restoring qinetiq
to strength
qinetiq group plc annual report and accounts 2010  qinetiq group plc annual report and accounts 2010 1
directors’ report – business review
performance 1
the business at a glance 2
chairman’s statement 4
chief executive officer’s review 6
 performance review – qinetiq north america 10
 performance review – emea 11
chief financial officer’s review 12
key performance indicators 16
principal risks and uncertainties 18
corporate responsibility review 22
directors’ report – governance
board of directors 26
corporate governance report 28
remuneration report 36
other statutory information 42 
statement of directors’ responsibilities 44
financial statements
independent auditor’s report 45
consolidated income statement 46
consolidated statement of comprehensive income 47
consolidated statement of changes in equity 47
consolidated balance sheet 48
consolidated cash flow statement 49
notes to the financial statements 50
company balance sheet 94
notes to the company financial statements 95
fiveyear record 97
glossary 98
financial calendar and shareholders 99
 wwwqinetiqcom
directors’ report – business review
•  we employ more than 13000 people worldwide 6900 people in the 
uk and australia and 6100 people in north america
•  our scientists and engineers solve some of the world’s most important problems
•  we are the uk’s largest research and technology organisation 
•  we are the world’s leading supplier of military robotics
•  more than 85 of our workforce carry highlevel national security clearances
qinetiq uses its domain knowledge to provide technical advice 
to customers in the global aerospace defence and security 
markets its unique positioning enables it to be a trusted partner 
to government organisations predominantly in the uk and the 
us including defence departments intelligence services and 
security agencies
for more 
information 
go online
wwwqinetiqcom
cautionary statement
all statements other than historical facts included in this document 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 forwardlooking statements 
such forwardlooking statements which reflect management’s assumptions 
made on the basis of information available to it at the 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 
forwardlooking statements nothing in this document should be regarded 
as a profit forecast
key facts
contents  qinetiq group plc annual report and accounts 2010 1
£16254m
 revenue 2009 £16173m
£457 4m
 net debt 2009 £5379m
£1203m
 underlying operating profit 2009 £1516m
111p
 underlying earnings per share 2009 159p
£253m
operating lossprofit 2009 £1281m
97p
basic earnings per share 2009 143p
7 4
 underlying operating margin 2009 94
158p
 dividend 2009 475p
see pages 
1215 
for more 
information
• difficult year – sales disappointing margins weakened
• markets remain challenging
• review of operations complete – priorities agreed
• programme underway to restore qinetiq to strength over next two years
•  immediate drive on debt reduction to reduce net debtebitda from 25x† to a target of below 2x† 
by decisive internal programme to restore value and
•  board recommending a suspension of dividend for 12 months
 definitions of underlying measures of performance are in the glossary on page 98 
underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† annualised and calculated in accordance with the group’s credit facility ratios
performance
our markets are likely to remain uncertain for some time 
but we now have a decisive programme of selfhelp to restore 
value we are acting to make our costs more competitive 
our productivity better and our debt lower we are changing 
our structure to benefit from qinetiq’s overall strengths most 
of all we are working to transform our culture into one based 
on leadership accountability and empowerment of what is 
an outstanding group of people leo quinn chief executive officer 2 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 3
defence
aerospace security
we provide the following capabilities
•  technical assistance and programme support 
•  technology offerings
•  test and evaluation
•  research and development 
•  training delivery
the business at a glance
directors’ report – business review
qinetiq’s business model is based on providing hitech advice 
to customers and building relationships as a trusted partner 
our customers value our technical and domain knowledge in 
support of professional services they value our independence 
and our integrity and trust us to share in their mission
how we operate
our markets
highlights in our markets during the year
aerospace defence security
typhoon programme
the business won a £37m threeyear 
contract during the year to support the 
typhoon programme
iraqi flighttraining
we continue to deliver iraqi flighttraining 
services as part of a multiyear contract 
worth more than 100m
cyveillance
cyveillance providing proactive preventative 
solutions for customers in the cyber 
security market was acquired during the 
year for an initial consideration of £261m 2 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 3
we have operations throughout the uk and north america as well as australia as illustrated 
our capabilities are utilised across the world by an international range of customers who recognise 
qinetiq as a trusted partner
qinetiq provides services and products across international markets our services business which 
accounts for approximately 80 of total sales is based on providing expertise and knowledge in national 
markets our products business provides the platform for potential profitable growth on a global basis
at the start of the new financial year we moved to a new structure
• us services
• uk services
• global products
we believe this structure will provide greater focus to leverage qinetiq’s expertise technology 
customer relationships and business development skills to enable sustainable and profitable growth 
over the longerterm
where we operate
what we offer 4 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 5
chairman’s statement
directors’ report – business review
a tough year given the 
economic market and 
political uncertainty
mark elliott chairman
dear shareholder
i am pleased to submit my first report as chairman of qinetiq 
having assumed the role in march this year following the retirement 
of sir john chisholm
the last financial year was noteworthy for the group given the 
changes in our markets on both sides of the atlantic responding to 
fastmoving market developments has required a step change by the 
business and particularly by our people i would like to pay testimony 
to our employees who have taken on the challenge to adapt quickly 
to the changing priorities of our customers
with changes in the political landscape on both sides of the atlantic 
compounded by economic pressures our business has experienced 
considerable uncertainty on the back of political change customers 
have delayed decision making as they review their budgets as a 
consequence of these market changes in november we alerted the 
market that the group was unlikely to meet market expectations 
the wider uk budget pressures and delays in contract awards 
resulted in lower utilisation of our teams in the last quarter this 
was followed in january by confirmation that the delays in orders 
for survivability products and unmanned ground vehicles within 
the qinetiq north america qna technology solutions group would 
result in performance for our second half not exceeding that of the 
first half this was disappointing and highlighted the need for the 
business to be more agile and to look to itself to reduce its cost base 
to ensure that it remains competitive 
the safety of our operations remains a priority following the tragic 
loss of nimrod xv230 in 2006 and the subsequent publication of 
the haddoncave report in october 2009 we were determined 
to take on board any key findings which will further improve our 
ways of working subsequently in november 2009 the board 
appointed sir robert nelson qc to consider the findings and 
recommendations of the haddoncave report sir robert concluded 
that substantial improvements have occurred in qinetiq since 2004 
but recommended that further changes were implemented and that 
improvements which have been made to date are consolidated 
i am pleased to report that we are already well underway with 
implementing sir robert’s recommendations and are in the 
process of recruiting a new group safety director to the executive 
team qinetiq has a long established heritage and track record in 
airworthiness and safety it is important that we ensure through 
our actions processes procedures and people that we are able 
to reinforce our credentials in this crucially important field
in november leo quinn joined the board as chief executive officer 
to lead the next stage of qinetiq’s development leo took over 
the reins from graham love who left the group after eight years 
having taken the organisation through privatisation leo joined the 
group having led de la rue plc overseeing its transformation into 
a focused marketleading security printer prior to that leo was 
responsible for a number of business turnarounds in both europe 
and the us leo has drive and energy and a passion for operational 
excellence and delivery i am pleased to report that in the short time 
that he has been with the group he has already started the process 
of its transformation the board is fully supportive of the priorities 
set out by leo quinn in his chief executive officer’s report
the results 
group revenues were flat at £16254m 2009 £16173m including 
a £43m benefit from the strengthening us dollar exchange rate the 
overall organic decline in us revenues at constant currency was 4 
with the decline in higher margin product sales partially offset by 
growth in services the uk businesses suffered from a reduction in 
the historic concentration of ministry of defence mod order flow 
towards the year end although this impact was partially masked at 
the revenue level by higher passthrough revenues resulting in a 1 
organic decline in emea revenues
as a result of the reduction in higher contribution revenues 
underlying operating profit decreased to £1203m 2009 £1516m 
resulting in an underlying margin of 74 2009 94 the emea 
underlying margin decreased to 75 2009 100 and the qna 
underlying margin fell to 85 2009 108 losses for the ventures 
division reduced as a result of the partial disposal of cody gate 
ventures in the prior year underlying profit before tax was 
£857m 2009 £1302m
the group incurred impairment charges on goodwill of £501m 
intangible assets and investments of £146m and tangible assets 
of £240m other nonrecurring items include a profit on business 
divestments of £51m 2009 £130m and a charge for reorganising 
the emea business announced in may 2009 of £421m the resulting 
statutory loss before tax was £661m 2009 profit of £1140m
the group achieved a strong underlying cash conversion of 145 
2009 107 due to a continued focus on cash generation cash flow 
from operations increased to £2046m 2009 £2022m before the 
costs of the emea reorganisation announced in may 2009 4 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 5
net debt as at 31 march 2010 was £4574m 31 march 2009 
£5379m resulting from strong cash flow from operations and 
the beneficial translation impact of the us dollar exchange rate 
as the majority of the group’s debt is drawn in us dollars the 
group’s gearing ratio† at 31 march 2010 was 25x† 31 march 
2009 22x† well inside the covenant level of 35x†
full year underlying earnings per share were 111p 2009 159p
the board is confident that the programme announced on 27 may 
will restore the group to strength over the next 24 months 
including the rapid paydown to a target gearing ratio of below 
2x† for this reason the board is recommending that no payment 
be made either of a final dividend for the year just ended or of an 
interim dividend for the current year it is the board’s expectation 
that the group will pay a final dividend with respect to the 
financial year ending 31 march 2011
the board
there have been a number of changes to the board during 
the year
in may 2009 sir john chisholm announced his intention to retire 
from the board as chairman some 19 years ago sir john took 
on the challenge of creating a successful commercial enterprise 
out of the research laboratories of the ministry of defence 
this culminated in the company’s listing on the london stock 
exchange in february 2006 his personal commitment integrity 
and phenomenal energy have made qinetiq the successful 
organisation it is today and on behalf of the board i thank him 
for his enormous contribution i am sure everyone at qinetiq 
wishes sir john all the very best for his retirement
in august last year david h langstaff joined the board as a 
nonexecutive director bringing an indepth understanding 
of the north american security market nonexecutive director 
dr peter fellner stepped down from the board at the close of the 
group’s agm on 4 august 2009 graham love left the company 
and leo quinn joined the board in the role of chief executive 
officer in november just after the year end i was pleased to 
announce the appointment of admiral sir james burnellnugent 
kcb cbe ma as an independent nonexecutive director 
sir james brings extensive experience of the operational 
challenges of the defence sector
people
qinetiq is a unique organisation built on the technical knowledge 
expertise and integrity of its people they are involved in solving 
some of society’s most complex problems i believe our teams 
undertake their roles with integrity and demonstrate commitment 
to our customers during the second half of the year our employees 
adapted to significant change which will modernise and reposition 
the business for the future ensuring we remain competitive in the 
market this required flexibility from our people and i thank them 
for their ongoing commitment and support
outlook
in both the us and the uk the defence markets remain challenging 
as a result of the economic environment additionally in the uk the 
impending strategic defence and security review adds uncertainty 
to forecasts for defence spending the board has concluded its 
review of operations and reset the priorities of the group the new 
management is taking action over the next 24 months to reduce 
costs improve productivity and drive cash generation both to 
reduce the group’s net debt rapidly and to refocus and reposition its 
businesses over the medium term for a return to profitable growth
in the current financial year the performance of qinetiq’s service 
businesses is likely to remain steady overall the product businesses 
whose performance is by nature more variable should benefit from 
the release of some orders in the us delayed from prior period 
although this will be partially offset by the weaker uk environment 
the board believes it will meet its expectations for the current year
mark elliott chairman
2 june 2010
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  6 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 7
chief executive officer’s review
directors’ report – business review
qinetiq’s deep customer 
relationships in the uk and 
the us together with the 
worldclass expertise and 
innovation of its employees 
provide the capacity for longer 
term profitable growth
leo quinn chief executive officer
during the past year it became apparent that our markets were 
undergoing significant changes as governments sought to reduce 
their budgets and their debt while continuing in the shortterm 
to conduct high levels of military operations abroad these 
uncertainties had a marked impact on the group’s performance 
but also highlighted the need for substantial internal change if 
we were to chart a course to profitable and sustainable growth
that is why immediately following my appointment in november 
2009 i began a review of our operations and processes that review 
is now complete and the board has agreed our priorities and actions 
to return qinetiq to strength
review of operations and processes
in recent years qinetiq has grown rapidly both by acquisition and by 
seeking to use its technology in industries outside its core expertise 
to date these investments have not delivered their expected returns 
and the group’s net debt has risen significantly in addition the 
organisational structure and processes within qinetiq have become 
overly complex and fragmented which is a barrier to effective 
performance these factors combined with challenging market 
conditions make it imperative that qinetiq ensures it has a strong 
foundation on which to build
qinetiq predominantly comprises a range of service businesses 
positioned to advise and support customers to achieve efficiency 
and effectiveness in the uk and the us these businesses are based 
on – and continue to refresh – qinetiq’s deep customer knowledge 
and technical understanding of the aerospace defence and 
security sectors and are capable of providing a relatively stable and 
predictable income pattern this capability is based on the expertise 
of our people and the relationships they develop in specific national 
markets and over time should create opportunities to provide 
similar services in other countries
the group also possesses a smaller proportion of product businesses 
with technically advanced offerings developed inhouse today 
these products are sold principally to customers in the uk and the 
us but the market is potentially global by their nature – based 
on technology – these businesses have higher margins but more 
variable sales and to date they have been managed without 
sufficient sharing of intellectual property or scale between the 
uk and us operations to maximise opportunities and profitability 
our us products businesses gives us a strong route into the world’s 
most advanced defence market and we believe that this position 
combined with the complementary skills of our research and 
expertise in the uk has the potential for profitable growth on 
a global basis 
fit for the future
my focus for the group is to deliver the full potential of the 
investments which the group has made this means removing 
barriers to success and focusing rigorously on the best opportunities 
created by our markets and our own strengths my objective is to 
build a new trajectory for qinetiq one with a very clear direction 
and more urgent pace our customers’ needs the development of 
offerings which address those needs and their successful execution 
must be our touchstone i am making changes to ensure that qinetiq 
competes successfully in challenging markets we need to remain 
competitive have robust processes which make us fit for the future 
fit for growth and that means tackling the way we all work we are 
focused on reducing our costs improving our efficiency stabilising 
our business and becoming more flexible and agile i set out my 
priorities over the following pages
i believe these changes are essential to provide the group with a 
solid foundation qinetiq’s deep customer relationships in the uk 
and the us the two leading markets in its core areas together with 
the worldclass expertise and innovation of its employees provide 
the capacity for longerterm profitable growth once the group’s 
operations and processes have been returned to strength 
trading environment and outlook
this has been a difficult year for qinetiq with challenging 
conditions in our core markets and considerable internal change 
our markets are likely to remain uncertain for some time but 
we now have a decisive programme of selfhelp to restore value 
we are acting to make our costs more competitive our productivity 
better and our debt lower we are changing our structure to benefit 
from qinetiq’s overall strengths most of all we are working to 
transform our culture into one based on leadership accountability 
and empowerment of what is an outstanding group of people 
with these immediate steps the board believes that it will meet 
its expectations for the current year at the same time our goal is to 
build the right foundation for a return to profitable and sustainable 
growth in the future 6 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 7
our service businesses address national markets and our product businesses 
address a global market
us services
— — — — — — —
systems engineering
group

mission solutions
group
uk services
— — — — — — —
managed services
• test and evaluation
• aerospace
advice
training delivery
australia
global products
— — — — — — — —
technology 
solutions uk

technology
solutions
group us
20  products  supply 
 globally targeted
80  services  advice
 nationally focused
my
contribution
my contribution introduced 
in march this year is the 
umbrella activity driving 
continuous improvement 
employee engagement and 
operational performance 
within qinetiq it is a tracked 
and measured productivity 
programme by which all 
employees are able to 
generate and voice their 
ideas and more importantly 
convert them quickly into 
projects that deliver concrete 
business beneﬁts
commercialisation
of innovation
value for
money
cash
365days
selling
one
qinetiq
productivity
our structure
the my contribution programme 8 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 9
chief executive officer’s review continued
directors’ report – business review
our priorities
to strengthen our foundations and build a future path to sustainable 
and profitable growth the following priorities to create value have 
been put in place
  set a clear direction which reduces the span of focus and matches 
both customer needs and core qinetiq strength – going forward 
our investment decisions will be guided by building on our 
known strengths some parts of the original qinetiq strategy 
have proven successful over recent years – focusing on the needs 
of existing customers exploiting the potential of our expert 
technical services and the decision to enter the us marketplace 
the largest defence market in the world however we have not 
been successful at commercialising our technology or exploiting 
it in adjacent markets as yet we have not achieved the potential 
from extending into defence markets beyond the uk and the us 
and from fully integrating and developing some of our acquisitions 
unquestionably qinetiq’s strength lies in its ability to provide 
customers with trusted advice working in close partnership 
and using its expertise in both technology and specific markets to 
enable customers to have greater efficiencies and to take effective 
decisions this work including the research we conduct on 
customers’ behalf in turn continually refreshes the knowledge 
and value of our people to provide innovative services 
  simplify and align our operating structure with the new direction 
removing unnecessary layers – the group’s current fragmented 
structure has hindered development of its full potential the 
operating model and management of the service businesses 
which comprise approximately 80 of our total sales differ 
markedly from that of our product businesses which currently 
account for about 20 of sales a new structure comprising three 
divisions – us services uk services and global products – will 
enable greater focus to leverage qinetiq’s expertise technology 
customer relationships and business development skills to enable 
sustainable and profitable growth
  increase transparency and control through all levels – following 
a period of growth it is essential to put disciplined standard 
processes which aid transparency and management visibility into 
the operations this includes standard reporting of performance 
information across the group and regular reviews of talent 
innovation and cost reduction
  upgrade leadership to ensure a commercial valueoriented 
mindset – given the challenges ahead for the business it is
vital we have the right strength of team in place and remove 
unnecessary management layers continually evaluating and 
upgrading the top leaders setting clear expectations which align 
performance and behaviours with the group’s overall objectives 
with appropriate incentives to drive profit and cash are key to 
our achievement of success increased communications and 
engagement by leaders both with their own teams and customers 
and the delivery of value for our shareholders will be laid out 
in personalised leadership charters and published throughout 
the organisation 
 set a clear direction which reduces the span of focus and matches both 
customer needs and core qinetiq strength
 simplify and align our operating structure with the new direction 
removing unnecessary layers
 increase transparency and control through all levels
 upgrade leadership to ensure a commercial valueoriented mindset
 create a strong performance culture of both accountability and 
empowerment to our people
 establish a lower level of cost base to ensure future competitiveness
 ensure a more uniﬁed approach groupwide to exploit key opportunities
 drive for cash generation to strengthen the groups balance sheet
 move to a new reporting structure comprising three 
divisions us services uk services and global products
 introduce standardised management reporting
and regular reviews of key business drivers
 assess the top leaders groupwide setting targets 
for performance and behaviours which reﬂect 
group objectives for proﬁt and cash and providing 
appropriate incentives
 install a groupwide performance management 
system and directly engage employees in the 
improvement of productivity
 eliminate waste and reduce costs with better 
business processes and a uniﬁed qinetiq approach
 reduce debt by driving cash generation including 
tight measurement of working capital to reduce
the ratio of net debtebitda† to below 20x
 suspend payment of dividend on qinetiqs
ordinary shares for 12 months
 return on capital employed
 operating proﬁt
 operating proﬁt margin
 operating cash conversion
 employee engagement
 customer satisfaction
 operating proﬁt margin
 employee engagement
 net debtebitda ratio†
 operating cash conversion
strategy
performance
kpis
how we will operate action plan kpis 8 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 9
  create a strong performance culture of both accountability and 
empowerment to our people – qinetiq needs to build a culture 
which embraces individual contribution and responsibility 
through measurement a new performance management system 
my personal success plan will focus on identifying our top leaders 
of the future and helping each person to develop their potential 
we will actively enrol the knowledge and ideas of our teams 
through the rollout of my contribution a tracked and measured 
productivity programme which embeds the concept of employee 
engagement to improve business performance we are refreshing 
our focus on health and safety as this is fundamental not only 
to employee wellbeing but also to the nature of the work that 
we undertake as part of this in response to the findings of the 
haddoncave report we are recruiting a new group safety 
director to the executive team
  establish a lower level of cost base to ensure future 
competitiveness – our customers are all under increasing pressure 
to gain better value for their investments and as a supplier to these 
markets we must have a competitive cost base we are therefore 
reexamining and streamlining our business processes through a 
programme called fit4growth focused on improving our systems 
and procedures to ensure we reduce and retain tight control of our 
costs eliminate inefficiencies and address lossmaking activities 
and whilst we will continue to invest in developing our businesses 
and our people this must be financed by rigorously reducing 
other costs
  ensure a more unified approach groupwide to exploit key 
opportunities – we need a more unified approach to exploit key 
opportunities so that we leverage our customer knowledge and 
technical expertise better including our approach to untapped 
opportunities in smaller international markets outside the uk and 
the us through a more unified approach to working as one team 
and making key decisions on a global basis we can develop our 
best opportunities and most effective routes to market to build 
qinetiq’s reputation and position
  drive for cash generation to strengthen the group’s balance 
sheet – we intend to reduce our indebtedness we have identified 
a number of ‘selfhelp’ measures to drive cash generation harder 
including the reduction of working capital lowering costs and the 
elimination of lossmaking activities
 set a clear direction which reduces the span of focus and matches both 
customer needs and core qinetiq strength
 simplify and align our operating structure with the new direction 
removing unnecessary layers
 increase transparency and control through all levels
 upgrade leadership to ensure a commercial valueoriented mindset
 create a strong performance culture of both accountability and 
empowerment to our people
 establish a lower level of cost base to ensure future competitiveness
 ensure a more uniﬁed approach groupwide to exploit key opportunities
 drive for cash generation to strengthen the groups balance sheet
 move to a new reporting structure comprising three 
divisions us services uk services and global products
 introduce standardised management reporting
and regular reviews of key business drivers
 assess the top leaders groupwide setting targets 
for performance and behaviours which reﬂect 
group objectives for proﬁt and cash and providing 
appropriate incentives
 install a groupwide performance management 
system and directly engage employees in the 
improvement of productivity
 eliminate waste and reduce costs with better 
business processes and a uniﬁed qinetiq approach
 reduce debt by driving cash generation including 
tight measurement of working capital to reduce
the ratio of net debtebitda† to below 20x
 suspend payment of dividend on qinetiqs
ordinary shares for 12 months
 return on capital employed
 operating proﬁt
 operating proﬁt margin
 operating cash conversion
 employee engagement
 customer satisfaction
 operating proﬁt margin
 employee engagement
 net debtebitda ratio†
 operating cash conversion
strategy
performance
kpis
how we will operate action plan kpis
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  10 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 11
chief executive officer’s review continued
directors’ report – business review
2010
£m
2009
£m
revenue
mission solutions 3547 2895
systems engineering 2733 2445
technology solutions qna 1721 2316
total 8001 7656
underlying operating profit 677 830
underlying operating margin 85 108
funded orders
mission solutions 3266 2832
systems engineering 2510 2675
technology solutions qna 1830 1879
total 7606 7386
book to bill ratio 101 101
backlog 3263 4150
revenues declined 4 on an organic basis at constant currency 
to £8001m 2009 £7656m within this the services businesses 
mission solutions and systems engineering which account for 
c80 of qna’s revenue grew by 7 on an organic basis this was 
offset by the slowdown in technology solutions’ military product 
sales as the new us administration completed many of its key 
department of defense dod leadership appointments and 
finalised its strategy for the continued involvement in afghanistan 
underlying operating profit decreased to £677m 2009 £830m 
delivering an underlying operating margin of 85 2009 108 
the decline in operating margin is principally reflective of the 
composition of qna’s revenue which included a smaller proportion 
of its higher margin product sales 
dragon runner™ unmanned 
ground vehicles ugvs 
purchased by the uk mod
the mission solutions business grew organically by 8 and 
continued to broaden its customer base with contract wins from 
a number of new customers including the us department of state 
the us secret service and a contract with the us federal emergency 
management agency the fiveyear 100m janus ii contract was 
awarded in august 2009 to replace and upgrade the department 
of state’s telecommunications systems at american embassies and 
other locations worldwide the systems engineering business grew 
organically by 6 with increased demand on a number of contracts 
from customers across the us army navy marines and special 
forces in addition the systems engineering business continues 
successfully to deliver iraqi flighttraining services the fourth option 
year of this contract was recently exercised by the customer towards 
the end of the year the services businesses experienced some delays 
and curtailments in government orders
 100m
multiyear contract for provision of iraqi 
flighttraining services
the slowdown in technology solutions qna resulted in a 31 
decrease in organic revenues against a very strong comparable prior 
year from an international perspective the australian department 
of defence placed a aud23m contract for talon® robots and 
replacement parts to support the australian defence force deployed 
on operations a key contract win for technology solutions qna this 
year was the 31m qnets contract a vehicle survivability product 
for the mrap lite fleet 
in july 2009 the group acquired cyveillance inc for an initial cash 
consideration including costs of £261m 422m a potential 
further payment up to a maximum of £264m 40m will be made 
depending on performance during the twoyear period ending 
31 december 2010 cyveillance develops and operates online 
monitoring technology to identify and track data on the internet 
providing proactive preventative solutions for customers in the 
cyber security market
performance review – qinetiq north america 10 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 11
 
2010
£m
2009
£m
revenue
managed services 3843 3707
consulting 1426 1451
technology solutions emea 2919 3265
total 8188 8423
underlying operating profit
2
611 842
underlying operating margin
2
75 10
funded orders
managed services 2370 1866
consulting 1287 3157
technology solutions emea 2693 3489
total 6350 8512
book to bill ratio
1
101 131
backlog
1
8392 8020
1  
excludes remaining £41bn 31 march 2009 £45bn in respect
of ltpa contract
2  
prior year comparatives have been restated to show the finance element
of the ias 19 pension cost in the finance and expense lines
revenue for the period was £8188m 2009 £8423m a 1 decline 
on an organic basis the uk budget pressures and delays in contract 
awards resulted in lower utilisation of employees in q4 than has 
been the case in prior years this impact was masked to a degree 
on the revenue line by higher levels of passthrough revenue on 
certain programmes however it resulted in underlying operating 
profit decreasing to £611m 2009 £842m orders received were 
down 25 against the prior year which included the £150m 15year 
maritime strategic capability agreement
£31m
£31m dtr early training transformation contract 
signed in august 2009
both consulting and technology solutions emea have previously 
benefited from a seasonal pickup in a large number of smallvalue 
contracts in q4 as mod closed out its financial year this year the 
volume of such contracts was much reduced and consequently 
consulting’s reported revenues declined by 3 on an organic basis 
in technology solutions emea the equivalent decline was 7 
exacerbated by the decrease in mod research revenues during the 
period technology solutions emea worked with qna in enabling 
transfer of technologies across the atlantic as evidenced by the 
sale of dragon runner™ unmanned ground vehicles ugvs to 
the uk mod
managed services’ revenue for the period increased organically 
by 6 over the prior period enhanced predominantly by some 
pass through revenues on the ltpa contract and the £31m defence 
training review dtr early training transformation contract signed 
in august 2009 package 1 of the uk mod dtr is progressing during 
the period £112m of bid costs were capitalised bringing the total 
amount of bid costs capitalised as at 31 march 2010 to £308m 
2009 £196m the programme has been submitted to the mod 
investment appraisal board ‘main gate’ which has indicated that 
mod may continue to develop the transaction in parallel with the 
strategic defence and security review the mod’s expectation for 
financial close is currently mid2011
managed services’ revenue 
increased by 6 in the year
the emea restructuring programme announced in may 2009 was 
largely completed this financial year the cost of this programme 
was £421m all of which has been expensed to the income 
statement in the year as a nonrecurring item
during the period the emea business disposed of a number 
of noncore assets including the underwater systems business 
in september 2009 for a cash consideration before costs of 
£235m and asap calibration services limited in july 2009 
for a nominal consideration
ventures 
2010
£m
2009
£m
revenue 65 94
underlying operating loss 85 156
the ventures portfolio in the year comprised of three businesses 
tarsier foreign object detection gps enabled telematics a high 
sensitivity business which delivers tracking solutions in difficult 
operational environments and optasense an acoustic sensing 
detection solution the prior year loss included £72m of equity 
accounted losses from the cody gate ventures fund prior to the 
group’s part disposal of the fund in march 2009
leo quinn chief executive officer
2 june 2010
performance review – emea
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  12 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 13
chief financial officer’s review
directors’ report – business review
despite the challenging year 
the cash generation across the 
group was very strong with 
net cash flow from operations 
up 3 at £1743m
david mellors chief financial officer
group overview results
revenue
2010
£m
2009
£m
revenue
qinetiq north america 8001 7656
emea 8188 8423
ventures 65 94
total 16254 16173
group revenues were flat at £16254m 2009 £16173m including 
a £43m benefit from the strengthening us dollar exchange rate
qna revenue declined 4 on an organic basis at constant currency 
to £8001m 2009 £7656m within this the services businesses 
mission solutions and systems engineering which account 
for c80 of qna’s revenue grew by 7 on an organic basis this 
was offset by the slowdown in technology solutions’ military 
product sales as the new us administration completed many of 
its key department of defense dod leadership appointments and 
finalised its strategy for the continued involvement in afghanistan 
underlying operating profit decreased to £677m 2009 £830m 
delivering an underlying operating margin of 85 2009 108 
the decline in operating margin is principally reflective of the 
composition of qna’s revenue which included a smaller proportion 
of its higher margin product sales
emea revenue for the period was £8188m 2009 £8423m a 1 
decline on an organic basis the uk budget pressures and delays 
in contract awards resulted in lower utilisation of employees in q4 
than has been the case in prior years this impact was masked to a 
degree on the revenue line by higher levels of pass through revenue 
on certain programmes however it resulted in underlying operating 
profit decreasing to £611m 2009 £842m
mod
dod
civilother
government
agencies
dhs commercial defence
23
36
fy10
£16254m
28
8
5
20
37
30
7
6
fy09
£16173m
revenue by customer

underlying operating profit
2010
£m
2009
£m
underlying operating profit
qinetiq north america 677 830
emea 611 842
ventures 85 156
total 1203 1516
 
underlying operating margin 74 94
as a result of the reduction in higher contribution revenues underlying 
operating profit decreased to £1203m 2009 £1516m resulting 
in an underlying operating margin of 74 2009 94 the emea 
underlying operating margin decreased to 75 2009 10 and the 
qna underlying operating margin fell to 85 2009 108 losses 
for the ventures division reduced as a result of the partial disposal 
of cody gate ventures in the prior year underlying profit before tax 
was £857m 2009 £1302m
our investment in ventures continued during the year the underlying 
operating loss of £85m 2009 £156m was mitigated during the 
year following our part disposal of our investment in the cody gate 
ventures fund in march 2009 the prior year results included the 
group’s share of cody gate ventures losses of £72m
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  12 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 13
acquisition amortisation and specific nonrecurring items
the performance of the group after allowing for nonrecurring 
events and amortisation of acquired intangible assets is shown 
below
2010
£m
2009
£m
underlying profit for the year attributable to 
equity shareholders of the parent company 728 1035
impairment of intangible assets 534 –
amortisation of intangible assets arising 
from acquisitions 261 235
impairment of plant property and equipment 240 –
emea reorganisation 421 –
gain on business divestments 51 130
unrealised impairment of investments 113 57
tax impact of items above 157 63
lossprofit for the year attributable to 
equity shareholders of the parent company 633 936
the resulting statutory loss after tax was £633m 2009 profit 
of £936m
nonrecurring items that have been excluded from underlying profit 
relate to gains on business divestments impairment of investments 
impairment of plant property and equipment impairment of 
intangible assets and emea reorganisation costs
during the period the group has elected to align the treatment 
of the group’s ias 19 pension charge with that of its peer listed 
companies by showing the finance element of the pension charge 
in the finance costs line and the service cost remaining in operating 
expenses in prior reported periods these elements had been combined 
and reported in operating costs ias 19 employee benefits permits 
both treatments the group’s comparative figures have been 
restated to reflect this change although there is no impact on the 
group’s profit before tax or retained profit this pension liability 
sits within the emea business and therefore the operating segment 
comparatives have also been restated
finance costs
net finance costs have increased to £346m 2009 £214m due 
principally to an adverse movement in the net pension return of 
£59m combined with the effect of refinancing floating rate us dollar 
debt under the revolving credit facility with more secure long term 
fixed rate debt obtained from the us private placement market in 
february 2009
taxation
the group’s underlying effective tax rate was 15 2009 205 
the reduction on prior year is due to the combination of the 
cessation of equity accounted losses of cody gate ventures and 
certain favourable outcomes and settlements to date coupled 
with lower reported profits in qinetiq north america the 
group continues to benefit from the availability of research and 
development relief and in future years the group will benefit from 
enacted tax law changes having an impact on us state taxes overall 
the group effective tax rate is not anticipated to rise significantly in 
the medium term subject to any future tax legislation changes
2010 2009‡
revenue £m 16254 16173
organic change at constant currency 3 7
underlying operating profit £m
1
 1203 1516
underlying operating margin
1
 74 94
underlying profit before tax £m
1
857 1302
net finance expense £m 346 214
underlying effective tax rate
1
150 205
basic earnings per share 97p 143p
underlying earnings per share
1
111p 159p
dividend per share 158p 475p
underlying net cash from operations post capex £m
1
1743 1698
underlying cash conversion ratio
1
145 107
net debt £m 4574 5379
net debt ebitda
2
25x 22x
average us£ exchange rate 159 168
closing us£ exchange rate 152 144
1
  definitions of underlying measures of performance are in the glossary on page 98 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
2
  annualised and calculated in accordance with the group’s credit facility ratios
‡  prior year comparatives have been restated to show the finance element of the ias 19 pension cost in the finance and expense lines 
there is no impact on reported profit before tax from this restatement
 
group summary 14 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 15
chief financial officer’s review continued
directors’ report – business review
during the year there has been an impairment of £534m against 
intangible assets a £501m impairment of goodwill has arisen in 
technology solutions qna £114m mission solutions £308m and 
australia £79m the global economic uncertainty has led to weaker 
market outlooks which has in turn impacted on the future growth 
potential the remaining impairment charge of £33m is in respect 
of other intangible assets 
an impairment charge of £207m against the group’s land and 
buildings was taken during the year relating to owned properties 
within emea where there are no external tenants following 
vacancies arising during the year an impairment charge of £33m 
was taken against the group’s plant machinery and vehicles during 
the year relating to the impairment of assets which are no longer 
generating a return both of these impairments relate to reductions 
in the carrying value of these assets to their recoverable amounts
the emea restructuring programme announced in may 2009 largely 
completed this financial year the cost of this programme was £421m 
all of which has been expensed to the income statement in the year 
as a nonrecurring item 
the gain on business divestments in the year relates to the disposal 
of two businesses during the period on 30 september 2009 the 
group disposed of the underwater systems business and on 31 july 
2009 the calibration business including asap calibration ltd for a 
nominal consideration
earnings per share
underlying earnings per share was 111p compared with 159p for 
the year to 31 march 2009 basic earnings per share reduced to 97p 
2009 143p over the same period
dividend
the group paid an interim dividend of 158 pence per share and the 
board is recommending that no final dividend be paid 2009 total 
dividends 475 pence per share 
other financials
cash flow
the group’s cash flow from operations before reorganisation costs 
was £2046m 2009 £2022m the underlying operating cash 
conversion ratio post capital expenditure was 145 2009 107 
as a result of a keen focus on cash generation the cash outflow 
in the year on emea reorganisation was £354m 2009 £270m
acquisition expenditure net of cash acquired totalled £456m 
2009 £892m £261m of which was due to the acquisition of 
cyveillance inc in july 2009 and the remainder was deferred 
consideration on prior year’s acquisitions proceeds received from 
the disposals of underwater systems and calibration businesses 
totalled £211m 2009 £209m
at 31 march 2010 net debt reduced by £805m to £4574m compared 
with £5379m at 31 march 2009
the group’s borrowings remained comfortably within its banking 
covenants the group’s two key debt covenant measures are the 
gearing and interest cover ratios at 31 march 2010 the actual ratios 
were well within the maximum covenant levels permitted with the 
gearing† ratio at 25x compared to the covenant maximum level of 35 
and interest cover of 56 compared to a minimum covenant level of 40
the total committed facilities available to the group at 31 march 
2010 were £877m the earliest maturity date of the group’s 
committed facilities is august 2012
committed facilities
§
 maturity profile
£m
0
100
200
300
400
500
600
700
800
900
mar
2019
mar
2018
mar
2017
mar
2016
mar
2015
mar
2014
mar
2013
mar
2012
mar
2011
mar
2010
utilised unutilised
§
including private placement debt detailed in note 27e
pensions
the net pension liability under ias 19 after deferred tax was 
£1061m at 31 march 2010 31 march 2009 £758m the increase 
in the net pension liability is primarily driven by reductions in the 
corporate bond discount rate which reduces the extent by which the 
pension liability is discounted
the key assumptions used in the ias 19 valuation of the scheme are
assumption
31 march 
2010
31 march 
2009 
discount rate 56 65
inflation 36 31
salary increase 46 41
life expectancy – male currently aged 40 89 89
life expectancy – female currently aged 40 90 90
each assumption is selected by the group in consultation with the 
company actuary and takes account of industry practice amongst 
comparator listed companies the sensitivity of each of the key 
assumptions is shown in the table below
assumption change in assumption
indicative effect on 
scheme liabilities 
before deferred tax 
discount rate increasedecrease 
by 01
decreaseincrease 
by £23m
inflation increasedecrease 
by 01
increasedecrease 
by £22m
salary increase increasedecrease 
by 01
increasedecrease 
by £6m
life expectancy increase by 1 year increase by £22m
the market value of the assets at 31 march 2010 was £9159m 
31 march 2009 £6474m and the present value of scheme 
liabilities was £10632m 31 march 2009 £7526m
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  14 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 15
capital risk
the group funds its operations through a mixture of equity funding 
and debt financing including bank and capital market borrowings 
at 31 march 2010 the group’s capital was £4858m 2009 £6194m 
which comprises total equity of £4737m 2009 £6027m plus 
amounts accumulated in equity relating to cash flow hedges of 
£121m 2009 £167m net debt as defined by the group was 
£4574m 2009 £5379m
the capital structure of the group reflects the judgement of the 
directors of an appropriate balance of funding required the group’s 
target is to reduce its gearing ratio to 2x ebitda† the directors have 
recommended a suspension of the dividend until 2011
treasury policy
the group treasury department works within a framework of 
policies and procedures approved by the audit committee as part 
of these policies and procedures there is strict control on the use of 
financial instruments speculative trading in financial instruments 
is not permitted the policies are established to manage and control 
risk in the treasury environment and to align the treasury goals 
objectives and philosophy to those of the group
funding and debt portfolio management
the group seeks to obtain certainty of access to funding in the 
amounts and maturities required to support the group’s medium 
to longterm forecast financing requirements group borrowings 
are arranged by the group treasury function
interest risk management
the group seeks to reduce the volatility in its interest charge caused 
by rate fluctuations
a significant portion of the group’s borrowings are fixed in the short 
to medium term through a combination of interest rate swaps and 
fixedrate debt
foreign exchange risk management
the principal exchange rate affecting the group was the sterling 
to us dollar exchange rate
2010 2009
£us – average 159 168
£us – closing rate 152 144
£us – opening rate 144 199
the group’s income and expenditure is largely settled in the functional 
currency of the relevant group entity mainly sterling or us dollar the 
group has a policy in place to hedge all material transaction exposure at 
the point of commitment to the underlying transaction uncommitted 
future transactions are not routinely hedged the group continues 
its practice of not hedging income statement translation exposure
to minimise the impact of currency depreciation of the net assets on 
its overseas subsidiaries the group seeks to borrow in the currencies 
of those subsidiaries but only to the extent that its gearing covenant 
within its loan documentation as well as its facility headroom are 
likely to remain comfortably within limits
tax risk management
the central principle of qinetiq’s tax strategy is to manage effective 
and cash tax rates whilst fully complying with relevant legislation 
tax is managed in alignment with the corporate strategy and with 
regard to qinetiq’s core value of integrity in all business dealings 
these principles are applied in a responsible and transparent manner 
in pursuing the group’s tax strategy and in all dealings with tax 
authorities around the world
credit risk
credit risk arises when a counterparty fails to perform its obligations 
the group is exposed to credit risk on financial instruments such 
as liquid assets derivative assets and trade receivables credit risk 
is managed by investing liquid assets and acquiring derivatives 
from highcredit quality financial institutions trade receivables are 
subject to credit limits control and approval procedures across the 
group the nature of the group’s operations leads to concentrations 
of credit risk on its trade receivables the majority of the group’s 
credit risk is with the uk and us governments and is therefore 
considered minimal
insurance
the group continually assesses the balance of risk arising from 
the operations undertaken against the insurance cover available 
for such activities and associated premiums payable for such cover 
a consistent approach to risk retention and scope of cover is applied 
across the group the group has a policy of selfinsurance through 
its captive insurance company on the first layer of specific risks with 
insurance cover above these levels placed in the external market 
with thirdparty insurers
employees
yearend employee numbers have decreased by 7 to 13078 at 
31 march 2010 the decline of 812 in emea including ventures  
corporate reflects normal inyear attrition departures under the 
reorganisation programme and the divestment of the underwater 
systems and calibration business in qna total headcount declined 
from 6348 to 6178
emea inc ventures and corporate
qna
47
group
13078
53
employees by sector

accounting standards
as a uk listed company the group is required to adopt eu endorsed 
ifrss and comply with the companies act 2006 the effect of 
changes to financial reporting standards in the year and critical 
accounting estimates and judgements have been disclosed in 
note 1 to the financial statements
critical accounting estimates and judgements 
in applying accounting policies
a description and consideration of the critical accounting estimates 
and judgements made in preparing these financial statements is set 
out in note 1 to the group financial statements
david mellors chief financial officer
2 june 2010 16 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 17
key performance indicators
directors’ report – business review
kpi description comment
underlying eps
pence
2010
2009
2008
111
159
134
the underlying earnings per share eps 
expressed in pence per share
eps provides shareholders with a measure 
of the earnings generated by the business 
after deducting tax and interest eps 
performance also determines the level 
of payout for the group’s longterm 
incentive plans
underlying return on
capital employed roce

2010
2009
2008
93
97
117
the underlying profit before interest and 
tax over capital employed defined as total 
assets less current liabilities
underlying roce provides shareholders 
with a measure of the financial returns 
being generated by the capital used in 
the business
organic revenue growth

2010
2009
2008
4
7
9
the group’s organic revenue growth is 
calculated by taking the increase in 2010 
revenue over 2009 pro forma revenue at 
constant exchange rates the pro forma 
revenue assumes that any acquisitions were 
owned and any discontinued operations 
or disposals excluded for the comparable 
period in the prior year
organic revenue growth demonstrates 
the group’s capability to expand its core 
operations within its chosen markets before 
the effect of acquisitions and currency 
translation impacts
underlying operating profit
restated for ias 19
£m
2010
2009
2008
1203
1516
1186
the underlying earnings before interest 
and tax
underlying operating profit for fy09 and 
fy08 has been restated to show the finance 
elements of the ias 19 pension cost in the 
finance income and expense lines there 
is no impact on reported profit before tax 
from this restatement
underlying operating profit is used by the 
group for internal performance analysis as 
a measure of operating profitability that is 
tracked over time
underlying operating margin
restated for ias 19

2010
2009
2008
74
94
87
the group’s calculation of underlying 
operating profit margin is consistent with 
prior years underlying operating profit 
margin is calculated by taking the earnings 
before tax and interest as a percentage 
of revenue
underlying operating profit margin can be 
used to show the underlying profitability 
of the revenues delivered by the group 
it can also be used to compare the group’s 
performance with that of our peers 
providing the definition of underlying 
operating profit is consistent
financial kpis 16 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 17
kpi description comment
operating cash conversion
restated for ias 19

2010
2009
2008
145
107
82
the ratio of our net cash flow from operations 
excluding reorganisations less outflows 
on the purchase of intangible assets and 
property plant and equipment to underlying 
operating profit excluding the share of 
posttax results of equity accounted joint 
ventures and associates
provides a measure of the group’s ability 
to generate cash from normal operations 
and gives an indication of its ability to pay 
dividends service its debt and to make 
discretionary investments
gearing ratio restated for ias 19
2010
2009
2008
25
22
23
the group’s gearing ratio† is calculated 
by taking the net debt over ebitda as 
calculated in accordance with the terms 
of the group’s credit facilities and is 
comfortably within our banking covenant 
limit of 35x
net debt to ebitda provides a measure of 
the strength of the group’s balance sheet
kpi description comment
health and safety
lost time injury rate per 1000 employees
2010
2009
2008
378
300
507
the lost time injury rate is calculated using 
the total number of work related lost time 
incidents x1000 divided by the average 
number of employees in that year the 2010 
figures are based on group data the 2008 
and 2009 figures are based on group data 
excluding australia
health and safety performance is monitored 
to drive continual improvement in minimising 
the risk to employees
employee engagement score
uk only on a scale of 01000
2010 5541
a measure of employee engagement 
on a scale of 01000 based on the best 
companies employee survey through this 
channel qinetiq employees share their 
views of working at qinetiq under the 
headings of management leadership 
my company personal growth my team 
giving back to the community fair deal 
and wellbeing
the survey forms part of the sunday 
times best companies to work for an 
annual survey run in the sunday times 
newspaper that ranks uk employers based 
on their employees’ feedback and allows 
comparison between qinetiq and other 
uk companies
financial kpis continued
nonfinancial kpis
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98  18 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 19
principal risks and uncertainties
directors’ report – business review
risk potential impact mitigation
a change in demand from 
reduced military operations 
in iraq and afghanistan
a significant shift in policy by either the 
administration in the us or the new 
government in the uk which results in a 
significant reduction in the number of forces 
personnel present in iraq and afghanistan 
may have a materially adverse impact on 
the group’s financial performance
qinetiq has capitalised on increased 
uk and us government spending on 
technology in support of operations in 
iraq and afghanistan notably qinetiq has 
experienced strong demand for unmanned 
ground vehicles and survivability products 
across the duration of both campaigns 
however the focus on operational support 
in defence on both sides of the atlantic 
has given rise to a decline in defence 
expenditure in other areas such as services 
to improve procurement efficiency and 
innovative research the group mitigates 
this by maintaining a market focus and 
competitive positioning in adjacent 
markets including defence services which 
are not directly conflictrelated aerospace 
security and intelligence providing a degree 
of portfolio diversification
a change in either us or 
uk government spending 
on defence and security
the strategic defence and security review in 
the uk and the financial burden on both uk 
and us government budgets from the recent 
economic downturn may lead to reduced 
spending in the markets in which the group 
operates any reduction in government 
defence and security spending in either the 
uk or the us could have an adverse impact 
on the group’s financial performance
 the group is focused on a range of markets in 
defence security and intelligence providing 
a degree of portfolio diversification the 
group will continue to review trends 
in defence aerospace and security 
expenditure in order to align the business 
with those trends
risk management
the understanding and effective management of the risks that 
face qinetiq is fundamental to its success and is an integral 
part of managing the business the identification assessment 
mitigation and reporting of risks are processes carried out at a 
group business and project level and are included as part of the 
business performance review process risks are assessed according 
to the likelihood of the event’s occurrence and its impact both from 
a financial and nonfinancial standpoint the group risk register 
includes an analysis of the potential exposures and severity of 
each risk as a function of the likelihood and impact of the risk 
the assumptions underlying each risk and the mitigating actions 
required to manage the risk
it is reviewed by the executive team on a monthly basis which considers
• the authority resources and coordination of those involved in the 
identification assessment and management of significant risks 
faced by the organisation
• the response to the significant risks which have been identified 
by management and others
• the monitoring of reports from group management and
• the maintenance of a control environment directed towards the 
proper management of risk
the risk register is reviewed quarterly by the board and in addition 
the risk owners present an update of current status and mitigating 
actions by rotation throughout the year 18 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 19
risk potential impact mitigation
defence training review dtr 
package 1 may not reach financial close
in 2007 metrix the group’s joint venture 
with land securities trillium was confirmed 
as the preferred bidder for package 1 of the 
proposed 30year dtr contract to outsource 
training for uk armed forces the group is 
responsible for the design and provision of 
training to metrix in january 2009 sodexo 
replaced land securities trillium as the joint 
venture partner metrix and the partners 
continue to work with the mod to finalise 
the scope of the programme as the next 
stage in moving to a financial close there is 
a risk that the dtr programme may suffer 
material change to the final scope delay 
inability to be financed or even cancellation 
this would have a significant impact on the 
expected future growth of the group in 
addition if financial close were not reached 
the bid costs incurred since preferred 
bidder status was achieved would have to 
be written off and expensed through the 
income statement these costs capitalised to 
date amount to £308m as at 31 march 2010
qinetiq maintains close contact with 
metrix sodexo and the mod in relation 
to the dtr programme including the 
potential timing of reaching a financial 
close in addition the mod has signed some 
precontract award letters pcal which 
effectively underwrite a small portion of 
the external costs incurred by the joint 
venture partners to date a funded early 
training transformation agreement which 
will study the proposed technical design 
and delivery of the training programmes 
has been let
changing in the timing of contracts the amounts payable under some 
government contracts can be significant 
and the timing of receiving orders could 
have a material impact on the group’s 
performance in a given reporting period
the contract and orders pipeline is 
regularly reviewed by senior operational 
management
funding of the defined benefit 
pension scheme
the group operates a defined benefit 
pension scheme in the uk presently 
there is a deficit between the projected 
liability of the scheme and the value of 
the assets held by the scheme the size of 
the deficit may be materially affected by 
a number of factors including inflation 
investment returns changes in interest 
rates and improvements in life expectancy 
an increase in the deficit may require the 
group to increase the cash contributions 
to the scheme which would reduce the 
group’s available cash for other purposes
the performance of the pension scheme is 
reviewed regularly by group management 
in conjunction with the scheme’s 
independent trustees external actuarial 
and investment advice is also taken on a 
regular basis to ensure that the scheme 
is managed in the best interests of both 
the group and the scheme’s members the 
most recent triennial funding valuation of 
the scheme as at 30 june 2008 resulted in a 
deficit of £1113m the group and trustees 
have agreed a tenyear recovery period to 
make up this deficit
policies or attitudes may change 
towards organisational conflicts 
of interest oci
the group provides services to defence 
customers that meet their needs as part 
of the defence supply chain and also as 
technical advisor through its consultancy 
services the future growth of the business 
could be compromised should the current 
attitudes to policies adopted by our key 
customers especially in the uk change
the group takes proactive steps to manage 
any potential oci and to maintain its ability 
to provide independent advice through 
its consulting and systems engineering 
activities in the uk a formal compliance 
regime operates with the mod to monitor 
and assess potential oci as part of the sales 
acceptance process 20 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 21
principal risks and uncertainties continued
directors’ report – business review
risk potential impact mitigation
tax liabilities may change as a 
result of changes in tax legislation
qinetiq is liable to pay tax in the countries 
in which it operates principally in the uk 
and the us changes in the tax legislation 
in these countries could have an adverse 
impact on the level of tax paid on the 
profits generated by the group
external advice and consultation is sought 
on potential changes in tax legislation in 
both the uk and the us this enables us 
to plan for and mitigate potential changes 
in legislation
a material element of the group’s 
revenue and operating profit is 
derived from one contract
the longterm partnering agreement ltpa 
is a 25year contract to provide a variety of 
evaluation and testing services to the mod 
the original contract was signed in 2003 
the ltpa operates under fiveyear periods 
with specific programmes targets and 
performance measures set for each period 
on 3 march 2008 the group signed up to a 
second fiveyear period of the ltpa with the 
mod the first break point is in 2013 in the 
current year the ltpa directly contributed 
11 of the group’s revenue and supported 
a further 8 through tasking services 
using ltpa managed facilities the loss 
cancellation or termination of this contract 
would have a material adverse impact on 
the group’s future reported performance
the group continues to achieve customer 
performance and satisfaction levels 
qinetiq achieved a weighted performance 
rating of 90 against an agreed minimum 
rating of 80
failure to comply with laws and 
regulations particularly trading 
restrictions and export controls
the group operates in a highlyregulated 
environment and the majority of its 
revenues are generated from sales within 
the uk and the us the group is subject 
to numerous domestic and international 
laws including import and export controls 
financial and fiscal laws health and 
safety environmental money laundering 
antibribery etc failure to comply with 
particular regulations could result in a 
combination of fines penalties civil or 
criminal prosecution and suspension or 
debarment from government contracts 
as well as reputational damage to the 
qinetiq brand any one of these could 
have a material impact on the group’s 
financial performance
the group has procedures in place to ensure 
that it meets all current regulations local 
management continuously monitors local 
laws and regulations and policies are in 
place for the appointment of advisors to 
support business development professional 
advice is sought when engaging in new 
territories to ensure that the group complies 
with local and international regulations 
and requirements in the us the group 
undertakes work that is deemed to be of 
importance to us national security and 
arrangements are in place to insulate these 
activities from undue foreign influence as 
a result of foreign ownership the group 
has procedures in place to ensure that 
these arrangements remain effective and 
to respond to any changes that might 
occur in us attitudes to foreign ownership 
of such activities the terms of reference 
of the compliance committee have been 
expanded to review the effectiveness of 
the compliance risk frameworks
exchange rate movement the group is exposed to volatility in exchange 
rates due to the international nature of its 
operations this includes a translational 
impact on the key financial statements as 
a result of the group reporting its financial 
results in sterling the group has limited 
transaction exposure as its revenues and 
related costs are often borne in the same 
currency principally us dollars or sterling 
qinetiq north america represents 49 
of the group’s consolidated revenues 
these operations are funded by us dollar 
denominated debt any significant movement 
in the foreign exchange markets could have 
a material impact on the group’s reported 
financial performance in a given period
the group actively hedges all significant 
transactional foreign exchange exposure 
as described on page 78 of the notes to 
the financial statements and has adopted 
hedge accounting the group’s objective 
is to reduce mediumterm volatility to 
cash flow margins and earnings the group 
protects its balance sheets and reserves 
from adverse foreign exchange movements 
by financing acquisitions in north america 
with us dollar denominated borrowings 
partially mitigating the risk as us dollar 
earnings are used to service and repay 
us dollar denominated debt 20 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 21
risk potential impact mitigation
raising external funding and 
volatility in interest rates
the group relies on the proper functioning 
of the credit markets which could have 
an impact on both the availability and 
associated costs of financing the group is 
exposed to interest rate risk derived mainly 
from longterm indebtedness and related 
to borrowings which have been issued at 
floating interest rates
the group maintains a sufficient level of 
committed funding facilities with a phased 
maturity profile from commercial banks 
and private placement investors the group 
also uses fixedrate debt instruments and 
interest rate swap derivatives to provide 
some certainty in the future cost of 
maintaining these facilities
fixed price contracts some of the group’s revenue is derived from 
contracts which have a fixed price there 
is a risk that the costs required for delivery of 
a contract could be higher than those agreed 
in the contract due to operational overruns 
or external factors such as inflation any 
significant increase in costs which cannot 
be passed on to a customer may reduce the 
profitability of a contract or even result in a 
contract becoming lossmaking
the nature of much of the services provided 
under such fixedprice arrangements 
is often for a defined amount of effort 
or resource rather than firm product 
deliverables and as such the risk of cost 
escalation is substantially mitigated the 
group ensures that its fixedprice bids and 
projects are reviewed for early detection 
and management of issues which may 
result in cost overrun
acquisition of businesses the group has the ability to acquire 
other businesses and companies these 
acquisitions may not perform in line 
with expectations thereby having a 
detrimental impact on the group’s 
financial performance
the risks are mitigated through the due 
diligence and internal approvals processes 
in addition the usual contractual 
protections are included in the purchase 
agreements signed with the vendors
inherent risks from trading 
in a global marketplace
qinetiq operates internationally the risks 
associated with having a large geographic 
footprint may include regulation and 
administration changes changes in 
taxation policy political instability civil 
unrest and cultural and terms of reference 
differences leading to a lack of common 
understanding with customers any such 
events could disrupt some of the group’s 
operations and have a material impact on 
its future financial performance
while the core activities of the group are 
confined to the uk and the us the group 
continues to explore potential client 
relationships internationally
highlycompetitive marketplace the aerospace defence and security 
markets overall are highly competitive 
the group’s financial performance may 
be adversely affected should it not be able 
to compete in the markets in which it aims 
to operate
qinetiq seeks to focus on areas 
within these markets in which its deep 
customer understanding domain 
knowledge technical expertise and 
platform independence provide a strong 
proposition and significant advantage in 
competitive bidding
realisation of value from intellectual 
property may be delayed
the funded research and development work 
that the group undertakes for defence and 
other customers creates intellectual property 
that the group retains and can utilise for 
commercial applications the uncertainty 
that exists over new technologies and 
markets may result in delays failure to 
realise value from intellectual property 
or the need for a higher level of investment 
for the opportunity to be realised the 
additional investment requirements may 
have to be funded from the group’s own 
capital resources which may have an adverse 
impact on the group’s financial performance
the group invests in the development 
of intellectual property only where it 
believes there is a substantial and realistic 
market opportunity for the technology 
and it undertakes a portfolio approach in 
recognition that not all investments will be 
successful the performance of intellectual 
property realisation programmes is 
monitored to increase support for successful 
prospects and reduce expenditure where 
realisation appears less likely the group 
uses external experts and financial backers 
as partners in a variety of structures 
to enhance the performance of certain 
intellectual property realisation projects 22 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 23
corporate responsibility review
directors’ report – business review
this is my first opportunity to report on corporate responsibility 
cr at qinetiq and i am clear that our aim is to be a responsible 
and sustainable company good corporate citizenship is a 
fundamental tenet of qinetiq our approach to the marketplace 
our people the environment and our community drives our aims 
we will continue to ensure this is a key focus as we adapt to our 
changing environment the measure of our success in cr is an 
evolving and key indicator for the business
leo quinn chief executive officer
cr performance overview
what we said what we did where to next
marketplace
achieve level 3 of the government’s 
flexible framework for sustainable 
procurement by 2010
there are five categories in the flexible 
framework level 1 to level 5 we attained 
level 3 for two categories and level 2 for 
three categories
reach level 3 in all categories of the 
flexible framework by november 2010 
and continue to work proactively with 
customers and suppliers on sustainable 
procurement issues
our people
continue to drive performance in health 
and safety hs maintain uk riddor 
rates that are better than the health and 
safety executive hse benchmark rate
investigate learning and development 
effectiveness measures for future years 
reporting of injuries diseases  dangerous 
occurrences regulations
a riddor rate of 369 per 1000 employees 
compared with the hse benchmark of 503
qualitative and quantitative measures 
have been identified we have found that 
learning and development intervention has 
a measurable impact on graduate retention 
and on time taken to achieve chartered 
status
reduce accidents incidents and the number 
of employee days away from work in future 
we will be reporting lost time injury rates
use uk employee survey to understand and 
improve employee engagement
environment
maintain our iso 14001 certification 
in the uk
achieve certification to the carbon trust 
standard
extend uk waste data capture to all minor 
sites and continue to increase recycling 
target is 70 by 2014
contribute to biodiversity through the 
effective maintenance of our conservation 
sites
successfully retained iso 14001 for uk sites
carbon trust standard achieved
data capture extended to almost all 
minor sites in the uk achieved 66 waste 
recycling on major uk sites
management plans and conservation leads 
are in place for designated conservation 
areas in the uk we received a sanctuary 
award for conservation work in the 
hebrides 
continue to maintain iso 14001 for uk sites
2 co
2
 emissions reduction target in the uk
achieve 70 recycling rate across the uk 
by 2012
delivery of uk conservation management 
plans
community
undertake tour of lab in a lorry in 200910
continue to focus and deliver our stem 
science technology engineering and 
maths education outreach programmes 
where we are working to inspire the next 
generation of scientists and engineers
lab in a lorry taken to portsmouth we 
have now interacted with 11000 students
development of extended training for 
stem ambassadors
attained three awards from stemnet
form partnerships with key schools to 
deliver our stem education outreach 
programme effectively 22 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 23
corporate responsibility management
the cr committee met three times during the year to discuss 
strategy and progress this new group which comprises the 
executive team and the group cr manager has enabled greater 
senior management visibility and support for cr programmes 
a report is provided monthly to the executive team and the ceo 
reports to the board on cr issues as required our approach is to 
embed cr into how we do business and the cr manager worked 
with a wide network of domain experts across the uk and the us 
in australia a new cr team has been formed and has developed a 
plan to roll out local initiatives in line with the group cr framework
delivery of the business risk management process is a key 
mechanism to improve awareness understanding and management 
of risk cr and ethical risks have previously been held separately but 
following a programme of work this year with the uk business are 
now integrated to ensure our approach to risk is holistic we have 
been refreshing our strategic objectives around health safety and 
environment hse and business ethics there is now a clearer focus 
on leadership communications competencies and risk management
policy and process
we have a balance between group and regional policies to 
encompass regional differences in best practice and law relevant 
policies include hse sustainable procurement business ethics 
equality and diversity our group business ethics policy which is 
available in the investor relations and cr sections of our website 
wwwqinetiqcom provides a framework of how we operate 
further information on governance can be found on page 28
marketplace 
mission statement to be a responsible and sustainable business
sustainable procurement 
we recognise that how and what we buy needs to be an integral 
part of our ambition to improve sustainability in qinetiq our uk 
sustainable procurement forum has been active in raising employee 
awareness through training employee campaigns and leadership 
team briefings an introduction to sustainable procurement is part 
of the corporate induction for uk employees a key part of the 
process is working with our suppliers and this is an area on which we 
must continue to focus we are a signatory to the mod’s sustainable 
procurement charter and are an active member of the modindustry 
sustainable procurement working group 
business ethics 
we are committed to the highest standards of ethical conduct 
we know this is critical for our success because it builds trust and 
transparency with our people and with our customers maintaining 
these high standards of ethical behaviour can result in difficult 
choices integrity and ethics may require us to forgo business 
opportunities but in the long run we will be better served by 
doing what is right over 95 of uk employees and 100 of qna 
employees have undertaken business ethics training the australian 
business now has its code of conduct in place
policies and procedures are in place to prevent corruption within our 
operations and activities we have been working with organisations 
such as trace transparent agents and contracting entities an 
independent and internationally recognised organisation in two 
areas firstly to conduct a due diligence review on the antibribery 
issue associated with engaging thirdparty representatives overseas 
secondly to provide bespoke training for our sales and commercial 
employees on international law and regulations covering anti
corruption and bribery
we have a whistleblower line available for all employees worldwide 
and we have developed a new gifts and hospitality register in the uk 
there is a need for continual improvement and we are developing our 
strategic objectives in business ethics which will focus on leadership 
communications competencies policy and risk management
environmental solutions
monitoring and collection of environmental data is increasingly 
crucial in addressing the challenges of climate change and 
environmental management the swima project is managed by 
qinetiq working with an international group of companies the uk 
environment agency and universities the team is using field trials 
in the river tamar catchment in south west england to demonstrate 
how the exploitation of open standards in ‘sensor webs’ networks 
of disparate sensors connected via the same web interface can make 
environmental monitoring more efficient and intelligent while also 
reducing associated costs having this type of data available at the 
click of a mouse has considerable impact on the accuracy and timely 
delivery of alerts of pollution and flooding
our people 
mission statement to create an environment which attracts 
great people and enables them to deliver high levels of 
performance
health and safety
employee safety is a key part of our overall business ethic and duty 
of care to fellow employees senior management is responsible 
for delivering and embedding the highest standards and we 
have been refreshing our programme of leadership including 
the introduction of safety leadership charters a comprehensive 
audit of our uk safety management system was completed by the 
explosives inspectorate of the hse whilst it identified a number of 
opportunities for improvement it concluded that we have ‘a clear 
and strong commitment to the safe conduct of the business’ and 
‘a strong culture of safe working’
our businesses in the uk the us and australia collect and report 
accident data differently because of incountry requirements going 
forward we are looking at greater alignment of reporting metrics
health and safety data
2006 2007 2008 2009 2010
uk riddor rate
1
hse benchmark
2
385
590
347
563
228
536
282
519
 369
503
uk
3
na na 761 466 532
qna
3
na 214 157 109
4
212
australia
3
na na na na 388
1
  the uk measures the number of riddor accidents as the number of events
per 1000 people during the year
2
  hse riddor benchmark for all ‘industries’
3
  data are work related lost time accident per 1000 employees
4
  slightly altered from 2009 078 due to legacy entities
uk employees have access to the employee wellbeing programme 
service which provides information and support on financial legal 
and family matters counselling and an online service uk employees 
also have a benefits package through ‘qinetiq currency’ which 
provides discounts on a range of items such as bicycles childcare 
and healthcare qna provides an excellent package of healthcare 
benefits for employees 24 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 25
corporate responsibility review continued
directors’ report – business review
employee engagement
regular dialogue with employees is part of good leadership and 
listening to our people has never been more important whilst 
we have been undergoing significant change a range of tools is 
deployed regularly to keep in touch with our employees including 
ceo notices team briefings and leaders hosting ‘town hall’ sessions 
across all our sites we also make good use of intranet newsletters 
video and print media the newly formed employee forum and 
the communications network create an open dialogue to give 
employees across the uk business the opportunity to have their 
say and to give input into important issues that we face employee 
engagement has been a key part of qna’s programme of bringing 
many separate companies together into one business 
employee surveys are also an opportunity for our people to have 
their say this year we introduced the widely used ‘best companies to 
work for’ questionnaire in the uk which will enable us to benchmark 
ourselves against other companies across a wide range of issues 
we had a high response of 73 and the survey gave us some clear 
feedback on areas on which we need to focus
we have introduced an exciting new programme ‘my contribution’ 
which enables everyone to play a part in improving our business it 
gives employees a way to generate and voice ideas and convert them 
quickly into projects that will benefit the company’s bottom line it is 
a simple common sense concept enabling continuous improvement 
the programme is up and running in the uk and there are plans in 
place to roll it out across qinetiq globally
learning and development
we support the development and employability of our people 
across qinetiq we have in place a range of high quality programmes 
from apprentice training and graduate entry to leadership for 
example the uk graduate development programme provides new 
entrant graduates with business awareness through the henley 
graduate programme and professional development through the 
accredited initial professional development scheme investment in 
graduate development continues to play a major factor in graduate 
retention cr is an integral part of the uk corporate induction and 
is supplemented by a cr elearning module in the uk our flight 
engineering services training centre is currently training just under 
100 engineering apprentices from across our managed services 
group and dstl the training pathways cover aircraft mechanical 
and avionics workshop machining and ground instrumentation
electrical the aircraft training pathways conform to the mod 
maintenance approved organisation scheme training requirements 
for mechanical b1 and avionics b2 trades
in australia a people development programme is establishing career 
development for our most talented employees and is supporting 
succession planning qna was formed over a short period from 
a number of companies with different cultures and practices 
the focus has been on efficiently implementing consistency in 
job roles and performance management qna has been driving 
robust succession planning and working with the darden business 
school at the university of virginia to develop future leaders for 
qna technical employees the focus is on a rapid and competitive 
knowledge update 
we are one of only 5 of the 28000 investors in people organisations 
that have chosen to stretch above the standard since a key area 
identified in recent feedback was performance management in the 
uk we have carried out a full review and update of our performance 
management processes and introduced the personal success plan
community 
mission statement to make a positive contribution 
to the community
science for society 
following a request from the combined services disabled ski team 
our experts designed and manufactured a more competitive ski 
racing seat for sergeant mick brennan a double amputee who has 
discovered a real talent for downhill skiing as part of the battle back 
initiative to rehabilitate injured servicemen and women mick’s 
performance improved considerably with the seat and he achieved 
a bronze medal in the giant slalom at the canadian nationals in 
vancouver
in 2009 two uk employees visited saravan province in southern laos 
and worked with norwegian people’s aid as part of our unexploded 
ordnance uxo science for society programme which has been 
running for five years the uxo is a legacy of the vietnam war the 
team provided training in uxo pinpointing cad surveying and 
mapping as well as simple practical solutions for water purification 
bomb disposal and simple protection schemes
education outreach
qinetiq collected three prestigious stem education outreach 
awards from stemnet including support  development most 
dedicated ambassador and most dedicated organisation in 2009 
we launched a strategic partnership with shoeburyness high 
school to provide some business focus to complement the stem 
curriculum we are working closely with the school on the delivery 
of the new twoyear stem leadership qualification and supporting 
16yearold fast track students on the applied science course going 
forward we aim to focus on our education outreach programmes 
by developing partnerships with other key schools near our sites 
qna also recognises the importance of encouraging young people 
towards maths and science careers and sponsors science and 
technology education in schools
in the uk we supported many students at various stages in their 
university careers 16 preuniversity students were hosted on 
the year in industry scheme while other students worked in the 
company for up to a year during their undergraduate course at any 
time over 50 doctoral level students are sponsored in conjunction 
with the engineering and physical sciences research council on 
projects that are relevant to our business with placements 
on various sites 
charity and community programmes
employees across the group undertook a range of volunteering 
activities in the community qna supported a number of employee
driven initiatives and contributed time resources and funding to 
numerous community grassroots efforts such as habit for humanity 
and the special olympics in addition qna encouraged active 
participation and support for militaryaligned programmes such 
as the wounded warrior project for injured servicemen and women 
in the uk employees have been involved in a range of community 
activities from conservation projects to beach safety talks for 
children total charitable giving from the business across the 
group was £114100 see page 42 in addition our uk employees 
raised £26112 for our priority charities through a range of events 
attracting corporate matched funding for priority charities and 
made contributions through our payroll giving scheme 24 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 25
environment 
mission statement to be an excellent environmental steward
carbon management
a highlight this year was meeting our target of attaining the carbon 
trust standard which demonstrates that we have measured 
managed and reduced our carbon emissions for the third year we 
provided information to the carbon disclosure project and we also 
took part in the business in the community may day network we 
recognise the importance of being prepared for the uk government’s 
carbon reduction commitment energy efficiency scheme and are 
well positioned having put in place the carbon management group 
cmg which brings together expertise from estates environmental 
management cr procurement and the 
business the cmg oversees our fiveyear 
carbon management plan promotes energy 
efficiency and awareness and sets and 
monitors targets following our carbon foot
printing programme this is the first year we 
are reporting co
2
 emissions from transport
as well as from energy used 
uk carbon management data
2006 2007 2008 2009 2010
uk gas use gwh 846 696 686 668 647
uk oil use gwh 259 225 214 217 206
uk electricity 
use gwh
1369 1369 1136 1027 993
uk total energy 
use gwh
2473 2291 2036 1912 1847
uk ktonnes co
2
 from 
energy use
 1
967 931 800 738 713
uk ktonnes co
2
 from 
transport
 2
na na na 238 179
1
  in the table co
2
 emissions are calculated using the defra october 2009 
greenhouse gas conversion factors gas 018358 oil 027927 electricity 
054055 these factors change regularly so in order to show actual 
reductions we have used the same conversion factor for all years this will 
result in slightly different numbers from those reported last year which 
were based on a previous conversion factor 2009 718 2008 778
2
  the data includes emissions from our own vehicles aircraft helicopters
and cars and from employee business mileage road and air 2009 data 
now included
0
20000
40000
60000
80000
100000
2010 2009 2008 2007 2006
uk co
2
 emissions data
tonnes
energy emissions travel emissions 2009 and 2010 only
environmental management and conservation 
we continue to maintain iso 140012004 certification in the uk 
this is evidence of effective controls as part of our environmental 
management systems which cover a broad range of activities from 
knowledge and technologybased research and services to weapons 
and systems testing our australian business has also established a 
small group responsible for developing environmental initiatives 
we take a responsible and proactive approach to the stewardship of 
the many sites of special scientific interest sssi that we manage in 
the uk with appropriate conservation management plans in place 
for all of them we won a prestigious sanctuary award for our work 
on a sssi on the mod hebrides range
waste
as part of our waste management programmes we have extended 
data collection to the majority of sites we own or manage for 
the mod and incorporated additional waste streams the largest 
of which are construction and grounds waste in qna recycling 
programmes operate across much of the business
uk waste management data
1
2006 2007 2008 2009 2010
general waste to 
landfill tonnes 
3131 2330 1551 1140 830
recycled waste 
tonnes 
680 761 932 1094 1623
2
percentage waste 
recycled
18 25 38 49 66
1
  major sites only for comparative purposes
2
  waste data collection now extended to include construction and 
composting waste
uk waste data
1
tonnes
0
500
1000
1500
2000
2500
3000
3500
4000
2010
2
2009 2008 2007 2006
general waste to landfill recycled waste
1
 major sites only for comparative purposes
2
 waste data collection now extended to include construction 
and composting waste 26 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 27
board of directors
directors’ report – governance
1
5
9
2
6
10
3
7
4
8
1 mark elliott
nonexecutive chairman – 61
appointed nonexecutive chairman in march 2010 nonexecutive 
director between june 2009 and february 2010
member of the remuneration committee compliance committee 
and nominations committee
mark was previously general manager of ibm europe middle east 
and africa and sat on ibm’s worldwide management council mark 
currently serves as a nonexecutive director on the boards of reed 
elsevier group plc in respect of which he is also chairman of the 
remuneration committee reed elsevier nv and g4s plc the board 
considers that mark’s extensive experience in the technology services 
sector both in the us and europe coupled with his exposure to a 
variety of industry sectors on the boards of ftse listed companies 
is a valuable asset to the group in terms of leadership and addressing 
the strategic issues affecting the group
2 leo quinn
chief executive officer – 53
appointed chief executive officer in november 2009
member of the compliance committee nominations committee 
and security committee
leo was chief executive officer of de la rue plc between 2005 and 
2009 before that he was chief operating officer of invensys plc’s 
production management division prior to that time he spent 16 
years with honeywell inc in a variety of senior management roles 
in the usa europe the middle east and africa leo was formerly 
a nonexecutive director of tomkins plc
3 david mellors
chief financial officer – 41
appointed chief financial officer in august 2008
member of the security committee
david was previously deputy chief financial officer of logica plc 
david has also held the position of chief financial officer of logica’s 
international division covering operations in north america 
australia the middle east and asia and prior to that he was the 
group financial controller earlier experience included various roles 
with cmg plc rio tinto plc and price waterhouse david is a member 
of the institute of chartered accountants in england and wales
4 sir david lees 
deputy chairman and senior independent 
nonexecutive director – 73
appointed deputy chairman and sid in august 2005
chairman of the compliance committee and nominations committee 
member of the audit committee and security committee
sir david is currently chairman of the court of the bank of england 
he has also been a member of the uk panel on takeovers and mergers 
since june 2001 sir david joined gkn plc in 1970 and had held the 
position of group finance director chief executive and executive 
chairman before becoming nonexecutive chairman in 1997 until 
his retirement in may 2004 other notable roles include being a 
member of the national defence industries council between 1995 
and 2004 chairman of courtaulds plc from 1996 to 1998 a non
executive director of the bank of england between 1991 and 1999 
and chairman of tate  lyle plc until 2009 from 2001 to 2006 he was 
nonexecutive joint deputy chairman of brambles industries plc and 
brambles industries limited sir david is a fellow of the institute of 
chartered accountants in england and wales the board considers that 
sir david’s detailed understanding of the defence sector coupled with 
his extensive experience of corporate governance and the city and 
its institutions significantly enhances the operation of the board 26 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 27
5 colin balmer
nonexecutive director – 63
appointed nonexecutive director in february 2003
chairman of the security committee member of the compliance 
committee nominations committee and remuneration committee
colin served as managing director of the cabinet office from 2003 
until his retirement in 2006 previously he was finance director 
of the mod with responsibility for qinetiq’s privatisation and the 
subsequent investment by carlyle as part of the ppp transaction 
colin has extensive experience across the mod and is currently 
a member of the foreign and commonwealth office’s audit and 
risk committee and is on the board of the royal mint chairing 
its audit committee the board considers that colin’s extensive 
knowledge of the development of qinetiq throughout its public
private partnership and his indepth understanding of the working 
of government particularly the uk mod provides the board with 
a unique insight into the issues facing government in delivering its 
procurement objectives and partnering with industry suppliers
6 noreen doyle
nonexecutive director – 61
appointed nonexecutive director in october 2005
chairman of the remuneration committee member of the 
audit committee
noreen sits on the board of credit suisse group zurich and is a 
nonexecutive director of newmont mining corporation denver 
and rexam plc prior to her appointment in 2001 as first vice president 
of the european bank for reconstruction and development ebrd 
noreen was head of risk management previously noreen had a 
distinguished career at bankers trust company now deutsche bank 
in corporate finance and leveraged financing with a concentration 
in oil gas and mining the board considers that noreen’s extensive 
international business experience particularly in the areas of 
corporate finance risk management and banking is of significant 
benefit to the board
7 david langstaff
nonexecutive director – 55
appointed nonexecutive director in august 2009
member of the audit committee nominations committee and 
remuneration committee
david was formerly president and chief executive officer of 
veridian corporation prior to that david held positions with first 
boston international blyth eastman dillon international and the 
inverness group focused on corporate finance venture capital and 
mergers and acquisitions david currently serves on the boards of 
tasc inc the us defense business board sra international inc 
and the aspen institute business and society program the board 
considers that david’s professional services experience and indepth 
understanding of the security market is highly beneficial to the 
future development of qinetiq’s business
8 admiral edmund p giambastiani jr us navy retired
nonexecutive director – 62
appointed nonexecutive director in february 2008
member of the compliance committee
between 2005 and 2007 ed was the secondhighest ranking military 
officer in the united states having served as the seventh vice chairman 
of the joint chiefs of staff a career nucleartrained submarine 
officer ed’s distinguished service has also included assignments 
as special assistant to the cia’s deputy director for intelligence 
senior military assistant to the us defense secretary and 
commander us joint forces command he also served as nato’s 
first supreme allied commander transformation after retirement 
and until october 2009 he served as the nonexecutive chairman 
of the board of directors for alenia north america inc he currently is 
a nonexecutive director of the boeing company sra international 
inc and monster worldwide inc and serves in a probono capacity 
on a number of us government advisory boards and panels the 
board considers that ed’s extensive knowledge of the us defence and 
security domain significantly enhances the operation of the board 
as qinetiq continues to pursue its strategy of developing its us 
platform in the defence and security technology sector
9 nick luff
nonexecutive director – 43
appointed nonexecutive director in june 2004
chairman of the audit committee member of the compliance 
committee and security committee
nick was appointed finance director of centrica plc in march 2007 
having previously served as cfo of the po group he trained as a 
chartered accountant with kpmg and is a member of the institute 
of chartered accountants in england and wales nick joined the 
po board as finance director in 1999 in october 2000 he became 
chief financial officer of po princess cruises plc on its demerger 
from the po group and returned as chief financial officer of po 
in may 2003 nick has also served as a nonexecutive director on 
the board of royal po nedlloyd nv the dutchlisted international 
container shipping company the board considers that nick’s experience 
of operating as chief financial officerfinance director with po 
and centrica coupled with his extensive exposure to a variety of 
industrial sectors provides the rigorous financial and commercial 
scrutiny required of a ftselisted company at board level particularly 
in the context of his role as chairman of the audit committee
10 admiral sir james burnellnugent
nonexecutive director – 60
appointed nonexecutive director in april 2010
member of the compliance committee remuneration committee 
and security committee
sir james commanded the aircraft carrier hms invincible and three 
other ships and submarines during a 37year career in the royal navy 
which culminated in his appointment as commanderinchief fleet 
inbetween operational duties he served in several appointments in 
the ministry of defence and gained crosswhitehall experience while 
on secondment to hm treasury the board considers that sir james’ 
expertise in the government contracting domain particularly with 
the uk mod and hm treasury is highly beneficial in the context of 
qinetiq’s government sourced operations 28 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 29
corporate governance report
directors’ report – governance
the board is committed to promoting the highest standards of 
corporate governance and believes that strong governance is 
key to delivering value to all stakeholders maintaining investor 
confidence and managing change
this section of the annual report together with the report of the 
remuneration committee on pages 36 to 41 describes how qinetiq 
has promoted strong governance throughout the group by applying 
the principles of the uk financial reporting council’s combined code 
on corporate governance the combined code the board considers 
that qinetiq has complied with the provisions of the combined code 
throughout the last financial year except that the combined code 
recommends that a company’s chairman should be independent 
on appointment and that its chief executive officer ceo should 
not become chairman of the same company sir john chisholm the 
chairman of the group until february 2010 was not regarded as 
independent under the combined code as he was formerly qinetiq’s 
ceo the board gave the reasons for this noncompliance both in the 
prospectus published as part of the company’s initial public offering 
ipo in 2006 and in subsequent annual reports
the board – governance processes and systems
highlights
• conducted a global search culminating in the appointment 
of a new chairman
• managed the process of appointing a new chief executive officer
• created a new security committee and conducted a review of the 
composition of the board committees
• appointed sir robert nelson to conduct an independent 
investigation into the conclusions and recommendations made 
in the haddoncave report
• created a revised risk register and introduced clear processes 
in relation to oversight and management of risk
board objectives
• provide support to the new chief executive officer to ensure 
the group’s success
• assist in the development of a new strategic direction for the 
group’s business
• remain focused on succession planning for the board
• deliver the highest standards of health and safety 
management across the group
• support the chief executive officer in ensuring that the 
key recommendations of sir robert nelson’s review of the 
haddoncave report published in november 2009 are 
implemented across the group
• continue to promote the highest standards of corporate 
governance and rigorous oversight of group performance 
and risk management
composition of the board
the board currently has ten members the nonexecutive chairman 
seven other nonexecutive directors and two executive directors 
namely the ceo and the chief financial officer cfo with the 
objective of achieving a balance of executive and nonexecutive 
directors
executive and nonexecutive board composition
nonexecutive directors
executive directors
20
10 board
directors
80
mark elliott has been the nonexecutive chairman of qinetiq since 
1 march 2010 following sir john chisholm stepping down from this 
role mr elliott joined the board as a nonexecutive director on 
1 june 2009 during the year the board also welcomed david langstaff 
who joined as a nonexecutive director on 5 august 2009 leo quinn 
who joined as qinetiq’s chief executive officer on 16 november 
2009 and admiral sir james burnellnugent who joined the board 
as a nonexecutive director on 10 april 2010 mr quinn replaced 
graham love who ceased to be ceo on 31 october 2009 the board 
would like to express its thanks to sir john chisholm graham love 
and dr peter fellner all of whom stepped down during the year 
for their dedication and valuable contributions during their years 
of service
the board considers its overall size and composition to be 
appropriate having regard in particular to the independence of 
character and integrity of all the directors and the experience and 
skills which they bring to their duties which prevents any individual 
or small group from dominating the board’s decisionmaking
the board considers that the skills and experience of its individual 
members particularly in the areas of ukus defence and security 
the commercialisation of innovative technologies corporate 
finance mergers and acquisitions and risk management have 
been fundamental in the pursuit of qinetiq’s strategic initiatives 
as described in the chief executive officer’s review section of 
this annual report in the past year in addition the quoted 
company experience available to members of the board in a 
variety of industry sectors and international markets has also 
been invaluable to the group as it seeks to penetrate new 
markets and geographic territories 28 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 29
roles and responsibilities
the board is responsible for managing the group’s operations and 
in this capacity determines the group’s strategic and investment 
policies the board also monitors the performance of the group’s 
senior management team and organises its business to have regular 
interaction with key members of the group including those based in 
north america the directors are responsible for the management of 
the business of the group and their powers are subject to the articles 
of association and any applicable legislation and regulation
chairman and chief executive officer
the roles of chairman and ceo are separate with their responsibilities 
having been clearly articulated by the board in writing the chairman 
mark elliott is responsible for the effective operation of the board 
and ensures that all directors are enabled and encouraged to play 
their full part in board activities the ceo leo quinn is responsible 
to the board for directing and promoting the profitable operation 
and development of the group consistent with enhancing longterm 
stakeholder value which includes the daytoday management of the 
group formulating communicating and executing group strategy 
and the implementation of board policies
senior independent director
the senior independent nonexecutive director is sir david lees 
sir david is also deputy chairman of the board and serves as an 
additional point of contact for shareholders should they feel that 
their concerns are not being addressed through the normal channels 
sir david is furthermore available to fellow nonexecutive directors 
either individually or collectively should they wish to discuss matters 
of concern in a forum that does not include the chairman the 
executive directors or the senior management of qinetiq
independence of nonexecutive directors
of the current directors of the company the board considers 
admiral sir james burnellnugent noreen doyle mark elliott 
admiral edmund p giambastiani david langstaff sir david lees 
and nick luff to be independent of qinetiq’s executive management 
and free from any business or other relationships that could materially 
interfere with the exercise of their independent judgement of the 
remaining nonexecutive directors the board considers that colin 
balmer is not independent for combined code purposes on the basis 
that he was until mod sold its entire ordinary shareholding in the 
company on 9 september 2008 the mod’s nominated director
based on the above the board considers that over half of its members 
were independent nonexecutive directors throughout the last 
financial year
performance of the board
during the financial year ended 31 march 2010 qinetiq conducted 
its fourth evaluation of the performance of the board and its 
committees since ipo given that the group had undertaken 
an externally facilitated evaluation in the previous financial year 
and the number of board changes occurring in year the 200910 
evaluation exercise was an internal exercise led by sir john chisholm 
the chairman used the core conclusions arising out of the prior year’s 
exercise as a reference point for a series of questions focused on best 
practice areas of corporate governance which was supplemented by 
a number of meetings held individually with each of the directors at 
which the performance of the board its committees and individual 
board members was discussed sir david lees in his capacity as the 
senior independent nonexecutive director also met with individual 
members of the board to evaluate the performance of the chairman 
the evaluation process revealed that the operation of the board 
was conducted in an open and transparent manner with the board 
possessing an appropriate range of skills which were well matched 
to qinetiq’s business and having devoted increased attention to 
strategic planning succession and risk management in the year 
as a result of the evaluation exercise the board agreed to maintain 
its focus on these key issues in the coming year 
as a separate exercise the chairman held various meetings with 
the nonexecutive directors in the last financial year without the 
executive directors present in order to review both the operation 
of the board and the performance of the executive directors 
in addition the executive directors were appraised as part of 
the annual salary review process which was overseen by the 
remuneration committee 
directors’ induction ongoing training and information
all newlyappointed directors participate in an induction 
programme which is tailored to meet their specific needs in relation 
to information on the group this induction programme includes 
an induction pack which is refreshed to ensure it contains the most 
uptodate information available on the group
all directors are encouraged to visit qinetiq’s principal sites and 
to meet a wide crosssection of the employee base during the 
last financial year the board held one of its meetings at qinetiq’s 
facility in mclean virginia and one at qinetiq’s facilities in waltham 
massachusetts which allowed members of the board to better 
appreciate the operational dynamics and technical offerings of the 
qna business the board also held one of its meetings at qinetiq’s 
farnborough site
as part of the corporate planning process the board has the 
opportunity to question the sector heads and the executive directors 
in relation to the formulation of the corporate plan at sector level 
and the impact of these plans on the group strategy as a whole 
the nonexecutive directors also have an opportunity to meet 
with other employees within the group including but not limited 
to other members of the senior management team at lunchtime
evening events which are scheduled to coincide with board meetings 
training is also available to the board on key business issues or 
developments in policy regulation or legislation on an ‘as needed’ 
basis 
each of the directors has access to the services of the company 
secretary and there is also an agreed procedure for the directors 
to seek independent advice at the company’s expense
reelection of directors
rules concerning the appointment and replacement of directors 
of the company are contained in the articles of association and 
changes to these articles must be submitted to shareholders for 
approval according to the articles of association all directors 
are subject to election by shareholders at the first agm following 
their appointment and to reelection thereafter at intervals of no 
more than three years it is the company’s practice for each serving 
member of the board to be put forward for election or reelection 
at each annual general meeting 30 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 31
corporate governance report continued
directors’ report – governance
board meetings and attendance
the board has regular scheduled meetings nine scheduled board 
meetings were held in the last financial year members of the 
board were also invited to attend a dinner on the occasion of each 
scheduled board meeting to assist in the process of relationship 
building and to ensure that key strategic initiatives were thoroughly 
discussed the board held two of its scheduled meetings in the us in 
the last financial year to give members of the board an opportunity 
to meet with senior management in qna one board meeting was 
held at qinetiq’s farnborough site to provide members of the board 
with greater opportunity to understand the operational dynamics of 
the uk business at first hand 
the following table shows the number of board meetings held 
during the year and the attendance by individual directors
attendance at board meetings april 2009 to march 2010
members
board meetings held in 20092010 
colin balmer 99
admiral sir james burnellnugent
1
00
sir john chisholm
2
88
noreen doyle 89
mark elliott
3
77
dr peter fellner
4
23
admiral edmund p giambastiani 99
david langstaff
5
77
sir david lees 99
graham love
6
55
nick luff 99
david mellors 99
leo quinn
7
44
1
  admiral sir james burnellnugent was appointed to the board
on 10 april 2010
2
 sir john chisholm resigned from the board on 28 february 2010
3
 mark elliott was appointed to the board on 1 june 2009
4
 dr peter fellner resigned from the board on 4 august 2009
5
 david langstaff was appointed to the board on 5 august 2009
6
 graham love ceased to be a director on 31 october 2009
7
 leo quinn was appointed to the board on 16 november 2009
matters reserved to the board
the board operates through a comprehensive set of processes 
which define the schedule of matters to be considered by the board 
and its committees during the annual business cycle the level of 
delegated authorities both financial and nonfinancial available to 
both executive directors and other layers of management within the 
business and qinetiq’s business ethics risk management and health 
safety and environmental processes the board devotes one entire 
meeting each year to consider strategy and planning issues which 
have an impact on the group from which the fiveyear corporate plan 
is generated the board also has a clearly articulated set of matters 
which are specifically reserved to it for consideration which include 
reviewing the annual budgets raising indebtedness granting security 
over group assets approving group strategy and the corporate 
plan approval of the annual and interim report and accounts 
approval of significant investment bid acquisition and divestment 
transactions approval of human resources policies including pension 
arrangements reviewing material litigation and monitoring the 
overall system of internal controls including risk management
operation of the board
the board receives written reports from the ceo and cfo each 
month together with a separate report on investor relations which 
is prepared in consultation with qinetiq’s brokers and a report 
produced by the company secretary on key legal and regulatory 
issues affecting the group the board also considers reports from the 
chairs of the committees of the board at the next scheduled board 
meeting following the date on which each committee meeting 
was held 
the ceo’s monthly report addresses the key strategic initiatives 
which have had an impact on the group since the previous meeting 
of the board and focuses in particular on the progress of each 
of the sectors other key areas of focus include health safety 
and environmental matters employee and organisational issues 
corporate responsibility the status of key account management
customer relationship initiatives the pipeline of potential bids 
acquisitions disposals and investments and the postacquisition 
performance of recently acquired businesses the board also receives 
updates from the ceo’s key functional reports on an ‘as needed’ 
basis on issues such as human resources treasury corporate 
responsibility real estate and pensions throughout the financial 
year key issues considered by the board in the past year included 
succession planning which culminated in the appointment of a 
new chairman and ceo in year strategy in particular the strategic 
response to the operational challenges faced by the qna and emea 
businesses as described in the business review and the company’s 
response to the key findings of the haddoncave report into the 
nimrod aircraft which crashed in afghanistan in 2006
the cfo’s monthly report addresses the financial performance and 
outlook of the group and each of the sectors both on a monthly and 
yeartodate basis with the key performance indicators analysed by 
the board being those identified on pages 16 and 17 the group risk 
register also forms part of the cfo’s report on a quarterly basis and 
tracks the ‘principal risks and uncertainties’ identified on pages 18 to 
21 of the business review the cfo also reports on a monthly basis 
as part of his investor relations report on the key issues raised by 
shareholders potential investors and other important stakeholders 
on qinetiq’s performance and key strategic initiatives
conflicts of interest
the company has established a process requiring directors to 
disclose proposed outside business interests before they are entered 
into this enables prior assessment of any conflict or potential 
conflict of interest and any impact on time commitment an annual 
review of all external interests is carried out by the board
directors’ responsibilities
statements explaining the directors’ responsibilities for preparing 
the group’s financial statements and the auditor’s responsibilities for 
reporting on those statements are set out on pages 44 and 45
other directors’ information
details of executive directors’ service contracts and the non
executive directors’ letters of appointment are set out in the report 
of the remuneration committee copies of directors’ service contracts 
and letters of appointment will be available for inspection at the 
company’s agm  30 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 31
other management committees
responsibility for the daytoday management of the group’s 
activities with the exception of qinetiq’s north american 
operations which are managed through the proxy board as 
described in the section below headed ‘management and control of 
us subsidiaries’ is conducted through the qinetiq executive team 
qet the qet comprises the group ceo group cfo functional 
directors and the managing directors of each of the sectors the 
qet meets on a monthly basis and receives weekly updates on key 
operational issues by way of prescheduled conference calls the 
activities of the qet are supplemented by the proxy board and the 
executive management team in qna separate committees have 
also been established to review group strategy in the areas 
of technology communications and corporate responsibility 
each of which meets on a periodic basis
board committees 
the board has established five principal committees the audit 
committee the remuneration committee the nominations 
committee the compliance committee and the security committee 
each operates within written terms of reference approved by the 
board details of which are set out in the investor relations section 
of qinetiq’s website wwwqinetiqcom each chairman of a board 
committee reports on the key issues discussed and decisions taken 
at the next meeting of the board following the committee meeting 
in question details of each of these committees are summarised 
below along with details of committee members’ attendance at 
committee meetings
audit committee
members
committee meetings held in 20092010
nick luff chairman 55
noreen doyle 55
mark elliott
1
12
dr peter fellner
2
22
david langstaff
3
33
sir david lees
4
00
1
 appointed on 5 august 2009 and ceased to be a member on 1 march 2010
2
 resigned on 4 august 2009
3
 appointed on 5 august 2009
4
 appointed on 28 april 2010
highlights
• introduction of an updatedmore comprehensive 
selfcertification tool
• increased focus on qna internal control activity
audit committee – role and focus
each member of the audit committee is an independent non
executive director the committee is chaired by nick luff who has 
been a member of the institute of chartered accountants in england 
and wales since 1991 the board considers him to have recent and 
relevant financial experience given his former roles as cfo of po 
and po princess cruises and his current position as finance director 
of centrica the audit committee meets as necessary and at least 
four times a year during the financial year ended 31 march 2010 
the committee met on five occasions the external auditor has the 
right to request that a meeting of the audit committee be convened 
during the past financial year the committee met with qinetiq’s 
external auditor on two separate occasions without executive 
directors present to discuss the audit process the committee 
chairman also met with the group head of internal audit on the 
same basis 
the ceo cfo group financial controller group head of internal 
audit the internal audit manager and a representative of the 
external auditor normally attend audit committee meetings 
except where not permitted
during the last financial year consideration of the audit process 
for the fullyear and interim results represented the principal areas 
of focus for the audit committee these included detailed reviews 
of asset valuation and impairment testing the committee also 
assessed the effectiveness of the internal audit function through 
a balanced scorecard review process designed to measure the 
achievement of internal audit objectives which resulted in the 
approval of a detailed 12month work programme for the function
in the context of the group’s north american business the 
committee undertook two indepth reviews of the internal 
controls environment across qna which included an assessment 
of the effectiveness of the financial controls in place across the us 
business contract management activity and the resourcing of the 
qna internal audit team as part of its review of internal controls 
the committee focused in particular on those matters which had 
failed to achieve at least a ‘satisfactory’ audit rating in the year and 
the management plans to address the issues raised by the internal 
audit function which benefited from the introduction of a more 
comprehensive ‘self certification’ process across the emea and qna 
businesses in year the committee also reviewed the activities of the 
pensions tax insurance and treasury functions in detail as well as 
overseeing the level of kpmg’s audit fees the committee confirms 
its view that it has received sufficient reliable and timely information 
from management in the last financial year to enable it to fulfil 
its responsibilities
audit 
committee
chairman 
nick luff
monitors the group’s 
integrity in financial 
reporting and reviews 
the effectiveness of 
the risk management 
framework
remuneration 
committee
chairman 
noreen doyle
sets remuneration 
and incentives for 
executive directors 
approves and monitors 
remuneration and 
incentives for the 
group
nominations  
committee
chairman 
sir david lees
ensures that the 
composition of 
the board and 
committees has 
the optimum balance 
of skills knowledge 
and experience
compliance 
committee
chairman 
sir david lees
monitors the group’s 
adherence to the mod 
compliance regime 
and those areas of risk 
where the principal 
impact on the group 
is not financial
security 
committee
chairman 
colin balmer
considers matters 
of a uk national 
security dimension 
which have an impact 
on the business 
it has not met since 
its inception in 
june 2009 32 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 33
corporate governance report continued
directors’ report – governance
in order to safeguard auditor independence and objectivity the 
committee ensures that any other advisoryconsulting services 
provided by the auditor does not conflict with their statutory 
audit responsibilities and are conducted through entirely separate 
working teams such advisory andor consulting services generally 
only cover regulatory reporting tax and mergers and acquisitions 
work any nonaudit services conducted by the auditor require 
the consent of the cfo or the chairman of the audit committee 
before being initiated with any such services exceeding £50000 
in value requiring the consent of the audit committee as a 
whole in the last financial year the only nonaudit activity 
conducted by kpmg on behalf of qinetiq which exceeded this 
£50000 threshold related to the provision of services to support 
detailed strategic planning work being conducted across the 
emea business as well as taxation advisory services to the group 
neither of which the committee concluded created any conflict 
of interest issues which might compromise the independence of 
kpmg audit work
it is also qinetiq’s policy that no kpmg employee may be 
appointed into a senior position within the qinetiq group 
without the prior approval of the cfo the cost of nonaudit 
work undertaken by the auditor was reviewed by the committee 
on several occasions during the last financial year this process 
enables the committee to take corrective action if it believes that 
there is a risk of the auditor’s independence being undermined 
through the award of such work
kpmg has been the company’s auditor since 2003 the members 
of the audit committee have declared themselves satisfied with the 
performance of kpmg as the company’s auditor in the last financial 
year a rotation of kpmg’s lead audit partner was undertaken during 
2008 it is anticipated that he will continue in this role for a maximum 
term of five years
remuneration committee
members
committee meetings held in 20092010
noreen doyle chairman
1
66
colin balmer
2
33
admiral sir james burnellnugent
3
00
mark elliott
2
33
dr peter fellner
4
33
david langstaff
2
33
sir david lees
5
66
1
  appointed as chair of the remuneration committee on 5 august 2009 upon 
dr peter fellner’s resignation
2
 appointed on 5 august 2009
3
 appointed on 28 april 2010
4
 resigned on 4 august 2009
5
 ceased to be a member on 28 april 2010
remuneration committee – role and focus
the committee meets as necessary although normally not less than 
three times a year during the financial year ended 31 march 2010 
the remuneration committee met on six occasions although not 
members of the committee the former group chairman the group 
ceo the group hr director and the group head of reward normally 
attended committee meetings together with representatives of 
the committee’s external consultants deloitte  touche llp as 
necessary executive directors are not present when their own 
remuneration is being discussed further information on the 
activities of the remuneration committee during the last financial 
year are set out in the report of the remuneration committee on 
pages 36 to 41 
nominations committee
members
committee meetings held in 20092010
sir david lees chairman 33
colin balmer 33
sir john chisholm
1
23
noreen doyle
2
23
mark elliott
3
11
dr peter fellner
4
22
admiral edmund p giambastiani
2
23
david langstaff
3
11
nick luff
2
33
leo quinn
5
00
1
  resigned on 28 february 2010
2
 ceased to be a member on 28 april 2010
3
 appointed on 5 august 2009
4
 resigned on 4 august 2009
5
 appointed on 28 april 2010
highlights
• appointment of mark elliott as a nonexecutive director and 
chairman elect
• appointment of david langstaff and admiral sir james burnell
nugent as a nonexecutive directors
• appointment of leo quinn as the group ceo and executive director
nominations committee – role and focus
the committee meets as necessary and when called by its chair 
during the financial year ended 31 march 2010 the committee met 
formally on three occasions and consulted informally on several 
other occasions
the principal focus of the committee’s activities during the financial 
year ended 31 march 2010 was to review qinetiq’s succession 
planning processes at both the executive and nonexecutive 
director levels as part of the process the committee oversaw 
the recruitment of a new chairman elect which culminated in the 
appointment of mark elliott as nonexecutive director in june 2009 
mark took over the role of chairman in march 2010 the committee 
also oversaw the appointment of two additional nonexecutive 
directors which culminated in the appointment of david langstaff 
in august 2009 and admiral sir james burnellnugent in april 2010 
together with a new ceo which culminated in the appointment of 
leo quinn in november 2009 32 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 33
compliance committee
members
committee meetings held in 20092010
sir david lees chairman 44
colin balmer 44
admiral sir james burnellnugent
1
00
sir john chisholm
2
44
mark elliott
3
22
admiral edmund p giambastiani
3
12
graham love
4
22
nick luff
1
00
leo quinn
5
22
1
 appointed on 28 april 2010
2
 resigned on 28 february 2010
3
 appointed on 5 august 2009
4
 ceased to be a member on 31 october 2009
5
 appointed on 16 november 2009
highlights
• transition of the committee’s focus to include wider compliance 
issues such as ethics and the qna proxy regime
• further widening of the committee’s remit to include matters such 
as trade controls and health safety and environment
compliance committee – role and focus 
during the last financial year the remit of the committee was 
widened to provide oversight of other significant compliance issues 
beyond the operation of the compliance regime particularly the 
activities that fall within the scope of the helsinki protocol covering 
trials involving human volunteers the group’s business ethics policy 
and the proxy regime
the committee continues to monitor the compliance regime which 
is designed to give mod customers confidence that qinetiq is able 
to provide impartial advice during any competitive evaluation of a 
procurement where qinetiq wishes to operate on both the ‘buy’ and 
the ‘supply’ sides qinetiq is required by its articles of association to 
implement a compliance regime which was established on its creation 
out of dera central to this regime is the requirement for qinetiq to 
seek permission from the mod prior to providing commercial defence 
services to others where there is potential for a conflict of interest with 
the services that qinetiq provides to the mod
in designing the compliance regime the mod and qinetiq sought 
to achieve a balance between meeting the needs of the procurement 
customers within the mod principally defence equipment and 
support and the need to allow qinetiq flexibility to exploit research 
into the supply chain and pursue its planned commercial activities 
without compromising the defence or security interests of the uk 
the compliance regime is largely selfpolicing in that it is applied 
by qinetiq in respect of its activities without extensive intervention 
or oversight by the mod since the inception of the compliance 
regime over 97 of the requests to the mod to allow qinetiq to 
operate on the supply side of the commercial defence market have 
been approved oversight of the operation of the regime is provided 
by the compliance committee the board nominates two senior 
executives to act as compliance implementation director and 
compliance audit director
qinetiq’s compliance committee meets on four occasions each 
year it receives a quarterly report on the compliance areas that it 
monitors from the head of business assurance in respect of the 
compliance regime the committee receives a report from the 
company’s compliance implementation director which describes 
the permissions which have been sought and granted since the last 
meeting of the committee and the status of projects where the 
potential conflicts of interest are being managed the committee 
also receives from the compliance audit director a report on the 
effectiveness of the controls that are in place to ensure that the 
regime is operated correctly the committee is the forum that would 
address any issues arising out of qinetiq’s failure to comply with the 
requirements of the regime the committee reviews the systems 
that support the compliance regime and those that may have an 
impact on it directing changes if appropriate a computerbased 
training package continues to be used to ensure that all relevant 
employees have a satisfactory knowledge of the operation of the 
regime for key roles competence is demonstrated by passing an 
annual mandatory test
the mod reviews the operation and effectiveness of the compliance 
regime through its right to have an observer at the compliance 
committee meetings
during the year a total of six new permissions were sought from 
the mod under the compliance regime where potential conflicts 
of interest were identified by qinetiq with one permission request 
being outstanding from the previous year of these seven requests 
five were approved one was rejected and one remained outstanding 
at the end of march 2010 at the end of the year 16 firewalls were 
in place with two being established and ten being closed down 
during the year since vesting in 2001 a total of 119 firewalls have 
operated with 103 now closed no breaches of the mod compliance 
regime were noted during the year a firewall is a series of rules and 
procedures governing written and oral communication between 
employees contributing to products in an mod competition with 
industry outside the wall and employees assessing those products 
for mod inside the wall
following the end of the last financial year the remit of the 
committee was further widened to include oversight of health 
safety and environment trade controls ethics and security
security committee
members
colin balmer chairman
1
admiral sir james burnellnugent
2
sir john chisholm
3
sir david lees
1
nick luff
1
graham love
4
david mellors
1
leo quinn
5
1
 appointed on 5 august 2009
2
 appointed on 28 april 2010
3
 appointed on 5 august 2009 and resigned on 28 february 2010
4
  appointed on 5 august 2009 and ceased to be a member
on 31 october 2009
5
 appointed on 16 november 2009 34 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 35
corporate governance report continued
directors’ report – governance
security committee – role and focus 
the security committee was established in june 2009 to allow uk 
nationals on the board to consider matters of a uk national security 
dimension which have an impact on qinetiq’s uk business the 
committee has not met since its inception as no business has 
arisen which would require it to do so the committee is chaired 
by colin balmer
going concern
the group’s activities combined with the factors that are likely to 
affect its future development and performance are set out in the 
ceo’s review on pages 6 to 11 the cfo’s report on pages 12 to 15 
sets out details on the financial position of the group the cash flows 
committed borrowing facilities liquidity and the group’s policies and 
processes for managing both its capital and financial risks note 27 to 
the financial statements also provides details of the group’s hedging 
activities financial instruments and its exposure to liquidity and 
credit risk
the market conditions in which the group operates have been 
and are expected to continue to be challenging as spending from 
the group’s key customers in its primary markets in the uk and us 
remain under pressure in light of this during the year the group 
announced revised results expectations which highlighted the 
challenges experienced from our key markets and customers 
despite these challenges the directors believe that the group is 
well positioned to manage its overall business risks successfully 
after making the appropriate enquiries including a review of the 
latest fiveyear forecast for cash flow and results the directors have 
a reasonable expectation that the group has adequate resources 
to continue in operational existence for the foreseeable future 
consequently the annual report and accounts have been prepared 
on a going concern basis
communication with shareholders
the company attaches significant importance to the effectiveness of 
its communications with shareholders during the last financial year 
the company has maintained regular dialogue with institutional 
shareholders and the financial community which has included 
presentations of the fullyear and interim results including investor 
‘road shows’ held in the uk europe and us regular meetings 
with major shareholders and industry analysts participation in 
stockbrokers’ seminars and investor site visits in addition each 
member of the board attended the company’s annual general 
meeting in august 2009 and a number of nonexecutive directors 
attended key shareholder events in the last financial year including 
the fullyear and interim results presentations at which they were 
available to take questions from shareholders all shareholders 
and potential shareholders can gain access to the annual report 
presentations to investors and other significant information about 
qinetiq on the company’s website wwwqinetiqcom
holders of ordinary shares may attend the company’s agm at 
which the company highlights key business developments during 
the year and at which shareholders have an opportunity to ask 
questions the chairs of the audit remuneration nominations 
compliance and security committees will be available to answer any 
questions on the work of the committees the company confirms 
that it will send the agm notice and relevant documentation to all 
shareholders at least 20 working days before the date of the agm 
for those shareholders who have elected to receive communications 
electronically notice is given of the availability of documents on the 
investor relations section of the group’s website
all shareholders will be entitled to vote on the resolutions put to the 
agm and to ensure that all votes are counted a poll will be taken on 
all the resolutions in the notice of meeting the results of the votes 
on the resolutions will be published on the company’s website
qinetiq group board and
committee structure
qinetiq group plc
board of directors
nominations 
committee
compliance 
committee
security 
committee
remuneration 
committee
audit 
committee 34 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 35
responsibility for maintaining regular communications with 
shareholders rests with the executive team led by the ceo assisted 
by an investor relations function which reports to the cfo the board 
is informed on a regular basis of key shareholder issues including 
share price performance the composition of the shareholder register 
and city expectations the chairman the senior independent 
director and nonexecutive directors make themselves available 
to meet with shareholders as required
management and control of us subsidiaries
qinetiq’s principal us subsidiaries are currently required by the us 
national industrial security program to maintain facility security 
clearances and to be insulated from foreign ownership control 
or influence to comply with these requirements qinetiq north 
america inc formerly known as qinetiq north america operations 
llc a whollyowned subsidiary of qinetiq in the us and the holding 
company for the substantive part of qinetiq’s north american 
operations and the us dod have entered into a proxy agreement 
that regulates the ownership management and operation of 
these companies pursuant to this proxy arrangement qinetiq has 
appointed four us citizens peter marino riley mixson john currier 
and vince vitto holding requisite us security clearances as proxy 
holders to exercise the voting rights of qinetiq north america inc’s 
shares in the us subsidiaries the proxy holders are also appointed 
as directors of the relevant us subsidiaries and in addition to their 
powers as directors have power under the proxy arrangements 
to exercise all prerogatives of share ownership of qinetiq north 
america inc the proxy holders have a fiduciary duty to and agree 
to perform their role in the best interests of qinetiq north america 
inc and consistent with the national security concerns of the us 
qinetiq does not have any representation on the boards of the 
subsidiaries covered by the proxy agreement and does not have the 
right to attend board meetings qinetiq may not remove the proxy 
holders except for acts of gross negligence or wilful misconduct 
or for breach of the proxy agreements with the consent of the 
us defense security service
internal controls
the board is ultimately responsible for the group’s system of 
internal control and for reviewing its effectiveness in safeguarding 
shareholders’ interests and the company’s assets however such a 
system is designed to manage rather than eliminate the risk of failure 
to achieve business objectives and can provide only reasonable 
and not absolute assurance against material misstatement or 
loss qinetiq managers are responsible for the identification and 
evaluation of significant risks applicable to their areas of business 
together with the design and operation of suitable internal controls 
to ensure effective mitigation these risks which are related to the 
achievement of business objectives are assessed on a continual basis 
and may be associated with a variety of internal and external events 
including control breakdowns competition disruption regulatory 
requirements and natural and other catastrophes
an annual process of hierarchical selfcertification has been 
established within the organisation which provides a documented 
and auditable trail of accountability for the operation of the system 
of internal control 
this process is informed by a rigorous and structured selfassessment 
that addresses all the guidance cited in the combined code and 
compliance with company policy the process provides for successive 
assurances to be given at increasingly higher levels of management 
and finally to the board the process is informed by the internal 
audit function which also provides a degree of assurance as to the 
operation and validity of the system of internal control in the last 
financial year the assessment was redesigned to provide greater 
objectivity and incorporate a wider scope planned corrective actions 
are independently monitored for their timely completion 
the centrally provided internal audit programme is prioritised 
according to risks identified by the company and is integrated across 
all business and functional dimensions thereby reducing issues of 
overlap or gaps in coverage these risks are identified dynamically 
and the board is involved in this process as well as the qinetiq 
executive team and the qna executive team
the audit committee reviews on behalf of the board the risk 
management process and the system of internal control necessary 
to manage risks and presents its findings to the board internal audit 
independently reviews the risk identification and control processes 
implemented by management and reports to the audit committee 
where areas for improvement in the system of internal control 
are identified the board considers the recommendations made by 
the qinetiq executive team the qna executive team the audit 
committee and the compliance committee 
the audit committee also reviews the assurance process ensuring 
that an appropriate mix of techniques is used to obtain the level 
of assurance required by the board it presents its findings to the 
board on a regular basis the board reviewed the effectiveness of the 
system of internal control that was in operation during the financial 
year ended 31 march 2010 the board also routinely challenges the 
management to ensure that the systems of internal control are 
constantly improving to maintain their continuing effectiveness
qinetiq has in place internal procedures which are designed not only 
to comply with but to exceed international best practice in relation to 
the prevention of corruption this is facilitated by the engagement of 
independent internationally recognised organisations such as trace 
transparent agents and contracting entities which conduct anti
bribery due diligence reviews and compliance training on behalf of 
the group particularly in circumstances in which qinetiq is planning 
to engage thirdparty agents overseas qinetiq has since 2006 been 
a member of the uk defence industry anticorruption forum 36 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 37
remuneration report
directors’ report – governance
introduction
i am pleased to present the remuneration committee’s report 
on directors’ remuneration for the year to 31 march 2010
the primary objectives of our remuneration policy remain unchanged
• incentivising key executives and managers
• driving superior performance in both the short and long term
• alignment with the interests of shareholders
during the year the committee approved the remuneration 
arrangements for the new chief executive officer ceo which are 
laid out in this report exit payments to the former ceo graham 
love were agreed by the committee in the light of existing 
contractual arrangements and the performance of the business 
at the time of exit and these arrangements are also detailed in 
this report
given the current challenging environment and our commitment 
to pay for performance we are reviewing all existing incentive 
arrangements to consider whether they remain appropriate to the 
company’s strategy
noreen doyle chair remuneration committee
2 june 2010
report of the remuneration committee
the following report of the remuneration committee has been 
approved by the board for submission to shareholders
the report covers the remuneration of directors and includes 
specific disclosures relating to their compensation shares and other 
interests the report also describes the sharebased incentive plans 
available to executive directors and to other employees this report 
has been prepared and where appropriate audited in accordance 
with the requirements of the large and mediumsized companies 
and groups accounts and reports regulations 2008 and the fsa 
listing rules
membership
the committee is composed of the following nonexecutive 
directors
• noreen doyle • mark elliott
• colin balmer • david langstaff
• admiral sir james burnellnugent
dr peter fellner served on the committee until his resignation 
from the board on 4 august 2009 sir david lees was a member 
of the committee until 28 april 2010 when he was replaced by 
admiral sir james burnellnugent
the full terms of reference of the committee can be found on 
the qinetiq website wwwqinetiqcom copies are also available 
on request
governance
the committee is chaired by noreen doyle and all its members 
are nonexecutive directors in the financial year 200910 the 
committee met six times
during the year the committee received advice from its appointed 
independent advisors deloitte llp ‘deloitte’ deloitte provided other 
consulting services during the year to qinetiq but did not provide advice 
on executive remuneration matters other than to the committee
following a review and a formal tender process the committee has 
appointed new independent advisers to support the review of the 
existing incentive arrangements
market data was provided by deloitte and by hewitt new bridge street 
who also advised on whether performance targets had been met
the former group chairman group chief executive group hr director 
and group head of reward also provided advice to the committee 
no employee of qinetiq is permitted to participate in discussions 
about their own remuneration
activities
during 200910 the committee meetings covered a number 
of topics including
april • executive directors’ fy09 bonuses
• fy10 performance targets
may • executive directors’ salary reviews
• directors’ remuneration report
•  executive team salary reviews and fy09 bonuses
july •  performance share plan restricted stock unit and 
share option awards
october • offer to leo quinn
• exit terms for graham love
november • review of executive team total compensation
• update on pay trends
• review of executive team shareholdings
january • review of remuneration committee remit
• review of comparator group
the key purpose of the committee is to ensure that the 
remuneration structure supports the company’s strategy 
and that we are able to attract retain and motivate the 
highest calibre executives while aligning their interests 
with those of shareholders
noreen doyle chair remuneration committee 36 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 37
directors’ remuneration policy
the committee aims to maintain a remuneration policy consistent 
with the company’s business objectives which
• attracts retains and motivates individuals of high calibre
• is responsive to both company and personal performance and
• competitive within industry
the remuneration policy is built on the following philosophy
• remuneration packages are structured to support business strategy 
and conform to current best practice
• appropriate rewards are given for meeting specific target objectives 
set at the beginning of each year
• incremental compensation is achieved for attaining stretch 
performance targets and
• objectives are measured on metrics designed to be consistent with 
the interests of all shareholders
the total remuneration levels of the executive directors are reviewed 
annually by the committee taking into account
• performance of the executive against specific targets
• competitive market practice and remuneration levels and
• the general economic environment
base salary
executive directors’ base salaries are reviewed annually as are all 
other employees there were no changes in salary for the executive 
directors in 200910 in line with the treatment of the majority of 
employees within qinetiq and reflecting market conditions
external remuneration consultants provide data about market salary 
levels for market comparison purposes account is taken of company 
type sector and company size in terms of both market capitalisation 
and turnover
no salary increase has been recommended for executive directors 
in respect of 201011
annual salary 200910 200809
executive directors
leo quinn
 
£580000
 
–
david mellors £300000 £300000
former director 
graham love
 
£400000
 
£400000
benefits 
benefits may include a pension or contribution in lieu car allowance 
health insurance life insurance and membership of the group’s 
employee share incentive plan which is open to all uk employees
annual cash bonus
executive directors participate in an annual cash bonus plan which 
is nonpensionable bonuses are linked to group performance targets 
and are modified for performance against personal objectives the 
200910 bonus potential and awards are laid out in the following 
table expressed as a percentage of salary
200910
 of salary
ontarget
payment
maximum 
payment
actual 
payment
executive directors
leo quinn
david mellors
 
50
50
 
100
100
 
0
0
former director 
graham love
 
50
 
100
 
0
the cash bonus was determined on a constant exchange rate basis 
against four elements in 200910 operating profit underlying eps 
operating cash flow and turnover
during 200910 target operating profit was not achieved and 
therefore annual bonuses have not been awarded 
leo quinn joined the company on 16 november 2009 and was thus 
eligible for a cash bonus based on his performance during his 4½ 
months as ceo the board agreed that leo quinn had achieved his 
partial year objectives and was eligible for a prorated annual cash 
bonus however in reflecting on the current results of the group 
leo quinn waived his right to a bonus for the financial year ended 
31 march 2010
in line with the corporate plan for 201011 target payment has been 
reduced as in the table below and the new bonus plan will focus on
• operating profit
• operating cash flow and
• underlying eps
201011
 of salary
ontarget
payment
maximum 
payment
executive directors
leo quinn
david mellors
 
40
40
 
100
100
deferred annual bonus dab plan 
the deferred annual bonus plan aligns the interests of executives 
with shareholders and aids retention of key individuals by ensuring 
that executives are incentivised to take part of their annual bonus 
awards in shares rather than cash
executive directors have a mandatory deferral of 30 of any bonus 
payable and may voluntarily defer up to 50 of their bonus into 
qinetiq shares any deferred bonus will be matched based on eps 
performance up to a maximum match of 100 of the deferred 
element
the eps element is earned only if eps growth measured over three 
years exceeds defined targets eps must grow by at least 225 
to trigger any vesting at which point 25 of the award will vest 
vesting increases pro rata to eps growth up to a maximum of 100 
of the award vesting at 52 eps growth as illustrated below
awards are in the form of matching shares delivered after three years 
subject to the achievement of the epsbased performance conditions
where an individual participates in the dab and also receives an award 
under the performance share plan psp they will not receive share 
awards which in aggregate exceed 150 of base salary in any one year 38 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 39
remuneration report continued
directors’ report – governance
3 year eps absolute growth
award vesting
100
25
255 52
eps performance
longterm incentives for executive directors
the objective is to align the rewards of executives with returns 
to shareholders by a focus on increasing the share price over the 
medium to long term executive directors are eligible to participate 
in both the psp and the dab plan
these arrangements are the principal means for longterm 
incentivisation of the executive directors and the direct reports of 
the ceo the committee considered various performance conditions 
and determined that the criteria set out below were appropriate to 
incentivise the longterm creation of shareholder value
performance share plan psp
awards of performance shares under the psp were made to 
executive directors and a limited number of other senior 
executives in july 2009 and to certain individuals on joining share 
awards are contingent on meeting predetermined performance 
criteria individual participants’ award levels are determined by 
the committee annually based on these criteria and with due 
consideration of business and personal performance
executive directors are eligible to receive awards with a value of up 
to 100 of base salary and other executives up to 75 of base salary
awards are earned based on an equal weighting of relative total 
shareholder return tsr performance and absolute underlying 
earnings per share eps growth
the eps performance criteria for the psp is the same as that applied 
to the dab outlined above
the tsr part of the award is measured against the constituents 
of the following comparator group of companies
babcock international plc invensys plc
bae systems plc logica plc
bba aviation plc meggitt plc
bodycote international plc the morgan crucible company plc
capita group plc rollsroyce plc 
chemring group plc serco plc
cobham plc senior plc
cookson group plc tomkins plc
gkn plc ultra electronics plc
halma plc vt group plc
hampson industries plc victrex group plc
imi plc ws atkins plc
the tsr element is earned only if relative performance is at least at 
median against this comparator group over a threeyear performance 
period calculated by an independent third party
performance vs comparators
award vesting
tsr performance
100
30
median upper quartile
incentive arrangements for new ceo
the board appointed leo quinn on 16 november 2009 to attract 
the services of leo quinn the committee recommended and the 
board approved a share scheme based on the existing longterm 
incentive plan and using the same tsr and eps metrics as the psp 
the board granted a matching share award under which leo quinn 
invested £1m in qinetiq shares the company agreed to match that 
investment based on tsr and eps criteria as in the psp
in addition leo quinn was granted a psp mirror award with the 
terms of the plan mirroring the normal psp plan as described 
opposite
external appointments
qinetiq allows its executive directors to broaden their knowledge and 
experience by becoming nonexecutive directors of other companies 
appointments are approved by the board or the committee on 
the basis that there is no conflict of interest or deterioration in the 
executive director’s performance fees are normally retained by 
the individual during the year ended 31 march 2010 none of the 
executive directors held such an appointment at a public company
performance graph
the graph below shows the company’s tsr over the period from 
flotation to 31 march 2010 compared to the ftse 250 and ftse 350 
aerospace  defence indices over the same period these were 
chosen for comparison as qinetiq is a constituent of both indices
relative total shareholder return
qinetiq ftse 250 ftse 350 aerospace  defence
60
75
90
105
120
135
150
31 mar
2010
31 mar
2009
31 mar
2008
31 mar
2007
31 mar
2006
9 feb
2006 38 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 39
directors’ terms and conditions
service agreements for the executive and the nonexecutive directors are reviewed annually and amended as appropriate 
notice to be given 
by the company
date of most recent
service agreement date of appointment
executives
leo quinn
a
12 months 28 october 2009 november 2009
david mellors 12 months 20 may 2008 august 2008
 
nonexecutives
mark elliott
b
– 10 february 2010 june 2009
sir david lees – 16 february 2006 august 2005
colin balmer – 16 february 2006 february 2003
noreen doyle – 16 february 2006 october 2005
admiral edmund p giambastiani – 1 february 2008 february 2008
nick luff – 16 february 2006 june 2004
david langstaff
c
– 4 august 2009 august 2009
admiral sir james burnellnugent
d
– 10 april 2010 april 2010
former directors
sir john chisholm
e
– 1 october 2006 february 2003
graham love
f
12 months 1 december 2005 february 2003
peter fellner
g
– 16 february 2006 september 2004
a
 leo quinn was appointed as a director on 16 november 2009
b
 mark elliott was appointed as a director on 1 june 2009 and as chairman 1 march 2010
c
 david langstaff was appointed as a director on 5 august 2009
d
 admiral james burnellnugent was appointed as a director on 10 april 2010
e
 sir john chisholm resigned as a director on 28 february 2010
f
 graham love resigned as a director on 31 october 2009
g
 peter fellner resigned as a director on 4 august 2009
qinetiq’s policy is that executive directors should have contracts with a rolling term providing for a maximum of one year’s notice consequently 
no executive director has a contractual notice period in excess of 12 months in the event of early termination this ensures that compensation is 
restricted to a maximum of 12 months’ basic salary and benefits the committee will generally require mitigation to reduce the compensation 
payable to a departing executive director
nonexecutive directors’ terms conditions and fees
the group chairman reviews the fees of the nonexecutive directors 
and makes recommendations to the board nonexecutive directors 
receive additional fees as agreed by the board for the chairing of 
board committees to take account of the additional responsibilities of 
the role the chairman’s fees are reviewed by the senior independent 
nonexecutive director who makes recommendations to the board
the level of fees paid in uk organisations of a similar size and 
complexity to qinetiq is considered in setting the remuneration 
policy for nonexecutive directors the fees are neither performance 
related nor pensionable nonexecutive directors are not eligible 
to participate in bonus profit sharing or employee share schemes 
current fee structures for nonexecutive directors are shown below
200910 fees
nonexecutive chairman £225000
basic fee for ukresident nonexecutive director £40000
basic fee for usresident nonexecutive director 100000
or £50000
additional fee for chairing a committee £7000
additional fee to deputy chairmansenior 
independent nonexecutive director
£10000
as the group chairman is a us resident the board have agreed 
an accommodation allowance of £75000 per annum
excluding the group chairman an additional fee of 4000 is payable 
to usresident nonexecutive directors when they attend board 
meetings in the uk
the review of fees scheduled for october 2009 was deferred until 
summer 2010
nonexecutive directors’ contracts are renewed on a rolling twelve
month basis subject to reappointment at the annual general 
meeting there are no provisions in their contracts for compensation 
on early termination
management of share based rewards
the committee also oversees arrangements for sharebased reward 
in respect of managers and the wider workforce in addition to psp 
the company also operates the following executive share plans
executive plans
• qinetiq share option scheme qsos
• restricted stock units rsu
executive directors do not participate in either plan 40 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 41
remuneration report continued
directors’ report – governance
no awards were made during the year under qsos provision exists 
for annual awards up to a face value of 300 of salary to be granted
allemployee plans
• share incentive plan uk and australia
the share incentive plan was operated in the uk and australia 
in the form of a share purchase award with matching company 
contribution to encourage employee ownership and engagement 
in the business
restricted stock units
rsu awards are used in qinetiq north america to retain and 
motivate senior managers the rsu awards vest evenly over a four
year period the vesting of half of the award is subject to a condition 
that organic profit grows by a minimum of 5 per annum maximum 
vesting of 125 of the award occurs at 15 per annum organic profit 
growth the other half of the award is subject to timebased vesting 
criteria
awards are granted based on business performance balanced with 
the need to attract retain and motivate highcalibre employees
dilution limits 
in accordance with abi guidelines the committee has determined 
that no more than 10 of the company’s issued share capital will 
be used under all of the company’s share schemes the dilution as 
at 31 march 2010 was significantly below this 10 level and below 
5 in respect of executive schemes in addition the board intends 
to continue to satisfy a proportion of awards with purchased shares 
held in the employee benefit trust
personal shareholding policy
the committee believes that a powerful way to align executives’ 
interests with those of shareholders is for the executives to build up 
and retain a personal holding in qinetiq shares 
the ceo and cfo are required to hold the equivalent of one times 
their base salary in qinetiq shares
david mellors having joined on 20 august 2008 has been given 
four years to build up such a shareholding the chief executive has 
already met the committee’s guideline on minimum shareholding 
requirement
direct reports of the ceo are required to hold the equivalent of 50 
of their base salary in shares these can be accumulated over a four
year period following appointment
interests of directors in office as at 31 march 2010 
including shares held under sip and dab
number 1p 
ordinary 
shares held at
1 april 2009
number 1p
ordinary
shares held at
31 march 2010
number 1p
ordinary
shares held at
27 may 2010
executives
leo quinn – 602757 602757
david mellors 249 24284 24538
nonexecutives
mark elliott – 100000 100000
sir david lees 73000 83000 83000
colin balmer – – –
noreen doyle 17000 17000 17000
admiral edmund p  giambastiani – – –
nick luff 50000 70000 70000
david langstaff – 12000 12000
audited information
directors’ remuneration 
the information about directors’ remuneration and directors’ 
interests on pages 40 to 41 has been audited
the table below shows the aggregate remuneration of the directors for the year ended 31 march 2010
salary
fees
a
other
compensation
b
other
benefits
c
payment for
loss of office total 2010 total 2009
executives
leo quinn £217872 £600000 £68692 – £886564 –
david mellors £300000 – £18085 – £318085 £215997
nonexecutives
mark elliott £72271 – – – £72271 –
sir david lees £64000 – – – £64000 £64000
colin balmer £40000 – – – £40000 £40000
noreen doyle £44667 – – – £44667 £40000
admiral edmund p giambastiani £62880 – – – £62880 £61700
nick luff £47000 – – – £47000 £47000
david langstaff £42643 – – – £42643 –
admiral sir james burnellnugent – – – – – –
former directors
sir john chisholm £197083 – £12633 – £209716 £230100
graham love £366667
d
– £64438 £517700
e
£948805 £488009
peter fellner £16028 – – – £16028 £47000
doug webb – – – – – £61767
total £1471111 £600000 £163848 £517700 £2752659 £1295573
a
 before adjustments to basic pay for smart pensions
b
 leo quinn was awarded a payment of £600000 in lieu of compensation earned but not yet payable from a contractual arrangement with a third party
c
 includes car allowance health insurance benefits and payments in lieu of pension
d
 graham love has agreed to provide services to the company during a sixmonth period on a consultancy basis to ensure a smooth transition on the dtr project 
for which he has received £100000 in february 2010 he received an additional payment of £100000 in may 2010
e
  in connection with his departure the following severance payments were made to graham love i payment of a cash sum equivalent to 9½ months’ basic pay 
ii payment in lieu of 12 months’ pension and for untaken annual leave iii compensation for loss of office and iv reimbursement of fees for legal advice in 
connection with his severance terms 40 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 41
interests of directors under longterm incentives
grant 
date
number 
at 1 april 
2009
granted 
in year
exercised
vested 
in year
lapsed 
in year
number at 
31 march 
2010
market price
on date of 
grant
earliest
vest date
latest 
vest date
leo quinn
matching award tsr 161209 – 362844 – – 362844 165p
a
281012
a
 281012
a
matching award eps 161209 – 362845 – – 362845 165p
a
281012
a
281012
a
psp mirror tsr 161209 – 210450 – – 210450 165p
a
281012
a
281012
a
psp mirror eps 161209 – 210450 – – 210450 165p
a
281012
a
281012
a
david mellors
psp tsr 210808 75567 – – – 75567 2178p
b
210811 210811
psp eps 210808 75567 – – – 75567 2178p
b
210811 210811
dab match 010709 – 6859 – – 6859 1447p 010712 010712
psp tsr 040809 – 100000 – – 100000 1350p 040812 040812
psp eps 040809 – 100000 – – 100000 1350p 040812 040812
former executive directors
graham love
psp tsr 260707 50288 – 50288
c
– – 174p 260710 260710
psp eps 260707 50287 – 50287
c
– – 174p 260710 260710
dab match 010708 53756 – 25155
c
28601 – 1958p 010711 010711
psp tsr 070808 100756 – 43919
c
56837 – 1985p 070811 070811
psp eps 070808 100755 – 43919
c
56836 – 1985p 070811 070811
psp tsr 040809 – 133333 13675
c
119658 – 135p 040812 040812
psp eps 040809 – 133333 13675
c
119658 – 135p 040812 040812
506976 1620114 240918 381590 1504582
a
 awards to leo quinn in 2009 were based on an average market price of 138p representing the average price over the ten days before joining
b
 awards to david mellors in 2008 were based on a market price of 1985p as at 7 august 2008
c
  these shares were subject to eps and tsr conditions as outlined earlier in this report at the time of departure the committee considered the time elapsed and 
the anticipated performance and resolved that the share awards would vestlapse as disclosed these shares vested on 1 december 2009 at which time the 
market price was 165p
the interests in the table above are subject to the performance conditions described in note 33 the price of a qinetiq share at 31 march 2010 
was 134p the highest and lowest prices of a qinetiq share during the year ended 31 march 2010 were 1785p and 1220p respectively
directors’ interest in the allemployee share incentive plan
interest as 
at 1 april 2009
partnership 
shares acquired
during year
matching shares 
appropriated
during year
dividend 
shares allocated
during year
interest as at 
31 march 2010
david mellors – 1425 – – 1425
former directors
sir john chisholm 266 – – – –
graham love 3562 – – – –
acquired as an executive director
pensions
the group’s policy is to offer all uk employees membership in the 
qinetiq pension scheme as described in note 38 to the financial 
statements executives whose benefits are likely to exceed the 
lifetime allowance may opt out of the qinetiq pension plan 
in such cases the individual will be paid a supplement in lieu 
of pension contributions 
contributions to the defined contribution section of the qinetiq 
pension scheme were as follows
200910 200809
executive directors
david mellors £60000 £36846
leo quinn and graham love received contributions in lieu of a pension 42 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 43
directors’ report – governance 
other statutory information
principal activity
qinetiq group plc is a public limited company listed on the london 
stock exchange and incorporated in england and wales with 
registered number 4586941
qinetiq group plc is the parent company of a group whose principal 
activities during the year were the supply of technical advice to 
customers in the global aerospace defence and security markets 
customers include government organisations such as the uk mod 
and the us dod and commercial customers around the world
research and development
one of the group’s principal business streams is the provision of 
funded research and development rd for customers the group 
also invests in the commercialisation of promising technologies 
across all areas of business 
the majority of rdrelated expenditure is incurred on behalf of 
customers as part of specific funded research contracts rd costs 
are included in the income statement and rd income is reflected 
within revenue in the financial year the group recorded £4256m 
2009 £4685m of total rdrelated expenditure of which £4183m 
was customerfunded work 2009 £4570m 
in the year to 31 march 2010 £73m 2009 £115m of internally 
funded rd was charged to the income statement £706m 2009 
£02m of latestage development costs were capitalised and £30m 
2009 £24m of capitalised development costs were amortised in 
the year
policy and practice on payment of suppliers
the policy of the group is to agree terms of payment prior to 
commencing trade with a supplier and to abide by those terms 
based on the timely submission of satisfactory invoices at 31 march 
2010 the trade creditors of the group represented 28 days of annual 
purchases 2009 42 days
political and charitable contributions
qinetiq does not make political donations to parties as that term 
would be commonly recognised the legal definition of that term 
is however quite broad and may have the effect of covering a 
number of normal business activities that would not commonly be 
perceived to be political donations such as sponsorship of events 
these may include legitimate interactions in making mps and others 
in the political world aware of key industry issues and matters 
affecting qinetiq which make an important contribution to their 
understanding of qinetiq the markets in which it operates and their 
constituents work during the last financial year this expenditure 
amounted to no more than £15000
charitable donations during the year across the group amounted 
to £114100 2009 £133500
share capital
as at 31 march 2010 the company had allotted and fully paid share 
capital of 660476373 ordinary shares of 1p each with an aggregate 
nominal value of £66 million including shares held by employee 
share trusts and one special share with an aggregate nominal 
value of £1
details of the shares issued during the financial year are shown 
in note 32 on page 84 
the rights of ordinary shareholders are set out in the articles of 
association the holders of ordinary shares are entitled to receive 
the company’s reports and accounts to attend and speak at general 
meetings of the company to exercise voting rights in person or by 
appointing a proxy and to receive a dividend where declared or paid 
out of profits available for such a purpose
the special share is held by hm government through the secretary 
of state for defence and it confers certain rights under the articles of 
association which are detailed in note 32 on page 84 these include 
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 the special share may only be 
held by and transferred to hm government 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 
capital before other shareholders any variation of the rights attaching 
to the special share requires the written approval of the mod
change of control – significant agreements
the following significant agreements contain provisions entitling 
the counter parties 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 no longer remains a uk company
• the combined aerial target service contract is a 20year contract 
awarded to qinetiq by mod on 14 december 2006 the terms of 
this contract require qinetiq limited 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 qinetiq limited’s share capital unless the change 
relates to shares listed on a regulated market with material defined 
as being 10 or more of the share capital additionally there 
are restrictions on transfers of shares to persons from countries 
appearing on the restricted list as issued by hm government and
• the longterm partnering agreement is a 25year contract which 
qinetiq limited signed on 28 february 2003 to provide test 
evaluation and training services to the mod this contract contains 
conditions where 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 permitted 
under the shareholders agreement to which mod is a party
the company is party to a £500m revolving credit facility with 
lloyds tsb bank plc as agent expiring 19 august 2012 under the 
terms of the facility if either 1 the mod ceases to retain in its 
capacity as special shareholder its special shareholders rights 
or 2 there is a change of control of the company any lender may 
request by not less than 90 days’ notice to the company that its 
commitment be cancelled and all outstanding amounts be repaid 
to that lender at the expiry of such notice period
on 6 december 2006 qinetiq us holdings inc formerly known 
as qinetiq north america inc as borrower and the company as 
guarantor entered into a note purchase agreement to issue 135m 
544 senior notes due 6 december 2013 and 125m 550 senior 
notes due 6 december 2016 under the terms of the agreement 
if either 1 the mod ceases to retain in its capacity as special 
shareholder its special shareholders rights or 2 there is a change 
of control of the company and 3 in either case where there has 
been a rating downgrade or where there are no rated securities 
unless a rating of at least investment grade is not obtained within 
90 days of the change of control the notes must be offered for 
prepayment by the company within 21 days of the change of control 
the prepayment date would be no later than 45 days after the offer 
of prepayment by the company 42 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 43
on 5 february 2009 qinetiq us holdings inc formerly known 
as qinetiq north america inc as borrower and the company as 
guarantor entered into a note purchase agreement to issue 62m 
713 senior notes due 5 february 2016 and 238m 762 senior notes 
due 5 february 2019 under the terms of the agreement if either 1 the 
mod ceases to retain in its capacity as special shareholder its special 
shareholders rights or 2 there is a change of control of the company 
the notes must be offered for prepayment within 21 days of the 
change of control the prepayment date would be no later than 
45 days after the offer of prepayment by the company
major shareholders
at 24 may 2010 being the latest practicable date prior to the 
issuance of this report the group had been notified of the following 
shareholdings of at least 3 in the ordinary share capital of the group
ruane cunniff  goldfarb inc 1126
lansdowne partners ltd uk 905
blackrock investment management ltd uk 893
artisan 504
fidelity international ltd uk 497
standard life investments ltd 479
legal  general 398
axa investment managers uk ltd 356
allotmentpurchase of own shares
at the company’s agm held in august 2009 the shareholders passed 
resolutions which authorised the directors to allot relevant securities 
up to an aggregate nominal value of £4403174 £2201587 pursuant 
only to a rights issue to disapply preemption rights up to 5 of 
the issued ordinary share capital and for the company to purchase 
ordinary shares up to 10 of its ordinary share capital equivalent 
resolutions will be laid before the 2010 agm
during the year the company provided funding to the trustees 
of its employee share schemes to make market purchases of the 
company’s ordinary shares to cover future obligations under 
outstanding shareoption and other sharebased awards further 
details are disclosed in note 32 on page 84
restrictions on transfer of shares
as outlined in note 32 on page 84 the special share confers certain 
rights under the company’s articles of association to require certain 
persons with an interest in qinetiq’s shares which exceed certain 
prescribed thresholds to dispose of some or all of their ordinary 
shares on grounds of national security or conflict of interest
articles of association
save in the respect of any variation to the rights attaching to the 
special share the company has not adopted any special rules 
relating to the amendment of the company’s articles of association 
other than as provided under uk corporate law
employees
the group is an equal opportunities employer upholds the principles 
of the uk employment service’s ‘two ticks’ symbol and is accredited 
by investors in people every possible consideration is given to 
applications for employment regardless of gender religion disability 
or ethnic origin having regard only to skills and competencies this 
policy is extended to existing employees and any change which may 
affect their personal circumstances the policy is supported by 
strategies for professional and career development
qinetiq seeks to utilise a range of communication channels 
to employees in order to involve them in the running of the 
organisation this is done using various media including inhouse 
magazines intranet regular newsletters bulletins management 
briefings trade union consultation the newly created qinetiq 
employee forum and widespread training programmes 
employee share scheme
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 
send a form of direction to all employees holding shares under the 
plan and will vote on all resolutions proposed at general meetings 
in accordance with the instructions received in circumstances where 
ordinary shares are held by the corporate sponsored nominee service 
equiniti corporate nominees limited will send a proxy form to all 
shareholders utilising such corporate nominee service and will vote 
on all resolutions proposed at general meetings in accordance with 
the instructions received
auditor
kpmg audit plc has expressed its willingness to continue in office as 
auditor and a resolution to reappoint them will be proposed at the 
annual general meeting
statement of disclosure of information to auditor
the directors who held office at the date of approval of this directors’ 
report have confirmed that so far as the directors are aware there 
is no relevant audit information of which the company’s auditor is 
unaware and the directors have taken all the steps they reasonably 
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
annual general meeting
the company’s annual general meeting will be held on thursday 
29 july 2010 at 200pm at the auditorium jp morgan cazenove 
20 moorgate london ec2r 6da details of the business to be 
proposed and voted upon at the meeting is contained in the notice 
of the annual general meeting which is sent to all shareholders and 
also published on the company’s website wwwqinetiqcom
by order of the board
lynton boardman company secretary
85 buckingham gate
london sw1e 6pd
2 june 2010 44 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 45
statement of directors’ responsibilities
directors’ report – governance 
the directors are responsible for preparing the annual report and 
the group and parent company financial statements in accordance 
with applicable law and regulations
company law requires the directors to prepare group and parent 
company financial statements for each financial year under that 
law they are required to prepare the group financial statements in 
accordance with ifrs as adopted by the eu and applicable law and 
have elected to prepare the parent company financial statements 
in accordance with uk accounting standards and applicable law 
uk generally accepted accounting practice
under company law the directors must not approve the financial 
statements unless they are satisfied that they give a true and fair 
view of the state of affairs of the group and parent company and of 
their profit or loss for that period in preparing each of the group and 
parent company financial statements the directors are required to
• select suitable accounting policies and then apply them 
consistently
• make judgments and estimates that are reasonable and prudent
• for the group financial statements state whether they have been 
prepared in accordance with ifrs as adopted by the eu
• for the parent company financial statements state whether 
applicable uk accounting standards have been followed subject 
to any material departures disclosed and explained in the parent 
company financial statements and
• prepare the financial statements on the going concern basis unless 
it is inappropriate to presume that the group and the parent 
company will continue in business 
the directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the parent company’s 
transactions and disclose with reasonable accuracy at any time 
the financial position of the parent company and enable them to 
ensure that its financial statements comply with the companies act 
2006 they have general responsibility for taking such steps as are 
reasonably open to them to safeguard the assets of the group and 
to prevent and detect fraud and other irregularities
under applicable law and regulations the directors are also 
responsible for preparing a directors’ report directors’ 
remuneration report and corporate governance statement 
that complies with that law and those regulations
the directors are responsible for the maintenance and integrity of 
the corporate and financial information included on the company’s 
website legislation in the uk governing the preparation and 
dissemination of financial statements may differ from legislation 
in other jurisdictions 
responsibility statement of the directors 
in respect of the annual report
we the directors of the company confirm that to the best 
of our knowledge
• the financial statements of the group have been prepared in 
accordance with ifrs as adopted by the eu and for the company 
under uk gaap in accordance with applicable united kingdom 
law and give a true and fair view of the assets liabilities financial 
position and profit or loss of the group and
• the directors’ report includes a fair review of the development 
and performance of the business and the position of the group 
together with a description of the principal risks and uncertainties 
that face the group
by order of the board
 
leo quinn david mellors
chief executive officer chief financial officer
2 june 2010 2 june 2010 44 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 45
independent auditor’s report to the members 
of qinetiq group plc
we have audited the financial statements of qinetiq group plc for 
the year ended 31 march 2010 which comprise the consolidated 
income statement the consolidated statement of comprehensive 
income the consolidated statement of changes in equity the 
consolidated and parent company balance sheets the consolidated 
cash flow statement and the related notes
the financial reporting framework that has been applied in the 
preparation of the group financial statements is applicable law and 
international financial reporting standards ifrss as adopted by 
the eu the financial reporting framework that has been applied 
in the preparation of the parent company financial statements is 
applicable law and uk accounting standards uk generally accepted 
accounting practice
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 2006 
our audit work has been undertaken so that we might state to the 
company’s members those matters we are required to state to them 
in an auditor’s report and for no other purpose to the fullest extent 
permitted by law we do not accept or assume responsibility to 
anyone other than the company and the company’s members 
as a body for our audit work for this report or for the opinions 
we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities statement 
set out on page 44 the directors are responsible for the preparation 
of the financial statements and for being satisfied that they give 
a true and fair view our responsibility is to audit the financial 
statements in accordance with applicable law and international 
standards on auditing uk and ireland those standards require us to 
comply with the auditing practices board’s apb’s ethical standards 
for auditors
scope of the audit of the financial statements
a description of the scope of an audit of financial statements is 
provided on the apb’s website at wwwfrcorgukapbscopeukp
opinion on financial statements
in our opinion
• the financial statements give a true and fair view of the state of the 
group’s and of the parent company’s affairs as at 31 march 2010 
and of the group’s loss for the year then ended
• the group financial statements have been properly prepared 
in accordance with ifrss as adopted by the eu
• the parent company financial statements have been properly 
prepared in accordance with uk generally accepted accounting 
practice
• the financial statements have been prepared in accordance with 
the requirements of the companies act 2006 and as regards the 
group financial statements article 4 of the ias regulation
opinion on other matters prescribed by the companies act 2006
in our opinion
• the part of the directors’ remuneration report to be audited has 
been properly prepared in accordance with the companies act 
2006 and
• the information given in the directors’ report for the financial year 
for which the financial statements are prepared is consistent with 
the financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you 
if in our opinion
• adequate accounting records have not been kept by the parent 
company or returns adequate for our audit have not been received 
from branches not visited by us or
• the parent company financial statements and the part of the 
directors’ remuneration report to be audited are not in agreement 
with the accounting records and returns or
• certain disclosures of directors’ remuneration specified by law 
are not made or
• we have not received all the information and explanations 
we require for our audit 
under the listing rules we are required to review
• the directors’ statement set out on page 34 in relation to going 
concern and
• the part of the corporate governance statement on pages 2835 
relating to the company’s compliance with the nine provisions of 
the june 2008 combined code specified for our review
mike maloney senior statutory auditor
for and on behalf of kpmg audit plc statutory auditor
chartered accountants
8 salisbury square
london
ec4y 8bb
2 june 2010 46 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 47
financial statements
consolidated income statement
for the year ended 31 march
2010 2009
all figures in £ million note
before 
acquisition 
amortisation 
and specific 
nonrecurring 
items 
acquisition 
amortisation 
and specific 
nonrecurring
items total
before 
acquisition 
amortisation 
and specific 
nonrecurring 
items
restated†
 acquisition
amortisation 
and specific 
nonrecurring
items
total
restated†
revenue 2 3 16254 – 16254 16173 – 16173
other operating costs excluding 
depreciation and amortisation 14658 421 15079 14240 – 14240
share of posttax loss of equity 
accounted joint ventures and 
associates 16 02 – 02 72 – 72
other income 2 69 – 69 79 – 79
ebitda earnings before 
interest tax depreciation and 
amortisation 1667 421 1246 1940 – 1940
depreciation and impairment of 
property plant and equipment 14 351 240 591 335 – 335
amortisation and impairment of 
intangible assets 1112 113 795 908 89 235 324
group operating lossprofit 3 1203 1456 253 1516 235 1281
gainloss on business 
divestments and impairment of 
investments 5 – 62 62 – 73 73
finance income 6 481 – 481 591 – 591
finance expense 6 827 – 827 805 – 805
lossprofit before tax 4 857 1518 661 1302 162 1140
taxation 7 129 157 28 267 63 204
lossprofit for the year 
attributable to equity 
shareholders 33 728 1361 633 1035 99 936
earnings per share
basic 10 97p 143p
diluted 10 97p 143p
 specific nonrecurring items include amounts relating to gainloss on business divestments and unrealised impairments of investments and in 2010 the 
impairment of property plant and equipment impairment of intangible assets and emea reorganisation costs see note 4
† restatement relates to the transfer of the finance element of the ias 19 pension cost totalling a net £34m credit to the finance income and expense lines 
this was previously reported in other operating costs 46 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 47
consolidated statement of comprehensive income
for the year ended 31 march
consolidated statement of changes in equity 
for the year ended 31 march
all figures in £ million 2010 2009
lossprofit for the year 633 936
other comprehensive income
effective portion of change in fair value of net investment hedges 287 1076
foreign currency translation differences for foreign operations 308 1816
decrease in fair value of hedging derivatives 02 176
reclassification of hedging derivatives to the income statement 66 –
movement in deferred tax on hedging derivatives 18 47
fair value gains on available for sale investments 17 09
actuarial loss recognised in defined benefit pension schemes 602 958
increase in deferred tax asset due to actuarial movement in pension deficit 169 341
other comprehensive income for the year net of tax 391 03
total comprehensive income for the year attributable to equity holders 1024 939
all figures in £ million
issued 
share 
capital
capital 
redemption 
reserve
share 
premium
hedge 
reserve
translation 
reserve
retained 
earnings total
minority 
interest
total 
equity
at 1 april 2009 66 399 1476 167 565 3687 6026 01 6027
total comprehensive income 
for the year – – – 46 21 1049 1024 – 1024
dividends paid – – – – – 316 316 – 316
purchase of own shares – – – – – 08 08 – 08
sharebased payments – – – – – 58 58 – 58
deferred tax on sharebased 
payments – – – – – – – – –
at 31 march 2010 66 399 1476 121 544 2372 4736 01 4737
 
at 1 april 2008 66 399 1476 38 175 3601 5329 01 5330
total comprehensive income 
for the year – – – 129 740 328 939 – 939
dividends paid – – – – – 289 289 – 289
purchase of own shares – – – – – 08 08 – 08
sharebased payments – – – – – 56 56 – 56
deferred tax on sharebased 
payments – – – – – 01 01 – 01
at 31 march 2009 66 399 1476 167 565 3687 6026 01 6027 financial statements
48 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 49
consolidated balance sheet
as at 31 march
all figures in £ million note 2010 2009
noncurrent assets
goodwill 11 5797 6385
intangible assets 12 1417 1642
property plant and equipment 14 2855 3324
other financial assets 15 100 116
equity accounted investments 16 09 07
other investments 17 48 157
deferred tax asset 24 287 –
10513 11631
current assets
inventories 18 798 683
other financial assets 15 78 31
trade and other receivables 19 4238 5329
current tax – 86
investments 20 23 06
assets classified as held for sale 51 18
cash and cash equivalents 21 639 2621
5827 8774
total assets 16340 20405
current liabilities
trade and other payables 22 3964 4472
current tax 75 –
provisions 23 161 43
other financial liabilities 25 89 221
4289 4736
noncurrent liabilities
retirement benefit obligation 38 1473 1052
deferred tax liability 24 108 89
provisions 23 79 88
other financial liabilities 26 5302 7926
other payables 22 352 487
7314 9642
total liabilities 11603 14378
net assets 4737 6027
capital and reserves 
ordinary shares 32 66 66
capital redemption reserve 399 399
share premium account 1476 1476
hedging and translation reserve 423 398
retained earnings 2372 3687
capital and reserves attributable to shareholders of the parent company 4736 6026
minority interest 01 01
total shareholders’ funds 4737 6027
the financial statements were approved by the board of directors and authorised for issue on 2 june 2010 and were signed on its behalf by
 
leo quinn chief executive officer david mellors chief financial officer 48 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 49
consolidated cash flow statement
for the year ended 31 march
all figures in £ million note 2010 2009
net cash inflow from operations before emea reorganisation cost 28 2046 2022
net cash outflow relating to emea reorganisation 354 270
cash inflow from operations 1692 1752
tax receivedpaid 15 25
interest received 04 10
interest paid 368 213
net cash inflow from operating activities 1343 1524
purchases of intangible assets 62 33
purchases of property plant and equipment 241 291
costs from sale of property plant and equipment 07 12
equity accounted investments and other investment funding 11 58
purchase of subsidiary undertakings 463 929
net cash acquired with subsidiary undertakings 07 37
proceeds from sale of equity accounted investment – 137
proceeds from sale of interests in subsidiary undertakings 211 72
net cash outflow from investing activities 566 1077
cash outflow from repayment of loan notes – 05
repaymentproceeds from bank borrowings 2321 133
proceeds from us private placement – 2104
payment of deferred finance costs – 15
settlement of forward contracts designated as net investment hedges 143 –
purchase of own shares 08 08
dividends paid to shareholders 316 289
capital element of finance lease rental payments 28 28
capital element of finance lease rental receipts 30 30
net cash outflowinflow from financing activities 2786 1922
decreaseincrease in cash and cash equivalents 29 2009 2369
effect of foreign exchange changes on cash and cash equivalents 05 57
cash and cash equivalents at beginning of the year 2621 195
cash and cash equivalents at end of the year 607 2621
cash and cash equivalents 21 639 2621
overdrafts 30 32 –
cash and cash equivalents at end of the year 607 2621
reconciliation of movement in net debt 
for the year ended 31 march
all figures in £ million note 2010 2009
decreaseincrease in cash and cash equivalents in the year 29 2009 2369
cash flows from repaymentdrawdown of loans private placement and other financial instruments 2462 2261
change in net debt resulting from cash flows 30 453 108
other noncash movements including foreign exchange 30 352 1688
movement in net debt in the year 805 1580
net debt at beginning of the year 30 5379 3799
net debt at end of the year 30 4574 5379 financial statements
50 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 51
notes to the financial statements
 
 
50 
1 significant accounting policies 
accounting policies 
the following accounting policies have been applied consistently 
to all periods presented in dealing with items which are considered 
material in relation to the group’s financial statements the group 
separately presents acquisition amortisation and specific non
recurring items in the income statement which in the judgement 
of the directors need to be disclosed separately by virtue of 
their size and incidence in order for the reader to obtain a proper 
understanding of the financial information specific nonrecurring 
items include amounts relating to gains and losses on business 
divestments and unrealised impairments and in 2010 the 
impairment of property plant and equipment impairment 
of intangible assets and emea reorganisation costs 
basis of preparation 
the group’s financial statements have been prepared on a going 
concern basis as discussed in the corporate governance report on 
page 34 the group’s financial statements have been prepared and 
approved by the directors in accordance with international financial 
reporting standards as adopted by the eu ‘adopted ifrs’ and 
the companies act 2006 applicable to companies reporting under 
ifrs the company has elected to prepare its parent company 
financial statements in accordance with uk gaap these are 
presented on pages 94 to 96 the financial statements have been 
prepared under the historical cost convention as modified by the 
revaluation of availableforsale financial assets and other relevant 
financial assets and liabilities noncurrent assets held for sale 
are held at the lower of carrying amount and fair value less costs 
to sell the group’s reporting currency is sterling and unless 
otherwise stated the financial statements are rounded to the 
nearest hundred thousand 
basis of consolidation 
the consolidated financial statements comprise the financial 
statements of the company and its subsidiary undertakings up 
to 31 march 2010 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 a subsidiary 
is an entity over which the group has the power to govern financial 
and operating policies in order to obtain benefits potential voting 
rights that are currently exercisable or convertible are considered 
when determining control 
an associate is an undertaking over which the group exercises 
significant influence usually from 20 to 50 of the equity 
voting rights over financial and operating policy a joint venture 
is an undertaking over which the group exercises joint control 
associates and joint ventures are accounted for using the equity 
method from the date of acquisition up to the date of disposal the 
group’s investments in associates and joint ventures are held at cost 
including goodwill on acquisition and any postacquisition changes 
in the group’s share of the net assets of the associate less any 
impairment to the recoverable amount where an associate or 
joint venture has net liabilities full provision is made for the group’s 
share of liabilities where there is a constructive or legal obligation 
to provide additional funding to the associate or joint venture 
the financial statements of subsidiaries joint ventures and 
associates are adjusted where necessary to ensure compliance 
with group accounting policies 
on consolidation all intragroup income expenses and balances 
are eliminated  
revenue 
revenue represents the value of work performed for customers 
and is measured net of value added and other sales taxes on the 
following bases 
longterm contracts 
the group’s longterm contract arrangements are accounted 
for under ias 11 construction contracts revenue is recognised 
once the group has obtained the right to consideration in exchange 
for its performance no profit is recognised on contracts until the 
outcome of the contract can be reliably estimated when the 
outcome of a contract can be estimated reliably revenue and 
costs are recognised by reference to the stage of completion 
of the contract activity at the balance sheet date this is normally 
measured by the proportion of contract costs incurred for work 
performed to date compared to the estimated total contract costs 
after making suitable allowances for technical and other risks 
related to performance milestones yet to be achieved when it is 
probable that total contract costs will exceed total contract revenue 
the expected loss is recognised immediately as an expense 
goods sold and services rendered 
sales of goods and the provision of services not under longterm 
contract are recognised in the income statement when the 
significant risks and rewards of ownership have been transferred 
to the customer and revenue and costs can be reliably measured  
costplus contracts 
revenue on costplus and timeandmaterials contracts 
is recognised as work is performed 
royalties and intellectual property  
royalty revenue is recognised on the earlier of the date on which 
the income is earned and measurable with reasonable certainty 
or cash is received cash received in advance is deferred over the 
period to which the royalty relates intellectual property revenue can 
be attributed either to perpetual licences or limited licences limited 
licences are granted for a specified time period and revenue is 
recognised over the period of the licence perpetual licences are 
granted unlimited time frames and are recognised when the risks 
and rewards of ownership are transferred to the customer 
segmental information 
segmental information is presented according to the group’s 
management structure and markets in which the group operates 
the principal activities of the group are managed through three 
sectors organised according to the distinct markets in which the 
group operates 
• emea europe middle east and australasia mainly delivers 
technical advice technology solutions consultancy and managed 
services to the ministry of defence in the uk and civil and other 
government customers in the uk and australia 
• qinetiq north america mainly provides technology and services 
to the us government and 
• ventures mainly comprises commercial product businesses and 
business venturing activities 
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 
comprise mainly profit on disposal of noncurrent assets business 
divestments and unrealised impairment of investments financing 
costs and taxation eliminations represent intercompany trading 
between the different segments  50 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 51
 
 
51
1 significant accounting policies continued 
segmental assets comprise property plant and equipment 
goodwill and other intangible assets trade and other receivables 
inventories and prepayments and accrued income unallocated 
assets represent financial assets which are included in net debt 
segmental liabilities comprise trade and other payables accruals 
and deferred income and retirement benefit obligations unallocated 
liabilities represent financial liabilities which are included in net debt 
segmental assets and liabilities are as at the end of the year 
research and development expenditure 
research and development costs incurred on behalf of a 
customer as part of a specific project are directly chargeable to 
the customer on whose behalf the work is undertaken 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 committed to complete the project such capitalised 
costs are amortised over the forecast period of sales resulting from 
the development all other research and development 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 projectrelated costs are 
treated as if they were incurred in the research phase only and 
expensed 
financing 
financing represents the financial expense on borrowings 
accounted for using the effective rate method and the financial 
income earned on funds invested 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 interest income and expense in financing 
taxation 
the taxation charge is based on the taxable profit for the year 
and takes into account taxation deferred because of temporary 
differences between the treatment of certain items for taxation 
and accounting purposes current tax and deferred tax are charged 
or credited to the income statement except where they relate to 
items charged or credited to equity in which case the relevant 
tax is charged or credited to equity deferred taxation is the tax 
attributable to the temporary differences that appear when taxation 
authorities recognise and measure assets and liabilities with rules 
that differ from those of the consolidated financial statements the 
amount of deferred tax provided is based on the expected manner 
of realisation or settlement of the carrying amount of assets and 
liabilities using rates enacted or substantively enacted at the 
balance sheet date 
any change in the tax rates are recognised in the income statement 
unless related to items directly recognised in equity deferred tax 
liabilities are recognised on all taxable temporary differences 
excluding nondeductible goodwill deferred tax assets are 
recognised on all deductible temporary differences provided that 
it is probable that future taxable income will be available against 
which the asset can be utilised deferred tax assets and liabilities 
are offset only where there is a legally enforceable right to offset 
and there is an intention to settle balances on a net basis 
goodwill 
business combinations are accounted for under the purchase 
accounting method all identifiable assets acquired and liabilities 
and contingent liabilities incurred or assumed are recorded at fair 
value at the date control is transferred to qinetiq irrespective of the 
extent of any minority interest the cost of a business combination 
is measured at the fair value of assets received equity instruments 
issued and liabilities incurred or assumed at the date of exchange 
plus costs directly attributable to the acquisition any excess of the 
cost of the business combination over the group’s interest in the 
net fair value of the identifiable assets liabilities and contingent 
liabilities recognised is capitalised as goodwill goodwill is subject to 
annual impairment reviews see below if the cost of an acquisition 
is less than the fair value of the net assets acquired the difference 
is immediately recognised in the consolidated income statement 
as a gain 
intangible assets 
intangible assets arising from business combinations are 
recognised at fair value and are amortised over their expected 
useful lives typically between 0 and 9 years internally generated 
intangible assets are recorded at cost including labour directly 
attributable costs and any thirdparty expenses 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 2–8 years 
development costs useful economic life or unit of 
production method subject to a 
minimum amortisation of no less than 
straight line method over economic life 
of 1–4 years 
other 1–9 years 
property plant and equipment 
property plant and equipment are stated at cost less depreciation 
freehold land is not depreciated other tangible noncurrent 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 3–10 years 
fixtures and fittings 5–10 years 
computers 3–5 years 
motor vehicles 3–5 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 
attributable 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  financial statements
notes to the financial statements continued
52 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 53
 
 
52 
1 significant accounting policies continued 
impairment of tangible goodwill intangible and 
held for sale assets 
the group assesses at each reporting date 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 are written down to their recoverable amounts 
the recoverable amount of an asset or a cash generating unit 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 cash generating unit 
calculated using an appropriate pretax discount rate impairment 
losses are expensed to the income statement 
investments in debt and equity securities 
investments held by the group are classified as either a current 
asset or as a noncurrent asset and those classified as available 
for sale are stated at fair value with any resultant gain or loss being 
recognised directly in equity except for impairment losses 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 
are held at fair value based upon 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 
inventories 
inventory and workinprogress including dtr precontract costs 
capitalised since qinetiq was awarded preferred bidder status in 
2007 are stated at the lower of cost and net realisable value 
workinprogress 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 
bid costs 
costs incurred in bidding for work are normally expensed as 
incurred in the case of large multiyear government contracts 
the bidding process typically involves a competitive bid process 
to determine a preferred bidder and then a further period to reach 
financial close with the customer in these cases the costs incurred 
after announcement of the group achieving preferred bidder status 
are deferred to the balance sheet within workinprogress from the 
point financial close is reached the costs are amortised over the life 
of the contract if an opportunity for which the group was awarded 
preferred bidder status fails to reach financial close the costs 
deferred to that point will be expensed in the income statement 
immediately when it becomes likely that financial close will not 
be achieved 
trade and other receivables 
trade and other receivables are stated net of provisions for doubtful 
debts amounts recoverable on contracts are included in trade and 
other receivables and represent revenue recognised in excess of 
amounts invoiced payments received on account are included in 
trade and other payables and represent amounts invoiced in excess 
of revenue recognised 
cash and cash equivalents 
cash and cash equivalents comprise cash at bank and shortterm 
deposits that are readily convertible into cash in the cash flow 
statement overdraft balances are included in cash and equivalents 
current and noncurrent liabilities 
current liabilities include amounts due within the normal operating 
cycle of the group interestbearing current and noncurrent 
liabilities are 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 
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 settle the obligation where 
appropriate provisions are determined by discounting the expected 
cash flows at the group’s weighted average cost of capital 
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 the derecognition of 
a financial instrument takes place when the group no longer 
controls the contractual rights that comprise the financial instrument 
when the instrument expires or is sold terminated or exercised 
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 
changes in the fair value of derivatives designated as fair value 
hedges of currency risk or interest rate risk are recognised in the 
income statement the hedged item is held at fair value with respect 
to the hedged risk with any gain or loss recognised in the income 
statement 
cash flow hedging 
the effective portion of changes in the fair value of derivatives 
designated as a cash flow hedge 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 
hedging of net investment in foreign operations 
the effective portion of changes in the fair value of derivatives 
designated as hedges of the net investment in a foreign entity 
are recognised in equity until the net investment is sold or 
disposed any ineffective portion is recognised directly in the 
income statement  52 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 53
 
 
53
1 significant accounting policies continued 
leased assets 
leases are classified as finance leases when substantially all of the 
risks and rewards of ownership are held by the lessee assets held 
under finance leases are capitalised and included in property plant and 
equipment at the lower of the present value of minimum lease payments 
and fair value at the inception of the lease assets are then depreciated 
over the shorter of their useful economic lives or the lease term 
obligations relating to finance leases net of finance charges arising 
in future periods are included under financial liabilities  
rentals payable under operating leases are charged to the income 
statement on a straightline basis over the term of the lease 
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 periodend 
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 retranslation of the opening net investment and the results for 
the period to the periodend rate are taken directly to equity and 
reported in the statement of comprehensive income 
postretirement benefits 
the group provides both defined contribution and defined benefit 
pension arrangements the liabilities of the group arising from defined 
benefit obligations and the related current service cost are determined 
using the projected unit credit method valuations for accounting 
purposes are carried out half yearly for the largest plans and on a 
regular basis for other plans 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 
for defined benefit plans the actuarial cost charged to the income 
statement consists of service cost interest cost and expected 
return on plan assets the finance element of the pension charge 
is shown in finance income and expenses the remaining service 
cost element is charged as a component of employee costs in 
the income statement actuarial gains and losses are recognised 
in full immediately through the statement of comprehensive 
income contributions to defined contribution plans are charged 
to the income statement as incurred 
sharebased payments 
the group operates sharebased payment arrangements with 
employees the fair value of equitysettled awards for sharebased 
payments is determined on grant and expensed straight line over 
the period from grant to the date of earliest unconditional exercise 
the fair value of cashsettled awards for sharebased payments is 
determined each period end until they are exercised or lapse the 
value is expensed straight line over the period from grant to the date 
of earliest unconditional exercise the charges for both equity and 
cashsettled sharebased payments are updated annually for non
marketbased vesting conditions 
share capital 
ordinary share capital of the company is recorded as the proceeds 
received less issue costs 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 
restatement of prior periods for finalisation of fair values 
arising on acquisitions 
the fair values of the net assets of acquired business are finalised 
within 12 months of the acquisition date with the exception of 
certain deferred tax balances all fair value adjustments are 
recorded with effect from the date of acquisition and consequently 
may result in the restatement of previously reported financial results 
recent accounting developments 
the following eu endorsed new revised and amended published 
standards and interpretations are effective for accounting periods 
beginning on or after 1 april 2009 and have been adopted 
ifrs 8 operating segments replaces ias 14 segmental 
reporting and requires an entity to present segment information 
on the same basis as used for internal management reporting 
as provided to the chief operating decision maker adoption of this 
standard did not affect the reportable segments disclosures have 
been prepared in accordance with the new standard 
ias 1 revised presentation of financial statements requires 
the group to present a statement of comprehensive income and 
statement of changes in equity as primary statements the group 
has elected to present the statement of comprehensive income 
and the income statement as two statements these consolidated 
financial statements have been prepared under the revised 
disclosure requirements 
amendment to ifrs 7 financial instruments disclosures 
requires enhanced disclosures around fair value measurement 
and liquidity risk the disclosures in these financial statements 
have been prepared in accordance with the new standard 
the following eu endorsed amendments improvements and 
interpretations of published standards are effective for accounting 
periods beginning on or after 1 april 2009 and have been adopted 
with no material impact on the group’s financial statements 
• ias 23 revised borrowing costs 
• amendments to ifrs1 first time adoption of ifrs and ias 27 
consolidation and separate financial statements 
• amendment to ifrs 2 sharebased payment 
• amendments to ifrs 7 financial instruments disclosures and 
ias 39 financial instruments recognition and measurement 
• amendments to ias 32 financial instruments presentation and 
ias 1 presentation of financial statements 
• amendments to ifric 9 reassessment of embedded 
derivatives and ias 39 financial instruments recognition 
and measurement 
• improvements to ifrs 
• ifric 13 customer loyalty programmes 
• ifric 15 agreements for the construction of real estate 
• ifric 16 hedges of a net investment in a foreign operation 
early adopted 
• ifric 18 transfers of assets from customers and 
• annual improvements 20082009  financial statements
notes to the financial statements continued
54 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 55
 
 
54 
1 significant accounting policies continued 
at the date of authorisation of these financial statements the following 
eu endorsed revised amended and improved published standards 
and interpretations which have not been applied in these financial 
statements were in issue but not yet effective 
ifrs 3 revised business combinations and amendments to ias 
27 consolidated and separate financial statements the standard 
continues to apply the acquisition method to business combinations with 
some significant changes for example all acquisition related costs will 
be expensed all payments to purchase a business will be recorded at 
fair value at the acquisition date with contingent payments subsequently 
remeasured at fair value through the income statement there are also 
changes to the reporting of noncontrolling interest these revisions will 
have an impact on the way in which the group reports all future 
business combinations 
the impact of adoption of the following new revised amended and 
improved published standards and interpretations in future periods 
which were also in issue at the date of authorisation of these 
financial statements is under assessment 
• ifrs 9 financial instruments subject to eu endorsement 
• ias 24 revised related party disclosures subject to eu 
endorsement 
• amendment to ifric 14 ias 19 – the limit on a defined benefit 
asset minimum funding requirements and their interaction 
subject to eu endorsement 
• ifric 19 extinguishing financial liabilities with equity 
instruments subject to eu endorsement and 
• improvements to ifrss 2010 subject to eu endorsement 
the directors anticipate that the adoption of the following new 
revised amended and improved published standards and 
interpretations in future periods which were also in issue at the date 
of authorisation of these financial statements will have no material 
impact on the financial statements of the group 
• ifrs 1 revised first time adoption of ifrs  
• amendments to ifrs 1 first time adoption of ifrs subject 
to eu endorsement 
• amendment to ifrs 2 sharebased payment 
• amendment to ias 32 financial instruments presentation 
• amendment to ias 39 financial instruments recognition 
and measurement and 
• ifric 17 distributions of noncash assets to owners  
critical accounting estimates and judgements in applying 
accounting policies 
the following commentary is intended to highlight those policies  
hat are critical to the business based on the level of management 
judgement required in their application their complexity and their 
potential impact on the results and financial position reported for 
the group the level of management judgement required includes 
assumptions and estimates about future events which are uncertain 
the actual outcome of which may result in a materially different 
outcome from that anticipated 
revenue and profit recognition 
the estimation process required to evaluate the potential outcome 
of contracts and projects requires skill knowledge and experience 
from a variety of sources within the business to assess the status 
of the contract costs to complete internal and external labour resources 
required and other factors this process is carried out continuously 
throughout the business to ensure that project and contract 
assessments reflect the latest status of such work no profit is 
recognised on a contract until the outcome can be reliably estimated 
business combinations 
intangible assets recognised on business combinations have been 
valued using established methods and models to determine estimated 
value and useful economic life with input where appropriate from 
external valuation consultants such methods require the use of 
estimates which may produce results that are different from actual 
future outcomes  
the group tests annually whether goodwill has suffered any 
impairment this process is reliant on the use of estimates of the 
future profitability and cash flows of its cashgenerating units which 
may differ from the actual results delivered the group additionally 
reviews whether identified intangible assets have suffered any 
impairment  
postretirement benefits 
the group’s defined benefit pension obligations and net income 
statement costs are based on key assumptions including return 
on plan assets discount rates mortality inflation and future 
salary and pension increases management exercises their 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 deficit or the net income statement costs 
research and development expenditure 
internallyfunded development expenditure is capitalised when 
criteria are met see page 51 and is written off over the forecast 
period of sales resulting from the development management 
decides upon the adequacy of future demand and potential market 
for such new products in order to justify capitalisation of internally
funded development expenditure these can be difficult to 
determine when dealing with innovative technologies actual 
product sales may differ from these estimates 
tax 
in determining the group’s provisions for income tax and deferred 
tax it is necessary to assess the likelihood and timing of recovery 
of tax losses created and to consider transactions in a small 
number of key tax jurisdictions for which the ultimate tax 
determination is uncertain to the extent that the final outcome 
differs from the tax that has been provided adjustments will be 
made to income tax and deferred tax provisions held in the period 
the determination is made 
unquoted equity investments 
the group usually judges the fair value of unquoted equity 
investments using the valuation ascribed to the investment 
by a thirdparty funding round or similar valuation event for that 
investment in determining the value of an investment the group 
may use information from funding rounds business plans and 
forecasts market projections and other estimation techniques 
including management estimates as a guide these valuation 
techniques require estimates of the business’s future performance 
the actual business performance of investments may differ from 
these estimates 
 
 
 
  54 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 55
 
 
55
2 revenue 
revenue and other income is analysed as follows 
year ended 31 march   
all figures in £ million 2010 2009 
sales of goods 1579 2163 
services 14675 14010 
revenue 16254 16173 
    
property rental income 69 79 
 
 
3 segmental analysis 
business segments 
year ended 31 march 2010     
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia ventures total 
revenue        
external sales
1
 8001 8188 65 16254 
     
other information     
ebitda before share of equity accounted joint ventures and associates  743 985 63 1665 
share of equity accounted joint ventures and associates 01 01 – 02 
ebitda before restructuring 744 986 63 1667 
depreciation of property plant and equipment  67 289 04 360 
amortisation of purchased or internally developed intangible assets – 86 18 104 
group operating profitloss before acquisition amortisation and 
specific nonrecurring items
2
 677 611 85 1203 
emea reorganisation  – 421 – 421 
impairment of plant property and equipment – 230 10 240 
amortisation of intangible assets arising from acquisitions  202 59 – 261 
impairment of intangible assets 422 79 33 534 
group operating lossprofit  53 178 128 253 
lossgain on business divestments and unrealised impairment of 
investments    62 
net finance expense    346 
profitloss before tax    661 
taxation    28 
profitloss for the year    633 
1
 there were internal sales of £125m from qna to emea during the year 
2
 group operating profitloss before acquisition amortisation is stated before specific nonrecurring items these comprise the emea reorganisation costs and 
impairment of plant property and equipment and intangible assets this is the measure of profit presented to the chief operating decision maker 
 
  financial statements
notes to the financial statements continued
56 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 57
 
 
56 
3 segmental analysis continued 
business segments 
year ended 31 march 2009     
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia 
restated
2
 ventures 
total 
restated
2
revenue        
external sales
1
 7656 8423 94 16173 
     
other information     
ebitda before share of equity accounted joint ventures and associates  895 1181 64 2012 
share of equity accounted joint ventures and associates – – 72 72 
ebitda 895 1181 136 1940 
depreciation of property plant and equipment  65 267 03 335 
amortisation of purchased or internally developed intangible assets – 72 17 89 
group operating profitloss before acquisition amortisation  830 842 156 1516 
     
amortisation of intangible assets arising from acquisitions  180 55 – 235 
group operating profitloss  650 787 156 1281 
gain on business divestments and unrealised impairment of investments    73 
net finance expense    214 
profit before tax    1140 
taxation     204 
profit for the year    936 
1
 there were internal sales of £40m from qna to emea during the year 
2
 restatement relates to the transfer of the finance element of the ias 19 pension cost totalling a £34m net credit to the income statement to the finance 
income and expense lines this was previously reported in other operating costs 
 
 
year ended 31 march 2010      
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia ventures unallocated consolidated 
segment assets

 8981 6382 160 – 15523 
segment liabilities

 1506 4640 66 – 6212 
unallocated net debt note 30 – – – 4574 4574 
net assets 7475 1742 94 4574 4737 
      
other information      
capital expenditure – own equipment 90 109 13 – 212 
capital expenditure – ltpa funded – 91 – – 91 
total capital expenditure 90 200 13 – 303 
 
  56 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 57
 
 
57
3 segmental analysis continued 
year ended 31 march 2009      
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia ventures unallocated consolidated 
segment assets 9838 7488 311 – 17637 
segment liabilities 1608 4594 29 – 6231 
unallocated net debt note 30 – – – 5379 5379 
net assets  8230 2894 282 5379 6027 
      
other information      
capital expenditure – own equipment 91 108 02 – 201 
capital expenditure – ltpa funded – 123 – – 123 
total capital expenditure 91 231 02 – 324 
 segment assets and liabilities exclude unallocated net debt 
 capital expenditure is defined as cash paid for property plant and equipment additions and purchased and internally developed intangible assets  
  
 
revenue by major customer type 
year ended 31 march 2010     
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia ventures consolidated 
uk government – 6141 04 6145 
us government 7432 103 06 7541 
other  569 1944 55 2568 
total 8001 8188 65 16254 
 
 
year ended 31 march 2009     
all figures in £ million 
qinetiq 
north 
america 
europe  
middle east  
australasia ventures consolidated 
uk government – 6387 – 6387 
us government 7161 41 12 7214 
other  495 1995 82 2572 
total 7656 8423 94 16173 
 
 
revenue by customer location 
year ended 31 march   
all figures in £ million 2010 2009 
north america 8253 7875 
united kingdom 7200 7729 
other 801 569 
total  16254 16173 
 
  financial statements
notes to the financial statements continued
58 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 59
 
 
58 
4 lossprofit before tax 
the following items have been charged in arriving at lossprofit before tax for the year ended 31 march 
all figures in £ million  2010 2009 
fees payable to the auditor    
– statutory audit  10 11 
– audit of the company’s subsidiaries pursuant to legislation   01 01 
– other services supplied pursuant to legislation  – 01 
– other services relating to taxation  01 01 
– other services  04 – 
total auditor’s remuneration  16 14 
    
inventories recognised as an expense  769 918 
depreciation of property plant and equipment    
– owned assets before impairment  351 335 
– owned assets impairment  240 – 
– under finance lease  – – 
foreign exchange gains  02 05 
research and development expenditure – customer funded contracts  4183 4570 
research and development expenditure – group funded  73 115 
 
 
the following items have been charged in arriving at lossprofit before tax in the column titled ‘acquisition amortisation and specific 
nonrecurring items’ 
all figures in £ million note 2010 2009 
emea reorganisation costs
1
  421 – 
impairment of plant property and equipment 14 240 – 
amortisation of intangible asset arising on acquisitions 12 261 235 
impairment of intangible asset  12 33 – 
impairment of goodwill
2
 11 501 – 
total goodwill and intangible impairment and acquisition amortisation  795 235 
gainloss on business divestment 5 51 130 
unrealised impairment of investment 5 113 57 
    
gainloss on business divestment and unrealised impairment of investment  5 62 73 
total nonrecurring items before tax  1518 162 
1
 the emea reorganisation programme announced in may 2009 was largely completed this financial year the cost of this programme is £421m which has 
been expensed to the income statement this year as a nonrecurring item the cash spent against this during the year was £354m 
2
 the goodwill impairment charge of £501m arises in three cash generating units cgus technology solutions in qna £114m mission solutions 
in qna £308m and australia in emea £79m 
 
  58 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 59
 
 
59
5 lossgain on business divestments and impairment of investments 
for the year ended 31 march 
all figures in £ million 2010 2009 
gain on business divestments  51 130 
unrealised impairment of investments 113 57 
 62 73 
 
the gain on business divestments in the year relates to the disposal of two businesses on 30 september 2009 the group disposed of the 
underwater systems business a division of qinetiq limited to atlas elektronik uk limited for a consideration before costs of £235m which 
resulted in a profit on disposal of £69m on 31 july 2009 the calibration business of the group including asap calibration ltd was sold for 
proceeds before costs of £04m and resulted in a loss on disposal of £18m  
the current year impairment of investments and associated committed costs relates to a £113m 2009 £57m charge in respect of the 
impairment in the carrying value of investments held for sale  
the prior year gain on business divestments of £130m comprises £35m of profit on the disposal of a sales contract by qna’s mission 
solutions business and a £95m profit on the disposal of part of the cody gate ventures llp formerly qinetiq ventures llp which was 
held as an equity investment  
 
 
6 finance income and expense 
for the year ended 31 march  
 
all figures in £ million 2010 
2009 
restated
receivable on bank deposits 04 10 
finance lease income  14 16 
expected return on pension scheme assets  463 565 
finance income 481 591 
   
amortisation of recapitalisation fee 07 03 
payable on bank loans and overdrafts 79 138 
payable on us dollar private placement debt 232 107 
finance lease expense 11 14 
unwinding of discount on financial liabilities 10 12 
interest on pension scheme liabilities 488 531 
finance expense 827 805 
net finance expense 346 214 
 restatement relates to the transfer of the finance element of the ias 19 pension cost totalling a net £34m credit to the income statement to the finance 
income and expense lines this was previously reported in other operating costs 
 
  financial statements
notes to the financial statements continued
60 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 61
 
 
60 
7 taxation  
all figures in £ million 
2010 
before 
acquisition 
amortisation 
and specific 
non 
recurring 
items 
2010 
acquisition 
amortisation 
and specific 
non 
recurring 
items 
2010 
total 
2009 
before 
acquisition 
amortisation 
and specific 
non
recurring 
items 
2009 
acquisition 
amortisation 
and specific 
non
recurring 
items 
2009 
total 
analysis of charge     
 
  
uk corporation tax  – – – – – – 
overseas corporation tax 167 88 79 29 58 29 
total corporation tax 167 88 79 29 58 29 
deferred tax  36 69 105 231 05 226 
deferred tax in respect of prior years 02 – 02 07 – 07 
taxation creditexpense  129 157 28 267 63 204 
       
factors affecting the tax charge in year        
the principal factors reducing the group’s current year tax 
charge below the uk statutory rate are explained below  
 
  
 
  
lossprofit before tax  857 1518 661 1302 162 1140 
tax on lossprofit before tax at 28 2009 28  240 425 185 364 45 319 
effect of       
expenses not deductible for tax purposes research and 
development relief and nontaxable items 
 
196 294 98 
 
178 01 179 
unprovided tax losses of overseas subsidiaries joint 
ventures and associates 
 
01 – 01 
 
14 – 14 
movements in unrecognised deferred tax assets 
in respect of tax losses 
 
61 – 61 
 
07 – 07 
deferred tax in respect of prior years 02 – 02 09 – 09 
effect of different rates in overseas jurisdictions 27 26 01   51 17 34 
taxation creditexpense  129 157 28 267 63 204 
 
the effective tax rate on acquisition amortisation and specific nonrecurring items in 2010 is lower than the group rate as most of the 
elements do not attract tax relief the tax rate on acquisition amortisation and specific nonrecurring items in 2009 exceeds the overall 
group tax rate as it primarily relates to items subject to the higher us tax rate 
factors affecting future tax charges 
the effective tax rate continues to be below the statutory rate in the uk primarily as a result of the benefit of research and development 
relief in the uk the effective tax rate is expected to remain below the uk statutory rate in the medium term subject to any future tax 
legislation changes  
 
  60 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 61
 
 
61
8 dividends 
an analysis of the dividends paid and proposed in respect of the years ended 31 march 2010 and 2009 are provided below 
 
pence per 
share £m  date paidpayable 
interim 2010 158 104 feb 2010 
final 2010 proposed – – – 
total for the year ended 31 march 2010 158 104  
    
interim 2009 150 98 feb 2009 
final 2009 325 213  sep 2009 
total for the year ended 31 march 2009 475 311  
 
 
9 analysis of employee costs and numbers 
the largest component of operating expenses is employee costs the yearend and average monthly number of persons employed by the 
group including directors analysed by business segment was 
 year end 31 march monthly average 
 
2010 
number 
2009  
number 
2010 
number 
2009  
number 
qinetiq north america 6178 6348 6316 6167 
europe middle east  australasia 6760 7565 7141 7570 
ventures 65 68 66 66 
corporate  75 79 81 79 
total 13078 14060 13604 13882 
 
 
the aggregate payroll costs of these persons were as follows 
all figures in £ million note 2010 2009 
wages and salaries   5781 5682 
social security costs   521 534 
other pension costs   446 466 
cost of sharebased payments  33 58 56 
employee costs before emea reorganisation costs  6806 6738 
emea reorganisation costs  421 – 
total employee costs  7227 6738 
 
the 2010 emea reorganisation costs principally comprise the headcount reduction programme announced on 21 may 2009  
 
  financial statements
notes to the financial statements continued
62 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 63
 
 
62 
10 earnings per share 
basic earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of ordinary 
shares in issue during the year the weighted average number of shares used excludes those shares bought by the group and held as own 
shares see note 32 for diluted earnings per share the weighted average number of shares in issue is adjusted to assume conversion of all 
potentially dilutive ordinary shares arising from unvested sharebased awards including share options underlying basic earnings per share 
figures are presented below in addition to the basic and diluted earnings per share as 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 
nonrecurring items amortisation of acquired intangible assets and tax thereon 
 
for the year ended 31 march     
   2010 2009 
basic eps     
lossprofit attributable to equity shareholders £m  633 936 
weighted average number of shares million  6535 6527 
basic eps pence  97 143 
     
diluted eps     
lossprofit attributable to equity shareholders £m  633 936 
weighted average number of shares million  6535 6527 
effect of dilutive securities million  – 28 
diluted number of shares million  6535 6555 
diluted eps pence  97 143 
     
underlying basic eps     
lossprofit attributable to equity shareholders £m  633 936 
reorganisation costs £m  421 – 
gainloss on business divestments disposals and unrealised impairment  
of investments £m  62 73 
impairment of property plant and equipment £m  240 – 
amortisation of intangible assets arising from acquisitions and impairment 
of intangible assets £m  795 235 
tax impact of items above £m  157 63 
underlying profit after taxation £m  728 1035 
weighted average number of shares million  6535 6527 
underlying basic eps pence  111 159 
 the loss attributable to equity shareholders in the year ended 31 march 2010 results in no effect of dilutive securities to the weighted average number of 
shares if there had been a profit in the year ended 31 march 2010 the effect of dilutive securities would have been to increase the diluted number of shares 
by 42m  
  62 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 63
 
 
63
11 goodwill 
all figures in £ million note 2010 2009 
cost    
at 1 april   6390 4379 
acquisitions  13 191 379 
foreign exchange  282 1632 
at 31 march   6299 6390 
 
impairment    
at 1 april   05 05 
impairment in year  501 – 
foreign exchange  04 – 
at 31 march  502 05 
net book value at 31 march  5797 6385 
 
goodwill at 31 march 2010 was allocated across seven cash generating units cgus in qna and emea in the year two cgus in the 
emea business were amalgamated into one to reflect the way in which these cgus are managed and operated  
goodwill is attributable to the excess of consideration over the fair value of net assets acquired and includes expected synergies future 
growth prospects and staff knowledge expertise customer contacts and security clearances the group tests goodwill impairment for each 
cgu annually or more frequently if there are indications that goodwill might be impaired  
key assumptions 
the value in use calculations use discounted future cash flows based on the most recent forecasts from the fiveyear corporate plan 
the fiveyear corporate plan is approved by the board cash flows for periods beyond this period are extrapolated based on the final year 
of the corporate plan with a terminal growth rate assumption applied  
terminal growth rates  
the specific plans for each of the cgus have been extrapolated using a terminal growth rate of 15 to 25 2009 25 to 30 growth 
rates are formed based on management’s estimates which take into consideration the longterm nature of the industry in which the cgus 
operate and external forecasts as to the likely growth of the industry in the longer term 
discount rates 
the group’s weighted average cost of capital wacc was used as a basis in determining the discount rate to be applied adjusted for risks 
specific to the geographical location of cgus as appropriate on a pretax basis the pretax discount rate applied for qna cgus was 
118–121 and a range from 93–169 for emea cgus  
impairment 
the in year impairment charge of £501m arises in three cgus technology solutions in qna £114m mission solutions in qna £308m 
and australia in emea £79m 
defence markets remain challenging as a result of the economic environment and both cgus have seen a moderation in market growth 
expectations which has led the group to reevaluate the growth forecasts for the cgu including the longterm growth rate additionally 
technology solutions in qna has been affected by the finalisation of the strategy for the us’s continued involvement in afghanistan and 
the completion of key department of defense dod leadership appointments 
the australian cgu impairment reflects an overall moderation in anticipated market growth which has in turn had an impact on the growth 
assumptions for this cgu and an associated moderation in the terminal growth rate  
  financial statements
notes to the financial statements continued
64 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 65
 
 
64 
11 goodwill continued 
significant cgus 
sensitivity analysis shows that both the discount rate and growth rate assumptions are key components of the outcome of the recoverable 
amount  
the technology solutions cgu was impaired during the year by £114m if the discount rate assumption was increased by 1 the 
impairment charge would have increased by £281m to £395m or conversely should the discount rate have been 1 lower this would 
have given the cgu headroom of £283m sensitivity analysis shows that a move of up to 1 in the terminal growth rate could result in 
an impairment of £338m or headroom of £203m the resulting carrying value of goodwill for this cgu at 31 march 2010 was £1207m 
the systems engineering cgu had headroom with current assumptions of £1091m the group’s sensitivity analysis shows that the 
pretax discount rate would have to increase to 166 or the terminal growth rate to decline to 14 to cause the carrying value of 
the cgu to exceed its recoverable amount the carrying value of goodwill for this cgu as at 31 march 2010 was £1614m  
during the period the mission solutions business was impaired by £308m if discount rates were assumed to be 1 higher the impairment 
charge would have increased by £534m to £842m conversely if discount rates were 1 lower the cgu would have had a headroom of 
£473m the sensitivity to terminal growth rates would imply that a decrease of 1 would result in a further impairment of £438m or an 
increase of 1 would show the cgu with headroom of £329m the resulting carrying value of goodwill for this cgu at 31 march 2010 
was £2404m  
in emea the managed services and consulting cgus have significant headroom an increase in either the discount rate or decrease in the 
terminal growth rate by 1 would not cause the net operating assets to exceed their recoverable amount 
the technology solutions cgu in emea has headroom under current assumptions of £217m if the discount rate was to decrease 
or increase by 1 the cgu would have headroom of £439m or £57m respectively similarly if terminal growth rates were to decrease 
or increase by 1 headroom would be £93m or £391m respectively  
during the period the australia cgu was impaired by £79m if discount rates were assumed to be 1 higher the impairment charge would 
have increased by £07m to £86m conversely if discount rates were 1 lower the extent of the impairment would have been reduced by 
£08m to £71m the sensitivity to terminal growth rates would imply that a decrease of 1 would result in a further impairment of £05m or 
an increase of 1 would reduce the impairment by £06m 
the directors have not identified any other likely changes in other significant assumptions since 31 march 2010 and the signing of the 
financial statements that would cause the carrying value of the recognised goodwill to exceed its recoverable amount   64 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 65
 
 
65
12 intangible assets 
year ended 31 march 2010      
all figures in £ million note 
acquired  
intangible 
assets 
development 
costs 
other  
intangible  
assets total 
cost      
at 1 april 2009  2215 109 344 2668 
additions – internally developed  – 06 – 06 
additions – purchased  – – 56 56 
additions – recognised on acquisitions  13 160 – – 160 
disposals  – 02 43 45 
disposals – recognised on divestments  05 – 08 13 
transfers  – 21 14 35 
foreign exchange  82 – 02 84 
at 31 march 2010   2288 134 361 2783 
      
amortisation and impairment      
at 1 april 2009  860 45 121 1026 
amortisation charge for the year  261 30 83 374 
impairment in year  – – 33 33 
disposals  – 02 31 33 
disposals – recognised on divestments  05 – 04 09 
foreign exchange  24 – 01 25 
at 31 march 2010  1092 73 201 1366 
net book value at 31 march 2010  1196 61 160 1417 
 
 
year ended 31 march 2009      
all figures in £ million note 
acquired  
intangible 
assets 
development 
costs 
other  
intangible  
assets total 
cost      
at 1 april 2008  1194  107 318 1619 
additions – internally developed  –  02 01 03 
additions – purchased  –  – 22 22 
additions – recognised on acquisitions  13 534  – – 534 
disposals  03  – 01 04 
foreign exchange  490  – 04 494 
at 31 march 2009  2215  109 344 2668 
      
amortisation and impairment      
at 1 april 2008  452  21 55 528 
amortisation charge for the year  235  24 65 324 
disposals  –  – 01 01 
foreign exchange  173  – 02 175 
at 31 march 2009  860  45 121 1026 
net book value at 31 march 2009  1355  64 223 1642 
 acquired intangible assets principally consist of the value of attributed to customer contracts including orders backlog and certain customer relationships 
a minor element is attributed to technology patentslicences and brand names no value is attributed to customer relationships where shortterm contracts 
are held that are subject to regular recompetition 
  financial statements
notes to the financial statements continued
66 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 67
 
 
66 
13 business combinations 
in the year to 31 march 2010 the group acquired 100 of the issued share capital of cyveillance inc if this acquisition had been completed 
as at 1 april 2009 group revenue for the year ended 31 march 2010 would have increased by £20m to £16274m and group loss before 
tax would have reduced by £01m to £660m  
acquisitions in the year to 31 march 2010 
all figures in £ million      contribution postacquisition 
company acquired 
date 
acquired 
cash 
consideration
1
deferred 
consideration
4
goodwill 
fair value  
of assets 
acquired
2
revenue 
operating  
profit 
qna acquisitions        
cyveillance inc 1 july 2009 261 04 191 74 59 09 
current year acquisitions   261 04 191 74 59 09 
deferred consideration in respect 
of prior year acquisitions
3
        
its corporation   62 – – – – – 
novare services pty ltd  04 – – – – – 
spectro inc  08 – – – – – 
dominion technology resources inc   128 – – – – – 
total  463 04 191 74 59 09 
1
 initial cash consideration includes acquisition costs and price adjustments for working capital and net debt 
2
 fair value of assets acquired are provisional 
3
 cash consideration paid in the year includes deferred consideration amounts in respect of prior year acquisitions as a result of payment criteria being met 
4
 deferred consideration of £04m has been recognised on the acquisition of cyveillance inc based upon the estimated payment to be made the maximum 
amount payable is 40m depending on the financial performance of cyveillance in the twoyear period ending 31 december 2010  
 
set out below are the allocations of purchase consideration assets and liabilities of the acquisitions made in the year and the adjustments 
required to the book values of the assets and liabilities in order to present the net assets of these businesses at fair value and in accordance 
with group accounting policies these allocations and adjustments are provisional there were no adjustments to the provisional fair values 
at 31 march 2009 
 
acquisition in the year to 31 march 2010     
all figures in £ million note book value 
fair value 
adjustment 
fair value at 
acquisition 
intangible assets 12 – 160 160 
property plant and equipment 14 04 – 04 
trade and other receivables  10 – 10 
other current assets  07 – 07 
trade and other payables  02 – 02 
cash and cash equivalents  07 – 07 
deferred tax liability 24 – 63 63 
other liabilities   49 – 49 
net assets acquired  23 97 74 
goodwill    191 
    265 
     
consideration satisfied by     
cash    256 
deferred consideration    04 
total consideration before costs    260 
related costs of acquisition    05 
    265 
 
the fair value adjustments include £160m in relation to the recognition of acquired intangible assets less the recognition of a deferred tax 
liability of £63m in relation to these intangible assets 
  66 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 67
 
 
67
13 business combinations continued 
acquisitions in the year to 31 march 2009  
all figures in £ million      contribution postacquisition 
company acquired 
date 
acquired 
initial cash 
consideration
1
 
deferred 
consideration goodwill 
fair value  
of assets 
acquired revenue 
operating  
profit 
qna acquisitions        
spectro inc 23 july 08 62  05 22 45  59 09 
dominion technology resources inc 17 oct 08 742  226 336 632  160 16 
emea acquisitions        
commerce decisions ltd 13 oct 08 125  – 64 61  24 10 
current year acquisitions  929  231 422 738  243 35 
update in respect of acquisitions  
made in the year to 31 march 2009  –  43 43 –  – – 
total  929  188 379 738  243 35 
1
 initial cash consideration includes acquisition costs and price adjustments for working capital and net debt 
 
set out below are the allocations of purchase consideration assets and liabilities of the acquisitions made in the year and the adjustments 
required to the book values of the assets and liabilities in order to present the net assets of these businesses at fair value and in accordance 
with group accounting policies 
 
acquisitions in the year to 31 march 2009     
all figures in £ million note book value 
fair value 
adjustment 
fair value at 
acquisition 
intangible assets 12 – 534 534 
property plant and equipment 14 07 02 09 
deferred tax asset 24 – 346 346 
trade and other receivables  81 – 81 
other current assets  17 – 17 
trade and other payables  73 20 93 
cash and cash equivalents  37 – 37 
debt and other borrowings  – – – 
deferred tax liability 24 – 193 193 
net assets acquired  69 669 738 
goodwill    422 
    1160 
     
consideration satisfied by     
cash    896 
deferred consideration    231 
total consideration before costs    1127 
related costs of acquisition    33 
    1160 
  financial statements
notes to the financial statements continued
68 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 69
 
 
68 
14 property plant and equipment 
year ended 31 march 2010      
all figures in £ million 
land and 
buildings 
plant  
machinery 
 and vehicles 
computers 
and office 
equipment 
assets under 
construction total 
cost       
at 1 april 2009 3022 1366 625 244 5257 
additions 19 34 34 148 235 
acquisition of subsidiaries 01 – 03 – 04 
disposals 35 10 22 48 115 
disposals – recognised on divestments 17 28 13 – 58 
transfers 57 159 30 221 35 
foreign exchange  01 04 09 01 15 
at 31 march 2010 3046 1517 588 122 5273 
      
depreciation      
at 1 april 2009 645 901 387 – 1933 
charge for the year 118 167 66 – 351 
impairment 207 33 – – 240 
disposals 35 10 22 – 67 
disposals – recognised on divestments 10 18 10 – 38 
transfers 31 01 30 – – 
foreign exchange  – – 01 – 01 
at 31 march 2010 956 1072 390 – 2418 
net book value at 31 march 2010 2090 445 198 122 2855 
 
impairment of land and buildings of £207m relates to vacant owned properties within the emea sector where there are no external tenants 
following vacancies arising in the year plant machinery and vehicles impairments of £33m relates to the impairment of assets which are 
no longer generating a return both these impairments relate to reductions in the carrying value of these assets to their recoverable amounts  
 
year ended 31 march 2009      
all figures in £ million 
land and 
buildings 
plant  
machinery 
 and vehicles 
computers 
and office 
equipment 
assets under 
construction total 
cost       
at 1 april 2008 3068 1155 420 220 4863 
additions 09 55 45 182 291 
acquisition of subsidiaries 03 03 03 – 09 
disposals 18 08 20 – 46 
transfers 62 131 92 161 – 
foreign exchange  22 30 85 03 140 
at 31 march 2009 3022 1366 625 244 5257 
      
depreciation      
at 1 april 2008 546 739 254 – 1539 
charge for the year 116 147 72 – 335 
disposals 17 06 20 – 43 
transfers 17 03 19 – 01 
foreign exchange  17 24 62 – 103 
at 31 march 2009 645 901 387 – 1933 
net book value at 31 march 2009 2377 465 238 244 3324 
 
assets held under finance leases capitalised and included in computers and equipment have 
• a cost of £nil 31 march 2009 £52m  
• aggregate depreciation of £nil 31 march 2009 £52m and 
• a net book value of £nil 31 march 2009 £nil  
under the terms of the business transfer agreement with the mod certain restrictions have been placed on freehold land and buildings  
and certain plant and machinery related to them these restrictions are detailed in note 35  68 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 69
 
 
69
15 other financial assets 
as at 31 march    
all figures in £ million 2010 2009 
derivative financial instruments 48 01 
net investment in finance lease  30 30 
total current financial assets 78 31 
   
net investment in finance lease 100 116 
derivative financial instruments – – 
total noncurrent financial assets 100 116 
total financial assets 178 147 
 
 
16 equity accounted investments 
year ended 31 march 2010    
all figures in £ million 
 joint ventures 
and associates 
financial results 
group net share 
of joint ventures 
and associates 
revenue 189 59 
profit after tax 05 02 
   
noncurrent assets 12 04 
current assets 69 21 
 81 25 
current liabilities 47 15 
noncurrent liabilities 02 01 
 49 16 
net assets 32 09 
 
 
year ended 31 march 2009   
all figures in £ million 
 joint ventures 
and associates 
financial results 
group net share 
of joint ventures 
and associates 
revenue 142 52 
loss after tax 147 72 
   
noncurrent assets 07 02 
current assets 64 22 
 71 24 
current liabilities 35 13 
noncurrent liabilities 15 04 
 50 17 
net assets 21 07 
 
the unrecognised share of losses of equity accounted investments at 31 march 2010 was £nil 31 march 2009 £nil during the year ended 
31 march 2010 there were sales to joint ventures of £nil 2009 £26m and to associates of £27m 2009 £nil at the year end there were 
outstanding receivables from joint ventures of £nil 2009 £nil and £03m 2009 £nil from associates there were no other related party 
transactions between the group and its joint ventures and associates in the year  financial statements
notes to the financial statements continued
70 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 71
 
 
70 
17 other noncurrent investments 
all figures in £ million 2010 2009 
available for sale investments at 1 april  157 147 
cash repaidinvested in year – 06 
noncash additions in year  – 56 
impairment charged to income statement in year 108 50 
foreign exchange 01 10 
available for sale investments at 31 march 48 157 
 
impairments in the year relate to four unquoted investments due to a decline in the future growth prospects of the markets in which these 
investments operate  
 
 
18 inventories 
as at 31 march    
all figures in £ million 2010 2009 
raw materials 44 34 
work in progress 328 264 
finished goods 426 385 
 798 683 
 
included in work in progress is an amount of £308m 2009 £196m relating to deferred precontract costs relating to the dtr programme 
which are recoverable in more than one year  
 
 
19 trade and other receivables 
as at 31 march    
all figures in £ million 2010 2009 
trade debtors 2130 3312 
amounts recoverable under contracts 1807 1691 
other debtors 99 148 
prepayments 202 178 
 4238 5329 
 
in determining the recoverability of trade receivables the group considers any changes in the credit quality of the trade receivable from 
the date credit was granted up to the reporting date credit risk is limited due to the high percentage of turnover being derived from uk and 
us defence and other government agencies accordingly the directors believe there is no further credit provision required in excess of the 
allowance for doubtful debts as at 31 march 2010 the group carried a provision for doubtful debts of £88m 2009 £59m 
 
ageing of past due but not impaired receivables 
  
all figures in £ million 2010 2009 
up to 3 months 294 836 
over 3 months 28 91 
 322 927 
  70 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 71
 
 
71
19 trade and other receivables continued 
movements on the group doubtful debt provision   
all figures in £ million 2010 2009 
at 1 april  59 62 
created 56 37 
released 27 40 
utilised – – 
at 31 march  88 59 
 
the maximum exposure to credit risk in relation to trade receivables at the reporting date is the fair value of trade receivables the group 
does not hold any collateral as security 
 
 
20 current asset investments 
as at 31 march    
all figures in £ million 2010 2009 
available for sale investment  23 06 
 
at 31 march 2010 the group held a 49 shareholding in psivida limited 31 march 2009 49 a company listed on nasdaq and the 
australian and frankfurt stock exchanges the investment is held at fair value of £23m 2009 £06m using the closing share price at 
31 march 2010 of a420 per share 31 march 2009 a130 per share during the year the increase in value of £17m 2009 reduction 
£07m has been recognised as a gain in the statement of comprehensive income  
 
 
21 cash and cash equivalents 
as at 31 march    
all figures in £ million 2010 2009 
cash 572 1282 
cash equivalents 67 1339 
total cash and cash equivalents 639 2621 
 
at 31 march 2010 £44m 31 march 2009 £45m of cash was held by the group’s captive insurance subsidiary including £36m 
2009 £35m which is restricted in its use 
 
 
22 trade and other payables  
as at 31 march    
all figures in £ million 2010 2009 
payments received on account 699 828 
trade creditors 480 713 
other tax and social security 369 369 
other creditors 873 664 
accruals and deferred income 1543 1898 
total current trade and other payables 3964 4472 
   
payments received on account 237 293 
other payables 115 194 
total noncurrent trade and other payables 352 487 
total trade and other payables 4316 4959 
  financial statements
notes to the financial statements continued
72 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 73
 
 
72 
23 provisions  
year ended 31 march 2010    
all figures in £ million reorganisation other
1
 total 
at 1 april 2009 09 122 131 
created in year 441 79 520 
released in year – 41 41 
utilised in year 354 16 370 
at 31 march 2010 96 144 240 
    
current liability 96 65 161 
noncurrent liability  – 79 79 
at 31 march 2010  96 144 240 
1
 other provisions comprise legal environmental property and other liabilities 
   
 
 
year ended 31 march 2009    
all figures in £ million reorganisation other total 
at 1 april 2008 293 164 457 
created in year – 63 63 
released in year 11 40 51 
utilised in year 273 65 338 
at 31 march 2009 09 122 131 
    
current liability 09 34 43 
noncurrent liability  – 88 88 
at 31 march 2009 09 122 131 
 
 
24 deferred tax 
deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset and there is an intention to settle the 
balances net 
movements in the deferred tax assets and liabilities are shown below 
year ended 31 march 2010 
deferred tax asset     
all figures in £ million 
pension 
liability  hedging other total 
at 1 april 2009 294 66 220 580 
created  118 29 64 153 
prior year adjustment  – – 13 13 
foreign exchange – – 11 11 
transfer – – 68 68 
gross deferred tax asset at 31 march 2010 412 37 354 803 
less liability available for offset     516 
net deferred tax asset at 31 march 2010    287 
  72 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 73
 
 
73
24 deferred tax continued 
the net deferred tax asset created in the year relating to the pension liability includes £169m released to equity 2009 £341m released 
to equity 
deferred tax liability  
all figures in £ million 
accelerated tax 
depreciation and 
amortisation  
at 1 april 2009 669 
acquisitions  63 
created  102 
prior year adjustment 11 
foreign exchange 17 
gross deferred tax liability at 31 march 2010 624 
less asset available for offset  516 
net deferred tax liability at 31 march 2010 108 
 
at the balance sheet date the group had unused tax losses of £1171m 2009 £775m potentially available for offset against future profits 
no deferred tax asset has been recognised in respect of this amount due to uncertainty over the timing of its utilisation these losses can be 
carried forward indefinitely 
 
year ended 31 march 2009 
deferred tax asset     
all figures in £ million pension liability  hedging other total 
at 1 april 2008 65 12 118 195 
created 229 47 154 430 
prior year adjustment  – 07 52 45 
gross deferred tax asset at 31 march 2009 294 66 220 580 
less liability available for offset     580 
net deferred tax asset at 31 march 2009    – 
 
 
deferred tax liability  
all figures in £ million 
accelerated tax 
depreciation and 
amortisation  
at 1 april 2008 503 
acquisitions  153 
created  262 
foreign exchange 57 
gross deferred tax liability at 31 march 2009 669 
less asset available for offset  580 
net deferred tax liability at 31 march 2009 89 
 
 
25 other financial liabilities – current 
as at 31 march    
all figures in £ million 2010 2009 
bank overdraft 32 – 
deferred financing costs 07 07 
finance lease creditor 28 28 
derivative financial instruments 36 200 
  89 221 
 
further analysis of the terms and maturity dates for financial liabilities are set out in note 27  financial statements
notes to the financial statements continued
74 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 75
 
 
74 
26 other financial liabilities – noncurrent 
as at 31 march    
all figures in £ million 2010 2009 
bank loan 1437 3862 
deferred financing costs 09 16 
 1428 3846 
us 135m 544 private placement repayable december 2013 904 955 
us 62m 713 private placement repayable february 2016 419 433 
us 125m 55 private placement repayable december 2016 834 880 
us 238m 762 private placement repayable february 2019 1610 1662 
finance lease creditor 97 114 
derivative financial instruments 10 36 
  5302 7926 
 
the bank loan reflects drawdowns under the revolving credit facility comprising loans of us210m and 6m after the effect of interest 
rate swaps the loan has an average fixed rate of 435 until september 2010 when it returns to floating rate  
all the us private placements have been issued as fixed rate bonds and have not been converted to floating rate further analysis of the 
terms and maturity dates for financial liabilities are set out in note 27 
 
 
27 financial risk management 
the group’s international operations and debt financing expose it to financial risks which include the effects of changes in foreign exchange 
rates interest rates credit risks and liquidity risks 
capital treasury and risk management policies are set by the board setting out specific guidelines on financial risks and the use of financial 
instruments to manage risk the instruments and techniques used to manage exposures include foreign currency derivatives and interest 
rate derivatives group treasury monitors financial risks and compliance with risk management policies these policies are discussed further 
in the chief financial officer’s review on pages 1215 
 
a fair values of financial instruments  
effective 1 april 2009 the group adopted the amendment to ifrs7 financial instruments disclosures for the financial instruments that are 
measured in the balance sheet at fair value this requires disclosure of fair value measurements by level of the following fair value 
measurement hierarchy 
level 1 quoted prices unadjusted in active markets for identical assets or liabilities 
level 2 inputs other than quoted prices including within level 1 that are observable for the asset or liability either directly ie as prices 
or indirectly ie derived from prices and  
level 3 inputs for the assets or liability that are not based on observable market data ie unobservable inputs 
the following table presents the group’s assets and liabilities that are measured at fair value at 31 march 2010 
 note level 1 level 2 level 3 2010 total 
assets 
current derivative financial instruments 
 
15 
 
– 
 
48 
 
– 
 
48 
current other investments 20 23 – – 23 
non current other investments 
 
17 
 
– 
 
– 
 
48 
 
48 
 
liabilities 
current derivative financial instruments 
 
25 
 
– 36 – 
 
36 
noncurrent derivative financial instruments 26 – 10 – 10 
total  23 02 48 73 
  74 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 75
 
 
75
27 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 due to 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 marketbased interest rates translated at the yearend rates except for unlisted fixed asset investments where 
a fair value equals carrying value  
all financial assets and liabilities have a fair value identical to book value at 31 march 2010 and 31 march 2009 except where noted below 
as at 31 march 2010         
all figures in £ million 
 
 
note 
financial 
asset fair 
value 
through 
income 
statement 
available 
for sale 
loans and 
receivables 
financial 
liabilities at 
amortised 
cost 
derivatives 
used as 
hedges 
total 
carrying 
value 
total fair 
value 
financial assets 
noncurrent 
net investment in finance lease  31 – – 100 – – 100 114 
equity accounted investments 16 – 09 – – – 09 09 
other investments 
current 
17 – 48 – – – 48 48 
derivative financial instruments 15 48 – – – – 48 48 
net investment in finance leases 31 – – 30 – – 30 30 
trade and other receivables 19 – – 4238 – – 4238 4238 
investments 20 – 23 – – – 23 23 
cash and cash equivalents 21 – – 639 – – 639 639 
  48 80 5007 – – 5135 5149 
 
financial liabilities 
noncurrent 
trade and other payables  
 
 
22 – – – 
 
 
352 – 352 352 
derivative financial instruments 26 – – – – 10 10 10 
bank and other borrowings 26 – – – 5195 – 5195 5527 
finance lease 31 – – – 97 – 97 107 
current         
trade and other payables 22 – – – 3964 – 3964 3964 
derivative financial instruments 25 – – – – 36 36 36 
finance lease 31 – – – 28 – 28 28 
bank overdraft and finance costs 25 – – – 25 – 25 25 
 
 
– – – 9661 46 9707 10049 
total 
 
48 80 5007 9661 46 4572 4900 
  financial statements
notes to the financial statements continued
76 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 77
 
 
76 
27 financial risk management continued 
as at 31 march 2009         
all figures in £ million 
 
 
note 
financial 
asset fair 
value 
through 
income 
statement 
available 
for sale 
loans and 
receivables 
financial 
liabilities at 
amortised 
cost 
derivatives 
used as 
hedges 
total 
carrying 
value 
total fair 
value 
financial assets 
noncurrent 
net investment in finance lease  31 – – 116 – – 116 123 
equity accounted investments 16 – 07 – – – 07 07 
other investments 
current 
17 – 157 – – – 157 157 
derivative financial instruments 15 01 – – – – 01 01 
net investment in finance leases 31 – – 30 – – 30 30 
trade and other receivables 19 – – 5329 – – 5329 5329 
investments 20 – 06 – – – 06 06 
cash and cash equivalents 21 – – 2621 – – 2621 2621 
  01 170 8096 – – 8267 8274 
financial liabilities 
noncurrent 
trade and other payables  
 
 
22 – – – 487 – 487 487 
derivative financial instruments 26 – – – – 36 36 36 
bank and other borrowings 26 – – – 7776 – 7776 7568 
finance lease 31 – – – 114 – 114 112 
current         
trade and other payables 22 – – – 4472 – 4472 4472 
derivative financial instruments 25 – – –  200 200 200 
finance lease 31 – – – 28 – 28 28 
bank overdraft and finance costs 
25 
– – – 07 – 07 07 
 
 
– – – 12870 236 13106 12896 
total 
 
01 170 8096 12870 236 4839 4622 
 
market values where available have been used to determine fair values where market values are not available fair values have been 
calculated by discounting cash flows to net present values using prevailing marketbased interest rates translated at yearend exchange 
rates except for unlisted fixed asset investments where a fair value equals book value 
  76 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 77
 
 
77
27 financial risk management continued 
b interest rate risk 
the group operates an interest rate policy designed to optimise interest cost and reduce volatility in reported earnings the group’s current 
policy is to require rates to be fixed for 30–80 of the level of borrowings but with a maximum 100 fixed for no more than 12 months 
this is achieved primarily through fixed rate borrowings and also through the use of interest rate swaps at 31 march 2010 98 2009 73 
of the group’s borrowings were at fixed rates after adjusting for interest rate swaps 
 
financial assetsliabilities        
as at 31 march 2010   
financial asset financial liability 
 
all figures in £ million 
fixed or 
capped floating 
noninterest 
bearing 
fixed or 
capped floating 
noninterest 
bearing 
sterling 130 563 105 125 03 08 
us dollar – 44 – 5152 01 38 
euro – 14 – – 52 – 
australian dollar – 18 23 – 12 – 
 130 639 128 5277 68 46 
 
as at 31 march 2009 
  
 financial asset financial liability 
all figures in £ million 
fixed or 
capped floating 
noninterest 
bearing 
fixed or 
capped floating 
noninterest 
bearing 
sterling 146 2161 165 142 977 185 
us dollar – 426 – 5811 696 51 
euro – 14 – – 116 – 
australian dollar – 20 06 – 169 – 
 146 2621 171 5953 1958 236 
 
floating rate financial assets attract interest based on the relevant national libid equivalent floating rate financial liabilities bear interest 
at the relevant national libor equivalent trade and other receivablespayables 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 
 2010 2009 
 
fixed or 
capped 
 £m 
weighted 
average  
interest rate  
 
weighted 
average years  
to maturity 
fixed or 
capped 
£m 
weighted 
average  
interest rate 
 
weighted 
average years  
to maturity 
financial assets 
sterling 130 134 55 146 134 65 
financial liabilities       
sterling 125 121 55 142 121 65 
us dollar 5152 59 48 5811 58 55 
  5277 61 48 5953 59 55 
 
sterling assets and 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 majority of the groups bank and private placement borrowings were fixed through a combination of interest rate swaps and fixed rate 
debt the notional principal amount of the outstanding interest rate swap contracts at 31 march 2010 was £1384m or us210m 31 march 
2009 £1881m or us270m the swaps have the economic effect of converting floating rate us dollar borrowings into fixed rate us dollar 
borrowings and are accounted for as cash flow hedges 
  financial statements
notes to the financial statements continued
78 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 79
 
 
78 
27 financial risk management continued 
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 table below shows the groups currency exposures 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 other than certain nonsterling borrowings treated as hedges 
of net investments in overseas entities 
functional currency of the operating company  
 net foreign currency monetary assetsliabilities 
all figures in £ million us dollar euro australian dollar other total 
31 march 2010 – sterling 51 14 41 04 110 
31 march 2009 – sterling 56 14 06 09 85 
 
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 
2010 against sterling are net us dollars sold of £62m 94m and net euros sold of £125m  141m 
translational currency exposure 
the group has significant investments in overseas operations particularly in the united states as a result the sterling value of the group’s 
balance sheet can be significantly affected by movement in exchange rates the group seeks to mitigate the effect of these translational 
exposures by matching the net investment in overseas operations with borrowings denominated in their functional currencies unless the cost 
of such hedging activity is uneconomic this is achieved by borrowing in the local currency or in some cases indirectly through the use of 
forward foreign exchange contracts 
net investment hedges 
the group had one 6 million currency loan designated as a net investment hedge at 31 march 2010 but no swap contracts during the 
year the group dedesignated currency loans of 210m which had previously been used to hedge translational currency exposures and 
entered into offsetting currency swaps to eliminate any future exchange exposure arising from this loan 
 
d financial credit risk 
the group is exposed to credit related losses in the event of nonperformance by counterparties to financial instruments but does not 
currently expect any counterparties to fail to meet their obligations credit risk is mitigated by the boardapproved policy of only selecting 
counterparties with a strong investment grade longterm credit rating for cash deposits normally at least aa – or equivalent in the normal 
course of business the group operates notional cash pooling systems where a legal right of setoff applies 
the maximum creditrisk exposure in the event of other parties failing to perform their obligations under financial assets excluding trade and 
other receivables totals £802m at 31 march 2010 the maximum exposure with a single bank for deposits and cash was £419m whilst the 
maximum mark to market exposure for derivatives was £48m these exposures were with different financial institutions rated aa or better 
  78 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 79
 
 
79
27 financial risk management continued 
e liquidity risk 
borrowing facilities 
as at 31 march 2010 the group had a revolving credit facility rcf of £500m 2009 £500m the rcf is contracted until 2012 and 
is utilised as shown in the table below 
 
interest rate 
 
total 
£m 
drawn 
£m 
undrawn 
£m 
committed facilities 31 march 2010 
libor plus 
03 5000 1437 3563 
freely available cash and cash equivalents    639 
available funds 31 march 2010    4202 
     
committed facilities 31 march 2009  5000 3862 1138 
freely available cash and cash equivalents    2586 
available funds 31 march 2009    3724 
 
in addition to the above borrowing facilities there is debt of £3767m 2009 £3930m under the us private placement  
gross contractual cash flows for borrowings and other financial liabilities 
the following are the 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 
as at 31 march 2010       
all figures in £ million book value 
contractual  
cash flows 1 year or less 12 years 35 years 
more than  
5 years 
nonderivative financial liabilities       
trade and other payables 4316 4316 3964 352 – – 
bank overdrafts 32 32 32 – – – 
us private placement debt 3767 5499 242 242 1569 3446 
multicurrency revolving facility 1437 1437 – – 1437 – 
recapitalisation fee 16 – – – – – 
finance leases 125 155 28 28 85 14 
derivative financial liabilities       
interest rate swaps – cash flow hedges 38 38 28 08 02 – 
forward foreign currency contracts – cash 
flow hedges 08 08 08 – – – 
 9707 11485 4302 630 3093 3460 
 
 
as at 31 march 2009       
all figures in £ million book value 
contractual  
cash flows 1 year or less 12 years 35 years 
more than  
5 years 
nonderivative financial liabilities       
trade and other payables 4959 4959 4472 155 332 – 
bank overdrafts – – – – – – 
us private placement debt 3930 6017 207 256 768 4786 
multicurrency revolving facility 3862 3897 62 – 3835 – 
recapitalisation fee 23 – – – – – 
loan notes – – – – – – 
finance leases 142 183 28 28 84 43 
derivative financial liabilities       
interest rate swaps – cash flow hedges 80 80 50 22 08 – 
forward foreign currency contracts – cash 
flow hedges 13 13 06 07 
 
– 
 
– 
forward foreign currency contracts – net 
investment hedges 143 143 143 – 
 
– 
 
– 
 13106 15292 4968 468 5027 4829 
  financial statements
notes to the financial statements continued
80 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 81
 
 
80 
27 financial risk management continued 
f derivative financial instruments 
as at 31 march    
 2010 2009 
all figures in £ million 
asset 
gains 
liability 
losses net  
asset 
gains 
liability 
losses net 
interest rate swaps – 38 38 – 80 80 
forward foreign currency contracts – cash flow hedges – 08 08 01 20 19 
forward foreign currency contracts – not designated as hedge 
accounted 48 – 48 – – – 
forward foreign currency contracts – net investment hedges – – – – 136 136 
derivative assetsliabilities at the end of the year 48 46 02 01 236 235 
 
 
as at 31 march   
 2010 2009 
all figures in £ million 
asset 
gains 
liability 
losses net 
asset 
gains 
liability 
losses net 
expected to be recognised       
in one year or less 48 36 12 01 199 198 
between one and two years – 08 08 – 29 29 
between two and five years – 02 02 – 08 08 
 48 46 02 01 236 235 
 
the forward currency contracts that are not hedge accounted comprise derivatives entered into during the period to offset the net investment 
hedges dedesignated as explained earlier in note 27c 
 
g maturity of financial liabilities 
as at 31 march 2010     
all figures in £ million 
trade 
and other 
payables 
bank 
borrowings 
and loan notes  
 finance leases and  
derivative financial 
instruments total 
due in one year or less 3964 25 64 4053 
due in more than one year but not more than two years 352 07 26 371 
due in more than two years but not more than five years  – 1435 67 1502 
due in more than five years – 3767 14 3781 
  4316 5220 171 9707 
 
 
as at 31 march 2009      
all figures in £ million 
trade 
and other 
payables 
bank 
borrowings 
 and loan notes  
 finance leases and  
derivative financial  
instruments total 
due in one year or less 4472 07 228 4693 
due in more than one year but not more than two years 155 07 49 197 
due in more than two years but not more than five years  332 3853 74 4259 
due in more than five years – 3930 27 3957 
  4959 7769 378 13106 
  80 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 81
 
 
81
27 financial risk management continued 
h sensitivity analysis 
the group’s sensitivity to changes in market rates on financial assets and liabilities as at 31 march 2010 is set out in the table below 
the amounts generated from the sensitivity analysis are forwardlooking estimates of market risk assuming certain adverse market 
conditions occur actual results in the future may differ materially from those projected results due to developments in the global financial 
markets which may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the table below 
which therefore should not be considered 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 percent 100 basis points 
in the specific rate of interest applicable to each class of financial instruments from the levels effective at 31 march 2010 with all other 
variables remaining constant the estimated changes for foreign exchange rates are based on an instantaneous 10 percent weakening or 
strengthening in sterling against all other currencies from the levels applicable at 31 march 2010 with all other variables remaining constant 
such analysis is for illustrative purposes only – in practice market rates rarely change in isolation 
 
as at 31 march 2010     
 1 decrease in interest rates 10 weakening in sterling 
all figures in £ million equity 
profit  
before tax equity 
profit  
before tax 
sterling – 03 – – 
us dollar 31 – 418 34 
other – – 01 – 
 
 
 1 increase in interest rates 10 strengthening in sterling 
all figures in £ million equity 
profit  
before tax equity 
profit  
before tax 
sterling – 05 – – 
us dollar 31 – 342 28 
other – – 01 – 
 
 
as at 31 march 2009     
 1 decrease in interest rates 10 weakening in sterling 
all figures in £ million equity 
profit  
before tax equity 
profit  
before tax 
sterling – 11 – – 
us dollar 01 06 685 39 
other 01 02 27 01 
 
  financial statements
notes to the financial statements continued
82 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 83
 
 
82 
28 cash flows from operations 
all figures in £ million  
year ended 
31 march 2010 
year ended  
31 march 2009 
restated
lossprofit after tax for the period  633 936 
adjustments for    
taxation   28 204 
net finance costs  346 214 
lossgain on business divestments and impairment of investments  62 73 
amortisation of purchased or internally developed intangible assets  113 89 
amortisation of intangible assets arising from acquisitions and impairments  795 235 
depreciation and impairment of property plant and equipment  591 335 
share of post tax profitloss of equity accounted entities  02 72 
retirement benefit obligations deficit payments  130 – 
net movement in provisions  109 326 
  1223 1686 
    
increase in inventories  131 29 
decrease in receivables  899 44 
decreaseincrease in payables  299 51 
changes in working capital  469 66 
cash generated from operations   1692 1752 
add back cash outflow relating to emea reorganisation  354 270 
net cash flow from operations before emea reorganisation costs  2046 2022 
 restatement relates to the transfer of the finance element of the ias 19 pension cost totalling a net £34m credit to the income statement to the finance income 
and expense lines  
 
 
29 reconciliation of net cash flow to movement in net debt 
all figures in £ million note 
year ended 
31 march 2010 
year ended  
31 march 2009 
decreaseincrease in cash in the year  2009 2369 
repaymentadditional bank loans   2321  133 
us private placements  – 2104 
loan note repayments  – 05 
settlement of forward contracts designated as net investment hedges  143 – 
payment of deferred financing costs  – 15 
escrow cash receipt  – 42 
capital element of finance lease payments   28 28 
capital element of finance lease receipts  30 30 
change in net debt resulting from cash flows  453 108 
amortisation of deferred financing costs  07 03 
finance lease receivables  14 16 
finance lease payables  11 14 
foreign exchange movements and other noncash movements  356 1687 
movement in net debt in the year  805 1580 
net debt at the start of the year  5379 3799 
net debt at the end of the year  30 4574 5379 
  82 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 83
 
 
83
30 analysis of net debt 
all figures in £ million 
year ended  
31 march 2009 cash flow 
noncash 
movement 
year ended  
31 march 2010 
due within one year     
bank and cash 2621 1977 05 639 
bank overdraft – 32 – 32 
recapitalisation fee 07 – – 07 
finance lease receivables 30 30 30 30 
finance lease payables 28 28 28 28 
derivative financial assets 01 – 47 48 
derivative financial liabilities 200 143 21 36 
  2431 1868 65 628 
due after one year     
bank loan  3862 2321 104 1437 
recapitalisation fee 16 – 07 09 
us private placement 3930 – 163 3767 
finance lease receivables 116 – 16 100 
finance lease payables 114 – 17 97 
derivative financial assets – – – – 
derivative financial liabilities 36 – 26 10 
  7810 2321 287 5202 
total net debt as defined by the group 5379 453 352 4574 
 
 
31 finance leases 
group as a lessor 
the minimum lease receivables under finance leases fall as follows 
 minimum lease payments present value of minimum lease payments 
all figures in £ million 2010 2009 2010 2009 
amounts receivable under finance leases     
within one year 30 30 30 30 
in the second to fifth years inclusive 120 120 89 89 
greater than five years 15 45 11 27 
 165 195   
less unearned finance income 35 49   
present value of minimum lease payments 130 146 130 146 
     
classified as follows     
financial asset – current   30 30 
financial asset – noncurrent   100 116 
   130 146 
 
the group leases out certain buildings under finance leases over a 12year term expiring in 2015  financial statements
notes to the financial statements continued
84 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 85
 
 
84 
31 finance leases continued 
group as a lessee  
the minimum lease payments under finance leases fall due as follows 
 minimum lease payments present value of minimum lease payments 
all figures in £ million 2010 2009 2010 2009 
amounts payable under finance leases     
within one year 28 28 28 28 
in the second to fifth years inclusive 113 113 89 89 
greater than five years 14 42 08 25 
 155 183   
less future finance charges 30 41   
present value of minimum lease payments 125 142 125 142 
     
classified as follows     
financial liability – current   28 28 
financial liability – noncurrent    97 114 
     125 142 
 
the group utilises certain buildings under finance leases average lease terms are typically between two and ten years 31 march 2009 
between two and ten years 
 
 
32 share capital and other reserves 
shares allotted called up and fully paid 
 
ordinary shares of 1p each 
equity 
special share of £1 
nonequity total 
 £ number £ number £ number 
at 1 april 2008 6604764 660476373 1 1 6604765 660476374 
issued in year – – – – – – 
at 31 march 2009 6604764 660476373 1 1 6604765 660476374 
issued in year – – – – – – 
at 31 march 2010 6604764 660476373 1 1 6604765 660476374 
 
except as noted below all shares in issue at 31 march 2010 rank pari passu in all respects 
rights attaching 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 the special share confers certain rights on the holder 
a 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 
b to refer matters to the board or the compliance committee for its consideration in relation to the application of the compliance principles 
c to veto any contract transaction arrangement or activity which the special shareholder considers 
i may result in circumstances which constitute unacceptable ownership influence or control over qinetiq or any other member of the 
qinetiq consolidated group contrary to the defence or security interests of the united kingdom or 
ii would not or does not ensure the effective application of the compliance principles to andor by all members of the qinetiq 
controlled group or would be or is otherwise contrary to the defence or security interests of the united kingdom 
d to require the board to take any action including but not limited to amending the compliance principles or 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 interest of the united kingdom 
e to exercise any of the powers contained in the articles in relation to the compliance committee and 
f 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  84 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 85
 
 
85
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 35 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 shares 
in the capital or profits of qinetiq 
the special shareholder must give consent to a general meeting held on short notice 
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 since the group transitioned to ifrs 
movements on hedge instruments where the hedge is effective are recorded in the hedge reserve until the hedge ceases 
the capital redemption reserve is not distributable and was created following redemption of preference share capital and the bonus issue 
of shares 
own shares 
own shares represent shares in the company that are held by independent trusts and shares held by the employee share ownership plan 
included in retained earnings at 31 march 2010 are 6440256 own shares 2009 7911191 shares 
 
 
33 sharebased payments 
the group operates a number of sharebased payment plans for employees the total sharebased payment expense in the year was £58m 
year to 31 march 2009 £56m 
2003 employee share option scheme 2003 esos 
under the employee share option scheme all employees as at 25 july 2003 received share options which vested when the group completed 
its ipo and had to be exercised within ten years of grant the options are settled by shares  
 2010 2009 
 number 
weighted  
average 
exercise  
price number 
weighted 
average 
exercise 
price 
outstanding at start of the year 924186 23p 1210122 23p 
exercised during the year  103822 23p 207644 23p 
forfeited during the year  105524 23p 78292 23p 
outstanding and exercisable at end of the year 714840 23p 924186 23p 
 
the 2003 esos are equity settled awards and those outstanding at 31 march 2010 had an average remaining life of 33 years 31 march 
2009 43 years in respect of the share options exercised during the year the average share price on the date of exercise was 143p 
the exercise price of the outstanding options was 23p  financial statements
notes to the financial statements continued
86 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 87
 
 
86 
33 sharebased payments continued 
qinetiq share option scheme qsos  
the exercise price of the options is equal to the average market price of the group’s shares on the date of the grant the options vest after 
three years for 8711683 2009 17930229 of the options outstanding at the end of the year the number that will vest is dependent upon 
the growth of earnings per share ‘eps’ over the measurement period 25 of options will vest if eps growth is 225 for the period and 
100 will vest if growth is at least 52 no options will vest if eps growth is below 225 options will vest on a straight line basis if eps 
growth is between 225 and 52 there were no options subject to total shareholder return ‘tsr’ performance targets 2009 173071 
for awards with a tsr performance condition the eps growth target is replaced by a performance target based on qinetiq’s ranking by 
reference to total shareholder return ‘tsr’ against a comparator group of ftse listed companies over a threeyear performance period 
such that a below median ranking will result in nil shares vesting at the median level 30 of the options would vest and the amount vested 
will increase on a straight line basis such that 100 would vest if tsr reaches the upper quartile of the ranking over a threeyear period 
 2010 2009 
 number 
weighted 
average 
exercise price number 
weighted 
average 
exercise price 
outstanding at the start of the year 18103300 1900p 14043584 1870p 
granted during the year – – 4723464 1985p 
forfeited during the year 8966544 1935p 663748 1870p 
outstanding at the end of the year 9136756 1862p 18103300 1900p 
 
qsos grants are equitysettled awards and those outstanding at 31 march 2010 had an average remaining life of 09 years 
2009 10 years the exercise price of the 2009 qsos awards was 199p there were no qsos awards in 2010  
performance share plan psp  
in the year the group made awards of conditional shares to certain uk senior executives under the performance share plan the awards 
vest after three years with 50 of the awards subject to total shareholder return conditions and 50 subject to eps conditions as detailed 
in the qsos tsr and eps conditions above  
 
2010 
number of 
shares  
2009 
number of 
shares 
outstanding at the start of the year 1318213 700804 
granted during the year 3219463 956249 
exercised during the year 215763 – 
forfeited during the year 635290 338840 
outstanding at the end of the year 3686623 1318213 
 
psp are equity settled awards and those outstanding at 31 march 2010 had an average remaining life of 22 years 2009 19 years 
there is no exercise price for these psp awards  
restricted stock units rsu  
in the year the group granted rsu awards to certain senior us employees under the rsu plan the awards vest over 1 year 2 years 
3 years and 4 years half the awards are dependent on achieving qna organic profit growth targets and half on a timebased criteria 
the timebased criteria require the employee to have been in continued service up to the date of vesting qna organic profit growth 
is measured over the most recent financial year compared with the previous financial year with 125 of this element awarded at qna 
organic profit growth rate above 15 100 awarded at 125 75 awarded at 10 and 25 awarded at 5  
 
2010 
number of 
shares 
2009 
number of 
shares 
outstanding at the start of the year 3694277 1657330 
granted during the year 5304501 2358130 
exercised during the year 1087219 94482 
forfeited during the year 590331 226701 
outstanding at the end of the year 7321228 3694277 
 
rsu are equity settled awards and those outstanding at 31 march 2010 had an average remaining life of 17 years 2009 17 years 
there is no exercise price for these rsu awards  
 
  86 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 87
 
 
87
33 sharebased payments continued 
group share incentive plan sip 
under the qinetiq share incentive plan the group offers uk employees the opportunity of purchasing up to £125 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 3 years of the award of the shares there is no exercise 
price for these sip awards 
 
2010 
number of 
matching 
shares 
2009 
number of 
matching 
shares 
outstanding at the start of the year 1252730 871331 
granted during the year 555688 420907 
exercised during the year 430743 – 
forfeited during the year 38132 39508 
outstanding at the end of year 1339543 1252730 
 
sip matching shares are equity settled awards and those outstanding at 31 march 2010 had an average remaining life of 15 years 
2009 15 years there is no exercise price for these sip awards  
group deferred annual bonus plan dab 
under the qinetiq deferred annual bonus plan the group requires certain senior executives to defer part of their annual bonus as shares 
and be entitled to matching awards to a maximum of 11 based upon eps performance the number that will vest is dependent upon the 
growth of eps over the measurement period of 3 years as detailed in the qsos eps conditions above no awards will vest if eps growth 
in the vesting period is below 225 
 
2010 
number of 
matching 
shares 
2009 
number of 
matching 
shares 
outstanding at the start of the year 83539 – 
granted during the year  6859 94137 
exercised during the year 25155 – 
forfeited during the year 53255 10598 
outstanding at the end of the year 11988 83539 
 
dab matching shares are equity settled awards and those outstanding at 31 march 2010 had an average remaining life of 18 years 
2009 23 years there is no exercise price for these dab awards  
 
sharebased award pricing – options 
share options excluding tsr performance related and awards under the deferred annual bonus plan have been valued using 
blackscholes models to determine the fair value of awards assumptions used within the models were as follows for awards in 2009 
there were no such awards in 2010 
  2009 
share price at date of grant pence  1985p 
exercise price pence  1985p 
volatility   310 
average expected term to exercise  3 years 
riskfree rate   43 
expected dividend yield   22 
 
no such assumptions have been disclosed in the current year as no qsos awards have been made in the year ended 31 march 2010 
the average share price in 2009 was 1797p the expected volatility assumption is based on the average historic volatility of qinetiq’s 
share price at the date of grant commensurate with the vesting period to the extent possible  financial statements
notes to the financial statements continued
88 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 89
 
 
88 
33 sharebased payments continued 
sharebased award pricing – other 
sharebased awards involving market based performance conditions including those based on tsr have used monte carlo models to 
determine the fair value at grant date assumptions used in these models included 41 2009 32 for the average share price volatility 
of the ftse comparator group and 36 2009 33 for the average correlation to comparator group the fair value for these awards 
before the probability of lapsing in the year ended march 2010 was 665p 2009 1191p 
sharebased awards that vest based upon nonmarket performance conditions including certain psp rsus and deferred annual bonus 
awards have been valued at the share price at grant less attrition for the 2003 share option scheme there was a prebonus issue 
weighted average share price of £1 and a weighted average exercise price of £1 based on thirdparty transactions in the company’s shares 
in the period immediately prior to the issue of the share options prior to ipo in february 2006 there was no active market for the company’s 
shares therefore expected volatility was determined using the average volatility for a comparable selection of businesses at this time the 
group had no established pattern of dividend payments therefore no dividends were assumed in this model 
 
 
34 operating leases 
group as a lessor 
the group receives rental income on certain properties the group had contracted with tenants for the following future minimum 
lease payments 
all figures in £ million 2010 2009 
within one year 46 63 
in the second to fifth years inclusive 163 115 
greater than five years – – 
  209 178 
 
 
group as a lessee   
all figures in £ million 2010 2009 
lease and sublease income statement expense – minimum lease payments 233 189 
 
 
the group had the following future minimum lease payment commitments 
all figures in £ million 2010 2009 
within one year 169 173 
in the second to fifth years inclusive 504 525 
greater than five years 332 227 
  1005 925 
 
operating lease payments represent rentals payable by the group on certain office property and plant leases are negotiated for an average 
of three to ten years 
  88 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 89
 
 
89
35 transactions with mod 
the mod continues to own its special share in qinetiq which conveys certain rights as set out in note 32 transactions between the group 
and the mod are disclosed as follows 
freehold land and buildings and surplus properties 
under the terms of the groups 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 
i restrictions on transfer of title 
the title deeds of those properties designated as 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 
ii property clawback agreement 
the mod retains an interest in future profits on disposal following a ‘trigger event’ a ‘trigger event’ includes the granting of planning 
permission for development andor change of use and the disposition of any of the acquired land and buildings during the 12 years from 
1 july 2001 following a ‘trigger event’ the mod is entitled to clawback a proportion of the gain on each individual property transaction in 
excess of a 30 gain on a july 2001 professional valuation the proportion of the excess gain due to the mod is based on a sliding scale 
which reduces over time from 50 to 9 and at 31 march 2010 stands at 28 2009 33 the july 2001 valuation was approximately 
16 greater in aggregate than the consideration paid for the land and buildings on 1 july 2001 
compliance regime 
the compliance committee monitors the effective application of the compliance regime required by the mod to maintain the position 
of qinetiq as a supplier of independent and impartial scientifictechnical advice to the mod and ensures that the required standards are 
met in trials involving human volunteers  
strategic assets 
under the principal agreement with the mod the qinetiq controlled group is not permitted without the written consent of the mod to 
i 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 2010 was £25m 31 march 2009 £27m the principal 
items being plant and machinery 
longterm partnering agreement 
on 27 february 2003 qinetiq limited entered into a longterm partnering agreement to provide the test and evaluation te facilities 
and training support services to the mod this is a 25year contract with a total revenue value of up to £56bn dependent on the level of 
usage by mod under which qinetiq limited is committed to providing the te services with increasing efficiencies through cost saving 
and innovative service delivery 
 
 
36 directors and other senior management personnel 
the remuneration of directors and other senior management personnel of the group during the year to 31 march 2010 is set out below  
all figures in £ million 2010 2009 
shortterm employee remuneration including benefits 54 32 
postemployment benefits 01 02 
sharebased payments expense 10 10 
total 65 44 
 
shortterm employee remuneration and benefits include salary bonus and benefits postemployment benefits relate to pension amounts   financial statements
notes to the financial statements continued
90 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 91
 
 
90 
37 contingent liabilities and assets 
the group including subsidiary undertakings have given unsecured guarantees primarily on leased properties and bank lines of £551m 
at 31 march 2010 31 march 2009 £347m in the ordinary course of business  
the group is aware of claims and potential claims by or on behalf of current and former employees including former employees of the mod 
and dera and contractors in respect of intellectual property employment rights and industrial illness and injury which involve or may 
involve legal proceedings against the group the directors are of the opinion having regard to legal advice received and the groups 
insurance arrangements and provisions carried in the balance sheet that it is unlikely that these matters will in aggregate have a material 
effect on the groups financial position results of operations and liquidity 
the group has not recognised contingent amounts receivable relating to the chertsey property which was disposed of during 2004 
or the fort halstead property disposed of in september 2005 additional consideration subject to clawback to the mod pursuant to the 
arrangements referred to in note 35 is potentially due upon the purchasers obtaining additional planning consents with the quantum 
dependent on the scope of the consent achieved 
 
 
38 postretirement benefits 
triennial funding valuation 
the most recent full actuarial valuation of the defined benefit section of the qinetiq pension scheme was undertaken as at 30 june 2008 
and resulted in an actuarially assessed deficit of £1113m on the basis of this full valuation the trustees of the scheme and the company 
agreed the employer contribution rate of 115 from 30 june 2009 and past service deficit recovery payments of £13m per year for a 
10year period from this date  
introduction and background to ias 19 
international accounting standard 19 employee benefits requires the group to include in the balance sheet the surplus or deficit 
on defined benefit schemes calculated as at the balance sheet date it is a snapshot view which can be significantly influenced by 
shortterm market factors the calculation of the surplus or deficit is therefore dependent on factors which are beyond the control 
of the group – principally the value at the balance sheet date of equity shares in which the scheme has invested and longterm interest 
rates which are used to discount future liabilities the funding of the scheme is based on longterm trends and assumptions relating to 
market growth as advised by qualified actuaries 
the qinetiq pension scheme 
in the uk the group operates the qinetiq pension scheme for the majority of its uk employees a mixed benefit scheme the defined 
benefit db section of the scheme provides future service pension benefits to transferring civil service employees all group employees 
who were members or eligible to be members of the principal civil service pension scheme or the ukaea principal nonindustrial 
superannuation scheme were invited to join the db section of the scheme from 1 july 2001 together with all new employees who were 
previously members of schemes who are part of the public sector transfer club on 31 march 2010 the group withdrew from the public 
sector transfer club the defined contribution dc section of the scheme was set up for employees who were not eligible or did not wish 
to join the db section of the scheme 
other uk schemes  
in the uk the group operates one further small defined benefit scheme qinetiq prudential platinum scheme the net pension deficits 
of this scheme at 31 march 2010 amounted to £02m 31 march 2009 £02m there were no outstanding or prepaid contributions at the 
balance sheet date march 2009 £nil set out below is a summary of the overall ias 19 defined benefit pension schemes’ liabilities the fair 
value of the schemes assets which are not intended to be realised in the short term and may be subject to significant change before they 
are realised and the present value of the schemes’ liabilities which are derived from cash flow projections over long periods and thus 
inherently uncertain were 
all figures in £ million 2010 2009 2008 2007 
equities 7146 4737 6208 6415 
corporate bonds 695 784 839 745 
government bonds 696 832 763 747 
property 534 – – – 
cash  88 121 32 34 
total market value of assets 9159 6474 7842 7941 
present value of scheme liabilities 10632 7526 8076 8849 
net pension liability before deferred tax 1473 1052 234 908 
deferred tax asset 412 294 65 271 
net pension liability 1061 758 169 637 
  90 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 91
 
 
91
38 postretirement benefits continued 
assumptions 
the major assumptions weighted to reflect individual scheme differences were 
 2010 2009 
rate of increase in salaries 46 41 
rate of increase in pensions in payment  36 31 
rate of increase in pensions in deferment 36 31 
discount rate applied to scheme liabilities 56 65 
inflation assumption  36 31 
assumed life expectancies in years   
future male pensioners currently aged 60 87 87 
future female pensioners currently aged 60 89 89 
future male pensioners currently aged 40 89 89 
future female pensioners currently aged 40 90 90 
 
the assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which due to 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 external market indicators the life expectancy assumptions for mortality have 
remained unchanged in the year to 31 march 2010 with the base tables for mortality in line with the medium cohort projections with minimum 
annual rates of improvement of 1 for males and 05 for females 2009 improvement 1 for males and 05 for females the current 
mortality rates reflect the standard tables pnma00mc for males and pnfa00mc for females for members year of birth these mortality 
tables are published by the continuous mortality investigation and adopted by the actuarial profession 
scheme assets 
the overall expected rate of return on plan assets is based upon the expected return rates for each asset class equity return rates are the 
longterm expected return rates based upon the market rates of return for risk free investments typically government bonds together with 
the historical level of risk premium associated with equities with the resulting rate then being reviewed and benchmarked against a peer 
group of listed companies expected longterm rates of return on scheme assets weighted to reflect the individual scheme actual asset 
allocations were 
 2010 2009 
equities 80 80 
corporate bonds 55 60 
government bonds 44 38 
property 85 – 
cash 43 40 
weighted average 75 71 
 
 
return on scheme assets   
all figures in £ million 2010 2009 
actual return on plan assets   
expected return on scheme assets 463 565 
actuarial gainloss on scheme assets 2066 2128 
actual gainloss on scheme assets 2529 1563 
 
 
value of scheme assets   
all figures in £ million 2010 2009 
changes to the fair value of scheme assets   
opening fair value of scheme assets 6474 7842 
expected return on assets 463 565 
actuarial gainloss on scheme assets 2066 2128 
contributions by the employer 384 373 
contributions by plan participants 03 13 
scheme disposal – asap calibration limited 06 – 
net benefits paid out and transfers 225 191 
closing fair value of scheme assets 9159 6474 
  financial statements
notes to the financial statements continued
92 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 93
 
 
92 
38 postretirement benefits continued 
changes to the present value of the defined benefit obligation   
all figures in £ million 2010 2009 
opening defined benefit obligation 7526 8076 
current service cost 200 268 
interest cost 488 531 
contributions by plan participants 03 13 
actuarial lossgains on scheme liabilities 2668 1171 
scheme disposal – asap calibration limited 08 – 
curtailment gain 20 – 
net benefits paid out and transfers 225 191 
closing defined benefit obligation 10632 7526 
 
 
total expense recognised in the income statement   
all figures in £ million 2010 2009 
pension costs charged to the income statement   
current service cost 200 268 
interest cost 488 531 
expected return on plan assets 463 565 
curtailment 20 – 
total expense recognised in the income statement gross of deferred tax 205 234 
 
 
analysis of amounts recognised in statement of recognised income and expense 
all figures in £ million 2010 2009 2008 2007 
total actuarial lossgain gross of deferred tax 602 957 655 858 
     
cumulative total actuarial losses recognised in the 
statement of recognised income and expense 2534 1932 975 1630 
     
history of scheme experience gains and losses     
experience gainslosses on scheme assets 2066 2128 839 74 
experience lossesgains on scheme liabilities 29 371 10 – 
 experience gains and losses exclude the impact of changes in assumptions 
 
the expected employer cash contribution to the defined benefit scheme for the year ending 31 march 2011 is £365m 2010 £384m 
defined contribution schemes  
payments to the defined contribution schemes totalled £246m march 2009 £232m 
  92 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 93
 
 
93
39 capital commitments 
the group had the following capital commitments for which no provision has been made 
all figures in £ million 2010 2009 
contracted 59 50 
 
capital commitments at 31 march 2010 include £55m 2009 £39m in relation to property plant and equipment that will be whollyfunded 
by a thirdparty customer under longterm contract arrangements 
 
 
40 subsidiaries 
the principal subsidiary undertakings at 31 march 2010 all of which are included in the consolidated financial statements are shown below 
name of company principal area of operation country of incorporation 
subsidiaries
1 2 3
   
qinetiq holdings limited uk england  wales 
qinetiq limited uk england  wales 
qinetiq overseas holdings limited uk england  wales 
qinetiq north america inc usa usa 
qinetiq north america operations llc usa usa 
analex corporation usa usa 
apogen technologies inc usa usa 
fostermiller inc usa usa 
westar aerospace  defence group inc usa usa 
1
 accounting reference date is 31 march all principal subsidiary undertakings listed above have financial year ends of 31 march and 100 of the ordinary 
shares are owned by the group  
2
 qinetiq holdings limited is a direct subsidiary of qinetiq group plc all other subsidiaries are held indirectly by other subsidiaries of qinetiq group plc 
3
 all companies except for holding companies are operating companies engaged in the group’s principal activities as described in the report of the directors 
on page 42 
 
 
  financial statements
94 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 95
company balance sheet
as at 31 march
 
 
94 
 
all figures in £ million note 2010 2009 
fixed assets    
investments in subsidiary undertaking 2 1087 1029 
  1087 1029 
current assets    
debtors 3 3039 1648 
  3039 1648 
current liabilities    
creditors amounts falling due within one year 4 910 – 
net current assets   2129 1648 
    
net assets   3216 2677 
    
capital and reserves     
equity share capital 5 6 66 66 
capital redemption reserve 6 399 399 
share premium account 6 1476 1476 
profit and loss account 6 1275 736 
capital and reserves attributable to shareholders   3216 2677 
 
there are no other recognised gains and losses  
the financial statements of qinetiq group plc company number 04586941 were approved by the board of directors and authorised 
for issue on 2 june 2010 and were signed on its behalf by 
 
     
leo quinn chief executive officer     david mellors chief financial officer 
 
 
  94 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 95
notes to the company financial statements
 
 
95
1 accounting policies 
the following accounting policies 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 under the historical cost convention and in accordance with applicable uk accounting 
standards as permitted by section 4084 of the companies act 2006 a separate profit and loss account dealing with the results 
of the company has not been presented 
investments 
in the company’s financial statements investments in subsidiary undertakings are stated at cost less any impairment in value 
sharebased payments 
the fair value of equitysettled awards for sharebased payments is determined on grant and expensed straight line over the period 
from grant to the date of earliest unconditional exercise the fair value of cashsettled awards for sharebased payments is determined 
each period end until they are exercised or lapse the value is expensed straight line over the period from grant to the date of earliest 
unconditional exercise the charges for both equity and cashsettled sharebased payments are updated annually for nonmarketbased 
vesting conditions further details of the group’s sharebased payment charge are disclosed in note 33 of the group financial statements 
the cost of sharebased payments is charged to subsidiary undertakings 
 
 
2 investment in subsidiary undertaking 
as at 31 march   
all figures in £ million  2010 2009 
subsidiary undertaking – 100 of ordinary share capital of qinetiq holdings limited 1087 1029 
 
a list of all principal subsidiary undertakings of qinetiq group plc is disclosed in note 40 to the group financial statements the £58m 
2009 £56m increase in investment in the year relates to the capital contribution in relation to sharebased payments for employees 
of subsidiary companies  
 
 
3 debtors  
as at 31 march   
all figures in £ million 2010 2009 
amounts owed by group undertakings 3039 1647 
other debtors – 01 
  3039 1648 
 
 
4 creditors 
as at 31 march   
all figures in £ million 2010 2009 
amounts owed to group undertakings 910 – 
 
  financial statements
96 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 97
notes to the company financial statements continued
 
 
96 
5 share capital 
the company’s share capital is disclosed in note 32 to the group financial statements 
 
 
6 reserves 
all figures in £ million 
issued share 
capital 
capital 
redemption 
reserve share premium profit and loss total equity 
at 1 april 2009 66 399 1476 736 2677 
profit – – – 805 805 
purchase of own shares – – – 08 08 
dividend paid – – – 316 316 
sharebased payments – – – 58 58 
at 31 march 2010 66 399 1476 1275 3216 
      
at 1 april 2008 66 399 1476 856 2797 
profit – – – 121 121 
purchase of own shares – – – 08 08 
dividend paid – – – 289 289 
sharebased payments – – – 56 56 
at 31 march 2009 66 399 1476 736 2677 
 
the capital redemption reserve is not distributable and was created following redemption of preference share capital 
 
 
7 sharebased payments 
the company’s sharebased payment arrangements are set out in note 33 to the group financial statements  
 
 
8 other information 
directors’ emoluments excluding company pension contributions were £28m 2009 £13m 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 in the report of the remuneration 
committee details of oneoff payments made to directors during the year can be found in the footnotes on page 40 
the remuneration of the company’s auditor for the year to 31 march 2010 was £5000 2009 £5000 all of which was for statutory audit 
services no other services were provided by the auditor to the company 
 
 
 
 
 
 
  96 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 97
fiveyear record for the years ended 31 march unaudited
 
 
97
 
 
2010 2009 2008 2007 2006 
qinetiq north america £m 8001 7656 5402 3582 2484 
emea £m 8188 8423 8201 7793 7972 
ventures £m 65 94 57 120 61 
revenue £m 16254 16173 13660 11495 10517 
       
qinetiq north america £m 677 830 621 399 245 
emea
2
 £m 611 842 716 669 740 
ventures £m 85 156 151 69 75 
operating profit
1
 
2
 £m 1203 1516 1186 999 910 
       
operating margin
1
   74 94 87 87 87 
underlying profit before tax
1
  £m 857 1302 1090 940 801 
lossprofit before tax  £m 661 1140 514 893 725 
lossprofit after tax  £m 633 936 474 690 604 
       
underlying basic eps pence 111 159 134 113 102 
diluted eps pence 97 143 72 103 98 
basic eps pence 97 143 72 105 100 
dividend per share  pence 158 475 425 365 225 
       
underlying cash flow from operations post capex £m 1743 1698 1003 601 769 
net debt £m 4574 5379 3799 3008 2330 
average number of employees  13580 13882 13470 11870 11024 
orders £m 14009 15960 12771 12140 8167 
1
 underlying measures are stated before amortisation of intangibles arising from acquisitions emea reorganisation costs in 2010 and 2008 and restructuring 
costs in 2005 ipo costs in 2006 profit on disposal of interests in subsidiaries profit on disposal of interest in associates and business divestments and 
unrealised impairment of investments and tangible fixed assets  
2
 operating profit and operating margins for 2009 2008 2007 and 2006 have been restated to show the net finance element of the ias19 pension cost in the 
finance income and expense lines this was previously reported in other operating costs 
  definitions of underlying measures of performance are in the glossary on page 98 underlying financial measures are presented as the board believes these 
provide a better representation of the groups longterm performance trend 
 
 
  98 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 99
other information
glossary
agm annual general meeting
book to bill ratio ratio of funded orders received in the year to 
revenue for the year adjusted to exclude revenue 
from the 25year ltpa contract
cmg carbon management group
compliance 
principles
the principles underlying the compliance 
regime covering impartiality integrity conflicts 
confidentiality and security
cr corporate responsibility
defra department for environment food and 
rural affairs
dhs us department of homeland security
dod us department of defense
dragon runner
tm
a small unmanned manportable ground vehicle 
intended for use in urban environments
dtr mod’s defence training review programme
ebitda earnings before interest tax depreciation 
amortisation gainsloss on business divestments 
unrealised impairment of investment and 
disposal of noncurrent assets
emea europe middle east and australasia
eu european union
funded backlog the expected future value of revenue from 
contractually committed and funded customer 
orders excluding £41bn value of the remaining 
18 years of ltpa contract
gearing 
ratio
the gearing is the ratio of net debt at the balance 
sheet date translated at average exchange 
rates for the period to ebitda generated in 
the 12month period to balance sheet date 
annualised and calculated in accordance with 
the group’s credit facility ratios
hse health and safety executive
hse health safety and environment
ias international accounting standards
ifrs international financial reporting standards
ipo initial public offering
libid london interbank bid rate
libor london interbank offered rate
lse london stock exchange
ltpa longterm partnering agreement – 25year 
contract established in 2003 to manage the 
mod’s test and evaluation ranges
mod uk ministry of defence
mrap mine resistant ambush protected – 
armoured vehicle
msca maritime strategic capability agreement
nasa national aeronautics and space administration 
usa
oci organisational conflicts of interest
organic growth the level of yearonyear growth expressed 
as a percentage calculated at constant foreign 
exchange rates adjusting comparatives to 
incorporate the results of acquired entities 
and excluding the results for any disposals or 
discontinued operations for the same duration 
of ownership as the current period
qna qinetiq north america
rd research  development
rfid radio frequency identification
riddor reporting of injuries diseases  dangerous 
occurrences regulations
specific non
recurring items 
and acquisition 
amortisation
major restructuring costs disposal of noncurrent 
assets business divestments amortisation of 
intangible assets arising from acquisitions and 
impairment of investments
sssi site of special scientific interest
stem science technology engineering and 
mathematics educational programme
talon® powerful durable lightweight tracked vehicles 
that are widely used for explosive ordnance 
disposal eod and reconnaissance etc
trace transparent agents and contracting entities
tsr total shareholder return
uav unmanned aerial vehicle 
ugv unmanned ground vehicle
uk gaap uk generally accepted accounting practice
underlying earnings 
per share
basic earnings per share as adjusted for gainloss 
on business divestments disposal of noncurrent 
assets unrealised impairment of investments 
major reorganisation costs and amortisation 
of intangible assets arising from acquisitions 
and tax thereon
underlying 
effective 
tax rate 
the tax charge for the year excluding the tax 
impact on gainloss on business divestments 
disposal of noncurrent assets unrealised 
impairment of investments major reorganisation 
costs acquisition amortisation and any tax rate 
change effect expressed as a percentage of 
underlying profit before tax
underlying net cash 
from operations
net cash flow from operations before 
emea reorganisation costs and after capital 
expenditure
underlying cash 
conversion ratio
the ratio of net cash flow from operations 
excluding major reorganisations less outflows 
on the purchase of intangible assets and property 
plant and equipment to underlying operating 
profit excluding share of posttax result of equity 
accounted joint ventures and associates
underlying 
operating margin 
underlying operating profit expressed as a 
percentage of revenue
underlying 
operating 
profitloss
earnings before interest tax gainloss on 
business divestments disposal of noncurrent 
assets unrealised impairment of investments 
major reorganisation costs and amortisation of 
intangibles arising on acquisitions
underlying 
profit before tax
profit before tax excluding gainloss on business 
divestments disposal of noncurrent assets 
unrealised impairment of investments major 
reorganisation costs and amortisation of 
intangible assets arising from acquisitions
uxo unexploded ordnance 98 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 99
financial calendar
29 july 2010 interim management statement
29 july 2010 annual general meeting
30 september 2010 interim financial period end
18 november 2010 interim results announcement
february 2011 interim management statement provisional date
31 march 2011 financial year end
may 2011 preliminary results announcement
analysis of shareholders
institutional investors with a shareholding greater than 05m shares 93
other including employees management and financial institutions with a shareholding less than 05m shares 7
100
 analysis as at 24 may 2010
auditor
kpmg audit plc
8 salisbury square
london
ec4y 8bb
advisors
corporate brokers principal legal advisors principal bankers registrars
jp morgan cazenove herbert smith llp lloyds tsb plc equiniti
20 moorgate exchange house 25 gresham street aspect house
london primrose street london spencer road
ec2r 6da london ec2v 7hn lancing
ec2a 2hs west sussex
ubs investment bank bn99 6da
1 finsbury avenue
london
ec2m 2pp
company information
company registration number 4586941
registered office
85 buckingham gate
london
sw1e 6pd
additional information 100 wwwqinetiqcom
other information
where can you learn more
view our report online at wwwqinetiqcominvestors
the qinetiq annual report 2010 can be viewed at 
wwwqinetiqcominvestors along with further useful 
shareholder information and information on the company 
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Summary:
 4 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 5
chairman’s statement
directors’ report – business review
a tough year given the 
economic market and 
political uncertainty
mark elliott chairman
dear shareholder
i am pleased to submit my first report as chairman of qinetiq 
having assumed the role in march this year following the retirement 
of sir john chisholm
the last financial year was noteworthy for the group given the 
changes in our markets on both sides of the atlantic responding to 
fastmoving market developments has required a step change by the 
business and particularly by our people i would like to pay testimony 
to our employees who have taken on the challenge to adapt quickly 
to the changing priorities of our customers
with changes in the political landscape on both sides of the atlantic 
compounded by economic pressures our business has experienced 
considerable uncertainty on the back of political change customers 
have delayed decision making as they review their budgets as a 
consequence of these market changes in november we alerted the 
market that the group was unlikely to meet market expectations 
the wider uk budget pressures and delays in contract awards 
resulted in lower utilisation of our teams in the last quarter this 
was followed in january by confirmation that the delays in orders 
for survivability products and unmanned ground vehicles within 
the qinetiq north america qna technology solutions group would 
result in performance for our second half not exceeding that of the 
first half this was disappointing and highlighted the need for the 
business to be more agile and to look to itself to reduce its cost base 
to ensure that it remains competitive 
the safety of our operations remains a priority following the tragic 
loss of nimrod xv230 in 2006 and the subsequent publication of 
the haddoncave report in october 2009 we were determined 
to take on board any key findings which will further improve our 
ways of working subsequently in november 2009 the board 
appointed sir robert nelson qc to consider the findings and 
recommendations of the haddoncave report sir robert concluded 
that substantial improvements have occurred in qinetiq since 2004 
but recommended that further changes were implemented and that 
improvements which have been made to date are consolidated 
i am pleased to report that we are already well underway with 
implementing sir robert’s recommendations and are in the 
process of recruiting a new group safety director to the executive 
team qinetiq has a long established heritage and track record in 
airworthiness and safety it is important that we ensure through 
our actions processes procedures and people that we are able 
to reinforce our credentials in this crucially important field
in november leo quinn joined the board as chief executive officer 
to lead the next stage of qinetiq’s development leo took over 
the reins from graham love who left the group after eight years 
having taken the organisation through privatisation leo joined the 
group having led de la rue plc overseeing its transformation into 
a focused marketleading security printer prior to that leo was 
responsible for a number of business turnarounds in both europe 
and the us leo has drive and energy and a passion for operational 
excellence and delivery i am pleased to report that in the short time 
that he has been with the group he has already started the process 
of its transformation the board is fully supportive of the priorities 
set out by leo quinn in his chief executive officer’s report
the results 
group revenues were flat at £16254m 2009 £16173m including 
a £43m benefit from the strengthening us dollar exchange rate the 
overall organic decline in us revenues at constant currency was 4 
with the decline in higher margin product sales partially offset by 
growth in services the uk businesses suffered from a reduction in 
the historic concentration of ministry of defence mod order flow 
towards the year end although this impact was partially masked at 
the revenue level by higher passthrough revenues resulting in a 1 
organic decline in emea revenues
as a result of the reduction in higher contribution revenues 
underlying operating profit decreased to £1203m 2009 £1516m 
resulting in an underlying margin of 74 2009 94 the emea 
underlying margin decreased to 75 2009 100 and the qna 
underlying margin fell to 85 2009 108 losses for the ventures 
division reduced as a result of the partial disposal of cody gate 
ventures in the prior year underlying profit before tax was 
£857m 2009 £1302m
the group incurred impairment charges on goodwill of £501m 
intangible assets and investments of £146m and tangible assets 
of £240m other nonrecurring items include a profit on business 
divestments of £51m 2009 £130m and a charge for reorganising 
the emea business announced in may 2009 of £421m the resulting 
statutory loss before tax was £661m 2009 profit of £1140m
the group achieved a strong underlying cash conversion of 145 
2009 107 due to a continued focus on cash generation cash flow 
from operations increased to £2046m 2009 £2022m before the 
costs of the emea reorganisation announced in may 2009 4 wwwqinetiqcom qinetiq group plc annual report and accounts 2010 5
net debt as at 31 march 2010 was £4574m 31 march 2009 
£5379m resulting from strong cash flow from operations and 
the beneficial translation impact of the us dollar exchange rate 
as the majority of the group’s debt is drawn in us dollars the 
group’s gearing ratio† at 31 march 2010 was 25x† 31 march 
2009 22x† well inside the covenant level of 35x†
full year underlying earnings per share were 111p 2009 159p
the board is confident that the programme announced on 27 may 
will restore the group to strength over the next 24 months 
including the rapid paydown to a target gearing ratio of below 
2x† for this reason the board is recommending that no payment 
be made either of a final dividend for the year just ended or of an 
interim dividend for the current year it is the board’s expectation 
that the group will pay a final dividend with respect to the 
financial year ending 31 march 2011
the board
there have been a number of changes to the board during 
the year
in may 2009 sir john chisholm announced his intention to retire 
from the board as chairman some 19 years ago sir john took 
on the challenge of creating a successful commercial enterprise 
out of the research laboratories of the ministry of defence 
this culminated in the company’s listing on the london stock 
exchange in february 2006 his personal commitment integrity 
and phenomenal energy have made qinetiq the successful 
organisation it is today and on behalf of the board i thank him 
for his enormous contribution i am sure everyone at qinetiq 
wishes sir john all the very best for his retirement
in august last year david h langstaff joined the board as a 
nonexecutive director bringing an indepth understanding 
of the north american security market nonexecutive director 
dr peter fellner stepped down from the board at the close of the 
group’s agm on 4 august 2009 graham love left the company 
and leo quinn joined the board in the role of chief executive 
officer in november just after the year end i was pleased to 
announce the appointment of admiral sir james burnellnugent 
kcb cbe ma as an independent nonexecutive director 
sir james brings extensive experience of the operational 
challenges of the defence sector
people
qinetiq is a unique organisation built on the technical knowledge 
expertise and integrity of its people they are involved in solving 
some of society’s most complex problems i believe our teams 
undertake their roles with integrity and demonstrate commitment 
to our customers during the second half of the year our employees 
adapted to significant change which will modernise and reposition 
the business for the future ensuring we remain competitive in the 
market this required flexibility from our people and i thank them 
for their ongoing commitment and support
outlook
in both the us and the uk the defence markets remain challenging 
as a result of the economic environment additionally in the uk the 
impending strategic defence and security review adds uncertainty 
to forecasts for defence spending the board has concluded its 
review of operations and reset the priorities of the group the new 
management is taking action over the next 24 months to reduce 
costs improve productivity and drive cash generation both to 
reduce the group’s net debt rapidly and to refocus and reposition its 
businesses over the medium term for a return to profitable growth
in the current financial year the performance of qinetiq’s service 
businesses is likely to remain steady overall the product businesses 
whose performance is by nature more variable should benefit from 
the release of some orders in the us delayed from prior period 
although this will be partially offset by the weaker uk environment 
the board believes it will meet its expectations for the current year
mark elliott chairman
2 june 2010
 definitions of underlying measures of performance are in the glossary on page 98
 underlying financial measures are presented as the board believes these provide 
a better representation of the group’s longterm performance trend
† the gearing ratio is net debt to adjusted ebitda and the definition is in the 
glossary on page 98