Writedowns show Serco can't outsource troubles
Friday 04 July 2014
The scale of the challenge facing Rupert Soames at Serco was laid bare yesterday when the outsourcing giant's new boss admitted that it expected to write down the value of some of its largest contracts.
Serco, which operates prisons, healthcare services and London's "Boris Bikes", has been under intense pressure since last year when it was found to have overcharged the Government on contracts for tagging offenders.
Mr Soames, the grandson of Sir Winston Churchill who joined as chief executive from Aggreko in May, said the write-downs would include its Compass programme to provide accommodation and support services for asylum seekers. This contract has already cost the company £15 m since 2012 and he warned that it "may continue to lose money".
Others in the spotlight include a contract with Suffolk Community Healthcare.
Mr Soames warned that between £10m and £15m of provisions could be required to cover the total shortfalls when the company reports its half-year results next month.The shares fell 3.3p to 363p.
Serco has already downgraded its 2014 profit forecast three times and launched a share placing to raise cash. Operating profits are expected to come in at £170m this year.
"Whilst difficulties continue on some contracts, overall our trading and financial position is in line with the expectations on which we updated the market two months ago," Mr Soames said. "We are rebuilding trust and confidence with the UK Government and the strategy review is proceeding according to plan.
"There are many challenges ahead, but I am confident that we can build a strong future for the business."
Analysts at the broker Liberum maintained a hold rating on Serco ahead of Mr Soames' strategic review, the results of which will be unveiled next year. The news has not been all bad: in May it was awarded an £800m contract to run the Caledonian Sleeper service between London Euston and Scotland.
"The only certainty is uncertainty until March 2015," Liberum said.
"If improved prudence restores faith in earnings, and increased focus on return on invested capital improves cashflow, the business may be capable of healing itself. But it will be a long slog."
- 1 I've been called an abusive and dangerous parent, when all I did was listen to my transgender child
- 2 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 3 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 4 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 UK weather: Britain braced for snow to replace sun as arctic air mass moves in
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Russian hack of President Obama's emails worse than previously admitted
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow to replace sun as arctic air mass moves in
Nepal earthquake: US Pastor Tony Miano sparks outcry by suggesting Nepalis should convert and not rebuild their 'pagan shrines'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...