News Column

Serco flounders in red after fraud allegations

August 10, 2014

By Jon Rees, Financial Mail on Sunday, London



Aug. 10--Serco, the troubled outsourcing giant being probed by the Serious Fraud Office, is set to plunge into the red and is believed to be poised to ask investors for hundreds of millions of pounds.

Investment bank Numis believes profits have nosedived from pounds sterling 106 million in the first half of 2013 to a loss of pounds sterling 11 million over the same period this year.

The City expects Serco will need to raise up to pounds sterling 375 million from shareholders in a rights issue, though this is likely to come next year after a strategic review of the company has been completed.

Recently-installed chief executive Rupert Soames, a grandson of Sir Winston Churchill, will on Tuesday explain to investors that there has been a catastrophic collapse in profits since the Government suspended the awarding of new contracts to Serco and its rival G4S for six months after a scandal relating to the electronic tagging of criminals.

The Government had accused Serco of charging for tagging people who were either already in jail or dead. Serco has agreed to refund the Government more than pounds sterling 70 million. The company has also agreed to repay pounds sterling 2 million in past profits on a prisoner escort contract after it was found to have claimed that it had delivered defendants 'ready for court' when it had actually failed to do so.

The controversies led to the departure of Serco's chief executive Chris Hyman, who was replaced by Soames, who joined from power company Aggreko.

Major contracts to run the Docklands Light Railway and Westminster City Council have already been lost. But there are also fears that it could lose its pounds sterling 275 million annual contract for operating Australia's immigration detention centres. It recently lost the contract to provide support for Australia's defence forces after 15 years.

Soames has warned that Serco is likely to lose millions on some contracts -- including those related to asylum seekers and healthcare.

Serco's share price has plunged by nearly 50 per cent this year to leave the company with a value of pounds sterling 1.6 billion.

___

(c)2014 Daily Mail (London, )

Visit the Daily Mail (London, ) at www.dailymail.co.uk/home/index.html

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Daily Mail (London, England)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters