Shares in FTSE 100 outsourcing giant Serco plummeted 11 per cent yesterday as its chief executive Christopher Hyman failed to convince investors that the scandal-engulfed group can rebuild its relationship with the Government.
Mr Hyman pledged to "put right any issues" at Serco having referred some employees to the police on Wednesday after irregularities were discovered on records kept for its £285m prisoner-escorting contract with the Ministry of Justice.
This follows allegations that Serco and security group G4S had overcharged the taxpayer by £50m on claiming to have electronically tagged offenders who turned out to have been in custody or who were even dead.
Coupled with poor half-year results that saw a 2.6 per cent fall in pre-tax profit to £106.1m, Serco's woes saw investors flee the stock. The shares fell 68p to 538.5p.
The public sector is Serco's most important customer, as it runs everything for local and central government from Ofsted inspections to London's "Boris bike" hire scheme. However, Serco is blocked from winning government contracts until the group can prove it has improved its internal controls. Mr Hyman said: "Serco has … agreed with the MoJ to initiate a programme of change and corporate renewal designed to increase the voice of our customer in our organisation and strengthen Serco's systems."
Westhouse Securities analyst Michael Donnelly said: "The main investment point… will be what else is going to come to light as the government continues its investigation into Serco's contract portfolio."