Troubled outsourcing company Serco has blamed "poor trading" after it recorded a major loss in the first half of 2014.
The firm reported a pre-tax loss of £7.3 million, a 107 per cent drop from the same period 12 months earlier. It highlighted reorganising costs and loss-making contracts as the primary reasons why it had experienced a downturn of this ilk. While it announced plans to raise £170 million through the sale of new shares in May, this was compounded by two profit warnings and has resulted in a significant drop in revenue.
Rupert Soames, Serco's chief executive, explained there are a number of obstacles for the company to overcome it is going to get back on track. Mr Soames, who was previously chief executive at engineering firm Aggreko, conceded the first half of the year produced some disappointing results but there were plans to rectify the situation.
Serco's chief executive said: ""As expected, trading was poor in the first half. Many challenges remain, and we have a lot of work to do, but I am confident that, in time, we can restore the company's fortunes."
The firm, alongside G4S, was involved in an investigation from the Serious Fraud Office after being accused of overcharging the government for its electronic tagging contract. There were calls for the two companies to be barred from bidding for public sector contracts during the investigation, which was launched in May.
Serco had previously won a government deal after the Cabinet Office lifted a ban in February while G4S was allowed to bid for contracts since April.
In July, the company lost out to French transport group Keolis for control of London's Dockland's Light Railway. Serco had been operating the route since 1997 but was beaten by Keolis which will now be responsible for the franchise until April 2021.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.