QinetiQ restructuring will drive defence firm back into the red

DEFENCE company QinetiQ yesterday said it was to cut operating costs 10 per cent to return to growth as it reported annual profit down a third due to delays in government contracts.

“QinetiQ is a company that came out of the UK civil service and it needs to move to a much more commercial culture,” said chief executive Leo Quinn, adding 10 per cent was “a fair guideline” for the reduction in costs.

The maker of hi-tech military equipment such as bomb disposal robots and sniper detectors said it would move to a new structure comprising three divisions: US Services, UK Services and Global Products, suspend dividends for a year, examine contracts with suppliers, change employees’ terms and conditions, and cut jobs.

QinetiQ shares, which had fallen 30 per cent this year, were up 12 per cent at 139.9p in early trading, valuing the group at around £840m and making it the top gainer among London’s leading 350 listed stocks.

“We consider the decision to suspend the dividend for 12 months to be prudent in light of debt constraints, ongoing restructuring and uncertain end markets,” said analysts at JP Morgan Cazenove.