algardish
08 Jun 2016
FRC announces Investigation into Serco Group FRC (accounting watchdog ) has announced this am they are Investigating Serco accounting in 2012. Might affect the share price so watch out! You heard it here first!
II Editor
25 May 2016
NEW ARTICLE: Serco profits upgrade triggers breakout "Finally! LSE:SRP:Serco has published good news, with promising contract progress and deferred costs forcing a profits upgrade for 2016. A wave of buyers triggered a chart breakout, sending shares in the British outsourcer through the crucial 100p ..."[link]
nk1999
05 Apr 2016
Nomura "Serco was still facing a difficult outlook so it was too soon to get back into the shares, Nomura said.The company's management believed it would be able to lower the company's net debt to about twice earnings before interest, taxes, depreciation and amortisation by year-end.That was about right, but analyst Andrew Chu cautioned that net debt would only peak at approximately 2.8 times operating profits at the end of 2018.Furthermore, Chu estimated the company would not generate any positive free cash flow over the next three years.Onerous contract provisions would weigh on the Hampshire-based firm's cash flow to the tune of £90m in 2016 and by a further £60m in 2016 and 2018 each.Compounding matters, there was a lack of clarity around its growth prospects over that same time horizon.On a multiple of 13.2 times enterprise value to EBITDA that yielded a target of 96.0p, Chu said in a research note sent to clients."From ADVFN.
nk1999
02 Mar 2016
Re: Liberum "Serco shares could double in three years Liberum believes shares in outsourcing company Serco (SRP) could double over the next three-to-four years as chief executive Rupert Soames implements his turnaround plan.Analyst Joe Brent rates the shares a ‘buy’ with a 135p target price. Serco jumped 9.1% yesterday after the company posted a trading profit ahead of guidance and cut a chunk out of its debt.‘Rupert Soames paraphrases Von Moltke that the plan has survived the first contact with the enemy,’ said Brent.‘Profit was in line, but free cash flow, but free cash flow, onerous contract provision and net debt were better. We leave our [earnings estimates] unchanged, recognising it is a little ahead of guidance.‘We believe the shares could double over three-to-four years. As another great leader said, “If you are going through hell, keep going”.’
algardish
29 Feb 2016
Cash position and future [link] at their cash position Page 17 of link to their results above , they have had cash from a rights issue £530m and £184m from disposal of subsids. So cash in of £714m in 2015 from funding. Net debt improved by £605m, so still burning cash at over £100m per year. ( £714m-£605m ). Their EBITA covenent Page 18 is £209m so they have 2 years at that cash burn rate before another rights issue or cash call, crudely speaking, if they can't generate some cash operationally in that period. With more impairments, writedowns , onerous contracts and more exceptional items that will be difficult.Wouldn't touch them with a bargepole !
nk1999
27 Feb 2016
Liberum From Citywire:"Upside potential at Serco Outsourcer and detention services provider Serco (SRP) reported results slightly ahead of consensus and analysts are confident on the stock’s prospects. Liberum analyst Joe Brent retained his ‘buy’ recommendation and target price of 135p following full year results that were ‘a tad ahead’. The shares jumped 16.4% to 95.1p yesterday.‘Reiteration of £50 million profit guidance for 2016 and 2017. Our high earnings and low net debt unchanged at present, but consensus may come down,’ he said.‘Order book reduced to £10 billion but encouragingly pipeline up from £5 billion to £6.5 billion. There is nothing here to scare the horses.’"
nk1999
22 Dec 2015
From Citywire (08/12):"Serco: no gain without painShares in Serco (SRP) slumped yesterday after the outsourcing group said it expected revenue and trading profits to fall in 2016, but Liberum is sticking with its ‘buy’ recommendation on the stock.Analyst Joe Brent retained his 135p target price on the shares, as they fell 6.6% to 106.7p yesterday. Serco yesterday cautioned that 2016 trading profits were likely to fall to £50 million, from £95 million this year.‘In March, management articulated its strategy for the business and it has made good progress on balance sheet, structure, management and problem contracts. The focus is now turning to pipeline,’ said Brent. ‘The pipeline is still weak and will take time to build.‘The shares may react negatively to [the] downgrade to 2016...However, while we reduce our base estimates, we believe that a 5-6% margin is increasingly achievable. The more pain now, the more likely this number becomes.’ "
mtap
15 Dec 2015
Re: Any info greatly appreciated Hi Algardish I changed my mind as soon as Hardboy mentioned no divis. I don't trade any shares that don't pay a divi to compensate me for the risk GLTYA
Hardboy
15 Dec 2015
Re: Any info greatly appreciated When Algardish refers to "they" he changes who "they" are through his post. The "they" he accuses of lying for years are ex-directors who are no longer with the company. "They" are not the "they" who are now running the company. The Government who think they have been ripped off have cleared the current company and awarded it contracts since the investigation was concluded. He is also wrong when he says "more profitable" contracts have to be higher priced contracts. They could be lower priced but different specs, or the same price, same spec, managed more efficiently. This business has always been low margin, so the key to profitability is in the management of the contracts. He also implies that the Government "wins" if they employ contractors who are losing money. Of course they don't. If the Government has contractors running its services in danger of going bust it is not good for the Government.
Hardboy
15 Dec 2015
Re: Serco share price etc Herbie,My first reaction was you could not have held shares for over 25 years, but I was surprised to see it was first listed in 1988. My knowledge of them came when they merged with IAL some time in the early 90s. This more than doubled the size of the business, and I had worked for IAL, which is where my interest arose. I did not think them became LSE listed till after the merger, but obviously I was wrong, so thanks for enlightening me, Although Serco & WS Atkins are professional services firms, I would not really compare the two, though I hope the recovery potential is similar. Serco is a lower level of professional services (it has concentrated more and more on the cheaper services - e.g. refuse collection, security - end as it grew away from the IAL base of higher tech services - e.g. air traffic controllers & medical equipment maintenance) and tend to be for on -going services. WSA is more specialised one off or changing pieces of work. A company changes with the personnel working for them, specially at the top end, and I am sure the bad blood who falsified the financial reporting have gone; and there is so much scrutiny on them now, that I think they would be stupid to mis-report things now, especially as they had the perfect opportunity to get all their dirty laundry aired and out in the open. If you have any faith in the LSE process for publication of data, you would have to believe the data coming out of Serco now.
algardish
15 Dec 2015
Re: Any info greatly appreciated I would be very careful. This is not a recovery play , it never was profitable, not in the last 10 years at least , they have been lying for many years even if they are just "down the road" and look pleasant enough. Soames has to create a new business model entirely because in the past it has not been profitable or at least at he level they say, they have been lying. And then deliver it. The Government thinks they have been ripped off , and have the evidence, and still they were not profitable. So Soames has an enormous task of creating a new business model and delivering, getting the government to sign up for more profitable contracts with Serco , i.e at higher prices . That is a heads Serco lose tails the Government wins situation created by dishonesty. It is not a recovery play in that if they go back to what they were, they will have to lie and cheat. [link]
whatshouldIknow
15 Dec 2015
Re: Any info greatly appreciated With dividends currently suspended, I understand 2018 is when they are planning on restarting, though it is possible some could be paid earlier
Honest Herbie
14 Dec 2015
Serco share price etc I've held this share on and off for over 25 years, and have made significant monies from this stock at different price levels. The share price is currently at a very low level, as a result of the issues /problems well documented. However, the organisation (their Head Office in Hook is about a half a mile from my home so I know many employees at varying managerial levels) and I have no doubts that it will recover in the medium /long-term.The company I can best liken to Serco is W S Atkins, the huge world-wide engineering consultancy(biggest in the UK) when in 2002 it dropped to 12p. Do look at the latest price to see how Serco can /will similarly recover to. There is no doubt that the present level is a good buying-in opportunity, whereby investors can expect to realistically double their money within 2 - 4 years.
mtap
14 Dec 2015
Re: Any info greatly appreciated Many thanks for your comprehensive reply Hardboy, best regards and hope Santa is kind to you
Hardboy
11 Dec 2015
Re: Any info greatly appreciated I'm not going to answer all the questions but they got into trouble falsifying invoices to the prison service. There was a ban on them bidding for any new government contracts and they gave up price rises on other public sector contracts to show good faith, while everything was looked into. There were also some rumours about prison guards being rough with inmates. Full, very long investigation, Directors resigned, processes were tightened, and approved, and now there is no problem with bidding for Government Contracts. The business works on very low margins, and I believe there was also some dodgy accounting bringing income from long contracts forward to make things look better. What all this should mean is their processes, financial and operation should now be cleaner than clean. Rupert Soames, the CEO did a good job with Aggreko and was brought in about a year ago? There was a wonderful article about him in Management Today a few years back - well worth reading - [link] He has set out his turn round strategy - and is now implementing it, selling off non-core businesses to reduce the debt. There was also a heavily dilutitive rights issue. The recent update gave me some reassurance that they are on the right track.The dividend is more than under threat it's been scrapped - which is the right thing to do when trying to reduce debt. I've never understood companies borrowing money just to pay shareholders. Are the Directors any good? Don't know, but Rupert Soames is very well connected (as a grand son of Winston Churchill) and I am sure he can open doors within the public sector, which is their key target, in this country and in others. Also, with the purge a while back, if the large shareholders had any doubts about any of the directors, they would likely have gone. Is it a good recovery play investment? Time will tell, but I'm optimistic, though I think it will be quite a long term recovery play. One of the good things about the business is their contracts tend to be long term, so there is some excellent visibility of forward earnings.
