Serco makes humiliating rebate U-turn

SERCO, the FTSE 100 outsourcing firm, was forced into a grovelling apology yesterday for demanding money back from suppliers, despite promising the government it would not do so.

In September Serco financial director Andrew Jenner wrote to the company’s 193 biggest suppliers saying that “like the government, we are looking to determine who our real partners are that we can rely upon.

“Your response will no doubt indicate your commitment to our partnership but will also be something I will seriously consider in our working relationship as Serco continues to grow,” Jenner went on, and asked for a rebate of 2.5 per cent for contracts in the first half of 2010.

However, in the face of bemusement and fury from the cabinet office over the weekend, Serco said yesterday that its plans have “evolved”and it withdrew the demands for a rebate. “We deeply regret this action and apologise unreservedly,” it said in a statement.

Serco insisted that it had not attempted to mislead the government, which is its biggest client. Global CEO Chris Hyman agreed with cabinet office minister Francis Maude in October that Serco would not make savings by cutting costs with suppliers, but the firm says that by that time it had already ditched the plan. Its only error was not communicating the change of heart to its suppliers, said a spokesman.

The City was unimpressed by the episode, with Serco’s share price losing 4.4 per cent during the day to close down 27p at 587p.

Mike Murphy from broker Numis said in a note that the group may suffer “some reputational damage”, and that the firm will now have to find another way to make savings.

SERCO
CHRIS HYMAN, CEO

ANDREW
JENNER, FD

THE two men at the heart of the Serco row are both high-fliers who have reached the heights of the company at an early age. CEO Chris Hyman, 47, is a South African-born Christian who has been described as "combining the zeal of Cliff Richard with the determination of Seb Coe".

He says that his faith is a central part of his business life and that "what I am successful for is listening to God." He fasts every Tuesday and donates 10 per cent of his income to his local Pentecostal church in Surrey, where he lives with his wife, a fellow South African and their two children.

He is also a keen sportsman, who considered pursuing a career in athletics after running a 10.8 second 100m, and used to race Formula 3 cars.

He joined Serco in 1994 after working at Arthur Andersen and Ernst & Young and became group finance director in 1999 and then CEO three years later. He was awarded a CBE earlier this year.

At 41, Andrew Jenner was recently described as one of a "young, hungry and dynamic breed of FDs". He was appointed to the role in 2003, having joined the firm in 1997 after beginning his career working at Deloitte and then Unilever.

He was also appointed a non-executive director of Galliford Try in early 2009.