Rupert Soames defends Serco's third profit warning amid emergency fundraising

Shares in Serco have halved since July and fell another 3.5% today

Click to follow
The Independent Online

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.