QinetiQ in the red after 'rip-off'

THE Government defence lab lined up for privatisation, QinetiQ, sank £19.1m into the red last year after booking £14.1m in sell-off fees and costs. The costs include about £7.7m paid to numerous advisers including NM Rothschild, KPMG, Herbert Smith and Andersen, a sum denounced as a 'scandalous rip-off' by Conservative MPs when it was revealed to the Commons in January.

QintetiQ's losses come after Government plans to float the research and consultancy group on the stock market were shelved earlier this year. Poor market conditions for flotations, particularly in hi-tech stocks, were blamed for the decision to pull the listing, but the public-private debacles such as Railtrack and National Air Traffic Services also played their part.

Instead the Government now plans to sell up to 51% of QinetiQ to a 'strategic partner', to be followed by a full flotation in three to four years.

A shortlist of four to six bidders has since been drawn up, the winner to be announced by the end of the year. Carlyle Group, the secretive US private equity firm that has former Prime Minister John Major as its European chairman, is tipped as the likely buyer.

Carlyle is reported to be collaborating on the deal with consultancy firm WS Atkins. The Government wants to raise at least £250m from the strategic partnership deal, and a figure of £500m has been mooted for the group's value overall.

QinetiQ's annual review showed an operating profit of £42.7m before exceptional items on sales of £653.3m last year. The firm, which employs about 9,000 staff at 42 sites across the UK, was dragged into negative territory by interest payable on debts of £467.5m - the acquisition cost of its facilities from the MoD - and losses on its nascent joint ventures.

Exceptionals included 'asset impairments' of £20.2m related to its surplus property portfolio and the £14.1m in costs related to its transition to public-private partnership.

Chief financial officer Graham Love defended the group's performance, saying: 'This year's losses were completely in line with expectations.'