30th Jan 2025 11:55
(Alliance News) - Serco Group PLC on Thursday expanded its US business with the GBP264 million acquisition of Northrop Grumman Corp's mission training and satellite ground network communications software business, MT&S.
Hampshire, England-based Serco is a government services outsourcing provider, focused on defence, justice & immigration, transport, health & other facilities management and citizen services.
MT&S provides the US military with advanced mission training services, and software that makes satellite ground networks more efficient. It supports programmes across the US Army, Space Force, Air Force, Navy, Combatant Commands and international partners.
Serco Chief Executive Mark Irwin said the deal "increases our scale, capabilities and growth potential in US defence, the largest defence market in the world, as well as providing solutions we can offer to our customers worldwide."
MT&S will build additional scale for Serco in North America, the firm said, growing the business to beyond USD2 billion of revenue and USD200 million of profit.
In 2025, MT&S is expected to generate revenue of around GBP242 million and underlying operating profit of GBP27 million, with an underlying operating profit margin of around 11%, before transaction and integration costs.
It is forecast to be mid-single digit accretive to underlying earnings per share in 2026, the first full year of ownership.
In response, shares in Serco rose 5.4% to 158.70 pence each in London on Thursday.
"We have approximately doubled revenue and more than trebled profit in Serco's North America business in recent years through a successful combination of organic growth and strategic acquisitions. MT&S provides an excellent opportunity to continue that success," Irwin commented.
The deal, which is expected to complete in mid-2025, will be funded through existing cash and debt facilities.
Earlier this month, Serco announced a US defence contract, for up to USD247 million, with the US Army.
By Jeremy Cutler, Alliance News reporter
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