GLOSSARY

book value

The net asset value of a company for accounting purposes, calculated as total assets minus liabilities.

Compliance Regime

The QinetiQ Compliance Regime was established to protect the impartiality of the advice QinetiQ provides to the Department, while enabling QinetiQ to engage in commercial activity within the UK Defence supply chain.

Comprehensive Spending Review

Treasury issue spending reviews setting firm and fixed three-year Departmental Expenditure Limits and which, through Public Service Agreements (PSAs), define the key improvements that the public can expect from these resources.

data room

A physically secure continually monitored room, which bidders and their advisers will visit in order to inspect and report on the various documents and other data made available for due dilligence.

DERA

Defence Evaluation and Research Agency. The Trading Fund established in 1995 to unify the Department's defence research, testing and evaluation capability and broken up in 2001 into DSTL and QinetiQ.

DSTL

Defence Science and Technology Laboratory. A Trading Fund established to retain the most sensitive aspects of defence research such as chemical and biological research.

due diligence

A process by which bidders have access to detailed material about a company in order to develop a view of its value. This would include interviews with management and detailed review of financial and legal information.

EBITDA

Earnings Before Interest, Tax, Depreciation and Amortisation which also excludes exceptional 'one off' items of expenditure.

enterprise value

The total value of a business irrespective of the levels of debt and equity.

equity value

The value of the shares in a business.

firewalls

Information barriers implemented within organisations to guard against potential conflicts of interest. They separate and isolate persons, teams and systems from information which may unduly influence decisions. These barriers are also known as 'Chinese walls'.

franchising

Method of doing business wherein a franchisor licenses trademarks and tried and proven methods of doing business to a franchisee in exchange for a recurring payment, and usually a percentage piece of gross sales or gross profits as well as the annual fees.

greenshoe option

Legally referred to as an over-allotment option, a provision contained in an underwriting agreement which gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for shares proves higher than expected.

indicative bid

The first bids submitted which give a very rough indication of the value ascribed to the business for sale by potential bidders.

information memorandum

The formal documentation provided to prospective purchases which includes financial and other information about the business for sale.

intellectual property

Property rights created through intellectual and/or discovery efforts of a creator that is generally protected under patent, trademark, copyright, trade secret, trade dress or other law.

Initial Public Offering

The first sale to the public of shares in a company and the listing of this company on a stock market, in QinetiQ's case the London Stock Exchange

Internal Rate of Return (IRR)

The interest rate used to discount cash flows that makes the net present value of all cash inflows and outflows equal zero.

joint ventures

The co-operation of two or more individuals or businesses each agreeing to share profit, loss and control in a specific enterprise

LTPA

Long Term Partnering Agreement. A 25 year contract, signed on 28 February 2003 between the Department and QinetiQ, for the provision of test and evaluation services.

market indices

An imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numerical value.

market value

An asset's market value is the price it would fetch in the open market.

management buyout

When the managers and/or executives of a company purchase controlling interest in a company from existing shareholders.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the profitability of an investment or project.

pension fund deficit

A situation in which a company offering employees a defined benefit plan does not have enough money set aside to meet the pension obligations to employees who will be retired in the future.

pension indemnity

An agreement whereby one party will pay the pension liability which may be suffered by the second party.

Pre-Qualification Questionnaire (PQQ)

A set of questions issued to entities expressing an interest in a transaction. These typically cover the bidder's organisational structure, financial position and other information supporting a potential investment.

ratchet

A mechanism used to pass additional value to a shareholder of a company, usually a manager, if the share price rises. Used in order to provide an incentive to deliver that rise in value.

Return on Capital Employed

A measure of the returns that a company is realising from its capital. Calculated as profit before interest and tax divided by the difference between total assets and current liabilities. The resulting ratio represents the efficiency with which capital is being used to generate revenue.

Shareholder Executive

The Shareholder Executive was created in September 2003 to improve the Government's performance as a shareholder.

Its role is to be a proactive, intelligent shareholder, working with government departments and management teams to help government-owned businesses perform better. It advises Ministers and officials on a wide range of shareholder issues including objectives, governance, strategy, performance monitoring, board appointments and remuneration.

Smart Acquisition Initiative

A long term initiative to improve the way the Department acquires defence capability. It aims to adopt a through-life approach to acquisition, rather than concentrating resources on the initial procurement.

strategic partner

A strategic partnership is a mutually advantageous, joint business venture between two entities, that produces a commodity or service not otherwise available in that form, and/or results in the sharing of expertise, resources, services or commodities.

underwriting agreement

Before a company issues shares to the public, the underwriter undertakes in consideration of a commission to take up the whole or a portion of such (if any) of the offered shares as may not be subscribed for by the public.