Serco surges as 2015 loss narrows significantly

For the year ended 31 December, the loss narrowed to £69.4m from £990.5m the previous year.

The much-improved performance came despite a fall in revenue to £3.2bn from £3.6bn, which Serco said was largely the result of the ending of contracts such as the Docklands Light Railway and National Physical Laboratory, as well as certain US intelligence agency support services and visa processing work.

Underlying trading profit for the period came in at £96m, down from 2014’s £113.2m but slightly better than the company’s guidance of £95m.

Meanwhile, net debt fell to £77.5m at the end of 2015 compared with £682.2m the previous year.

Chief executive Rupert Soames said: "The business has delivered a much better performance than we expected at the start of the year, which reflects the fact that we are making good progress in the first year of the implementation of our strategy.

"Serco has achieved a great deal in 2015: we have a significantly stronger balance sheet with materially less debt, we have successfully disposed of the majority of our offshore BPO business, reduced costs, improved our internal reporting processes, recruited new management, improved the position on several of our largest loss-making contracts, and strengthened our pipeline. Our plan has survived first contact with the enemy.”

Looking ahead, the company – which is still recovering from the costs and reputational damage relating to the scandal over its criminal tagging contract in 2013 – said it still expects revenues and profit to decline in 2016 due to the disposal of its private sector BPO business and contract attrition.

It said it has four priorities this year: to further improve the operational and financial performance of its contracts; to build its new business pipeline; to reduce our costs; and to improve and embed its new management information systems.

Serco did not pay a dividend, as indicated in March 2015, but said it was committed to resuming payments “when it is prudent to do so”.

At 0923 GMT, Serco shares were up 18.4% to 96.70p.