Serco maintains profit guidance, trading better than expected

Outsourcers’ reputations have been dragged through the mud in recent years, with Serco taking a particular battering during the criminal tagging scandal of 2013.

Still, as it booked the pretax loss, Serco said it has scrapped its interim dividend, having paid out 3.10 pence per share a year earlier.

That’s enough to make anyone throw down their weapons.

But things have begun to improve for the company after former Aggrekko chief exec Rupert Soames (who, lest we forget, is the grandson of Winston Churchill) was brought in to turn things around. Nonetheless, the outsourcer’s half-year results aren’t a pretty sight at first glance.

Meanwhile revenues fell 12% to £1.79 billion including a 28% slump in turnover from its central government division.

In April the group received £530.1m from a rights issue, and it slashed operating costs by £200m.

Revenues were dented by a charge of £117.4m, including a £70.1m impairment to assets held for sale and £32.8m refinancing costs.

But there are some glimmers of hope.

Shares in British outsourcing firm Serco (SRP.L) jumped more than 6 percent in early trading after it posted a better-than-expected fall in revenue in its first half, allowing it to maintain its full-year profit guidance. By the close of the first half, net debt had been reduced by £392m at the start of the year to £290m.

Outsourcing giant Serco Group believes it has made a “respectable step” in what will be a “long, bumpy road to recovery” despite reporting a pre-tax loss of more than £75m.

But investors are yet to be convinced.

Free cash flow was an outflow of £77.5m, compared with an inflow of £49.7m last year, although it anticipates free cash flow for the year of £150m. Soames will need the bloody-minded grit of his famous grandfather if he’s to win this war.

“With the rights issue and refinancing behind us, we can now focus on the service we provide our customers and delivering our strategy”.