Serco expects half year profit to flatline despite revenue rise

Outsourcing company Serco Group expects its profit in the first six months of its 2015 financial year to be the same as the same period in 2014, despite a 15% fall in sales.

In a trading update released on 1 July the company reported it expects to make a profit of £45m (€63.5m, $70.7m) over the half-year, although revenue is expected to fall by 15% to £1.7bn.

Chief executive Rupert Soames, who is the grandson of Winston Churchill, said in a statement: "We have ended the first half in reasonably good order and are making progress in implementing our plans."

"Whilst our recovery is at an early stage, and there will be bumps along the road, I am confident that we are doing the right things, with a stronger balance sheet and supported by an excellent management team."

Edison Investment Research analyst Roger Johnston said in a note that the trading statement almost had an optmistic tone, as it was in line with market expectations and the company's restructure is taking shape.

He added: "With the rights issue reducing net debt by approximately £500m, Serco is now at least in a position to rebuild confidence with its customers and despite the half being quiet as expected £1bn of contract wins were achieved."

The company is being restructured after Serco and competitor G4S overcharged the UK's ministry of justice for security products, which infuriated the British taxpayer. It was also scrutinised because of its contracts with the infamous Yarl's Wood detention centre.

Serco had said it will take a while before it will be reporting growth again, as it issued four profit warnings in 2014 and got fined £68.5m for the overcharging scandal.

Soames was announced to lead the company in February 2014 and has been working on a turnaround since.