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Serco's corporate renewal plan gets the thumbs up from government

Derek du Preez | Feb. 5, 2014
The Cabinet Office has given Serco's corporate renewal plans a 'positive assessment', which were established in an attempt to stop it getting blocked from all government business following a row with the Ministry of Justice (MoJ).

The Cabinet Office has given Serco's corporate renewal plans a 'positive assessment', which were established in an attempt to stop it getting blocked from all government business following a row with the Ministry of Justice (MoJ).

Serco has been accused, alongside G4S, of overcharging on an electronic tagging contract, which has resulted in a Serious Fraud Office (SFO) investigation and threats from the government that it could be banned from all public sector business. CEOs at both companies have also stepped down as a result.

It was recently announced that Capita would take over delivery of the contract - using systems and equipment supplied by G4S and Serco - in an interim basis by April 2014.

Serco has said that the impact of the dispute with government will be significant in 2014, where the company has also issued a profits warning. However, it stated that the positive assessment by the Cabinet Office is a "significant milestone" in a process that has been a major focus of management.

Ed Casey, acting CEO, said: "The significant steps we are taking demonstrate our commitment to rebuilding the confidence of our UK Government customer and ensuring that the issues that emerged last year will not reoccur.

"We are pleased that our progress has been recognised by the positive assessment of our corporate renewal plan, and we believe that Serco can now be considered on an equal basis to other suppliers for current bids, rebids and extensions, such as the Northern Rail franchise extension and the Defence Infrastructure Organisation (DIO) opportunity."

He added: "We have been through a very difficult period since July of last year, which has had a major impact on Serco: reducing near-term growth, diverting management focus, and adding costs to strengthen the business. We are now able to assess more clearly the adverse impact that continues into 2014."

The corporate renewal plan includes the following commitments:

Commitment by leadership throughout the business to do what is right by always dealing with customers fairly and placing this above any other conflicting drivers for successRevising Serco's Code of Conduct, Values Statement and Governing Principles, backed up by training, induction and performance managementStrengthening contract level governance, including improved contract bid processes to ensure appropriate levels of operational resource and the delivery of sustainable performanceAppointing three additional plc Board non-executive directors, one of whom will chair a new Corporate Responsibility Committee to formalise the process of guidance and decision making on ethical issues

Casey said: "[Following the] announcement by UK Government and the continued implementation of our corporate renewal plans, Serco will be in a stronger position to compete effectively and return to making sustainable progress across our diverse markets. These markets remain attractive in size and future growth potential, both in the UK and around the world. Serco has the capabilities, relationships, and global reputation for delivering excellent customer service to take full advantage of these opportunities."

Serco has said it now expects to show a mid-single digit percentage organic revenue decline in 2014, and adjusted operating profits to be 10-20% down on the £277m previously predicted.

 

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