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Restructuring plans impact on outsourcing giants 14 August 2014

Two of the UK’s largest private sector outsourcing firms, Serco and G4S, have reported the effects of on-going restructuring plans.

Outsourcing giant Serco announced a pre-tax loss of £7.4m for first six months of 2014 on Tuesday (12 August), affected by “one-off” restructuring costs of £29.4m. The loss represents a 107% year-on-year decrease (2013: £106.1m).

Serco also reported “good progress” in strengthening its management team, with appointments including Angus Cockburn as CFO (as of October), Kevin Craven as CEO UK Central Government division (as of September), Liz Benison as CEO UK Europe Local & Regional Government division (as of September), and David Eveleigh as Group General Counsel and Company Secretary (as of November).

Rupert Soames, Group CEO of Serco, said: “As expected, trading was poor in the first half. Profits were in line with our revised expectations, and cash flow and net debt were better.

“We are making good progress with our Strategy Review, and in rebuilding trust and confidence with the UK government.

“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.”

In contrast, rival firm G4S today (14 August) posted pre-tax profits of £85m for the same period, up from a loss of £94m during the first six months of 2013.

The company has cited its “corporate renewal programme” and its performance within emerging markets for its financial turnaround.

Ashley Almanza, Group CEO of G4S, said: “The group made good progress and delivered a satisfactory financial performance in the first six months winning new contracts with a total value of £1.2 billion and producing a 13.2% increase in earnings.

“There remains much to be done to capture the full potential of our strategy and to strengthen the group’s performance.

“Demand for our services was robust, particularly in emerging markets. We are restructuring and rebuilding our businesses in UK & Ireland and in Europe. We have seen growth return to the North American market.”

Both firms are currently under investigation by the Serious Fraud Office after being issued bans on UK government contracts after a scandal over overcharging for criminal tagging services last year.

In April 2014, G4S was cleared to bid for government contracts again after it agreed to repay £109m.

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