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Today’s Mid-Cap Winner: Serco Group plc Up 6% As It Faces Down Challenges

Serco (LSE: SRP), the troubled outsourcing group, reported a 59% drop in operating profit in the six months to 30 June, while margins reduced to 2.1% from 5.7% a year earlier.

Since July 2013, when Serco was given a six month ban on securing new government work, the share price has fallen by around 45%.

sercoThe chief executive, Rupert Soames, lamented not winning as many new contracts as they would have liked, and there is still a way to go before the firm rebuilds its reputation.

“I am confident that, in time, we can restore the Company’s fortunes,” Soames said.

The market was cheered in early trade after the appointment of Angus Cockburn, whom Mr Soames worked with for 11 years at Aggreko, as chief financial officer.

Serco shares rose over 6% on the news in early trade.

Serco’s 2014 guidance has been maintained, with revenue at around £4.8bn (excluding currency) expected, which would imply a revenue decline of around 10% in the second half due to contract losses and volume reductions.

Serco strengthened its balance sheet through an equity placing and this, together with improved free cash flow generation, reduced net debt to £559m from £732m.

The interim dividend was maintained at 3.1p per share.

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Mark Stones has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.