Serco's 2013 profits hurt by criminal tagging scandal

4th Mar 2014 07:45

- Criminal tagging scandal hurts profits- Revenues rise on 2012 contracts- 2014 profit and revenue forecast to fall- Dividend lifted 4.5 per centSerco's 2013 profits tumbled 62 per cent to 102.6m pounds, reflecting the costs relating to the scandal over its criminal tagging contract with the UK government. The company paid £90.5m to settle claims it charged the government for tagging people who were either dead or in jail. The group paid a further £21m in other indirect costs. "The events of last year are well documented: the contract issues that were identified in our UK Electronic Monitoring and Prisoner Escort & Custody Services operations should never have happened and we have apologised unreservedly for them," said Chairman Alastair Lyons."We are doing everything in our power to make sure that such issues cannot reoccur anywhere in our business around the world."An investigation by the Serious Fraud Office into allegations that it overcharged for tagging offenders are ongoing.Earnings per share plunged 60.1% to 19.51p and operating profit dropped 47.1% to £143.8m last year.The company achieved organic revenue growth of 5.9% to £4,28bn, driven from contract awards in the previous year. However, a decline in contracts with the UK government is expected to lead to a further drop in profits in 2014. This year also faces reduced volume of work in Australian immigration services due to policy changes, Serco warned. A mid-single digit organic revenue fall and a 50-100 basis points reduction in adjusted operating margin are anticipated."It is essential that we take the steps now that are necessary to put Serco onto a sound basis for future growth, even if to do that means a degree of reversal of past growth," Lyons said. The firm raised its dividend by 4.5% to 10.55p per share.Shares rose 0.87% to 453.70p at 08:22 on Tuesday. RD