OUTSOURCING giant Serco, which is at the centre of a controversy over its use of lock changes against tenants denied the right to remain in the UK, has reported an almost £20 million drop in profits.

In the six months to the end of June, its pre-tax profit plunged from £25.6m in the first six months of last year, to £6.7m – despite revenue rising from £1.37 billion to £1.48bn.

Serco said profit performance was hit by “exceptional charges” of £31.1m (up from £11.6m) – largely a result of a £24m charge related to UK Government reviews and £5.4m of restructuring costs.

The government contractor had threatened to evict asylum seekers in Glasgow and change the locks on their doors.

It is now facing an intervention from the Scottish Human Rights Commission, which has been granted leave to intervene in the ongoing legal challenge to the practice.

In January, the Home Office announced that Serco had lost its asylum housing contract in Scotland and would be replaced by Mears Group from September.

The company’s underlying pre-tax profit – excluding exceptional and other non-underlying items – was £40.1m, up from £31.3m for the same period last year.

Chief executive Rupert Soames said yesterday: “Following a strong 2018, which marked an inflection point for Serco after several years of decline, we are reporting another good performance in the first half of 2019 with underlying trading profit and margin well up on the first half of last year.

“Order intake so far this year has been very strong at over £3bn, already exceeding our revenue forecast for the whole of 2019.

“The strategic advantage of having a strong international footprint shows clearly in these results, with strong revenue growth in North America and Asia Pacific; I am also delighted to see the UK and Europe division reaping the benefit of the Carillion health facilities management acquisition completed in 2018.”

Serco announced in May its plans to buy the Naval Systems Business unit from Alion Science and Technology for $225m (£173m), and Soames said that transaction should be completed soon.

“The acquisition of the Naval Systems Business Unit of Alion … will add materially to the scale and capability of our US defence business; having now received all necessary regulatory approvals, we look

forward to completing the transaction imminently and to seeing the earnings accretion it will deliver.

“We continue to expect our organic growth to accelerate from this year’s 4% to around 5% in 2020, as a number of large new contracts become fully operational.

“As we noted at the beginning of the year, absent unforeseen headwinds or major rebid losses, our recent strong order intake gives us confidence that we will grow faster than our market for at least the next two years.”

Although it will lose the asylum housing contract next month, Serco is still at the centre of legal action over the policy at the Inner House of the Court of Session in Edinburgh.

The move by the Scottish Human Rights Commission is the first time it has used its power to intervene in civil litigation and this case sits alongside multiple successful challenges to the lock-change policy in the sheriff courts.

Commission chair Judith Robertson said: “This case raises serious human rights implications for people who are already in a deeply vulnerable position. Nobody should be left deliberately destitute and homeless by the actions of the state, or by organisations delivering services on the state’s behalf.”