27th Jun 2024 09:23
(Alliance News) - Serco Group PLC on Thursday raised its annual operating profit outlook after a good performance in the first half of the year.
Shares in Serco rose 8.3% to 187.10 pence each in London on Thursday morning.
The Hampshire, England-based outsourcer increased its underlying operating profit guidance for 2024 by GBP10 million, or 4%, to GBP270 million. This would be 9% higher than the GBP249 million reported in 2023.
Second half profit is therefore expected to be nearly 30% higher than the same period in 2023, Serco noted.
First half underlying operating profit is ahead of plan at around GBP140 million, Serco said, with progress in improving productivity and the underlying performance of its portfolio delivering a margin of around 5.8%.
However, this would be lower than the GBP148 million posted a year prior, due to the new Centers for Medicare & Medicaid Services contract, immigration volumes in Australia, mobilisation costs on new work, and the prior year benefiting from a GBP6 million one off settlement.
Revenue in the first half is expected to be around GBP2.4 billion, in line with expectations, but 4% lower than the GBP2.5 billion reported in the first half of 2023.
Serco reported continued growth in its international immigration services platform, and growth in defence and justice, but said this was partially offset by declines in other areas.
In particular, Serco highlighted lower revenue from the new CMS contract and its previously announced exit from some low margin contracts in the UK.
For the full-year, Serco continues to expect revenue of GBP4.8 billion, below the GBP4.9 billion reported in 2023, with a 3% organic contraction, a 2% contribution from acquisitions and a 1% adverse impact from currency.
Chief Executive Mark Irwin was upbeat despite being mindful of the impact of elections across the globe.
"As we enter the second six months of the year, while mindful of a potential impact internationally from elections in 2024, we remain optimistic about the quality of our pipeline of potential new work to support our medium-term growth targets."
Serco expects free cash flow of GBP150 million in the first half above previous guidance for GBP140 million.
By Jeremy Cutler, Alliance News reporter
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