Serco wobbles after 14% profit fall scares backers
INVESTORS rode away from Serco today after the troubled outsourcing giant admitted that exiting a number of contracts had pushed down profits.
The government contractor said a £250 million sale of its Indian callcentres business in 2015, as well as ending a job with Suffolk Community Healthcare, had contributed to underlying profit dropping 14% to £82.1 million last year.
Revenues fell 13% at the firm, which runs the Boris Bikes scheme.
Analysts at Liberum said the results were weaker than expected, and the broker cut its recommendation from Hold to Sell.
Serco was one of the biggest fallers on the FTSE 250 index, with the shares down 14%, or 21.7p, to 126p. But boss Rupert Soames was upbeat and said trading was better than expected at the company, which is looking to recover from a string of scandals such as charging the Government for tagging some criminals who were dead, imprisoned or non-existent.
He noted new contract wins, and added that Serco was bidding for six major deals this year, including running Saudi Arabia’s biggest-ever transport project, the £18.3 billion Riyadh Metro.
“This shows we have some big opportunities at our feet,” said Soames.
“The road back to prosperity was always going to be long and winding... but we are making good progress,” he added.
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