SERCO boss Rupert Soames drafted in his right-hand man from Aggreko today as first-half losses high-lighted the scale of the turnaround task he faces.
The scandal-hit outsourcing giant slumped to a loss of £7.3 million in the six months to 30 June, compared to profits of £106.1m for the same period last year.
But the City cheered as Angus Cockburn joined as finance director,
in a move that was widely expected since he made clear he would not be staying on at Aggreko after stepping into the top job when Soames joined Serco in May.
The pair worked together for 11 years at the Glasgow-based temporary power firm, building a relatively small
company into a FTSE 100 giant.
Soames said: “He [Cockburn] was instrumental in the success of Aggreko, is a highly experienced chief financial
officer, and he and I have complementary skills.”
Soames was brought in to turn around Serco after a scandal-hit 2013 in which it was forced to refund the UK government £68.5m for overcharging on criminal tagging contracts, as well as repay £2m of past profits from a
prisoner escorting contract.
The company, which employs 100,000 staff, is now clear to resume bidding for public sector contracts but has admitted that trading conditions have become increasingly challenging.
Out of a pipeline of 40 major contract opportunities at the start of this year, eight were lost while just two had been won.
The value of big contracts up for grabs over the next two years was estimated at £8 billion, down from £12bn six months ago. The wins included a 15-year deal to provide Caledonian Sleeper train services, worth around £800m.
Soames said: “We have had a poor first half, and we have not won as many new contracts as we would have liked, but there is some good news. We expect financial performance in the second half to be much stronger than in the first.”
He said the proceeds of a £165m share placing earlier this year had helped shore up the firm’s balance sheet, while there had been good progress in rebuilding trust with the UK government.
The chief executive said Serco was maintaining its guidance on full-year profits, although “many challenges and uncertainties remain”.
The group warned that its strategy review, which will see it comb over the details of all contracts, could impact on expectations.
Although the dire figures had been expected, some analysts were concerned over the lack of new work for the company.
Andrew Gibb, at Investec, said: “On the positive side, net debt was lower than expected, the interim dividend has been maintained and Angus Cockburn has been confirmed as CFO.
“On the negative side, operating margins are low and the group looks to be struggling to win major new work.”
He reiterated his “sell” rating on the shares and lowered his target price, adding: “The turnaround story is potentially becoming more interesting, but equally we do not think this will be an overnight success. At present, there appears to be more downside risk, as the strategy review digs deeper into the broad contract base.”