Rupert Soames defends Serco's third profit warning amid emergency fundraising
Shares in Serco have halved since July and fell another 3.5% today
New Serco boss Rupert Soames reassured investors he understood their concerns over yet another profit warning on his first day in charge of scandal-struck outsourcer.
Soames, Winston Churchill’s grandson and former boss of Aggreko, the temporary power generator, was forced to defend Serco’s third profit warning in six months; another management departure as finance boss Andrew Jenner quit last night; and a £170 million emergency fundraising.
Shares in the Boris Bikes and prisons operator — which lost a £40 million government contract last year after charging the taxpayer for tagging dead offenders — have halved since July and fell another 3.5 per cent to 328.1p today.
Investors demanded an explanation from Soames for the latest trimming of Serco’s adjusted annual operating profit — now expected to come in at £170 million — and the new boss conceded that the string of profit warnings might have hit confidence in the group’s latest numbers. “How do we come up with £170 million?” he said. “Let me talk you through our logic, if it can be called that. Because I’m a bear of little brain, let me talk through the numbers.”
He said a profit of £220 million to £250 million, announced just seven weeks ago, had been cut because “it was clear to me there was still an undesirable level of risk involved”.
He added: “How comfortable do I feel with the number? The fact that I’ve personally been an employee of this business for eight and a half hours does not make me comfortable. The fact that the business has prided itself on having a large degree of forward visibility but has been missing short-term targets does not make me comfortable. But we get paid big bucks to come to a judgement, and my judgment is that we should have enough contingency … to [hit] £170 million.”
Quizzed about what Serco’s contract margins could be after its strategy review, which is to last nine months, Soames said: “In the words of Manuel from Faulty Towers, ‘I know nothing’.” But he did say that some smaller divisions in Serco’s diverse business could be sold. The firm is spending £15 million to £20 million on restructuring this year, including shedding 600 staff.
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