Yahoo Finance Serco recovery still on 'long and winding' road, says boss Soames
The boss of troubled outsourcer Serco has warned that its road to recovery will be “long and winding” as its strategy to concentrate on providing services to governments means it is exposed to political changes.
Rupert Soames said the business’s five-year plan remained on track, after its shares were hit when the company today announced that last year its revenues fell by 13pc to just over £3bn.
Despite long-running problems, he did not rule out rebidding for the controversial Compass contracts, which provide accommodation, transport and other related services for asylum seekers across the UK, when they are brought out for tender in two years’ time.
Serco, along with security firm G4S, has faced extensive losses from the contracts with the Home Office since they were first signed in 2012 as the number of asylum seekers has risen along with the cost of housing.
The firms faced a blow in December when the Government opted to trigger an extension clause, tying them in for a further two years. Serco had previously said that it expected losses arising from the extension of the contract to hit £112m by 2019.
But Mr Soames said today that the company had worked hard to “stabilise” the contracts, and would consider rebidding in 2019.
“I think operationally it’s going better, although it’s losing a lot of money,” he said.
When asked whether Serco would rebid, he said: “It depends on how the Government wants to offer it to the market. We have world leading expertise in this sector and so we wouldn’t write it off.”
Releasing its final results for 2016 today, the company said it had increased the value of its pipeline of work by 30pc to £8.4bn. There are six major contracts that Serco hopes will be awarded in the coming months, Mr Soames said. The company made £29.6m of pre-tax profit in 2016, having recorded a loss of £69.4m a year earlier.
Shares in the company were down 15.1pc at lunchtime, to 125.4p, having fallen as low as 119.8p earlier in the day. A year ago shares were worth just 80p.
When Mr Soames took over at the head of the business in 2014, he quickly announced an enormous rights issue and plans to pull out of providing services to the private sector altogether.
However, he admitted that the current geopolitical trends provided challenges for the company. “In the UK there’s what’s happening around Brexit and the civil service,” he said, “and in the US a change of administration always forces you to take stock.”
But he added that he thought “uncertainty is oversold”, and that he preferred to take a longer term view. “There’s always something to worry about, but on the whole Governments know that they need the expertise that private companies can bring to go and deliver services.”
