This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2012/aug/29/serco-slump-us-budget-contract

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Serco profits hit by US budget stalemate Serco profits hit by US budget stalemate
(35 minutes later)
Political wrangling over the US budget has hit profits at London-listed outsourcing company Serco, which runs everything from air-traffic control to nuclear facilities and prisons across the world.Political wrangling over the US budget has hit profits at London-listed outsourcing company Serco, which runs everything from air-traffic control to nuclear facilities and prisons across the world.
The company said the US budget stalemate had meant government agencies postponed contract awards, delayed work, and cancelled or reduced the scope of existing contracts. The company said US government agencies had postponed contract awards, delayed work, and cancelled contracts because of the stalemate over the debt ceiling.
Serco was also hit by a change in US government policy, which now awards contracts on the basis of "lowest price technically acceptable" rather than "best value". The company does not expect the US market to improve soon, with "ongoing uncertainty regarding budgets, the upcoming presidential election and the challenges facing congress in dealing with the growing national debt". Serco chief executive, Chris Hyman, said the company does not expect a solution to the debt crisis "until the presidential election and until we have a new Congress in place". He said the US market will continue to be "tough" in the second half, but that it will grow in the long-term. "People are screaming for work to be done, they are just trying to agree their funding."
Overall, profits before tax and one-off items slumped 17% in the first half to £102m. In the UK, Serco saw a decline in welfare-to-work contracts but said that was offset by other contract wins. It said conditions were improving in the UK, where it sees opportunities as the government puts more health and probation services out to private contractors. Last month, Serco won a £37m contract to provide community punishment programmes in London, becoming the first private company to take over a significant portion of work from the probation service. Overall, profits before tax and one-off items slumped 17% in the first half to £102m. In the UK, Serco saw a decline in welfare-to-work contracts but said that was offset by other contract wins, such as the deal to provide ferry services to the northern isles in Scotland.
Hyman said: "The UK is starting to move again. I'm cautiously optimistic about that. There were questions over whether the government would go deep into public sector reform. We've seen them do what they said."
Last month, Serco won a £37m contract to provide community punishment programmes in London, becoming the first private company to take over a significant portion of work from the probation service.
The group won £4.2bn of contracts in the first half, up from £2.5bn in the same period last year, boosted by a £1.5bn joint venture with the Ministry of Defence to provide and maintain the UK's nuclear warheads.The group won £4.2bn of contracts in the first half, up from £2.5bn in the same period last year, boosted by a £1.5bn joint venture with the Ministry of Defence to provide and maintain the UK's nuclear warheads.
It also booked £15.7m of restructuring costs in the first half, which went towards creating a global business process outsourcing division to help it win more back-office work. Revenues picked up 4.3% to £2.34bn, and pre-tax profits, including a one-off profit of £31m from the sale of subsidiaries, rose 8% to £121m. It also booked £15.7m of restructuring costs in the first half, which went towards creating a global business process outsourcing division to help it win more back-office work.
Mike Allen at Panmure Gordon said cash generation in the first half was "slightly disappointing" but noted that the company remained upbeat "despite clear headwinds in the business". He kept a "hold" recommendation on the shares.