30th Jan 2014 11:26
LONDON (Alliance News) - Support services company Serco Group PLC saw its shares plunge again Thursday after it warned of a bigger and ongoing hit from its corporate renewal program in the wake of issues with some UK government contracts and additionally said it was being hurt by recent currency moves.
In a statement, the company it now expects its 2013 organic revenues to have fallen by a mid-single digit percentage compared with 2012 as it was hit by a lower amount of incremental work in the wake of its highly-publicised UK government contract issues. It also reflects lower volumes in its Australian immigration contract after the Australian government changed its immigration policy.
Back in November, it had also warned that it was being hit by unfavourable currency movements. Thursday, it said that currency moves had continued to go against it, and would reduce revenues by about GBP50 million and profits by about GBP8 million in 2013.
Serco said it now expects its 2014 adjusted operating profit to come in about 10% to 20% below current market forecasts for GBP277 million. It said it expects to book about GBP10 million in costs for its corporate renewal programme and costs of about GBP15 million to pay for external advisors, implementing the programme and initial training and systems set-up.
It said it will also book a further restructuring charge of between GBP10 million and GBP15 million for cutting headcount and relate costs.
It expects its 2014 adjusted operating margin to be about 50 to 100 basis points below the 2013 margin.
Serco will release its 2013 earnings March 4 and will also give further 2014 guidance at that time.
The announcement came after the UK government gave a positive assessment of the company's corporate renewal plan, put in place after its contract issues.
Acting Chief Executive Ed Casey said he hoped the assessment meant the company would now be considered on an equal basis with other supplies in bids, rebids and contract extensions, including a bid for the Northern Rail franchise extension and the Defence Infrastructure Organisation opportunity.
Serco shares were down 12.1% at 447.5 pence Thursday morning, the biggest decline on the FTSE 250.
By Steve McGrath; [email protected]; @SteveMcGrath1
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