Serco lifts full-year guidance again

Outsourcer Serco lifted its full-year guidance slightly on Thursday to reflect trading in May and June, as it said strong growth across the business had offset the wind-down of the Test & Trace business.

In the six months to 30 June, underlying trading profit grew 6% to £130m on revenues of £2.18bn, up 1% on the same period a year earlier. The interim dividend was boosted by 18% to 0.94p a share.

The company pointed to the wind-down of Test & Trace, which ended in April, and the ending of the Dubai Metro contract in September 2021. It noted that the contracts reduced revenue by around £280m, or 13% year-on-year.

However, most of this decline was offset by strong growth in other contracts, including immigration in Australia and the UK, case management in North America and employment services in the UK. Excluding Test & Trace, revenues grew by 12%.

The company, which already lifted its guidance for the full year in May, raised its guidance again. It now expects full-year underlying trading profit of £230m, up from a previous forecast of £225m. This reflects further FX movement since the last update and trading in May and June.

Chief executive Rupert Soames said: "Looking at the first half performance in the round - robust revenues despite the wind-down in Test & Trace, strong margins, large and growing order book, healthy pipeline, strong cash conversion and balance sheet - tells of the agility of Serco's Business-to-Government platform and the advantages of our differentiated business model and international footprint."