4.1 The financial performance of QinetiQ has improved significantly over the period 2003 to 2007 following the appointment of a strategic partner as set out in Figure 13. The increase in the Return on Capital Employed occurred despite increased long term debt to finance acquisitions. The overall growth in revenue has been almost completely as a result of the US acquisitions. Although UK revenue has not grown significantly, QinetiQ has been able to find new sources of revenue to balance the decline in the Department's research budget.
4.2 In 2003, the ventures business, responsible for commercialising past research, generated revenue of £0.7 million, by 2007 this had increased to £12 million. Despite this increase in turnover the ventures business still generated an operating loss of £6.9 million in 2007 (down from £11.8 million in 2003) due to the high level of investment required to develop these products. Specific ventures include the Tarsier radar for detecting debris on airport runways, which has been sold in Dubai and Vancouver and is being trialled at Heathrow, and SatID technology for detecting satellite interference. In June 2004 QinetiQ sold their stake in the joint venture pSiMedica, a company exploring the use of porous silicon for medical applications; this realised a profit of £17 million at that time.35
4.3 Figure 14 on page 34 shows the movement of the QinetiQ share price relative to the most appropriate market indices;36 the share price and indices are based to the issue price of 200 pence. This shows that for a large part of the time since the flotation the share price has been below the issue price. The success of the flotation was principally driven by the strong growth story which relied heavily on expansion into the US market through acquisition. More recently, QinetiQ's ability to win significant contracts, including its involvement in the consortium-named preferred bidder for one element of the Defence Training Review and provisional preferred bidder for the other, has contributed to an increase in the share price.
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35 QinetiQ received cash and shares in consideration for their stake in pSiMedica.
36 Indices used are: SPADE, FTSE 250, FTSE Technology, FTSE Techmark and FTSE Techmark 100.