Serco results fail to impress investors, shares fall 15 percent

International services company Serco (LON:SRP) reported a 14 percent fall in profit on Wednesday, causing shares to fall over 15 percent.

Headline trading profit fell to £82.1 million, down from £95.9 million the year before, with revenue falling to £3 billion. However, the dramatic drop in profit remained in line with expectations and the company reiterated its previous 2017 guidance.

Pretax profit for the year was £29.6 million, compared with a loss of £69.4 million for 2015. Closing net debt increased by £46 million to £109 million, but order intake fared slightly better; a 40 percent increase was aided by a total of £2.5 billion from signed contracts, with total order intake increasing by 80 percent to £3.2 billion.

Rupert Soames, Serco’s Chief Executive, commented on the results:

“Trading in 2016 was better than we expected at the start of the year, although this was in large part due to the resolution of a number of commercial matters in the first half, which will not recur; trading in the second half was in line with the guidance we gave at the time of our half-year results.

“Operationally, we have had a busy year: across key contracts our service delivery has improved; we have reduced operating costs by some £450 million whilst improving employee engagement and at year-end, the value of our pipeline of new opportunities was up 30 percent. These are the first fruits of the “transformation” phase of our plan, which we are now about half-way through.

“Our view of likely performance in 2017 remains unchanged from previous guidance. The road back to prosperity was always going to be long and winding, with many potholes and boulders, but we are making good progress.”

UK-based Serco Group are an international provider of public services, with businesses spanning across justice, transport and immigration sectors. The company’s investors failed to cheer Wednesday’s set of full-year results, with shares falling 14.35 percent to 126.50 by 0901GMT.