OUTSOURCER Serco has announced a £550 million rights issue after cutting its profit forecast and taking a £1.5 billion impairment charge.
The company, headed by the former executive team of Rupert Soames and Angus Cockburn, also confirmed it is cancelling its dividend.The announcements saw Serco's share price tumble 102.1p, or 32 per cent, to 215p.
Mr Soames said the business, which recently won the franchise to run the Caledonian Sleeper rail service, would focus efforts on core sectors including justice, defence, transport and healthcare.
Mr Soames said recognising the impairments, including on onerous contracts, was an important step in the turnaround of the business. He said: "Whilst it is a bitter pill, it is better for all concerned that we swallow it now and establish a really solid foundation on which to build Serco's future.
"There are a tough couple of years ahead as we make this transition, but it will be worth it."
The largest single contract writedown - for £150m - is for maintenance of the Royal Australian Navy's Armidale Class Patrol Boats. Serco also expects to increase its provisions relating to onerous UK central government contracts by between £150m and £200m.
Serco said it was reducing its forecast for adjusted profit for the year by £20m to between £130m and £140m. Its outlook for 2015 profit was also reduced.
The group is starting discussions with its banks relating to arranging new covenants although the rights issue has been underwritten by Bank of America Merrill Lynch and JP Morgan Cazenove.
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