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UK – Serco cautious over trading announcement

16 December 2013

Outsourcing firm Serco is likely to offer another cautious update on Thursday, ahead of its full-year results after recently warning that profits will miss previous forecasts, reports the Eastern Daily Press.

A multi-faceted company, according to their website, Serco’s core functions involve outsourcing, finding sustainable jobs for the long-term unemployed, providing safe transport, helping patients recovering more quickly, improving the local environment, and supporting the armed forces.

According to the Guardian, Serco agreed to the early termination of its contract last week for out-of-hours GP services in Cornwall, after the company left the county short of doctors.

The Group is also currently the subject of a fraud probe regarding its contract to electronically tag criminals. It announced last month that it was being hit by delays in potential contract awards due to the ongoing government audit of its work.

According to the company, profits will be on a similar level to those reported last year, £307 million, rather than the forecasted £325 million.

Mike Murphy, an analyst with Numis Securities, said the outlook for 2014 also looks very uncertain, as Serco awaits the results of the probes, after it emerged G4S and Serco overcharged the Ministry of Justice for electronically monitoring offenders, some of whom were found to be dead, back in prison, or overseas.

As well as a government review, the Serious Fraud Office (SFO) has also opened a criminal investigation.

The tagging contracts held by Serco and G4S will be handed to rival firm Capita on an interim basis by the end of the financial year, with Capita in the running to take on the work permanently later in 2014.

Mr Murphy added that Serco’s ability to win new contracts will continue to be significantly impacted next year, while an ongoing clampdown on government spending will add to its woes.

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