Serco Launches £170m Cash Call as Rupert Soames Parachutes In

Embattled Serco is launching a £170m fundraising mission to fund a "thorough review" of its business strategy with a view to rebuilding the group's reputation, according new chief executive Rupert Soames, who takes up his post today.

According one of a series of statements, Serco said it will launch close to 50 million new ordinary shares on the exchange to raise the cash from new investors, representing up to 9.99% of existing issued share capital.

Soames, who joined a month earlier than expected as the security giant looks to put the electronic tagging scandal behind it as quickly as possible, said: "The proposed equity placing has a single purpose: to give us the opportunity to conduct a thorough review of the strategy of the business whilst remaining within the terms of our debt facilities.

"This strategy review, which has already begun, will take about nine months to complete, and we expect to present the conclusions of it to analysts and investors at the time of reporting our 2014 full year results. I fully expect that this strategy review will enable us to establish a clear path to rebuild for the future," he added.

Soames said Serco's year-to-date performance had been weaker than the business expected, making original targets for the second half of 2014 more challenging, and requiring the board to take a more cautious view of projections.

He said: "The judgement of the likely out-turn for the year has therefore been materially reduced, with a consequent impact on our leverage ratios, which, without remedial action, would be uncomfortably close to their limits at the half-year.

On 29 April, Serco shares plunged by 18% on market open after the embattled security revealed that it is aiming to launch a rights issue in order to boost its balance sheet following the electronic tagging scandal.

Rupert Soames is the grandson of British wartime Prime Minister Winston Churchill.