The chair of scandal-hit outsourcing group Serco has fallen on his sword, saying that he takes “ultimate responsibility” for the string of “operational missteps” that have hit the business. But Alastair Lyons, who has led the Serco board since 2010, insisted he had not been sacked. “While colleagues have asked me not to resign, it has been my intention to step down once a new strategy and direction for the business were in place,” he said.
His decision to resign comes a week after Serco issued its fourth profit warning in a year, sending the stock price crashing to a 10-year low and wiping £600m off its market value.
Serco, which runs trains, GP out-of-hours services, immigration detention centres and prisons, and provides street cleaning, said its 2014 profits would be £20m lower than forecast because of worse-than-expected losses on some problem contracts. The government outsourcing company admitted it had made “strategic missteps”, mainly by diversifying into areas of business where it had little expertise.
Serco, which employs 120,000 people in 30 countries, has hardly been out of the public eye since it emerged that it had overcharged the taxpayer for tagging prisoners. The firm has also faced criticism for failure to provide decent accommodation for vulnerable asylum seekers and for running inadequate GP out-of-hours services that led to the premature end of a contract in Cornwall.
Lyons is a former banking executive, who chairs motor insurer Admiral and is deputy chairman of homebuilder Bovis.
In 2013, his pay from Serco rose 4% to £277,500, a year when the outsourcing company was found to have been overcharging the taxpayer for the electronic tagging of prisoners. Lyons was forced to appear before a committee of MPs, where he said the overcharging of prisoners was “ethically wrong” and “was one of the signs that we needed to have an attitudinal change in our business”. G4S, Serco’s rival for government contracts, was also implicated in the tagging scandal, which led to the two companies repaying nearly £180m.
He will stand down from Serco’s board during the first half of the 2015, but there are no guarantees he will be gone at the time of Serco’s next annual general meeting of shareholders in May.
The AGM is the one guaranteed opportunity shareholders have each year to vote down the board.
Rupert Soames, Serco chief executive, who arrived in May to rescue the firm, said: “I want to put on record the fact that [Alastair Lyon] has done an outstanding job stewarding the company through the travails of the last 12 months.”
Soames has embarked on a forensic examination of Serco’s books that has led to £1.5bn in value being written off the company’s books because of loss-making contracts. Lyons said: “The initial findings of the strategy and balance sheet review point to strategic and operational missteps at Serco for which, as chairman of the board since 2010, I take ultimate responsibility. It is also the right thing for Serco to select a new chairman, to take the helm for the future.”
The company said it had begun the search for a new chair immediately.
The company revealed last week that it would not have made any underlying profit growth in 2009-13 were it not for a controversial contract running Australia’s migrant detention centres, including a facility on Christmas Island that was condemned by Australia’s top human rights official for conditions that put mothers and children at risk.
Serco shares crept up three pence (1.65%) to 315 pence, after Lyons announced his departure. The stock has seen its value collapse by 123% over the last year.