It looks like Rupert Soames plan to rescue Serco from the abyss is working.
Serco’s 2015 results, released on Thursday, show losses dramatically reduced as Soames restructures the business to try and shake off its toxic image.
Soames, the grandson of wartime Prime Minister Winston Churchill, was appointed CEO of Serco in May 2014 when the outsourcing business — which does everything from handle cash to guard prisoners — was in the midst of a huge scandal.
Serco was caught overcharging the government for electronically tagging criminals, charging for tagging people who were either in prison or even dead. Other instances of mismanagement and alleged fraud quickly emerged, with then Justice Minister Chris Grayling saying at the time it had “become very clear there has been a culture within parts of Serco that has been totally unacceptable.” The Guardian called Serco “a poster-child for the dangers of outsourcing.”
Profits plunged 62% in 2014 as a result of the fiasco, with a huge pre-tax loss of £990.5 million ($1.37 billion). Serco wrote off £1.5 billion ($2 billion) worth of business, which led to a £550 million ($765 million) rights issue to shore up finances.
But it looks like Soames root-and-branch review of the business is working. Soames has sold off Serco’s private sector outsourcing business and is refocusing the company on public sector outsourcing.
While 2015 was another year of losses, they have been dramatically pared down to just £69.4 million ($96.6 million). That’s despite revenues falling from £3.95 billion ($5.5 billion) to £3.5 billion in the year ($4.8 billion).
With a nod to his grandfather, Soames writes in the release:
In summary, in 2015 we delivered on our promises, our plan has survived first contact with the enemy, and we go into 2016 in much better shape than we entered 2015. However, to paraphrase the Duke of Wellington at Waterloo, we know that much hard pounding lies ahead.
Serco is forecasting another big fall in revenue this year to £2.8 billion ($3.9 billion).
Investors are lapping up Soames battle talk — Serco shares popped over 9% at the open and are still up over 8% 25 minutes after trade began in London.
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