Sir Winston Churchill's grandson asks Serco shareholders for £170m

Rupert Soames was in typically ebullient mood yesterday as he told City analysts: "I'm sitting here with my satchel, my protractor set, and a large pink eraser on my first day at school."

But the lighthearted style of the grandson of Sir Winston Churchill could not hide the seriousness of the task ahead as Soames started his first working day at Serco.

The new boss of the vast outsourcing company – which is still dogged by last year's revelations that it billed the government for electronically tagging prisoners who were dead – had just revealed he is going cap in hand to shareholders for an emergency £170m to keep the company's bankers off his back.

The cash pile is needed to give Soames, whose operations range from running the Docklands Light Railway to immigration services in Australia, "space and air cover" from the group's lenders while he embarks on a nine-month review of almost 1,000 contracts in 30 different countries. Without it the business will be "uncomfortably close" to breaching the borrowing terms stipulated by its lenders.

Soames had applied for a job at Serco in 2002 but was turned away. Instead he went to Aggreko, a company which provides mobile power generation plant. In his 11 years at the helm it soared up the stock market rankings into the FTSE-100, rising in value almost tenfold to £4.5bn.

This time when Serco needed a new boss, the company turned to him. While Soames now has the top job in a business that employs 120,000 workers, it faces a battle for its future and is suffering a rapidly shrinking stock market value – currently £1.6bn as a result of the shares crashing from last summer's 10-year high of 683p to 340p.

Last month the company said its debt had increased by 21% to £700m. This week it admitted this will now reach £800m by the end of this year as a result of shrinking cash flows caused by the loss of the contract for tagging prisoners, a fall in contract volumes from the Australian immigration service and rising costs on other contracts.

Even after the £170m share placing – the most that Serco could raise under stock market convention without a full-blown rights issue – some analysts questioned whether it would be enough.

"We are not convinced that this will be sufficient given the downward spiral the company seems to be in," said analysts at Cantor Fitzgerald.

Soames described the fundraising as pragmatic and necessary "to give us the headroom to get through a strategy review … without being under the cosh of our lenders".

Thursday's early morning call with analysts followed two unscheduled, late night announcements by the company in just 48 hours. On Monday it issued a profits warning and revealed the need to tap shareholders for cash. On Wednesday night it put a size on the fundraising, £170m, and a figure on the scale of profit fall – perhaps as much as £80m – in an announcement that also included the resignation of the finance director, Andrew Jenner.

Soames admitted yesterday that morale at the company was "not as good as it should be" as a result of an overhaul of the business which began in the wake of the tagging scandal and subsequent departure of the group's long-standing chief executive Chris Hyman in October.

The decision to split the UK and European arms, with one section to focus on the "UK government customers" and the other on activities in the wider public sector, has led to a duplication in costs and had an impact on staff. "There is no denying that the events of the past year have been very traumatic for the business," Soames said. "One of my first and more urgent tasks is to help rebuild the management team."

Soames is replacing the temporary boss Ed Casey, who was parachuted in from the US operations following Hyman's departure. Casey, however, is to stay on as chief operating officer and Soames quipped he had "got over the shock of meeting me and had not yet been physically sick".

The strategy review, he said, will look at every aspect of the business. "I'm conscious nine months might seem like a long time but this a large and complex business."

One of the key measures he will look at is the amount of profit being generated from the working capital employed. He will also be focusing on profit margins, because Serco is winning fewer highly profitable contracts.

Asked about his three priorities, he will not answer.

But he likened the events of last year – and the opportunities they might provide – as similar to those faced by Exxon after the Valdez oil spill 25 years ago.

"Exxon had a tanker called Valdez – they had owned about 100 tankers and only one went off the rocks," he said, but Exxon had reacted and now had an outstanding safety record. Serco, he said, had an opportunity to show it "learnt the lessons" of its past, high-profile mistakes.

Born to lead?

Rupert Soames can just remember his grandfather, Sir Winston Churchill. His earliest memories are of playing cowboys and Indians with Britain's wartime prime minister – and of not being allowed to attend his state funeral. He was six at the time and furious: "Watching it on TV was a very poor substitute," he once said.

His family has long been part of the political establishment: his father Christopher was the last governor of southern Rhodesia, now Zimbabwe, who served in Margaret Thatcher's cabinet and was also a European commissioner, while his brother Nicholas is a current Tory MP.

Educated at Eton and Oxford, where he graduated with a third, Soames showed an enterprising streak as a student, travelling from Oxford to London twice a week in his final year to run disco nights at Annabel's nightclub in Mayfair – a talent he also put to use when he DJ-ed at the wedding of Charles and Diana.

Soames says he liked being in charge from an early age – hence his preference for being on the turntables at a party, making people dance faster or slower, he says.

After Oxford, he joined GEC, then the largest private sector employer in the UK, where he stayed for 15 years working for the company's empire-building boss, Arnie Weinstock.

Following a stint at software firm Misys (which he left after disagreeing with its founder Kevin Lomax about the firm's strategy), he landed the Aggreko job after its boss, Philip Harrower, was killed in Louisiana in a car crash.

Under Soames's stewardship, the supplier of temporary generators whose customers range from offshore oil platforms to such events as the London Olympics, expanded rapidly and made it into the FTSE 100. The company also supplies the Glastonbury festival, which Soames attends every year.

The 54-year-old is married with three children and lives on a farm in Buckinghamshire.