Bad to worse for Serco

The contracting giant has issued a profit warning sending shares down 12%.

by Gabriella Griffith

Not yet three weeks after chief executive Chris Hyman handed in his notice, his acting successor Ed Casey has had to step in to announce a profit warning for this year and the next. Somewhat predictably, the ongoing scandal over Serco’s handing of government contracts will take a chunk out of its profits for the next two years.
 
The company revealed its operating profits for 2013 were likely to be around £300m - £25m short of analysts predictions, sending its share price tumbling by over 13% in early morning trading.
 
Regaining the government’s trust looks to be a challenge for the company, which has been accused of overcharging for its monitoring of tagged criminals.
 
Remaining resolutely positive, Casey pointed out the company has won £3bn worth of contracts, in spite of the investigation by the Serious Fraud Office.
 
‘The group’s opportunities in the large and growing markets in which we are represented around the world continue to provide good long-term growth potential," he said.
 
‘The UK government audits and reviews are ongoing and we remain firmly committed to rebuilding the confidence of our UK  government customer.’
 
There have been repercussions though. Serco has lost its UK electronic tagging contract, along with a deal to look after the National Physical Laboratory. To make matters worse, the bad situation in the UK is joined by the congressional deadlock across the pond, which is affecting Serco’s US contracts. Add to that a change of government in Australia, which has slashed Serco’s antipodean revenues.
 
It doesn’t rain…
 

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