August 29 2014 Latest news:
Graeme Evans , PA City editor
Tuesday, March 4, 2014
Outsourcing giant Serco is battling a “material loss of momentum” after the scandal over its criminal tagging contract left annual profits 62pc lower.
The fall-out from the crisis will also result in lower revenues and profits this year, even though Serco is now clear to resume bidding for public sector contracts.
Last year, Serco agreed to repay the Government £68.5m for over-charging on criminal tagging contracts, as well as repay £2m of past profits from a prisoner escorting contract.
It followed allegations that Serco and rival G4S overcharged for tagging offenders, some of whom were found to be dead, back in prison or overseas. The revelations, which are still being investigated by the Serious Fraud Office, led to a freeze on bidding for lucrative Government contracts.
Chairman Alastair Lyons said the scandal also affected the company’s ability to win contacts with the private sector, while management time was diverted to focus on the crisis and subsequent corporate turnaround plan.
He added: “The inevitable consequence has been a material loss of momentum, particularly in the UK, translating into lower organic revenue growth and profitability than we would have otherwise have aimed to achieve in 2014.”
The company said it was taking steps to return the business to growth, including through the appointment of Aggreko boss Rupert Soames as chief executive.
Profits for last year fell to £106.6m, reflecting £90.5m of one-off charges principally relating to the tagging settlement. Its order book stood at £17.1bn at the end of last year, compared with £19.1bn a year earlier.
Contract awards during the year included the operation of the Docklands Light Railway in London and the construction and running of additional capacity at Thameside prison in southeast London.
Operating profits were down 2.3pc to £285.4m and are set to fall to between £220m and £250m in 2014, in line with a profits warning from the FTSE 250 Index company in January.
Acting chief executive Ed Casey said the priority for this year will be to take the actions necessary to return the business to longer term growth.
A Norwich-based business which started as a “man with a van” operation is eyeing further expansion after seeing its predicted turnover increase from £6,000 to £340,000 within five years.