(MENAFN- ProactiveInvestors - UK) Outsourcing firm Serco (LON:SRP) cheered investors with results that were better than anticipated both by the market and Serco's own management.
The scandal-stricken firm's underlying trading in 2015 was 96mln ahead of the 95mln forecast by the company back in December albeit lower than the 113.2mln reported the year before.
The company did not quite make it back into the black at the pre-tax level reporting losses of 69.4mln versus losses of 990.5mln the year before.
The loss from continuing operations narrowed to 86.9mln from 989.5mln.
Underlying earnings per share (EPS) eased to 3.44p from 4.73p. EPS before exceptional items including those for discontinued operations came in at 6.55p whereas with the exceptional items included reported EPS was negative with a loss per share of 15.47p.
Revenue excluding discontinued operations declined to 3.18bn from 3.60bn the year before.
Net debt reduced by 605mln to 78mln thanks to a 555mln rights issue at a massive 50% discount and proceeds from the sale of most of its offshore business process outsourcing (BPO) business.
'Looking ahead and in line with our plan we expect revenues and profits to decline in 2016 as a result of the disposal of our private sector BPO business and contract attrition' said Rupert Soames Serco's chief executive officer.
'We have four priorities this year: further improve the operational and financial performance of our contracts; build our new business pipeline; reduce our costs; and improve and embed our new management information systems" he added.
The group's order book excluding the discontinued Global Services division stands at 10.0bn a reduction of 1.6bn over the year.
Robin Speakman of Shore Capital said the public sector services specialist had reported a complex set of results that appeared to show an operating performance better than the worst fears of the market and management guidance.
'With major surgery continuing across operations with disposals continuing comparatives are restated; however the underlying EPS [earnings per share] performance at c6.5p appears somewhat better than our estimate being 4.0p. The cash performance dominated by ongoing charges and the utilisation of provisions is encouragingly better that we had forecast with an outflow of c16mln at the free cash level with net debt at 77.5mln. This is due in part we believe to some timing issues in provision utilisation as well as some straight wins on contract unwinds' Speakman said.
'Looking forward caution is required with the contract pipeline still under pressure building slowly and the business reconstruction continuing. So earnings are still likely to be effectively at the zero level for the current year' Speakman predicted as he stuck to his 'hold' recommendation.
Liberum Capital said 'there is nothing here to scare the horses' and correctly predicted a positive reaction from the market; the shares rose 15.8% to 94.58p in the first hour of trading.
The order book reduced to 10bn but the broker was encouraged that the pipeline was up from 5.0bn to 6.5bn.
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