Britain’s Serco shares get boost from upbeat outlook

Serco, which is undergoing an overhaul started three years ago after a series of profit warnings prompted a reset of its strategy, said 2017 revenues would be just under £3 billion. (Reuters)
Updated 13 December 2017
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Britain’s Serco shares get boost from upbeat outlook

EDINBURGH: An upbeat outlook on Wednesday from Serco lifted shares in the British outsourcer, which runs government services in defense, justice, immigration, transport and health, bucking recent pressure on the sector due to political uncertainty.
Serco said strong growth in overseas markets was offsetting slower prospects at home because of Brexit. Combined with cost cutting, this meant its 2017 underlying trading profit would be at the top end of an earlier forecast range.
Although Chief Executive Rupert Soames was positive about the prospects for Serco once Britain’s exit from the EU is decided, he said the pipeline was unpredictable.
“Some markets, and in particular the UK, are currently growing more slowly than their former trend rate,” he said in a statement.
“The (UK) government is incredibly distracted at the moment,” he later told Reuters.
“That’s a threat, but once Brexit is done, the one thing that is absolutely certain is that there is going to be a whole lot more government going on in the UK, and we’re going to have to have different arrangements at borders,” he added.
Soames cited the need to set up new regulatory agencies and new environmental compliance rules as reasons to be more positive on the British market in the future.
Serco, which is undergoing an overhaul started three years ago after a series of profit warnings prompted a reset of its strategy, said 2017 revenues would be just under £3 billion, while it also saw good profit growth in 2018 and 2019.
Shares in the company, which had fallen by nearly 16 percent in the last three months, were up by 5.6 percent to 100.7 pence at 1051 GMT, after earlier rising as much as 13 percent.
Outsourcers have been grappling with global political uncertainty which is hampering the pace of decision-making in the public and private sector and increasing margin pressure.
Serco also announced the purchase of some of the UK health care facilities of debt-laden Carillion for about £47.7 million.
It said the timing of reaching a long-term goal of 5 to 7 percent revenue growth and 5 to 6 percent profit margin would depend on when demand reverted to trend in its target markets.
Soames said Serco was rebalancing its business development budget away from the UK to target other countries but its pipeline of new bid opportunities, currently worth £4 billion to £5 billion, would be “noticeably lower” by the year end.
Serco dropped out of a big Middle Eastern rail contract bid process earlier this year because it was too difficult to predict the level of risk, Soames said.
But its businesses abroad were otherwise performing well, with “green shoots” in its US defense business.


Australian court fines Apple $6.7 million over iPhone ‘bricking’ case

Updated 26 min 2 sec ago
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Australian court fines Apple $6.7 million over iPhone ‘bricking’ case

SYDNEY: An Australian court fined US electronics giant Apple Inc. A$9 million ($6.7 million) on Tuesday after a regulator accused it of using a software update to disable iPhones which had cracked screens fixed by third parties.
The Australian Competitor and Consumer Commission (ACCC) sued the world’s biggest company by market value for “bricking” — or using a software update to disable — hundreds of smartphones and tablet devices, then refusing to unlock them if the devices had been serviced by non-Apple repairers.
On Tuesday the Australian Federal Court found in the regulator’s favor, saying Apple had breached the country’s consumer law by telling some 275 customers they were not eligible for a remedy if their device had been repaired by a third party.
“The mere fact that an iPhone or iPad had been repaired by someone other than Apple did not, and could not, result in the consumer guarantees ceasing to apply,” ACCC Commissioner Sarah Court said in a statement.
“Global companies must ensure their returns policies are compliant with the Australian Consumer Law, or they will face ACCC action,” Court said.
An Apple spokeswoman said in an email the company had “very productive conversations with the ACCC about this” without commenting further on the court finding.
The ACCC said after it told Apple about its investigation, the US company sought to compensate customers whose devices were made inoperable by the software update, known as “error 53.” So far, Apple had contacted about 5,000 customers, the ACCC said.
Apple has also offered to improve staff training, information about warranties and consumer law on its website, and processes to ensure compliance, the ACCC said.