Serco Group Plc Reports Q1 Rev €1.2B (-0.3% organic decline); internal forecasts are that revenue will be slightly (about 1%) lower than we previously thought,
- Guides FY14 Rev at £4.7-4.9bn at constant currency
- Serco's order book was £17.1bn at 31 December 2013. Since the beginning of the financial year, our contract awards totalled £1.2bn, which is higher than the equivalent stage last year, although this figure does include the Northern Rail contract
- Sharp declines in trading margin in the first quarter, and a weakened outlook for the first half, have led us to reassess the overall margin we are likely to achieve for the year. Factors which are reducing, or may further reduce, the profitability of the business include: new terms on our interim franchise agreement for Northern Rail; transition costs that may be incurred to close our Australian garrison support operations; greater-than-anticipated investment to achieve further improvement in the operational performance of challenging contracts such as PECS and COMPASS; delays in implementing reductions in headcount and related costs, in part caused by the requirements of our Corporate Renewal Programme; and a lower recovery on bid investment costs given fewer new contract wins than previously anticipated. Revenues are also expected to be about £50m (1%) lower than previously anticipated.
- Based on an assessment of the risks in these forecasts, the Board now believes that Adjusted Operating Profit at constant currency in 2014 will be not less than £170m. At latest rates of exchange, currency movements would serve to reduce reported profits by around £15m.
- Board's views appropriateness of an equity placing of up to 49,932,918 shares, representing up to 9.99% of existing issued share capital, details of which we anticipate will be announced shortly.