Defence cutbacks cast cloud over QinetiQ
DEFENCE supplier QinetiQ said today that its principal markets remained uncertain ahead of a swathe of likely public sector cutbacks.
The company, which has already announced it is to axe 260 jobs at its base in Malvern, said the UK’s Strategic Defence Review and the drive by the US Secretary of Defense to reduce non-operational costs were likely to impact the business.
In a trading statement for the five months ended August 31, 2010, the company said: “Decisions on orders continue to be delayed across the sector and visibility remains limited, particularly in the UK.”
It added: “With market conditions remaining tough, revenues are running below last year, but the businesses continue to make progress on their restructuring programme to enhance competitiveness through a better focus in offerings and a reduction in structural and discretionary costs.”
Revenues in the US are running at a similar level to the second half of last year, following the impact of government insourcing. It said management control of overheads had enabled the businesses to make a steady contribution to performance.
The group’s products business in the US has now received significant orders for its new Q-NETS vehicle survivability product. This continues to be largely offset by the performance in the UK, where the business, in spite of making progress on the alignment of its technology portfolio to a challenging market, is suffering delayed or cancelled orders.
The group is implementing its self-help plan to refocus the businesses, build a more commercial performance-oriented culture and strengthen the balance sheet. It said work on the reshaping of its structure continued.
The 700 likely job losses across the UK are set to incur non-recurring charges of approximately £40m.
In outlook, it said: “As yet the outcome of governments’ policy reviews is difficult to predict. Absent any resulting changes in customer requirements, overall the board believes that the group will meet its expectations for the current year, while continuing to reposition the business for a return to profitable growth over the medium term.”
The group’s interim results for the six months to September 2010 are due on November 18.
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