Soames launches Serco cash call on day one

Rupert Soames delivered his own brand of fighting talk on his first day as boss of outsourcing group Serco, pledging to reverse the “severe damage” caused by contract scandals and put “a spring in the step” of staff.

First day at school Rupert Soames said to investors
First day at school Rupert Soames said to investors

The group was rocked last year when it was found to have overcharged the UK government on a contract to tag criminals – sparking a ban on new government work, the exit of its long-serving boss Chris Hyman and a slide in its market value.

Late on Wednesday the firm said a detailed review of contracts and its work prospects had revealed the extent of the damage, forcing it to downgrade 2014 profit forecasts for the third time and launch a share placing to raise cash.

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“The reason I joined the company is because I believe the chances of not being able to produce a good plan is next to zero,” new chief executive Soames said yesterday, just hours into the job, having joined from Scottish temporary power supplier Aggreko.

“There is an opportunity that investors will give management to take a deep breath, do a proper strategy review and come forward with a plan.”

The appointment of Soames, grandson of Winston Churchill, has been widely welcomed, although his nine-month strategy review, which is set to conclude next March, illustrates the lengthy road to recovery flagged by analysts.

“I’m sitting here with my satchel, protractor set and a large pink eraser on my first day at school,” said Soames, whose jovial tone belied the scale of the task ahead. “I joined the company because I am sure there is a terrific business here,” he said in a call to analysts and investors.

The firm expects 2014 adjusted operating profit will now be “no less than £170 million”, as much as 32 per cent below March guidance of £220-250m, itself a downgrade. The group is now clear to resume bidding for public sector contracts.

To avoid stretching its debt facilities and to buy himself time, Soames launched a placing of new shares representing 9.9 per cent of its existing stock, which raised £160m yesterday.