Outsourcing group Serco upbeat despite posting a first-half loss of £76.2 million

CALEDONIAN Sleeper operator Serco Group has tumbled to a £76.2 million pre-tax loss for the first half of the year.

On an underlying basis the outsourcing company, which is bidding to win the west coast ferries contract from Caledonian MacBrayne in Scotland, said operating profits edged up from £57.5m to £59.8m. But in the six-month period it booked £84.6m of exceptional operating items and an additional £32.8m of exceptional finance costs.

Pre-tax profits for the first half of 2014 had been £10.9m.

Rupert Soames, Serco Group chief executive, said: “This is a respectable start to what will be a long, and no doubt occasionally bumpy, road to recovery.”

Revenue for the first six months was £1.79 billion, down from £2.02bn.

Mr Soames, the former Aggreko boss, said the drop was largely a result of the ending of contracts including the Docklands Light Railway and National Physical Laboratory in London, along with visa processing and IT support services for intelligence services in the US.

Serco completed a £530m rights issue earlier this year that helped to reduce net debt to £290.3m at the end of June, from £682.2m in December.

Among the £1bn of new contracts signed between January and June was one for the estates management at the new district general hospital for NHS Dumfries and Galloway.

Mr Soames pointed to a £200m reduction in costs in the period and progress in exiting loss-making contracts.

He also indicated better control and reporting procedures are being rolled out. He said: “Many challenges remain, but we are now heading in the right direction.

“Trading in the period was a little better than we anticipated at the time of the rights issue, and we are maintaining our previous guidance for 2015, albeit that we now believe that the risks associated with this guidance are weighted to the upside.

“As previously stated, we expect that revenues and profits will continue to be under pressure in 2016.”

Serco kept its profit guidance for 2015 and said the value of its bid pipeline was steady at about £5bn.

Shares rose sharply in initial trading but closed down 1.5p, or 1.2 per cent, at 124p.