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Serco Surges as CFO Appointment Outweighs Quarterly Loss

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Aug. 12 (Bloomberg) -- Serco Group Plc rose the most in more than five months on better-than-expected orders and the appointment of Angus Cockburn as chief financial officer, even as the U.K. prison services company posted its first-ever loss.

Cockburn, currently the interim chief executive officer at Aggreko Plc, will start at the end of October, Hook, England-based Serco, which also operates London’s Docklands Light Railway, said in a statement today.

The new CFO is following Chief Executive Officer Rupert Soames, who joined from Aggreko in May, to try to help the company recover after it was barred from campaigning for some public contracts because it overcharged authorities for electronic tagging of criminals, some of whom had died.

The appointment “should be well-received,” Liberum analysts including Joe Brent, who have a “hold” recommendation on Serco shares, wrote in a note to clients today.

The company posted a first-half net loss of 7.3 million pounds ($12.3 million) after a profit of 106.1 million pounds a year earlier, Serco said today. Sales fell 5 percent to 2.4 billion pounds. The company won contracts worth 2.5 billion pounds in the first half, keeping the order book level at 17.1 billion pounds.

“For the first time in my memory, Serco has not made money,” Soames said on a conference call. “There were too many loss-making contracts. A few that lost a lot, and a lot that lost a little.”

The stock rose as much as 9.4 percent and was up 1.3 percent at 333.30 pence at 2:19 p.m. in London, paring the stock’s decline this year to 33 percent.

The order intake was “a little better than expected,” Liberum’s analysts said.

“As expected, trading was poor in the first half,” the CEO said. “Many challenges remain, and we have a lot of work to do, but I am confident that, in time, we can restore the company’s fortunes.”

To contact the reporter on this story: Benjamin Katz in London at bkatz38@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net David Risser