UPDATE: QinetiQ Says Unions Accept Changes To Job Terms

28th Jun 2010 08:23

(Adds analyst comment and detail) By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)-- "The unions have formally accepted the company's offer and the agreed changes now come into effect," it said in a statement. QinetiQ gave no further details on the changes to the contracts, though press reports have suggested that staff have given up their lucrative civil service-style severance terms in return for a 2% pay rise, effective from next month. "This result is a credit to our people in understanding the increasingly competitive nature of our markets," said Chief Executive Leo Quinn, "this agreement was integral to our plans announced last month and will enable us to strengthen our U.K. business." The company suspended its dividend for 12 months in May as it launched a two-year program to restructure and reposition the business. CEO Quinn has been looking to cut costs in the U.K. by about 10% in a bid to return to profitable growth. The civil service contracts held by 40% of its staff had been seen as a barrier to that. QinetiQ was once part of the U.K. government's Ministry of Defence, which means that staff are entitled to eight weeks' pay for every year of service if they lose their jobs. One analyst, who declined to be named, welcomed the union decision but said a number of structural uncertainties remain. Restructuring will be expensive, he said, and could be difficult. The news was not unexpected and by 0722 GMT, Qinetiq shares had yet to trade from Friday's closing price of 117 pence. The shares have fallen 19% in the past year amid concerns about the levels of defense spending. The company is taking action over the next 24 months to reduce costs, improve productivity and drive cash generation, both to reduce net debt and to refocus and reposition its businesses over the medium term. QinetiQ employs about 6,500 workers in the U.K., about 40% of whom are on civil service contracts. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (Andrea Tryphonides contributed to this article.) (END) Dow Jones Newswires June 28, 2010 03:23 ET (07:23 GMT)