Guarding

‘More challenging than expected’: Serco

by Mark Rowe

The services contractor Serco Group plc has reported more changes at the top. Andrew Jenner, Group Chief Financial Officer of Serco since 2002, has formally told the Group he is to step down from the board and as CFO once there is a successor. He has been at the firm for 17 years. Serco and rival G4S last year admitted to over-billing of the UK Government for its offender electronic monitoring service, which has led to the ending of those firms’ management of the work.

After the arrival on May 1 of Rupert Soames as Group Chief Executive, Ed Casey will become Group Chief Operating Officer. The contract firm on April 30 gave an Interim Management Statement (IMS) for its performance from January 2014 to date. The company admitted sharp declines in trading margin in the first quarter, and a weakened outlook for the first half, led it to reassess the overall margin we are likely to achieve for the year. Revenues are expected to be about £50m (1pc) lower than previously anticipated.

According to the firm Soames’ priority over the initial months is to gain a thorough understanding of all facets of the businesses by meeting customers and spending time with staff, giving him the background to lead a strategic review of the business, the initial phases of which are already under way.

Rupert Soames said: “Year-to-date performance has been weaker than the business expected, and this shortfall has had two impacts. First, it has made the original targets for the second half of 2014 even more challenging, and secondly it has required the Board to take a more cautious view of projections. The judgement of the likely out-turn for the year has therefore been materially reduced, with a consequent impact on our leverage ratios, which, without remedial action, would be uncomfortably close to their limits at the half-year. Accordingly, we will be seeking to strengthen the balance sheet via an equity placing of up to 49,932,918 shares, representing up to 9.99pc of existing share capital, and will shortly be making a further announcement in this regard.

“The proposed equity placing has a single purpose: to give us the opportunity to conduct a thorough review of the strategy of the business whilst remaining within the terms of our debt facilities. This strategy review, which has already begun, will take about nine months to complete, and we expect to present the conclusions of it to analysts and investors at the time of reporting our 2014 full year results. I fully expect that this strategy review will enable us to establish a clear path to rebuild for the future.”

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