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Serco makes loss of £7.3m
NEW Serco boss Rupert Soames outlined the scale of the challenge facing the scandal-hit outsourcing company as it slumped to a first-half loss of £7.3m.
Serco's pre-tax loss compared to profits of £106.1m for the same period last year.
Earnings were dragged lower by the loss of contracts including its criminal tagging deal - hit by an overcharging controversy - and one-off charges from restructuring and the cost of dealing with Government reviews.
Mr Soames revealed that out of 40 major contract opportunities at the start of this year, eight had been lost while just two had been won.
The value of big contracts up for grabs over the next two years was estimated at £8bn, down from £12bn six months ago.
Mr Soames said: "We have had a poor first half, and we have not won as many new contracts as we would have liked, but there is some good news. We expect financial performance in the second half to be much stronger than in the first."
The chief executive said the proceeds of a £165 million share placing earlier this year had helped shore up the firm's balance sheet while there had been good progress in rebuilding trust with the Government.
Mr Soames said Serco was maintaining its guidance on full-year profits though "many challenges and uncertainties remain". The group warned that its strategy review, which will see it comb over the details of all contracts, could impact on expectations.
The chief executive, who joined Serco in May, also said he was delighted to announce the hiring of Mr Cockburn, currently Aggreko's interim chief executive, among a raft of new appointments.
The pair worked together for 11 years at their previous employer and Mr Soames said: "He was instrumental in the success of Aggreko, is a highly experienced CFO [chief financial officer], and he and I have complementary skills."
Mr Soames took the helm at Serco after a scandal-hit 2013 in which it was forced to refund the Government £68.5m for overcharging on criminal tagging contracts, as well as repay £2m of past profits from a prisoner escorting contract.
The company, which employs 100,000 staff, and in this area operates the International Fire Training Centre (IFTC) at Durham Tees Valley Airport, is now clear to resume bidding for public sector contracts but has admitted that trading conditions have become increasingly challenging.
Mr Soames said the events of last year had resulted in a number of senior managers leaving the UK business and "the sheer weight of adverse publicity and scrutiny had an understandable impact on morale".
Its first six-months saw it hit with one-off costs of £31.6m including £14.5m for restructuring and £5.7m for external advice and other charges in relation to UK Government reviews.
There was also a £7.5m provision to cover a dispute over its liability for the Docklands Light Railway (DLR) pension scheme. It recently lost the DLR franchise, which it has operated since 1997.
Contract wins included a 15-year deal to provide Caledonian Sleeper train services, worth around £800m.
Shore Capital analyst Robin Speakman said: "The results for the half year to end June are better than our worst fears, but still pretty grim reading in surveying the tribulations of the past year for Serco."