Sir John Chisholm: Psst! Top secret - for your eyes only. QinetiQ is preparing to go public

Sir John Chisholm is a man of contradictions. Standing in his office round the corner from Buckingham Palace, the chief executive of QinetiQ is immaculate. His suit is pressed, his shirt crisply ironed and his hair is neatly combed to one side. But take a look at his fingernails - they are chipped and oily like an engineer's. And while in his day job he runs one of the UK's biggest technology groups, which specialises in pushing the boundaries of science, at the weekend he gets under the bonnet of his 50-year-old Jaguar XK120 and then blasts it round a race track.

Sir John Chisholm is a man of contradictions. Standing in his office round the corner from Buckingham Palace, the chief executive of QinetiQ is immaculate. His suit is pressed, his shirt crisply ironed and his hair is neatly combed to one side. But take a look at his fingernails - they are chipped and oily like an engineer's. And while in his day job he runs one of the UK's biggest technology groups, which specialises in pushing the boundaries of science, at the weekend he gets under the bonnet of his 50-year-old Jaguar XK120 and then blasts it round a race track.

This weekend he will be rolling up his sleeves and preparing his Jag for the classic car season, which begins at Silverstone on Saturday. "This time of year, everyone is preparing their cars - that is why my fingers are so battered and bruised. I have 30 races planned this year."

Sir John races in what is known as the "drum brake series". This means that while pelting around the track, he will be relying on a hopelessly out-of-date technology when he presses the middle peddle. "The going forward bit is all right, it's just the stopping that's the problem. Drum brakes get very hot, you see. They will work for the first three laps, but after that you are praying."

Like its chief executive, QinetiQ is a bit of a contradiction. It was born out of the old Defence Evaluation and Research Agency, which itself began life 50 years ago with the aim of using science to fight the Cold War, and is credited with inventing carbon fibre and the liquid crystal display. QinetiQ retains much of its Cold War heritage, employing around 7,000 scientists, many of whom spend a good proportion of their careers engaged in secret government projects. But alongside these former civil servant scientists are thrusting entrepreneurs looking for ways to make money out of their inventions.

This apparently awkward mix seems to be working. In 2003, QinetiQ became a public-private partnership after the Government sold just under a third of the business for ?150m to the US private equity group Carlyle, which has close links with the Pentagon.

While 80 per cent of QinetiQ's work is "Secret Squirrel" stuff for the Ministry of Defence, the other 20 per - turning the scientific discoveries into commercial applications - is paying handsome rewards. In its last set of accounts for the year ending 31 March 2004, QinetiQ revealed a ?56.7m operating profit on turnover of ?795.4m. Sir John, a technology industry veteran who has led the group since 1991, admits a float is now on the agenda.

"Late 2005 is getting into the window for an IPO, but for this to happen there must be three things: the company needs to be doing well, the markets have to be receptive and the shareholders have to be in a mood to sell." Experts believe that when it does float, QinetiQ will have a value of at least ?1bn. So, if Carlyle sells its stake, it will have more than doubled its money in less than three years.

Money raised through listing on the stock market will be used, according to Sir John, to fund acquisitions. Last year QinetiQ bought American companies Foster-Miller and Westar Aerospace & Defense for a combined $293m (?155m), and that transatlantic push is set to continue. "We are looking to increase our exposure to the US in defence and security. The US remains a fast-growing market that has a great propensity to buy exactly what we have to offer," he says.

When QinetiQ floats, Sir John will also have to spend a lot of time with the City explaining what his company does, as there are few businesses to compare it with. This is something that troubles him: "There aren't tons of role models, certainly not in the UK." Britons, he adds, "are good inventors, but we are not good at turning our inventions into wealth".

He puts some of the blame for this on the Government, which he believes should follow the US example of supporting science companies through its own investment programmes. "My point is that, in physics-based sciences, it is not so much the invention that is important but the process that gets you from invention to exploiting it commercially. For this you need pull-through mechanisms, and one of the most powerful is the Government's own purchasing. In the US you have the tremendous power of the Department of Defense. My thrust is that the UK Government needs to pay more attention to that."

He also believes that the Department of Trade and Industry and the Ministry of Defence don't offer enough grants to finance long-term research and development projects. "If you compare the funds in the UK to those available in France and Germany, they are very small. And if you compare what the MoD spends to what the US Department of Defense spends, it is also small."

The issue of funding isn't a big one for QinetiQ, as it still receives the lion's share of its work from its biggest shareholder, the MoD. But Sir John is aggressively pushing the company's commercial operations as a source of future revenues. He and his team have produced what is known internally as "the elephant list", comprising 20-or-so projects that could become big money-spinners.

Close to the top of that list is Quintel, an enterprise jointly set up by QinetiQ and Rotch, the private property firm. Quintel has found a way of allowing mobile phone companies to share third-generation masts, which - because of the higher radio frequencies - has not been possible using existing technology. "We are the only people to have solved the technical problem; it was much harder than anyone imagined," says Sir John. "We are taking orders from the network operators and we believe this business could easily earn more than ?100m a year."

Another project is Zephyr, a solar-powered, high-altitude, unmanned aircraft that can say airborne for months. "The number of customers around the world, once it is proven, will be tremendous. The cheapest satellite today will cost you ?100m; this will cost you a couple of million."

For every project Sir John can talk about, there are probably 10 on which he must remain tight-lipped - like an invention that can detect suicide bombers or a mysterious device that was trailed by the Metropolitan Police to detect an illegal substance.

Sir John says there is a "need-to- know culture" at QinetiQ. "We are very good at keeping secrets - it's in the blood of the organisation." But given the City's obsession with disclosure and transparency, this may be one contradiction that QinetiQ has to get over for a successful float.

BIOGRAPHY

Born: 1946.

Education: degree in engineering from Queens' College, Cambridge.

Career (1968): graduate apprentice, General Motors.

1969: various management roles at Scicon, BP's former computer consultancy arm.

1979: formed CAP, a computer software company.

1988: UK managing director of Sema after the French firm merged with CAP.

1991: chief executive of the Defence Evaluation and Research Agency, which later became QinetiQ.

2001 to present: chief executive of QinetiQ.