- Serco now expects to achieve underlying operating profits of £270m this year
- The FTSE 250 company plans to report a lower first-half profit of around £140m
Serco has raised its annual forecast following strong performance during the first six months of 2024.
Performance has been strengthened by Serco’s immigration services contracts, which offset weakness in healthcare services thanks to sector acquisitions.
The outsourcing giant now anticipates achieving underlying operating profits of £270m this year, up 9 per cent on 2023 and £10m above previous guidance.
It forecasts to report a lower first-half profit of around £140 million, due largely to adverse currency impacts, reduced immigration-related work in Australia and a new contract with the Centers for Medicare and Medicaid Services ( US CMS)
Forecast: Serco now anticipates achieving underlying operating profits of £270 million this year, up 9 per cent on 2023 and £10 million above previous guidance.
However, the FTSE 250 firm said improvements in its portfolio productivity and underlying performance had led to margins exceeding expectations during the period.
Serco also believes second half profits will be around 30 per cent better than a year ago, partly thanks to recent acquisitions and the “step-up” of new contracts.
Recent deals won by the company include one from Buckinghamshire Council to run five leisure centres and a decade-long £200m contract to run HMP Ashfield in South Gloucestershire.
Just before that, Serco agreed to acquire German immigration company European Homecare from Korte-Stiftung for €40m (£34m).
The group said the acquisition helped bolster its immigration services platform and somewhat offset reduced trading in other areas, including lower revenue from the new CMS contract.
At the same time, the Hampshire-based company said full-year adjusted net debt and free cash flow would be better than expected, with the former closing the year at around £165m.
Mark Irwin, Serco’s chief executive, commented: “While we are mindful of the potential international impact of the 2024 election, we remain optimistic about the quality of our pipeline of potential new work to support our medium-term growth objectives.”
Irwin was promoted to CEO in early 2023, having previously led Serco’s UK and European division.
He succeeded Rupert Soames, the current president of the Confederation of British Industry, who resigned after eight years of successful recovery of the business.
During his tenure, Serco sold several divisions, expanded into Asia and North America and began focusing on winning public sector contracts.
The company was also a major provider of coronavirus testing sites in England and Northern Ireland and call handlers operating the NHS Test and Trace programme.
Serco Group Shares Oil prices rose 4.75 percent to 181 pence on Thursday morning and have risen by about a third in the past 12 months.