Serco share price crashes as group posts £1.32bn loss

Serco Group Plc (LON:SRP) has this morning unveiled a £1.32 billion full-year loss, reflecting asset impairments and onerous contract provisions. The troubled outsourcing group also announced a £555 million rights issue in a move to repair its balance sheet. Serco’s share price has slumped in early morning trading, having lost 13.03 percent to 179.50p as of 08:06 GMT.

Serco announced in a statement this morning that its operating loss for 2014 had come in at £1.32 billion, compared with a £146 million operating profit a year ago. Revenues declined from £4.25 billion in 2013 to £3.96 billion last year. The mid-cap outsourcing group also unveiled a trading loss of £632 million, compared with a trading profit of £257 million for 2013. The company said that it was not recommending a final dividend for 2014, and that it was not anticipated that it would recommend any dividend payment for the 2015 financial year.
Serco chief executive Rupert Soames called 2014 “an extremely difficult year”.
“The magnitude of the provisions, impairments and other charges reflects the scale of the challenges we have had to face,” he added. Serco is currently undergoing a mass overhaul following a disastrous period of contract scandals, including having overcharged the UK government for tagging criminals.
“Asking shareholders for financial support, and lenders to adjust terms on their facilities, is not a position any management would want to be in,” Soames pointed out.
In a separate statement, Serco announced a £555 million rights issue to reduce the group’s gross indebtedness, with the balance to be used for continued investment in the business and general corporate purposes.The issue price of 101p per new ordinary share represents a discount of 51.1 percent to Serco’s closing share price on March 11.
As of March 10, the consensus forecast amongst 39 investment analysts covering Serco for the Financial Times has it that the company will underperform the market.The 18 analysts offering 12- month price targets for the FTSE 250 services group have a median target of 190.00p, with a high estimate of 290.00p and a low of 130.00p.
As of 08:15 GMT, Thursday, 12 March, Serco Group plc share price is 188.10p.