Serco ‘clears first fence’ in long road to recovery

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The boss of scandal-hit outsourcer Serco has said the company had “climbed the first fence” as it attempts to claw its way back after a dire 2014.

Chief executive Rupert Soames, a grandson of Winston Churchill, said the six months to June 30 was better than expected as the company posted sales of £1.8 billion.

The drop from £2 billion in the same period in 2014 was not as steep as analysts had expected for the company, which is trying to bounce back from controversy and contract losses.

In July the New Zealand government took control of Mount Eden Corrections Facility, which was run by Serco, after evidence of a “fight club” within the prison walls emerged. Video footage showing inmates brawling was posted to YouTube.

Soames said Serco’s work will “be subject to controversy and scrutiny”, but that an investigation was under way.

He added that the prison’s reputation of being poorly run had improved since Serco took on the contract.

The incident follows a turbulent few years for the business, which admitted in November it needed to tap investors for £550 million after identifying  £1.5 billion in writedowns.

But in the first half of this year it agreed contracts for £1 billion of new business, and is bidding for some  £5 billion of new deals. 

They will help lessen the blow of losing its historic deal to run London’s Docklands Light Railway last year.

Soames told the Evening Standard: “We have come out of the traps and climbed the first fence.”

He joined in May 2014 to revive the firm, whose problems stem from its admission in July 2013 that it had charged the Government for tagging criminals who were dead, imprisoned or non-existent. It turned off investors last year with a series of profit warnings, but earlier today shares were up 2.6p to 128.1p.

Andy Brown, equity analyst at Sanlam Securities, said: “The fall from grace has been high profile, and new chief executive Rupert Soames acknowledges that recovery is at an early stage. Progress, none the less, is being made in implementing change.”

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August 12, 2015 |
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