Qinetiq to cut costs as profits slump
Defence firm Qinetiq has said it plans to cut operating costs by 10% after reporting a slump in profits.
Qinetiq announced a pre-tax profit of £85.7m for the year to March. The previous year it made a £130.2m profit. Sales were flat at £1.6bn.
It had previously warned that results would be hit because of delays in awarding government contracts.
Chief executive Leo Quinn said Qinetiq needed to rid itself of a civil service mentality.
Qinetiq emerged from the former state-owned Defence Evaluation and Research Agency, and was floated on the London stock market in February 2006.
"Qinetiq is a company that came out of the UK civil service and it needs to move to a much more commercial culture," Mr Quinn told reporters.
Qinetiq, which makes hi-tech military equipment, employs 13,000 people worldwide, about 7,000 of whom work in the UK.
There are now fears that job cuts may be likely.
"Our markets are likely to remain uncertain for some time, but we now have a decisive programme of self-help to restore value," Mr Quinn said.
Mr Quinn, who took over as chief executive in November, also concluded a review of the group's operations, and was scathing in his findings:
- the decision to enter the US market had produced lower-than-expected returns
- internally, the organisation had become "fragmented and overly complex" and its processes "weak"
- the firm lacked strategic focus and transparency, leading to higher costs
- the group's rapid acquisition-based growth had not created value for money to investors.
The group also declared that it would be suspending payment of its dividend for 12 months.
Despite this, shares in Qinetiq were up 12% at 131p in Thursday lunchtime trading.