Monday 2 November 2020 10:58 am

Serco shares crash as outsourcer loses role on nuclear weapons consortium

Shares in Serco plummeted this morning after the outsourcing giant confirmed that the government had taken back management of its atomic weapons development facility.

Shares dropped nearly 12 per cent as markets opened as traders digested the news.

Yesterday Sky News reported that the government was due to announce that it would take over the running of the Atomic Weapons Establishment (AWE) from next year.

AWE has been run by a consortium made up of US defence giant Lockheed Martin, Serco and Jacobs since 2000.

The contract was due to expire in 2025, so the government’s decision to renationalise the facility is a considerable blow to the FTSE 250 company.

Serco said that it was expecting to make £17m in profit from its 24.5 per cent stake in AWE this year. In its last full year results the firm reported profit of £120m.

However, it said that it would stick to its full year financial forecasts for 2020/21.

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Analysts at Shore Capital said: “Whilst a disappointment, the contract has been restructured in the past and with the next generation of nuclear deterrent infrastructure now building, bringing AWE to a close is not a total surprise to us.

“The contribution emerging from Serco’s UK activities continues to diminish, on a trajectory to below 40 per cent of group – which we are pleased to see, de-risking Serco from a political perspective.”

AWE, which makes nuclear warheads for the UK’s submarines, will pass back into government ownership on 30 June.

Earlier this year the facility came under fire from spending watchdog the National Audit Office (NAO).

According to a report, nuclear warhead assembly facility Mensa, which is located on AWE’s site near Reading, is one of three nuclear programmes to be substantially delayed due to “poor management”.

It said that the projects will be delivered between 1.7 and 6.3 years late, at an additional cost of £1.4bn.