Qinetiq was at its inception a highly-unusual company, in that the MoD was both its owner and its principal customer. Most (about 80%) of Qinetiq's revenue then came from MoD contracts, and almost all of those contracts were awarded without competition [Fig. 11]. It follows that Qinetiq's profitability was largely determined by the prices which it charged to MoD for defence research and other services. It also follows that the distinction in Qinetiq's accounts between its share capital and loans is less significant than it would be for most commercial companies; in such companies the capital comes from shareholders and the loans come from banks, whereas for Qinetiq both were provided from public funds by the MoD. However the chosen equity/debt ratio was very significant in determining the financial rewards which were obtained by Qinetiq's senior managers.
Since 2002 Qinetiq has used the cash generated from its operations (still largely with MoD and still largely awarded without competition) to acquire companies in the US and to take advantage of the substantial growth in DoD research funding since the terrorist attack on 11th September 2001. It is unclear how this move into the US market has affected the quality and cost of the research and other services now being provided by Qinetiq to the MoD, but that issue is beyond the scope of this NAO Report.