The long road towards Serco 's (SRP) rehabilitation may seem a little less daunting after the group's share price benefited from a double-digit mark-up on release of its full-year figures. The support services company, which managed to reduce net losses from £1.35bn to a relatively respectable £153m, has been attempting to win over hearts and minds following a string of contract problems and scandals, the most notorious being the 2013 tags for lags wheeze, where Serco overcharged the UK government for monitoring criminals who were already back in prison. There’s no easy way back from that, but the group has made solid operational improvements on several fronts.
Operating costs are down by £330m and net debt has fallen from £682m to a more than manageable £77.5m, following a successful rights issue and the sale of the group's offshore call centre in India. Although Serco approached breakeven at the operating level, the loss of a number of contracts, including the Docklands Light Railway in London, is weighing on the top line. As a consequence, the group reiterated expectations for a decline in 2016 revenues to £2.8bn, while trading profits in the region of £50m are expected for this year.
Prior to these figures analysts at JPMorgan Cazenove were expecting adjusted EPS of 1.29p, rising to 1.68p in 2017.
| SERCO (SRP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 93.6p | MARKET VALUE: | £1.03bn | |
| TOUCH: | 93.6-93.7p | 12-MONTH HIGH: | 189p | LOW: 76p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 26p* | NET DEBT: | 21% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 4.65 | 0.24 | 35.7 | 8.4 |
| 2012 | 4.91 | 0.28 | 48.9 | 10.1 |
| 2013 | 4.28 | 0.12 | 20.1 | 10.6 |
| 2014 | 3.60 | -0.99 | -151 | 3.1 |
| 2015 | 3.18 | -0.07 | -8.8 | nil |
| % change | -12 | - | - | - |
Ex-div:- Payment:- *Includes intangible assets of £600m, or 55p a share. | ||||
