a competitive level

against the comparator group.

In general the level of fee increase for the

Non-executive Directors and the Group Chair will

be set taking account of any change in responsibility

and the general rise in salaries across employees.

The Company will pay reasonable expenses

incurred by the Non-executive Directors and

Group Chair and may sele any tax incurred in

relation to these.

Purpose and link to strategy

Operation and performance measures

Maximum opportunity

Consideration of shareholder and

employee views

The Chair of the Commiee and the Group Chair consult

with key shareholders on remuneration maers from time

to time, and particularly in seeking views on the Directors’

Remuneration Policy in preparation for the triennial vote

at the AGM. Any concerns expressed by shareholders

are reported to the Commiee and these are taken into

account as the Commiee develops and implements its

Policy. Any comments received from shareholders outside

these consultation exercises are also reported to the

Commiee, and the Commiee takes account of general

views on remuneration expressed by shareholders and

their representative bodies.

The Remuneration Commiee is grateful for shareholders’

comments and engagement during the Directors’

Remuneration Policy consultation process. At the end of

this process, the Remuneration Commiee was pleased

that the majority of the shareholders consulted expressed

support for the new Policy.

The Commiee has not formally consulted with employees

in developing this Policy. However, our Global Employee

Voice (GEV) is deeply engaged across the Company to

provide an employee voice at the table on all relevant issues,

including remuneration (regular interactions are held

with the Group Chair, Remuneration Commiee Chair,

CEO and the Chief People Oﬀicer). The Company takes

the views of employees very seriously and we monitor

this through a quarterly survey using a market-leading

dynamic tool (Peakon).

The Commiee is cognisant of employment conditions

when determining Executive Director pay. In particular,

the annual salary increase available to the rest of the

workforce is an important factor in determining any salary

increase for the Executive Directors. The Commiee

reviews the CEO pay ratio and considers it in the broader

context of pay trends within the business.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

128

GOVERNANCE

STRATEGIC REPORT

Annual Report

on Remuneration

The following section of this report details how the Directors’ Remuneration Policy has been implemented for the

year ended 31 March 2026. In the interests of clarity, CEO refers to Steve Wadey, CFO to Martin Cooper and Former CFO

to Carol Borg.

Executive Directors’ single total ﬁgure of remuneration (audited):

Executive Director

Year

Salary

£’000

Beneﬁts

£’000

Pension

£’000

Total

ﬁxed pay

£’000

Annual

Bonus

Plan

£’000

Deferred

Plan

£’000

Compensation

Share Plan

£’000

Long-term

Performance

Award

£’000

Total

variable

pay

£’000

Total

remuneration

£’000

Steve Wadey (CEO)

FY26

727

113

917

1,028

1,312

–

1,139

3,480

4,396

FY25

719

880

861

–

861

1,740

Martin Cooper (CFO)

FY26

466

541

659

–

624

–

1,284

1,824

FY25

265

304

–

304

Beneﬁts can include travel and subsistence expenses incurred in relation to the execution of their duties with the Company

that are considered by HMRC to be taxable. Where the Company seles the Director’s tax, the value disclosed is not

grossed up for tax.

Salary (audited)

Salaries are reviewed eﬀective 1 July, which is the same

timing as for the rest of the UK employee population. The

decision on the salary increase for the CEO was deferred

until the end of FY26 at the CEO’s request to allow the

Commiee to consider the appropriate level of any increase

in light of the progress made by the Group following the

March 2025 trading statement. Following this review the

Commiee determined that the CEO’s FY26 increase should

proceed but that this would be implemented from 1 April

2026. This results in the eﬀective increase for the CEO in

FY26 being nil, with his FY26 bonus and LPA grant being

determined based on the FY25 salary.

Salary as

1 April 2025

£'000

Increase in

the year

Salary as

1 July 2025

£'000

FY26

salary

actually

paid

£'000

CEO

727

0.0%

727

CFO

455

3.3%

470

466

Beneﬁts (audited)

Beneﬁts comprise a car allowance, travel allowance, private

medical insurance, life assurance, income protection and

taxable expenses.

Taxable

expenses

£'000

Travel

& car

allowance

£’000

Insurance

beneﬁt

£’000

Total

beneﬁts

£’000

CEO

113

CFO

Pensions (audited)

The Executive Directors did not participate in the QinetiQ

pension scheme for FY26. The pension ﬁgure is cash in lieu

of pension equating to 10.5% of base salary.

Cash in

lieu of

pension

£’000

Total in lieu

of pension

£’000

CEO

CFO

129

Annual Report

on Remuneration

FY26 Annual Bonus Plan (audited)

The Annual Bonus Plan (ABP) is an annual incentive with a one-year performance measurement period, with any award paid

partly in deferred shares. After the end of the ﬁrst year, 70% of the award is paid as a cash bonus. The remaining 30% is made

as a deferred share award that must be held for two years and is subject to continued employment. Malus and clawback

apply for up to three years from the payment date.

ABP award

£’000

June 2026

payment in cash

(70% value £’000)

Value of share

payment

(30% value £’000)

30-day average

share price to

31 March 2026

(p)

Estimated

deferred shares

awarded

June 2026

CEO

1,028

720

308

490.1p

62,934

CFO

659

462

198

490.1p

40,362

On-target performance provides a payment equal to 100% of base salary, rising on a linear scale to 200% of base salary

for achievement of stretch performance. The scheme begins to pay out once threshold performance measures have

been achieved.

For the year ended 31 March 2026, the CEO and CFO were measured against ﬁnancial objectives of orders, proﬁt and cash

and a non-ﬁnancial objective based on their personal performance; all with an equal weighting of 25%. To drive consistent

cash collection, 30% of the cash ﬁnancial objective was based on the achievement of H1 performance. The target payment

was 50% of maximum for ﬁnancial and non-ﬁnancial objectives.

When seing performance targets the Remuneration Commiee takes into account the budget and the Company’s

strategy set in relation to the Integrated Strategy-to-perform Plan (ISP), shareholder expectations an the external

environment.

The aim is to set stretching targets which incentivise the Executive Directors to deliver annual results which will exceed

the expectations of investors, but which are also sustainable and do not create undue proﬁt risk. Financial performance

measures exclude the contribution from businesses acquired in the year.

FY26 performance outcomes (audited)

Weighting

Threshold

payment

Target

50%

payment

Stretch

100%

payment

Actual

% of

maximum

reward

achieved

CEO

ouurn

CFO

ouurn

CEO/CFO ﬁnancial

performance measures

Orders

25.0%

£1,700.0m

£1,800.0m

£2,000.0m

£1,876.8m

69.2%

£251,542

£161,326

Underlying operating proﬁt

25.0%

£210.0m

£220.0m

£240.0m

£218.9m

44.5%

£161,758

£103,743

Underlying H1 net cash ﬂow

from operations

7.5%

£95.0m

£113.0m

£135.0m

£128.0m

84.1%

£91,701

£58,812

Underlying full-year net cash ﬂow

from operations

17.5%

£235.0m

£277.0m

£331.0m

£313.9m

84.2%

£214,162

£137,353

CEO non-ﬁnancial measures

Personal goals: performance

against stretching objectives

25.0%

40%

50%

100%

85.0%

£308,975

CFO non-ﬁnancial measures

Personal goals: performance

against stretching objectives

25.0%

40%

50%

100%

85.0%

£198,161

CEO overall result

70.7%

£1,028,138

CFO overall result

70.7%

£659,394

Orders and underlying operating proﬁt have been adjusted to account for the disposal of the non-core Federal IT Services business, as part of the

US restructuring programme, as described in note 12 to the ﬁnancial statements (page 168).

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

130

GOVERNANCE

STRATEGIC REPORT

FY26 Personal goals (25% weighting)

(audited)

FY26 performance

Measure

Outcome

Ouurn

(% maximum)

CEO

Deliver performance

Achieving consistent operational

performance through improving discipline

in our execution, controls and forecasting

Organic revenue growth of 1.3% at 11.3%

operating margin, against a challenging

external market

Achieved

Develop capability

Improving our organisation ability to

ensure we operate with greater eﬀiciency

and eﬀectiveness, professionalising

how we work

Comprehensive restructuring programme

completed, reducing costs, reshaping the

portfolio and simplifying the organisation

Achieved

Drive growth

Driving strategic growth by shaping and

winning larger long-term programmes

aligned to our customers’ mission

Record order intake of £3.6bn and year-end

backlog of £4.8bn

Exceeded

Enterprise leadership

Role model visible and responsible

(safety, security and environmental)

leadership to inspire and engage our

people to enable a high performing

inclusive culture

Demonstrated strong leadership through

a challenging external environment,

strengthening QinetiQ leadership team

with internal and external appointments

Continued good progress on safety, security,

and environmental goals

Achieved

Total

85.0%

CFO

Deliver performance

Instil Company-wide discipline and

integrity on ﬁnancial control, governance

and accounting

Implemented stricter and clearer reporting and

ﬁnancial review processes

Achieved

Develop capability

Lead reorganisation of Supply Chain

to deliver indirect savings and a change

in procurement and cost aitude in

the Group

Reorganisation started and successful delivery

of indirect savings targets

Achieved

Drive growth

Deliver improvements in ﬁnance and

business analysis and forecasting

Lead improvements in cash forecasting that

enabled more accurate decision making

across the Group

Achieved

Enterprise leadership

Role model visible and responsible

(safety, security and environmental)

leadership to inspire and engage our

people to enable a high performing

inclusive culture

Maintained high levels of engagement with

the Board and QinetiQ Leadership Team

Demonstrated strong leadership within the

Group by engaging with key employee groups

during a period of uncertainty and change

Continued good progress on safety, security,

and environmental goals

Exceeded

Total

85.0%

Annual Report

on Remuneration

131

FY24 Annual Bonus Plan (audited)

In accordance with the scheme rules, 30% of the FY24 ABP was awarded on 1 July 2024 as deferred shares, at a share price

of 448.8p. These shares must be held for two years and vest in July 2026.

FY24 Shares awarded

Vesting

Shares vesting

Estimated value

£’000

CEO

78,911

100%

78,911

406

Former CFO

49,765

100%

49,765

256

The value of this award is calculated as CEO £405,603 and Former CFO £255,792 based on the three-month average to

31 March 2026 (496.5p). The estimated value includes CEO £13,809 and Former CFO £8,709 as dividend equivalent payments

based on an aggregate dividend of 17.5p paid in FY25 to FY26 and a share price appreciation between grant and vesting of

£87,306 and £55,059 respectively.

Deferred Share Plan (audited)

The DSP ﬁgures shown in the FY25 single ﬁgure has been

updated in accordance with the regulations to show the

actual vesting of the FY22 award replacing the estimate

provided last year. The share price at vesting was 517.1p

and the FY25 ﬁgure includes £37,180 and £8,904 paid to

the CEO and Former CFO respectively as income in respect

of a dividend equivalent payments.

The FY23 legacy DSP award achieved the performance

underpin and, therefore, the shares ceased to be

contingent. These will vest in June 2026 and are disclosed

in the single ﬁgure for FY26. These values will be restated

in the FY27 report based on the actual share price and

dividend equivalents at vesting.

FY23

awarded

Vesting

vesting

Estimated

value

£’000

CEO

251,444

100%

251,444

1,312

Former CFO

163,256

100%

83,360

435

The FY23 DSP award performance underpin required the

FY26 proﬁt to exceed that in FY23 (£169.5m). Adjusting for

the disposal of the non-core Federal IT Services business,

as described in note 12 to the ﬁnancial statements, proﬁt

for FY26 was £218.9m and, therefore, the shares will be

released on 20 June 2026. The 100% vesting refers to the

shares which have passed the underpin of those initially

granted based on FY23 performance, which was 100% of

the maximum available. If the underpin had not been met,

50% of the DSP award would have lapsed.

For the Former CFO, the shares vesting were pro-rated

based on her leaving arrangements, with 79,896 shares of

the original award having lapsed. The net shares vesting

from the FY23 DSP must be retained for a further two years.

The value of this award is calculated as CEO £1,312,286 and

Former CFO £435,056 based on the share amounts due to

vest of 251,444 and 83,360 (pro-rata) respectively based

on the three-month average to 31 March 2026 (496.5p).

The estimated value includes CEO £63,867 and Former

CFO £21,173 as dividend equivalent payments based on an

aggregate dividend of 25.4p paid in FY24 to FY26 and a share

price appreciation between grant and vesting of £378,080

and £125,343 respectively (for the Former CFO this is based

on her pro-rata award).

After the approval of the new Directors’ Remuneration

Policy at the 2023 AGM, the DSP was terminated with this

FY23 award being the ﬁnal award, with no further awards

having been made.

Compensation Share Plan (audited)

The Compensation Share Plan (CSP) was awarded to Martin

Cooper in part compensation for share awards which were

forfeited on resigning from his former employer as disclosed

at the time of his appointment and in the FY24 Directors’

Remuneration Report. This award comprises of two parts,

both granted on 18 December 2024, at a share price of

410.4p, with the ﬁrst part, detailed below, vesting in

March 2026 and the second part vesting in March 2027.

The value of the ﬁrst part of the award is calculated as

£624,305 based on the actual share price on 31 March 2026,

the date of vesting (454.0p). The value includes a dividend

equivalent payment of £15,881 based on an aggregate

dividend of 11.85p paid between date of grant and vesting

and a share price appreciation of £148,251.

awarded

Vesting

vesting

Value

£’000

CFO

134,015

100%

134,015

624

Annual Report

on Remuneration

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

132

GOVERNANCE

STRATEGIC REPORT

FY24 Long-term Performance Award outcome (audited)

The FY24 Long-term Performance Award (LPA) was measured against three metrics, with a clear link to Company strategy

and incentivising growth (20% of each element vests at Threshold):

Measure

Weighting

Threshold

20%

payment

Target

50%

payment

Stretch

100%

payment

Actual

% of

maximum

reward

achieved

FY24 Shares

awarded

vesting

Estimated

value

£’000

Cumulative underlying

operating proﬁt

(FY24 to FY26)

35%

£630m

£660m

£710m

£620.6m

0.0%

ROCE (FY24 to FY26)

35%

15.0%

17.5%

20.0%

25.5%

100.0%

Revenue (FY26)

30%

£1,900m

£2,200m

£2,700m

£1,943.1m

24.3%

CEO overall result

42.3%

521,352

220,495

1,139

Revenue has been adjusted to account for the disposal of the non-core Federal IT Services business, as part of the US restructuring programme,

as described in note 12 to the ﬁnancial statements (page 168).

The value of this award is calculated as £1,139,077 based on the share amounts due to vest of £1,094,758 based on the three-month

average to 31 March 2026 (496.5p). The estimated value includes £44,319 as dividend equivalent payments based on an aggregate

dividend of 20.1p paid in FY24 to FY26 and a share price appreciation between grant and vesting of £340,749 respectively.

FY26 Long-term Performance Award targets for grant in July 2025 (audited)

The Commiee maintained the same set of performances measures and weightings used in FY25 for the FY26 Long-term

Performance Award (LPA). These have a clear link to Company strategy and incentivising growth:

Measure

Weighting

Threshold

Stretch

Rationale

Cumulative underlying

operating proﬁt

(FY26 to FY28)

35%

TBA

Designed to deliver consistent operational performance over

the longer term

Understood, relevant and actionable for QinetiQ senior leaders

ROCE (FY26 to FY28)

35%

20.0%

25.0%

Average EBITA for the three-year period divided by average

capital employed

Designed to drive robust investment selection and delivery

Revenue (FY28)

30%

£2.2bn

£2.7bn

Designed to drive value creation through collaboration and

market leverage

Cumulative earnings targets are deemed commercially sensitive at this time but are consistent with our growth ambition at 11–12% margin.

The FY26 LPA target level of performance is not calculated on a linear basis and the target is deemed commercially sensitive

at this time as it is aligned to conﬁdential Group strategy. 20% of each element vests at threshold. Subject to the targets no

longer being commercially sensitive they will be disclosed in full at the time of vesting.

FY26 LPA conditional share awards were granted based on a maximum of 250.0% of base salary at a share price of 502.5p

for the CEO and CFO in July 2025 determined over a ﬁve-day period before grant, in line with the scheme rules. The three-

year performance period for the FY26 award ends on 31 March 2028. Any shares which vest must then be held until ﬁfth

anniversary after grant.

FY26 Long-term Performance Award

Participant

Date of grant

Number

of shares

granted

Share price

used to

determine

grant

Exercise price

Face value of

% of salary

granted

Vest date

Performance

period end

CEO

3 Jul 25

361,720

502.5

–

£1,817,500

250.0%

3 Jul 28

31 Mar 28

CFO

3 Jul 25

226,386

502.5

–

£1,137,500

250.0%

3 Jul 28

31 Mar 28

Annual Report

on Remuneration

133

Statement of Directors’ shareholding

and share interests (audited)

In relation to the shareholding requirement adopted on

1 April 2017, the Company requires Executive Directors to

hold shares (beneﬁcially owned) equivalent to 300%

(CEO)

and 200% (CFO) of base salary. Executive Directors have

ﬁve years from the adoption of the guideline to achieve the

required level through, at a minimum, retaining 50% of the

after-tax shares vesting from Company incentive plans.

The CEO has achieved his shareholding requirement and

currently holds shares equivalent to 711% of base salary

using a share price of 496.5p (three-month average to

31 March 2026).

The CFO does not currently meet the minimum shareholding

requirement, with a current holding equivalent to 110%

of base salary using a share price of 496.5p (three-month

average to 31 March 2026). This reﬂects his relatively recent

appointment as CFO.

The Remuneration Commiee continues to monitor

compliance with the shareholding requirement.

beneﬁcially

owned

subject to

performance

conditions

Shares not

subject to

performance

conditions

Total share

interests

at 31 March

2026

Steve Wadey

1,040,105

1,600,883

446

2,641,434

Martin Cooper

104,030

588,836

–

692,866

Shonaid

Jemme-Page

7,000

–

7,000

Neil Johnson

100,000

–

100,000

Dina Knight

–

Roger Krone

–

Ross McEwan

20,000

–

20,000

General

Sir Gordon

Messenger

11,958

–

11,958

Steve Mogford

–

Ezinne

Uzo-Okoro

–

Ross McEwan – Resigned 17 July 2025.

Shares beneﬁcially owned comprise shares purchased

under the Share Incentive Plan (SIP) and shares owned by

the Director and any connected persons. SIP matching

shares are identiﬁed as shares not subject to performance

conditions. On 9 April 2026 Steve Wadey purchased

31 shares, then on 11 May 2026 he purchased a further

36 shares, through his participation in the SIP. Shares

subject to performance conditions comprise awards made

under the Deferred Share Plan and Long-term Performance

Award which remain contingent subject to the relevant

performance conditions as detailed on page 133.

There have been no other changes to the shares shown

above between 31 March 2026 and 21 May 2026.

Payments to past Directors and

payment for loss of oﬀice (audited)

No payments were made to past Directors for loss of oﬀice

during the year.

As disclosed in last year’s report, Carol Borg stepped

down from the role of CFO by mutual agreement. Her FY24

ABP will vest in July 2026 (shown in table on page 132) at

an estimated value of £255,792. Additionally her FY23 DSP

award (shown in table on page 133), which was adjusted

pro-rata for time served, will vest in June 2026 at an

estimated vale of £435,056, with the vested shares

remaining subject to a two-year holding period.

Full details of Carol Borg’s termination agreements were

disclosed in accordance with s.430(2B) of the Companies

Act 2006 in the FY24 Directors’ Remuneration Report.

Annual Report

on Remuneration

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

134

GOVERNANCE

STRATEGIC REPORT

Total scheme interests summary (audited)

Total scheme interests, including those awarded during the ﬁnancial year ended 31 March 2026, are as follows.

Plan name

Date of grant

Number

1 April 2025

Granted in year

(maximum

potential of

awards)

Vested in year

Lapsed in year

Number

31 March 2026

Share price on

date of grant

Vest date

Steve Wadey

DSP 2022

14 Jun 22

159,198

—

159,198

—

302.1

10 Jun 25

DSP 2023

20 Jun 23

251,444

—

251,444

330.2

20 Jun 26

LPA 2024

28 Sep 23

521,352

—

521,352

321.3

28 Sep 26

ABP 2024

1 Jul 24

78,911

—

78,911

448.8

1 Jul 26

LPA 2025

1 Jul 24

387,456

—

387,456

448.8

1 Jul 27

LPA 2026

3 Jul 25

—

361,720

—

361,720

502.5

3 Jul 28

1,398,361

361,720

159,198

—

1,600,883

Martin Cooper

CSP Tranche 1

18 Dec 24

134,015

—

134,015

—

410.4

31 Mar 26

CSP Tranche 2

18 Dec 24

85,282

—

85,282

410.4

31 Mar 27

LPA 2025

18 Dec 24

277,168

—

277,168

410.4

18 Dec 27

LPA 2026

3 Jul 25

—

226,386

—

226,386

502.5

3 Jul 28

496,465

226,386

134,015

—

588,836

Carol Borg

DSP 2022

14 Jun 22

37,489

—

37,489

—

302.1

10 Jun 25

DSP 2023

20 Jun 23

83,360

—

83,360

330.2

20 Jun 26

ABP 2024

1 Jul 24

49,765

—

49,765

448.8

1 Jul 26

170,614

—

37,489

—

133,125

Vested shares include shares sold to cover tax and National Insurance contributions.

There have been no other changes to the interests shown above between 31 March 2026 and 21 May 2026.

Performance review

The 10-year chart shows the Company’s Total Shareholder Return (TSR) over the period from 31 March 2016 to 31 March 2026

compared with the FTSE 250 (excluding investment trusts) over the same period based on spot values. The Commiee has

chosen to demonstrate the Company’s performance against this index as it is the index in which the Company is listed.

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

100

150

200

250

300

TSR – Value of £100 investment

made on 31 March 2016

As at 31 March

10-year comparator chart

QinetiQ

FTSE 250

Annual Report

on Remuneration

135

CEO remuneration

The table below shows the CEO’s remuneration over the same performance period 31 March 2016 to 31 March 2026 as the

TSR chart:

Financial year ended 31 March

CEO

Salary/fees

Single ﬁgure

Annual bonus

(% of maximum)

Long-term incentives

(% of maximum vesting)

FY26

Steve Wadey

727,000

4,396,185

70.7%

61.1%

FY25

Steve Wadey

719,147

1,740,459

—

100.0%

FY24

Steve Wadey

689,160

2,928,669

85.6%

100.0%

FY23

Steve Wadey

664,126

2,164,306

98.2%

—

FY22

Steve Wadey

639,121

2,477,069

71.4%

100.0%

FY21

Steve Wadey

511,550

2,695,414

95.7%

100.0%

FY20

Steve Wadey

610,357

1,978,247

87.5%

38.4%

FY19

Steve Wadey

596,422

2,339,474

94.4%

31.7%

FY18

Steve Wadey

582,167

1,522,460

66.7%

—

FY17 (restated)

Steve Wadey

568,166

1,829,470

86.4%

—

CEO pay ratio

The calculation below is based on the FY26 single ﬁgure

for the CEO of £4,396,185 and similar calculations for the

UK workforce (i.e. ‘Option A’ as deﬁned by the Companies

(Miscellaneous Reporting) Regulations 2018

). The

Remuneration Commiee chose Option A as it is the

approach generally favoured by investors and GC100.

The calculations for the UK workforce were performed

as at 31 March 2026, with all calculations made using full-

time equivalent pay.

Total remuneration

Ratio of the CEO’s to the pay of UK employees

Year

25th percentile

Median

75th percentile

FY26

88: 1

67: 1

53: 1

FY25

33: 1

25: 1

20: 1

FY24

67: 1

50: 1

38: 1

FY23

53: 1

40: 1

31: 1

FY22

67: 1

49: 1

37: 1

FY21

70: 1

52: 1

39: 1

FY20

56: 1

41: 1

31: 1

The CEO pay ratios have increased between FY25 and

FY26 as a result of the higher CEO single ﬁgure for FY26

due to zero annual bonus being paid in FY25 as well as the

inclusion, in accordance with the regulations, of the vested

value of the FY23 DSP in addition to the FY24 LPA in this

year’s single ﬁgure.

The Company believes that the median pay ratio for FY26 is

consistent with the pay, reward and progression policies for

the UK employees as the approach for all QinetiQ employees

is monitored and reported to the Remuneration Commiee

on an annual basis.

Year-on-year movements in the CEO pay ratio are likely to be

volatile due to the wide range of incentive outcomes for the

CEO single ﬁgure, but the Remuneration Commiee does

note the ratio and will monitor long-term trends.

Total pay of UK employees

25th percentile

Median

75th percentile

Total pay

and beneﬁts

£49,835

£65,369

£82,718

Salary

component

£45,151

£52,686

£69,386

The Remuneration Commiee welcomes the opportunity to

provide this information to shareholders. The Company aims

to reward all employees fairly for the success and growth

they create.

Annual Report

on Remuneration

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

136

GOVERNANCE

STRATEGIC REPORT

Remuneration policy for all employees

All employees of QinetiQ are entitled to base salary, beneﬁts

and pension. UK and Australia-based employees are entitled

to participate in the QinetiQ Share Incentive Plan. The

maximum incentive opportunity available is based on the

seniority and responsibility of the role. Participation in the

LPA is available to Executive Directors, senior leaders and

selected employees throughout the Company.

The All Employee Incentive Scheme (AEIS) provides every

eligible employee the opportunity to earn a cash bonus

based on Company and personal performance. For FY26 the

Company performance element of the AEIS was awarded

at the target award level of £500. The AEIS will be operated

again in FY27 and thereafter.

The Commiee reviews (but does not decide) the general

reward policy for all employees and any signiﬁcant changes

proposed. Alignment with the workforce is delivered

through the Rewarding for Performance framework,

including a transparent and consistent approach to the

annual salary review, the AEIS to drive Company and

personal performance, recognition schemes and market

competitive beneﬁts in our countries.

The CEO and the Chief People Oﬀicer have held regular

discussions with our Global Employee Voice (GEV)

representatives on reward maers. Members of the Board

also met with the GEV representatives twice in FY26.

Among other things, these meetings have discussed

how executive remuneration is aligned to the broader

employee oﬀering in support of Group strategy.

Single ﬁgure total remuneration for the Chairman and each Non-executive

Director (audited)

Non-executive Directors’ remuneration is shown as a single ﬁgure to provide an annual comparison between the

remuneration awarded during the ﬁnancial year ended 31 March 2026 and the preceding year.

Non-executive Directors

Fees

£’000

Beneﬁts

£’000

Single ﬁgure

£’000

FY26

FY25

FY26

FY25

FY26

FY25

Shonaid Jemme-Page

Neil Johnson

290

281

295

283

Dina Knight

Roger Krone

Ross McEwan

General Sir Gordon Messenger

Steve Mogford

Ezinne Uzo-Okoro

Fees include Commiee Chair fees.

Ross McEwan – Resigned 17 July 2025.

The fees for Steve Mogford, Roger Krone and Ross McEwan include £12,500 as Senior Independent Director, Senior US

and Australia resident Non-executive Director (pro-rated based on resignation date) respectively.

Beneﬁts include travel and subsistence expenses (grossed-up for tax) incurred in relation to the execution of their duties

with the Company that are considered by HMRC to be taxable. Aendance fees are also included in this number.

Roger Krone and Ezinne Uzo-Okoro as US residents received a $4,000 fee for aending UK meetings; as an Australian

resident Ross McEwan received a UK meeting fee of AU$8,000.

Annual Report

on Remuneration

137

Percentage change in Directors’ remuneration

The following table compares the percentage change in the Director’s salary/fees, bonus and beneﬁts to the average

percentage change in salary, bonus and beneﬁts for a comparison group (4,635 employees) in the UK business in service

between 1 April 2025 and 31 March 2026. The analysis only includes Directors who served for FY26.

Fees

Beneﬁts

Annual bonus

FY26

FY25

FY24

FY23

FY22

FY26

FY25

FY24

FY23

FY22

FY26

FY25

FY24

FY23

FY22

Executive

Directors

Steve Wadey

1.1%

4.4%

3.8%

3.9%

24.9%

33.3%

-1.2%

9.2%

21.5%

-4.3%

— -100.0%

-10.5%

43.0%

-22.7%

Martin Cooper

75.9%

—

139.9%

—

Non-

executive

Directors

Shonaid

Jemme-Page

3.3%

4.8%

8.2%

1.5%

—

168.1%

123.9%

-62.1%

—

Neil Johnson

3.2%

4.2%

3.6%

14.3%

168.5%

103.2%

-77.2%

33.3%

100%

—

Dina Knight

26.7% 1,140%

—

39.7%

—

Roger Krone

350.8%

—

429.6%

—

Ross McEwan

-70.0% 1,133%

—

-61.0%

422.3%

—

General

Sir Gordon

Messenger

3.3%

4.8%

4.3%

—

103.4%

173.6%

-76.8%

—

Steve Mogford

3.4%

9.6%

82.4%

—

93.8%

589.5%

-52.7%

—

Ezinne

Uzo-Okoro

147.5%

—

324.3%

—

Employees

Average UK

employee

4.3%

6.0%

7.8%

4.4%

2.9%

34.7%

-1.0%

-22.2%

5.7%

10.9%

391.6%

-76.7%

3.0% 96.2%

-38.2%

UK employees were chosen to avoid the impact of exchange rate movements over the year. QinetiQ Group plc has no employees so QinetiQ Group

Ltd employees were used.

The beneﬁts paid to Non-executive Directors are largely travel and subsistence expenses incurred in relation to the

execution of their duties with the Company that are considered by HMRC to be taxable.

Relative importance of spend on pay

The graph below shows actual spend on all employee remuneration, shareholder dividends and buybacks and any other

signiﬁcant use of proﬁt and cash within the previous two ﬁnancial years.

Total employee remuneration

£676.2m

£707.1m

2025

2026

£195.5m

£122.8m

2025

2026

Share-based proﬁt distribution

Other signiﬁcant proﬁt distribution

There were no other signiﬁcant

proﬁt distributions in 2025 or 2026.

Dividend cash payment plus purchase of

own shares (see CFO Review page 32).

Diﬀerence

-4.4%

Diﬀerence

+59.2%

Annual Report

on Remuneration

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

138

GOVERNANCE

STRATEGIC REPORT

Gender related pay

QinetiQ is subject to gender pay reporting for UK employees and a copy of our latest report is available on the

Company’s website.

Service contracts/leers of appointment

The Company’s policy is that Executive Directors have rolling contracts which can be terminated by either party giving

12 months’ notice.

The Group Chairman and the Non-executive Directors do not have service contracts but are appointed under leers of

appointment. All service contracts and leers of appointment are available for viewing at the Company’s registered oﬀice

and at the AGM.

Non-executive Directors typically serve two three-year terms but may be invited by the Board to serve for an additional

period (see table in the Nominations Commiee report on page 96).

Director

Date appointed

Arrangement

Notice period

Steve Wadey

27 April 2015

Service contract

12 months

Martin Cooper

2 September 2024

Service contract

12 months

Shonaid Jemme-Page

19 May 2020

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Neil Johnson

2 April 2019

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Dina Knight

1 March 2024

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Roger Krone

8 January 2025

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

General Sir Gordon Messenger

12 October 2020

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Steve Mogford

1 August 2022

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Ezinne Uzo-Okoro

1 November 2024

Initial term of three years from date of appointment, subject

to annual reappointment at the AGM

—

Implementation of Policy for the year ended 31 March 2026

The Remuneration Policy operated as intended for the

year ended 31 March 2026. Non-executive Directors’ fees

reviewed eﬀective 1 July 2025 were set as follows:

Basic fee £64,500 (was £62,500)

Commiee Chair fee £14,500 (was £14,000)

Senior Independent Director fee £12,500 (was £12,000)

The fee increase was based on a Non-executive Directors’

fee benchmarking report provided by Mercer, with increases

in line with increases applied to the UK workforce in FY26.

The Non-executive Group Chair receives a fee of

£292,500 per annum which was increased by 3.0% eﬀective

1 July 2025, less than the increases applied to the

UK workforce in FY26.

Fees are reviewed in line with Policy.

Executive Directors are permied to accept one external

Non-executive Director position with the Board’s approval.

Any fees received in respect of these appointments may be

retained by the Executive Director. The CEO and CFO do not

hold any Non-executive Directorships in other companies.

Fees eﬀective

1 July 2025

Group Chairman

292,500

Basic fee for UK Non-executive Director

64,500

Additional fee for chairing a Commiee

14,500

Additional fee to Deputy Chair/Senior

Independent Non-executive Director

12,500

Additional fee for aendance at a Board meeting

held in US by UK resident Non-executive Director

2,500

Additional fee for aendance at a Board meeting

held in UK by US resident Non-executive Director

$4,000

Additional fee for aendance at a Board

meeting held in UK by Australia resident

Non-executive Director

AU$8,000

Annual Report

on Remuneration

139

Implementation of Policy for the year

ending 31 March 2027

At the 13 May 2026 meeting of the Remuneration Commiee,

the Commiee considered the CEO’s FY26 increase which

had been deferred until this time at the CEO’s request. It

was agreed that a 3.0% increase (to £748,800) would be

implemented from 1 April 2026. This increase is below the

4% budget for the workforce in FY26 and also slightly below

the 3.3% increase awarded to the CFO from 1 July 2025.

For FY27, the salary review will operate on the normal

timetable, with increases becoming eﬀective from 1 July.

Having considered the 4% budget awarded for increases to

the wider workforce, the Commiee has determined that

the CEO’s salary should be increased by 3.5% (to £775,000).

For the CFO, a 6.4% increase (to £500,000) was approved

in recognition of his strong performance and development

since joining the Company in September 2024 as well as the

below market position of his current salary. This increase

is in-line with increases awarded to other high performing

employees who are below the market median.

Incentives for Executives

The table below shows the measures and relative weighting

for the Annual Bonus Plan for the CEO and CFO:

Performance measure

Relative

weighting

(%)

Orders

20.0%

Revenue

20.0%

Underlying operating proﬁt

20.0%

Underlying net cash ﬂow from operations

20.0%

Personal and strategic goals, including selected

ESG metrics

20.0%

For FY27 the Remuneration Commiee adjusted the

ﬁnancial metrics for FY27 including revenue alongside the

same three ﬁnancial metrics as in FY26 (orders, proﬁt and

cash) each with an equal weighting of 20%. Building on the

changes made in FY26 to drive consistent performance, 30%

of all ﬁnancial elements will be based on the achievement

of meeting H1 performance targets, with 70% based on

performance over the full ﬁnancial year. The personal and

strategic goals will continue to provide greater emphasis

on personal leadership, performance standards and ESG

metrics (safety, security and environmental leadership).

In line with the Directors' Remuneration Policy, target

performance results in 100% of base salary being paid, with

stretch performance resulting in 200% of base salary being

paid. Details of speciﬁc performance targets for the ABP

have not been provided as they are deemed commercially

sensitive. The targets will be disclosed retrospectively in

next year’s Annual Report on Remuneration.

After the inclusion of revenue within the annual plan, the

Commiee has removed it from FY27 LPA, focusing on

two core measures of:

Earnings:

cumulative earnings per share (EPS) on

a three-year basis (50% weighting) has replaced

organic underlying operating proﬁt

Designed to strengthen alignment between

long-term reward outcomes, earnings growth and

sustainable shareholder value creation

Returns:

ROCE (50% weighting)

Average EBITA for the three-year period divided by

average capital employed

Designed to drive robust investment selection

and delivery

Threshold

Stretch

Cumulative 3-year EPS (FY27 to FY29)

110p

120p

3-year average ROCE (FY27 to FY29)

20.0%

30.0%

The FY27 target level of performance is not calculated on a

linear basis and the target is deemed commercially sensitive

at this time as it is aligned to conﬁdential Group strategy.

Subject to the targets no longer being commercially

sensitive they will be disclosed in full at the time of vesting.

Annual Report

on Remuneration

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

140

GOVERNANCE

STRATEGIC REPORT

141

Annual Report

on Remuneration

Remuneration Commiee meetings, activities and decisions FY26

The following table provides a summary of all the key activities during the year. The aendance at each meeting is detailed

on page 90.

The membership of the Remuneration Commiee for the whole of FY26 was Dina Knight (Chair), Neil Johnson, General Sir

Gordon Messenger, Shonaid Jemme-Page, Roger Krone, Steve Mogford and Ezinne Uzo-Okoro. Ross McEwan joined the

Commiee on 14 May 2025 and 16 July 2026 respectively.


Date	Incentives	Share awards	Governance	Salaries and resourcing
May 2025	Review of	Review FY25	Approve FY26 Directors’	QLT base salary reviews
	FY25 Company	LPA performance	Remuneration Report
	performance	Conﬁrm FY26	2026 Directors’
		LPA targets	Remuneration Policy
			Review share plan equity dilution
July 2025			AGM preparation
			Review shareholder feedback
November 2025	FY26 half-year forecast		Review of QLT shareholdings
			Review of all-employee
			remuneration to ensure,
			inter alia, alignment of incentives
			and reward with culture
March 2026	FY26 provisional results		Mercer review of independence	Preliminary 2025 CEO
	FY27 target seing			salary review

Remuneration Commiee

eﬀectiveness review

A performance evaluation of the Commiee is conducted

annually. This process is described further on page 101.

Remuneration consultants

Mercer was appointed as independent adviser to the

Commiee to provide advice on market practice, corporate

governance and investors’ views. Mercer was selected by

the Commiee after providing ad-hoc advice in support of

the design of the Directors’ Remuneration Policy and prior

experience of working with it. Fees paid to Mercer during

the year for services provided were £92,723 calculated on

a time-spent basis at pre-agreed rates.

Statement of voting


Directors’ Remuneration
Report – 2025
Votes for	410,589,945 (97.7%)
Votes against	9,873,611 (2.3%)
Total votes cast	420,463,556 (77.4% of share capital)
Abstained	1,647,962


Directors’ Remuneration
Policy – 2023
Votes for	406,828,507 (84.3%)
Votes against	75,547,245 (15.7%)
Total votes cast	482,375,752 (83.4% of share capital)
Abstained	26,105

Details on the voting on all resolutions at the 2026 AGM

will be announced via the RNS and posted on the QinetiQ

website after the AGM.

Directors’ Remuneration Report 2025 % of votes

(%)

Votes for

Votes against

97.7%

2.3%

Directors’ Remuneration Report 2023 % of votes

(%)

Votes for

Votes against

84.3%

15.7%

Dina Knight

Remuneration Commiee Chair

21 May 2026

Directors’ report

In accordance with Section 415 of the Companies Act 2006

(the 'Act'), the Directors present their report together with

the audited consolidated ﬁnancial statements for the year

ended 31 March 2026. Other sections of the Annual Report

and Accounts have been deemed to be incorporated into

the Directors’ report by reference, and the table below

details where the required disclosures can be found.

Corporate governance statement

Culture

Board of Directors

Directors’ conﬂicts of interest

Directors’ interests in shares

134

Dividends

Engagement with employees

Engagement with suppliers, customers and others

Employment of disabled people

144

Financial instruments: Information on the Group’s ﬁnancial

risk management objectives and policies, and its exposure

to credit risk, liquidity risk, interest rate risk and foreign

currency risk

179

Future developments

1-76

Greenhouse gas emissions

43-52

Results

32-39

Section 172 Statement

Subsidiaries, joint ventures and associates

199

Publication of the ratio of the CEO’s remuneration to

the median, 25th and 75th quartile pay remuneration

of the Company’s UK employees in the Directors’

Remuneration Report

136

Illustration of the eﬀect of future share price

increases on executive pay outcomes in the

Directors’ Remuneration Report

127

Management report

The Strategic report, Corporate Governance statement

and Directors’ Report together are the management

report for the purposes of DTR 4.1.5(2) and DTR 4.1.8R.

Corporate Governance statement

The Corporate governance statement, including the

Directors’ Remuneration Report, fulﬁls the requirement

of a corporate governance statement under DTR 7.2.1.

Disclosures in accordance with Listing Rule 6.6.1

For the purposes of the UK Listing Rules, the information

required to be disclosed by UKLR 6.6.1R can be found

as follows:

Section

Information

Page

(1)

Interest capitalised

n/a

(2)

Publication of unaudited

ﬁnancial information

n/a

(3)

Details of long-term incentive schemes

123

(4)

Waiver of emoluments by a Director

n/a

(5)

Waiver of future emoluments

by a Director

n/a

(6)

Non pre-emptive issues of equity for cash

n/a

(7)

Non pre-emptive issue by major

subsidiary undertakings

n/a

(8)

Listed subsidiary

n/a

(9)

Contracts of signiﬁcance

n/a

(10)

Provision of services by

a controlling shareholder

n/a

(11)

Shareholder waivers of dividends

n/a

(12)

Shareholder waivers of future dividends

n/a

(13)

Compliance with controlling

shareholder rules

n/a

Research and development

One of the Group’s distinct business capabilities is the

provision of funded research and development (R&D) to

customers. The Group also invests in the commercialisation

of promising technologies across all areas of business.

In the ﬁnancial year, the Group recorded £341.2m

(FY25: £344.9m) of total R&D-related expenditure, of which

£330.6m (FY25: £332.9m) was customer-funded work and

£10.6m (FY25: £12.0m) was internally funded. Additionally,

£1.7m (FY25: £3.7m) of late-stage development costs

were capitalised and £11.8m (FY25: £6.2m) of capitalised

development costs were amortised in the year.

Political donations

QinetiQ’s policy is that it does not make what are commonly

regarded as donations to any political party. QinetiQ

does undertake legitimate interactions with MPs and

others in the political world, to make them aware of key

industry issues and maers that aﬀect QinetiQ, and to

make an important contribution to their understanding of

QinetiQ, the markets in which it operates and the work of

their constituents.

Directors’ Report

and statutory information

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

142

GOVERNANCE

STRATEGIC REPORT

Branches

The Company and its subsidiaries have established

branches in a number of diﬀerent countries; their results

are, however, not material to the Group’s ﬁnancial results.

Share capital

As at 31 March 2026, the Company had an alloed and

fully paid-up share capital of 524,757,317 ordinary shares

of 1p each with an aggregate nominal value of £5.2m and

one Special Share with a nominal value of £1.

Details of the shares in issue during the ﬁnancial year are

shown in note 28 on page 194.

Acquisition of own shares

On 5 June 2025, the Company announced an extension of its

share buyback programme for an additional £200m over two

years. The ﬁrst two tranches for an aggregate £100 million

completed on 24 March 2026. In total 20,677,403 ordinary

shares of £0.01 were repurchased and subsequently

cancelled in the ﬁrst two tranches of this programme.

The third £50m tranche of the extension commenced on

25 March 2026 and is expected to complete by the end

of September 2026. As at 20 May 2026, the Company has

repurchased 4,624,033 ordinary shares of £0.01 under

this programme.

Pursuant to the above-mentioned buyback programmes,

in the year ended 31 March 2026, the Company repurchased,

and subsequently cancelled, 28,623,138 Ordinary Shares

of £0.01, which represents approximately 5.45% of the

Company’s issued share capital.

Further details on the share buyback programme can be

found on our website www.qinetiq.com.

Rights of ordinary shareholders

The holders of ordinary shares are entitled to receive the

Company’s Reports and Accounts, to aend and speak

at general meetings of the Company, to exercise voting

rights in person or by appointing a proxy in accordance

with the deadlines set out in the relevant Notice of Meeting,

and to receive a dividend (where declared) or paid out of

proﬁts available for that purpose.

Each ordinary share carries one vote. There are no

restrictions on voting rights or limits on the number of votes

a shareholder may exercise. Voting rights may be restricted

if a shareholder fails to comply with a notice issued under

section 793 of the Companies Act 2006. Shares may be

held through nominee arrangements where voting rights

are exercised in line with the arrangements between the

beneﬁcial owner and the registered holder.

Rights of Special Shareholder

The Special Share is held by HM Government through the

Secretary of State for Defence (the Special Shareholder)

and it may only be held by and transferred to

HM Government. It confers certain rights to protect

UK defence and security interests. These include:

The promotion and reinforcement of the MOD

compliance principles which require QinetiQ to

be an impartial, ethical and responsible contractor

by avoiding conﬂicts of interest in its dealings with

the MOD

The protection of deﬁned strategic assets of the

Group, such as certain testing facilities, by providing

the Special Shareholder with an option to purchase

those assets in certain circumstances

The right to require certain persons with a material

interest in QinetiQ to dispose of some or all of their

ordinary shares on the grounds of national security

or conﬂict of interest

A provision whereby at least the Non-executive

Chairman or Chief Executive Oﬀicer must be

a British citizen

The Special Share carries no ﬁnancial and economic value

and the Special Shareholder is not entitled to vote at a

general meeting of the Company. At any time the Special

Shareholder may require QinetiQ to redeem the share at par

and, if wound up, the Special Shareholder would be entitled

to be repaid at its nominal value before other shareholders.

Any variation of the rights aached to the Special Share

requires the wrien approval of the MOD. Further details

can be found in note 28 on page 194.

Restrictions on the transfer of shares

As detailed above, the special share requires certain

persons with an interest in QinetiQ’s shares that exceed

certain prescribed thresholds to dispose of some or all of

their ordinary shares on the grounds of national security

or conﬂict of interest.

Directors’ Report

and statutory information

143

Directors’ Report

and statutory information

Employee share schemes

The QinetiQ Group plc Employee Beneﬁt Trust (the Trust)

holds shares in connection with QinetiQ’s employee share

schemes, excluding the Share Incentive Plan. As at 31 March

2026, the Trust held 2,684,125 ordinary shares of 1p each

(the Trust Shares). The Trustees of the Trust have agreed

to waive their entitlement to dividends payable on the

Trust Shares.

Equiniti Share Plan Trustees Limited acts as Trustee in

respect of all ordinary shares held by employees under the

QinetiQ Group plc Share Incentive Plan (the ‘Plan’). Equiniti

Share Plan Trustees Limited will vote on all resolutions

proposed at general meetings in accordance with voting

instructions received from participants in the Plan.

Major shareholdings

In accordance with DTR 5, the following disclosures have

been notiﬁed to the Company from holders representing 3%

or more of the issued ordinary share capital of the Company.

Name of shareholder

As at 31 March

2026 % of issued

share capital*

As at 20 May 2026

% of issued share

capital*

Klear Kite LLC

14.02%

15.08%

BlackRock, Inc.

5.14%

Franklin Mutual Advisers LLC

4.99%

Schroders Plc

9.98%

4.96%

As notiﬁed by the shareholder and based on the issued ordinary share

capital at the time of the notiﬁcation.

Employees

The Group is commied to the fair treatment of people with

disabilities in relation to applications, training, promotion

and career development. If an existing employee becomes

disabled, the Company makes every eﬀort to enable them

to continue their employment and career development

and to arrange appropriate training, wherever practical.

Directors’ interests in contracts

At the date of this report, there is no contract or

arrangement with the Company or any of its subsidiaries

that is signiﬁcant in relation to the business of the

Group as a whole in which a Director of the Company

is materially interested.

Indemnities

The Company has entered into indemnity deeds with

all its current Directors containing qualifying indemnity

provisions, as deﬁned in Section 234 of the Companies Act

2006, under which the Company has agreed to indemnify

each Director in respect of certain liabilities, which may be

aached to them as Directors or as former Directors of the

Company or any of its subsidiaries. The qualifying third-

party indemnity was in force during the ﬁnancial year and

also at the date of approval of the ﬁnancial statements.

Articles of Association

Changes to the Articles must be submied to shareholders

for approval save in respect of the rights aaching to the

Special Share; the Company has not adopted any special

rules relating to the appointment and replacement of

Directors or the amendment of the Company’s Articles of

Association, other than as provided under UK corporate law.

Change of control –

signiﬁcant agreements

The following signiﬁcant agreements contain provisions

entitling the counterparties to require prior approval,

exercise termination, alteration or other similar rights

in the event of a change of control of the Company,

or if the Company ceases to be a UK company:

The Combined Aerial Target Service contract is a

20-year contract awarded to QinetiQ Target Services

Limited by the MOD on 14 December 2006. The terms

of this contract require the Company to remain a UK

company which is incorporated under the laws of any

part of the UK, or an overseas company registered

in the UK, and that at least 50% of the Board of

Directors are UK nationals. The terms also contain

change of control conditions and restricted share

transfer conditions which require prior approval from

HM Government if there is a material change in the

ownership of the Company’s share capital, unless the

change relates to shares listed on a regulated market;

‘material’ is deﬁned as being 10% or more of the share

capital. In addition, there are restrictions on transfers

of shares to persons from countries appearing on the

restricted list as issued by HM Government.

The Long Term Partnering Agreement (LTPA) is

a 30-year contract (its original term being 25 years

but having been extended in 2025), which QinetiQ

Limited signed on 28 February 2003, to provide

test, evaluation and training services to the MOD.

This contract contains conditions under which the

prior approval of HM Government is required if the

contractor, QinetiQ Limited, ceases to be a subsidiary

of the QinetiQ Group, except where such change

in control is permied under the Shareholders

Agreement to which the MOD is a party.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

144

GOVERNANCE

STRATEGIC REPORT

The Maritime Strategic Capabilities Agreement Future

Arrangement contract is a 10-year contract awarded

by the MOD which came into eﬀect on 1 April 2023. The

contract terms include a provision requiring that any

change of control of QinetiQ Limited requires prior

approval from HM Government (with control being

deﬁned as the ability to control the Company’s aﬀairs

by reason of the holding of shares or by means of voting

or other powers). If such approval is not obtained, the

MOD reserves the right to terminate the agreement.

The Engineering Delivery Partner Agreement placed

with QinetiQ Limited by the MOD came into force

on 5 October 2018 and has a 10-year duration. The

contract contains a provision under which any change

of control of QinetiQ Limited requires prior approval

from HM Government (with control being deﬁned as

the ability to control the Company’s aﬀairs by reason

of the holding of shares or by means of voting or other

powers). The MOD is entitled to terminate the contract

where a change of control has occurred without such

approval having been obtained.

The Group is party to funding agreements, provided

by a consortium of banks: a £290m multi-currency

revolving credit facility which is due to mature on

22 April 2029; a multi-currency ﬂoating rate term

loan of £333.6m which matures on 27 September

2027, and interest rate derivative contracts maturing

on 27 September 2027 to ﬁx the ﬂoating rate bank

borrowings in line with Treasury policy. Under the terms

of the agreements, in the event of a change of control

of the Company, any lender may give notice to cancel

its commitment and require all outstanding amounts

to be repaid.

The Directors’ contracts contain no provisions for

compensation for loss of oﬀice on a change of control of

the Company.

Appointment and replacement

of Directors

According to the Articles of Association, all Directors

are subject to election by shareholders at the ﬁrst AGM

after their appointment and must stand for re-election

at intervals of no more than three years thereafter. In

line with best practice reﬂected in the UK Corporate

Governance Code, however, the Company requires

each serving member of the Board to stand for election

or re-election on an annual basis at each AGM.

Powers of the Directors:

allotment/purchase of own shares

At the Company’s AGM held in July 2025, the shareholders

passed resolutions which authorised the Directors to allot

relevant securities up to an aggregate nominal value of

£1,822,873 (£3,645,746 pursuant only to a rights issue)

and to disapply pre-emption rights (up to 5% of the issued

ordinary share capital). The authorities will remain valid

until the 2026 AGM.

Resolutions in respect of the allotment of relevant

securities, the disapplication of pre-exemption rights and

the purchase of own shares will be laid before the 2026 AGM.

Annual General Meeting

The Company’s AGM will be held on Thursday 16 July 2026 at

11:00 at the oﬀice of Ashurst LLP, London Fruit and

Wool Exchange, Duval Square, London E1 6PW.

Independent auditors

A resolution to conﬁrm the reappointment of

PricewaterhouseCoopers ('PwC') as auditor of the Company

will be proposed at the 2026 AGM. The reappointment has

been recommended to the Board by the Audit Commiee

and PwC has expressed its willingness to continue in oﬀice.

Statement of Directors’ responsibilities

in respect of the ﬁnancial statements

The Directors are responsible for preparing the Annual

Report and Accounts including the Directors’ Remuneration

Report and the Financial Statements in accordance with

applicable law and regulations.

UK company law requires the Directors to prepare ﬁnancial

statements for each ﬁnancial year. Under that law, the

Directors have prepared the Group ﬁnancial statements

in accordance with International Accounting Standards in

conformity with the requirements of the Companies Act

2006 and the Company ﬁnancial statements in accordance

with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards,

comprising FRS 101 Reduced Disclosure Framework,

and applicable law). Additionally, the Financial Conduct

Authority’s Disclosure Guidance and Transparency Rules

require the Directors to prepare the Group Financial

Statements in accordance with UK-adopted International

Accounting Standards.

Directors’ Report

and statutory information

145

Directors’ Report

and statutory information

Under UK company law, Directors must not approve the

Financial Statements unless they are satisﬁed that they

give a true and fair view of the state of aﬀairs of the Group

and Company and of the proﬁt or loss of the Group for

that period. In preparing the ﬁnancial statements, the

Directors are required to:

Select suitable accounting policies and apply

them consistently;

State whether applicable international accounting

standards in conformity with the requirements of the

Companies Act 2006 and UK-adopted International

Accounting Standards have been followed for the

Group ﬁnancial statements and United Kingdom

Accounting Standards, comprising FRS 101, have

been followed for the Company ﬁnancial statements,

subject to any material departures disclosed and

explained in the ﬁnancial statements;

Make reasonable and prudent judgements and

accounting estimates; and

Prepare the ﬁnancial statements on the going-

concern basis unless it is inappropriate to presume

that the Group and Company will continue in business.

The Directors are also responsible for safeguarding the

assets of the Group and Company and hence for taking

reasonable steps for the prevention and detection of

fraud and other irregularities.

The Directors are responsible for keeping adequate

accounting records that are suﬀicient to show and explain

the Group’s and Company’s transactions, and disclose with

reasonable accuracy at any time, the ﬁnancial position of

the Group and Company and enable them to ensure that

the ﬁnancial statements and the Directors’ Remuneration

report comply with the Companies Act 2006.

The Directors are responsible for the maintenance and

integrity of the Company’s website. Legislation in the UK

governing the preparation and dissemination of ﬁnancial

statements may diﬀer from legislation in other jurisdictions.

Directors’ conﬁrmations

The Directors of the Company who served during the

ﬁnancial year ending 31 March 2026:

Neil Johnson

Steve Wadey

Martin Cooper

Steve Mogford

Shonaid Jemme-Page

Dina Knight

Roger Krone

Ross McEwan (resigned on

17 July 2025)

General Sir Gordon

Messenger

Ezinne Uzo-Okoro

Each of the Directors conﬁrm that, to the best of

their knowledge:

The Group ﬁnancial statements, which have been

prepared in accordance with international accounting

standards in conformity with the requirements of

the Companies Act 2006 and international ﬁnancial

reporting standards, adopted pursuant to UK-adopted

International Accounting Standards, give a true and

fair view of the assets, liabilities, ﬁnancial position and

proﬁt of the Group;

The Company Financial Statements, which have

been prepared in accordance with United Kingdom

Accounting Standards, comprising FRS 101, give a true

and fair view of the assets, liabilities, ﬁnancial position

and proﬁt of the Company; and

The going-concern statement on page 71 includes a

fair review of the development and performance of the

business and the position of the Group and Company,

together with a description of the principal risks and

uncertainties that it faces.

In the case of each Director in oﬀice at the date the

Directors’ report is approved.

Scope of the reporting in this

Annual Report

The Board has prepared a Strategic report which provides

an overview of the development and performance of the

Group’s business in the year ended 31 March 2026.

For the purposes of DTR 4.1.5R(2) and DTR 4.1.8 the

Directors conﬁrm that, so far as they are aware, there is no

relevant audit information of which the Company’s auditor

is unaware, and that they have taken all steps that they

ought to have taken as Directors to make themselves

aware of any relevant audit information and to establish

that the Company’s auditor is aware of that information.

By order of the Board.

James Field

Company Secretary

21 May 2026

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

146

GOVERNANCE

STRATEGIC REPORT

Report on the audit of the

ﬁnancial statements

Opinion

In our opinion:

QinetiQ Group plc’s group ﬁnancial statements

and company ﬁnancial statements (the “ﬁnancial

statements”) give a true and fair view of the state

of the group’s and of the company’s aﬀairs as at

31 March 2026 and of the group’s proﬁt and the

group’s cash ﬂows for the year then ended;

the group ﬁnancial statements have been properly

prepared in accordance with UK-adopted international

accounting standards as applied in accordance

with the provisions of the Companies Act 2006;

the company ﬁnancial statements have been properly

prepared in accordance with United Kingdom Generally

Accepted Accounting Practice (United Kingdom

Accounting Standards, including FRS 101 “Reduced

Disclosure Framework”, and applicable law); and

the ﬁnancial statements have been prepared

in accordance with the requirements of the

Companies Act 2006.

We have audited the ﬁnancial statements, included within

the Annual Report & Accounts 2026 (the “Annual Report”),

which comprise:

the Consolidated balance sheet as at 31 March 2026;

the Company balance sheet as at 31 March 2026;

the Consolidated income statement for the year

then ended;

the Consolidated statement of comprehensive income

for the year then ended;

the Consolidated statement of changes in equity for

the year then ended;

the Company statement of changes in equity for the

year then ended;

the Consolidated cash ﬂow statement for the year

then ended; and

the notes to the ﬁnancial statements, comprising

material accounting policy information and other

explanatory information.

Our opinion is consistent with our reporting to the

Audit Commiee.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK)

(“ISAs

(UK)”

) and applicable law.

Our responsibilities under ISAs (UK) are further described

in the Auditors’ responsibilities for the audit of the ﬁnancial

statements section of our report. We believe that the audit

evidence we have obtained is suﬀicient and appropriate to

provide a basis for our opinion.

Independence

We remained independent of the group in accordance

with the ethical requirements that are relevant to our

audit of the ﬁnancial statements in the UK, which includes

the FRC’s Ethical Standard, as applicable to listed public

interest entities, and we have fulﬁlled our other ethical

responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that

non-audit services prohibited by the FRC’s Ethical Standard

were not provided.

Other than those disclosed in Note 8, we have provided

no non-audit services to the company or its controlled

undertakings in the period under audit.

Our audit approach

Overview

Audit scope

We conducted full scope audit work in the United

Kingdom over QinetiQ Limited, in the United States

over QinetiQ US, and in Australia over QinetiQ Pty Ltd

based on their size. This provides signiﬁcant coverage

over all ﬁnancial statement balances, except inventory

and intangible assets;

We performed an audit of the inventory and intangible

assets ﬁnancial statement line items at QinetiQ

Target Systems Limited to provide suﬀicient overall

group coverage;

We performed procedures over goodwill, acquired

intangible assets, share-based payments, the deﬁned

beneﬁt pension scheme, IFRS 16 lease accounting,

taxation, borrowings and the consolidation at

a group level.

Key audit maers

Long-term contract accounting (group)

Valuation of goodwill related to the US CGU (group)

Valuation of investment in subsidiary

undertakings (parent)

Independent auditors’ report

to the members of QinetiQ Group plc

147

Independent auditors’ report

to the members of QinetiQ Group plc

Report on the audit of the ﬁnancial statements (continued)

Overview continued

Materiality

Overall group materiality: £11,500,000

(2025: £10,000,000) based on 5% of underlying

proﬁt before tax.

Overall company materiality: £5,520,000

(2025: £5,400,000) based on 1% of total assets.

Performance materiality: £8,600,000

(2025: £7,500,000)

(group) and £4,140,000

(2025: £4,050,000)

(company).

The scope of our audit

As part of designing our audit, we determined materiality

and assessed the risks of material misstatement in the

ﬁnancial statements.

Key audit maers

Key audit maers are those maers that, in the auditors’

professional judgement, were of most signiﬁcance in the

audit of the ﬁnancial statements of the current period and

include the most signiﬁcant assessed risks of material

misstatement (whether or not due to fraud) identiﬁed by

the auditors, including those which had the greatest eﬀect

on: the overall audit strategy; the allocation of resources in

the audit; and directing the eﬀorts of the engagement team.

These maers, and any comments we make on the results

of our procedures thereon, were addressed in the context

of our audit of the ﬁnancial statements as a whole, and

in forming our opinion thereon, and we do not provide

a separate opinion on these maers.

This is not a complete list of all risks identiﬁed by our audit.

The key audit maers below are consistent with last year.

Key audit maer

How our audit addressed the key audit maer

Long-term contract accounting (group)

Refer to page 106 (Audit Commiee report)

and page 202 (note 35, Basis of preparation

and material accounting policies – Revenue

from contracts with customers) and page 160

(note 2, Revenue from contracts with

customers and other income). The group

has a large number of contracts which span

multiple periods and are accounted for on

a percentage of completion (POC) basis

in accordance with IFRS 15 (Revenue from

Contracts with Customers). Long term

contract accounting requires a number of

judgements and management estimates

to be made, particularly in calculating the

forecast costs to complete the contract.

These judgements drive revenue and proﬁt

recognition, and together with cash paid

by the customer, impact the balance sheet

position at the year end.

We evaluated the contract governance policies and controls in place within the

business and tested the design and operating eﬀectiveness of certain key controls

over long-term contracts. For long term contracts within the UK, the Group team

performed risk assessment procedures over the portfolio of contracts to identify

contracts to subject to detailed audit procedures. These detailed contract audits

involved meeting with key ﬁnancial and non-ﬁnancial personnel throughout the year

and at year end to discuss contract performance, as well as challenging management

to provide evidence to support the estimates taken on each selected contract in the

ﬁnancial statements.

Speciﬁcally, our procedures included the following:

We assessed the basis of revenue recognition to ensure it is in line with applicable

accounting standards.

We agreed overall anticipated revenue to the underlying contract and validated a

sample of customer invoices through to cash receipt.

We recalculated revenue recognised and agreed revenue, costs and associated

balance sheet positions to the underlying general ledger.

We obtained evidence to corroborate management estimates and judgements,

particularly around forecast costs to complete and risk contingencies, including:

Performing risk assessment sensitivity to identify those cost categories that

are most sensitive and require further assessment;

Comparing forecasts to established run rates obtaining evidence for movements

outside of our expectation, where applicable; and

Obtaining contract risk registers and obtaining support for signiﬁcant movements.

We validated the allocation of costs incurred to contracts during the year to

supporting documentation. For the remaining population of contracts, we selected

a sample and performed testing over revenue and costs, agreeing to supporting

documentation including customer contracts and validating a sample of customer

invoices to cash receipts. Additional testing was performed, where not suﬀiciently

covered by the above, over the contract asset and liability balance sheet positions

to gain assurance over the accuracy of these balances. These have been sample

tested and agreed to supporting documentation. Component audit teams in the

US and Australia stratify their contracts into risk categories and perform the above

procedures as relevant which were subject to oversight by the Group engagement

team. No material exceptions were found.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

148

GOVERNANCE

STRATEGIC REPORT

Independent auditors’ report

to the members of QinetiQ Group plc

Key audit maer

How our audit addressed the key audit maer

Valuation of goodwill related to the US CGU (group)

Refer to page 106 (Audit Commiee report),

page 206 (note 35, Basis of preparation and

material accounting policies – Impairment of

goodwill and tangible, intangible and held for

sale assets), page 168 (note 13, Goodwill).

The group has a material amount of goodwill

amounting to £236.9m at 31 March 2026

with £167.5m of this relating to the US cash-

generating unit (‘CGU’). As required by IAS

36, management performed an impairment

assessment, determining the recoverable

amount of each CGU as the higher of the

value in use or fair value less cost to sell.

This assessment is underpinned by the

Board-approved ﬁve-year strategic plan.

This annual impairment review was performed

as at 31 March 2026. The carrying value of

the US CGU is material and hence there is

a signiﬁcant estimate as to the value held

on the balance sheet.

Our audit focused on the risk that the carrying value of goodwill in the US CGU could

be materially misstated. We assessed the design and implementation of the goodwill

impairment processes and related controls; however, we concluded that we would not

rely on the controls over ﬁnancial reporting and therefore we performed only substantive

procedures in this area. We reviewed management’s assessment of value in use and

fair value less cost to sell for the US CGU to verify that the recoverable amount reﬂected

the higher of the two measures. We tested the principles and mathematical integrity of

the group’s discounted cash ﬂow model. With the assistance of our valuation experts,

we assessed the long-term growth rate and discount rate used in the impairment

calculation, by comparing the group’s assumptions to external data. We conﬁrmed that

cash ﬂows for the next 5 years were consistent with internal budgeting and strategic

planning processes and the long term viability assessment and that the underlying

budgets and strategic plans have been approved by the Board. Within the US CGU, we

challenged the cash ﬂow projections of future revenue growth used within the model

by reference to future market growth and contract opportunities, obtaining third

party evidence where possible. We held discussions with ﬁnancial and non-ﬁnancial

personnel, corroborating explanations to supporting evidence. We challenged

assumptions regarding forecast margin with reference to historical performance and

evidence of strategic plans supported by external advisors. We concluded that the

group’s assumptions were reasonable and supportable, and we did not identify any

indication of management bias. We assessed the related disclosures in the annual

report, including the sensitivity of the impairment calculations to changes in the

underlying assumptions and the dependency of the valuation on securing key contract

renewals and signiﬁcant pipeline opportunities, and consider them to be appropriate.

Valuation of investment in subsidiary undertakings (parent)

Refer to page 214 (Accounting policies –

Investments and note 2, Investments in

subsidiary undertakings). The company

has investments of £551.6m in its subsidiary

undertakings. Annually, the Directors consider

whether any events or circumstances have

occurred that could indicate that the carrying

amount of the investment in subsidiaries may

not be recoverable. If such circumstances are

identiﬁed, an impairment review is undertaken

to establish whether the carrying amount of the

investments exceeds its recoverable amount,

being the higher of fair value less costs to sell

or value in use. Impairment assessments of this

nature require signiﬁcant judgement and there is

a risk that a potential impairment trigger may not

be identiﬁed by management. In the event that

there is an impairment trigger identiﬁed, there

is a risk that the calculation of the recoverable

amount of the investment is incorrect and

therefore the value of the investment may be

misstated. No such indicators of impairment

were identiﬁed in the year ended 31 March 2026.

We have evaluated management’s consideration of impairment triggers through

performing our own independent assessment, which has included;

Considering the market capitalisation of the group at year end and comparing this

to the carrying value of the investment.

Assessing the overall ﬁnancial performance of the group to identify any indicators

of impairment as a result of poor ﬁnancial performance.

Considering other information gathered during the course of our audits of

components and assessing whether there were any other indicators of impairment.

Comparing the carrying value of the investment to the carrying value of the

underlying net assets.

We found that management’s conclusion, that there are no impairment triggers in the

investment in subsidiaries carrying value, was reasonable.

149

Independent auditors’ report

to the members of QinetiQ Group plc

Report on the audit of the ﬁnancial statements (continued)

How we tailored the audit scope

We tailored the scope of our audit to ensure that we

performed enough work to be able to give an opinion

on the ﬁnancial statements as a whole, taking into

account the structure of the group and the company,

the accounting processes and controls, and the industry

in which they operate.

We conducted full scope audit work over QinetiQ Limited,

QinetiQ US and QinetiQ Pty Ltd, with QinetiQ Limited being

the only component considered signiﬁcant to the group.

The audit of QinetiQ Limited is performed in the United

Kingdom and the audits of QinetiQ US and QinetiQ Pty Ltd

are performed by component audit teams based in the

United States and Australia, respectively. This provides

suﬀicient coverage over all ﬁnancial statement line items,

except inventory, intangible assets and central balances

audited by the group team.

We performed an audit of inventory and intangible assets

balances at QinetiQ Target Systems Limited to ensure

suﬀicient coverage over those ﬁnancial statement line

items. QinetiQ Target Systems Limited is located within the

UK and the work was performed by the group audit team.

In addition to the above, we performed risk assessment

analytical procedures on the remaining entities, other

than those considered inconsequential, to understand

key balances and transactions in the year. This was

performed by the group audit team and did not identify

any balances requiring additional testing.

The audit procedures performed over the ﬁnancial

information of full scope components, QinetiQ Limited,

QinetiQ US and QinetiQ Pty Ltd, accounted for 85% of

consolidated group revenue and 84% of underlying proﬁt

before taxation (on an absolute basis, excluding holding

companies and consolidation entities).

The full scope audits plus the additional audit procedures

over inventory and intangible assets in QinetiQ Target

Systems Limited, resulted in coverage of 83% of total

group assets.

The combination of the work referred to above, together

with additional procedures performed at a group level,

including testing of signiﬁcant journals posted within

the consolidation, goodwill, acquired intangible assets,

share-based payments, pensions, IFRS 16 lease accounting,

taxation and borrowings gave us the evidence required

for our opinion on the ﬁnancial statements as a whole.

The group engagement leader discussed and agreed the

audit plan with our component audit teams, in addition

to agreeing the format and content of communications.

We determined that the level of involvement we were

able to have in the audit work at our reporting entities

was suﬀicient, and appropriate audit evidence had

been obtained, to enable us to form our opinion on the

ﬁnancial statements as a whole. The group engagement

leader visited our local component teams and the local

management teams in the United States and Australia as

part of our planning procedures. We maintained regular

dialogue throughout the audit process with our component

audit teams through the use of video conferencing. We also

supervised the work performed by all component teams

through the review of component team working papers and

we concluded that suﬀicient and appropriate procedures

have been performed.

The audit of the company ﬁnancial statements was

performed by the group audit team. The company is

principally a holding company and there are no branches or

other locations to be considered when scoping the audit.

There are no ﬁnancial statement line items in scope for

the group audit. The company is audited on a stand-alone

basis and hence testing has been performed on all material

ﬁnancial statement line items.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to

understand the extent of the potential impact of climate

risk on the group’s and company’s ﬁnancial statements, and

we remained alert when performing our audit procedures

for any indicators of the impact of climate risk. In particular,

when carrying out our work over long term contracts we

challenged management over the impact of climate change

(e.g. ﬂooding at exposed areas) on the forecasted costs to

complete as well as any potential risks arising from physical

and environmental issues. Our procedures did not identify

any material impact as a result of climate risk on the group’s

and company’s ﬁnancial statements.

Materiality

The scope of our audit was inﬂuenced by our application

of materiality. We set certain quantitative thresholds for

materiality. These, together with qualitative considerations,

helped us to determine the scope of our audit and the

nature, timing and extent of our audit procedures on the

individual ﬁnancial statement line items and disclosures and

in evaluating the eﬀect of misstatements, both individually

and in aggregate on the ﬁnancial statements as a whole.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

150

GOVERNANCE

STRATEGIC REPORT

Independent auditors’ report

to the members of QinetiQ Group plc

Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows:

Financial statements – group

Financial statements – company

Overall materiality

£11,500,000 (2025: £10,000,000).

£5,520,000 (2025: £5,400,000).

How we determined it

5% of underlying proﬁt before tax

1% of total assets

Rationale for

benchmark applied

Underlying proﬁt before tax is one of the primary

measures used by the shareholders in assessing

the performance of the group, and is a generally

accepted auditing benchmark. It is considered

appropriate to exclude speciﬁc adjusting items

due to the nature of these balances as disclosed

in note 4 of the group ﬁnancial statements.

We believe that total assets is the primary measure

used by shareholders in assessing the performance

of this entity, and is a generally accepted auditing

benchmark for a holding company. This materiality

relates to the audit of the company only, as the

company was not in scope for the group audit.

For each component in the scope of our group audit,

we allocated a materiality that is less than our overall

group materiality. The range of materiality allocated

across components was between £6,000,000 and

£11,000,000. Certain components were audited to

a local statutory audit materiality that was also less

than our overall group materiality.

We use performance materiality to reduce to an

appropriately low level the probability that the aggregate

of uncorrected and undetected misstatements exceeds

overall materiality. Speciﬁcally, we use performance

materiality in determining the scope of our audit and the

nature and extent of our testing of account balances,

classes of transactions and disclosures, for example in

determining sample sizes. Our performance materiality

was 75% (2025: 75%) of overall materiality, amounting

to £8,600,000 (2025: £7,500,000) for the group ﬁnancial

statements and £4,140,000 (2025: £4,050,000) for the

company ﬁnancial statements.

In determining the performance materiality, we considered

a number of factors - the history of misstatements, risk

assessment and aggregation risk and the eﬀectiveness

of controls - and concluded that an amount at the upper

end of our normal range was appropriate.

We agreed with the Audit Commiee that we would report

to them misstatements identiﬁed during our audit above

£575,000 (group audit)

(2025: £500,000) and £276,000

(company audit)

(2025: £270,000) as well as misstatements

below those amounts that, in our view, warranted reporting

for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the directors’ assessment of the group’s

and the company’s ability to continue to adopt the going

concern basis of accounting included:

Obtaining the board-approved strategic plan. We held

discussions with management to understand the

budgeting process and the key assumptions made

over management’s going concern assessment period;

Performing a comparison of the cash ﬂow forecasts

used in the going concern assessment to those in the

strategic plan and, where applicable, compared these

forecasts for consistency to those used elsewhere

in the business, including for long term contract

accounting and impairment assessments;

Assessing whether the stress testing performed by

management appropriately considered the principal

risks facing the business, and was adequate;

Using our own knowledge from the audit and

assessment of previous forecasting accuracy we

assessed management’s sensitivities applied to the

cash ﬂow forecasts. These procedures conﬁrmed

liquidity and covenant headroom in management’s

forecasts when performing severe but plausible

downside sensitivities;

Evaluating the feasibility of management’s mitigating

actions in response to the severe but plausible

downside scenarios; and

Assessing the adequacy of disclosures in the

Going Concern statement on page 107 of the

Audit Commiee report and on page 201 in

Note 35 of the Financial Statements and found

these appropriately reﬂect our understanding of the

process undertaken and the conclusion reached.

Based on the work we have performed, we have not

identiﬁed any material uncertainties relating to events

or conditions that, individually or collectively, may cast

signiﬁcant doubt on the group’s and the company’s ability

to continue as a going concern for a period of at least

twelve months from when the ﬁnancial statements are

authorised for issue.

In auditing the ﬁnancial statements, we have concluded

that the directors’ use of the going concern basis of

accounting in the preparation of the ﬁnancial statements

is appropriate.

However, because not all future events or conditions

can be predicted, this conclusion is not a guarantee

as to the group’s and the company’s ability to continue

as a going concern.

151

Independent auditors’ report

to the members of QinetiQ Group plc

Report on the audit of the ﬁnancial statements (continued)

In relation to the directors’ reporting on how they have

applied the UK Corporate Governance Code, we have

nothing material to add or draw aention to in relation to

the directors’ statement in the ﬁnancial statements about

whether the directors considered it appropriate to adopt

the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors

with respect to going concern are described in the relevant

sections of this report.

Reporting on other information

The other information comprises all of the information in

the Annual Report other than the ﬁnancial statements and

our auditors’ report thereon. The directors are responsible

for the other information. Our opinion on the ﬁnancial

statements does not cover the other information and,

accordingly, we do not express an audit opinion or, except

to the extent otherwise explicitly stated in this report,

any form of assurance thereon.

In connection with our audit of the ﬁnancial statements,

our responsibility is to read the other information and,

in doing so, consider whether the other information is

materially inconsistent with the ﬁnancial statements or

our knowledge obtained in the audit, or otherwise appears

to be materially misstated. If we identify an apparent

material inconsistency or material misstatement, we are

required to perform procedures to conclude whether there

is a material misstatement of the ﬁnancial statements or

a material misstatement of the other information. If, based

on the work we have performed, we conclude that there

is a material misstatement of this other information,

we are required to report that fact. We have nothing to

report based on these responsibilities.

With respect to the Strategic report and Directors’ report,

we also considered whether the disclosures required by

the UK Companies Act 2006 have been included.

Based on our work undertaken in the course of the audit,

the Companies Act 2006 requires us also to report certain

opinions and maers as described below.

Strategic report and Directors’ report

In our opinion, based on the work undertaken in the course

of the audit, the information given in the Strategic report

and Directors’ report for the year ended 31 March 2026 is

consistent with the ﬁnancial statements and has been

prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the group

and company and their environment obtained in the course

of the audit, we did not identify any material misstatements

in the Strategic report and Directors’ report.

Directors’ Remuneration

In our opinion, the part of the Directors’ Remuneration

report to be audited has been properly prepared in

accordance with the Companies Act 2006.

Corporate governance statement

The Listing Rules require us to review the directors’

statements in relation to going concern, longer-term

viability and that part of the corporate governance

statement relating to the company’s compliance with

the provisions of the UK Corporate Governance Code

speciﬁed for our review. Our additional responsibilities

with respect to the corporate governance statement as

other information are described in the Reporting on other

information section of this report.

Based on the work undertaken as part of our audit, we

have concluded that each of the following elements of the

corporate governance statement is materially consistent

with the ﬁnancial statements and our knowledge obtained

during the audit, and we have nothing material to add or

draw aention to in relation to:

The directors’ conﬁrmation that they have carried out a

robust assessment of the emerging and principal risks;

The disclosures in the Annual Report that describe

those principal risks, what procedures are in place

to identify emerging risks and an explanation of how

these are being managed or mitigated;

The directors’ statement in the ﬁnancial statements

about whether they considered it appropriate to

adopt the going concern basis of accounting in

preparing them, and their identiﬁcation of any

material uncertainties to the group’s and company’s

ability to continue to do so over a period of at least

twelve months from the date of approval of the

ﬁnancial statements;

The directors’ explanation as to their assessment

of the group’s and company’s prospects, the period

this assessment covers and why the period is

appropriate; and

The directors’ statement as to whether they have

a reasonable expectation that the company will be

able to continue in operation and meet its liabilities

as they fall due over the period of its assessment,

including any related disclosures drawing aention

to any necessary qualiﬁcations or assumptions.

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

152

GOVERNANCE

STRATEGIC REPORT

Independent auditors’ report

to the members of QinetiQ Group plc

Our review of the directors’ statement regarding the

longer-term viability of the group and company was

substantially less in scope than an audit and only consisted

of making inquiries and considering the directors’ process

supporting their statement; checking that the statement

is in alignment with the relevant provisions of the UK

Corporate Governance Code; and considering whether

the statement is consistent with the ﬁnancial statements

and our knowledge and understanding of the group and

company and their environment obtained in the course

of the audit.

In addition, based on the work undertaken as part of

our audit, we have concluded that each of the following

elements of the corporate governance statement is

materially consistent with the ﬁnancial statements and

our knowledge obtained during the audit:

The directors’ statement that they consider the

Annual Report, taken as a whole, is fair, balanced

and understandable, and provides the information

necessary for the members to assess the group’s

and company’s position, performance, business model

and strategy;

The section of the Annual Report that describes

the review of eﬀectiveness of risk management

and internal control systems; and

The section of the Annual Report describing the work

of the Audit Commiee.

We have nothing to report in respect of our responsibility

to report when the directors’ statement relating to the

company’s compliance with the Code does not properly

disclose a departure from a relevant provision of the Code

speciﬁed under the Listing Rules for review by the auditors.

Responsibilities for the ﬁnancial statements and

the audit

Responsibilities of the directors for the

ﬁnancial statements

As explained more fully in the Statement of Directors’

responsibilities in respect of the ﬁnancial statements,

the directors are responsible for the preparation of the

ﬁnancial statements in accordance with the applicable

framework and for being satisﬁed that they give a true

and fair view. The directors are also responsible for such

internal control as they determine is necessary to enable

the preparation of ﬁnancial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the directors are

responsible for assessing the group’s and the company’s

ability to continue as a going concern, disclosing, as

applicable, maers related to going concern and using the

going concern basis of accounting unless the directors either

intend to liquidate the group or the company or to cease

operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the

ﬁnancial statements

Our objectives are to obtain reasonable assurance about

whether the ﬁnancial statements as a whole are free from

material misstatement, whether due to fraud or error,

and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance

with ISAs (UK) will always detect a material misstatement

when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the

aggregate, they could reasonably be expected to inﬂuence

the economic decisions of users taken on the basis of these

ﬁnancial statements.

Irregularities, including fraud, are instances of

non-compliance with laws and regulations. We design

procedures in line with our responsibilities, outlined

above, to detect material misstatements in respect of

irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities,

including fraud, is detailed below.

Based on our understanding of the group and industry,

we identiﬁed that the principal risks of non-compliance

with laws and regulations related to Single Source

Contracting Regulations, the Health and Safety Executive

and anti-bribery and corruption legislation, and we

considered the extent to which non-compliance might

have a material eﬀect on the ﬁnancial statements. We also

considered those laws and regulations that have a direct

impact on the ﬁnancial statements such as the Companies

Act 2006 and relevant tax legislation. We evaluated

management’s incentives and opportunities for fraudulent

manipulation of the ﬁnancial statements (including the risk

of override of controls), and determined that the principal

risks were related to posting inappropriate journal entries

to increase revenue as well as considering management

bias in accounting estimates. The group engagement team

shared this risk assessment with the component auditors

so that they could include appropriate audit procedures

in response to such risks in their work. Audit procedures

performed by the group engagement team and/or

component auditors included:

153

Independent auditors’ report

to the members of QinetiQ Group plc

Report on the audit of the ﬁnancial statements (continued)

Discussions with management at multiple levels

across the business, internal audit and the group’s

legal counsel throughout the year, as well as at year

end. These discussions have included consideration

of known or suspected instances of non-compliance

with laws and regulations and fraud;

Evaluation of management’s controls designed to

prevent and detect irregularities, in particular their

anti-bribery controls;

Assessment of maers reported on the group’s

whistleblowing helpline and the results of

management’s investigation of such maers;

Reviewing correspondence with and reporting to

relevant regulatory authorities;

Challenging assumptions and judgements made by

management in their signiﬁcant accounting estimates

and judgements, particularly in relation to the key audit

maers above;

Designing risk ﬁlters to search for journal entries, such

as those posted with unusual account combinations,

and testing those journals highlighted (if any); and

Incorporating elements of unpredictability into the

audit procedures performed.

There are inherent limitations in the audit procedures

described above. We are less likely to become aware of

instances of non-compliance with laws and regulations that

are not closely related to events and transactions reﬂected

in the ﬁnancial statements. Also, the risk of not detecting

a material misstatement due to fraud is higher than the

risk of not detecting one resulting from error, as fraud may

involve deliberate concealment by, for example, forgery or

intentional misrepresentations, or through collusion.

Our audit testing might include testing complete

populations of certain transactions and balances, possibly

using data auditing techniques. However, it typically

involves selecting a limited number of items for testing,

rather than testing complete populations. We will often

seek to target particular items for testing based on their

size or risk characteristics. In other cases, we will use audit

sampling to enable us to draw a conclusion about the

population from which the sample is selected.

A further description of our responsibilities for the audit of

the ﬁnancial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description

forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared

for and only for the company’s members as a body in

accordance with Chapter 3 of Part 16 of the Companies Act

2006 and for no other purpose. We do not, in giving these

opinions, accept or assume responsibility for any other

purpose or to any other person to whom this report is shown

or into whose hands it may come save where expressly

agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report

to you if, in our opinion:

we have not obtained all the information and

explanations we require for our audit; or

adequate accounting records have not been kept by

the company, or returns adequate for our audit have

not been received from branches not visited by us; or

certain disclosures of directors’ remuneration

speciﬁed by law are not made; or

the company ﬁnancial statements and the part of the

Directors’ Remuneration report to be audited are not in

agreement with the accounting records and returns.

We have no exceptions to report arising from

this responsibility.

Appointment

We were ﬁrst appointed by the company for the ﬁnancial

year ended 31 March 2018. Our uninterrupted engagement

covers 9 ﬁnancial years.

Other maer

The company is required by the Financial Conduct Authority

Disclosure Guidance and Transparency Rules to include

these ﬁnancial statements in an annual ﬁnancial report

prepared under the structured digital format required

by DTR 4.1.15R - 4.1.18R and ﬁled on the National Storage

Mechanism of the Financial Conduct Authority. This

auditors’ report provides no assurance over whether

the structured digital format annual ﬁnancial report has

been prepared in accordance with those requirements.

John Ellis (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Southampton

21 May 2026

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

154

GOVERNANCE

STRATEGIC REPORT

Financial

statements

156

Consolidated income statement

157

Consolidated statement of

comprehensive income

157

Consolidated statement of

changes in equity

158

Consolidated balance sheet

159

Consolidated cash ﬂow statement

159

Reconciliation of movements in net debt

160

Notes to the Consolidated

Financial Statements

212

Company balance sheet

213

Company statement of

changes in equity

214

Notes to the Company

Financial Statements

Specialist marine test infrastructure

generating high-quality data that

underpins trusted engineering decisions

and long-term customer programmes.

155

All ﬁgures in £ million

Note

FY26

FY25

Underlying*

Speciﬁc

adjusting

Items*

Total

Underlying*

Speciﬁc

adjusting

Items*

Total

Revenue

2, 3

1,922.6

–

1,922.6

1,931.6

–

1,931.6

Operating costs excluding depreciation

and amortisation

(1,609.0)

(53.8)

(1,662.8)

(1,669.1)

(136.8)

(1,805.9)

Other income

30.1

–

30.1

39.2

–

39.2

EBITDA (earnings before interest, tax,

depreciation and amortisation)

343.7

(53.8)

289.9

301.7

(136.8)

164.9

Depreciation and impairment of property,

plant and equipment

3, 15

(76.6)

(0.5)

(77.1)

(70.6)

(1.0)

(71.6)

Impairment of goodwill

–

(143.9)

Amortisation and impairment of other

intangible assets

3, 4, 14

(19.9)

(23.1)

(43.0)

(15.7)

(24.2)

(39.9)

Operating proﬁt/(loss)

247.2

(77.4)

169.8

215.4

(305.9)

(90.5)

Finance income

5.2

2.4

7.6

6.6

1.0

7.6

Finance expense

(22.8)

–

(22.8)

(23.4)

–

(23.4)

Gain on business divestment

–

0.5

–

Proﬁt/(loss) before tax

229.6

(74.5)

155.1

198.6

(304.9)

(106.3)

Taxation (expense)/income

(61.1)

13.5

(47.6)

(51.6)

(27.8)

(79.4)

Proﬁt/(loss) for the year

168.5

(61.0)

107.5

147.0

(332.7)

(185.7)

Earnings/(loss) per share for proﬁt/(loss) aributable to the owners of the parent company

All ﬁgures in pence

Note

FY26

FY25

Underlying*

Total

Underlying*

Total

Basic

31.5

20.1

26.1

(33.0)

Diluted

31.0

19.8

25.8

(33.0)

Alternative performance measures are used to supplement the statutory ﬁgures. These are additional ﬁnancial indicators used by management

internally to assess the underlying performance of the Group. Deﬁnitions can be found on page 220. Also refer to note 4 for details of ‘speciﬁc

adjusting items’.

Consolidated

income statement

For the year ended 31 March

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

156

STRATEGIC REPORT

FINANCIAL STATEMENTS

GOVERNANCE

All ﬁgures in £ million

Note

FY26

FY25

Proﬁt/(loss) for the year

107.5

(185.7)

Items that will not be reclassiﬁed to proﬁt or loss:

Actuarial gain recognised in deﬁned beneﬁt pension schemes

10.2

17.7

Tax on items that will not be reclassiﬁed to proﬁt and loss

(2.6)

(4.4)

Total items that will not be reclassiﬁed to proﬁt or loss

7.6

13.3

Items that may be reclassiﬁed to proﬁt or loss:

Foreign currency translation losses on foreign operations

(5.4)

(11.6)

Movement in deferred tax on foreign currency translation

0.2

0.7

Movement in the fair value of hedging derivatives

0.7

(4.3)

Movement in deferred tax on hedging derivatives

(0.2)

1.1

Total items that may be reclassiﬁed to proﬁt or loss

(4.7)

(14.1)

Other comprehensive income/(expense) for the year, net of tax

2.9

(0.8)

Total comprehensive income/(expense) for the year

110.4

(186.5)

Consolidated statement of changes in equity

For the year ended 31 March

All ﬁgures in £ million

capital

Capital

redemption

reserve

premium

Hedge

reserve

Translation

reserve

Retained

earnings

Total

Note

At 1 April 2025

5.5

41.0

147.6

3.2

(27.6)

456.8

626.5

Total comprehensive expense

Proﬁt for the year

–

107.5

Other comprehensive income/(expense) for the

year, net of tax

–

0.5

(5.2)

7.6

2.9

Total comprehensive income/(expense) for

the year

–

0.5

(5.2)

115.1

110.4

Purchase of own shares

(0.3)

0.3

–

(146.9)

Share-based payment

–

11.0

Tax on share-based payments (note 9)

–

0.7

Dividends

–

(48.7)

At 31 March 2026

5.2

41.3

147.6

3.7

(32.8)

388.0

553.0

At 1 April 2024

5.7

40.8

147.6

6.4

(16.7)

742.3

926.1

Total comprehensive expense

Loss for the year

–

(185.7)

Other comprehensive (expense)/income for the

year, net of tax

–

(3.2)

(10.9)

13.3

(0.8)

Total comprehensive expense for the year

–

(3.2)

(10.9)

(172.4)

(186.5)

Purchase of own shares

(0.2)

0.2

–

(74.9)

Share-based payments

–

8.9

Tax on share-based payments (note 9)

–

0.8

Dividends

–

(47.9)

At 31 March 2025

5.5

41.0

147.6

3.2

(27.6)

456.8

626.5

Consolidated statement

comprehensive income

For the year ended 31 March

157

All ﬁgures in £ million

Note

31 March

2026

31 March

2025

Non-current assets

Goodwill

236.9

249.8

Other intangible assets

249.4

293.9

Property, plant and equipment

444.6

473.3

Other ﬁnancial assets

2.3

3.0

Equity accounted investments

1.1

2.1

Net pension asset

54.4

39.4

Deferred tax asset

18.2

10.7

1,006.9

1,072.2

Current assets

Inventories

73.7

70.7

Other ﬁnancial assets

3.3

4.9

Trade and other receivables

394.9

388.4

Current tax asset

0.4

1.6

Cash and cash equivalents

259.2

290.6

731.5

756.2

Total assets

1,738.4

1,828.4

Current liabilities

Trade and other payables

(585.6)

(597.5)

Current tax payable

(13.4)

(3.6)

Provisions

(34.1)

(56.2)

Other ﬁnancial liabilities

(13.5)

(15.1)

(646.6)

(672.4)

Non-current liabilities

Deferred tax liability

(102.2)

(101.0)

Provisions

(16.6)

(3.5)

Borrowings and other ﬁnancial liabilities

(410.4)

(416.6)

Other payables

(9.6)

(8.4)

(538.8)

(529.5)

Total liabilities

(1,185.4)

(1,201.9)

Net assets

553.0

626.5

Equity

Ordinary shares

5.2

5.5

Capital redemption reserve

41.3

41.0

Share premium account

147.6

Hedging reserve

3.7

3.2

Translation reserve

(32.8)

(27.6)

Retained earnings

388.0

456.8

Total equity

553.0

626.5

The ﬁnancial statements on pages 156 to 215 were approved by the Board of Directors and authorised for issue on 21 May

2026 and were signed on its behalf by:

Steve Wadey

Martin Cooper

Group Chief Executive Oﬀicer

Group Chief Financial Oﬀicer

Consolidated balance sheet

As at 31 March

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

158

STRATEGIC REPORT

FINANCIAL STATEMENTS

GOVERNANCE

All ﬁgures in £ million

Note

FY26

FY25

Underlying net cash inﬂow from operations

343.2

316.2

Less: speciﬁc adjusting items

(51.6)

(29.5)

Net cash inﬂow from operations

291.6

286.7

Tax paid

(44.4)

(48.6)

Interest received

6.2

6.6

Interest paid

(21.6)

(23.4)

Net cash inﬂow from operating activities

231.8

221.3

Purchases of intangible assets

(12.9)

(12.7)

Purchases of property, plant and equipment

(59.6)

(96.1)

Proceeds from sale of property

–

108.5

Proceeds from sale of plant and equipment

–

0.4

Dividends from joint ventures and associates

–

0.3

Disposal of businesses

17.9

–

Net cash (outﬂow)/inﬂow from investing activities

(54.6)

0.4

Purchase of own shares

(146.9)

(108.9)

Dividends paid to shareholders

(48.7)

(47.9)

Capital element of lease payments

(12.6)

(10.8)

Cash ﬂow relating to intercompany loan hedges

–

9.2

Net cash outﬂow from ﬁnancing activities

(208.2)

(158.4)

(Decrease)/increase in cash and cash equivalents

(31.0)

63.3

Eﬀect of foreign exchange changes on cash and cash equivalents

(0.4)

(3.7)

Cash and cash equivalents at beginning of the year

290.6

231.0

Cash and cash equivalents at end of the year

259.2

290.6

Reconciliation of movements in net debt

For the year ended 31 March

All ﬁgures in £ million

Note

FY26

FY25

(Decrease)/increase in cash and cash equivalents in the year

(31.0)

63.3

Add back net cash ﬂows not impacting net debt

12.9

12.4

Movement in net debt resulting from cash ﬂows

(18.1)

75.7

Net increase in lease obligations

(7.3)

(50.8)

Net movement in derivative ﬁnancial instruments

0.1

(4.7)

Other movements including foreign exchange

(0.6)

(2.2)

Movement in net debt as deﬁned by the Group

(25.9)

18.0

Net debt as deﬁned by Group at the beginning of the year

(133.2)

(151.2)

Net debt as deﬁned by the Group at the end of the year

(159.1)

(133.2)

Less: borrowings

333.6

335.0

Less: total net derivative ﬁnancial instruments, capitalised borrowing costs and lease liabilities

84.7

88.8

Total cash and cash equivalents

259.2

290.6

Consolidated cash ﬂow statement

For the year ended 31 March

159

Notes to the Consolidated Financial Statements

For the year ended 31 March

160

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

1. Signiﬁcant changes in the current reporting period

The ﬁnancial position and performance of the Group was particularly aﬀected by the following events and transactions

during the reporting period:

1) A £146.9m (FY25: £74.9m

) reduction in equity due to the ongoing purchase to acquire own shares as part of the share

buyback programme

2) A reduction in Goodwill and Other intangible assets in the US CGU following completion of the Fed IT disposal in H1 which

resulted in a modest gain on disposal

For a detailed discussion of the Group’s performance and ﬁnancial position refer to the Strategic Report on pages 1 to 76.

2. Revenue from contracts with customers and other income

Revenue and other income is analysed as follows:

Revenue by category

For the year ended 31 March



All ﬁgures in £ million	FY26	FY25
Services contracts with customers	1,842.3	1,810.9
Sale of goods contracts with customers	78.6	110.6
Royalties and licences	1.7	10.1
Total revenue	1,922.6	1,931.6
Adjust for disposed businesses	(9.7)	(25.8)
Adjust to constant prior year exchange rates	18.8	–
Total revenue on an organic, constant currency basis*	1,931.7	1,905.8
Organic revenue growth at constant currency*	1%	2%

Alternative performance measures are used to supplement the statutory ﬁgures. These are additional ﬁnancial indicators used by management

internally to assess the underlying performance of the Group. Deﬁnitions can be found on page 220.

Other income



All ﬁgures in £ million	FY26	FY25
Share of joint ventures’ (loss)/proﬁt after tax	(1.0)	0.3
Research and development expenditure credits (RDEC)	29.3	30.0
Other income	1.8	8.9
Total other income	30.1	39.2

Revenue and loss after tax of associates and joint ventures was £1.3m and £1.2m respectively (FY25: revenue of £5.9m and

proﬁt after tax of £0.3m). The ﬁgures in the table above represent the Group share of this proﬁt after tax.

Other income is in respect of property rentals and the recovery of other related property costs.

Revenue by customer geographic location

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| United Kingdom (UK) | 1,416.4 | 1,311.0 |
| United States of America (US) | 288.0 | 348.4 |
| Australia | 93.5 | 147.9 |
| Home countries | 1,797.9 | 1,807.3 |
| Europe | 61.6 | 64.7 |
| Rest of world | 63.1 | 59.6 |
| Total revenue | 1,922.6 | 1,931.6 |
| Home countries revenue % | 94% | 94% |
| International (non-UK) revenue % | 26% | 32% |

161

Notes to the Consolidated

Financial Statements

2. Revenue from contracts with customers and other income (continued)

Revenue by major customer type

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| UK government | 1,290.4 | 1,205.3 |
| US government | 248.8 | 338.1 |
| Other | 383.4 | 388.2 |
| Total revenue | 1,922.6 | 1,931.6 |

‘Other’ does not contain any customers with revenue in excess of 10% of total Group revenue.

The following table shows the aggregate amount of revenue allocated to performance obligations that are unsatisﬁed (or

partially satisﬁed) as at the end of the reporting period:



All ﬁgures in £ million	FY27	FY28	FY29	FY30+	Total
Total forecast revenue allocated to unsatisﬁed performance obligations	1,347.2	744.7	458.0	1,871.5	4,421.4

Management expects that 30% (£1,347.2m) of revenue allocated to unsatisﬁed performance obligations as of 31 March

2026 will be recognised as revenue during the next reporting period. The amount disclosed above does not include variable

consideration which is constrained.

The following table shows the aggregate amount of revenue allocated to performance obligations that were unsatisﬁed (or

partially satisﬁed) as at the end of the prior reporting period:



All ﬁgures in £ million	FY26	FY27	FY28	FY29+	Total
Total forecast revenue allocated to unsatisﬁed performance obligations	1,393.3	645.8	453.0	353.0	2,845.1

Revenue of £195.2m was recognised during the year that was previously unrecognised as at the previous year end and

reported as a contract liability.

3. Segmental analysis

The analysis by business segment is presented in accordance with IFRS 8 Operating Segments, on the basis of those

reportable segments whose operating results are regularly reviewed by the Board (the Chief Operating Decision Maker

as deﬁned by IFRS 8) and are aligned with the Group’s strategic direction, determined with reference to the products and

services they provide, as follows:

EMEA Services provides technical assurance, test and evaluation and training services, underpinned by long-term

contracts. EMEA Services comprises the following business units which are not considered reportable segments as deﬁned

by IFRS 8: UK Defence, UK Intelligence and the Australia sector.

Global Solutions combines all other business units not aggregated within EMEA Services, including the QinetiQ US Sector

and Other Products (which includes QinetiQ Target Systems). Generally these business units (which are not considered

reportable segments as deﬁned by IFRS 8) deliver innovative solutions and products which include contract-funded

research and development and developing intellectual property in partnership with key customers and through internal

funding with potential for new revenue streams.

Operating segments



	FY26		FY25
	Revenue	Underlying	Revenue	Underlying
	from external	operating	from external	operating
All ﬁgures in £ million	customers	proﬁt 1,2	customers	proﬁt 1,2
EMEA Services	1,529.2	182.3	1,477.7	169.0
Global Solutions	393.4	35.6	453.9	16.4
Revenue/Operating proﬁt from segments 1,2	1,922.6	217.9	1,931.6	185.4
Research and development expenditure credits (RDEC)		29.3		30.0
Underlying operating proﬁt 2		247.2		215.4
Operating proﬁt margin from segments 2		11.3%		9.6%

The measure of proﬁt presented to the Chief Operating Decision Maker is Operating proﬁt from segments, stated before speciﬁc adjusting items

and research and development expenditure credits. The speciﬁc adjusting items are detailed in note 4.

Deﬁnitions of the Group’s ‘Alternative performance measures’ can be found on page 220.

Notes to the Consolidated

Financial Statements

3. Segmental analysis (continued)

162

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

No measure of segmental assets and liabilities is reported as this information is not regularly provided to the Chief Operating

Decision Maker. Transactions between segments are included within the operating proﬁt and revenue of each segment

as appropriate.

Reconciliation of segmental results to total proﬁt/(loss)



All ﬁgures in £ million	Note	FY26	FY25
Underlying operating proﬁt from segments 1,2		217.9	185.4
Research and development expenditure credits (RDEC)		29.3	30.0
Underlying operating proﬁt 2		247.2	215.4
Speciﬁc adjusting items operating loss	4	(77.4)	(305.9)
Operating proﬁt/(loss)		169.8	(90.5)
Net ﬁnance expense	7	(15.2)	(15.8)
Gain on business divestment	12	0.5	–
Proﬁt/(loss) before tax		155.1	(106.3)
Taxation expense	9	(47.6)	(79.4)
Proﬁt/(loss) for the year		107.5	(185.7)

The measure of proﬁt presented to the Chief Operating Decision Maker is Operating proﬁt from segments, stated before speciﬁc adjusting items

and research and development expenditure credits. The speciﬁc adjusting items are detailed in note 4.

Deﬁnitions of the Group’s ‘Alternative performance measures’ can be found on page 220.

Non-current assets* by geographic location



					Rest of
All ﬁgures in £ million	UK	US	Australia	Germany	world	Total
As at year ended 31 March 2026	483.1	340.6	36.4	63.9	6.9	930.9
As at year ended 31 March 2025	508.3	392.1	39.8	65.8	11.0	1,017.0

Excluding deferred tax, ﬁnancial instruments, equity accounted investments and net pension asset.

Depreciation and amortisation by business segment – excluding speciﬁc adjusting items

For the year ended 31 March 2026



	EMEA	Global
All ﬁgures in £ million	Services	Solutions	Total
Underlying depreciation and impairment of property, plant and equipment	69.7	6.9	76.6
Underlying amortisation and impairment of purchased or internally developed intangible assets	19.6	0.3	19.9
	89.3	7.2	96.5

For the year ended 31 March 2025



	EMEA	Global
All ﬁgures in £ million	Services	Solutions	Total
Underlying depreciation and impairment of property, plant and equipment	63.1	7.5	70.6
Underlying amortisation and impairment of purchased or internally developed intangible assets	7.5	8.2	15.7
	70.6	15.7	86.3

163

Notes to the Consolidated

Financial Statements

4. 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. Further explanation of this rationale is provided in note 35 (Accounting Policies).

Underlying measures of performance exclude speciﬁc adjusting items. The following speciﬁc adjusting items have been

(charged)/credited in the consolidated income statement:



All ﬁgures in £ million	Note	FY26	FY25
One-oﬀ period of digital investment		(23.6)	(20.8)
Restructuring costs and associated impacts		(30.2)	(64.5)
Acquisition and disposal related costs		–	(14.9)
Loss on sale of property		–	(36.6)
Speciﬁc adjusting items loss before interest, tax, depreciation and amortisation		(53.8)	(136.8)
Impairment of property		(0.5)	(1.0)
Impairment of goodwill	13	–	(143.9)
Amortisation of intangible assets arising from acquisitions		(23.1)	(24.2)
Speciﬁc adjusting items operating loss		(77.4)	(305.9)
Deﬁned beneﬁt pension scheme net ﬁnance income	27	2.4	1.0
Gain on business divestment	12	0.5	–
Speciﬁc adjusting items loss before tax		(74.5)	(304.9)
Tax impact of the above speciﬁc adjusting items	9	13.5	17.2
Derecognition of US deferred tax asset	9	–	(45.0)
Total speciﬁc adjusting items loss after tax		(61.0)	(332.7)

Reconciliation of underlying proﬁt for the year to total proﬁt/(loss) for the year



All ﬁgures in £ million	FY26	FY25
Underlying proﬁt after tax	168.5	147.0
Total speciﬁc adjusting items loss after tax	(61.0)	(332.7)
Total proﬁt/(loss) for the year	107.5	(185.7)

The total impact of speciﬁc adjusting items (which are excluded from underlying performance due to their distorting nature)

on operating proﬁt was a cost of £77.4m (FY25: cost of £305.9m). The improved position reﬂects that FY25 included the

goodwill impairment charge of £143.9m relating to the US Sector and acquisition, disposal and integration costs of £14.9m

associated with integrating the Avantus and Air Aﬀairs acquisitions into their respective sectors, while this year there are

no charges against these line items.

In FY26 the non-recurring cost of the discrete digital investment programme is £23.6m (FY25: £20.8m). We continue to

roll out this project to modernise the IT infrastructure to support our future growth ambitions. The non-recurring costs

are reported as speciﬁc adjusting items in the P&L, with ongoing recurring operating costs (such as licence costs and

overheads) remaining within underlying operating costs. This year is expected to be the ﬁnal year of digital investment.

Restructuring costs and other impacts were £30.2m (FY25: £64.5m). This includes the costs of eﬀiciency activity in UK and

Australia operations which is nearing completion, as well as the further non-cash charges in the US. The majority of these

costs were reported within the ﬁrst half of FY26 and were a consequence of continued reﬁnement of the market-facing

strategy and ongoing restructuring of the US Sector against challenging market conditions.

Also included within speciﬁc adjusting items are net ﬁnance income from pensions of £2.4m (FY25: £1.0m), amortisation

of acquisition intangibles of £23.1m (FY25: £24.2m) and the £0.5m gain on disposal of the Federal IT business in the US,

which completed during the ﬁrst half of the year.

Notes to the Consolidated

Financial Statements

164

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

5. Analysis of employee costs and numbers

The largest component of operating expenses is employee costs. The year-end and average monthly number of persons

employed by the Group, including Executive Directors, analysed by business segment, were:



	As at 31 March		Monthly average
	2026	2025	FY26	FY25
	Number	Number	Number	Number
EMEA Services	6,213	6,903	6,448	6,955
Global Solutions	1,165	1,500	1,274	1,575
Total employees	7,378	8,403	7,722	8,530

The aggregate payroll costs of these persons were as follows:



All ﬁgures in £ million	Note	FY26	FY25
Wages and salaries		533.9	569.4
Social security costs		60.1	54.5
Other pension costs		70.7	73.4
Share-based payments costs	29	11.5	9.8
Total employee costs		676.2	707.1

6. Key management personnel

The key management personnel of the Group during the year to 31 March 2026 comprise the Board of Directors and the

QinetiQ Leadership Team. Their remuneration and beneﬁts are summarised below:



All ﬁgures in £ million	FY26	FY25
Short-term employee remuneration including beneﬁts	8.4	6.9
Post-employment beneﬁts	0.1	0.1
Share-based payments costs	3.3	3.3
Total	11.8	10.3

Short-term employee remuneration and beneﬁts include salary, bonus and beneﬁts. Post-employment beneﬁts relate to

pension amounts.

The highest paid director is the Group Chief Executive Oﬀicer, details of whose remuneration are provided on page 129 of the

Directors’ Remuneration Report.

165

Notes to the Consolidated

Financial Statements

7. Finance income and expense

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| Bank interest receivable | 5.2 | 6.6 |
| Finance income before speciﬁc adjusting items | 5.2 | 6.6 |
| Amortisation of deferred ﬁnancing costs | (1.2) | (1.4) |
| Bank interest and commitment fees | (16.2) | (17.8) |
| Lease expense | (5.4) | (4.2) |
| Finance expense | (22.8) | (23.4) |
| Underlying net ﬁnance expense | (17.6) | (16.8) |
| Speciﬁc adjusting item: deﬁned beneﬁt pension scheme net ﬁnance income | 2.4 | 1.0 |
| Net ﬁnance expense | (15.2) | (15.8) |

8. Proﬁt/(loss) before tax

The following auditors’ remuneration has been charged in arriving at proﬁt/(loss) before tax:

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| Fees payable to the auditors and its associates: | | |
| Audit of the Group’s annual accounts | 1.0 | 1.0 |
| Audit of the accounts of subsidiaries of the Company | 0.9 | 0.9 |
| Total audit fees | 1.9 | 1.9 |
| Audit-related assurance services (Interim ﬁnancial statements) | 0.1 | 0.1 |
| Other assurance services | 0.1 | 0.1 |
| Total non-audit fees | 0.2 | 0.2 |
| Total auditors’ remuneration | 2.1 | 2.1 |

The following items have also been charged in arriving at proﬁt/(loss) before tax:

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| Cost of inventories expensed – underlying | 43.5 | 53.8 |
| Cost of inventories wrien down – speciﬁc adjusting item (restructuring costs and associated impacts) | – | 18.5 |
| Owned assets: depreciation | 59.7 | 57.2 |
| Leased assets: depreciation | 11.6 | 10.9 |
| Foreign exchange (gain)/loss | (0.6) | 0.4 |
| Research and development expenditure – customer funded contracts | 330.6 | 332.9 |
| Research and development expenditure – Group funded | 10.6 | 12.0 |

Notes to the Consolidated

Financial Statements

166

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

9. Taxation charge

| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | |
| | FY26 | | | FY25 | | |
| | | Speciﬁc | | | Speciﬁc | |
| | | adjusting | | | adjusting | |
| All ﬁgures in £ million | Underlying | items | Total | Underlying | Items | Total |
| Analysis of charge | | | | | | |
| Current UK tax expense/(income) | 65.1 | (6.2) | 58.9 | 51.0 | (6.2) | 44.8 |
| Current UK tax in respect of prior years | 0.9 | (2.5) | (1.6) | 2.2 | – | 2.2 |
| Overseas corporation tax | | | | | | |
| Current year | 0.2 | – | 0.2 | 3.5 | (0.9) | 2.6 |
| In respect of prior years | (2.0) | – | (2.0) | 1.0 | – | 1.0 |
| Current tax expense/(income) | 64.2 | (8.7) | 55.5 | 57.7 | (7.1) | 50.6 |
| Deferred tax (income)/expense | (5.5) | (4.8) | (10.3) | (5.0) | 5.3 | 0.3 |
| Deferred tax impact of derecognition of prior year | | | | | | |
| US deferred tax asset | – | – | – | – | 29.6 | 29.6 |
| Deferred tax in respect of prior years | 2.4 | – | 2.4 | (1.1) | – | (1.1) |
| Deferred tax (income)/expense | (3.1) | (4.8) | (7.9) | (6.1) | 34.9 | 28.8 |
| Taxation expense/(income) | 61.1 | (13.5) | 47.6 | 51.6 | 27.8 | 79.4 |
| Factors aﬀecting tax expense in the year | | | | | | |
| Principal factors reducing the Group’s current year tax charge | | | | | | |
| below the UK statutory rate are explained below: | | | | | | |
| Proﬁt/(loss) before tax | 229.6 | (74.5) | 155.1 | 198.6 | (304.9) | (106.3) |
| Tax on proﬁt/(loss) before tax at 25%

(FY25: 25%) | 57.4 | (18.6) | 38.8 | 49.7 | (76.2) | (26.5) |
| Eﬀect of: | | | | | | |
| Expenses not deductible for tax purposes and | | | | | | |
| non-taxable items | – | – | – | 0.8 | 1.2 | 2.0 |
| Derecognition of US deferred tax asset | 2.4 | 4.6 | 7.0 | – | 45.0 | 45.0 |
| Non-deductible US goodwill impairment | – | – | – | – | 36.0 | 36.0 |
| Non-recognition of deductible restructuring impacts | – | 4.6 | 4.6 | – | 13.1 | 13.1 |
| Non-deductible loss on sale of property | – | – | – | – | 9.1 | 9.1 |
| Tax in respect of prior years | 1.3 | (2.5) | (1.2) | 2.0 | – | 2.0 |
| Diﬀerent tax rates in overseas jurisdictions | – | (1.6) | (1.6) | (0.9) | (0.4) | (1.3) |
| Taxation expense/(income) | 61.1 | (13.5) | 47.6 | 51.6 | 27.8 | 79.4 |
| Eﬀective tax rate | 26.6% | | 30.7% | 26.0% | | (74.7)% |

The total tax charge was £47.6m (FY25: £79.4m). The underlying tax charge was £61.1m (FY25: £51.6m), on a higher underlying

proﬁt before tax, with an underlying eﬀective tax rate of 26.6% for the year ended 31 March 2026 (FY25: 26.0%). The

underlying eﬀective tax rate is above the UK statutory rate of 25% (FY25: 25%), primarily as a result of unrecognised tax

deductions and prior year adjustments to returns.

Tax on speciﬁc adjusting items

The total speciﬁc adjusting items tax credit was £13.5m (FY25 charge: £27.8m). The tax credit arises primarily due to the

deductible restructuring and digital investment costs, amortisation of acquired intangibles and oﬀset by a prior year

adjustment to the non-deductible loss on sale of Cody Technology Park.

Amounts recognised directly in equity

Current and deferred tax not recognised in net proﬁt or loss or other comprehensive income but directly credited to equity

was £0.7m (FY25: £0.8m).

167

Notes to the Consolidated

Financial Statements

9. Taxation charge (continued)

Factors aﬀecting future tax charges

The underlying eﬀective tax rate is expected to remain marginally above the UK statutory rate, subject to the impact of any

tax legislation changes and the geographic mix of proﬁts. The Group has engaged with advisers to assess any potential

impact on the tax charge by the UK’s enactment of the OECD’s Global Anti-Base Erosion Model Rules (Pillar Two). The Group

performed an assessment of the potential exposure to Pillar Two income taxes based on current period data. The Group

believes it qualiﬁes for one of the transitional safe harbours provided in the rules in all territories in which it operates. The

Group has not accrued a Pillar Two top-up tax charge for FY26. The Group has applied the temporary exemption issued by

the International Accounting Standards Board from the accounting for deferred taxes under IAS 12 and neither recognises

nor discloses information about deferred taxes related to Pillar Two income taxes. The Group does not expect a material

quantitative impact from Pillar Two legislation; however, there are expected to be signiﬁcant compliance obligations.

Tax risk management and tax cash

For details of the Group’s approach to tax risk management and discussion of tax cash ﬂows in the year, see ‘Additional

Financial Information’.

10. Earnings/(loss) per share

Basic earnings/(loss) per share

(EPS) is calculated by dividing the proﬁt aributable to equity shareholders by the weighted

average number of ordinary shares in issue during the year. The weighted average number of shares used excludes those

shares bought by the Group and held as own shares (see note 28). For diluted earnings (but not losses

) per share the

weighted average number of shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares

arising from unvested share-based awards including share options.

Weighted average and diluted number of shares



		FY26	FY25
Weighted average number of shares	Million	535.4	563.4
Eﬀect of dilutive securities	Million	7.9	7.4
Diluted number of shares	Million	543.3	570.8

Underlying basic earnings per share ﬁgures are presented below, in addition to the basic and diluted earnings per share,

because the Directors consider this gives a more relevant indication of underlying business performance and reﬂects the

adjustments to basic earnings per share for the impact of speciﬁc adjusting items (see note 4) and tax thereon.

Underlying EPS



		FY26	FY25
Proﬁt/(loss) aributable to the owners of the Company	£ million	107.5	(185.7)
Remove loss after tax in respect of speciﬁc adjusting items	£ million	61.0	332.7
Underlying proﬁt after taxation	£ million	168.5	147.0
Weighted average number of shares	Million	535.4	563.4
Underlying basic EPS	Pence	31.5	26.1
Diluted number of shares	Million	543.3	570.8
Underlying diluted EPS	Pence	31.0	25.8

Basic and diluted EPS



		FY26	FY25
Proft/(loss) aributable to the owners of the Company	£ million	107.5	(185.7)
Weighted average number of shares	Million	535.4	563.4
Basic EPS	Pence	20.1	(33.0)
Diluted number of shares	Million	543.3	563.4
Diluted EPS	Pence	19.8	(33.0)

Notes to the Consolidated

Financial Statements

168

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

11. Dividends

An analysis of the dividends paid and proposed in respect of the years ended 31 March 2026 and 31 March 2025 is

provided below:


	Pence		Date paid/
	per share	£m	payable
Interim 2026	3.00	15.9	Feb 2026*
Final 2026 (proposed)	8.00	40.7	Aug 2026
Total for the year ended 31 March 2026	11.00	56.6
Interim 2025	2.80	15.7	Feb 2025
Final 2025	6.05	32.8	Aug 2025*
Total for the year ended 31 March 2025	8.85	48.5

Total cash paid in the year to 31 March 2026 was £48.7m (FY25: £47.9m).

The proposed ﬁnal dividend in respect of the year ended 31 March 2026 will be paid on 20 August 2026. The ex-dividend date

is 23 July 2026 and the record date is 24 July 2026.

12. Business divestment

The gain on business divestment of £0.5m (FY25: £nil) relates to the disposal of the non-core Federal IT Services business,

as part of the US restructuring programme, in the ﬁrst half of the year. Proceeds received in the period, net of transaction

related costs of £2.5m, were £17.9m. The carrying value of the business was £17.4m. All consideration received was in cash

and there is no deferred or contingent consideration.

13. Goodwill

| | | |
| --- | --- | --- |
| | 31 March | 31 March |
| All ﬁgures in £ million | 2026 | 2025 |
| Cost | | |
| At 1 April | 541.0 | 551.7 |
| Disposals | (22.3) | – |
| Foreign exchange | (7.4) | (10.7) |
| At 31 March | 511.3 | 541.0 |
| Accumulated impairment | | |
| At 1 April | (291.2) | (150.3) |
| Disposals | 12.9 | – |
| Impairment charge | – | (143.9) |
| Foreign exchange | 3.9 | 3.0 |
| At 31 March | (274.4) | (291.2) |
| Net book value at 31 March | 236.9 | 249.8 |

Goodwill analysed by cash-generating unit (CGU)

Goodwill is allocated across ﬁve cash-generating units within the EMEA Services segment and two CGUs within the Global

Solutions segment. During the year, the Group determined that the Australia CGU is more appropriately deﬁned at the

Sector level. This avoids the need to allocate goodwill on an increasingly arbitrary basis and represents the lowest level

at which business performance is now monitored by management. This followed the completion of the Air Aﬀairs post-

acquisition integration activities and the cash inﬂows no longer being independently generated.

169

Notes to the Consolidated

Financial Statements

13. Goodwill (continued)

The full list of CGUs that have goodwill allocated to them is as follows:


		31 March	31 March
All ﬁgures in £ million	Primary reporting segments	2026	2025
US Sector	Global Solutions	167.5	181.1
Target Systems	Global Solutions	24.0	24.0
Naimuri	EMEA Services	14.8	14.8
Inzpire	EMEA Services	11.7	11.7
Australia Sector (previously QinetiQ Australia PTY and Air Aﬀairs Australia)	EMEA Services	8.4	7.8
QinetiQ Training & Simulation	EMEA Services	7.8	7.8
Germany	EMEA Services	2.7	2.6
Net book value at 31 March		236.9	249.8

Goodwill is aributable to the excess of consideration over the fair value of net assets acquired and includes expected

synergies, future growth prospects and employee knowledge, expertise and security clearances. The Group tests each

CGU for impairment annually, or more frequently if there are indications that goodwill might be impaired. Impairment testing

is dependent on management’s estimates and judgements, particularly as they relate to the forecasting of future cash

ﬂows, the discount rates selected and expected long-term growth rates.

During the prior year an impairment charge was recognised in respect of the combined US Sector CGU. Given that this reset

the amount of headroom to nil, the headroom remains tight and downward revisions to the key assumptions (which would be

reasonably possible) could result in a further impairment. There are no likely variations in the key assumptions used for any

of the other CGUs which would lead to an impairment being recognised.

Key assumptions

Cash ﬂows

The value in use and fair value less costs to dispose calculations use discounted future cash ﬂows based on ﬁnancial plans

approved by the Board covering a ﬁve-year period (aligned with the Group’s Integrated Strategic Plan process and the

longer-term viability assessment period). These are ‘boom-up’ forecasts based on detailed analysis by contract for the

revenue under contract and by opportunity for the pipeline, or with growth rates assumed based on market benchmarks.

Pipeline opportunities are categorised as ‘base case’ and ‘high case’ by management and only ‘base case’ opportunities are

included in the ﬁnancial plans used for the value in use calculations.

Cash ﬂows beyond these periods are extrapolated based on the last year of the plans, with a terminal growth-rate

assumption applied. While the Group will likely be impacted by climate change in the future to an extent, the impacts on

future cash ﬂows used in the value in use calculations are not considered to be material.

Terminal growth rates and discount rates

The speciﬁc plans for each of the CGUs have been extrapolated using the terminal growth rates as detailed in the following

table. Growth rates are based on management’s estimates which take into consideration the long-term nature of the

industry in which the CGUs operate and external forecasts as to the likely growth of the industry in the longer term. The

discount rates used are calculated based on the weighted average cost of capital of a portfolio of comparable companies,

adjusted for risks speciﬁc to the market characteristics of each CGU, and converted to a pre-tax basis where relevant. This

is considered an appropriate estimate of a market participant discount rate.


						QinetiQ
All ﬁgures %		Target		Australia	QinetiQ	Training &
31 March 2026: (2025)	US Sector*	Systems	Inzpire	Sector	Germany	Simulation	Naimuri
Terminal growth rate	2.5 (2.3)	2.3 (2.3)	2.3 (2.3)	2.5 (2.4)	2.0 (2.1)	2.3 (2.3)	2.3 (2.3)
Discount rate*	9.5 (9.4)	11.9 (12.2)	11.7 (12.1)	12.4 (13.8)	10.3 (9.4)	11.8 (12.2)	11.7 (12.1)

All discount rates stated are on a pre-tax basis, except for the US which is on a post-tax basis per the fair value less costs to dispose calculation.

Notes to the Consolidated

Financial Statements

13. Goodwill (continued)

170

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Sensitivity analysis shows that the value of the terminal year cash ﬂow, the discount rate and the terminal growth rates have

a signiﬁcant impact on the value of the discounted cash ﬂows. Sensitivities are provided below for each of the CGUs.

Results of impairment testing by CGU

US Sector

The carrying value of the goodwill for the US Sector CGU as at 31 March 2026 was £167.5m (2025: £181.1m). The recoverable

amount of this CGU as at 31 March 2026 is based on a fair value less costs to dispose calculation which is derived from the

latest cash ﬂow projections. This beer reﬂects the transaction structure and tax treatment of the historical acquisitions

and hence gives a higher value than the equivalent value in use calculation. The calculation uses the assumptions noted

above and is higher than the carrying value of the net operating assets (of £395.0m). Our US operations have had a more

stable year and successfully completed a major restructuring programme.

The key assumption underpinning the recoverable amount is the revenue growth applied over the period of the calculation

which is required to achieve the terminal year cash ﬂows. The growth is based on market growth rates for the high growth

segments in which the business operates, as well as reﬂecting the expectation of securing a number of key contract

renewals and signiﬁcant pipeline opportunities. In the event that assumed contract renewals and signiﬁcant pipeline

opportunities are not secured in line with the plan, this will result in a future signiﬁcant impairment charge. A 400 basis

point reduction in the compound annual revenue growth rate or a 100 basis point reduction in operating margins over

the plan period, which are considered reasonably possible changes, would reduce the recoverable amount and result in

an impairment of £47.9m and £30.6m respectively. A decrease in the terminal growth rate of 0.5% would not result in an

impairment however an increase in the discount rate of 1%, which is considered a reasonably possible change, would cause

an impairment of £28.5m.

14. Other intangible assets

| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | |
| | Acquired intangibles | | | Other | |
| | Customer | Other | Development | internally | |
| All ﬁgures in £ million | relationships | acquired | costs | generated

1 | Total |
| Cost | | | | | |
| At 1 April 2025 | 297.9 | 90.9 | 61.9 | 75.3 | 526.0 |
| Reclassiﬁcations from PPE | – | – | 5.8 | 0.5 | 6.3 |
| Reclassiﬁcations between categories | – | – | 4.2 | (4.2) | – |
| Additions – internally developed

2 | – | – | 1.7 | 4.5 | 6.2 |
| Additions – purchased

2 | – | – | – | 6.7 | 6.7 |
| Disposals | – | – | (3.6) | (9.7) | (13.3) |
| Disposal divestments | (15.3) | – | – | – | (15.3) |
| Foreign exchange | (3.2) | (0.4) | – | – | (3.6) |
| At 31 March 2026 | 279.4 | 90.5 | 70.0 | 73.1 | 513.0 |
| Accumulated amortisation and impairment | | | | | |
| At 1 April 2025 | (96.6) | (69.8) | (33.6) | (32.1) | (232.1) |
| Amortisation charge for year | (18.1) | (5.1) | (11.1) | (2.6) | (36.9) |
| Disposals | – | – | 1.2 | 4.0 | 5.2 |
| Disposal divestments | 6.4 | – | – | – | 6.4 |
| Impairment | – | – | – | (6.1) | (6.1) |
| Foreign exchange | (0.3) | – | 0.2 | – | (0.1) |
| At 31 March 2026 | (108.6) | (74.9) | (43.3) | (36.8) | (263.6) |
| Net book value at 31 March 2026 | 170.8 | 15.6 | 26.7 | 36.3 | 249.4 |

Includes Assets In Course Of Construction of closing net book value of £36.4m as at 31 March 2026 (2025: £31.7m).

Additions per the table above are diﬀerent to the capital expenditure included in the cash ﬂow statement due to the relative timing of cash

payments compared to the recognition of balance sheet assets.

171

Notes to the Consolidated

Financial Statements

14. Other intangible assets (continued)

‘Other acquired’ consists primarily of intellectual property and existing technology arising on past acquisition of

businesses. Signiﬁcant individual assets from past acquisitions include: customer relationships associated with US

Avantus, US C5ISR, Germany and QinetiQ Training & Simulation Limited (NBV: £142.8m; £7.4m; £14.7m; £1.8m respectively)

with remaining amortisation periods of approximately 13 years, 4 years, 7 years and 5 years respectively, and acquired

technology associated with US Avantus, US C5ISR, Germany and QinetiQ Training & Simulation Limited (£0.7m; £6.3m; £2.5m;

£1.0m respectively) all with remaining amortisation periods of approximately ﬁve years.



	Acquired intangibles			Other
	Customer	Other	Development	internally
All ﬁgures in £ million	relationships	acquired	costs	generated	Total
Cost
At 1 April 2024	303.8	92.6	51.1	80.4	527.9
Reclassiﬁcations from PPE	–	–	8.1	0.6	8.7
Reclassiﬁcations between categories	–	–	0.1	(0.1)	–
Additions – internally developed*	–	–	2.5	9.0	11.5
Additions – purchased*	–	–	1.2	0.4	1.6
Disposals	–	–	(0.7)	(14.3)	(15.0)
Foreign exchange	(5.9)	(1.7)	(0.4)	(0.7)	(8.7)
At 31 March 2025	297.9	90.9	61.9	75.3	526.0
Accumulated amortisation and impairment
At 1 April 2024	(79.6)	(65.6)	(24.1)	(36.8)	(206.1)
Amortisation charge for year	(18.6)	(5.6)	(6.2)	(5.5)	(35.9)
Disposals	–	–	0.6	10.2	10.8
Impairment	–	–	(4.0)	–	(4.0)
Foreign exchange	1.6	1.4	0.1	–	3.1
At 31 March 2025	(96.6)	(69.8)	(33.6)	(32.1)	(232.1)
Net book value at 31 March 2025	201.3	21.1	28.3	43.2	293.9

Additions per the table above are diﬀerent to the capital expenditure included in the cash ﬂow statement due to the relative timing of cash

payments compared to the recognition of balance sheet assets.

15. Property, plant and equipment

| | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | |
| | Owned assets | | | | Right-of-use assets | | | |
| | | Plant, | Computers | | | Plant, | Computers | |
| | Land and | machinery | and oﬀice | Assets under | Land and | machinery | and oﬀice | |
| All ﬁgures in £ million | buildings | and vehicles | equipment | construction | buildings | and vehicles | equipment | Total |
| Cost | | | | | | | | |
| At 1 April 2025 | 169.9 | 345.2 | 155.7 | 129.4 | 99.9 | 5.7 | 0.4 | 906.2 |
| Reclassiﬁcations to intangibles | – | 0.8 | – | (7.1) | – | – | – | (6.3) |
| Reclassiﬁcations between categories | 37.5 | 13.2 | 5.4 | (56.1) | – | – | – | – |
| Additions – purchased* | 0.3 | 5.4 | 1.3 | 47.9 | 13.2 | 0.4 | – | 68.5 |
| Disposals | (7.7) | (18.7) | (11.0) | (4.4) | (8.2) | – | – | (50.0) |
| Business divestment | – | – | – | – | (5.5) | – | – | (5.5) |
| Foreign exchange | (0.1) | 3.0 | 0.3 | 0.5 | (0.1) | 0.1 | – | 3.7 |
| At 31 March 2026 | 199.9 | 348.9 | 151.7 | 110.2 | 99.3 | 6.2 | 0.4 | 916.6 |
| Accumulated depreciation and | | | | | | | | |
| impairment | | | | | | | | |
| At 1 April 2025 | (91.3) | (202.1) | (94.9) | – | (40.7) | (3.5) | (0.4) | (432.9) |
| Charge | (13.3) | (23.4) | (23.0) | – | (11.0) | (0.6) | – | (71.3) |
| Disposals | 7.1 | 15.4 | 9.7 | – | 4.1 | – | – | 36.3 |
| Business divestment | – | – | – | – | 2.0 | – | – | 2.0 |
| Impairment | (3.3) | (2.0) | – | – | (0.5) | – | – | (5.8) |
| Foreign exchange | 0.1 | (0.5) | – | – | – | 0.1 | – | (0.3) |
| At 31 March 2026 | (100.7) | (212.6) | (108.2) | – | (46.1) | (4.0) | (0.4) | (472.0) |
| Net book value at 31 March 2026 | 99.2 | 136.3 | 43.5 | 110.2 | 53.2 | 2.2 | – | 444.6 |

Additions per the table above are diﬀerent to the capital expenditure included in the cash ﬂow statement due to the relative timing of cash

payments compared to the recognition of balance sheet assets.

Notes to the Consolidated

Financial Statements

15. Property, plant and equipment (continued)

172

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

During the prior year a £36.6m loss was recognised on the sale and leaseback of Cody Technology Park; this was included

within operating costs as a speciﬁc adjusting item (see note 4). While the Group will likely be impacted by climate change in

the future to an extent, the impact on the carrying value of property, plant and equipment is not considered to be material.



	Owned assets				Right-of-use assets
		Plant,	Computers			Plant,	Computers
	Land and	machinery	and oﬀice	Assets under	Land and	machinery	and oﬀice
All ﬁgures in £ million	buildings	and vehicles	equipment	construction	buildings	and vehicles	equipment	Total
Cost
At 1 April 2024	375.7	324.4	140.9	142.3	92.4	3.4	0.4	1,079.5
Reclassiﬁcations to intangibles	–	–	(0.9)	(7.8)	–	–	–	(8.7)
Reclassiﬁcations/transfers	29.7	23.7	15.4	(68.8)	–	–	–	–
Additions – purchased*	5.9	24.8	5.6	67.5	23.9	2.3	–	130.0
Disposals	(240.6)	(25.0)	(4.7)	(3.6)	(14.5)	–	–	(288.4)
Foreign exchange	(0.8)	(2.7)	(0.6)	(0.2)	(1.9)	–	–	(6.2)
At 31 March 2025	169.9	345.2	155.7	129.4	99.9	5.7	0.4	906.2
Accumulated depreciation and
impairment
At 1 April 2024	(227.0)	(194.3)	(78.4)	–	(44.4)	(3.2)	(0.4)	(547.7)
Charge	(13.7)	(22.7)	(20.8)	–	(10.6)	(0.3)	–	(68.1)
Disposals	149.3	16.5	4.0	–	14.5	–	–	184.3
Impairment	–	(2.5)	–	–	(1.0)	–	–	(3.5)
Foreign exchange	0.1	0.9	0.3	–	0.8	–	–	2.1
At 31 March 2025	(91.3)	(202.1)	(94.9)	–	(40.7)	(3.5)	(0.4)	(432.9)
Net book value at 31 March 2025	78.6	143.1	60.8	129.4	59.2	2.2	–	473.3

Additions per the table above are diﬀerent to the capital expenditure included in the cash ﬂow statement due to the relative timing of cash

payments compared to the recognition of balance sheet assets.

16. Equity accounted investments


	31 March 2026		31 March 2025
	Joint		Joint
	Ventures’	Group net	Ventures’	Group net
	ﬁnancial	share of Joint	ﬁnancial	share of Joint
All ﬁgures in £ million	position	Ventures	position	Ventures
Non-current assets	0.5	0.4	0.9	0.5
Current assets	2.5	2.1	3.4	2.4
	3.0	2.5	4.3	2.9
Current liabilities	(0.3)	(0.2)	(0.3)	(0.1)
Non-current liabilities	(1.6)	(1.2)	(1.5)	(0.7)
	(1.9)	(1.4)	(1.8)	(0.8)
Net assets of joint ventures	1.1	1.1	2.5	2.1

The loss from the Group’s share of joint ventures for the year ended 31 March 2026 was £1.0m (FY25: proﬁt of £0.3m).

173

Notes to the Consolidated

Financial Statements

17. Deferred tax

For the year ended 31 March 2026

Deferred tax asset



		Carried
	Short-term	forward
	timing	interest	Lease
All ﬁgures in £ million	diﬀerences	expense	liabilities	Tax losses	Total
At 1 April 2025	12.1	2.1	8.8	4.8	27.8
Credited/(charged) to income statement	(2.7)	2.3	(0.9)	4.7	3.4
Credited to other comprehensive income	–	–	–	–	–
Credited to equity	0.2	–	–	–	0.2
Foreign exchange	0.5	0.2	–	0.5	1.2
Gross deferred tax asset at 31 March 2026	10.1	4.6	7.9	10.0	32.6
Less: liability available for oﬀset					(14.4)
Net deferred tax asset at 31 March 2026					18.2

Deferred tax liability



		Owned
		property,
	Pension	plant &	Right-of-use	Acquisition
All ﬁgures in £ million	surplus	equipment	assets	intangibles	Total
At 1 April 2025	(14.6)	(82.8)	(7.8)	(12.9)	(118.1)
Credited/(charged) to income statement	(0.7)	1.0	1.6	2.6	4.5
Charged to other comprehensive income	(2.6)	–	–	–	(2.6)
Foreign exchange	–	–	–	(0.4)	(0.4)
Gross deferred tax liability at 31 March 2026	(17.9)	(81.8)	(6.2)	(10.7)	(116.6)
Less: asset available for oﬀset					14.4
Net deferred tax liability at 31 March 2026					(102.2)

Deferred tax has been calculated at the rate at which the timing diﬀerence is expected to reverse using enacted future

statutory rates. Deferred tax assets and liabilities are oﬀset where there is a legally enforceable right to oﬀset current tax

assets and liabilities and where the deferred tax balances relate to the same taxation authority.

At 31 March 2026 the Group had unused tax losses and carried forward interest expenses of £383.1m (2025: £305.3m) which

are available for oﬀset against future taxable proﬁts.

During FY25, with our US operations performing below expectations, the change in the Administration and the change in

US Sector CEO, re-alignment of strategy and required restructuring, there was a material impact on the future projections

of the US business. As a result, in FY25 the Group derecognised the deferred tax assets previously recognised in respect

of net operating losses in FY25. There is continued derecognition in FY26 due to the uncertainty over future taxable proﬁts

for the US business. No deferred tax asset is recognised in respect of £236.8m (2025: £183.8m) of US net operating losses

and £86.2m (2025: £85.9m) of US excess interest. There is also no deferred tax asset recognised in respect of £9.5m

(2025: £8.8m) of UK capital losses due to uncertainty over the timing and extent of their utilisation. Full recognition of the

US and UK losses would increase the deferred tax asset by £92.4m. Of the £236.8m (2025: £183.8m) of US net operating

losses, £30.3m (2025: £31.1m) are time-limited of which £21.4m will expire in 2035 and £8.9m in 2036.

Deferred tax assets in respect of losses and excess interest are recognised on the balance sheet of £14.6m (2025: £6.9m),

being £3.6m in respect of £15.7m of Canadian net operating losses and excess interest, £7.2m in respect of £22.3m of German

trade losses and excess interest, and £3.8m in respect of £12.7m of Australian trade losses and excess interest.

The Group made overseas losses in the year ended 31 March 2026 and recognition of deferred tax assets is dependent on

future forecast taxable proﬁts. The Group has reviewed the latest forecasts for these businesses which incorporate the

unsystematic risks of operating in the defence business. In the period beyond the ﬁve-year forecast we have reviewed the

terminal period proﬁts and, based on these and our expectations for these businesses, we believe it is probable the losses,

with the exception of the US and UK, will be fully utilised over the next 3–10 years. A 10% change in the forecast proﬁts would

alter the utilisation period by 2 years.

Notes to the Consolidated

Financial Statements

17. Deferred tax (continued)

174

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

There are no material temporary diﬀerences associated with investments in subsidiaries or interests in joint ventures for

which deferred tax liabilities have not been recognised.

For the year ended 31 March 2025

Deferred tax asset



		Carried
	Short-term	forward
	timing	interest	Lease	Tax
All ﬁgures in £ million	diﬀerences	expense	liabilities	losses	Total
At 1 April 2024	20.1	1.0	8.9	35.9	65.9
Credited to income statement	(8.8)	1.1	–	(30.7)	(38.4)
Charged to other comprehensive income	1.8	–	–	–	1.8
Foreign exchange	(1.0)	–	(0.1)	(0.4)	(1.5)
Gross deferred tax asset at 31 March 2025	12.1	2.1	8.8	4.8	27.8
Less: liability available for oﬀset					(17.1)
Net deferred tax asset at 31 March 2025					10.7

Deferred tax liability



		Owned
		property,
	Pension	plant &	Right-of-use	Acquisition
All ﬁgures in £ million	surplus	equipment	assets	intangibles	Total
At 1 April 2024	(9.6)	(80.4)	(7.6)	(26.0)	(123.6)
Charged to income statement	(0.6)	(2.4)	–	12.6	9.6
Credited to other comprehensive income	(4.4)	–	–	–	(4.4)
Foreign exchange	–	–	(0.2)	0.5	0.3
Gross deferred tax liability at 31 March 2025	(14.6)	(82.8)	(7.8)	(12.9)	(118.1)
Less: asset available for oﬀset					17.1
Net deferred tax liability at 31 March 2025					(101.0)

18. Current tax



	31 March	31 March
All ﬁgures in £ million	2026	2025
Current tax receivable	0.4	1.6
Current tax payable	(13.4)	(3.6)
Net current tax payable	(13.0)	(2.0)

19. Inventories

| | | |
| --- | --- | --- |
| | |
| | 31 March | 31 March |
| All ﬁgures in £ million | 2026 | 2025 |
| Raw materials | 28.1 | 28.7 |
| Work in progress | 7.1 | 8.7 |
| Finished goods | 38.5 | 33.3 |
| Total inventories | 73.7 | 70.7 |

175

Notes to the Consolidated

Financial Statements

20. Trade and other receivables

| | | |
| --- | --- | --- |
| | |
| | 31 March | 31 March |
| All ﬁgures in £ million | 2026 | 2025 |
| Trade receivables | 143.3 | 148.9 |
| Contract assets | 178.2 | 154.5 |
| Other receivables | 44.2 | 48.1 |
| Prepayments | 29.2 | 36.9 |
| Total trade and other receivables | 394.9 | 388.4 |

Trade and other receivables includes assets that are realised as part of the business’s normal operating cycle, including

amounts of £12.1m (2025: £nil) that are not expected to be realised within 12 months of the year end. Credit risk is limited as

a result of the high percentage of revenue derived from UK and US government agencies. Accordingly, the Directors believe

that no credit provision in excess of the allowance for doubtful debts is required. As at 31 March 2026 the Group carried a loss

allowance in respect of expected credit risk of £1.6m (2025: £1.4m).

Contract assets decreased during the year due to the timing of invoicing. Contract assets represents unbilled amounts

recoverable under customer contracts (refer to accounting policies, note 35).

Ageing of receivables and associated loss allowance for expected credit risk

As at 31 March 2026



		Up to 30 days	30-120 days	>120 days
	Current	past due	past due	past due	Total
Gross carrying amount – trade receivables (£m)	126.1	11.1	4.7	3.0	144.9
Gross carrying amount – contract assets (£m)	178.2	–	–	–	178.2
Expected loss rate (%)	0.0%	0.0%	0.0%	53.3%	0.5%
Loss allowance (£m)	–	–	–	1.6	1.6

As at 31 March 2025



		Up to 30 days	30-120 days	>120 days
	Current	past due	past due	past due	Total
Gross carrying amount – trade receivables (£m)	120.1	23.1	2.4	4.7	150.3
Gross carrying amount – contract assets (£m)	154.5	–	–	–	154.5
Expected loss rate (%)	0.0%	0.0%	0.0%	29.8%	0.5%
Loss allowance (£m)	–	–	–	1.4	1.4

Movements in the provision for expected credit loss



	FY26		FY25
	Trade	Contract	Trade	Contract
All ﬁgures in £ million	receivables	assets	receivables	assets
At 1 April	1.4	–	1.7	–
Increase in loss allowance recognised in income statement	0.3	–	0.2	–
Unutilised amount reversed through income statement	(0.1)	–	(0.1)	–
Utilised (receivables wrien oﬀ)	–	–	(0.4)	–
At 31 March	1.6	–	1.4	–

The maximum exposure to credit risk in relation to trade and other receivables at the reporting date is the fair value of trade

and other receivables. The Group does not hold any collateral as security.

Notes to the Consolidated

Financial Statements

176

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

21. Trade and other payables

| | | |
| --- | --- | --- |
| | |
| | 31 March | 31 March |
| All ﬁgures in £ million | 2026 | 2025 |
| Trade payables | 184.2 | 152.1 |
| Other tax and social security | 54.6 | 56.7 |
| Contract liabilities | 158.3 | 207.0 |
| Accrued expenses and other payables | 188.5 | 181.7 |
| Total current trade and other payables | 585.6 | 597.5 |
| Contract liabilities | 5.6 | 6.4 |
| Other payables | 4.0 | 2.0 |
| Total non-current trade and other payables | 9.6 | 8.4 |
| Total trade and other payables | 595.2 | 605.9 |

Trade payables include £59.4m (2025: £38.0m) of goods received not invoiced accruals where invoices had not been

processed as at the year end. Contract liabilities, which are inﬂuenced by the timing of revenue recognition and invoicing on

contracts, were broadly consistent with the prior year.

22. Provisions

For the year ended 31 March 2026



All ﬁgures in £ million	Property	Other	Total
At 1 April 2025	24.8	34.9	59.7
Created in year	0.6	15.9	16.5
Released in year	(0.1)	(1.6)	(1.7)
Utilised in year	(2.4)	(21.5)	(23.9)
Foreign exchange	–	0.1	0.1
At 31 March 2026	22.9	27.8	50.7
Current liability	20.1	14.0	34.1
Non-current liability	2.8	13.8	16.6
At 31 March 2026	22.9	27.8	50.7

For the year ended 31 March 2025



All ﬁgures in £ million	Property	Other	Total
At 1 April 2024	2.5	17.0	19.5
Created in year	24.3	21.7	46.0
Released in year	–	(1.2)	(1.2)
Utilised in year	(2.0)	(2.5)	(4.5)
Foreign exchange	–	(0.1)	(0.1)
At 31 March 2025	24.8	34.9	59.7
Current liability	23.0	33.2	56.2
Non-current liability	1.8	1.7	3.5
At 31 March 2025	24.8	34.9	59.7

Property provisions relate to obligations relating to the sale and leaseback transaction, dilapidations and under-utilised

properties. The under-utilised property provision is aﬀected by the timing of when properties can be sub-let and the

proportion of space that can be sub-let. Other provisions includes £10.7m (2025: £12.1m) in respect of a civil liability for the

Pendine incident. There is an equivalent balance in Other Receivables for an insurance recoverable. There is uncertainty

around the timing of the utilisation of this balance although this will not impact cash or the P&L. Other provisions also

includes £8.4m (31 March 2025: £14.3m) relating to the group-wide restructuring programme, the cost of which is included

as a speciﬁc adjusting item. The remaining balance consists of liabilities relating to legal, regulatory and other maers,

the magnitude and timing of utilisation of which are determined by a variety of factors.

177

Notes to the Consolidated

Financial Statements

23. Net debt

| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | |
| | 31 March 2026 | | | 31 March 2025 | | |
| All ﬁgures in £ million | Assets | Liabilities | Net | Assets | Liabilities | Net |
| Current ﬁnancial assets/(liabilities) | | | | | | |
| Deferred ﬁnancing costs | 1.2 | – | 1.2 | 1.3 | – | 1.3 |
| Lease liabilities | – | (12.4) | (12.4) | – | (13.3) | (13.3) |
| Derivative ﬁnancial instruments | 2.1 | (1.1) | 1.0 | 3.6 | (1.8) | 1.8 |
| Total current ﬁnancial assets/(liabilities) | 3.3 | (13.5) | (10.2) | 4.9 | (15.1) | (10.2) |
| Non-current assets/(liabilities) | | | | | | |
| Deferred ﬁnancing costs | 0.3 | – | 0.3 | 1.0 | – | 1.0 |
| Borrowings – Term loan | – | (333.6) | (333.6) | – | (335.0) | (335.0) |
| Lease liabilities | – | (76.7) | (76.7) | – | (80.6) | (80.6) |
| Derivative ﬁnancial instruments | 2.0 | (0.1) | 1.9 | 2.0 | (1.0) | 1.0 |
| Total non-current ﬁnancial assets/(liabilities) | 2.3 | (410.4) | (408.1) | 3.0 | (416.6) | (413.6) |
| Total ﬁnancial assets/(liabilities) | 5.6 | (423.9) | (418.3) | 7.9 | (431.7) | (423.8) |
| Cash | 91.8 | – | 91.8 | 120.2 | – | 120.2 |
| Cash equivalents | 167.4 | – | 167.4 | 170.4 | – | 170.4 |
| Total cash and cash equivalents | 259.2 | – | 259.2 | 290.6 | – | 290.6 |
| Total net debt as deﬁned by the Group | | | (159.1) | | | (133.2) |

At 31 March 2026 the Group held £0.6m (2025: £0.7m) of cash which is restricted in its use. The term loan was issued at

ﬂoating rates as Tranche A £273.3m and Tranche B USD 79.6m. A proportion of Tranche A has been converted to ﬁxed rate

using interest rate swaps. Further analysis of the terms and maturity dates for ﬁnancial liabilities are set out in note 26.

24. Cash ﬂows from operations

| | | |
| --- | --- | --- |
| | |
| All ﬁgures in £ million | FY26 | FY25 |
| Proﬁt/(loss) after tax for the year | 107.5 | (185.7) |
| Adjustments for: | | |
| Taxation expense | 47.6 | 79.4 |
| Net ﬁnance expense | 15.2 | 15.8 |
| Impairment of goodwill | – | 143.9 |
| Gain on business divestment | (0.5) | – |
| Loss on sale of property | – | 36.6 |
| Loss on disposal of plant and equipment | 8.4 | 4.6 |
| Loss on disposal of intangibles | 7.7 | 4.2 |
| Impairment of property | 0.5 | 1.0 |
| Amortisation of purchased or internally developed intangible assets | 19.9 | 15.7 |
| Amortisation of intangible assets arising from acquisitions | 23.1 | 24.2 |
| Depreciation of property, plant and equipment | 76.6 | 70.6 |
| Share of post-tax loss/(proﬁt) of equity accounted entities | 1.0 | (0.3) |
| Share-based payments charge | 11.5 | 9.8 |
| Retirement beneﬁt contributions in excess of income statement expense | (2.4) | (2.3) |
| Net movement in provisions | (9.0) | 19.4 |
| | 307.1 | 236.9 |
| (Increase)/decrease in inventories | (3.2) | 16.5 |
| (Increase)/decrease in receivables | (4.9) | 56.3 |
| Decrease in payables | (7.4) | (23.0) |
| Changes in working capital | (15.5) | 49.8 |
| Net cash inﬂow from operations | 291.6 | 286.7 |

The working capital movements in the cash ﬂow statement do not agree directly to the balance sheet due to impact of

foreign exchange movements, accrued interest and the timing of capex payments.

Notes to the Consolidated

Financial Statements

24. Cash ﬂows from operations (continued)

178

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Reconciliation of net cash ﬂow from operations to underlying net cash ﬂow from operations



All ﬁgures in £ million	FY26	FY25
Net cash ﬂow from operations	291.6	286.7
Speciﬁc adjusting items*:
Add back speciﬁc adjusting item: digital investment	23.6	20.8
Add back speciﬁc adjusting item: restructuring costs	24.8	3.4
Add back speciﬁc adjusting item: sale and leaseback obligations	1.0	–
Add back speciﬁc adjusting item: acquisition and disposal related items	2.2	5.3
Total speciﬁc adjusting items	51.6	29.5
Underlying net cash ﬂow from operations*	343.2	316.2

Reconciliation of net cash ﬂow from operations to free cash ﬂow



All ﬁgures in £ million	FY26	FY25^
Net cash ﬂow from operations	291.6	286.7
Less: tax and net interest payments	(59.8)	(65.4)
Less: net purchases of intangible assets and property plant and equipment	(72.5)	(108.4)
Free cash ﬂow*	159.3	112.9

Underlying cash conversion ratio



	FY26	FY25
Underlying EBITDA* – £ million	343.7	301.7
Underlying net cash ﬂow from operations* – £ million	343.2	316.2
Underlying cash conversion ratio* – %	100%	105%

Deﬁnitions of the Group’s ‘Alternative performance measures’ can be found on page 220.

The free cash ﬂow deﬁnition has been revised to include the cash ﬂow impact of speciﬁc adjusting items within operating proﬁt as this is

considered to be a more appropriate reﬂection of the Group’s cash generation prior to shareholder return. The prior year comparative has been

restated accordingly.

25. Leases

Group as a lessor

The Group receives rental income on certain properties. Primarily these are properties partially occupied by Group

companies, with vacant space sub-let to third-party tenants. There was £0.3m (FY25: £0.7m) of sublease income which

related to right-of-use assets. The Group had contracted with tenants for the following future minimum lease payments:



	31 March	31 March
All ﬁgures in £ million	2026	2025
Within one year	1.1	1.0
In the second to ﬁfth years inclusive	2.6	2.3
Greater than ﬁve years	0.5	0.4
Total future minimum lease payments	4.2	3.7

Group as a lessee

Amounts recognised in the balance sheet

The balance sheet shows the following amounts relating to leases:

Right-of-use assets (included within Property, Plant & Equipment – see note 15)



	31 March	31 March
All ﬁgures in £ million	2026	2025
Land and buildings	53.2	59.2
Plant, machinery and vehicles	2.2	2.2
Total right-of-use assets net book value	55.4	61.4

179

Notes to the Consolidated

Financial Statements

25. Leases (continued)

Lease liabilities (included within Net debt – see note 23)



	31 March	31 March
All ﬁgures in £ million	2026	2025
Current	12.4	13.3
Non-current	76.7	80.6
Total lease liabilities	89.1	93.9

Additions to the right-of-use assets during FY26 were £13.6m (FY25: £26.2m). The total cash outﬂow for leases in FY26 was

£18.0m (FY25: £15.0m). The Group had no expense relating to variable lease payments not included in the measurement of

lease liabilities.

Amounts recognised in the consolidated income statement

The consolidated income statement includes the following amounts relating to leases:



All ﬁgures in £ million	FY26	FY25
Depreciation charge
Land and buildings	11.0	10.6
Plant, machinery and vehicles	0.6	0.3
Total depreciation charge (see note 15)	11.6	10.9
Interest expense (included in ﬁnance cost – see note 7)	5.4	4.2
Expense relating to short-term leases (included in operating costs)	0.8	0.8
Expense relating to low value leases (included in operating costs)	0.3	0.4
Total lease expense charged to proﬁt before tax	18.1	16.3

Principal leases are negotiated for a term of approximately 10 years.

26. Financial risk management

The Group’s international operations expose it to ﬁnancial risks that include the eﬀects of changes in foreign exchange

rates, interest rates, credit risks and liquidity risks.

Treasury and risk management policies, which are set by the Board, specify guidelines on ﬁnancial risks and the use of

ﬁnancial instruments to manage risk. The instruments and techniques used to manage exposures include foreign currency

and interest rate swap derivatives. Group treasury monitors ﬁnancial risks and compliance with risk management policies

during the year. There have been no changes in any risk management policies during the year or since the year end. For

details of the Group’s Treasury policy and management of ﬁnancial instruments see ‘Additional Financial Information’ on

page 218.

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while

maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of

the Group consists of debt, cash and cash equivalents and equity aributable to equity holders of the parent, comprising

issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity. The Group

has a revolving credit facility and ﬂoating rate term loan with its relationship banks with a requirement for the half yearly

testing period that the ratio of Net Debt to EBITDA will not exceed 3.5:1 and the ratio of EBITDA to net ﬁnance charges will not

be less than 4:1. The Group complied with both covenants during the year. As at 31 March 2026, the ratio of Net Debt to EBITDA

was 0.5:1 and the ratio of EBITDA to net ﬁnance charges was 22:1. The revolving credit facility is undrawn at the year end and

matures in 2029. The ﬂoating rate term loan is repayable in 2027.

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

180

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

A) Fair values of ﬁnancial instruments

The table below analyses ﬁnancial instruments carried at fair value, by valuation method. The diﬀerent levels have been

deﬁned as follows:

Level 1

– measured using quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2

– measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 2 derivatives comprise forward foreign exchange

contracts which have been fair valued using forward exchange rates that are quoted in an active market; and interest rate

swaps which have been fair valued using interest rates that are quoted in an active market

Level 3

– measured using inputs for the assets or liability that are not based on observable market data (i.e. unobservable inputs)

The following table presents the Group’s assets and liabilities that are measured at fair value through the P&L as at

31 March 2026:



All ﬁgures in £ million	Note	Level 1	Level 2	Level 3	Total
Assets
Current derivative ﬁnancial instruments	23	–	2.1	–	2.1
Cash equivalents		–	167.4	–	167.4
Non-current derivative ﬁnancial instruments	23	–	2.0	–	2.0
Liabilities
Current derivative ﬁnancial instruments	23	–	(1.1)	–	(1.1)
Non-current derivative ﬁnancial instruments	23	–	(0.1)	–	(0.1)
Total		–	170.3	–	170.3

The following table presents the Group’s assets and liabilities that are measured at fair value through the P&L as at

31 March 2025:



All ﬁgures in £ million	Note	Level 1	Level 2*	Level 3	Total*
Assets
Current derivative ﬁnancial instruments		–	3.6	–	3.6
Cash equivalents		–	170.4	–	170.4
Non-current derivative ﬁnancial instruments		–	2.0	–	2.0
Liabilities
Current derivative ﬁnancial instruments		–	(1.8)	–	(1.8)
Non-current derivative ﬁnancial instruments		–	(1.0)	–	(1.0)
Total		–	173.2	–	173.2

Restated to include cash equivalent balances which relate to money market fund investments which are held at fair value through the proﬁt and

loss account.

181

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

For cash and cash equivalents, trade and other receivables and bank and current borrowings, the fair value of the ﬁnancial

instruments approximate to their carrying value as a result of the short maturity periods of these ﬁnancial instruments. For

trade and other receivables, allowances are made within the carrying value for credit risk. For other ﬁnancial instruments,

the fair value is based on market value, where available. Where market values are not available, the fair values have been

calculated by discounting cash ﬂows to net present value using prevailing market-based interest rates translated at the

year-end rates. There have been no transfers between levels.

All ﬁnancial assets and liabilities had a fair value that is identical to book value at 31 March 2026 and 31 March 2025, other

than lease liabilities where the book value is not reﬂective of changes in interest rates. Detailed analysis is provided in the

following tables:

As at 31 March 2026


		Financial	Financial	Financial
		assets at fair	assets at	liabilities at	Derivatives		Total carrying
		value proﬁt	amortised	amortised	used as		value and
All ﬁgures in £ million	Note	and loss	cost	cost	hedges	Other	fair value
Financial assets
Non-current
Derivative ﬁnancial instruments	23	–	–	–	2.0	–	2.0
Deferred ﬁnancing costs	23	–	0.3	–	–	–	0.3
Current
Trade receivables and similar items		–	154.0	–	–	–	154.0
Derivative ﬁnancial instruments	23	–	–	–	2.1	–	2.1
Deferred ﬁnancing costs	23	–	1.2	–	–	–	1.2
Cash and cash equivalents	23	167.4	91.8	–	–	–	259.2
Total ﬁnancial assets		167.4	247.3	–	4.1	–	418.8
Financial liabilities
Non-current
Bank borrowings	23	–	–	(333.6)	–	–	(333.6)
Derivative ﬁnancial instruments	23	–	–	–	(0.1)	–	(0.1)
Lease liabilities	23	–	–	–	–	(76.7)	(76.7)
Current
Trade payables and similar items		–	–	(347.4)	–	–	(347.4)
Derivative ﬁnancial instruments	23	–	–	–	(1.1)	–	(1.1)
Lease liabilities	23	–	–	–	–	(12.4)	(12.4)
Total ﬁnancial liabilities		–	–	(681.0)	(1.2)	(89.1)	(771.3)
Total		167.4	247.3	(681.0)	2.9	(89.1)	(352.5)

182

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

As at 31 March 2025



		Financial	Financial	Financial
		assets at fair	assets at	liabilities at	Derivatives		Total carrying
		value proﬁt	amortised	amortised	used as		value and fair
All ﬁgures in £ million	Note	and loss	cost	cost	hedges	Other	value
Financial assets
Non-current
Derivative ﬁnancial instruments	23	–	–	–	2.0	–	2.0
Deferred ﬁnancing costs	23	–	1.0	–	–	–	1.0
Current
Trade receivables and similar items		–	161.0	–	–	–	161.0
Derivative ﬁnancial instruments	23	–	–	–	3.6	–	3.6
Deferred ﬁnancing costs	23	–	1.3	–	–	–	1.3
Cash and cash equivalents*	23	170.4	120.2	–	–	–	290.6
Total ﬁnancial assets		170.4	283.5	–	5.6	–	459.5
Financial liabilities
Non-current
Bank borrowings	23	–	–	(335.0)	–	–	(335.0)
Derivative ﬁnancial instruments	23	–	–	–	(1.0)	–	(1.0)
Lease liabilities	23	–	–	–	–	(80.6)	(80.6)
Current
Trade payables and similar items		–	–	(302.5)	–	–	(302.5)
Derivative ﬁnancial instruments	23	–	–	–	(1.8)	–	(1.8)
Lease liabilities	23	–	–	–	–	(13.3)	(13.3)
Total ﬁnancial liabilities		–	–	(637.5)	(2.8)	(93.9)	(734.2)
Total		170.4	283.5	(637.5)	2.8	(93.9)	(274.7)

Restated in respect of cash balances which are not held at fair value through the proﬁt and loss account.

B) Interest rate risk

The Group’s objective is to manage its exposure to interest rate ﬂuctuations on borrowings through varying the proportion

of ﬁxed rate debt relative to ﬂoating rate debt with debt-related derivative ﬁnancial instruments, including interest rate and

cross-currency swaps.

The Group operates an interest rate policy designed to optimise interest costs and to reduce volatility in reported earnings.

The Group’s current policy requires rates to be ﬁxed for 30–80% of the level of borrowings, which is achieved primarily

through ﬁxed-rate borrowings or debt-related derivative ﬁnancial instruments. Where there are signiﬁcant changes

in the level and/or structure of debt, the policy permits borrowings to be 100% ﬁxed, with regular Board reviews of the

appropriateness of this ﬁxed percentage.

At 31 March 2026, the Group had 81% (2025: 80%) of ﬁxed rate debt and 19% (2025: 20%) of ﬂoating rate debt based on gross

debt of £333.6m (2025: £335.0m) after including the impact of debt-related derivative ﬁnancial assets

(interest rate swaps).

The table below shows the debt-related derivative ﬁnancial assets as ﬁxed rate and the gross debt as ﬂoating rate.

Financial assets/(liabilities)

As at 31 March 2026



	Financial assets			Financial liabilities
	Fixed or		Non-interest	Fixed or		Non-interest
All ﬁgures in £ million	capped	Floating	bearing	capped	Floating	bearing
Sterling	3.3	192.3	0.8	(58.9)	(273.3)	(1.2)
US dollar	–	44.6	–	(21.0)	(60.3)	–
Euro	–	6.9	–	(1.5)	–	–
Australian dollar	–	7.6	–	(7.7)	–	–
Other	–	7.8	–	–	–	–
Total	3.3	259.2	0.8	(89.1)	(333.6)	(1.2)

183

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

As at 31 March 2025


	Financial assets			Financial liabilities
	Fixed or		Non-interest	Fixed or		Non-interest
All ﬁgures in £ million	capped	Floating	bearing	capped	Floating	bearing
Sterling	4.2	226.9	1.4	(63.8)	(273.3)	(2.6)
US dollar	–	45.2	–	(19.5)	(61.7)	–
Euro	–	3.0	–	(1.8)	–	–
Australian dollar	–	13.2	–	(8.8)	–	–
Other	–	2.3	–	(0.2)	–	–
Total	4.2	290.6	1.4	(94.1)	(335.0)	(2.6)

Floating rate ﬁnancial assets aract interest based on the relevant reference rate. Floating rate ﬁnancial liabilities bear

interest at the relevant reference rate. Trade and other receivables/payables and deferred ﬁnance costs are excluded from

this analysis.

For the ﬁxed or capped rate ﬁnancial assets and liabilities, the average interest rates (including the relevant marginal cost of

borrowing) and the average period for which the rates are ﬁxed are:


	31 March 2026			31 March 2025
		Weighted			Weighted
	Fixed or	average	Weighted	Fixed or	average	Weighted
	capped	interest rate	average years	capped	interest rate	average years
	£m	%	to maturity	£m	%	to maturity
Financial assets:
Sterling	3.3	3.5	1.5	4.2	3.5	2.4
Financial liabilities:
Sterling	(58.9)	7.0	7.6	(63.8)	7.0	8.0
US dollar	(21.0)	5.3	4.2	(19.5)	5.1	5.1
Euro	(1.5)	2.6	4.3	(1.8)	2.6	4.7
Australian dollar	(7.7)	4.8	4.1	(8.8)	4.7	4.4
Other	–	5.3	0.7	(0.2)	4.6	1.9
Total ﬁnancial liabilities	(89.1)	6.5	6.7	(94.1)	6.3	7.0

Sterling assets consist of debt-related derivative ﬁnancial instruments. Sterling liabilities consist primarily of ﬁnance leases

with the weighted average interest rate reﬂecting the internal rate of return of those leases.

Interest rate risk management

The revolving credit facility (note 26E) is ﬂoating rate and undrawn as at 31 March 2026.

As at 31 March 2026, the majority of the Group’s ﬂoating rate bank borrowings were ﬁxed through interest rate swaps which

swap the Sterling ﬂoating rate interest payable into ﬁxed rate Sterling. The notional principal amount of the outstanding

interest rate swap contracts as at 31 March 2026 is £270m (2025: £310m). The swaps have the economic eﬀect of converting

ﬂoating rate borrowings into ﬁxed rate borrowings and are accounted for as cash ﬂow hedges.

C) Currency risk

Transactional currency exposure

The Group is exposed to foreign currency risks arising from sales or purchases by businesses in currencies other than their

functional currency. It is Group policy that when such a sale or purchase is certain, the net foreign exchange exposure

is hedged using forward foreign exchange contracts. Hedge accounting documentation and eﬀectiveness testing are

undertaken for all the Group’s transactional hedge contracts.

The currency and notional amount of the designated hedging instruments match the currency and principal amounts of the

transactions being hedged, therefore the hedging instruments and hedged items have values which will generally move in

opposite directions because of the same hedged risk. As the critical terms of the hedging instruments match those of the

hedged items, an economic relationship can be demonstrated on an ongoing basis.

184

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

The hedge ratio is 1:1 on the basis that the notional amount of the designated hedging instruments matches the principal

amount of the foreign currency sales/purchases designated as the hedged items. The Group does not designate groups of

items with oﬀseing risk positions as hedged items.

The Group considers the potential sources of hedge ineﬀectiveness to be:

Valuation adjustments for credit risk made to derivative hedging instruments at each hedge eﬀectiveness

measurement date;

Changes to the timing and amount of transactions; and

Non-occurrence of the designated hedged items.

Ineﬀectiveness due to foreign currency basis was highly immaterial.

The table below shows the Group’s currency exposures (based on functional currency of the operating company), being

exposures on currency transactions that give rise to net currency gains and losses recognised in the income statement.

Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional

currency of the operating company involved.



	Net foreign currency monetary assets/(liabilities)
All ﬁgures in £ millions	US$	Euro	A$	Other	Total
31 March 2026 – Sterling	9.0	(0.5)	2.1	2.8	13.4
31 March 2025 – Sterling	14.4	(2.3)	2.8	7.6	22.5

The amounts shown in the table take into account the eﬀect of the forward contracts entered into to manage these

currency exposures. The Group enters into forward foreign currency contracts to hedge the currency exposures that arise

on sales and purchases denominated in foreign currencies, as the transaction occurs. The principal contract amounts

of the outstanding forward currency contracts as at 31 March 2026 against Sterling are net US dollars bought of £5.3m

(USD 7.4m), net Euros sold of £113.6m (EUR 128.3m), net Canadian dollars sold of £8.0m (CAD 15.6m), net Swiss Francs bought

of £46.9m (CHF 44.9m) and net Australian dollars sold of £39.5m (AUD 83.4m).

Translational currency exposure

The Group has signiﬁcant investments in overseas operations, particularly in the US. As a result, the Sterling value of the

Group’s balance sheet can be aﬀected by movement in exchange rates. The Group does not hedge against translational

currency exposure to overseas net assets.

D) Financial credit risk

The Group is exposed to credit-related losses in the event of non-performance by counterparties to ﬁnancial instruments,

but does not currently expect any counterparties to fail to meet their obligations. Credit risk is mitigated by a Board-approved

policy of only selecting counterparties with a strong investment grade long-term credit rating for cash deposits and

seing a utilisation credit limit based on the credit rating. The cash and cash equivalents of the Group are invested in

non-speculative ﬁnancial instruments which are usually highly liquid, such as short-term deposits. Therefore, the Group

believes it has reduced its exposure to counterparty credit risk through this process.

The cash and cash equivalents balance is subject to review for impairment, and due to the high credit ratings of the

counterparties set out below, no impairment has been recognised within the year:



	31 March	31 March
Counterparty credit rating	2026	2025
AAA to AA-	88%	78%
A+ to A-	12%	22%
BBB+ to BBB-	–	–

The Group uses three-year cumulative default rate metrics to determine the estimated credit-rated losses on our ﬁnancial

instruments. Based on the expected default rates, the ﬁnancial instruments have an immaterial risk of credit impairment.

In the normal course of business the Group operates notional cash pooling systems and master neing agreements for

derivatives, where a legal right of set-oﬀ applies.

185

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

The maximum credit-risk exposure in the event of other parties failing to perform their obligations under ﬁnancial assets,

excluding trade and other receivables, totals £263.2m (2025: £296.2m). This balance includes cash and cash equivalents

and derivative ﬁnancial assets. The cash and cash equivalents of £259.2m at 31 March 2026 (2025: £290.6m) represents the

maximum credit exposure on these assets. The cash and cash equivalents were held with diﬀerent ﬁnancial institutions

which were rated single A or beer. Cash equivalents comprise £167.4m (2025: £170.4m) invested in AAA-rated money market

funds. The Group’s assessment is that credit risk is limited as a result of the high percentage of revenue derived from UK and

US government agencies. Therefore the provision for expected credit losses is immaterial in respect of receivables from

these customers.

E) Liquidity risk

Borrowing facilities

As at 31 March 2026 the Group had a revolving credit facility (RCF) of £290.0m (2025: £290.0m

) and a ﬂoating rate term

loan of £333.6m (2025: £335.0m). The RCF, which is unutilised, will mature on 22 April 2029. The term loan will mature on

27 September 2027. Total available funds, comprising the RCF, term loan and the Group’s freely available cash and cash

equivalents, are shown in the table below:



	Interest rate:
	Reference	Total	Drawn	Undrawn
	rate* plus	£m	£m	£m
As at 31 March 2026
Commied facilities – RCF	0.58%	290.0	–	290.0
Commied facilities – term loan	1.00%	333.6	333.6	–
Freely available cash and cash equivalents	–	–	–	258.6
Available funds 31 March 2026				548.6
As at 31 March 2025
Commied facilities – RCF	0.60%	290.0	–	290.0
Commied facilities – term loan	1.00%	335.0	335.0	–
Freely available cash and cash equivalents	–	–	–	289.9
Available funds 31 March 2025				579.9

Reference rate refers to SONIA for GBP and SOFR for USD.

Gross contractual cash ﬂows for borrowings and other ﬁnancial liabilities

The following are the undiscounted contractual maturities of ﬁnancial liabilities, including interest payments. The cash ﬂows

associated with derivatives that are cash ﬂow hedges are expected to have an impact on proﬁt or loss in the periods shown.

The £333.6m term loan is repayable on 27 September 2027, with interest periods set to three months. The loan bears interest at

a variable margin over the relevant reference rate of between 1.00% and 2.50% dependent on the ratio of Net Debt to EBITDA.

As at 31 March 2026



		Contractual	1 year			More than
All ﬁgures in £ million	Book value	cash ﬂows	or less	1–2 years	2–5 years	5 years
Non-derivative ﬁnancial liabilities
Term loan	(333.6)	(357.9)	(15.2)	(342.7)	–	–
Revolving credit facility	–	–	–	–	–	–
Trade payables and similar items	(347.4)	(347.4)	(347.4)	–	–	–
Leases	(89.1)	(110.6)	(17.5)	(16.3)	(52.0)	(24.8)
Derivative ﬁnancial liabilities
Forward foreign currency contracts – cash ﬂow hedges	(1.2)	(1.2)	(1.1)	(0.1)	–	–
Interest rate swaps	–	–	–	–	–	–
Total	(771.3)	(817.1)	(381.2)	(359.1)	(52.0)	(24.8)

186

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

As at 31 March 2025



		Contractual	1 year			More than
All ﬁgures in £ million	Book value	cash ﬂows	or less	1–2 years	2–5 years	5 years
Non-derivative ﬁnancial liabilities
Term loan	(335.0)	(375.8)	(15.7)	(15.7)	(344.4)	–
Revolving credit facility	–	–	–	–	–	–
Trade payables and similar items	(302.5)	(302.5)	(302.5)	–	–	–
Leases	(93.9)	(120.0)	(18.7)	(18.1)	(39.6)	(43.6)
Derivative ﬁnancial liabilities
Forward foreign currency contracts – cash ﬂow hedges	(2.6)	(2.6)	(1.8)	(0.6)	(0.2)	–
Interest rate swaps	(0.2)	(0.2)	–	(0.1)	(0.1)	–
Total	(734.2)	(801.1)	(338.7)	(34.5)	(384.3)	(43.6)

F) Derivative ﬁnancial instruments

The Group has the following derivative ﬁnancial instruments on the balance sheet, reported within the ‘Other ﬁnancial

assets’ line items.



	31 March 2026			31 March 2025
		Liability			Liability
All ﬁgures in £ million	Asset gains	losses	Net	Asset gains	losses	Net
Forward foreign currency contracts – cash ﬂow hedges	0.8	(1.2)	(0.4)	1.4	(2.6)	(1.2)
Interest rate swaps	3.3	–	3.3	4.2	(0.2)	4.0
Derivative assets/(liabilities) at the end of the year	4.1	(1.2)	2.9	5.6	(2.8)	2.8

The maturity of these derivative ﬁnancial instruments is as follows:



	31 March 2026			31 March 2025
		Liability			Liability
All ﬁgures in £ million	Asset gains	losses	Net	Asset gains	losses	Net
Expected to be recognised:
In one year or less	2.1	(1.1)	1.0	3.6	(1.8)	1.8
Between one and two years	1.5	(0.1)	1.4	1.3	(0.7)	0.6
More than two years	0.5	–	0.5	0.7	(0.3)	0.4
Derivative assets/(liabilities) at the end of the year	4.1	(1.2)	2.9	5.6	(2.8)	2.8

The eﬀects of these derivatives on the Group’s ﬁnancial position and performance are as follows:



	31 March 2026			31 March 2025
	Cash ﬂow	Interest rate		Cash ﬂow	Interest rate
All ﬁgures in £ million	hedges	swaps	Total	hedges	swaps	Total
Notional amount (gross)	368.4	270.0	638.4	515.8	310.0	825.8
Carrying value (current and non-current assets
and (liabilities))	(0.4)	3.3	2.9	(1.2)	4.0	2.8
Maturity date	2026-2029	2026-2027	2026-2029	2025-2028	2025-2027	2025-2028
Hedge ratio	1:1	1:1	1:1	1:1	1:1	1:1
Change in fair value of outstanding hedging instruments
in the year	0.8	(0.7)	0.1	(0.2)	(4.5)	(4.7)
Change in value of hedged item used to determine
hedge eﬀectiveness	0.8	(0.7)	0.1	(0.2)	(4.5)	(4.7)
Weighted average hedged rate for the year*	1.33%	3.5%		1.29%	3.5%

The weighted average hedged rate for the year for cash ﬂow hedges is based on GBP:USD, being the most signiﬁcant currency pair. The Group also

has cash ﬂow hedges relating to a number of other currency pairs aligned to its global operations.

187

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

G) Maturity of ﬁnancial liabilities

The contractual maturity of the Group’s ﬁnancial liabilities is shown below:

As at 31 March 2026



	Trade	Bank
	payables and	borrowings	Derivative
	similar items	and loan	ﬁnancial	Lease
All ﬁgures in £ million	payables	notes	instruments	liabilities	Total
Due in one year or less	347.4	–	1.1	12.4	365.3
Due in more than one year but not more than two years	–	–	0.1	11.9	11.9
Due in more than two years but not more than ﬁve years	–	333.6	–	43.3	376.6
Due in ﬁve years or more	–	–	–	21.5	21.5
Total	347.4	333.6	1.2	89.1	771.3

As at 31 March 2025



	Trade	Bank
	payables and	borrowings	Derivative
	similar items	and loan	ﬁnancial	Lease
All ﬁgures in £ million	payables	notes	instruments	liabilities	Total
Due in one year or less	302.5	–	1.8	13.3	317.6
Due in more than one year but not more than two years	–	–	0.7	13.5	14.2
Due in more than two years but not more than ﬁve years	–	335.0	0.3	41.3	376.6
Due in ﬁve years or more	–	–	–	25.8	25.8
Total	302.5	335.0	2.8	93.9	734.2

H) Sensitivity analysis

The Group’s sensitivity to changes in foreign exchange rates and interest rates on ﬁnancial assets and liabilities as at

31 March 2026 is set out in the following table. The impact of a weakening in Sterling on the Group’s ﬁnancial assets and

liabilities would be more than oﬀset in equity and income by its impact on the Group’s overseas net assets and earnings

respectively. Sensitivity on Group’s assets other than ﬁnancial assets and liabilities is not included in this analysis.

As at 31 March 2026



	1% decrease		10% weakening
	in interest rates		in Sterling
		Proﬁt		Proﬁt
All ﬁgures in £ million	Equity*	before tax	Equity	before tax
Sterling	–	0.8	–	–
US dollar	–	0.2	0.3	0.9
Other	–	(0.2)	0.4	–



	1% increase		10% strengthening
	in interest rates		in Sterling
		Proﬁt		Proﬁt
All ﬁgures in £ million	Equity*	before tax	Equity	before tax
Sterling	–	(0.8)	–	–
US dollar	–	(0.2)	(0.1)	0.2
Other	–	0.2	(0.3)	–

This relates to the impact on items charged directly to equity and excludes the impact on proﬁt/loss for the year ﬂowing into equity.

188

Notes to the Consolidated

Financial Statements

26. Financial risk management (continued)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

As at 31 March 2025



	1% decrease		10% weakening
	in interest rates		in Sterling
		Proﬁt		Proﬁt
All ﬁgures in £ million	Equity*	before tax	Equity	before tax
Sterling	–	0.5	–	–
US dollar	–	0.2	(4.0)	0.9
Other	–	(0.2)	0.7	–



	1% increase		10% strengthening
	in interest rates		in Sterling
		Proﬁt		Proﬁt
All ﬁgures in £ million	Equity*	before tax	Equity	before tax
Sterling	–	(0.5)	–	–
US dollar	–	(0.2)	3.2	0.1
Other	–	0.2	(0.4)	–

This relates to the impact on items charged directly to equity and excludes the impact on proﬁt/loss for the year ﬂowing into equity.

The amounts generated from the sensitivity analysis are forward-looking estimates of market risk assuming that certain

market conditions occur. Actual results in the future may diﬀer materially from those projected as a result of developments

in global ﬁnancial markets that may cause ﬂuctuations in interest and exchange rates to vary from the hypothetical

amounts disclosed in the previous tables, which should not, therefore, be considered to be a projection of likely future

events and losses.

The estimated changes for interest rate movements are based on an instantaneous decrease or increase of 1%

(100 basis points) in the speciﬁc rate of interest applicable to each class of ﬁnancial instruments from the levels eﬀective

at 31 March 2026, with all other variables remaining constant. The estimated changes for foreign exchange rates are based

on an instantaneous 10% weakening or strengthening in Sterling against all other currencies from the levels applicable at

31 March 2026, with all other variables remaining constant. Such analysis is for illustrative purposes only – in practice market

rates rarely change in isolation. The impact of transactional risk on the Group’s monetary assets/liabilities that are not held

in the functional currency of the entity holding those assets/liabilities is minimal.

27. Post-retirement beneﬁts

Deﬁned contribution plans

The Group operates a number of deﬁned contribution pension arrangements, the largest of which is in the UK and provided

by the Mercer Master Trust. A deﬁned contribution plan is a pension plan under which the Group and employees pay

ﬁxed contributions to a third-party ﬁnancial provider. The Group has no legal or constructive obligations to pay further

contributions if the fund does not hold suﬀicient assets to pay all employees the beneﬁts relating to employee service

in the current and prior periods. The contributions are recognised as an employee beneﬁt expense when they are due.

The expense incurred during the year was £70.7m (FY25: £73.4m). Prepaid contributions are recognised as an asset to the

extent that a cash refund or a reduction in the future payments is available.

Deﬁned beneﬁt pension plan

In the UK the Group operates the QinetiQ Pension Scheme (‘the Scheme’) for approximately 10% of its UK employees.

The Scheme closed to future accrual on 31 October 2013 and there is no ongoing service cost. After this date, deﬁned active

beneﬁt members transferred to a deﬁned contribution section of the Scheme. The Scheme is a ﬁnal salary plan, which

provides beneﬁts to members in the form of a guaranteed level of pension payable for life.

The level of beneﬁts provided depends on the members’ length of service and their ﬁnal pensionable earnings at closure

to future accrual. In the Scheme, pensions in payment are generally updated in line with the Consumer Price Index (CPI).

The beneﬁt payments are made from Trustee-administered funds.

189

Notes to the Consolidated

Financial Statements

27. Post-retirement beneﬁts (continued)

Plan assets held in trusts are governed by UK regulations as is the nature of the relationship between the Group and the

Trustees and their composition. Responsibility for the governance of the Scheme – including investment decisions and

contribution schedules – lies with the Scheme Trustee with consultation with the Company as needed. Dalriada, one of

the largest professional trustee ﬁrms in the UK, act as Professional Corporate Sole Trustee (PCST) for the Scheme. Being

governed by a PCST is well suited to an ever-changing and highly regulated pension landscape.

The asset recognised in the balance sheet in respect of the deﬁned beneﬁt pension plan is the fair value of plan assets

less the present value of the deﬁned beneﬁt obligation at the end of the reporting period. The deﬁned beneﬁt obligation is

calculated bi-annually by independent actuaries using the projected unit credit method. Future cash ﬂows of the Scheme

which are subject to inﬂation are calculated using a CPI inﬂation assumption for the majority of the cash ﬂows, with a

small proportion of cash ﬂows linked to RPI. IAS 19 requires the inﬂation assumptions to be market-based assumptions,

as opposed to being based on economic forecasts.

The present value of the deﬁned beneﬁt obligation is determined by discounting the estimated, inﬂated future cash

outﬂows using interest rates of high quality corporate bonds that have terms to maturity approximating to the terms of the

related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or

credited to equity in other comprehensive income in the period in which they arise.

Triennial funding valuation

The most recent completed full actuarial valuation of the Scheme was undertaken as at 30 June 2023 and resulted in an

actuarially assessed surplus of £11.4m (relative to the technical provisions, i.e. the level of assets agreed by the Trustee

and the Company as being appropriate to meet member beneﬁts, assuming the Scheme continues as a going concern).

The next triennial valuation will be performed as at 30 June 2026. Under the new schedule of contributions agreed at the

conclusion of the recent triennial valuation, and reﬂecting the Scheme being in surplus, there are no employer contributions

required. Separately to the schedule of contributions the Company does have a cash commitment to the Scheme in respect

of an asset-backed funding arrangement established in 2012; see QinetiQ Pension Funding Partnership below.

QinetiQ’s Pension Funding Partnership (PFP) structure

On 26 March 2012 QinetiQ established the QinetiQ PFP Limited Partnership (‘the Partnership’) with the Scheme. Under

this arrangement, properties to the capitalised value of £32.3m were transferred to the Partnership. The transfers were

eﬀected through a 20-year sale and leaseback agreement. The Scheme’s interest in the Partnership entitles it to annual

distributions from 2012. The annual distribution in the year to 31 March 2027 will be £3.7m, which will increase thereafter,

indexed by reference to CPI, until 2032.

The Partnership is controlled by QinetiQ and its results are consolidated by the Group. Under IAS 19, the interest held by

the Scheme in the Partnership does not qualify as a plan asset for the purposes of the Group’s consolidated ﬁnancial

statements and is, therefore, not included within the fair value of plan assets. As a result, the Group’s consolidated ﬁnancial

statements are unchanged by the Partnership. In addition, the value of the property transferred to the Partnership and

leased back to QinetiQ remains on the balance sheet. QinetiQ retains the operational ﬂexibility to substitute properties of

equivalent value within the Partnership and has the option to sele outstanding amounts due under the interest before

2032 if it so chooses.

Other UK schemes

In the UK the Group has a small number of employees for whom beneﬁts are secured through the Prudential Platinum

Scheme (‘the PPS’). The PPS scheme is always fully funded and has a very small surplus at year end. QinetiQ also

oﬀers employees access to a Group Self Invested Personal Pension Plan, but no Company contributions are paid to

this arrangement.

190

Notes to the Consolidated

Financial Statements

27. Post-retirement beneﬁts (continued)

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Deﬁned beneﬁt pension plan (‘Scheme’) net pension asset

The Scheme is in a net asset position with the market value of assets in excess of the present value of Scheme liabilities.

These have the values set out below as at 31 March of each year end.



	31 March	31 March
All ﬁgures in £ million	2026	2025
Total market value of assets – see table below for analysis by category of asset	1,208.0	1,176.7
Present value of Scheme liabilities	(1,153.6)	(1,137.3)
Net pension asset before deferred tax	54.4	39.4
Deferred tax liability	(17.9)	(14.6)
Net pension asset after deferred tax	36.5	24.8

The balance sheet net pension asset is a snapshot view which can be signiﬁcantly inﬂuenced by short-term market factors.

The calculation of the net asset depends on factors which are beyond the control of the Group – principally the value of the

various categories of assets in which the Scheme has invested and long-term interest rates and inﬂation rates used to value

the Scheme’s liabilities. This is particularly pertinent at times when markets are volatile. Sensitivities and risks are described

on page 193.

The key driver for the increase in the net pension asset since 31 March 2025 was a net actuarial gain on the net pension asset.

Total net income/(expense) recognised in the income statement



All ﬁgures in £ million	FY26	FY25
Net ﬁnance income	2.4	1.0
Administrative expenses	(1.2)	(1.2)
Total net income/(expense) recognised in the income statement (excluding tax)	1.2	(0.2)

Movement in the net pension asset

The movement in the net pension asset (before deferred tax) is set out below:



All ﬁgures in £ million	FY26	FY25
Opening net pension asset	39.4	18.4
Net ﬁnance income	2.4	1.0
Net actuarial gain and asset re-measurement gain/(loss)	10.2	17.7
Administrative expenses	(1.2)	(1.2)
Contributions by the employer	3.6	3.5
Closing net pension asset	54.4	39.4

191

Notes to the Consolidated

Financial Statements

27. Post-retirement beneﬁts (continued)

Fair value of Scheme assets by type of asset

The fair value of the Scheme’s assets, which are not intended to be realised in the short term and may be subject to

signiﬁcant changes before they are realised, were:


	31 March 2026			31 March 2025*
		Not quoted			Not quoted
		in an active			in an active
All ﬁgures in £ million	Quoted	market	Total	Quoted	market	Total
Equities	–	7.5	7.5	–	11.2	11.2
Liability driven investment	223.3	–	223.3	351.1	–	351.1
Asset backed security investments	118.4	–	118.4	75.0	–	75.0
Alternative bonds 1	–	185.4	185.4	–	228.1	228.1
Corporate bonds 2	135.7	73.1	208.8	–	98.6	98.6
Cash and cash equivalents	9.8	–	9.8	46.1	–	46.1
Equity derivative ﬁnancial instruments	–	–	–	(0.9)	–	(0.9)
Corporate credit derivative ﬁnancial instruments 3	(1.0)	–	(1.0)	1.8	–	1.8
Other derivatives (forward FX contracts) 4	(1.4)	–	(1.4)	10.0	–	10.0
Insurance buy-in policies	–	457.2	457.2	–	450.7	450.7
Borrowings 5	–	–	–	–	(95.0)	(95.0)
Total market value of assets	484.8	723.2	1,208.0	483.1	693.6	1,176.7

The comparative cash and cash equivalents balance has been presented as quoted, to reﬂect the observable nature of its fair value.

Primarily private market debt investments.

Includes unlisted corporate bonds with commercial property held as security.

The fair value of corporate credit derivative ﬁnancial instruments is recognised as a liability of £1.0m. This is in respect of various credit default

swap ﬁnancial instruments held by the Scheme. These instruments provide the Scheme with signiﬁcantly greater exposure to corporate bonds.

The notional value of the credit default swap contracts was £229.6m as at 31 March 2026. The economic exposure (notional exposure +MTM)

was £228.6m as at 31 March 2026.

The fair value of other derivative ﬁnancial instruments is recognised as a liability of £1.4m. This is in respect of various foreign exchange contracts

held by the Scheme. The exposure to foreign exchange risk is signiﬁcantly greater than the £10.0m marked to market value of the forward

contracts. The notional value of these ﬁnancial instruments was £114.5m as at 31 March 2026, with a total economic exposure value of £113.1m.

The £95m loan as at 31 March 2025 (originally arranged in September 2023 to facilitate an increase in liquidity to support increased levels of

hedging) was repaid during the year.

The Scheme’s assets do not include any of the Group’s own transferable ﬁnancial instruments, property occupied by the

Group or other assets used by the Group.

The insurance policies obtained by the pension scheme can only be used to pay or fund employee beneﬁts under the

Company’s deﬁned beneﬁt plan. They are not available to the Company’s own creditors and cannot be paid to another

entity. These are the requirements of IAS 19 paragraph 7 and hence the Company’s determination is that the insurance

policies are qualifying insurance policies and require classiﬁcation as a plan asset. The policies were issued by insurers that

are not a related party.

Per the Scheme rules the Company has an unconditional right to a refund of any surplus, assuming gradual selement of

all liabilities over time. Such surplus may arise on cessation of the Scheme in the context of IFRIC 14 paragraphs 11(b) and 12

and therefore the full net pension asset can be recognised on the Group’s balance sheet and the Group’s minimum funding

commitments to the Scheme do not give rise to an additional balance sheet liability.

Changes to the fair value of Scheme assets


All ﬁgures in £ million	FY26	FY25
Opening fair value of Scheme assets	1,176.7	1,316.2
Interest income on Scheme assets	65.9	62.0
Re-measurement gain/(loss) on Scheme assets	21.2	(149.0)
Contributions by the employer	3.6	3.5
Net beneﬁts paid out and transfers	(58.2)	(54.8)
Administrative expenses	(1.2)	(1.2)
Closing fair value of Scheme assets	1,208.0	1,176.7

Notes to the Consolidated

Financial Statements

27. Post-retirement beneﬁts (continued)

192

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Changes to the present value of Scheme liabilities

The present value of the Scheme’s liabilities, which are derived from cash ﬂow projections over long periods, and thus

inherently uncertain, were:


All ﬁgures in £ million	FY26	FY25
Opening present value of Scheme liabilities	(1,137.3)	(1,297.8)
Interest cost	(63.5)	(61.0)
Actuarial gain/(loss) on Scheme liabilities based on:
Change in demographic assumptions	(4.5)	17.4
Change in ﬁnancial assumptions	2.4	149.6
Experience losses	(8.9)	(0.3)
Net beneﬁts paid out and transfers	58.2	54.8
Closing present value of Scheme liabilities	(1,153.6)	(1,137.3)

Assumptions

The major assumptions used in the IAS 19 valuation of the Scheme’s liabilities were:


	31 March 2026		31 March 2025
	Insured	Uninsured	Insured	Uninsured
All ﬁgures in £ million	members	members	members	members
Discount rate applied to Scheme liabilities	5.85%	6.15%	5.70%	5.75%
CPI inﬂation assumption	2.80%	2.80%	2.45%	2.50%
Net rate (discount rate less inﬂation)	3.05%	3.35%	3.25%	3.25%
Assumed life expectancies in years:
At 60 for males currently aged 40	n/a	28.2	n/a	27.8
At 60 for females currently aged 40	n/a	30.5	n/a	30.3
At 60 for males currently aged 60	n/a	26.9	n/a	26.5
At 60 for females currently aged 60	n/a	29.2	n/a	28.9
At 65 for males currently aged 65	22.6	n/a	22.1	n/a
At 65 for females currently aged 65	24.9	n/a	24.6	n/a

The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions

which, because of the timescale covered, may not necessarily be borne out in practice. It is important to note that these

assumptions are long term and, in the case of the discount rate and the inﬂation rate, are measured by reference to external

market indicators.

The discount rate is based on observable yields on corporate bonds but there is no direct, observable market rate for CPI.

A ‘market approach’ to deriving CPI involves adjusting a market-based RPI rate downward by an ‘inﬂation risk premium’ and

an RPI-CPI adjustment factor (determined from relevant market yield curves). This market

-based approach is required by

IAS 19 and results in a CPI inﬂation rate in excess of the Bank of England long-term target and also in excess of a consensus

view of CPI (based on surveys of economists). However, adopting an economic consensus approach to seing CPI inﬂation

is not acceptable under accounting standards.

The mortality assumptions for both the current and prior year were based on the SAPS Normal S3 ‘All Lives’ base tables,

with various scaling factors based on sex and status. Allowance was made for improvements in mortality in line with

CMI_2025 core projections (31 March 2025: CMI_2023 projections) and a long-term rate of improvement of 1.0% per

annum (31 March 2025: 1.0%).

The funding of the Scheme is based on long-term trends and assumptions relating to market growth, as advised by qualiﬁed

actuaries and investment advisors. The Scheme ‘duration’, calculated using discounted future cash ﬂows, is an indicator

of the weighted average time until beneﬁts are paid and is approximately 14 years for non-insured liabilities and 9 years for

insured liabilities.

193

Notes to the Consolidated

Financial Statements

27. Post-retirement beneﬁts (continued)

The sensitivity of the Scheme liabilities to each of the key assumptions is shown in the following table.

Sensitivity analysis of the principal assumptions

| | | | |
| --- | --- | --- | --- |
| | |
| | Indicative impact on | Indicative impact on | Indicative impact on |
| Assumption | Scheme assets | Scheme liabilities | net pension asset |
| Decrease discount rate by 0.25% | Increase by £10.6m | Increase by £34.5m | Decrease by £23.9m |
| Increase rate of inﬂation by 0.25% | Increase by £9.7m | Increase by £32.7m | Decrease by £23.0m |
| Increase life expectancy by one year | Increase by £14.0m | Increase by £24.8m | Decrease by £10.8m |

The impact of movements in Scheme liabilities will, to an extent, be oﬀset by movements in the value of Scheme assets as

the Scheme has assets invested in a Liability Driven Investment Portfolio. As at 31 March 2026 this portfolio hedged against

approximately 100% of the interest rate risk and also approximately 100% of the inﬂation rate risk, as measured on the

actuarial funding valuation basis.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant.

In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the

sensitivity of the deﬁned beneﬁt obligation to signiﬁcant actuarial assumptions the same method (projected unit credit

method) has been applied as when calculating the pension liability recognised within the statement of ﬁnancial position.

The methods and types of assumption did not change.

In addition to the sensitivity of the liability side of the net pension asset (which will impact the value of the net pension

asset) the net pension asset is also exposed to signiﬁcant variation due to changes in the fair value of Scheme assets.

A speciﬁc sensitivity on assets has not been included in the above table but any change in valuation of assets ﬂows straight

through to the value of the net pension asset, e.g. if equities fall by £10m then the net pension asset reduces by £10m. The

values of unquoted assets assume that an available buyer is willing to purchase those assets at that value. For the Group’s

portfolio of assets, the unquoted alternative bonds of £185.4m, the unquoted corporate bonds of £73.1m and the unquoted

equities of £7.5m are the assets with most uncertainty as to valuation as at 31 March 2026.

The accounting assumptions noted are used to calculate the year-end net pension asset in accordance with the relevant

accounting standard, IAS 19 (revised) Employee Beneﬁts. Changes in these assumptions have no impact on the Group’s

cash payments into the Scheme. The payments into the Scheme are reassessed after every triennial valuation. The triennial

valuations are calculated on a funding basis and use a diﬀerent set of assumptions, as agreed with the pension Trustees.

The key assumption that varies between the two methods of valuation is the discount rate. The funding basis valuation uses

the risk-free rate from UK gilts as the base for calculating the discount rate, while the IAS 19 accounting basis valuation uses

corporate bond yields as the base.

Risks

Through its deﬁned beneﬁt pension plan, the Group is exposed to a number of risks, the most signiﬁcant of which are

detailed below:


Volatility in	Results under IAS 19 can change dramatically depending on market conditions. The present value of
market conditions	Scheme liabilities is linked to yields on corporate bonds, while many of the assets of the Scheme are invested in
	various forms of assets subject to ﬂuctuating valuations. Changing markets in conjunction with discount rate
	volatility will lead to volatility in the net pension asset on the Group’s balance sheet and in other comprehensive
	income. To a lesser extent this will also lead to volatility in the IAS 19 pension net ﬁnance income in the Group’s
	income statement.
Choice of accounting	The calculation of the present value of Scheme liabilities involves projecting future cash ﬂows from the Scheme
assumptions	many years into the future. This means that the assumptions used can have a material impact on the balance sheet
	position and proﬁt and loss charge. In practice future experience within the Scheme may not be in line with the
	assumptions adopted. For example, members could live longer than foreseen or inﬂation could be higher or lower
	than allowed for in the calculation of the liabilities.

In June 2023, in Virgin Media Limited v NTL Pension Trustees II Limited, the UK High Court ruled that speciﬁc historical

amendments to contracted-out deﬁned beneﬁt schemes in the period from 6 April 1997 to 5 April 2016 were invalid as they

lacked a conﬁrmation under section 37 of the Pension Schemes Act 1993 from the scheme’s actuary. Following a review of

the equivalent documentation by the Scheme’s lawyers, we consider that there is no need for any further investigation at

this stage and that the probability of a signiﬁcant ﬁnancial impact is remote.

Notes to the Consolidated

Financial Statements

194

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

28. Share capital and other reserves

Shares alloed, called up and fully paid:

| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | |
| | Ordinary shares of 1p each | | Special Share of £1 | | | |
| | (equity) | | (non-equity) | | Total | |
| | £ | Number | £ | Number | £ | Number |
| As at 1 April 2025 | 5,535,305 | 553,530,455 | 1 | 1 | 5,535,306 | 553,530,456 |
| Cancellation of shares | (287,731) | (28,773,138) | – | – | (287,731) | (28,773,138) |
| At 31 March 2026 | 5,247,574 | 524,757,317 | 1 | 1 | 5,247,575 | 524,757,318 |

During the year, the Group continued its share buyback programme. £134.6m was completed in cash in FY26 (FY25: £102.9m),

which is shown in the table above as the 28,773,138 cancelled shares (FY25: 20,865,436).



	Ordinary shares of 1p each		Special Share of £1
	(equity)		(non-equity)		Total
	£	Number	£	Number	£	Number
As at 1 April 2024	5,743,959	574,395,891	1	1	5,743,960	574,395,892
Cancellation of shares	(208,654) (20,865,436)		–	–	(208,654) (20,865,436)
At 31 March 2025	5,535,305	553,530,455	1	1	5,535,306 553,530,456

Except as noted below all shares in issue at 31 March 2026 rank pari-passu in all respects.

Rights aaching to the Special Share

QinetiQ carries out activities which are important to UK defence and security interests. To protect these interests in

the context of the ongoing commercial relationship between the MOD and QinetiQ, and to promote and reinforce the

Compliance Principles, the MOD holds a Special Share in QinetiQ. QinetiQ obtained MOD consent to changes in its Special

Shareholder rights, which were approved by shareholders at the 2012 AGM. The changes to the Special Share were disclosed

in the 2012 Annual Report. Subsequent to the changes approved at the 2012 AGM the Special Share confers certain rights on

the holder:

To require the Group to implement and maintain the Compliance System (as deﬁned in the Articles of Association) so as

to make at all times eﬀective its and each member of QinetiQ Controlled Group’s application of the Compliance Principles,

in a manner acceptable to the Special Shareholder;

To refer maers to the Board for its consideration in relation to the application of the Compliance Principles;

To require the Board to obtain Special Shareholder’s consent:

If at any time when the chairman is not a British citizen, it is proposed to appoint any person to the oﬀice of chief

executive, who is not a British citizen; and

ii)

If at any time when the chief executive is not a British citizen, it is proposed to appoint any person to the oﬀice of

chairman, who is not a British citizen;

To require the Board to take action to rectify any omission in the application of the Compliance Principles, if the

Special Shareholder is of the opinion that such steps are necessary to protect the defence or security interests of

the United Kingdom; and

To demand a poll at any of QinetiQ’s meetings (even though it may have no voting rights except those speciﬁcally set out

in the Articles).

The Special Shareholder has an option to purchase deﬁned Strategic Assets of the Group in certain circumstances. The

Special Shareholder has, inter alia, the right to purchase any Strategic Assets which the Group wishes to sell. Strategic

Assets are normally testing and research facilities (see note 30 for further details).

The Special Share may only be issued to, held by and transferred to HM Government (or as it directs). At any time the Special

Shareholder may require QinetiQ to redeem the Special Share at par. If QinetiQ is wound up the Special Shareholder will be

entitled to be repaid the capital paid up on the Special Share before other shareholders receive any payment. The Special

Shareholder has no other right to share in the capital or proﬁts of QinetiQ and the Special Shareholder must give consent to

a general meeting held on short notice.

195

Notes to the Consolidated

Financial Statements

28. Share capital and other reserves (continued)

The Special Share entitles the Special Shareholder to require certain persons who hold (together with any person acting

in concert with them) a material interest in QinetiQ to dispose of some or all of their ordinary shares in certain prescribed

circumstances on the grounds of national security or conﬂict of interest. The Directors must register any transfer of the

Special Share within seven days.

Other reserves

The translation reserve includes the cumulative foreign exchange diﬀerence arising on translation. Movements on hedging

instruments, where the hedge is eﬀective, are recorded in the hedge reserve until the hedge ceases.

The capital redemption reserve, which was created following the redemption of preference share capital and the bonus

issue of shares, cannot be distributed.

Own shares

Own shares represent shares in the Company that are held by independent trusts and include treasury shares and

shares held by the employee share ownership plan. Included in retained earnings at 31 March 2026 are 4,315,670 shares

(2025: 3,442,435 shares).

29. Share-based payments

The Group operates a number of share-based payment plans for employees. The total share-based payment expense

in the year was £11.5m, all relating to equity-seled schemes (FY25: £9.8m, all relating to equity-seled schemes). The

share-based payment amount recognised in equity was £11.0m, reﬂecting an £11.5m expense recorded in the income

statement, partly oﬀset by £0.5m relating to dividends accrued on unvested awards.

Valuation of share-based awards

Share-based awards that vest based on non-market performance conditions have been valued at the share price at grant

date and are equity-seled.

Group Share Incentive Plan (SIP)

Under the QinetiQ SIP the Group oﬀers UK employees the opportunity of purchasing up to £150 worth of shares a month at

the prevailing market rate. The Group will make a matching share award of a third of the employee’s payment. The Group’s

matching shares may be forfeited if the employee ceases to be employed by QinetiQ within three years of the award of the

shares. There is no exercise price for these SIP awards.



	FY26	FY25
	Number of	Number of
	matching	matching
	shares	shares
Outstanding at start of the year	707,834	753,447
Awarded during the year	44,645	256,966
Exercised during the year	(51,854)	(262,526)
Forfeited during the year	(37,001)	(40,053)
Outstanding at end of the year	663,624	707,834

SIP matching shares are equity-seled awards; those outstanding at 31 March 2026 had an average remaining life of 1.5

years (2025: 1.5 years). There is no exercise price for these SIP awards. Of the shares outstanding at the end of the year nil

were exercisable (2025: nil).

Bonus Banking Plan (BBP)

During previous years the Group granted BBP awards to certain senior executives in the UK and US.



	FY26	FY25
	Number of	Number of
	awards	awards
Outstanding at start of the year	–	892,416
Granted during the year	–	–
Exercised during the year	–	(833,623)
Forfeited during the year	–	(58,793)
Outstanding at end of the year	–	–

Notes to the Consolidated

Financial Statements

29. Share-based payments (continued)

196

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

The legacy BBP was a remuneration scheme that ran until the change in remuneration policy in 2023, with the ﬁnal

payment under the scheme made in 2024. The BBP operated in three-year performance cycles, with each cycle vesting

over a four-year period. Under the BBP a contribution was made by the Company into the participant’s Plan account

following the end of each Plan year. 50% of the value of a participant’s Plan account was paid out annually for three years

with 100% of the residual value paid out at the end of year four. 50% of the unpaid balance of a participant’s bonus account

was at risk of forfeiture. Refer to the 2024 Directors’ Remuneration Report for further details.

At 31 March 2026 the awards had a weighted average remaining life of nil year (2025: nil year). There is no exercise price

for these awards. The fair value of the awards at 31 March 2026 was £nil (2025: £nil) being the Group’s 30-day average

on 31 March. The weighted average share price at date of exercise was £nil (2025: £nil). Of the awards outstanding at the

end of the year nil were exercisable.

Deferred Share Plan (DSP)

During the year, the Group did not provisionally award any DSP awards as this share scheme has been replaced by the

LTIP share scheme.


	FY26	FY25
	Number of	Number of
	awards	awards
Outstanding at start of the year	3,760,387	6,274,618
Granted during the year	–	9,795
Lapsed during the year	(125,658)	(502,662)
Exercised during the year	(1,372,007)	(2,021,364)
Outstanding at end of the year	2,262,722	3,760,387

The number of awards is dependent on the Group’s performance during the year (speciﬁcally with respect to the Group

revenue growth). This is provisionally quantiﬁed at year end based on Group performance and also the number of eligible

employees in employment as at 31 March. Actual awards are made in the following June and the ﬁnal number awarded will

be slightly diﬀerent to the number provisionally calculated.

Awards are then subject to a three-year vesting period and a further two-year holding period. Vesting of the awards is

contingent upon Group operating proﬁt in the year before vesting being maintained at the level reported during the year

before award. Refer to the Directors’ Remuneration Report for further details.

At 31 March 2026 the awards had a weighted average remaining life of 0.2 years (2025: 0.6 years). There is no exercise price

for these awards. The weighted average share price at date of exercise was £5.18 (2025: £4.47). Of the awards outstanding at

the end of the year nil were exercisable.

Long Term Incentive Plan (LTIP)

During the year the Group granted LTIP awards to replace the DSP awards.


	FY26	FY25
	Number of	Number of
	awards	awards
Outstanding at start of the year	12,131,756	7,306,172
Granted during the year	4,879,515	6,519,447
Exercised during the year	–	–
Lapsed during the year	(1,539,937)	(1,693,863)
Outstanding at end of the year	15,471,334	12,131,756

At 31 March 2026 the awards had a weighted average remaining life of 1.3 years (2025: 2.0 years). There is no exercise price for

these awards. The weighted average fair value of grants made during the year was £4.97 (2025: £4.44). The weighted average

share price at date of exercise was nil. Of the options outstanding at the end of the year nil were exercisable.

197

Notes to the Consolidated

Financial Statements

29. Share-based payments (continued)

Restricted share plan (RSP)

RSP is a share award made to senior executives on a discretionary basis. For example, to oﬀset a new senior executive joiner

on a loss of stock options from their previous employer and it is a ﬁxed number of shares. During the year the Group granted

RSP awards to certain senior executives in the UK and US.



	FY26	FY25
	Number of	Number of
	awards	awards
Outstanding at start of the year	474,056	797,371
Granted during the year	868,651	263,186
Exercised during the year	(89,153)	(488,374)
Lapsed during the year	(23,813)	(98,127)
Outstanding at end of the year	1,229,741	474,056

At 31 March 2026 the awards had a weighted average remaining life of 1.0 years (2025: 0.7 years). There is no exercise price for

these awards. The weighted average fair value of grants made during the year was £4.93 (2025: £4.11). The weighted average

share price at date of exercise was £4.49 (2025: £4.02). Of the options outstanding at the end of the year nil were exercisable

(2025: nil).

Annual Bonus Plan (ABP)

ABP is a share award made to senior executives. This award replaced the BBP.



	FY26	FY25
	Number of	Number of
	awards	awards
Outstanding at start of the year	227,176	292,067
Granted/awarded during the year	15	–
Diﬀerence between actual awards in year and amount provisionally awarded in prior year	–	(64,891)
Lapsed during the year	–	–
Exercised during the year	–	–
Provisionally awarded during the year	213,723	–
Outstanding at end of the year	440,914	227,176

At 31 March 2026 the awards had an average remaining life of 0.3 years (2025: 1.3 years). There is no exercise price for these

awards. The weighted average fair value of grants made during the year was £4.49 (2025: £4.49). The weighted average share

price at date of exercise was £nil (2025: £nil). Of the options outstanding at the end of the year nil were exercisable (2025: nil).

Notes to the Consolidated

Financial Statements

198

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

30. Transactions with the Ministry of Defence (MOD)

The MOD continues to own its Special Share in QinetiQ which conveys certain rights as set out in note 28. Transactions

between the Group and the MOD are disclosed as follows:

Freehold land and buildings and surplus properties

Under the terms of the Group’s acquisition of part of the business and certain assets of DERA from the MOD on 1 July 2001,

the MOD retained certain rights in respect of the freehold land and buildings transferred.

Restrictions on transfer of title

The title deeds of those properties with strategic assets (see below) include a clause that prevents their transfer without

the approval of the MOD. The MOD also has the right to purchase any strategic assets in certain circumstances.

MOD’s generic compliance regime

Adherence to the generic compliance system is monitored by the Risk & Security Commiee. Refer to the Commiee’s

report within the Corporate Governance Statement on page 110.

Strategic assets

Under the Principal Agreement with the MOD, the QinetiQ controlled Group is not permied without the wrien consent

of the MOD, to:

Dispose of or destroy all or any part of a strategic asset; or

ii)

Voluntarily undertake any closure of, or cease to provide a strategic capability by means of, all or any part of

a strategic asset.

The net book value of assets identiﬁed as being strategic assets as at 31 March 2026 was £1.1m (2025: £1.3m).

Long Term Partnering Agreement

On 27 February 2003 QinetiQ Limited entered into a Long Term Partnering Agreement (LTPA) to provide test and evaluation

(T&E) facilities and training support services to the MOD. This is a 25-year contract with a total revenue value of up to £5.6bn,

dependent on the level of usage by the MOD, under which QinetiQ Limited is commied to providing T&E services with

increasing eﬀiciencies through cost saving and innovative service delivery. Following an amendment to the LTPA contract

on 5 April 2019 this contract is no longer subject to re-pricing every ﬁve years and is now contracted at a ﬁxed price to

31 March 2028. A £1.7bn ﬁve-year extension to the LTPA contract was signed in H1 and secures our position of partnership

with the MOD and provides a ﬁrm foundation to invest in the transformation of UK sovereign Test, Trials, Training & Evaluation

(T3E) capabilities.

Other contracts with MOD

The LTPA is the most signiﬁcant contract QinetiQ has with the MOD. In total approximately 60% (FY25: 57%) of the Group’s

revenue comes directly from contracts with the MOD.

31. Contingent liabilities and assets

Subsidiary undertakings within the Group have given unsecured guarantees of £53.7m at 31 March 2026 (2025: £49.7m) in

the ordinary course of business, typically in respect of performance bonds and rental guarantees. The Company has on

occasion been required to take legal action to protect its intellectual property rights, to enforce commercial contracts or

otherwise and similarly to defend itself against proceedings brought by other parties, including in respect of environmental

and regulatory issues. Provisions are made for the expected costs associated with such maers, 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 selement is assessed as remote.

199

Notes to the Consolidated

Financial Statements

32. Capital commitments

The Group had the following capital commitments for which no provision has been made:



	31 March	31 March
All ﬁgures in £ million	2026	2025
Total contracted	30.2	51.3

Capital commitments at 31 March 2026 include £26.7m (2025: £47.2m) in relation to property, plant and equipment that will

be wholly funded by a third-party customer under long-term contract arrangements. These primarily relate to investments

under the LTPA contract.

33. Related parties

During the year ended 31 March 2026 there were sales to joint ventures of nil (FY25: £0.2m). At the year-end there were

outstanding receivables from joint ventures of nil (31 March 2025: £0.2m). Details of the remuneration of Directors and

Key management personnel are included within Note 6 and the Directors’ Remuneration Report.

34. Subsidiaries and other related undertakings

In accordance with section 409 of the Companies Act 2006, a full list of subsidiaries and other related undertakings

as at 31 March 2026 is detailed below. Unless stated otherwise, the Group’s holding comprises ordinary shares which

are held indirectly by QinetiQ Group plc, with the exception of QinetiQ Group Holdings Limited which is held directly by

QinetiQ Group plc.



Name of company	Country of incorporation	Registered oﬀice
Subsidiaries 1,6
QinetiQ Training Australia Pty Ltd *	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Air Aﬀairs (Australia) Pty Ltd	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Air Aﬀairs Aviation Pty Ltd	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Air Target Services Pty Ltd	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Astra Aerospace Pty Ltd	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Avantus Federal LLC	USA	10440 Furnace Road Lorton, VA 22079
Avantus Federal Services LLC	USA	10440 Furnace Road Lorton, VA 22079
Avantus National Security Solutions LLC	USA	10440 Furnace Road Lorton, VA 22079
E3 Federal Solutions PR LLC	USA	10440 Furnace Road Lorton, VA 22079
Far Ridgeline Engagements LLC	USA	10440 Furnace Road Lorton, VA 22079
Foster-Miller Inc. 2	USA	358 2nd Ave, Waltham, Massachuses, MA 02451-1104, USA
Hirose Holdings Pty Ltd	Australia	Tower 4, Level 10, 727 Collins Street, Melbourne,
		VIC 3008, Australia
Inzpire Group Limited	England & Wales	C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street,
		Bristol, BS2 0HQ
Inzpire Holdings Limited	England & Wales	C/O FRP Advisory Trading Limited Kings Orchard, 1 Queen Street,
		Bristol, BS2 0HQ
Inzpire Limited	England & Wales	Landmark House West Unit 1b, Alpha Court, Kingsley Road,
		Lincoln, Lincolnshire, LN6 3TA
Lucid Perspectives LLC	USA	10440 Furnace Road Lorton, VA 22079
Naimuri Limited	England & Wales	Farnborough 3
Occam’s Razor Technologies LLC	USA	10440 Furnace Road Lorton, VA 22079
Operational Intelligence LLC	USA	10440 Furnace Road Lorton, VA 22079
Qinetic Limited	England & Wales	Farnborough 3

Notes to the Consolidated

Financial Statements

34. Subsidiaries and other related undertakings (continued)

200

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

| | | |
| --- | --- | --- |
| | |
| Name of company | Country of incorporation | Registered oﬀice |
| QinetiQ Australia Pty Ltd | Australia | Tower 4, Level 10, 727 Collins Street, Melbourne, |
| | | VIC 3008, Australia |
| QinetiQ Estates Limited | England & Wales | Farnborough

3 |
| QinetiQ GmbH | Germany | Flughafenstraße 65, 41066, Mönchengladbach, Germany |
| QinetiQ GP Limited | Scotland | 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, Scotland |
| QinetiQ Group Canada Inc.

2 | Canada | 5300 Commerce Court West, 199 Bay Street, Toronto, |
| | | ON M5L 1A9, Canada |
| QinetiQ Group Holdings Limited | England & Wales | Farnborough

3 |
| QinetiQ Holdings Limited | England & Wales | Farnborough

3 |
| QinetiQ Inc.

2 | USA | 10440 Furnace Road Lorton, VA 22079 |
| QinetiQ Insurance PCC Limited | Guernsey | Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey |
| QinetiQ Limited | England & Wales | Farnborough

3 |
| QinetiQ Novare Pty Ltd | Australia | Tower 4, Level 10, 727 Collins Street, Melbourne, |
| | | VIC 3008, Australia |
| QinetiQ Overseas Holdings Limited | England & Wales | Farnborough

3 |
| QinetiQ Overseas Trading Limited | England & Wales | Farnborough

3 |
| QinetiQ Pension Scheme Trustee Limited | England & Wales | Farnborough

3 |
| QinetiQ PFP Limited Partnership

4 | Scotland | 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, Scotland |
| QinetiQ Philippines Company, Inc. | Philippines | 22nd Floor Corporate Centre, 139 Valero Street, Salcedo Village, |
| | | Makati City, Philippines |
| QinetiQ Pty Ltd | Australia | Tower 4, Level 10, 727 Collins Street, Melbourne, VIC 3008, |
| | | Australia |
| QinetiQ Services Holdings Pty Ltd | Australia | Tower 4, Level 10, 727 Collins Street, Melbourne, VIC 3008, |
| | | Australia |
| QinetiQ Solutions Sdn. Bhd. | Malaysia | Suite 6.01, 6th Floor, Plaza See Hoy Chan, Jalan Raja Chulan |
| | | 50200, Kuala Lumpur, W.P. Kuala Lumpur, Malaysia |
| QinetiQ Target Services Limited | England & Wales | Farnborough

3 |
| QinetiQ Target Systems Limited | England & Wales | Farnborough

3 |
| QinetiQ Training and Simulation Limited | England & Wales | Farnborough

3 |
| QinetiQ US Holdings, Inc. | USA | 5885 Trinity Parkway, Suite 130, Centreville, |
| | | Virginia 20120-1969, USA |
| RubiKon Group Pty Limited | Australia | Level 33, 101 Collins Street, Melbourne, Victoria 3000, Australia |
| TSG International LLC | USA | 358 2nd Ave, Waltham, Massachuses MA 02451-1104, USA |

| | | |
| --- | --- | --- |
| | |
| Name of company | Country of incorporation | Registered oﬀice |
| Joint ventures

6 | | |
| Avantus CTA, LLC

5 | USA | 10440 Furnace Road Lorton, VA 22079 |
| Federal Mission Solutions, LLC

5 | USA | 58 W Main Street, Suite B, Luray, VA 22835, USA |
| Houbara Defence & Security LLC

5,6 | United Arab Emirates | Unit 3, Zone 4, Tawazun Industrial Park, Abu Dhabi, |
| | | United Arab Emirates, PO Box 128220 |
| QinetiQ Dar Massader QDM Limited

5,6 | Saudi Arabia | Al Nakhla Tower, 3026-Prince Saud Bin Mohamed Bin Muqin Road, |
| | | PO Box 2985, Riyadh 13321, Kingdom of Saudi Arabia |
| Quick Services LLC

5 | USA | 409 Chicago Drive Suite 103 in Fayeeville, NC 28306 |

Aerospace Training Services Pty Ltd was renamed QinetiQ Training Australia Pty Ltd on 30 April 2025.

As at 31 March 2026 the Group owned 100% of the ordinary shares of all subsidiary undertakings.

The class of shares is ‘common share’.

Cody Technology Park, Ively Road, Farnborough, Hampshire, GU14 OLX.

Limited partnership. The partners are all wholly-owned Group companies.

As at 31 March 2026 the Group owned 90% of Avantus CTA, LLC, 49% of Federal Mission Solutions, LLC, 49% of Houbara Defence & Security LLC,

49% of QinetiQ Dar Massader QDM Limited, and 49% of Quick Services LLC.

The ﬁnancial year end of each undertaking is 31 March other than Houbara Defence & Security LLC (31 December) and QinetiQ Dar Massader QDM

Limited (31 December).

201

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

QinetiQ Group plc (‘the Company’) is a public limited company, which is listed on the London Stock Exchange and is

incorporated and domiciled in England, United Kingdom. The consolidated ﬁnancial statements of the Group comprise

statements for the Company and its subsidiaries, together referred to as ‘the Group’.

Accounting policies

The following accounting policies have been applied consistently to all periods presented in dealing with items that are

considered material in relation to the Group’s ﬁnancial statements. In the income statement, the Group presents ‘speciﬁc

adjusting items’ separately. In the judgement of the Directors, for the reader to obtain a proper understanding of business

performance, speciﬁc adjusting items need to be disclosed separately. Underlying measures of performance exclude

speciﬁc adjusting items.

Speciﬁc adjusting items

Speciﬁc adjusting items include the following:

| | | | |
| --- | --- | --- | --- |
| | |
| | | | Does not reﬂect |
| | Distorting due to | Distorting due to | in-year operational |
| | irregular nature | ﬂuctuating nature | performance of |
| Item | year on year | (size and sign) | continuing business |
| Amortisation of intangible assets arising from acquisitions | | |  |
| Pension net ﬁnance income | |  |  |
| Gains/losses on disposal of businesses, property and investments |  |  |  |
| Transaction, integration and on-oﬀ remuneration costs in respect of business | | | |
| acquisitions and disposals |  | |  |
| Impairment of property and goodwill |  | | |
| One-oﬀ period of digital investment |  |  |  |
| Costs and other impacts of group-wide restructuring programmes |  |  | |
| The tax impact of the above |  |  |  |
| Other signiﬁcant non-recurring tax and RDEC movements |  |  |  |

The ﬁnancial impact of each item is reported in note 4 to these ﬁnancial statements.

These ‘speciﬁc adjusting items’ are of a ‘non-operational’ nature and do not include all signiﬁcant, irregular items that are of

an operational nature, for example contract risk provisions and gains/losses on disposal of plant and equipment.

Basis of preparation

The Group’s ﬁnancial statements, approved by the Directors, have been prepared on a going concern basis as discussed

in the Strategic Report on page 71 in accordance with UK-adopted International Accounting Standards and with the

requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Company has

elected to prepare its parent company ﬁnancial statements in accordance with UK GAAP (FRS 101); these are presented on

page 212. The ﬁnancial statements have been prepared under the historical cost convention, except for certain ﬁnancial

assets and liabilities (such as derivative ﬁnancial instruments) measures at fair value. The Group’s reporting currency is

Sterling and unless otherwise stated the ﬁnancial statements are rounded to the nearest £100,000.

Basis of consolidation

The consolidated ﬁnancial statements comprise the ﬁnancial statements of the Company and its subsidiary undertakings

to 31 March 2026. The purchase method of accounting has been adopted. Those subsidiary undertakings acquired or

disposed of in the period are included in the consolidated income statement from the date control is obtained to the date

that control is lost (usually on acquisition and disposal respectively). An investor controls an investee when it is exposed,

or has rights, to variable returns from its involvement with the investee and has the ability to aﬀect those returns through

its power over the investee. This is the IFRS 10 deﬁnition of ‘control’.

The Group comprises certain entities that are operated within the terms of a Special Security Arrangement (‘SSA’). Details

of the SSA and QinetiQ’s management of US subsidiaries are set out in the Corporate Governance section of this Annual

Report (on page 94). IFRS 10 is the accounting standard applicable in respect of consolidation of entities. This does not

speciﬁcally deal with SSAs. However, having considered the terms of the SSA, the Directors consider that the Group meets

the requirements of IFRS 10 in respect of control over such aﬀected entities and, therefore, consolidates these entities in

the consolidated accounts. The impact of this speciﬁc judgement is full consolidation as opposed to treatment as a 100%

associated undertaking.

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

202

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

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. Joint ventures are accounted

for using the equity method from the date of acquisition

to the date of disposal. The Group’s investments in joint

ventures are held at cost including goodwill on acquisition

and any post-acquisition changes in the Group’s share

of the net assets of the joint venture less any impairment

to the recoverable amount. Where a joint venture has net

liabilities, full provision is made for the Group’s share of

liabilities where there is a constructive or legal obligation

to provide additional funding to the joint venture.

The ﬁnancial statements of subsidiaries, joint ventures

and associates are adjusted where necessary to ensure

compliance with Group accounting policies.

Consideration of climate change

In preparing the ﬁnancial statements, the Board has

considered the impact to the Company and its activities

of climate change, particularly those risks highlighted

on page 63 in line with the recommendations by the Task

Force for Climate-related Disclosures (TCFD). The Board

recognises its responsibilities for oversight of climate-

related risks and opportunities. The QinetiQ Leadership

Team support the Board through the implementation of

a strategic led approach to monitor, assess and address

climate transition risks and opportunities, which includes

reﬁning our capability to quantify, forecast and model

ﬁnancial statement impacts due to climate change.

Speciﬁc aspects of the ﬁnancial statements that could

potentially be impacted by climate change are the carrying

value and useful economic lives of tangible assets and

goodwill, future capability development and the ﬁnancial

performance of customer contracts.

While the Group will likely be impacted by climate change

in the future, the impacts on the ﬁnancial statements as

at 31 March 2026 are not considered to be material.

Recent accounting developments

Developments adopted by the Group for the year ended 31 March 2026

with no material impact on the Group’s ﬁnancial statements

The following standards, interpretations and amendments

to existing standards became eﬀective on 1 January 2025

and have not had a material impact on the Group:

Amendments to IAS 21 Lack of Exchangeability,

eﬀective from 1 January 2025.

IFRS 18 Presentation and Disclosure in Financial Statements

(eﬀective for annual periods beginning on or after 1 January 2027)

IFRS 18 will replace IAS 1 Presentation of ﬁnancial

statements, introducing new requirements that will help

to achieve comparability of the ﬁnancial performance of

similar entities and provide more relevant information and

transparency to users. Even though IFRS 18 will not impact

the recognition or measurement of items in the ﬁnancial

statements, its impacts on presentation and disclosure

are expected to be pervasive, in particular those related

to the statement of ﬁnancial performance and providing

management-deﬁned performance measures within the

ﬁnancial statements.

We are currently assessing the detailed implications of

applying the new standard on the group’s consolidated

ﬁnancial statements.

The group will apply the new standard from its mandatory

eﬀective date of 1 January 2027. Retrospective application

is required, and so the comparative information for the

ﬁnancial year ending 31 March 2027 will be restated in

accordance with IFRS 18.

Developments expected in future periods of which are not expected to

have a material impact on the Group’s ﬁnancial statements

The following other standards, interpretations and

amendments to existing standards have been issued but

were not mandatory for accounting periods beginning on

1 April 2025. These either have been, or are expected to

be endorsed by, the UK Endorsement Board and are not

expected to have a material impact on the Group:

Amendments to the Classiﬁcation and Measurement

of Financial Instruments – amendments to IFRS 9

and IFRS 7, eﬀective from 1 January 2026;

Annual improvements 2024, eﬀective from

1 January 2026; and

Contracts Referencing Nature-dependent

Electricity – amendment to IFRS 9 and IFRS 7,

eﬀective from January 2026.

Material accounting policies

Revenue from contracts with customers

The Group recognises revenue primarily from the following

major sources:

Through combining world-leading expertise with

unique facilities to provide technical assurance, test

and evaluation and training services underpinned by

long-term contracts; and

Through delivering innovative solutions and products

to meet customer requirements by undertaking

contract-funded research and development,

developing intellectual property and by internal

funding with potential for new revenue streams.

203

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

Revenue is measured based on the consideration speciﬁed

in a contract with a customer and excludes amounts

collected on behalf of third parties. The Group recognises

revenue when it transfers control of a product or service to

a customer. The Group’s revenue contracts are accounted

for under IFRS 15 Revenue from Contracts with Customers

taking into account the requirement to distinguish between

the various performance obligations within a contract

and treating these separately. The Group’s methodology

applies IFRS 15 on a contract-by-contract basis which

includes considerations for contract modiﬁcations, variable

consideration, the determination of distinct performance

obligations, determination of agency and principal

relationships and licences.

Service contracts

The Group’s long-term service contracts are generally

‘test and evaluation’ or advice-based contracts where

control of the service is transferred over a period of time

as the Group performs. At contract inception the Group

undertakes an assessment to determine how many distinct

performance obligations exist within a contract. As part of

the assessment the Group obtains an understanding of the

overall deliverable to the customer through discussions

with business units and project leads. Each individual

deliverable in the contract is then assessed to determine if

it is an input into the overall deliverable, and therefore part

of a single performance obligation, or if it is a stand-alone

separable deliverable with its own transaction price and

therefore a distinct performance obligation in its own right.

Each distinct performance obligation identiﬁed within a

contract is accounted for separately.

Certain service contracts have a similar paern of transfer

of control to the customer where each year is eﬀectively

the same from a performance obligation perspective. The

Group has applied the series guidance as permied within

the Standard to these contracts and accounts for these

as a series of distinct service performance obligations

satisﬁed annually over the contract term.

The transaction price for a contract is determined at contract

inception based on a ﬁxed-margin applied to the total

forecast costs to complete the deliverable. Some long-term

contracts include an excess proﬁt clause which is a variable

consideration factor that could impact the transaction price.

Excess proﬁts are estimated at contract inception and at the

end of each reporting period to ensure that the transaction

price is not under or over stated. Any required adjustment will

be made against the transaction price in the period in which

it occurred. The Group does not oﬀer any right of return or

refunds which could impact transaction price at inception.

Certain contracts aract bonuses and/or penalties

which are variable and will have an impact on transaction

price at contract inception. The Group assesses variable

consideration in relation to bonuses and penalties at

contract inception using the most-likely method and this

forms part of the transaction price and recognised over time

as costs are incurred. The Group only includes bonuses and

penalties into the transaction price to the extent that it is

highly probable that a signiﬁcant reversal of revenue will not

occur in future periods. Historical evidence and experience

show that even where a reduction has been required, that

reduction has been immaterial to the Group.

The transaction price is allocated between each distinct

performance obligation identiﬁed in a contract based

on the stand-alone selling price of each performance

obligation. Each performance obligation will be costed and

the transaction price will be cost plus margin. This amount

would be the stand-alone selling price of each performance

obligation if contracted with a customer separately.

Long-term service contracts allow for modiﬁcations to the

original order. If a contract modiﬁcation is determined to

be distinct and the price of the contract increases by an

amount of consideration that reﬂects the entity’s stand-

alone selling prices for the additional promised goods

or services, the Group accounts for this as a separate

contract. If a contract modiﬁcation is not distinct, the

Group accounts for this as if it were part of the existing

contract. A cumulative catch-up adjustment to revenue is

then recognised to disclose the eﬀect that the contract

modiﬁcation has on the transaction price and the Group’s

measure of progress towards complete satisfaction of the

performance obligation.

Long-term service contracts also sometimes allow for

extensions to the original order. A contract extension is

determined to include either additional goods or services or

no additional goods or service. If a contract extension with

additional goods or services is determined to be distinct

and the price of the contract increases by an amount of

consideration that reﬂects the entity’s stand-alone selling

prices for the additional promised goods or services, the Group

accounts for this as a separate performance obligation.

If a contract extension with additional goods or services is

not distinct, the Group accounts for this as if it were part of

the existing contract. A cumulative catch-up adjustment to

revenue is then recognised to disclose the eﬀect that the

contract extension has on the transaction price and the

Group’s measure of progress towards complete satisfaction

of the performance obligation.

When the outcome of a distinct performance obligation

in delivering services can be reliably estimated, revenue

associated with the performance obligation is recognised

over time using the input method. The input method

recognises revenue over time on the basis of costs incurred

to date to the satisfaction of a performance obligation

relative to the total forecast costs to complete the

performance obligation.

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

204

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

The Group has determined the input method to be

appropriate as it best depicts the Group’s performance

in transferring control of the service to the customer as it

incurs costs on a particular contract.

No proﬁt is recognised on contracts until the outcome of the

contract can be reliably estimated. When it is probable that

total contract costs will exceed total contract revenue, the

expected loss is recognised immediately as an expense.

Goods sold

The Group recognises revenue on the sale of products at

a point in time once control has been transferred to the

customer. Control is generally transferred to customers

on delivery of products or when the customer has the

signiﬁcant risks and rewards of ownership of the product.

Payment is typically due within 30 days of invoice (within the

UK) and customers typically do not have a right of return or

refund. The transaction price for sale of products is agreed

at contract inception. When the Group develops a bespoke

product for a customer with no alternative use to the Group,

revenue is recognised over time using the input method.

Licence revenue

Licence revenue is aributed to either ‘right to use’ or

‘right to access’ licences. ‘Right to use’ licence revenue is

recognised at a point in time when the Group sells a licence

to a customer and does not undertake signiﬁcant further

activities or involvement in developing the licence after

the sale. ‘Right to access’ licence revenue is recognised

over time when the Group maintains a signiﬁcant level of

involvement in developing and enhancing the licence after

the sale. The level of involvement goes beyond general

support, bug-ﬁxing and upgrades which generally only

maintain the current operating level. The transaction price

for intellectual property is agreed at contract inception.

The Group does not oﬀer any right of return or refunds

which could impact transaction price at inception.

The Group recognises licence revenue through the supply

of a range of security, messaging and connectivity software

products. A licence fee is paid for each computer that

uses the software and the customer can also purchase

a support service contract for a ﬁxed period. The sale of

these types of licences is recognised at a point in time as a

distinct performance obligation because the Group does not

undertake any further activities in developing the licence after

the sale. The support service contract is recognised over time

as a separate performance obligation as this is an optional

extra and is not integral to the functionality of the licence.

The support service contract oﬀers general support and

maintenance of the licence to the customer over a ﬁxed period.

Contract assets

Contract assets represent revenue recognised in excess of

amounts invoiced. Revenue is recognised on service contracts

by using a ‘percentage complete’ method, applying the

proportion of contract costs incurred for work performed to

date relative to the estimated total contract cost, after making

suitable allowances for technical and other risks related to

performance milestones yet to be achieved, and applying

that proportion to total contract price. Payment for service

contracts are not always due from the customer until certain

milestones have been reached and, therefore, a contract

asset is recognised over the period in which the services are

performed representing the Group’s right to consideration for

services performed to date, to the extent that the customer

has not yet been invoiced for those services.

Contract liabilities

The Group, on occasion, bills customers in advance of

performing certain types of work which results in the Group

recognising contract liabilities. Once the work has been

performed these amounts will be reduced and recognised

as revenue. For sale of goods, revenue is recognised in the

income statement when control of the goods has been

transferred to the customer; being at the point when the

goods are delivered. Any transaction price received by the

Group before that point is recognised as a contract liability.

Principal-agent arrangements

The Group enters into certain arrangements which involve

a consortium of service providers. The Group acts as a

‘Prime’ contractor in certain contracts with customers and

utilises sub-contractors to undertake the work. Under these

contracts the Group is considered to be primarily responsible

for fulﬁlling the service to the customer. The Group performs a

technical assessment of the work before it is delivered to the

customer and is responsible for quality and performance of

the sub-contractor. As such the Group is considered to be the

principal to the arrangement with the customer and includes

sub-contractor costs within revenue. However, where the

Group is merely acting as an agent of a sub-contractor then no

revenue is recognised in respect of sub-contractor costs.

All consortium arrangements are assessed by the Group to

determine if it is the principal or agent.

Contract bidding costs

The Group recognises the ‘incremental costs of obtaining a

contract’ with a customer as an asset if the Group expects

to recover those costs. The ‘incremental costs of obtaining

a contract’ are those costs that the Group incurs to obtain

a contract with a customer that it would not have incurred if

the contract had not been won. Costs to obtain a contract

that would have been incurred regardless of whether the

contract was won or lost shall be recognised as an expense

when incurred, unless those costs are explicitly chargeable

to the customer.

205

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

Segmental information

Segmental information is presented according to the

Group’s internal management reporting structure and the

markets in which it operates. Segmental results represent

the contribution of the diﬀerent segments to the proﬁt

of the Group. Corporate expenses are allocated to the

corresponding segments. Unallocated items mainly comprise

Research and Development Expenditure Credits (RDEC) and

speciﬁc adjusting items. Speciﬁc adjusting items are referred

to in note 4. Segmental assets and liabilities information is not

regularly provided to the Chief Operating Decision Maker.

Research and development expenditure

Research and development (R&D) costs incurred in respect

of speciﬁc contracts placed by customers are recognised

within operating costs and revenue is recognised in

respect of the R&D services performed. Internally funded

development expenditure is capitalised in the balance sheet

where there is a clearly deﬁned project, the expenditures

are separately identiﬁable, the project is technically and

commercially feasible, all costs are recoverable by future

revenue and the resources are commied to complete

the project. Such capitalised costs are amortised over the

forecast period of sales resulting from the development. All

other R&D costs are expensed to the income statement in

the period in which they are incurred. If the research phase

cannot be clearly distinguished from the development phase,

the respective project-related costs are treated as if they

were incurred in the research phase only and expensed.

Borrowings and ﬁnancing

The Group has a term loan and access to a revolving credit

facility with its relationship banks. Borrowings are initially

recognised at fair value. Borrowings are subsequently

measured at amortised cost. Any diﬀerence between the

proceeds (net of transaction costs) and the redemption

amount is recognised in proﬁt or loss over the period of the

borrowings using the eﬀective interest method.

Borrowings are removed from the balance sheet when the

obligation speciﬁed in the contract is discharged, cancelled

or expired. The diﬀerence between the carrying amount of a

ﬁnancial liability that has been extinguished or transferred

to another party and the consideration paid, including

any non-cash assets transferred or liabilities assumed, is

recognised in proﬁt or loss as other income or ﬁnance costs.

Borrowings are classiﬁed as non-current liabilities where

the Group has an unconditional right to defer selement of

the liability for at least 12 months after the reporting period.

Fees paid on the establishment of loan facilities are recognised

as transaction costs of the loan to the extent that it is probable

that some or all of the facility will be drawn down. In this case,

the fee is deferred until the draw-down occurs. The Group

pays in advance ﬁnance costs in relation to the multi-currency

facility which are recognised as a deferred ﬁnance cost

asset and amortised over the period of the facility, where it

is probable that some or all of the facility will be drawn down.

Costs of leers of credit are also charged to ﬁnance expense.

Exchange diﬀerences on ﬁnancial assets and liabilities and

the income or expense from interest hedging instruments

that are recognised in the income statement are included

within ﬁnance income and ﬁnance expense. Financing also

includes the net ﬁnance income or expense in respect of

deﬁned beneﬁt pension schemes.

Taxation

The income tax expense or credit for the period is the tax

payable on the current period’s taxable income, based

on the applicable income tax rate for each jurisdiction,

adjusted by changes in deferred tax assets and liabilities

aributable to temporary diﬀerences and to unused tax

losses. The current income tax charge is calculated on the

basis of the tax laws enacted or substantively enacted at

the end of the reporting period in the countries where the

Company and its subsidiaries and associates operate and

generate taxable income.

Management periodically evaluates positions taken in

tax returns with respect to situations in which applicable

tax regulation is subject to interpretation and considers

whether it is probable that a taxation authority will accept

an uncertain tax treatment. The Group measures its tax

balances either based on the most likely amount or the

expected value, depending on which method provides a

beer prediction of the resolution of the uncertainty.

Deferred income tax is provided in full, using the liability

method, on temporary diﬀerences arising between the tax

bases of assets and liabilities and their carrying amounts in

the consolidated ﬁnancial statements. However, deferred

tax liabilities are not recognised if they arise from the initial

recognition of goodwill.

Deferred income tax is also not accounted for if it arises

from initial recognition of an asset or liability in a transaction

other than a business combination that, at the time of the

transaction, aﬀects neither accounting nor taxable proﬁt or

loss. Deferred income tax is determined using tax rates (and

laws) that have been enacted or substantively enacted by

the end of the reporting period and are expected to apply

when the related deferred income tax asset is realised or the

deferred income tax liability is seled.

Deferred tax assets are recognised only if it is probable that

future taxable amounts will be available to utilise those

temporary diﬀerences and losses.

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

206

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Deferred tax assets are derecognised when that probability

assessment changes. Deferred tax liabilities and assets

are not recognised for temporary diﬀerences between

the carrying amount and tax bases of investments in

foreign operations where the Company is able to control

the timing of the reversal of the temporary diﬀerences and

it is probable that the diﬀerences will not reverse in the

foreseeable future.

Deferred tax assets and liabilities are oﬀset where there is

a legally enforceable right to oﬀset current tax assets and

liabilities and where the deferred tax balances relate to the

same taxation authority. Current tax assets and tax liabilities

are oﬀset where the entity has a legally enforceable right to

oﬀset and intends either to sele on a net basis or to realise

the asset and sele the liability simultaneously.

The Group has applied the temporary exemption issued

by the International Accounting Standards Board from the

accounting for deferred taxes under IAS 12 and neither

recognises nor discloses information about deferred taxes

related to OECD’s Global Anti-Base Erosion Model Rules

(Pillar Two) income taxes.

Current and deferred tax is recognised in proﬁt or loss,

except to the extent that it relates to items recognised in

other comprehensive income or directly in equity. In this

case, the tax is also recognised in other comprehensive

income or directly in equity, respectively.

Research and Development Expenditure Credits (RDEC) are

recognised within other operating income.

Goodwill

Goodwill on acquisitions of subsidiaries is included in non-

current assets. Goodwill on acquisitions of joint ventures

is included in the carrying value of equity accounted

investments. Goodwill is tested annually for impairment and

carried at cost less accumulated impairment losses. Gains

and losses on the disposal of an entity include the carrying

amount of goodwill related to the entity sold.

Other intangible assets

Other intangible assets arising from business combinations

are recognised at fair value and are amortised over their

expected useful lives, typically between 1 and 16 years.

Internally generated intangible assets are recorded at

cost, including labour, directly aributable costs and any

third-party expenses.

The ‘multi-period excess earnings’ method and the ‘relief-

from-royalty’ method are both used for fair valuing intangible

assets arising from acquisitions. The multi-period excess

earnings method considers the present value of net cash

ﬂows expected to be generated by customer relationships,

by excluding any cash ﬂows related to contributory assets.

The relief-from-royalty method considers the discounted

estimated royalty payments that are expected to be avoided

as a result of the patents or trademarks being owned.

Purchased intangible assets are recognised at cost less

amortisation. Intangible assets are amortised over their

respective useful lives on a straight-line basis as follows:



Intellectual property rights	2–10 years
Customer relationships	1–16 years
Development costs	1–5 years
Other	1–14 years

Property, plant and equipment

Property, plant and equipment are stated at cost less

depreciation. Freehold land is not depreciated. Other

tangible non-current assets are depreciated on

a straight-line basis over their useful economic lives

to their estimated residual value as follows:



Freehold buildings	20–25 years
Leasehold land and buildings	Shorter of useful
	economic life and the
	period of the lease
Plant and machinery	3–15 years
Motor vehicles	3–5 years
Aircraft (vehicles)	10–20 years
Computers	3–5 years
Oﬀice equipment	5–10 years

Assets under construction are included in property, plant

and equipment on the basis of expenditure incurred at the

balance sheet date. In the case of assets constructed by the

Group, the value includes the cost of own work completed,

including directly aributable costs and interest. The useful

lives, depreciation methods and residual values applied to

property, plant and equipment are reviewed annually and,

if appropriate, adjusted accordingly.

Impairment of goodwill and tangible, intangible and held

for sale assets

At each reporting date the Group assesses whether there is

an indication that an asset may be impaired. If the carrying

amount of any asset exceeds its recoverable amount an

impairment loss is recognised immediately in the income

statement. In addition, goodwill is tested for impairment

annually irrespective of any indication of impairment. If the

carrying amount exceeds the recoverable amount, the

respective asset or the assets in the cash-generating unit

(CGU) are wrien down to their recoverable amounts. The

recoverable amount of an asset or CGU is the higher of its

fair value less costs to sell and its value in use. The value in

use is the present value of the future cash ﬂows expected

to be derived from an asset or CGU calculated using an

appropriate pre-tax discount rate. Impairment losses are

expensed to the income statement.

207

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

Leases

Leases – as a lessor

Lease income from operating leases where the Group is a

lessor is recognised in income on a straight-line basis over the

lease term (note 25). Initial direct costs incurred in obtaining

an operating lease are added to the carrying amount of the

underlying asset and recognised as expense over the lease

term on the same basis as lease income. The respective leased

assets are included in the balance sheet based on their nature.

Leases – as a lessee

The Group leases various oﬀices, aircraft, equipment and

vehicles. Rental contracts are typically made for ﬁxed

periods of 6 months to 25 years, but may have extension

options as described below.

Contracts may contain both lease and non-lease

components. The Group allocates the consideration in the

contract to the lease and non-lease components based

on their relative stand-alone process. Lease terms are

negotiated on an individual basis and contain a wide range

of diﬀerent terms and conditions. The lease agreements do

not impose any covenants other than the security interests

in the leases assets that are held by the lessor. Leased

assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and

corresponding liability at the date at which the leased asset

is available for use by the Group.

Assets and liabilities arising from a lease are initially

measured on a present value basis. Lease liabilities include

the net present value of the following lease payments:

Fixed payments (including in-substance ﬁxed

payments), less any lease incentives receivable;

Variable lease payments based on an index or a rate,

initially measured using the index or rate as at the

commencement date;

Amounts expected to be payable by the Group under

residual value guarantees;

The exercise price of a purchase option if the Group is

reasonably certain to exercise that option; and

Payments of penalties for terminating the lease, if the

lease term reﬂects the Group exercising that option.

Lease payments to be made under reasonably certain

options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate

implicit in the lease. If the rate cannot be readily determined,

which is generally the case for leases in the Group, the

lessee’s incremental borrowing rate is used, being the

rate the individual lessee would have to pay to borrow the

funds necessary to obtain an asset of similar value to the

right-of-use asset in a similar economic environment with

similar terms, security and conditions. To determine the

incremental borrowing rate, the Group:

Where possible, uses recent third-party ﬁnancing

received by the individual lessee as a starting point,

adjusted to reﬂect changes in ﬁnancing conditions

since third party ﬁnancing was received;

Uses a build-up approach that starts with a risk-free

interest rate adjusted for credit risk for leases held by

QinetiQ Plc, which does not have recent third-party

ﬁnancing; and

Makes adjustments speciﬁc to the lease, for example

to term, country, currency and security.

The exposure by the Group to potential future increases in

variable lease payments based on an index or rate, which are

not included in the lease liability until they take eﬀect, is not

considered material. When adjustments to lease payments

based on an index or rate take eﬀect, the lease liability is

reassessed and adjusted against the right-of-use asset. Lease

payments are allocated between principal and ﬁnance cost.

The ﬁnance cost is charged to proﬁt or loss over the lease

period so as to produce a constant periodic rate of interest on

the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising

the following:

The amount of the initial measurement of lease liability;

Any lease payments made at or before the

commencement date less any lease incentives received;

Any initial direct costs; and

Restoration costs.

Right-of-use assets are generally depreciated over the

shorter of the asset’s useful life and lease term on a straight-

line basis. If the Group is reasonably certain to exercise

a purchase option, the right-of-use asset is depreciated

over the underlying asset’s useful life. The Group does not

revalue its land and buildings that are presented within

property, plant and equipment and has chosen to do the

same for right-of-use buildings by the Group. Payments

associated with short-term leases of oﬀices, equipment and

vehicles and all leases of low-value assets are recognised

on a straight-line basis as an expense in proﬁt or loss. Short-

term leases are leases with a lease term of 12 months or less.

Low-value assets comprise lease assets under £5,000.

Lease extension and termination options

Extension and termination options are included in a number of

property and equipment leases across the Group. These are

used to maximise operational ﬂexibility in terms of managing

the assets used in the Group’s operations. The majority of

extension and termination options held are exercisable only

by the Group and not by the respective lessor.

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

208

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Judgements in determining the lease term

In determining the lease term, management considers all

facts and circumstances that create an economic incentive

to exercise an extension option or not exercise a termination

option. Extension options (or periods after termination

options) are only included in the lease term if the lease is

reasonably certain to be extended (or not terminated).

For leases of oﬀices and equipment, the following factors

are normally the most relevant:

If there are signiﬁcant penalties to terminate (or

extend), the Group is typically reasonably certain to

end (or not to terminate).

If any leasehold improvements are expected to have

a signiﬁcant remaining value, the Group is typically

reasonably certain to extend (or not terminate).

Otherwise, the Group considers other factors including

historical lease durations and the costs and business

disruptions required to replace the leased asset.

Most extension options in oﬀice and vehicles leases

have not been included in the lease liability, because the

Group could replace the assets without signiﬁcant cost or

business disruption.

As at 31 March 2026 no (undiscounted) potential future

cash outﬂows have been included in the lease liability for

extension or termination.

The lease term is reassessed if an option is actually

exercised (or not exercised) or the Group becomes

obliged to exercise (or not exercise) it. The assessment of

reasonable certainty is only revised if a signiﬁcant event of

signiﬁcant change in circumstance occurs, which aﬀects

this assessment, and that is within the control of the

lessee. During the current ﬁnancial year, the ﬁnancial eﬀect

of revising lease terms to reﬂect the eﬀect of exercising

extension or termination options was nil (FY25: nil) in

recognised lease liabilities and right-of-use assets.

Inventories

Inventory and work-in-progress are stated at the lower

of cost and net realisable value, using the ﬁrst-in-ﬁrst-

out cost formula. Work-in-progress and manufactured

ﬁnished goods are valued at production cost. Production

cost includes direct production costs and an appropriate

proportion of production overheads. A provision is

established when the net realisable value of any inventory

item is lower than its cost. A ‘market comparison’ technique

is used to fair value inventories acquired through a business

combination. The fair value is determined based on the

estimated selling price in the ordinary course of business

less the estimated costs of completion and sale, and a

reasonable proﬁt margin based on the eﬀort required to

complete and sell the inventories.

Trade and other receivables

Trade and other receivables are measured at amortised

cost less any impairment losses. Amounts recoverable

on contracts are included in trade and other receivables

and represent revenue recognised in excess of amounts

invoiced. Other receivables will also include insurance

recoveries where we are virtually certain of recovery.

Impairment of trade and other receivables

The Group applies the simpliﬁed approach when using the

expected credit loss (ECL) impairment model for trade and

other receivables. Under the simpliﬁed approach the Group

always measures the loss allowance at an amount equal to

the lifetime expected credit losses for trade receivables.

The Group measures the expected credit losses of trade

and other receivables in a way that reﬂects a probability-

weighted amount that is determined by evaluating a range of

possible outcomes, the time value of money and supportable

information that is readily available at each reporting date

about past events, current condition and forecasts of future

economic conditions. The ECLs are updated each reporting

period to reﬂect changes in credit risk since initial recognition.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and

short-term, highly liquid investments that are readily

convertible into a known amount of cash and which are

subject to an insigniﬁcant risk of changes in value. The

Group holds various short-maturity money market funds

(see note 23) across numerous ﬁnancial institutions which

meet the IAS 7 criteria to be classiﬁed as cash equivalents.

In the cash ﬂow statement overdraft balances are included

in cash and equivalents. Cash and cash equivalents includes

an element that is restricted in use (note 23).

Current and non-current liabilities

Current liabilities include amounts due within the normal

operating cycle of the Group. Deferred income, or ‘contract

liabilities’, is included in trade and other payables and

represents amounts invoiced in excess of revenue

recognised. Interest-bearing current and non-current

liabilities are initially recognised at fair value and then

stated at amortised cost with any diﬀerence between the

cost and redemption value being recognised in the income

statement over the period of the borrowings on an eﬀective

interest rate basis. Costs associated with the arrangement

of bank facilities or the issue of loans are held net of

the associated liability presented in the balance sheet.

Capitalised issue costs are released over the estimated

life of the facility or instrument to which they relate using

the eﬀective interest rate method. If it becomes clear

that the facility or instrument will be redeemed early,

the amortisation of the issue costs will be accelerated.

209

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

Provisions

A provision is recognised in the balance sheet when the Group

has a present legal or constructive obligation as a result of a

past event which can be reliably estimated, and it is probable

that an outﬂow of economic beneﬁts will be required to sele

the obligation. Where appropriate, provisions are determined

by discounting the expected cash ﬂows at an appropriate

discount rate reﬂecting the level of risk and the time value of

money. Where an exposure is highly likely to be covered by

insurance an oﬀseing receivable is recorded.

Financial instruments

Financial assets and ﬁnancial liabilities are recognised on

the Group’s balance sheet when the Group becomes a party

to the contractual provisions of the instrument at the trade

date. The derecognition of a ﬁnancial instrument takes

place when the Group no longer controls the contractual

right that comprises the ﬁnancial instrument, when

the instrument expires, or when the instrument is sold,

terminated or exercised.

Financial assets and liabilities

Financial assets are classiﬁed on the Group’s balance sheet

as subsequently measured at amortised cost, fair value

through other comprehensive income or fair value through

proﬁt or loss. This classiﬁcation is made on the basis of

both the Group’s business model for managing the ﬁnancial

assets and the contractual cash ﬂow characteristics of the

ﬁnancial asset.

Financial liabilities are classiﬁed on the Group’s balance

sheet as subsequently measured at amortised cost except

for ﬁnancial liabilities at fair value through proﬁt and loss.

The Group may at initial recognition irrevocably designate

a ﬁnancial liability as measured at fair value through proﬁt

or loss if a contract contains one or more embedded

derivatives and the host is not an asset within the scope of

IFRS 9, or when doing so results in more relevant information.

Derivative ﬁnancial instruments

Derivative ﬁnancial instruments are initially recognised

and thereafter held at fair value, being the market value

for quoted instruments or valuation based on models and

discounted cash ﬂow calculations for unlisted instruments.

Fair value hedging

The Group’s activities expose it primarily to the ﬁnancial risks of

changes in foreign currency exchange rates and interest rates.

The Group uses foreign exchange contracts and interest rate

swap contracts to hedge these exposures. The use of ﬁnancial

derivatives is governed by the Group’s Treasury Policies as

approved by the Board of Directors, which provides wrien

principles on the use of derivatives. The Group does not use

derivative instruments for speculative purposes.

Certain derivative instruments do not qualify for hedge

accounting. These are categorised as ‘fair value through

proﬁt or loss’ and are stated at fair value, with any resultant

gain or loss recognised in the income statement.

The Group designates certain hedging instruments in

respect of foreign currency risk as cash ﬂow hedges. At the

inception of the hedge relationship, the Group documents

the relationship between the hedging instrument and the

hedged item, along with its risk management objectives

and strategy for undertaking various hedging transactions.

The Group also documents, both at hedge inception and on

an ongoing basis, whether the hedging instrument that is

used in a hedging relationship is highly eﬀective in oﬀseing

changes in fair values or cash ﬂows of the hedged item.

For the Group’s cash ﬂow hedges of highly probable

forecast transactions in foreign currencies, the hedge

ratio is 100%, subject to a £100k de Minimis threshold. If

the underlying exposure changes over time, either due

to commercial factors or timing diﬀerences, the hedging

instruments will be rebalanced to ensure that the hedge

ratio of 100% is maintained.

Cash ﬂow hedging

Changes in the fair value of derivatives designated as a

cash ﬂow hedge that are regarded as highly eﬀective are

recognised in equity. The ineﬀective portion is recognised

immediately in the income statement. Where a hedged item

results in an asset or a liability, gains and losses previously

recognised in equity are included in the cost of the asset or

liability. Gains and losses previously recognised in equity

are removed and recognised in the income statement at the

same time as the hedged transaction.

Foreign currencies

Transactions in foreign currencies are recorded using

the rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities in foreign currencies are

translated at period-end rates. Any resulting exchange

diﬀerences are taken to the income statement. Gains and

losses on designated forward foreign exchange hedging

contracts are matched against the foreign exchange

movements on the underlying transaction.

The individual ﬁnancial statements of each Group company

are presented in its functional currency. On consolidation,

assets and liabilities of overseas subsidiaries, associated

undertakings and joint ventures, including any related

goodwill, are translated to Sterling at the rate of exchange

at the balance sheet date. The results and cash ﬂows of

overseas subsidiaries, associated undertakings and

joint ventures are translated to Sterling using the

average rates of exchange during the period. Exchange

adjustments arising from the re-translation of the opening

net investment and the results for the period to the

period-end rate are taken directly to equity and reported

in the statement of comprehensive income.

Notes to the Consolidated

Financial Statements

35. Basis of preparation and material accounting policies

(continued)

210

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

Post-retirement beneﬁts

The Group provides both deﬁned contribution and deﬁned

beneﬁt pension arrangements. The liabilities of the Group

arising from deﬁned beneﬁt obligations are determined using

the projected unit credit method. Valuations for accounting

purposes are carried out bi-annually. Actuarial advice is

provided by external consultants. For the funded deﬁned

beneﬁt plans, the excess or deﬁcit of the fair value of plan

assets less the present value of the deﬁned beneﬁt obligation

are recognised as an asset or a liability respectively.

Per the Scheme rules the Company has an unconditional

right to a refund of any surplus that may arise on cessation

of the Scheme in the context of IFRIC 14 paragraphs 11(b)

and 12 and, therefore, the full net pension asset can be

recognised on the Group’s balance sheet and the Group’s

minimum funding commitments to the Scheme do not give

rise to an additional balance sheet liability.

For deﬁned beneﬁt plans the cost charged to the income

statement consists of administrative expenses and the net

interest income. There is no service cost due to the fact the

plans are closed to future accrual. The net interest income

is reported within ﬁnance income and the administration

cost element is charged as a component of operating costs

in the income statement. Actuarial gains and losses and

re-measurement gains and losses are recognised

immediately in full through the statement of comprehensive

income. Contributions to deﬁned contribution plans are

charged to the income statement as incurred.

Share-based payments

The Group operates share-based payment arrangements

with employees. The fair value of equity-seled awards

for share-based payments is determined on grant and

expensed straight line over the period from grant to

end of the service period. The charges for equity-seled

share-based payments are updated annually for

non-market-based vesting conditions.

Share-buybacks

Where any member of the Group purchases the Company’s

own equity instruments, including pursuant to a share

buy-back programme, the consideration paid, together

with any directly aributable incremental transaction

costs (net of related income tax eﬀects), is recognised as

a deduction from equity aributable to the shareholders of

the Group and presented within treasury shares until such

shares are cancelled or reissued.

Where treasury shares are subsequently cancelled, the

cost of the shares is transferred from treasury shares to the

appropriate reserves within equity. Where treasury shares

are subsequently reissued, any consideration received, net

of any directly aributable incremental transaction costs

and related income tax eﬀects, is recognised within equity

aributable to the shareholders of the Group.

Investments in debt and equity securities

Investments held by the Group are classiﬁed as either

a current asset or as a non-current asset. These are

investments in debt and equity instruments that are

classiﬁed as at fair value through other comprehensive

income. When these investments are derecognised, the

cumulative gain or loss previously recognised directly in

equity is recognised in the income statement.

The fair value of quoted ﬁnancial instruments is their bid

price at the balance sheet date. The fair value of unquoted

equity investments is based on the price of the most recent

investment by the Group or a third party, if available, or

derived from the present value of forecast future cash ﬂows.

Share capital

Ordinary share capital of the Company is recorded as the

proceeds received. Company shares held by the employee

beneﬁt trusts are held at the consideration paid. They are

classiﬁed as own shares within equity. Any gain or loss on

the purchase, sale or issue of Company shares is recorded

in equity.

211

Notes to the Consolidated

Financial Statements

36. Critical accounting estimates

and judgments in applying

accounting policies

Critical accounting estimates

The following commentary is intended to highlight key

sources of estimation uncertainty that have a signiﬁcant

risk of resulting in a material adjustment to the ﬁnancial

statements in the next ﬁnancial year.

Carrying value of goodwill relating to the US Sector CGU

The Group tests annually whether goodwill has suﬀered any

impairment. This process relies on the use of estimates of

the future proﬁtability and cash ﬂows of its cash-generating

units which may diﬀer from the actual results delivered. In

addition, the Group reviews whether identiﬁed intangible

assets have suﬀered any impairment. Further details on the

sensitivity of the carrying value of goodwill to changes in the

key assumptions are set out in note 13.

Estimation of the Group’s deﬁned beneﬁt pension

net surplus

The Group’s deﬁned beneﬁt pension obligations (and hence

the net surplus) are based on key assumptions, including

discount rates, mortality and inﬂation. Management

exercises its best judgement, in consultation with actuarial

advisors, in selecting the values for these assumptions that

are the most appropriate to the Group. Small changes in

these assumptions at the balance sheet date, individually or

collectively, may result in signiﬁcant changes in the size of

the net surplus/deﬁcit. Further details of these assumptions

and the sensitivity of the net pension surplus to changes in

these assumptions are set out in note 27.

In addition to the sensitivity of the liability side of the net

pension surplus (which will impact the value of the net

pension surplus) the net pension surplus is also exposed

to signiﬁcant variation due to changes in the fair value of

Scheme assets. A speciﬁc sensitivity on assets has not

been included in note 27 but any change in valuation of

assets ﬂows straight through to the value of the net pension

surplus, e.g. if equities fall by £10m then the net pension

surplus reduces by £10m. The values of unquoted assets

assume that an available buyer is willing to purchase those

assets at that value. For the Group’s portfolio of assets,

the unquoted alternative bonds of £185.4m, the unquoted

corporate bonds of £73.1m and the unquoted equities of

£7.5m are the assets with most uncertainty as to valuation

as at 31 March 2026.

Estimates of costs to complete on long-term contracts

The Group has a large number of contracts which span

multiple years and are accounted for on a percentage of

completion basis in accordance with IFRS 15. Long-term

contract accounting requires a number of estimates to

be made, particularly in calculating the forecast costs

to complete the contract. These forecast costs will be

impacted by various factors including numerous risks

that could crystallise in the future (with a range of cost

outcomes), particularly on contracts of a developmental

nature. Across the Group’s portfolio of long-term contracts

there is a risk that the actual ouurn of these contracts

could be diﬀerent than assumed in the year-end contract

forecasts, impacting both revenue and operating proﬁt.

For ﬁrm price contracts the impact of actual costs being

higher or lower than estimated costs would generally

impact the contract proﬁtability and the timing of revenue

recognition. Costs could increase or decrease based on

the level of inﬂation and the outcome of assumed risk and

identiﬁed savings positions. As an example, an increase

in total forecast costs to complete of 1% in one of the

Group’s most signiﬁcant contracts, would reduce proﬁt by

approximately £1m to £2m per annum, on average over the

remaining contract duration. Depending on the timing of

such cost increases there would be an adjustment to the

timing of revenue recognition, which would have no impact

on total contract revenue but could impact an individual

year’s revenue by £2m to £3m. In many cases ﬁxed price

contracts include inﬂation uplift clauses, such that inﬂation

of costs would create additional contract value

and revenue, thus resulting in increased proﬁt.

Critical accounting judgements

Speciﬁc, material judgements made by the Directors in

applying the Group’s accounting policies are set out below:

Basis of consolidation

The Group comprises certain entities that are operated

within the terms of a Special Security Arrangement

(‘SSA’). Details of the SSA and QinetiQ’s management of

US subsidiaries are set out in the Corporate Governance

section of this Annual Report. IFRS 10 is the accounting

standard applicable in respect of consolidation of entities.

This does not speciﬁcally deal with SSAs. However, having

considered the terms of the SSA, the Directors consider

that the Group meets the requirements of IFRS 10 in respect

of control over such aﬀected entities and, therefore,

consolidates these entities in the consolidated accounts.

The impact of this speciﬁc judgement is full consolidation

as opposed to treatment as a 100% associated undertaking.

Treatment as a 100% associated undertaking would reduce

Group revenue by a material amount (c.£300m per annum)

but would have no impact on reported proﬁt, which would

include an equivalent amount of proﬁt reported within

Other Income as ‘Share of proﬁts of joint ventures’.

All ﬁgures in £ million

Note

31 March

2026

31 March

2025

Non-current assets

Investments in subsidiary undertakings

551.6

540.1

551.6

540.1

Current liabilities

Creditors: amounts falling due within one year

(127.3)

(107.8)

Net current liabilities

(127.3)

(107.8)

Total assets less current liabilities

424.3

432.3

Net assets

424.3

432.3

Equity

Share capital

5.2

5.5

Capital redemption reserve

41.3

41.0

Share premium

147.6

Retained earnings

230.2

238.2

Total equity

424.3

432.3

The proﬁt for the year ended 31 March 2026 was £176.6m (FY25: proﬁt of £146.9m).

The ﬁnancial statements of QinetiQ Group plc (company number 4586941) on pages 212 to 215 were approved by the Board of

Directors and authorised for issue on 21 May 2026 and signed on its behalf by:

Steve Wadey

Martin Cooper

Group Chief Executive Oﬀicer

Group Chief Financial Oﬀicer

Company balance sheet

As at 31 March

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

212

STRATEGIC REPORT

FINANCIAL STATEMENTS

GOVERNANCE

All ﬁgures in £ million

capital

Capital

redemption

reserve

premium

Retained

earnings

Total

equity

At 1 April 2025

5.5

41.0

147.6

238.2

432.3

Proﬁt for the year

–

176.6

Purchase of own shares

(0.3)

0.3

–

(146.9)

Dividend paid

–

(48.7)

Share-based payments

–

11.0

At 31 March 2026

5.2

41.3

147.6

230.2

424.3

At 1 April 2024

5.7

40.8

147.6

205.2

399.3

Proﬁt for the year

–

146.9

Purchase of own shares

(0.2)

0.2

–

(74.9)

Dividend paid

–

(47.9)

Share-based payments

–

8.9

At 31 March 2025

5.5

41.0

147.6

238.2

432.3

The capital redemption reserve is not distributable and was created following redemption of preference share capital.

Company statement of changes in equity

For the year ended 31 March

213

1. Accounting policies

The Company is a public limited company and is incorporated and domiciled in Farnborough, United Kingdom.

The accounting policies below have been applied consistently in dealing with items which are considered material in relation

to the Company’s ﬁnancial statements.

Basis of preparation

The ﬁnancial statements have been prepared on a going concern basis under the historical cost convention and in

accordance with applicable UK Accounting Standards. As permied by section 408 of the Companies Act 2006, a separate

proﬁt and loss account dealing with the results of the Company has not been presented.

These ﬁnancial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure

Framework. In preparing these ﬁnancial statements, the Company is in accordance with International Accounting Standards

in conformity with the requirements of the Companies Act 2006 and the International Financial Reporting Standards adopted

pursuant to Regulation (EC) No 1606/2002 as it applies in the EU but makes amendments where necessary in order to comply

with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

A cash ﬂow statement and related notes

Disclosures in respect of capital management

The eﬀects of new but not yet eﬀective IFRSs

Disclosures in respect of the compensation of key management personnel

IAS 24 in respect of related party transactions entered into between two or more members of a group

IFRS 2 Share Based Payments in respect of Group-seled share-based payments

Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7

Investments

In the Company’s ﬁnancial statements, investments in subsidiary undertakings are stated at cost less any impairment in value.

Share-based payments

The cost of share-based payments in respect of employees of Group subsidiaries is charged to those subsidiary

undertakings. In the Company ﬁnancial statements the recoverable from subsidiaries is credited directly to equity as

a capital contribution. The fair value of equity-seled awards for share-based payments is determined on grant and

expensed in subsidiary undertakings (and credited to equity in the Company) on a straight-line basis over the period from

grant to the date of earliest unconditional exercise. The charges for equity-seled share-based payments are updated

annually for non-market-based vesting conditions. Further details of the Group’s share-based payment charge are

disclosed in note 29 to the Group ﬁnancial statements.

Current liabilities

Current liabilities include amounts due within the normal operating cycle of the Company. Costs associated with the

arrangement of bank facilities or the issue of loans are held net of the associated liability presented in the balance sheet.

Share capital

Ordinary share capital of the Company is recorded as the proceeds received. Company shares held by the employee beneﬁt

trusts are held at the consideration paid. They are classiﬁed as own shares within equity. Any gain or loss on the purchase,

sale or issue of Company shares is recorded in equity.

2. Investments in subsidiary undertakings

All ﬁgures in £ million

31 March

2026

31 March

2025

Subsidiary undertaking – 100% of ordinary share capital of QinetiQ Group Holdings Limited

424.3

Capital contributions arising from share-based payments to employees of subsidiaries

113.7

102.2

Capital contributions arising from share-seled liabilities

13.6

Total investment in subsidiary undertakings

551.6

540.1

The increase in investments in subsidiary undertakings in FY26 mainly relates to equity-seled schemes during the year.

A list of all subsidiary undertakings of QinetiQ Group plc is disclosed in note 34 to the Group ﬁnancial statements.

Notes to the Company Financial Statements

ADDITIONAL INFORMATION

QinetiQ Group plc

Annual Report and Accounts 2026

214

STRATEGIC REPORT

FINANCIAL STATEMENTS

GOVERNANCE

3. Creditors: amounts falling due within one year

All ﬁgures in £ million

31 March

2026

31 March

2025

Amounts owed to Group undertakings

127.3

107.8

Creditors: amounts falling due within one year

127.3

107.8

Amounts owed to Group undertakings are unsecured, repayable on demand and bear no interest, with the exception of a

£39.7m intercompany loan which bears interest at a margin of 1.44% over SONIA.

4. Share capital

The Company’s share capital is disclosed in note 28 to the Group ﬁnancial statements.

5. Share-based payments

The Company’s share-based payment arrangements are set out in note 29 to the Group ﬁnancial statements.

6. Parent company guarantees

The Company has provided guarantees to various customers of subsidiaries to the value of £21.0m as at 31 March 2026

(2025: £21.0m) in the ordinary course of business. The Company has also provided a guarantee of £333.6m as at 31 March 2026

(2025: £332.7m) in respect of the term loan.

7. Other information

Directors’ emoluments, excluding Company pension contributions for the year to 31 March 2026, were £4.9m (FY25: £4.1m).

These emoluments were all in relation to services provided on behalf of the QinetiQ Group with no amount speciﬁcally

relating to their work for the Company. Details of the Directors’ emoluments, share schemes and entitlements under money

purchase pension schemes are disclosed on page 118 in the Directors’ Remuneration Report.

The remuneration of the Company’s auditors for the year to 31 March 2026 was £0.6m (FY25: £0.6m), which was for audit of

the Group ﬁnancial statements and Company ﬁnancial statements and audit-related assurance services. No other services

were provided by the auditors to the Company.

The monthly average number of employees for the year to 31 March 2026 was nil (FY25: nil).

Notes to the Company

Financial Statements

215

Additional

information

217

Five-year ﬁnancial summary

218

Additional ﬁnancial information

219

Glossary

220

Alternative performance

measures (APMs)

221

Shareholder information

224

Company information and advisers

Highly skilled scientists at QinetiQ’s

Farnborough site delivering specialist

engineering biology capability.

QinetiQ Group plc

Annual Report and Accounts 2026

216

STRATEGIC REPORT

GOVERNANCE

ADDITIONAL INFORMATION

FINANCIAL STATEMENTS

FY26

FY25

FY24

FY23

FY22

EMEA Services

£m

1,529.2

1,477.7

1,417.4

1,179.3

1,059.2

Global Solutions

£m

393.4

453.9

494.7

401.4

261.2

Revenue

£m

1,922.6

1,931.6

1,912.1

1,580.7

1,320.4

EMEA Services

£m

182.3

169.0

163.4

137.1

135.6

Global Solutions

£m

35.6

16.4

51.8

41.8

1.8

Operating proﬁt from segments

£m

217.9

185.4

215.2

178.9

137.4

Operating proﬁt margin from segments

11.3

9.6

11.3

10.4

Statutory operating proﬁt/(loss)

£m

169.8

(90.5)

192.5

172.8

123.7

Underlying operating proﬁt

£m

247.2

215.4

242.4

196.3

143.6

Underlying proﬁt before tax

£m

229.6

198.6

227.0

189.7

142.2

Proﬁt/(loss) before tax

£m

155.1

(106.3)

182.7

192.0

125.9

Proﬁt/(loss) aributable to owners of the Company

£m

107.5

(185.7)

139.6

154.4

90.0

Underlying basic EPS

Pence

31.5

26.1

29.4

26.5

20.6

Basic EPS

Pence

20.1

(33.0)

24.2

26.8

15.7

Diluted EPS

Pence

19.8

(33.0)

23.8

26.5

15.5

Dividend per share

Pence

11.00

8.85

8.25

7.7

7.3

Underlying net cash ﬂow from operations

£m

343.2

316.2

320.2

270.1

220.7

Net (debt)/cash

£m

(159.1)

(133.2)

(151.2)

(206.9)

225.1

Average number of employees

7,722

8,530

8,459

7,443

6,911

Orders excluding LTPA amendments and extensions

£m

1,864.0

1,954.8

1,740.4

1,724.1

1,226.6

Underlying measures are stated before speciﬁc adjusting items. Deﬁnitions of underlying measures of performance are provided on

page 220. Underlying ﬁnancial measures are presented because the Board believes these provide a beer representation of the Group’s

long-term performance trend. For details of speciﬁc adjusting items refer to note 4 and note 35 of the ﬁnancial statements.

FY22 was restated in FY23 due to a change in accounting policy for Research and Development Expenditure Credits (RDEC).

Five-year ﬁnancial summary

217

Additional

ﬁnancial information

Foreign exchange

The principal exchange rates aﬀecting the Group were the Sterling to

US Dollar exchange rate and the Sterling to Australian Dollar rate.

12 months

to 31 March

2026

12 months

to 31 March

2025

£/US$ – opening

1.29

1.26

£/US$ – average

1.34

1.28

£/US$ – closing

1.32

1.29

£/A$ – opening

2.07

1.94

£/A$ – average

2.03

1.96

£/A$ – closing

1.92

2.07

Treasury policy

The Treasury policy is approved by the Audit Commiee. There is

a structured approach to ﬁnancial risk management, mitigating

exposures to currency, liquidity, counterparty and credit risks as

outlined in note 26. The policy allows the use of ﬁnancial instruments

to manage and hedge business operational risks that arise on

movements in ﬁnancial, credit or money markets. There is strict

control on the use of ﬁnancial instruments. Speculative trading in

ﬁnancial instruments is not permied.

Currency risk – The Group’s income and expenditure is largely seled

in the functional currency of the relevant entity. Where cash ﬂows are

denominated in currencies other than the functional currency of the

relevant trading entity, the policy is to hedge all material transaction

exposure at the point of commitment to the underlying transaction.

Uncommied future transactions are not routinely hedged. Where

the timing of cash ﬂows diﬀer from the original expectation, currency

swaps will be used to realign the hedge maturity. The maximum

permied hedge period is ﬁve years. Translation exposures arising

from the consolidation of overseas subsidiaries in foreign currencies

are not hedged.

Interest rate risk – The Group’s funding is largely in ﬂoating rate debt

and subject to the adverse eﬀects of changes in interest rates.

The Group has a policy to ﬁx no less than 30% and no more than

80% of the debt and spread the risk of ﬂuctuations in interest rates.

Options and similar open-ended instruments are not permied to

manage interest rate exposures.

Financial credit and liquidity risk – Liquidity risk is managed to ensure

funds are available to meet business needs and maximise return

subject to counterparty and credit risks. Investments are permied

with institutions on an Approved Counterparty list and must not

exceed the counterparty credit limit. Investments must be held in

the currency of the reporting entity except currency deposits or

borrowings speciﬁcally placed to hedge assets or liabilities with

related hedge documentation. Group funding is established to

meet the Group’s medium and long-term ﬁnancing requirements.

Facilities are agreed with a number of ﬁnancial institutions such that

no single institution exerts undue inﬂuence on the Group. At the year

end the Group had an undrawn revolving credit facility of £290m,with

an with an accordion option to increase the facility size to £400m,

maturing on 22 April 2029 and a term loan of £333.6m maturing on

27 September 2027.

The policies manage and control treasury risk in alignment with the

Group strategy.

Tax risk management

QinetiQ’s tax strategy, as published on its corporate website, is to

ensure compliance with all relevant tax legislation, wherever we do

business, while managing our eﬀective tax rates and tax cash ﬂows.

Tax is managed in alignment with our corporate responsibility strategy

in that we strive to be responsible in all our business dealings with a

zero-tolerance of tax evasion. These principles are applied in

a consistent and transparent manner in pursuing the tax strategy

and in all dealings with tax authorities around the world.

Tax planning – QinetiQ manages both eﬀective tax rate (ETR) and

cash tax in line with the Board-endorsed tax strategy. External advice

and consultation are sought on potential changes in tax legislation

in the UK, the US and elsewhere as necessary, enabling the Group

to plan for and mitigate potential changes. QinetiQ does not make

use of ‘oﬀ-shore’ entities or tax structures to focus taxable proﬁts

in jurisdictions that legislate for low tax rates. QinetiQ has a low risk

appetite for tax planning.

Relationships with tax authorities – QinetiQ is commied to building

constructive working relationships with tax authorities based on a

policy of full disclosure in order to remove uncertainty in its business

transactions and allow the authorities to review possible risks. In the

UK, QinetiQ seeks to be open and transparent in its engagement with

the tax authorities by sharing with HMRC the methodologies adopted

in its tax returns.

Transfer pricing – QinetiQ does not have a signiﬁcant level of

cross-border activity but this will increase as it pursues its policy of

expanding around the globe. Where there is cross-border activity,

controls are in place to ensure pricing reﬂects ‘arm’s length’ principles

in compliance with the OECD Transfer Pricing Guidelines and the laws

of the relevant jurisdictions. The Group does not, therefore, have a

signiﬁcant exposure to transfer pricing legislation. QinetiQ submits

its ‘Country by Country’ report to the UK tax authorities in line with

the OECD rules providing insight for tax authorities into its global

tax aﬀairs.

Governance – The Board has approved the strategy. The Audit

Commiee oversees the tax aﬀairs and risks through periodic

reviews. The governance framework is used to manage tax risks,

establish controls and monitor their eﬀectiveness. The Group

Director of Tax is responsible for ensuring that appropriate policies,

processes and systems are in place and that the tax team has the

required skills and support to implement this approach.

QinetiQ’s corporate tax contribution – QinetiQ is liable to pay tax in

its home countries. Changes in tax legislation in these countries

would impact the level of tax paid on proﬁts generated by the Group.

A signiﬁcant majority of the Group’s proﬁt before tax is generated in

the UK where the majority of the Group’s business is undertaken and

employees are based. Total corporation tax payments in the year to

31 March 2026 were £44.4m (FY25: £48.6m).

The diﬀerential between the taxation expense and the tax paid in

the year relates primarily to the impact of deferred tax movements,

whereby the income statement bears tax charges and credits (e.g. on

ﬁxed assets or losses) but for which there is no corporation tax paid

or recovered in the year. Together, these result in the cash paid being

£3.2m less than the total expense charged to the income statement.

QinetiQ Group plc

Annual Report and Accounts 2026

218

STRATEGIC REPORT

GOVERNANCE

ADDITIONAL INFORMATION

FINANCIAL STATEMENTS

Glossary

ABP

Annual Bonus Plan

ADS

Aerospace, Defence and Security

AEIS

All Employee Incentive Scheme

AGM

Annual General Meeting

AUKUS

A tri-lateral security agreement between

Australia, United Kingdom and the United States

BBP

Bonus Banking Plan

C5ISTAR

Command, Control, Computers,

Communications, Cyber, Intelligence,

Surveillance and Reconnaissance

CCASCOE

Climate Change and Security Centre

of Excellence

CEO

Chief Executive Oﬀicer

CFO

Chief Financial Oﬀicer

CGU

Cash Generating Unit

CMI

Continuous Mortality Investigation

COO

Chief Operating Oﬀicer

CPI

Consumer Price Index

Corporate Responsibility

CSDDD

Corporate Sustainability Due Diligence Directive

CSRD

Corporate Sustainability Reporting Directive

CTAP

Climate Transition Action Plan

DSEI

Defence and Security Equipment International

DSP

Deferred Share Plan

DSTL

UK Defence Science and

Technology Laboratories

EAP

Employee Assistance Programmes

EBITDA

Earnings before interest, tax,

depreciation and amortisation

ECL

Expected credit loss

EDP

Engineering Delivery Partner

eLoran

Enhanced Long-Range Navigation

EMEA

Europe, Middle East and Australasia

EPS

Earnings per share

ESG

Environmental, Social, Governance

FCA

Financial Conduct Authority

FRC

Financial Reporting Council

FTSE

The UK Main Market Stock Exchange

Financial year (ending 31 March)

GC100

The Association of General Counsel

and Company Secretaries

GEV

Global Employee Voice

GHG

Greenhouse Gas

HMRC

His Majesty’s Revenue and Customs

HVO

Hydrotreated Vegetable Oil

IAS

International Accounting Standards

ICRS

Institute of Corporate Responsibility

and Sustainability

IFRIC

International Financial Reporting

Interpretations Commiee

IFRS

International Financial Reporting Standards

ISP

Integrated Strategy-to-perform Plan

ISSB

International Sustainability Standards Board

JATTS

Joint Adversarial Training and Testing Services

JOSCAR

Joint Supply Chain Accreditation Register

KPI

Key Performance Indicator

LDEW

Laser Directed Energy Weapons

LPA

Long-term Performance Award

LTI

Lost time incident

LTPA

Long Term Partnering Agreement –

25-year contract established in 2003 to manage

the UK MOD’s Test and Evaluation ranges

M&A

Mergers and Acquisitions

MOD

UK Ministry of Defence

NATO

North Atlantic Treaty Organisation

OECD

Organisation for Economic Co-operation

and Development

PPS

Prudential Platinum Scheme

PTSD

Post Traumatic Stress Disorder

Photovoltaic

QLC

QinetiQ Leadership Community

QLT

QinetiQ Leadership Team

QTS

QinetiQ Target Systems

QVRN

QinetiQ Veterans and Reservists Network

R&D

Research and Development

RCP

Representative Concentration Pathways

RDEC

Research and Development Expenditure Credit

ROCE

Return on Capital Employed

RSP

Restricted Share Plan

SBTi

Science Based Targets initiative

SCO

Strategic Capabilities Oﬀice

SDA

Space Development Agency

SECR

Streamlined Energy and Carbon Reporting

SID

Senior Independent Director

SIP

Share Incentive Plan

SME

Small to Medium Sized Enterprises

SOFR

Secured Overnight Financing Rate

SONIA

Sterling Overnight Index Average

SQEP

Suitably Qualiﬁed and Experienced Personnel

SSA

Special Security Agreement

SSSI

Site of Special Scientiﬁc Interest

STEM

Science, Technology, Engineering and Maths

T3E

Test, Trials, Training & Evaluation

T&E

Test and Evaluation

TARS

Tethered Aerostat Radar System

TCFD

Taskforce on Climate-related

Financial Disclosures

The Code

2024 UK Corporate Governance Code

Guidelines of the Financial Reporting

Council to address the principal aspects

of corporate governance in the UK

TISC

Transparency in Supply Chains

TNFD

Taskforce on Nature-related

Financial Disclosures

TRIR

Total Recordable Incident Rate

TSR

Total shareholder return

UAS

Unmanned Aerial System

UK GAAP

UK Generally Accepted Accounting Practice

UKLR

UK Listing Rules govern how companies list

securities on the London Stock Exchange

UK SRS

UK Sustainability Reporting Standards

219

The Group uses various non-statutory measures of performance, or APMs. Such APMs are used by management internally

to monitor and manage the Group’s performance and also allow the reader to obtain a proper understanding of performance

(in conjunction with statutory ﬁnancial measures of performance). The APMs used by QinetiQ are set out below:

Measure

Explanation

Note

Organic growth

The level of year-on-year growth, expressed as a percentage, calculated at constant

prior year foreign exchange rates, adjusting for business acquisitions and disposals

to reﬂect equivalent composition of the Group

Note 2

Underlying operating proﬁt

Operating proﬁt as adjusted to exclude ‘speciﬁc adjusting items’

Note 3

Underlying operating margin

Underlying operating proﬁt expressed as a percentage of revenue

Note 3

Underlying operating proﬁt

from operating segments

Total operating proﬁt from segments which excludes speciﬁc adjusting items

and research and development expenditure credits (RDEC)

Note 3

Underlying operating margin

from operating segments

Operating proﬁt from segments expressed as a percentage of revenue

Note 3

Underlying net ﬁnance

income/expense

Net ﬁnance income/expense as adjusted to exclude ‘speciﬁc adjusting items’

Note 7

Underlying proﬁt

before/after tax

Proﬁt before/after tax as adjusted to exclude ‘speciﬁc adjusting items’

Note 4

Underlying eﬀective

tax rate

The tax charge for the year excluding the tax impact of ‘speciﬁc adjusting items’

expressed as a percentage of underlying proﬁt before tax

Note 9

Underlying basic

and diluted EPS

Basic and diluted earnings per share as adjusted to exclude ‘speciﬁc adjusting items’

Note 10

Orders

The level of new orders (and amendments to existing orders) booked in the year

N/A

Backlog, funded backlog

or order book

The expected future value of revenue from contractually commied and funded

customer orders

N/A

Book-to-bill ratio

Ratio of funded orders received in the year to revenue for the year, adjusted to exclude

revenue from the 25-year LTPA contract due to signiﬁcant size and timing diﬀerences

of LTPA order and revenue recognition which distort the ratio calculation

N/A

Underlying net cash ﬂow

from operations

Net cash ﬂow from operations before cash ﬂows of speciﬁc adjusting items

Note 24

Underlying operating

cash conversion or

cash conversion ratio

The ratio of underlying net cash from operations to underlying EBITDA

Note 24

Free cash ﬂow

Net cash ﬂow from operations, including exceptional operating cash ﬂows,

less net tax and interest payments less purchases of intangible assets and property,

plant and equipment plus proceeds from disposals of plant and equipment

Note 24

Net debt

Net debt as deﬁned by the Group combines cash and cash equivalents with

borrowings and other ﬁnancial assets and liabilities, primarily deferred ﬁnancing

costs, derivative ﬁnancial instruments and lease liabilities.

Note 23

Return on capital employed

Calculated as: Underlying EBITA/(average capital employed less net pension asset),

where average capital employed is deﬁned as shareholders equity plus net debt

CFO Review

Speciﬁc adjusting items

Amortisation of intangible assets arising from acquisitions; impairment of property

and goodwill; gains/losses on disposal of property, investments and businesses;

net pension ﬁnance income; transaction and integration costs in respect of business

acquisitions and disposals; costs and associated impacts of group-wide restructuring

programmes, digital investment; tax impact of the preceding items and signiﬁcant

non-recurring tax and RDEC movements

Note 4

Alternative performance

measures (APMs)

QinetiQ Group plc

Annual Report and Accounts 2026

220

STRATEGIC REPORT

GOVERNANCE

ADDITIONAL INFORMATION

FINANCIAL STATEMENTS

Shareholder

information

Registrar: Equiniti Limited

www.shareview.co.uk

Tel:

0371 384 2021

Shareholding enquiries

The Company’s registrar is Equiniti. Enquiries regarding

your shareholding, including the following administrative

maers, should be addressed to Equiniti:

Change of personal details such as change of name

or address

Lost share certiﬁcates

Dividend payment enquiries

Direct dividend payments. You can have your dividends

paid directly into a UK bank or building society account

by completing a dividend mandate form. The associated

dividend conﬁrmation will still be sent to your registered

address. If you live outside the UK, Equiniti oﬀers a global

payments service which is available in certain countries

and could enable you to receive your dividends direct

into your bank account in your local currency

Contact details for registrar

By post:

Equiniti, Highdown House, Yeoman Way, Worthing,

BN99 6DA

By telephone:

+44 0371 384 2021*

By email:

You can send an email enquiry securely from

Equiniti’s website, at help.shareview.co.uk

Online:

Equiniti’s website at help.shareview.co.uk (Shareview)

includes answers to frequently asked questions and

provides key forms for download. Shareview also oﬀers

online access to your shareholding where you can manage

your account, register for electronic communications,

see details of balance movements and complete certain

amendments online, such as changes to dividend mandate

instructions. You can register at www.shareview.co.uk,

click on ‘Register’ and follow the steps.

Lines are open 8.30am to 5.30pm (UK time), Monday to Friday

(excluding public holidays in England and Wales).

Electronic communications

The Company will now only make documentation and

communication available electronically via the Company’s

website, unless direct requests have been made otherwise.

In addition, communications electronically, via the wider

use of electronic communications, enables fast receipt of

documents, reduces the Company’s printing, paper and

postal costs and reduces the Company’s environmental

impact. Shareholders can register for electronic

communications at www.shareview.co.uk and may

also cast their vote for the 2026 Annual General Meeting

online quickly and easily using the Shareview service

by visiting www.shareview.co.uk

Donating shares to charity – ShareGift

Small parcels of shares, which may be uneconomic to

sell on their own, can be donated to ShareGift, the share

donation charity (registered charity no. 1052686).

ShareGift transfers these holdings into their name,

aggregates them, and uses the proceeds to support

a wide range of UK charities based on donor suggestion.

If you would like further details about ShareGift, please visit

www.sharegift.org, email [email protected] or telephone

them on 020 7930 3737.

221

Shareholder

information

Share price

Details of current and historical share prices can be found on the Company’s website at www.qinetiq.com/investors

Analysis of share register at 31 March 2026

By type of holder

Total number

of holdings

Percentage

of holders

Total number

of shares

Percentage

issued Capital

Individual

5,000

87.55%

4,382,456

0.84%

Institutions and others

711

12.45%

520,374,861

99.16%

Total

5,711

100.00%

524,757,317

100%

By size of holding

1–500

3,846

67.34%

703,341

0.13%

501–1,000

418

7.32%

331,544

0.06%

1,001–2,500

515

9.02%

900,451

0.17%

2,501–5,000

283

4.96%

1,017,944

0.19%

5,001–10,000

152

2.66%

1,101,885

0.21%

10,001–100,000

244

4.27%

8,734,598

1.67%

Over 100,000

253

4.43%

511,967,554

97.57%

Total

5,711

100.00%

524,757,317

100%

Share fraud reporting:

www.fca.org.uk/consumers/report-scam

FCA Consumer Helpline:

0800 111 6768

Beware of share fraud

Fraudsters use persuasive and high-pressure tactics to lure

investors into scams. They may oﬀer to sell shares that turn

out to be worthless or non-existent, or to buy shares at an

inﬂated price in return for an upfront payment. While high

proﬁts are promised, if you buy or sell shares in this way

you will probably lose your money.

How to avoid share fraud

Keep in mind that ﬁrms authorised by the FCA are

unlikely to contact you out of the blue with an oﬀer

to buy or sell shares.

Do not get into a conversation, note the name of the

person and ﬁrm contacting you and then end the call.

Check the Financial Services Register from

www.fca.org.uk to see if the person and ﬁrm

contacting you is authorised by the FCA.

Beware of fraudsters claiming to be from an

authorised ﬁrm, copying its website or giving

you false contact details.

Use the ﬁrm’s contact details listed on the Register

if you want to call it back.

Call the FCA on 0800 111 6768 if the ﬁrm does not have

contact details on the Register or you are told they are

out of date.

Search the list of unauthorised ﬁrms to avoid at

www.fca.org.uk/consumers/protect-yourself-scams

Consider that if you buy or sell shares from an

unauthorised ﬁrm you will not have access to the

Financial Ombudsman Service or Financial Services

Compensation Scheme.

Think about geing independent ﬁnancial and

professional advice before you hand over any money.

10. Remember: if it sounds too good to be true, it probably is.

Report a scam

If you are approached by fraudsters please tell

the FCA using the share fraud reporting form at

www.fca.org.uk/consumers/report-scam where you

can ﬁnd out more about investment scams. You can

also call the FCA Consumer Helpline on 0800 111 6768.

If you have already paid money to share fraudsters

you should contact Action Fraud on 0300 123 2040.

QinetiQ Group plc

Annual Report and Accounts 2026

222

STRATEGIC REPORT

GOVERNANCE

ADDITIONAL INFORMATION

FINANCIAL STATEMENTS

Shareholder

information

Key dates

For a list of upcoming key dates, please visit:

www.qinetiq.com/en/investors

Cautionary statement

All statements other than statements of historical

fact included in this Annual Report, including, without

limitation, those regarding the ﬁnancial condition, results,

operations and businesses of QinetiQ and its strategy,

plans and objectives and the markets and economies

in which it operates, are forward-looking statements.

Such forward-looking statements, which reﬂect

management’s assumptions made on the basis of

information available to it at this time, involve known and

unknown risks, uncertainties and other important factors

which could cause the actual results, performance or

achievements of QinetiQ or the markets and economies

in which QinetiQ operates to be materially diﬀerent from

future results, performance or achievements expressed or

implied by such forward-looking statements. Nothing in

this Annual Report should be regarded as a proﬁt forecast.

This Annual Report is intended to provide information to

shareholders and is not designed to be relied upon by any

other party. The Company and its Directors accept no

liability to any other person other than under English law.

223

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