Test and Trace winner Serco tempers profit forecasts for 2022

Test and Trace winner Serco tempers 2022 profit forecast with declining Covid activity

  • The outsourcer expects a ‘quick run-down’ of Covid-related matters
  • Serco saw 40% profit growth in 2021 and 13% revenue growth for the year
  • But revenues in 2022 are expected to be 6% lower as Covid sales decline

Serco Group has warned it expects lower revenues and profits next year, with the outsourcing giant anticipating “a rapid winding down” of business related to the coronavirus pandemic.

The FTSE 250 group, which operates 25 per cent of the testing centers and around half of the UK’s contract tracking business, is a major beneficiary of Covid-19 with an estimated 2021 profit of £225 million after raising guidance three times .

It reflects earnings growth of 40 per cent over the year, while Serco also expects to achieve revenue growth of 13 per cent to £4.4 billion by 2021.

Serco runs 25% of the test centers and about half of the contract tracing activities in the UK

While the company hailed “a pipeline of new opportunities” in the year ahead, it expects a “significant impact” on both top-line and earnings in 2022 as a result of a slump in Covid-related services delivered to customers in the first half of the year. governments are provided.

However, it expects “a large part” of this decline of about 13 percent will be offset by about 5 percent growth in other parts of the business due to “very strong” order intake.

Turnover in 2022 is expected to be £4.1bn to £4.2bn, about 6 per cent lower than expected turnover for 2021. This assumes a contribution of 1 per cent from acquisitions and a favorable currency impact of 1 per cent.

Underlying trading profits for 2022 are forecast to be around £195 million, with the decline also attributed to the expiration of some non-Covid contracts.

The recently announced 1.25 percent increase in employers’ National Insurance contributions is also expected to cost the company around £5million on an annual basis.

However, Serco highlighted positive contributions to revenue expected in the coming year, such as work with the DWP Restart Program and the Defense Infrastructure Organization, both of which are turning profitable, and the termination of the accelerated investment program.

Group boss Rupert Soames said: “We are ending 2021 on a high, with a very strong operational and financial performance, despite all the challenges we faced during the year.

“In our best interest, we hope that in 2022 the need for government spending on Covid-related services will decrease sharply, and this will reduce revenues and profits in 2022; however, our strong order intake in 2021 means we expect good growth in those parts of our business not involved in Covid-19 services.”

Serco shares rose 1.6 percent with 135.9 pence, bringing the performance over the year to 9.9 percent. It remains 18.8 percent lower than its pre-Covid 2020 peak.