Serco Shares Tumble 21% On New Profit Fears

Written By Unknown on Rabu, 30 April 2014 | 00.25

Shares in Serco, the outsourcing group embroiled in a Government contracts scandal, tumbled more than 20% on Tuesday in the wake of its latest profit warning.

The firm updated the market after trading closed on Monday to say it could downgrade its profit expectations further and issue new shares to shore up its finances.

Serco, which agreed last December to repay the Government £68.5m for overcharging for the tagging of convicted criminals, had previously warned in January that 2014 was also likely to be tough.

Its woes were matched by those of rival G4S, which confirmed last month a repayment settlement of £108.9m in relation to the tagging scandal.

Serco, which is now set to be run by former Aggreko chief executive Rupert Soames from May 1 after its CEO quit, said in March that restructuring costs - taken to help try and win back Government trust - would drive profits lower in 2014.

The company said then its order book was worth £17.1bn - down £2bn on a year ago - though it had been granted permission to bid again for new Government business so long as its reforms remained on track.

While adjusted net debt for 2013 grew 21% to £701m due to heavy exceptional charges, the group said at the time of its annual results that it still had sufficient financing headroom.

In its latest statement on Monday night, Serco said: "It has now become evident in the light of recent performance that we may need to reassess the level of risk implicit in the assumptions underlying our forecasts.

"This may in turn require a material downward revision to expectations, and for us to review the appropriateness of our financing position.

"We will, therefore, be consulting with shareholders regarding the possibility of strengthening the balance sheet through an equity placing."

Shares in the firm, which employs over 100,000 staff in some 30 countries running services from London's Docklands Light Railway to air traffic control towers in the United States, had fallen 34% over the year prior to Tuesday's opening.


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