Serco shares fall 17% after a second profit warning

Serco Group

Last Updated at 29 Aug 2014, 11:36 ET *Chart shows local time Serco Group intraday chart
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Shares in outsourcing firm Serco closed down 17% after it said profits this year would be up to 20% lower than expected.

It said it was unlikely meet analysts'forecasts of about £277m.

The news came as the government cleared Serco to resume bidding for public sector work after the scandal over its criminal tagging contract.

But Serco said in a statement that it needed time to "rebuild" and overhaul the business.

Serco is co-operating with investigations by the Serious Fraud Office (SFO) after allegations that the company overcharged for tagging offenders, some of whom were found to be dead, back in prison or overseas. Serco's rival G4S was also implicated.

The revelations led to a freeze on bidding for lucrative UK government contracts, although Serco said on Thursday that it had now received a "positive assessment" of its corporate renewal plan from the Cabinet Office.

Acting chief executive Ed Casey said: "The significant steps we are taking demonstrate our commitment to rebuilding the confidence of our UK Government customer and ensuring that the issues that emerged last year will not reoccur."

Serco has already repaid £68.5m to the government for its discrepancies.

It said it would create an ethics committee in each company division to prevent such a situation happening again.

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