Serco to press ahead with its cost-cutting as profits drop

SERCO boss Rupert Soames has said the company still has costs to cut before it is trading at full strength, as the firm enters the middle stage of its fiveyear turnaround plan.

He said that there were plans to further reduce overheads and make Serco’s processes more efficient, while bringing down some of its IT costs.

“We’ve still got a lot of costs that we have to get out of the business,” he said.

Serco said yesterday that it was still on course to meet fullyear expectations for its financial performance, despite a severe dip in profits in the first six months of the year.

Underlying pretax profits fell from £43.9m to £27.7m, a drop of almost 37pc. Revenue dipped from £1.52bn to £1.51bn, although it still beat expectations of £1.48bn.

But Mr Soames said the results were “reassuringly dull” and attributed the falls to a particularly strong comparable period in 2016.

The company’s order intake – its signed contracts – was boosted by a £1.5bn contract which Serco signed in June to operate a new prison in New South Wales, Australia – its largest ever contract. The win has sent its order intake to £4bn over the last 12 months, the highest it has been since 2012.

Serco is trying to shake off a bad reputation after being caught up in highprofile scandals in recent years, including overcharging for monitoring criminals and its handling of contracts to house asylum seekers. The company is currently around two and a half years through a fiveyear programme which aims to improve its standing.

Mr Soames said: “Two or three years ago Serco was regarded as the devil’s spawn. But we decided at the getgo that we would stand by all those lossmaking contracts, and in a relatively short space of time we’ve gone from zero to £4bn.”

Shares in the company rose 2.2pc to close at 115.5p.