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30 Jan 14. Raytheon Co is closely watching for possible acquisition opportunities among low- and mid-tier defense companies that can have future growth, but will not buy just to boost revenues, Chief Executive Officer William Swanson said Thursday. “Right now the mid- and lower-tiers are facing some … pressure,” Swanson told analysts on an earnings conference call, adding he thought at least some of the companies would be looking for buyers going forward. He said Raytheon’s strong balance sheet put it in a good position for acquisitions, but it was not looking to simply buy revenue. “Just to buy something for revenue sake, that never works,” Swanson said. “But where it fits in, especially where we see future growth, then that would be the case.” (Source: Reuters)

30 Jan 14. Serco warns on profits as government ban is lifted. Shares in Serco plunged on Thursday after the outsourcing giant warned on profits, despite being cleared by the UK government to win future public sector work in the wake of a six–month ban after a series of botched contracts. Serco, which runs facilities from prisons and hospitals to air traffic control towers in the UK, had been barred from winning fresh government work after it was referred to the City of London police for manipulating figures on a prison van escorting contract and to the Serious Fraud Office for overcharging on electronic tagging. The good news from the government was overshadowed by the company’s announcement that it anticipated a “mid-single digit” decline in revenues this year as a result of the loss of the electronic prisoner monitoring contract and the scaling back of its five-year deal to manage onshore detention centres for the Department of Immigration and Citizenship in Australia, its largest contract. Serco said the Cabinet Office decision “marked a significant milestone in a process that…has had a near-term negative impact on Serco’s pipeline and profitability”. The company said that the impact would “continue to be significant” in 2014, guiding that one-off costs and a decline in operating margins led it to anticipate that operating profits “could be 10-20 per cent lower” than forecast. It added that this also included the ongoing cost of corporate renewal and “assumptions as to the extent to which we will be successful in securing further rebids and extensions as well as new bid opportunities during the year”. The government said on Thursday it was reassured that Serco “had developed a thorough plan for corporate renewal”. Although it will continue to monitor the group, it added that it had “accepted this plan represents the right direction of travel to meet our expectations as a customer”. Experts said the decision to clear Serco despite the ongoing investigations was indicative of the government’s dependence on too few big suppliers. Serco is enmeshed with government with more than £4bn in contracts for the Ministry of Defence alone, including one to run the facility that builds Britain’s nuclear weapons until 2024. Although the company employs 122,000 staff in 30 countries, around one-quarter of its £4.9bn annual revenues come from work with the UK government. Getting a clean bill of health was essential to Serco, whose investors had seen their shares plummet with each successive crisis. But it is also important to the government, which remains keen to farm out work to outsourcers as part of its attempts to shrink the state and drive down the budget deficit. Tom Watson, an influential Labour MP, said: “Most reasonable-minded people will think that this is a very poor judgment by the government. The message it sends out to rogue contractors is that it’s business as usual – which is shocking.” The clearance paves the way for the government to award Serco more public sector contracts, including a 10-year £400m deal managing the MoD’s military estate. Serco is leading one of three consortiums and has been tipped to win the work. It is also in the race for a series of

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