News Column

Serco warns of lower revenue next year as profit dives

August 13, 2014

SUZIE NEUWIRTH



THE MAGNITUDE of the challenge facing Rupert Soames was revealed yesterday, as embattled outsourcing firm Serco reported a 66 per cent slump in first-half profit and confirmed that revenues would fall next year, missing industry forecasts.


The results came ahead of today's damning report from HM Inspect-orate of Prisons into Serco's management of Doncaster prison, which found levels of violence four times higher than in other prisons and a lack of staff control.


Pre-tax profit plunged to 33.3m from 127.1m year-on-year, as the FTSE 250 firm struggled to retain contracts and win new work in the wake of a high-profile fraud scandal on a prisoner tagging contract.


"With revenues expected to be lower in 2015 than in 2014, it will be hard to achieve anything other than a slight improvement in margin," warned the company. This implies 2015 earnings at eight per cent below consensus, according to UBS.


Soames, a grandson of wartime prime minister Winston Churchill, moved from Aggreko three months ago to take on the top role at Serco.


He has overhauled management and launched a strategic review in a bid to turn around its fortunes.


Serco said separately that Soames' right-hand man at Aggreko, Angus Cockburn, would join in October as chief financial officer, an announcement that was received well by analysts.


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Source: City A.M. (UK)


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