QinetiQ : Financial Document

Delivering enduring operational advantage

QinetiQ Group plc

Annual Report & Accounts 2024

Contents

Strategic report

Overview

01	Financial and operational highlights
02	Group Chair's statement
04	Group CEO review
Strategy and operating environment
08	Strategic framework
09	What we do
10	Business model
12	Investment case
14	Market themes
16	Trading environment
Performance
18	Segmental reporting
20	Sector review
28	Group CFO review
32	Key Performance Indicators
Sustainability
34	ESG Overview
36	Environmental
48	Social
54	Governance

Highlights

Strategic report

Our performance

Financial Highlights

Risk
56	Risk management
62	Viability statement
Section 172 statement
65	Section 172 statement and
67	stakeholder engagement
Section S172 relevant disclosures
68	Non-financial and sustainability
	information statement

Corporate governance

72	Group Chair's Introduction to Governance
74	Governance framework and Board
76	at a glance
The significance of our purpose,
78	values and strategy
Board biographies
81	Governance structure
82	Division of responsibilities
83	Composition, succession
85	and evaluation
Board decision-making
87	Board activity
88	Management and control of
89	US subsidiaries
Employee engagement
92	Nominations Committee report
97	Director effectiveness
100	Audit Committee report
106	Risk & Security Committee report

Our Purpose

Orders

£1,740.4m 1%

FY23: £1,724.1m

FY24 £1,740.4m

FY23 £1,724.1m

FY22 £1,226.6m

Book-to-bill ratio of 1.1x with 19% growth in orders excluding the 10 year, £260m Maritime Strategic Capability Agreement contract in FY23.

Statutory operating profit

£192.5m 11%

FY23: £172.8m

FY24 £192.5m

FY23 £172.8m

FY22 £123.7m

Revenue

£1,912.1m 21%

FY23: £1,580.7m

FY24 £1,912.1m

FY23 £1,580.7m

FY22 £1,320.4m

Underlying earnings per share

29.4p 11%

FY23: 26.5p

FY24 29.4p

FY23 26.5p

FY22 20.6p

Underlying* operating profit

£215.2m 20%

FY23: £178.9m

FY24 £215.2m

FY23 £178.9m

FY22 £137.4m

Statutory earnings per share

24.2p 10%

FY23: 26.8p

FY24 24.2p

FY23 26.8p

FY22 15.7p

110	Directors' remuneration report
112	Remuneration at a glance
117	Annual Report on remuneration
130	Directors' Report and Statutory
134	information
Independent auditors' report

Financial statements

1. Consolidated income statement
2. Consolidated comprehensive income statement

1. Consolidated statement of changes in equity
2. Consolidated balance sheet
3. Consolidated cash flow statement

1. Reconciliation of movements in net debt
2. Notes to the Financial Statements

1. Company balance sheet
2. Company statement of changes in equity
3. Notes to the Company Financial Statements

Other information

1. Five-yearfinancial summary
2. Additional financial information
3. Glossary
4. Alternative performance measures
5. Shareholder information

203 Company information and advisers

Protecting lives by serving the national security interests of our customers

* 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 .

Operational Highlights

Experimentation and technology			Robotics and autonomous systems			Engineering services and support
DragonFire			Robotic Combat Vehicle			Engineering Delivery Partner
Achieved the UK's first high-power			More than $30m orders won in Robotic			Continuing to deliver customer benefits,
firing of a laser weapon against aerial			Combat Vehicle (RCV) Portfolio			we secured a further £472m of orders
targets using our advanced coherent			Programs and selection by US Army for			through this UK Defence Framework
beam-combining technology.			Phase I, Platform Prototypes as part of			contract, taking orders over the first five
			Oshkosh Defense Consortium.			years to £1.5bn.

Test and evaluation			Cyber and information advantage				Training and mission rehearsal
Formidable Shield '23			TARS				JATTS
Successfully facilitated the Formidable			Awarded $170m contract by U.S.				Our Air Affairs team has seen a 24%
Shield exercise designed to test ballistic			Department of Homeland Security (DHS)				increase in demand in flying hours
missile defence capabilities of NATO			to deliver the Tethered Aerostat Radar				through the Joint Adversarial Training
and partner nations.			System (TARS) program.				and Testing Services (JATTS) contract
							for the Australian Defence Force.

QinetiQ Group plc|  Annual Report & Accounts 2024

01

Group Chair's statement

Group Chair	Delivering value for our
Neil Johnson
Non-executive
	customers, people and
	shareholders

Strategic report

//QinetiQ continues to provide critical expertise, protecting lives by serving the national interest of our customers - I'm proud of the important role we play in national defence and security, helping to make the world a safer place.//

We continue to see unrest and conflict across many regions of the world, demonstrating the important role of the defence sector. QinetiQ is critical to national defence and security, delivering world-class engineering and technology through our committed and inspirational people.

Alongside our customers, we continue to witness the remarkable pace of change of modern warfare. Such structural change, coupled with escalating tensions, has resulted in unprecedented levels of funding. In April, the UK Government announced an incremental £75bn of defence spending, the 'biggest strengthening of our national defence in a generation', with defence spending set to rise to 2.5% of GDP by the end of the decade. Such commitment, and transatlantic recognition of the requirement for greater investment, transcends party politics. It is increasingly apparent that we are at a turning point in terms of global security, with the consequences of inaction potentially catastrophic. Within this context, I am extremely proud of the critical and unique role we have in developing, testing and assuring cutting-edge systems that give our customers advantage on the battlefield. This, combined with the work we do to train our customers to use those enhanced sovereign defence capabilities in the land, sea, air, cyber and space domains, ensures they are able to protect and enhance their defence and security.

We have a clear and relevant strategy to drive meaningful outcomes for our customers, growth and opportunity for our people, and significant returns for our shareholders.

We continue to see increased demand for our six distinctive offerings with particularly strong progress in EMEA Services. Budget delays and market uncertainty has impacted the speed of growth in the US over the past year; whilst this was an area of risk identified at the point of the Avantus acquisition it has been challenging to offset these delays, impacting the overall Global Solutions segment this year. Despite these setbacks, at a Group-level we once again achieved good revenue growth and stable margins and remain confident in the future prospects of the business, which is well aligned to the planned structural growth areas of defence spending.

As a Board we continue to actively engage in the refinement and iteration of Company strategy - at our October 2023 Board meeting we engaged external experts from our main customers, partners and academia to review and consider the 10+ year view of the Company and its strategic direction. As part of this we remain focused on delivering for our customers, people and shareholders; both organically, and once current acquisitions are proven, with further acquisitions.

Delivering for our customers, people and shareholders

We understand that excellent customer relationships are critical to our success. Ensuring we retain an engaged and committed workforce helps us to meet and exceed customer expectations. We actively engage as a Board with our people, and this year have enjoyed extensive interactions with our colleagues in Australia, the UK and the US, including a number of site visits.

I'm delighted to have engaged directly with a large number of shareholders in the last year, either via one-to-one meetings or through the completion of our Shareholder Perception Audit

• all of these engagements have helped me and the Board to understand the views of our UK, US and European shareholders to shape our thinking and decision-making. We are pleased to demonstrate our balanced capital allocation policy with the commencement of the share buyback and, reflecting our confidence in the

future, an increase in our progressive dividend growth rate from 5% to 7%. The buyback represents an attractive use of our capital to drive shareholder value whilst maintaining the financial flexibility to invest in the ongoing execution of our strategy to deliver sustainable growth and attractive returns.

Sustainability remains an important area for consideration and debate, both within the business and at Board-level. In the past year we have retained our rating as a top-rated ESG company by Sustainalytics and our AA rating from MSCI. We have identified the most material issues for our business and monitor these as non-financial KPIs, where we are pleased to have seen improvements across safety (lost time incidents), employee engagement and Scope 1 and 2 greenhouse gas emissions.

Board changes

On 16 April we announced that Carol Borg, Group Chief Financial Officer (CFO) would be stepping down immediately from her role. In her place we have appointed Martin Cooper and he is expected to join the QinetiQ Board no later than October. Martin is a qualified chartered accountant and has more than 25 years' experience leading multi-disciplinary teams in senior finance roles. He joins QinetiQ from BAE Systems where he held a number of positions including UK & Rest of World Financial Controller, Divisional Finance Director and most recently Investor Relations Director.

To enable a smooth transition in the interim period prior to Martin joining QinetiQ, Heather Cashin, currently the Group Financial Controller, has been appointed Interim Group CFO. David Smith, former Group CFO of QinetiQ, has agreed to provide advice and support services to Heather and the Board during the interim period.

In addition to the above, a few months ago I was delighted to announce two new Board appointments which further strengthens the breadth and depth of skills on the Board: Ross McEwan CBE and Dina Knight both joined the Board on 1 March 2024.

Ross has been Chief Executive Officer and Managing Director of National Australia Bank Limited (NAB) since December 2019 and will retire from NAB on 1 July 2024. Ross brings extensive global business experience at the highest level and his successful track record is recognised in both the UK and in Australia. Dina is Chief People Officer of global technology services and solutions provider Datatec Group and Logicalis International, accountable for

its people operations and strategy. Dina is a seasoned HR professional and will bring a broad spectrum of corporate strategic experience to the role.

Susan Searle will remain as Chair of the Remuneration Committee for the time being to provide an extended handover to Dina, after which Susan Searle will step down as a Non- executive Board member. I would like to thank Susan for her invaluable contribution to both the Board and the QinetiQ Group.

Larry Prior took the decision to step down from the Board to be able to devote his time and focus to another corporate role. Larry's thoughtful advice and guidance to the Board and the business will be missed. During the coming year we will be looking at options for bringing a US perspective back onto the Board. Overall I am confident we have the right mix of skills and experience on the Board to provide effective challenge and support to the business as it continues its global growth.

Whilst not Executive-level appointments, I am also pleased to see the QinetiQ Leadership Team develop further, with the appointment of Iain Stevenson to the newly created role of Chief Operating Officer, and Will Blamey, as Chief Executive of our UK Defence sector. The new role of Chief Operating Officer will provide increased focus on the delivery of consistent operational performance across the Group as we continue to scale and grow.

Finally, I would also like to take this opportunity to thank Steve Wadey, our Group CEO, and

all of the QinetiQ leaders and employees for pulling together to deliver for our customers and shareholders.

Looking ahead

We are well placed to deliver our long-term growth and returns ambitions, with good customer relationships, strong employee engagement and positive support from shareholders for our strategy. I remain hugely impressed by the commitment, determination and focus of our people, living our values of Integrity, Collaboration and Performance on a day-to-day basis, making a real difference to defence and security around the world.

Neil Johnson

Non-executive Group Chair

23 May 2024

Historical dividend payments

2019	2.1p	4.5p		6.6p
				6.6p
2020	2.2p	4.4p
				6.9p
2021	2.2p	4.7p
						7.3p
2022	2.3p	5.0p
						7.7p
2023	2.4p	5.3p
2024							8.25p
2.6p	5.65p

Key:  Final  Interim

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QinetiQ Group plc|  Annual Report & Accounts 2024

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Group CEO review

Steve Wadey	Strong Group
Group Chief Executive Officer
	performance

Strategic report

//We enter this year with strong momentum and increasing spending in our major markets, which gives us confidence to increase our guidance for FY25 and underpins our FY27 outlook of c.£2.4bn organic revenue at c.12% margin.//

1. Our six distinctive offerings are: Experimentation and Technology, Robotics and Autonomous Systems, Engineering Services and Support, Test and Evaluation, Cyber and Information Advantage, Training and Mission Rehearsal

We have delivered strong overall Group financial results, against the background of difficult market conditions in the US.

These results have been achieved through the outstanding skills and capabilities of our people working in partnership with our customers and supply chain. The world is experiencing the highest and most rapidly evolving threat environment for a generation and our teams have continued to deliver our highly relevant services and products, critical to enduring national defence and security priorities.

Since launching our strategy in 2016 to build a disruptive and uniquely integrated global defence and security company, we have grown our revenue by more than 2.5x, doubled earnings and now have more than 8,500 highly-skilled people across 60 sites globally. Our depth and breadth of expertise across the defence and security lifecycle helps our customers to rapidly create, test and use capability to stay ahead of the threat. Our cutting edge technology and innovation, allied with world leading expertise in science, technology and engineering, is critical to enabling our customers' mission.

Our strategy is structurally aligned and focused on enabling the shared security mission of our Australian, United Kingdom and United States (AUKUS) customers and their allies. Our six distinctive offerings1 are highly relevant to the rapidly changing character of warfare and aligned to our customers' high-priority areas that are attracting increasing defence and security spending, most notably in Research & Development (R&D), Test & Evaluation (T&E), Training & Mission Rehearsal and Cyber & Intelligence.

For our people, we've made significant progress creating an environment where they can all thrive, with our highest ever level of employee engagement achieved this year. Having a highly skilled and engaged team, with an inclusive culture, enables us to deliver for our customers' mission with even greater agility and pace.

For our shareholders, we are focused on continuing disciplined execution of our strategy and are on-track to deliver our FY27 outlook of c.£2.4bn organic revenue at c.12% margin. With a strong balance sheet and enhanced focus on disciplined capital allocation, we are well positioned and have a clear strategy with optionality for investment in sustainable growth and further shareholder returns.

Performance in the year

We delivered another year of strong overall Group operational and financial performance. Revenue growth was 21%, or 14% on an organic constant currency basis and underlying operating profit grew by 20%, or 16% on an organic constant currency basis, with stable margin at 11.3%. We continued our track record of high cash generation with underlying cash conversion

at 104%, contributing to the reduction of our leverage (net debt to EBITDA) from 0.8x to 0.5x. Order intake achieved a record high of £1.74bn, with a book-to-bill of 1.1x and an order backlog of £2.9bn. As part of our enhanced capital allocation policy, we launched a value accretive £100m share buyback programme and have increased the growth rate of our progressive dividend from 5% to 7%.

EMEA Services

EMEA Services delivered excellent growth, achieving 19% organic revenue growth with stable margin at 11.5%. This performance was driven by the strong execution of prior year orders and consistent operational delivery on our long-term contracts.

In the UK, service delivery partnerships remain the bedrock of our offering. Our large long-term Engineering Delivery Partner (EDP) contract has now delivered more than £1.5bn of orders since inception, enabling capability and sustainment of the majority of UK military systems; and we signed a Principles Agreement with UK MOD to extend the Long Term Partnering Agreement (LTPA) to 2033, where we test, trial, train and evaluate (T3E) national defence and security capabilities critical to mitigating global threats. Both of these contracts make a meaningful contribution to the sustainable performance and returns generated by EMEA Services. In addition, to accelerate the production of mission data for

the Royal Air Force, the SOCIETAS transformation programme has achieved full operating capability three months early. Also, in the UK we commenced support of the new AUKUS submarine programme through initial tasking as a capability partner. In Australia, as a leading provider within Team Nova, we secured a three year extension to our Managed Service Provider (MSP) contract to provide technical advisory services in support of the Australian Capability Acquisition and Sustainment Group; and we continue to successfully develop the high energy defensive laser system prototype in collaboration with the Defence Science and Technology Group. In Germany, we signed a significant, multi-year contract to provide aerial training and mission rehearsal services for their Armed Forces.

Strategic achievements include:

• Formidable Shield for NATO - Over three weeks in May 2023 at UK MOD Hebrides, we hosted Formidable Shield 23, one of the world's largest and most complex tests of naval and missile defences. The exercise saw over 20 ships, 35 aircraft, and nearly 4,000 allied military personnel from 13 NATO nations come together to test military platforms, missiles, and sensor systems against representative threat scenarios in realistic live-firemission rehearsal exercises.
• DragonFire for the UK - In collaboration with the UK's Defence Science and Technology Laboratory (Dstl), MBDA and Leonardo, we demonstrated the capabilities of our world- leading beam combining technology with the UK's first high-powerfiring of a laser weapon against aerial targets. Subsequently, the MOD has recently announced that the cutting-edgeDragonFire laser directed energy weapon system will be installed on Royal Navy warships for the first time from 2027, far sooner than previously envisaged.
• Joint Adversarial Training and Testing Services (JATTS) for Australia - The JATTS contract supports our ambition to double the size of the Australian business over the next four years through training support to the Australian Defence Force with 'enemy' force aircraft and aerial targets. In the year we achieved a 20% increase in aircraft flying hours and 90% more aerial target missions than originally planned. A notable highlight was providing our threat representation services into the Talisman Sabre training exercise involving 13 allied nations and involving 30,000 military personnel.

With strong visibility, and a pipeline of significant opportunities, our confidence remains high that EMEA Services will continue to support the sustainable growth of the Group.

Global Solutions

Global Solutions was impacted by difficult market conditions in the US, with recent headwinds including one of the longest periods of Continuing Resolution on record. Overall, revenue was up 23%, declining 3% on an organic basis, with margin remaining stable at 10.5%.

Avantus delivered a high single digit revenue decline over the course of the year. However, the business achieved modest revenue growth in the second half, with double digit margin and cash conversion of c.100% over the full year. With the integration now complete, the benefits of Group synergies are now being realised with $977m of total contract awards during the year and a funded book-to-bill of 1.2x. We remain confident of Avantus delivering value for shareholders and expect mid-single digit growth in FY25 before returning to double digit growth in FY26. Notable contract awards include a $170m five year Tethered Aerostat Radar System (TARS) contract providing surveillance operations along the southern border of the US and its territories, a $126m five year contract to provide technical, professional, and support services to the Office of the Secretary of Defense Strategic Capabilities Office (SCO), and a $224m, five year, firm fixed price contract with the US Space Development Agency (SDA) to provide systems engineering and technical assistance support needed to deliver the Proliferated Space Warfare Architecture.

Revenue in the rest of Global Solutions was broadly flat for the year, due to the loss of the Optionally Manned Fighting Vehicle (OMFV) opportunity. We also saw the planned production ramp down of the Common Robotic System - Individual (CRS-I) small ground robots in the US, offset by QinetiQ Target Systems (QTS) achieving its highest ever production levels within the year in the UK.

A significant step forward in the year was the successful certification of our Banshee target by the US Threat Systems Management Office, enabling market entry and opening up growth opportunities in FY25 and beyond.

Formidable Shield

UK MOD Crown Copyright & LPhot Bradley

DragonFire

UK MOD Crown Copyright 2024

JATTS

£1.9bn

FY24 revenue

11.3%

FY24 operating profit margin2

104%

FY24 cash conversion

1. Underlying operating profit margin refers to operating profit from segments

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05

Group CEO review continued

Strategic report

Strategic achievements include:

- Tethered Aerostat Radar System for

the US - We were awarded a five

year $170m TARS contract as a Prime

System Integrator to the Department of

Homeland Security providing persistent

surveillance operations and sustainment

• Next Generation Advanced Bomb Suits (NGABS) -Afive year, $83m contract for the testing and production of over 700 next generation advanced bomb suits for the US Army, demonstrating our ability to leverage our R&D into core capability.

A combination of our global reach and alignment to these high-priorityhigh-growth areas provides confidence in the Group's ability to deliver organic revenue growth at double the rate of growth of national defence budgets, as we have done consistently over the past five years.

Capital allocation policy

Invest in our		Complement with value		Provide a progressive		Return excess cash to
organic growth		accretive acquisitions		dividend to shareholders		shareholders

along the southern border of the US and

its territories. Upon award, we successfully

transitioned eight operational sites in six

With an attractively positioned portfolio of high priority capabilities, and the integration of Avantus complete, we are confident that Global

Clear strategy delivering

At this time of heightened geopolitical uncertainty and conflict, our purpose has never

We are continuing to invest in value accretive organic growth, with a focus on our people,

Leadership changes

At the start of April, we announced that Carol

Revenue (£bn)

3.0

c.8% organic CAGR

weeks, hired 229 employees, negotiated

union agreements, and the management

Solutions is well placed to deliver a meaningful contribution to our FY27 organic revenue target

been more relevant: protecting lives by serving the national security interests of our customers.

technology and capability. This will be complemented by value accretive bolt-on acquisitions in time, following strengthened

Borg, Group CFO, and the Board together agreed that Carol would step down from her role. The

2.5

at c.12% margin

of all critical services providers. We are on

track to secure more than 10% on-contract

growth in FY25 through expanded mission

scope and capability enhancements,

and have identified c.50% on-contract

growth opportunities over the life of

the programme.

- Robotic Combat Vehicle Light (RCV-L)

for the US - Working alongside Oshkosh

Defence, we were one of four awardees

of c.£2.4bn.

Aligned with high priority needs

Global tensions continue at elevated levels. In the Middle East, Houthi forces attempt to disrupt world supply lines and broaden the Yemeni civil war, whilst Iran has escalated the Israel-Hamas conflict, and Russian forces remain entrenched within Ukraine. China continues to provide a destabilising influence, notably in the Indo-Pacific, as does North

With a unique customer value proposition to rapidly create, test and train effective use of capability, we enable our customers to respond to their national and global security needs and counter the increasing threat at pace.

With a clear purpose and strategy, the Group is well positioned to deliver sustainable shareholder value. Our strategy has three interrelated components:

delivery and performance of our US platform and growth of Avantus.

Reflecting our confidence in the future prospects of the business, we have increased the growth rate of our progressive dividend from 5% to 7% and are returning excess cash to shareholders through the £100m share buyback programme announced in January.

Board and I were delighted to announce the appointment of Martin Cooper as Group CFO. Martin is a qualified chartered accountant with more than 25 years' experience leading multi-disciplinary teams in senior finance roles and is expected to join QinetiQ no later than October. To enable a smooth transition prior to Martin joining, Heather Cashin, previously Group Financial Controller, has been appointed Interim Group CFO.

2.0		c.16% Total CAGR5
1.5		at c.12% margin
1.0
0.5
0	FY	FY FY FY FY FY	FY FY FY FY FY FY
	16	17	18	19	20	21	22	23	24	25	26	27
			EMEA Services		Global Solutions

5:  Compound annual growth rate

for the RCV-L full scale prototype contract

from the US Army, following successful

operational trials. The RCV-L solution

works directly with warfighters on the

ground providing an intelligence and

reconnaissance platform used for forward

scouting with the ability to carry lethal

payloads. The prototype contract positions

us well to compete for our share of the

future development and production phases

worth up to $500m.

TARS

The appearance of U.S. government visual information does not imply or constitute U.S. government endorsement.

RCV-L

NGABS

Korea and transnational terrorist networks. As a result, Australia, the UK and the US, through the AUKUS security pact, and with their 5-Eyes and NATO allies, continue to review their evolving defence and security capabilities and investment priorities.

Given this heightened threat environment, levels of defence spending are expected to increase over the long-term. In the US, the Research, Development, Test and Evaluation (RDT&E) budget is the largest ever at $145bn3. Governments in the UK and Australia intend to increase defence spending to c.2.5% of GDP over the long-term, with the UK ring-fencing

5% of the defence budget for R&D and 2% for exploitation. In total, our addressable market is estimated to be greater than £30bn4 per annum. More broadly, a record 18 member countries are now set to meet NATO's target of spending 2% of their economic output on defence and security this year, a marked increase from 11 out of the 31 members a year ago.

These investment priorities are driving increasing spending in high-priority areas such as R&D, T&E, Training & Mission Rehearsal, and Cyber & Intelligence, to enable our customers to maintain and develop technological superiority in areas such as robotics, autonomy, directed energy, hypersonics, integrated sensing, cyber, advanced data analytics and artificial intelligence. We remain at the forefront of the adoption and integration of these new and emerging technologies with traditional defence capabilities, providing enhanced inter-operability between allied systems and enhancing our customers' operational effectiveness.

1. IN12209 (congress.gov)
2. Sources: Jane's Market Budget Forecast March 2023, UK MOD and US DOD forecasts, Australia Defence publications, QinetiQ estimates

1. Delivering six distinctive and mutually supportive offerings: We co-createhigh-value differentiated solutions for our customers in experimentation, test, training, information, engineering and autonomous systems;
2. Applying disruptive and innovative technology and business models: We invest in and apply disruptive business models, digitisation
   and advanced technologies to enable our customers' operational mission at pace; and,
3. Leveraging those capabilities across our global operations: We are developing an integrated global defence and security company that leverages our capability in the UK, the US, Australia, Canada and Germany.

The disciplined execution of our strategy is building a global platform and delivering sustainable growth, underpinning our FY27 outlook to deliver c.£2.4bn organic revenue at c.12% margin. Our focus on our customers' high-priority areas, specifically Research and Development (R&D), Test and Evaluation (T&E), Training & Mission Rehearsal, and Cyber & Intelligence, provides confidence in our high single digit revenue growth guidance and is why our growth outpaces headline defence spending. Our strategy is further underpinned by a record order intake of £1.74bn with a backlog of £2.9bn, and an exceptionally strong pipeline of future growth opportunities worth more than £11bn over the next five years.

Disciplined capital allocation

Our strategy to deliver long-term sustainable growth is underpinned by an enhanced focus on disciplined capital allocation and execution. Given the highly cash generative nature of the Group, as well as the strength of the balance sheet, we continually assess the best risk adjusted opportunities to deploy capital to support shareholder returns.

Our strengthened balance sheet provides optionality for investment in growth and further shareholders returns.

Sustainability

In delivering our strategy, the single biggest contributor will be our people. Their safety, wellbeing and motivation is essential for our success.

We measure employee engagement each quarter and I was delighted that at the end of this year we achieved our highest ever employee engagement measure since introducing this metric five years ago. Since its introduction we have improved employee engagement by 19% and the loyalty measure by 25%, a fantastic achievement and symbolic of the inclusive culture we are growing.

We were deeply saddened by the fatal crash involving two aircrew on-board one of our PC-9 aircraft in the Neuenstein area of Germany whilst on a customer training exercise in September 2023. Our thoughts remain with the families and close colleagues. Although the formal investigations into this accident are ongoing, we do not believe that there was any contributory fault by the company.

We continue to make good progress on our Net- Zero plan. Our Scope 1 and 2 emissions have now reduced by 33% against our re-baselined FY20 base year, including a c.8% reduction

in FY24, whilst some elements of our Scope 3 emissions, such as business travel, have increased as we have grown globally. With our strong focus on our Environmental, Social and Governance (ESG) agenda, we are ranked as one of the top ESG companies in the defence and security sector by Sustainalytics and we have retained our AA rating from MSCI.

Also in April, I was delighted to announce the appointment of Iain Stevenson to the newly created role of Chief Operating Officer. As an experienced senior business leader having previously led large business divisions in the defence and construction sectors, his skills will strengthen the delivery of consistent operational performance across the Group as we continue to scale and grow.

Finally, I was extremely pleased to confirm the internal promotion of Will Blamey to Chief Executive UK Defence. Will has played a critical role leading the successful development and delivery of major programmes, such as the LTPA.

These appointments will add strength and depth to our leadership team and further enhance our capabilities to execute our plan for sustainable growth.

FY25 guidance increased and on-track to deliver FY27 outlook

We enter FY25 with strong momentum, a healthy order book and increased visibility, with 64% revenue under contract. We expect FY25 to deliver high single-digit organic revenue growth, compared to FY24, at a stable operating profit margin.

We are on-track to achieve c.£2.4bn organic revenue at c.12% margin by FY27.

This will deliver an attractive return on capital employed at or above the upper end of the 15-20%+ range.

Cash conversion will remain high at 90%+, with capital expenditure within the £90m to £120m range. Our strengthened balance sheet provides optionality, through disciplined deployment of capital, for bolt-on acquisitions to compound growth at 11-12% margin and further shareholder returns.

Summary

I am pleased with the significant progress we have made in FY24, delivering another year of strong Group operational and financial performance with stronger growth in EMEA Services and stable performance in Global Solutions. The company is well positioned with a clear strategy, underpinning our confidence in delivering sustainable growth and attractive returns for our shareholders.

Our strategy and distinctive offerings are uniquely relevant to our customers' mission within the current heightened threat environment. Everything we do is about delivering on our purpose: protecting lives by serving the national security interests of our customers. Our purpose continues to connect us all, giving us a sense of focus, direction and pride. We look forward to continuing to deliver for the benefit of all our stakeholders in the coming years.

Steve Wadey

Group Chief Executive Officer 23 May 2024

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QinetiQ Group plc|  Annual Report & Accounts 2024

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07

Strategic framework

Our strategy is increasingly relevant

to respond to market dynamics

Our purpose

Protecting lives by serving the national security interests

of our customers

Our vision

The chosen partner around the world for mission-critical solutions,

innovating for our customers' advantage

Mission-led innovation

Create It

Test It

Use It

Customer-focused growth strategy

What we do

Strategic report

Customer focused growth strategy aligned with AUKUS shared mission

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b

r

o

a

l

g

G

e

Di						g
s	ti				n	s
	n		ri
		fe
			ctive of

Global leverage	Distinctive offerings	Disruptive innovation
Build an integrated global defence and security	Co-createhigh-value differentiated solutions	Invest in and apply disruptive business
company to leverage our capability through	for our customers in experimentation,	models, digitisation and advanced
single routes to market in the UK, the US,	test, training, information, engineering	technologies to enable our customers'
Australia, Canada and Germany.	and autonomous systems.	operational mission at pace.

Creating a safe and secure environment for us all to thrive

	Our values			Our behaviours
Integrity	Collaboration	Performance	Listen	Focus	Keep my promises

We deliver safely, responsibly and sustainably

for the benefit of all our stakeholders

Experimentation and technology

QinetiQ collaborates with customers and partners to explore innovative technology solutions that solve our customers' complex problems. We bring together a wide range of experts to deliver new, fully assured capabilities that provide mission advantage.

Robotics and autonomous systems

QinetiQ develops, tests, evaluates and supplies trusted robotic and autonomous systems across land, sea and air domains.

Engineering

services

and support

Working alongside a large network of suppliers, QinetiQ uses its innovative approach and deep

understanding

of customer

requirements and existing systems to provide our customers with reliable technical advice and support, through all phases of procurement and systems engineering.

Test and

evaluation

QinetiQ leverages unique skills, data and facilities to test and evaluate the performance of military systems. This provides assurance for our customers that their equipment and platforms will work effectively when needed in demanding environments and threat scenarios, helping to reduce operational risk and through-life cost.

Cyber and

information

advantage

QinetiQ innovates with a broad range of partners across leading-edge sensor technologies, data processing, advanced analytics, cyber and artificial intelligence to use data and information in a more effective way.

Training

and mission

rehearsal

QinetiQ combines

engineering expertise,

operational knowhow and leading- edge technologies to deliver physical and virtual training exercises to support operational readiness

and mission

rehearsal.

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QinetiQ Group plc|  Annual Report & Accounts 2024

QinetiQ Group plc|  Annual Report & Accounts 2024

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Business model

Our business model

Sources of value

Value we create

Our customer relationships

Strategic report

Value we deliver

• Understanding our customers' mission We invest time in gaining a broad and deep understanding of our customers' mission, operations and challenges.
• Gaining insights from operations Through our training and mission rehearsal activities and in-servicesupport experience, we gain unique and valuable insights into the operational context.
• Collaborating and co-creating solutions We put the customer at the heart of what we do. Collaborating with our customers, we innovate at pace and co-createvalue for money solutions.

Our customers

Using our world-leading expertise we help our customers fulfil their defence and security needs. We are critical to the development, testing and assurance of cutting-edge systems and technologies essential to our customers' ability to maintain operational advantage.

Our shareholders

By focusing on our customers' needs and ensuring a disciplined approach to the management and governance of the Company,

we aim to deliver sustainable and attractive returns to our shareholders.

We engaged with our shareholders during the year through both

Our skills and knowledge

• Deep technical expertise and know-howOur highly skilled scientists and engineers apply their world-leadingtechnical and domain expertise to deliver evidenced-basedsolutions, services and intelligence to our customers.
• Understanding of threats and environments Our capability to replicate realistic and dynamic threat environments enables us to evaluate system performance across the domains of cyber and information, land, maritime, air and space.
• Broad knowledge of existing and emerging technologies
  Our world leading experts apply their scientific and engineering knowledge across existing and emerging technologies, harnessing them for the benefit of our customers.

Create It

Developing cutting-edge technology and rapidly turning it into capability

Our ability to add considerable value to customers was perhaps best demonstrated during Formidable Shield, with in excess of

20 ships, 35 aircraft, and c.4,000 Allied military personnel, from

13 NATO nations, involved in the test of missile defence capabilities.

Image courtesy of UKMoD Crown Copyright & LPhot Bradley

physical/virtual roadshows, results presentations, the AGM and an Investor Day. Our Chair also engaged with shareholders to proactively seek their views on QinetiQ. This engagement was fundamental in the decision to instigate a £100m buyback programme.

Our partner relationships

• Small to medium sized enterprises (SMEs) In all our home countries, we have established relationships with a large network of SMEs, drawing on their specialist expertise and services to deliver value, agility and innovation.
• Universities and research institutions We actively engage and team with universities and research institutes to undertake collaborative research and development of new operationally relevant technologies.
• Large defence and non-defence technology enterprises
  We frequently form teaming relationships with a variety of large defence and non-defence companies, collaborating to deliver cutting-edge solutions to our customers.

Our tools and techniques

We invest in and maintain specialist tools such as facilities, aircraft, test ranges and software:

Test It

Assuring a capability will work when it is critically needed

Use It

Ensuring our customers

are trained and

operationally ready

Delivering enduring operational advantage

Our people

We are developing a culture that enables sustainable growth across our global business and supply chains. With world-leading engineers, scientists and technologists employed at QinetiQ we are focused on a high performance environment where all can thrive and deliver.

This year we achieved the highest employee engagement score to date and delivered a breadth of development and growth opportunities for our people.

Our partners

We forge partnerships with industry and academia to address the challenges of the current threat environment with agility. We form complementary partnerships to deliver the most effective solutions for our customers by, often managing large networks of small and medium-size enterprises.

Supporting UK Home Office Accelerated Capability Environment (ACE), we continue to lead the Vivace Community consisting of over 350 organisations (75% SMEs and academia) to deliver cross-government impact at pace.

• Test facilities, aircraft and ranges We operate some of the most advanced facilities and land, sea and air ranges in the world and manage live-fireexercises and rehearsals combined with digitally enabled infrastructure.
• Datasets and models We maintain and create extensive datasets and models to support the performance and evaluation of defence and security capabilities.
• Digital engineering, innovation and transformation We apply digital engineering techniques to accelerate innovation, improve efficiency and create new defence and security capabilities for our customers.

Our communities

We aim to make a positive contribution to the communities where we work. Our people volunteer and we support a number of charities across all our markets. We work with Armed Forces organisations and those which are aligned with the development of technology and STEM skills.

Working with our Partner the Jon Egging Trust we have delivered interactive workshops to provide young people with insights into the range and value of apprenticeships (page 51).

Our environment

We play our part in tackling climate change by reducing our greenhouse gas emissions. We are also developing and delivering solutions for our customers to support their sustainability ambitions.

During the year we ran energy saving campaigns to help employees understand how to plan their part in our Net-Zero programme. (page 34).

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QinetiQ Group plc|  Annual Report & Accounts 2024

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Investment case

Investment case

Strategic report

Aligned strategic markets

Our business operates in global defence and security markets which are seeing significant spending increases; furthermore our capabilities are well aligned with those areas that are growing faster than their overall defence budgets:

• We are aligned to higher growth areas of the defence budgets, including sensors, communications, cyber, electronic warfare, autonomy and artificial intelligence
• We are a key partner to nations with shared defence and security interests, most significantly in the UK, Australia and the US, known collectively as AUKUS
• Our total addressable market is worth more than £30bn

>£30bn

addressable market

High single-digit

organic revenue growth to FY27+

Increasingly threat relevant

We have unique capabilities around the world critical to maintaining national defence and security, well aligned with customer priorities:

• Unique position in the defence ecosystem, often in-between and alongside the end-customer and the prime equipment providers
• Involved across the lifecycle of defence systems, from early-stage research and development, through engineering services and support, complex test and evaluation capabilities, provision of advanced mission rehearsal, cyber security and data analytics and select niche defence and security products
• Key partner to sovereign nations providing world-leading technical expertise and state-of-the-art facilities, trusted by national defence agencies, with decades of project history and specialist capabilities
• A leader in advanced technologies with the ability to partner across industry and academia to deliver innovation at pace for our customers

£2.9bn

backlog underpins long-term revenue visibility

c.8,500

highly skilled employees

Strong operational performance

Our business has attractive financial characteristics supported by a strong balance sheet which enables us to invest and realise our long-term growth ambitions:

• Long-termcontracts and repeatable business: predictable and strong revenue visibility
• Asset-lightand cash-generative business model supports organic investment to drive future growth: organic investment funded from operating cash flow
• Strong balance sheet and clear capital allocation policy - investment to drive long-term growth
• Progressive dividend policy and buyback programme

90%+

cash conversion

21%

return on capital employed

Investing in sustainable growth

QinetiQ has taken a proactive focus on ESG for many years and is uniquely placed to help our partners and customers achieve Net- Zero through effective use of technology:

• No exposure to controversial weapons
• AA Rated by MSCI and Top-Rated ESG company by Sustainalytics
• 33% reduction of our Scope 1 and Scope 2 emissions against our re-baselined FY20 base year
• Unique position to help our customers meet their ESG targets through advancements in technology

AA-rated

by MSCI

Top-rated ESG company

by Sustainalytics

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QinetiQ Group plc|  Annual Report & Accounts 2024

QinetiQ Group plc|  Annual Report & Accounts 2024

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Market themes

Themes driving market growth

Strategic report

Themes reshaping

How are defence and security markets changing?

//Our customers seek to rapidly modernise their defence and security capabilities so they can better address current

defence markets around the world

We are operating in an environment where there is an increasing threat of wider global conflict. This follows Russia's full-scale invasion of Ukraine; the threat posed by China's growing military power, coupled with its push to change global norms and potentially threaten its neighbours; and the Israel-Hamas conflict increasing further tension in the Middle East and threatening wider escalation in the region. These conflicts and ongoing tensions come at

a time when many countries are holding national elections and this could potentially compound global uncertainty.

In parallel, rapidly emerging and evolving technologies continue to disrupt traditional business and society with both positive and negative outcomes including the creation of unprecedented vulnerabilities.

Rising global tensions and increasingly complex threats

The threat environment continues to become increasingly complex, fuelled by rapid advances in technology and heightened geo-political tensions. From hypersonic missiles and advanced fighter jets to low-cost consumer drones adapted

to cause harm, technological advances have enhanced the lethality of threats at both ends of the spectrum, giving both state and non-state actors access to capabilities that have the potential to undermine Western superiority. In addition, digital-based threats continue to grow in sophistication and are often deployed in conjunction with more conventional capabilities.

Need for advanced capabilities, information advantage and better inter-operability

Maintaining technological superiority is critical in this increasingly complex threat environment. Our customers are investing heavily in R&D to develop next-generation capabilities and ensure informational advantage. Areas such as robotics, autonomy, advanced data analytics, artificial intelligence and novel weapons are all of particular interest to our customers. These new and emerging technologies must be integrated with traditional defence capabilities, and across our markets, there is a need for greater inter-operability between platforms and systems to enhance operational effectiveness. This extends to the need for greater co-operation between different forces and nations to ensure a concerted effort in countering these modern threats.

Resilience of supply chains

In light of the growing tension and competition between global powers, nations are increasingly focused on developing resilient domestic supply chains. These supply chains must demonstrate the agility, breadth and depth of capability to respond to changing and complex customer requirements. This

is a critical part of maintaining capability that can function without undue reliance on international trade, expertise or raw materials from potentially hostile states.

and future threats.//

To meet these increasing challenges, Australia, the UK, the US and their allies continue to review their evolving defence

How are we addressing these market dynamics?

and security capabilities and are increasing spending in high-priority areas aligned with our strategy.

Delivering disruptive science, engineering and technology required to modernise defence and security capabilities

QinetiQ was founded on innovation with research, development, test and evaluation at the core of what we do. As a predominantly service-based business, we are uniquely placed to operate across the breadth

of platforms, systems and lifecycles, unlike a more traditional vertical platform manufacturer. We experiment, innovate and develop new capabilities, drawing on a broad range of existing, emerging and disruptive technologies. We emulate advanced threats and test and evaluate the resilience and inter-operability of systems and platforms used to respond to these threats, to provide assurance.

Partnering for innovation

The capabilities our customers require can often be so complex that no one company can deliver them alone. In addition, cutting- edge technology is often found in the commercial sector and academia. The defence industry can benefit from leveraging this technology, but it needs new and more effective partnerships to convert emerging technologies rapidly into assured deployable capability. We collaborate across the supply chain, but also form partnerships with organisations outside of defence to provide the agility and expertise required to innovate at pace. Our ability to work across platforms and technologies and form powerful partnerships helps deliver mission-led innovation to our customers.

A multi-domestic strategy

Our multi-domestic strategy is aimed at developing sovereign defence capabilities within the countries in which we operate. The focus for growth is in our three home countries, Australia, the UK and US, where we are pursuing similar opportunities to support their shared defence and security missions. The formation of the AUKUS alliance between these nations reinforces our multi- domestic strategy and makes us increasingly relevant. We are well positioned to deliver strong growth in the Australian, UK and US businesses in the next five years.

© Crown copyright

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QinetiQ Group plc|  Annual Report & Accounts 2024

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Trading environment

Strategic report

Revenue by customer location

Revenue by division

Our >£30bn	Australia, the UK and US
are our home countries
addressable market	and collectively represent
94% of our revenue.

7%	3%
21%
	66%

	UK	£1,266m
	US	£402m
	Australia	£131m
	Rest of world	£114m

26%
		EMEA Services	£1,417m
		Global Solutions	£495m
74%

Australia

833

employees

9

sites

Trading environment

In 2024, the Australian Government released the inaugural National Defence Strategy and Integrated Investment Program complementing the 2023 Defence Strategic Review. Recognising that the current environment demands a new approach to defending its national interests, there is a commitment to invest in conventionally armed, nuclear-powered submarines through a partnership between Australia, the UK and the US (AUKUS), alongside deepening cooperation on

a range of advanced security and defence capabilities. The Defence Industry Development Strategy (DIDS) now articulates the defence industrial base required with Test and Evaluation, Certification and Systems Assurance (TECSA) forming one of the seven Sovereign Defence Industrial Priorities.

The consolidated Defence and Australian Signals Directorate funding for FY24/25 is estimated at AUD $55.3bn1. In April 2024, the Australian Government announced that it will increase defence spending by $50.3bn over the next decade, hitting $100bn by 2033, or c.2.4% of GDP.

UK

6,174

employees

32

sites

Trading environment

A more contested and volatile international environment has reinforced the UK Government's commitment to increased defence spending.

In April, the UK Government announced an incremental £75bn of defence spending over six years, with defence spending set to rise to 2.5% of GDP by the end of the decade - reaching £87bn a year in 2030. The Government states that "additional funding will be used to put the UK's defence industry on a war footing, deliver cutting-edge technology and back Ukraine against Russia"2. The new spending plan comes with a promise to spend at least 5% of the budget on R&D from next year, and another 2% to "support the exploitation of promising science and technology in military capability"3.

As the UK seeks to develop and deploy next-generation capabilities faster than its adversaries, we are well positioned to support our customers in applying mission-led innovation to achieve this.

US

1,389

employees

14

sites

Trading environment

The US continues to address the comprehensive and serious challenge of the People's Republic of China, while tackling the acute threat of a highly aggressive Russia, and increasing vigilance against the persistent threats of North Korea, Iran and transnational terrorist networks.

To support these aims, the Department of Defense funding for 2024 is $841.4bn4. As part of this, the Research, Development, Test and Evaluation (RDT&E) budget is the largest ever at $145bn5. Investment in critical technology areas aimed at strengthening technological advantage include directed energy, hypersonics, integrated sensing and cyber.

We serve our US customers' mission in the areas of Intelligence, Surveillance, Reconnaissance (ISR), mission operations, advanced cyber, information advantage, multi-domain autonomous solutions and systems and engineering and innovation.

Rest of the world

186	Germany
employees
5	Canada

sites

Trading environment

During 2023 there has been a marked increase in global defence investment as many countries have re-evaluated their defence and security priorities as a consequence of the Russia-Ukraine war. The 2024 forecast for global defence spending stands at $2.47tn6, which represents a 13% increase since 2022.

While priority and investment focus will be attached to the prosecution of our three home country strategies (Australia, UK and US), we continue to conduct business in the support of allied nations.

>£1.5bn

Market opportunity1

£130.6m

FY24 revenue

1 Budget 2024-25 Budget Paper No. 1.4A, page 16

>£5bn

Market opportunity1

£1,265.8m

FY24 revenue

1. PM announces 'turning point' in European security as UK set to increase defence spending to 2.5% by 2030,
   23 April 2024 (gov.uk)
2. Defending Britain 23 April 2024 (gov.uk)

>£23bn

Market opportunity1

£401.9m

FY24 revenue

1. FY24 NDAA Bill Report (senate gov)
2. IN12209 (congress.gov)

>£1bn

Market opportunity1

£113.8m

FY24 revenue

6 Janes Defence Budgets,

January 2024

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QinetiQ Group plc|  Annual Report & Accounts 2024

QinetiQ Group plc|  Annual Report & Accounts 2024

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