Qinetiq denies spending cuts will hit firm's forecast profit

Defence technology firm Qinetiq stuck by its forecast for full-year profits yesterday despite ongoing fears over the impact of government spending cuts.

The group, which has some 6,000 workers in the UK, including at sites in Benbecula and Glasgow, is facing a major spending clampdown by one of its biggest clients, the Ministry of Defence.

It said its own self-help plan was helping to refocus the business and cut debt, but added that it was too early to assess the full impact of defence spending reviews in the United States and the UK.

The group, which supplies technology such as Talon robots used for bomb disposal, posted pre-tax profits of 51.6 million for the six months to 3 September, up from 45.1m a year earlier after a 6 per cent rise in revenues.

The numbers were better-than-expected, despite costs relating to an ongoing redundancy and restructuring programme resulting in bottom-line losses of 37.6m.

Chief executive Leo Quinn said net debt fell to 327m from 452.3m a year ago in a yardstick of the company's rebuilding efforts.

He added: "Our goal is to become more competitive and to use our deep relationships with customers to help them find solutions to the challenges they face."

While the early retirement of the Harrier fleet and cancellation of the Nimrod MRA4 will have an impact on UK services revenues, Qinetiq said the government's plans to invest in cyber security were a positive for the group.

The firm was created out of the former Defence Evaluation and Research Agency, and floated on the stock market in February 2006, netting huge windfalls for its directors.

The group has some 40 UK sites, with facilities in Farnborough in Hampshire, Malvern in Worcestershire, Salisbury and Boscombe Down in Wiltshire, Portsmouth, Plymouth and Christchurch in Dorset.

According to stock market legend, the company's odd name is a reference to the inventor Q in the James Bond films.

Qinetiq is currently in consultation with UK staff and unions over the potential loss of about 800 jobs.

The company's UK services division reported a 7 per cent drop in revenues to 194.2m in the half year, which it blamed on the hiatus in decision-making and spending approvals ahead of the defence spending review. Underlying operating profits fell to 21.9m from 30.5m.