QinetiQ Group plc announces intention to float

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the prospectus (the "Prospectus") to be published by QinetiQ Group plc in due course in connection with the admission of its ordinary shares ("Ordinary Shares") to the Official List of the Financial Services Authority (the "FSA") and to trading on the main market for listed securities of London Stock Exchange plc (the "London Stock Exchange"). Copies of the Prospectus will, following publication, be available from QinetiQ Group plc's registered office at 85 Buckingham Gate, London SW1E 6PD.
QinetiQ Group plc
Announcement of Intention to Float

QinetiQ Group plc ("QinetiQ" or the "Company") today announces its intention to proceed with an offer of Ordinary Shares to institutional investors and eligible employees of the Company in the United Kingdom and elsewhere (the "Global Offer") and to apply for admission ("Admission") of its Ordinary Shares to the Official List of the FSA and to trading on the main market for listed securities of the London Stock Exchange.

Details of the Global Offer

• The Global Offer will comprise an offer of existing and new Ordinary Shares in the capital of the Company to institutions in the United Kingdom, the United States (under Rule 144A) and internationally. There will also be a priority offer of new Ordinary Shares to eligible group employees.
• The Company is currently majority-owned by the UK Secretary of State for Defence (the "MOD") and certain entities of The Carlyle Group (the "Carlyle Shareholders"), each of which intend to sell a part of their holding in connection with the Global Offer.
• The Global Offer is expected to raise gross primary proceeds for the Company of approximately £150 million and significant secondary proceeds from the sales by the MOD and the Carlyle Shareholders of a part of their holdings.
• QinetiQ intends to use the proceeds of the Global Offer to continue to grow its business both organically and through appropriate acquisitions. In the short term, QinetiQ intends to use part of the primary proceeds to make an additional one-off payment of approximately £45 million to reduce the deficit in its defined benefit pension scheme, and the balance to reduce the amounts drawn under its revolving bank facility.
• It is currently anticipated that the Global Offer will be priced in February 2006.
• Credit Suisse First Boston (Europe) Limited, JPMorgan Cazenove Limited and Merrill Lynch International have been appointed Joint Global Co-ordinators, Joint Bookrunners, Joint Sponsors and Joint Lead Managers for the proposed flotation.

Commenting on today's announcement, Sir John Chisholm, Chairman of QinetiQ said:

"QinetiQ has transformed itself from a UK R&D operation into the international defence and security technology business we have today. We are well on the way to delivering our founding ambitions of linking defence and civil technologies to create a successful, vibrant and growing organisation meeting the needs of governments and companies in facing the challenges of today's fast moving world. The IPO will mark a watershed in our development and provide us with the tools to continue to implement our ambitious goals."

Further announcements relating to the Global Offer will be made in due course.

Financials
QinetiQ's total turnover under UK GAAP has increased from £774.9 million in FY 2003 to £795.4 million in FY 2004 and £872.4 million in FY 2005 (31 March year end).

QinetiQ's total operating profit under UK GAAP before exceptional items, goodwill amortisation and impairment has increased from £35.7 million in FY 2003 to £54.1 million in FY 2004 and £69.3 million in FY 2005.

The contents of this announcement, which have been prepared by and are the sole responsibility of QinetiQ, have been approved by Credit Suisse First Boston (Europe) Limited, One Cabot Square, Canary Wharf, London E14 4QJ, JPMorgan Cazenove Limited, 20 Moorgate, London EC2R 6DA and Merrill Lynch International, Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000.

Credit Suisse First Boston (Europe) Limited, JPMorgan Cazenove Limited and Merrill Lynch International, each of which are authorised and regulated in the United Kingdom by the FSA, are acting exclusively for QinetiQ, the MOD and the Carlyle Shareholders and no-one else in connection with the Global Offer. They will not regard any other person as their clients in relation to the Global Offer and will not be responsible to anyone other than QinetiQ, the MOD and the Carlyle Shareholders for providing the protections afforded to their respective clients, nor for providing advice in relation to the Global Offer, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

This announcement does not constitute an offer of, or the solicitation of an offer to buy or subscribe for, Ordinary Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful and, in particular, is not for release, publication or distribution in or into the United States, Australia, Canada or Japan.

The offer and sale of the Ordinary Shares has not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or under the applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in Australia, Canada, Japan or the United States or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan or the United States. The Joint Bookrunners may arrange for the offer and sale of Ordinary Shares in the United States only to persons believed to be “qualified institutional buyers” in reliance on Rule 144A under the Securities Act, or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Ordinary Shares offered and sold outside the United States are being offered in reliance on Regulation S under the Securities Act.

This announcement contains certain "forward-looking statements". In particular, the words "expects", "anticipates", "plans", "intends", "estimates", "may", "should", "believes" and similar expressions can be used to identify forward-looking statements. Certain important factors could cause actual results or outcomes to differ materially from those expressed in forward-looking statements. These statements are based on the QinetiQ directors' expectations of external conditions and events, current strategy, plans and other objectives of management, and estimates and projections of QinetiQ's financial position. Although the directors of QinetiQ believe these expectations to be reasonable at the date of this announcement, they may prove to be erroneous. Forward-looking statements involve known and unknown risks and uncertainties and speak only as of the date they are made. Investors are cautioned that certain important factors could cause actual results or outcomes to differ materially from those expressed in forward-looking statements.

This announcement does not constitute a recommendation concerning the Global Offer. The value of shares can go down as well as up. Past performance is not a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Global Offer for the individual concerned.