April 28, 2014 / 5:37 PM / in 4 years

Serco flags profit downgrade, eyes equity placing

LONDON, April 28 (Reuters) - British outsourcing firm Serco said it could materially downgrade its profit expectations and might have to issue new shares to shore up its finances after its performance this year had been more challenging than expected.

Serco had already warned in January that profit in 2014 would be lower than 2013 due to underperforming contracts and the cost of issues relating to it being found to have overcharged the UK government on a contract to tag criminals.

“It has now become evident in the light of recent performance that we may need to reassess the level of risk implicit in the assumptions underlying our forecasts,” Serco said in a statement on Monday.

“This may in turn require a material downward revision to expectations, and for us to review the appropriateness of our financing position. We will, therefore, be consulting with shareholders regarding the possibility of strengthening the balance sheet through an equity placing,” it added.

The firm said a further announcement would be made this week. (Reporting by Neil Maidment)

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