The City’s taste for scandal-hit Serco Group has fluctuated after the British outsourcer posted a revenue and profit fall but also hailed progress in its turnaround.
Sales at the company, which has clients in more than 30 countries, dropped to £1.8bn in the six months to 30 June, from £2bn in the same half last year. It had set itself a target last month of £1.7bn. Sales were hit when it lost its franchise to run the Docklands Light Railway in London, as well as a contract with the National Physical Laboratory.
But Rupert Soames, its chief executive, said trading “was a little better than we anticipated”. He added: “This is a respectable start to what will be a long, and no doubt occasionally bumpy, road to recovery.”
Mr Soames took up the role in May 2014 to help the company bounce back from a turbulent few years.
Serco said in November 2014 that it needed to tap investors for £550m after identifying £1.5bn in writedowns. Problems stemmed from its admission in July 2013 that it had charged the Government for tagging criminals who were dead, imprisoned or non-existent.
Last month it temporarily lost work at the Mount Eden Corrections Facility in New Zealand, after evidence of a “fight club” within the prison emerged. Video footage showing inmates brawling was posted to YouTube. Mr Soames said an investigation was under way.
Warning: Contains violence
Commenting on the half-year, he said: “We have come out of the traps and climbed the first fence.”
Despite registering a pre-tax loss of £76.2m, down from a £10.9m pre-tax profit, he welcomed progress made during the period such as reducing overheads by around £200m.
The group also signed £1bn of new contracts, including one with a new district general hospital for NHS Dumfries and Galloway.
The company is bidding for a further £5bn of deals and “rebuilding the pipeline is a major focus of the divisional management teams,” Mr Soames said.
Its order book stood at £11.5bn on 30 June. The chief executive warned sales and profit will remain under pressure next year.
But this update prompted shares to jump 6 per cent in early trading, before dipping 1.5p, or 1.2 per cent, to close at 124p.
Christopher Bamberry, an analyst at Peel Hunt, said: “In our opinion the management are putting in place the right strategy, but execution and hence recovery will be lengthy. It will take time to rebuild confidence and the pipeline and as a consequence revenues.”
Andy Brown, at Sanlam Securities, said: “Rupert Soames acknowledges that recovery is at an early stage. Progress, nonetheless, is being made”.
