Serco 'lost traction', admits new boss Rupert Soames
Chief executive encouraged by investor support for £160m fundraising on his first day as he outlines his review plan for outsourcer Serco
Rupert Soames: 'It's not as if I didn't know there were going to be difficulties' Photo: Justin Thomas
6:24AM BST 02 May 2014
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The new chief executive of troubled outsourcer Serco admitted the company
"lost traction" in recent years as he set out plans for a major strategy
overhaul.
Rupert Soames, who took the reins of the FTSE 250 company on Thursday, said
"the appropriate way ahead from here may not be the appropriate way five
years ago".
"When it's gone from £400m of revenues a year to £4.6bn a year, it's time to
look again at what it does," he said.
Talking to The Telegraph, Mr Soames, however, denied the company had lost its
way, saying: "If it loses its way, it's gone through some fertile thickets
on the way."
He made the comments on the back of a successful overnight placing, in which
the company raised £160m at 320p a share, a slight discount to the 340.1p
closing price on Wednesday night.
The fundraising, led by brokers Bank of America Merrill Lynch and JP Morgan
Cazenove, was three times oversubscribed, with a mixture of new and existing
investors backing the placing.
"I'm delighted by the quality of investors … chuffed to the back teeth," said Mr Soames.
The placing is designed to give the company some financial headroom to allow Mr Soames to undertake the strategic review without having to initiate a fire sale of core assets.
The fundraising was announced on Wednesday night, alongside Serco's third profit warning in six months and news that Andrew Jenner, the company's chief financial officer for the past 12 years, is to depart once a replacement has been found.
Asked if he was surprised that his arrival began with such a flurry of negative news, Mr Soames said: "There's no point blubbing about it.
"It's not as if I didn't know there were going to be difficulties, it's just the order of how many tomatoes that are going to be thrown at you."
He said however that he was "delighted" at the reaction from investors to the placing. Shares in Serco closed off 0.1p at 340p, 20p above the placing price.
The former Aggreko chief executive said that, having spent all of yesterday talking to investors, the biggest gripe remained the continued profit warnings.
The company said on Wednesday that adjusted operating profit at constant currency rates would be not less than £170m, down from £220m to £250m just seven weeks ago when it published its results for 2013.
The downgrade was the result of new terms on its Northern Rail train franchise, fewer contract wins and costs related to the closure of its Australian garrison support business.
That £170m figure could be reduced yet further – some £15m lower – based on current rates of exchange, Serco went on to warn.
The warning was the latest in a line of bad news for the company, which lost a £40m government tagging contract last year after it was found to have charged for dead offenders and some who were in prison.
As a result, it was prohibited from bidding for government work until January, booked £90m in exceptional charges, and saw profits fall by 62pc last year.
Mr Soames said that his strategic review was vital to take the company forward, and he pointed to the fact that at Aggreko he carried out such a review every five years.
"I'm delighted by the quality of investors … chuffed to the back teeth," said Mr Soames.
The placing is designed to give the company some financial headroom to allow Mr Soames to undertake the strategic review without having to initiate a fire sale of core assets.
The fundraising was announced on Wednesday night, alongside Serco's third profit warning in six months and news that Andrew Jenner, the company's chief financial officer for the past 12 years, is to depart once a replacement has been found.
Asked if he was surprised that his arrival began with such a flurry of negative news, Mr Soames said: "There's no point blubbing about it.
"It's not as if I didn't know there were going to be difficulties, it's just the order of how many tomatoes that are going to be thrown at you."
He said however that he was "delighted" at the reaction from investors to the placing. Shares in Serco closed off 0.1p at 340p, 20p above the placing price.
The former Aggreko chief executive said that, having spent all of yesterday talking to investors, the biggest gripe remained the continued profit warnings.
The company said on Wednesday that adjusted operating profit at constant currency rates would be not less than £170m, down from £220m to £250m just seven weeks ago when it published its results for 2013.
The downgrade was the result of new terms on its Northern Rail train franchise, fewer contract wins and costs related to the closure of its Australian garrison support business.
That £170m figure could be reduced yet further – some £15m lower – based on current rates of exchange, Serco went on to warn.
The warning was the latest in a line of bad news for the company, which lost a £40m government tagging contract last year after it was found to have charged for dead offenders and some who were in prison.
As a result, it was prohibited from bidding for government work until January, booked £90m in exceptional charges, and saw profits fall by 62pc last year.
Mr Soames said that his strategic review was vital to take the company forward, and he pointed to the fact that at Aggreko he carried out such a review every five years.