Qinetiq will axe 400 as profits rise

Nov 29 2007 by Iain Laing, The Journal

THE bosses who made fortunes from the privatisation of defence research firm Qinetiq have announced plans to axe 400 jobs.

Chief executive Graham Love – who made £22m when the former Ministry of Defence business was floated in February last year – said the job cuts would fall among the company’s 8,000 UK staff.

Last week the National Audit Office (NAO) spending watchdog criticised the “excessive” £107.5m returns of Qinetiq’s senior management from the deal and said the taxpayer could have gained more.

The news on job losses came as Qinetiq announced a 9% rise in pre-tax profits to £25.9m for the six months to September 30, and said it expected a full-year performance “at the upper end of previous expectations”.

Mr Love said the job cuts would come as part of plans to overhaul its UK-focused Europe, Middle East and Africa division into four larger businesses by next summer.

The restructuring, intended to boost the division’s operating profits by £10m a year, will see duplicated administrative and backroom posts culled.

Mr Love highlighted that Qinetiq was a net recruiter with plans to employ more scientists and technicians, but added: “As far as we are concerned, we are doing the job, which is delivering value for shareholders.”

Qinetiq can trace its roots from the birth of powered flight in the UK at Farnborough through to the development of radar at Malvern during the Second World War.

But Conservative MP Edward Leigh, chairman of the Commons Public Accounts Committee, said the taxpayer had been “short-changed” while senior managers had “won the jackpot” following the NAO report.

Despite the criticism, the NAO said the privatisation of the former Defence Evaluation and Research Agency had safeguarded the future of the business following a 40% fall in MoD research budgets during the 1990s.

Qinetiq, which employs 13,500 people worldwide, said strong US markets had delivered a 55% rise in revenues to £256.6m over the period, led by sales of its Talon robot bomb disposal dogs.

In the UK, revenues grew by just 2% to £377.2m after the MoD delayed supply contracts due to the Comprehensive Spending Review. But the company is preferred bidder on the first package of the MoD’s Defence Training Rationalisation (DTR) programme.

Under the DTR – worth an estimated £16bn over the next 30 years – the current defence training estate will be reduced from 30 sites to around 10. Qinetiq has 38 UK sites at locations including Bristol, Plymouth, and Rosyth in Scotland.