QinetiQ Group plc

Great. Well, good morning, everybody, and good to see you all here. Welcome to you in the room here, but also those joining us online on the live webcast. This is our full year results for FY23, and we've got some really exciting results and new ambition to share with you today. I'm John Howarth. I'm the Group Director of Investor Relations for Kinetic, and I'm joined here today by Steve Wadey, our Group CEO, and Carol Borg, our Group CFO. As normal, Steve and Carol will run through the presentation, after which there will be an opportunity for you to ask questions. Thank you very much. Steve, over to you.

Good morning, everybody, and welcome to our results for FY23. Thank you for joining us, for those here in the theatre and also those online. I'd like to start by thanking our incredible people. They have responded to the heightened threat environment and supported our customers to deliver a really excellent full-year performance across the group. In March this year, the President of the United States and the Prime Ministers of the United Kingdom and Australia announced a pathway to develop a next-generation nuclear-powered submarine incorporating technology from all three nations. This historic announcement demonstrates the first commitment of the AUKUS trilateral partnership to cooperate on the most sensitive nuclear technology. They also made a second commitment to further trilateral collaboration, strengthening their joint capabilities by enhancing information and technology sharing as part of their shared mission of global security and stability. Our purpose and strategy is directly aligned to serving the national security interests of our AUKUS customers. With a strong track record of growth and increasing demand for our high-value solutions, we are upgrading our long-term guidance. The agenda this morning is as follows. I'll start by giving you the strategic and operational headlines. Carol will provide a commentary on our financial results. I'll come back and provide you with a strategic update. And then Carol and I will jointly give you more detail on our financial strategy and the upgraded guidance. We'll then open up for questions. So let's start with the headlines. We've delivered excellent operational performance across the group. Orders are up 41%, a record high of 1.7 billion pounds, growing our backlog to 3.1 billion pounds. Revenue is up 20% and profit is up 30%, up 11% and 12% respectively on an organic basis, excluding the impact of the write-down in FY22. Cash performance remains strong with 106% conversion, and returns are healthy with EPS up to 26.5 pence and the full year dividend at 7.7 pence up 5%. Significantly, through the disciplined execution of our strategy, we have more than doubled the size of our company over the last seven years. Looking forward, the defense and security context is heightening the long-term market demand for our distinctive offerings. As a result, we now see an addressable market of more than £30 billion per year, and we have delivered a step change in our global growth platform with two strategic acquisitions in the United States and Australia. Both are performing well and integrations are on track. Based upon our building momentum and expanded market opportunity, we are targeting high single-digit organic revenue growth at 11 to 12% margin and have increased the scale of our ambition to grow the company to approximately 3 billion pounds of revenue by FY27, including further strategic acquisitions. This upgraded guidance will approximately double our revenue and profit over the next four years, a 20% improvement to our previous guidance. To realize our increased ambition, we have a robust plan with the right skills and capabilities to deliver our future growth sustainably and enhance shareholder returns. Our excellent performance has been underpinned by a number of significant operational highlights across our six distinctive offerings. In the UK, we secured our largest contract of the year, a 260 million pounds renewal of the Maritime Strategic Capability Agreement. This contract provides sovereign test and evaluation capabilities for the Royal Navy's surface and submarine fleet, enabling the UK to fulfill a strategic role within the AUKUS partnership. We also won an 80 million pounds 10-year contract known as Societus to accelerate the production of mission data, including training and mission rehearsal, to improve the protection of all UK military platforms against rapidly changing threats. In the US, we've strengthened our cyber and information advantage offering through the acquisition of Avantis. I'm delighted that our new team continues to deliver high-quality operational outcomes for our customers, and has been selected for an $80 million multi-year contract by a national intelligence customer. We've had a strong start to this year, and the business is performing in line with our expectations. In addition, our existing U.S. business has delivered 25% revenue growth and won $280 million of new orders, including a $93 million four-year engineering services contract for digital night vision technologies to enhance the warfighter's situational awareness. In Australia, we also strengthened our threat representation offering through the acquisition of Air Affairs. Together with our existing business, we continue our strong customer relationships and have delivered 26% revenue growth. Through team collaboration, we also won a $13 million high-energy laser program by leveraging our laser technology from the UK into Australia. In Germany, we delivered record flying hours. And finally, our target systems business has seen its highest demand with 58 million pounds of new orders. We've had a really excellent year, and these are just a few of many operational highlights that demonstrate how we are serving the national security interests of our customers. I'll now hand over to Carol to take you through the results.

Thank you, Steve, and good morning, everyone. In this section of the presentation, I will provide more detail on our FY23 financial results. Like Steve, I have been extremely pleased with our results. We have delivered excellent operational performance deleveraged our position and continued to deliver impressive revenue growth at stable operating profit margins. Firstly, our key financial highlights. In FY23, we have delivered record high order intake of 1.72 billion pounds, growing 41% on a reported basis, demonstrating high demand for our distinctive offerings. Strong revenue at 1.58 billion pounds, growing 20% on a reported basis, delivered through good program execution across all of our major contracts, and this year with the partial contribution of our recent acquisitions and disposals. Good underlying operating profit at 179 million pounds, growing 30% on a reported basis, which at 11.3% margin reflects investments in the three capability areas that we have spoken about before, Our people, technology and net zero, all necessary to support our delivered growth and further enhancing our capability to achieve our strategic ambition. Strong cash performance with underlying net cash flow from operations at 270 million pounds, resulting in a cash conversion ratio of 106%. our strong underlying cash performance and continued discipline on working capital management has reduced our leverage to 0.8 times net debt to EBITDA. Underlying basic earnings per share of 26.5 pence increased by 29% due to our excellent operational performance. And finally, our return on capital employed has reduced as expected, remaining at an attractive 23% due to the acquisitions made in year. So overall an excellent underlying performance in FY23 with all metrics exceeding our expectations, which is a strong foundation to deliver our future ambition and upgraded guidance. I will now provide further detail on our performance, making reference to our organic growth rates, excluding the impact of the 14 and a half million pound profit write down that we experienced last year demonstrating transparently our true in-year performance. We have delivered excellent order growth, securing 1.72 billion pounds in-year, growing 41%, 37% on an organic consistent currency basis. In EMEA services, this includes the 260 million MSCA contract, as mentioned by Steve, and 404 million pounds of engineering delivery partner framework orders representing 23% of our in-year order intake. In global products, our largest order is the $93 million DNVT award previously described. It is pleasing to see our continued success in winning new business with our distinctive offerings in line with our previously communicated desire of moving towards larger, longer-term contracts. as I'm illustrating on the charts on the right-hand side. The upper bar chart illustrates in FY23, 47% of our orders were greater than £5 million in contract value, an increase from 28% in the same period three years ago. The lower bar chart shows the order backlog. Despite the naturally reducing impact of the long-term partnering agreement, which now represents less than 43% of total backlog, it is a significant achievement to increase our order backlog to 3.1 billion as at the 31st of March, demonstrating excellent order growth across all three of our home countries and shoring up our revenue coverage in future years. We have delivered strong revenue at 1.58 billion pounds, growing 20%, 11% on an organic, consistent currency basis. This has been driven by increased delivery across all of our major contracting frameworks, the largest being a 37% year-on-year increase in EDP framework revenue in EMEA services and good growth in global products across both the US and our target systems businesses. Inorganically, we reflect the partial year contribution of our recent acquisitions in Avantis and Air Affairs and disposal of our Space NV business. The investment we have made in recent years into our business winning capabilities across our three home countries is delivering results, driving this impressive level of continued revenue growth across the group. We start FY24 with 61% of our in-year revenue guidance under contract compared to 65% at the same point last year. This represents a more sustainable level of cover that we can expect moving forward as a result of the evolving geographic mix across the group, reflecting the markets we are growing more significantly in. We have delivered strong underlying operating profit at £178.9 million, which is 11.3% operating margin. This represents an increase of 30%, 12% on an organic consistent currency basis. AMEA services has been impacted by the investment made in our people this year as a result of cost of living pressures. Global products delivered double digit margin of 10.4% reflecting strong performance in the US. Our acquisitions, advances and their affairs have delivered operating profit margin in line with expectations. Now, Turning to the segmentation of our group performance, first we have Amaya Services. Amaya Services has delivered significant year-on-year growth, demonstrating our strategy to win larger, longer-term contracts. We have increased orders by 49% and revenue by 10% on an organic basis. Our largest in-year order is the $260 million MSCA contract, and we have successfully acquired and integrated Air Affairs, both of which Steve and I have mentioned earlier. Operating profit has seen a modest decline to 11.6% margin against a strong prior year comparative period, reflecting the additional investment made in our people, which we communicated in our interim results. The investment focused on our lowest paid employees, as well as ensuring we retain and attract highly skilled employees to underpin our future growth. EMEA services, has a funded order backlog of 2.8 billion pounds and a significant increase in our book-to-bill ratio of 1.4 times, excluding the LTPA, giving us good forward revenue visibility. Next on global products. Global products has had a number of notable achievements in year, in particular, the strong performance across both our targets business and in the US, where we delivered $280 million orders and 25% revenue growth in addition to successfully acquiring and integrating Avantis. Global Products has delivered a strong year-on-year growth, demonstrating that we have the right team and capabilities to deliver across this segment. We have increased orders by 2% and revenue by 15% on an organic basis. The largest order is the $93 million DNVT award, again, as both Steve and I mentioned earlier. Operating profit has seen a strong recovery with double-digit margins at 10.4% ahead of my previous guidance. Our strong performance in the US demonstrates greater stability, resilience, and consistent performance, giving us confidence that we have a strong foundation for future growth, both organically and inorganically. Global Products is inherently a shorter-order cycle business and therefore has fewer larger, longer-term contracts, than EMEA services. Global Products has a book to bill ratio of 0.9 times and a growing funded order backlog of 300 million pounds. We have delivered excellent underlying net cash flow from operations at 270 million pounds, which equates to a cash conversion ratio of 106%. This cash conversion is as a result of our strong underlying cash performance and continued focus and discipline on working capital management. We've invested 109 million pounds in capital expenditure, predominantly driven by the ongoing LTPA commitments, enhancing our capabilities for our customer. Upon the completion of Avantis, of the Avantis acquisition, we communicated that leverage at completion was 1.1 times on a full year pro forma basis, and that we were actively planning to rapidly deleverage to less than one times before the end of the first full year after completion. I'm delighted to report that we have delivered against our commitment within the first four months of ownership, much quicker than originally anticipated. A key component of delivering our strategic ambition is to have a robust financial framework that ensures efficient use of our balance sheet. This has been evidenced by the efficient funding of our recent acquisition of both Avantis and Air Affairs, where in line with our plan, we have closed FY23 with 207 million pounds net debt. I'm extremely pleased with our strong cash performance and efforts to successfully reduce leverage. As I have previously mentioned, the group could maintain leverage of up to two times. However, as we have demonstrated with the Avantis acquisition, We deploy strong discipline in the utilization of our balance sheet, actively working to de-lever as quickly as possible to ensure we are able to support our growth ambition. With that, I will now hand back to Steve to present our strategic update and upgraded guidance.