Serco Falls Most in Two Years After Withdrawing Supplier-Rebate Request
Stock Chart for Serco Group PLC (SRP)
Serco Group Plc, the operator of London’s Docklands Light Railway, fell the most in two years in London trading after a failed attempt to recoup money from its suppliers.
The stock dropped as much as 7.9 percent after the Hook, England-based government services provider withdrew letters requesting rebates from suppliers and apologized. Serco was one of several contractors that the U.K. government asked to lower prices.
“Where are they going to find the savings that they need in order to maintain margins, if they are giving up in terms of price to the government?” said Mike Murphy of Numis Securities in a telephone interview. He cut his recommendation to “reduce” from “hold” with a target price of 544 pence.
Serco fell as much as 48.5 pence to 565.5 pence, the biggest decline since October 2008. The stock traded at 577.5 pence as of 10:22 a.m., valuing the company at 2.85 billion pounds ($4.58 billion).
“We deeply regret this action and apologize unreservedly” to suppliers “for the concern that this has caused,” Serco said.
To contact the editors responsible for this story: Colin Keatinge at firstname.lastname@example.org