Serco Stock Continues Slide On Cash Call
The value of scandal-hit outsourcing firm Serco has continued to fall after it confirmed plans to raise £170m along with a strategy review.
The company, which has issued a series of profit downgrades in the wake of a contract row with the Government last year, updated the market on its capital-raising proposals after trading closed on Wednesday.
In order to shore up its finances, Serco said it would go ahead with a placing of 9.9% of its stock to raise around £170m.
The cash figure matched Serco's latest estimate of adjusted operating profit for 2014 - down significantly on earlier forecasts of between £220m-£250m.
The firm ran into trouble in 2013 when it was found to have overcharged the taxpayer on a contract to tag criminals.
It agreed last December to repay the Government £68.5m while rival G4S, which was also caught up in the scandal, confirmed just last month a repayment settlement of £108.9m.
Both firms have pledged reforms in return for being able to bid again for UK Government work.
Serco is now run by former Aggreko chief executive Rupert Soames, who took over on Thursday following the resignation of Chris Hyman in October.
He said in the statement: "Year-to-date performance has been weaker than the business expected, and this shortfall has had two impacts.
"First, it has made the original targets for the second half of 2014 even more challenging, and secondly it has required the Board to take a more cautious view of projections.
"The proposed equity placing has a single purpose: to give us the opportunity to conduct a thorough review of the strategy of the business whilst remaining within the terms of our debt facilities.
"This strategy review, which has already begun, will take about nine months to complete, and we expect to present the conclusions of it to analysts and investors at the time of reporting our 2014 full year results.
"I fully expect that this strategy review will enable us to establish a clear path to rebuild for the future."
Among Mr Soames' first tasks will be to find a new finance director after Andrew Jenner, who had been in the post for 12 years, confirmed plans to step down once a successor is appointed.
Serco shares fell more than 3% in early trading on Thursday, meaning its total value has almost halved over the past 12 months.