Directors’ Deals: Serco chief sells £3mn of shares

Rupert Soames’ sale of £3mn of shares in outsourcer Serco on November 9 is “part of prudent financial planning and portfolio management” ahead of his retirement at the end of this year, the company said.

Soames, a grandson of Sir Winston Churchill, will be replaced as chief executive by Mark Irwin, Serco’s UK and Europe head.

His nine-year spell in charge has been eventful but then a company that deals so closely with governments is always going to attract scrutiny.

For instance, Soames was appointed in February 2014 following a scandal where Serco was found to have been overcharging the public purse for monitoring offenders fitted with electronic tags. It recorded a £1.35bn loss during Soames’ first year in charge, due to write downs, lost contracts, and a temporary inability to win new work until the case settled.

Recovery efforts since have been both prolonged and patchy but the Covid-19 pandemic helped, as Serco secured several multimillion-pound contracts related to the NHS’s Test and Trace scheme. Serco only lost money in the first two of eight annual financial periods overseen by Soames and its 2021 pre-tax profit of £192mn was double the amount made just two years earlier. Chairman John Rishton credited Soames with turning around the group, describing it as “unrecognisable” from when he took over.

For shareholders, Soames’ success will be judged on when they bought in. Those that invested at its 2016 lows will have doubled their money, but longer-term holders will be less pleased. Since his appointment, the company has provided a negative total return to shareholders of 53.6 per cent, compared with a positive gain of 50.8 per cent for the FTSE All-Share index over the same period, according to FactSet.

LadBible founder increases stake

LBG Media, parent company of LadBible, is being dragged down in the advertising recession, writes Arthur Sants.

It invested massively in the last year, only to discover the e-commerce boom of the pandemic hasn’t sustained. Couple this with the upcoming recession and it is a bad time to be in the attention economy.

The company makes content and posts it on social media, such as TikTok, Snapchat and Facebook. Better content means more views and more advertising revenue. On this front, things are going well. In the six months to June, its global audience grew 25 per cent to 315mn. This included a remarkable 35.8bn content views, up 38 per cent on last year.

The problem is this only converted into an 8 per cent rise in revenue and costs increased a lot more than that. Staff costs rose 58 per cent to £16.1mn, while investment in technology rose 39 per cent to £2.6mn. This contributed to a swing from a profit before tax of £5.6mn last year to a loss of £1.9mn.

Over-hiring during the pandemic is a common story across the industry. Facebook, Snap and TikTok, the social media companies that provide the platforms for LadBible, have all made redundancies after advertising revenue slowed. Two days after Meta, owner of Facebook, made 11,000 redundancies, its share price was up 20 per cent. In part, this was because of the favourable US inflation report, but the market was already up before the report came out.

Any improvement in investor sentiment for social media firms would prove a good omen for co-founder, Solly Solomou, whose company’s shares are down almost 70 per cent since the start of the year. He has just bought £450,000 worth, bringing his stake up to 41.97 per cent. 

The company’s viewer growth is impressive and if Solomou can find a way to improve profitability there is a precedent for a positive market reaction. For a business founded 10 years ago, it’s about time it made some more cash.