Serco says Government is ‘keen to help us’ get through rough patch

 

The Government is back on side with Serco, just a year after the emergence of the multi-million pound offender tagging scandal, the outsourcer’s new chief executive Rupert Soames claimed yesterday, adding that ministers were “very, very keen to help us get through this”.

The scandal-struck company sank to a £7.3m pre-tax loss for the first half of the year, after a £106.1m profit for the first six months of 2013, as Serco paid for a massive clean-up operation after overcharging its biggest customer, the taxpayer, by tens of millions of pounds by claiming it had electronically tagged criminals who were actually dead or still in prison.

“This is a company that’s been badly traumatised by the events of last year. My job is to try to steady the ship,” said Rupert Soames, who was bought in from Aggreko to run Serco following the scandal.

Yesterday he also appointed Angus Cockburn, his finance boss at the power provider, who is currently interim chief executive at Aggreko, to become his finance director at Serco.

“I can’t decide whether it’s like the Blues Brothers reforming or the Odd Couple coming back together,” said Mr Soames, who said the first three months in the job had been “on the busy side of absolutely bloody hectic”.

Serco received a six-month ban on new government contracts last summer and repaid £70m to the Government for over-charging for tagging criminals.

Mr Soames, who is Winston Churchill’s grandson, said although “a reputation is in the eye of the beholder, my sense is that as far as the Government is concerned, they are keen to see us rehabilitated. The decision my chairman [Alastair Lyons] took last year to ’fess up, go for the absolute maximum co-operation and start a programme of corporate renewal has been vindicated.

“When I’ve been going round various government departments, I find them very, very keen to help us get through this.”

Serco was now running some government contracts at a loss, he said, including a £14m operating loss in the first-half on work providing housing for asylum seekers.

“It’s costing us a humongous amount of money to deliver these obligations to the Government, because we mis-priced them.”

Asked if the Government bartered too hard, Mr Soames said: “We offered the prices on our own free will. Now we’ve got to man up and deliver what we said we would.

“With several of the contracts that we won over the last three years, it’s turned out they’ve cost a lot more to run. The taxpayer is getting a spectacular deal at the expense of the shareholders of Serco.”

Mr Soames has launched a review of Serco’s contracts and strategy which is due to report alongside the full-year results next March. The company, which has issued three profit warnings since last November, said yesterday it was still on track for annual operating profits of at least £170m, provided no further problems were uncovered.

Mr Soames added: “My suspicion is that folk are not going to be hanging out the bunting yet but they are going to be quite pleased to see that after a stage where every Serco announcement was a downgrade, we’ve maintained guidance.”

Serco shares rose 1.6p to 330.5p yesterday.

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