It’s not been a happy first year or so as chief executive of Serco for Rupert Soames. In November he wrote £1.5bn off a business that was still reeling from the criminal tagging scandal of two years ago. Then he had to issue £550m of new shares in March, while announcing its first full-year loss for a quarter of a century.
That’s enough to make anyone throw down their weapons. But Soames, lest we forget, is a Churchill and so made of stronger stuff than mere mortals. Nonetheless, the outsourcer’s half-year results aren’t a pretty sight at first glance.
Revenues in the first six months of this year slipped 12% to £1.8bn. Meanwhile, an operating profit of £28m swung to a loss of £24.8m. The company also took a £117.4m one-off charge, split between impairing assets and refinancing debt. Ouch.
But there are some glimmers of hope. Firstly, those results weren’t actually as rubbish as expected: Serco had forecast revenues of £1.7bn, while £62.7m worth of trading profit was well above the predicted £45.1m. Secondly, debt was £392m lower than at New Year, helped by the aforementioned rights issue, while operating costs were slashed by £200m.
Soames gave a reasonable assessment of the battlefield: ‘This is a respectable start to what will be a long, and no doubt occasionally bumpy, road to recovery.’
But investors are yet to be convinced. Despite rising nearly 3% when the markets opened this morning, shares were down almost 1% to 124p around lunchtime, having haemorrhaged 75% in the last two years. Soames will need the bloody-minded grit of his famous grandfather if he’s to win this war.