Serco forecasts profits hike in 2023 and next year
The group expects operating profits to rise by around 3% in 2023 to £245 million and increase further to about £260 million in 2024.
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Your support makes all the difference.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 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%.
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
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.