Serco forecasts profits hike
Outsourcing giant Serco has forecast profit rising this year and next as recent acquisitions have helped drive a better-than-expected performance.
The group, which runs security, transport and immigration contracts, is forecasting underlying operating profits to rise by around 3% in 2023 to £245 million and increase further to about £260 million in 2024.
It said acquisitions and demand for immigration services is giving it a fillip and helping make up for a 7% earnings hit from the loss of Covid-related work.
The group, which runs leisure centres in Shropshire and operates waste services in Sandwell, was one of the suppliers for the UK government’s test-and-trace programme during the pandemic.
The update came as it announced a deal to buy European Homecare, a specialist provider of immigration services to public sector customers in Germany, from Korte-Stiftung for 40 million euros (£34.5 million).
Mark Irwin, chief executive of Serco, said: “Increasing our presence in Germany will expand the immigration support we already provide to government customers in the UK, Australia and across Europe.”
The group said acquisitions – such as its European immigration services provider ORS bought in 2022 – will contribute 3% to revenues this year, while currency will act as a 1% drag.
Overall sales are set to rise by around 7% this year to “at least” £4.8 billion, with organic growth of 4%.
The group said organic revenue growth is set to slow to 2% in the second half from 6% in the first six months.
It said this was “as our CMS (US Department of Health and Human Services, Centres for Medicare & Medicaid Services) contract moved into its new five-year contract agreement, immigration volume growth eased in the UK, and we exited, as previously announced, certain low-margin contracts in the UK in the health facilities management and transport sectors”.
But Mr Irwin said: “Our strong focus on execution has delivered good performance in the second half, resulting in full-year outcomes that are better than those expected when we initially laid out guidance.”
“We expect to enter 2024 with a strong pipeline of new business opportunities and a robust balance sheet,” he added.
Shares in the group lifted 5% in morning trading on Thursday.
