Serco Group Plc has lost the contract to run the Docklands Light Railway in London. This has been the second misfortune and disappointment for the U.K.-based company recently.
The automated metro system has been both run and maintained by Serco since 1997 and has attempted to keep the mandate until 2012. The 700-million-pound franchise was given by Transport for London to a joint venture between Keolis, a French transport group and Amey, providing infrastructure services.
As reported by the Financial Times, one of the analysts working at RBC Capital Markets, Mr. Andrew Brooke commented on the news, saying it was “disappointing”. Mr. Brooke also added: “If you get rid of all the contracts that are below-average margin you’re going to end up with a business that’s much smaller. Maybe that’s the right thing to do, but I’m not sure the market has got that figured into its revenue forecasts.”
The news comes at a time when Serco Group Plc has just announced that it expects to make extra provisions, which according to companys statement, are estimated to between 10 million pounds (17.15 million dollars) and 15 million pounds. The company also warned that its earnings could be adversely influenced in case it is forced to write down its assets value.
The company did not provide a projection for its performance over the first half of the year, including its profit, but announced that a number of exceptional items are to be reported. Serco Group Plc also said that it may take some impairments.
Sercos official announcement, cited by the Wall Street Journal, stated: “To the extent that there are further financial consequences of the strategy review, including analysis of our contract base, these may in turn impact our previously stated expectations for the financial year.”
Serco Group Plc lost 0.72% to trade at 360.40 pounds per share in London today, marking a one-year loss of 46.35%. According to data published by the Financial Times, the 18 analysts offering 12-month price targets for Serco Group Plc have a median target of 325.00, with a high estimate of 435.00 and a low estimate of 245.00. The median estimate represents a -10.47% decrease from the last price of 363.00.
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