First Quarter Trading Update

QinetiQ Group plc ("QinetiQ"), the science and engineering company that operates primarily in the defence, security and aerospace markets, today issues a trading update covering the period from 31 March 2017 to date and reconfirms its outlook for FY18 from its preliminary results.

This statement is issued ahead of QinetiQ's 2017 Annual General Meeting (AGM) to be held at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA at 11am today.

Trading environment
The trading environment remains dynamic, particularly in the UK following the recent General Election, and presents both opportunities and challenges. QinetiQ has the inherent capabilities and strategy to thrive in this environment despite some near-term unpredictability of order intake.

EMEA Services
In the EMEA Services division, first quarter revenue under contract is similar to the position a year ago but orders have been slower than expected with some customer contract award decisions deferred or delayed.
Despite the somewhat slower start to the year for orders, we continue to expect the division to deliver modest revenue growth in FY18. The lower baseline profit rate for single source contracts continues to represent a headwind for operating margins, as previously advised.

Global Products
The Global Products division has shorter order cycles than EMEA Services and its performance is dependent on the timing and shipment of key orders.
Revenue performance in Global Products during the first quarter was similar to the prior year and we expect the division to grow in FY18 as a result of its contracted orders and pipeline of opportunities, as well as the anticipated full year contribution from the Target Systems acquisition.

Balance Sheet
As outlined at our preliminary results, we are investing in our key contracts and their associated facilities. FY18 cash flow will reflect this increased investment, with capex of £80m - £100m to support the amendment to the Long Term Partnering Agreement announced in December 2016.

Outlook
We continue to make good progress delivering our strategy, embedding the cultural changes needed to improve customer focus and deliver our long-term growth aspirations.
Consequently, we are reaffirming the previous outlook outlined at our preliminary results dated 25 May 2017 and expect steady progress in FY18, excluding the non-recurring benefits in FY17, supported by revenue growth and consistent with our strategy.

For further information please contact:
David Bishop, Group Director Investor Relations and Communications: +44 (0) 7920 108675
Investor Relations: Ian Brown, Group Head of Investor Relations: +44 (0) 7908 251123
Media Relations: Chris Barrie, Citigate Dewe Rogerson: +44 (0) 20 7282 2943
Ellen Wilton, Citigate Dewe Rogerson: +44 (0) 20 7282 2849