Serco issues shares to plug finance gap after profit warning
Wanna own a piece of a troubled outsourcing firm? 50 million shares to hit market
Serco is looking to plug the gap in its finances from weaker-than-expected results via a share placement estimated to haul in £100m worth of filthy lucre.
This follows yesterday's latest profit warning and confirmation that long-standing CFO Andrew Jenner is to quit after 17 years of counting beans, once a successor is found that is.
Today's marks the first official day on the job for Serco UK CEO Rupert Soames, who replaced Chris Hyman after he quit. Hyman left following a police probe into biz practices related to an MoJ project gone wrong.
Acting UK boss Ed Casey, who was parachuted in from the US last October, becomes the local COO.
"Year-to-date performance has been weaker than the business expected," said Soames in a statement.
This made second half year targets "even more challenging" and "required the board to take a more cautious approach view of projections".
Revenues are likely to be one per cent or £50m lower than previously forecast and the bottom line is wobbling too.
"Sharp declines in trading margin in the first quarter, and a weakened outlook for the first half, have led us to reassess the overall margin we are likely to achieve", the company stated.
Serco expects to see profit come in around £30m below forecasts, caused by the troubled Prisoner Escort and Custody Services contract, delays in chopping the workforce, and lower recovery costs for contracts the firm had already bid for.
Reduced forecasts has a "consequent impact on leverage ratios, which, without remedial action, would be uncomfortably close to their limits at the half-year. Accordingly, we will be seeking to strengthen the balance sheet via an equity placing", Serco added.
The extra fund will provide a buffer that allows management to "review" business strategy and remain in the terms of its financial covenant.
Nearly 50 million shares - 9.99 per cent of issued share capital - at 2 pence each will be issued at a date yet to be specified.
The contract with MoJ related to PECS came under the glare of police in August when government data did not match up with the stats provided by Serco. ®