Serco slumps as it warns over 2016 profit

Shares in Serco fell sharply after the outsourcer said it expects revenue and trading profit to fall in 2016 partly due in part to the disposal of its offshore call centre, although underlying profit for 2015 is expected to be ahead of guidance.

Serco said it now expects revenue of around £2.8bn and underlying trading profit of around £50m in 2016. The group said the exit of private sector business process outsourcing operations will reduce revenue by around £300m.

Still, the company said underlying trading profit for 2015 is likely to be approximately £95m, a little higher than previous guidance of £90m.

Serco said the improvement was in part due to the group exceeding its targets to extract £20m of overheads and other cost savings in 2015 from specific initiatives, which has helped to offset other pressures such as lower levels of ad hoc work for customers.

Revenue for 2015 is likely to be around the previous guidance of £3.5bn, the company said.

Chief executive officer Rupert Soames said: “We expect to deliver a better performance than we originally expected in 2015, which reflects the fact that we are beginning to make progress and are delivering on our promises.

“Serco has achieved a great deal in 2015: we have reinforced the balance sheet, significantly reduced net debt, agreed the disposal of our offshore BPO business, started to implement our new strategy, reduced costs, vastly improved the reporting processes, recruited new management, and improved the position on several of our largest loss-making contracts.”

At 0843 GMT, shares were down 6.5% to 106.90p.