Serco on track for full year

FTSE 250 service company Serco said on Friday that it remains on track for the full year following a solid performance in the first half.

In a pre-close trading update ahead of its first-half results on 3 August, the group said it expects to report revenue of around £1.5bn, down around 8% from the year before, and underlying trading profit of approximately £35m compared to £51m in the first half of last year but similar to the £31m reported in the second half of 2016.

Serco said order intake to date has been very strong at around £2.4bn, which includes its recently-signed contract worth £1.5bn to operate Grafton prison. With £1.6bn booked in the second half of 2016, which included £450m for Barts NHS Trust, order intake for the 12 months to 30 June 2017 will be around £4bn. This would be the largest 12-month order intake for the company since 2012, and represents a book-to-bill ratio of approximately 130%.

2017 full-year guidance for revenue of around £3.1bn and underlying trading profit of between £65m and £70m was unchanged, although Serco said that if sustained, currency movements since its last statement in February may have a small negative effect.

"We do however reiterate that the potential outcomes for the year remain wider than the stated profit range, both to the upside and the downside, due to the sensitivity of our profits to even small percentage changes in either revenues or costs, as well as movements in currency."

Chief executive Rupert Soames said: "The business has performed well in the first half, which keeps us on track for the full year. The most striking element is the order intake, which for two successive periods has been very strong, totalling some £4bn in the last twelve months. However, over the last six months the environment in several of our markets has become markedly more unpredictable, so we remain sensibly cautious.

"Our views are unchanged for 2017. We are working hard to deliver our planned 'Transformation' phase, and although much still remains to be done to execute the long-term turnaround of Serco, we continue to track to plan and make good progress."