Serco has warned that next year’s profit would be less than expected after the government outsourcing operator sold its offshore call centre business and lost a number of contracts.
Underlying trading profit next year will be about £50m compared with analysts’ consensus forecast of £69m. Revenue is likely to fall by about 20% to £2.8bn, Serco said in a trading update.
Serco agreed to sell its business processing outsourcing (BPO) to the private equity firm Blackstone in September to refocus its business on public sector contracts. The absence of that business next year will reduce profit by about £20m, Serco said.
The company’s shares fell more than 13% to 99.5p. They have lost about a third of their value this year.
Serco, which makes about a quarter of its money from the UK government, is struggling to recover from a series of problems with government contracts, including overcharging the UK for monitoring criminals and mismanaging an out of hours health centre in Cornwall. Recently it apologised for using a stretch limousine to transport some asylum seekers from London to Manchester.
Rupert Soames, the grandson of Winston Churchill, took over running the company early last year. He repaired relations with the UK government, which had barred Serco and its rival G4S from new government outsourced work, and pledged to turn around operating performance by cutting costs and getting out of peripheral businesses.
Underlying trading profit for the year that ends this month will be £5m higher than the company’s earlier forecast of about £90m. Reported trading profit will be higher than the underlying figure because of reduced provisions for onerous contracts.
Soames said: “We expect to deliver a better performance than we originally expected in 2015, which reflects the fact that we are beginning to make progress and are delivering on our promises.
“We said that we expected 2016 to be a further challenging year. We still expect this to be the case, caused in part by continued attrition of the contract base, and in part by the BPO disposal. 2016 and 2017 involves much work to rebuild our new business pipeline and become more cost-efficient, but our view of the longer term recovery potential is unchanged.”
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