Key facts
- Serco anticipates a 3% revenue increase to £2.5bn for the first six months of the year.
- Profit for the first half is projected to reach approximately £155m with improved margins.
- Full-year revenue and operating profit guidance remain unchanged at £5bn and £300m, respectively.
- Defence contracts and immigration services in Europe were key drivers of growth.
- Procurement delays in North America persisted, but the region's pipeline expanded.
- Serco secured over £2bn in contract awards and extensions in the first half.
Serco reported that increased defence contracts and higher demand for its immigration services across Europe helped to offset delays in its North American business, leading to an expected 3% rise in revenue for the first six months of the year to £2.5bn. Profit is anticipated to increase to around £155m, with margins improving above 6%. The company reiterated its full-year guidance, expecting revenue of £5bn and underlying operating profit of approximately £300m.
The update comes amid broader concerns in the outsourcing sector following a government pledge to end "outsourcing by default." Serco's chief executive, Anthony Kirby, stated that the firm is well-positioned to benefit from rising government demand for defence and other critical public services, highlighting its global footprint and sector diversity as key strengths. Over half of Serco's profits are generated from its international business, contributing to financial and operational resilience.
Strong organic growth in the UK and Europe was attributed to defence contract mobilisations and higher-than-expected revenue from immigration-related services. Despite continued procurement delays in North America during the first half, Serco noted an expansion in its pipeline for the region, supporting future growth prospects. The company secured more than £2bn in contract awards and extensions in the first half, boosting its overall bidding pipeline to £12.5bn.
Serco also refinanced its revolving credit facility, increasing it from £350m to £400m and extending its maturity to 2031. The company reaffirmed its plan to complete its current £75m share buyback program by the end of July. The trading update is expected to reassure investors following recent pressure on outsourcing companies, including new government guidance requiring departments to consider bringing public services in-house before renewing contracts over £1m.