27th Jun 2019 08:52
(Alliance News) - Serco Group PLC on Thursday said it will deliver double-digit profit growth in the first half of its current financial year as it benefits from favourable currency movements and the adoption of the new accounting standard for leases.
Serco shares were trading 7.1% higher on Thursday morning in London at 145.50 pence each, the second biggest gainers in the FTSE 250 index.
The public services provider said it expects to deliver over 20% growth in underlying trading profit in the six months to Sunday, with revenue growth around 6%.
In 2018, Serco's first-half underlying trading profit totalled GBP37.6 million on revenue of GBP1.37 billion, meaning that the company expects about GBP45 million and GBP1.45 billion in the first half, respectively. Serco said its growth was driven by the Americas and Asia Pacific divisions.
This includes currency movements that have been modestly favourable, the company said, increasing revenue by GBP20 million and underlying trading profit by about GBP1 million to GBP2 million.
Revenue growth also includes a 2% contribution from acquisitions, Serco said, driven by health facilities management contracts from failed construction services firm Carillion that transferred to Serco between June and August last year.
Looking ahead, Serco said it expects its 2019 revenue to be around the top end of the previously stated GBP2.9 billion to GBP3.0 billion range. In 2018, revenue was GBP2.84 billion.
Underlying trading profit guidance is maintained at around GBP105 million compared to GBP93.1 million last year. Serco noted that the guidance includes an estimated GBP5 million increase from the adoption of IFRS16 accounting standard.
"The revenue growth seen in the second half of 2018 has continued, and profit and margins are both well up on the first half of last year," said Chief Executive Rupert Soames.
"Order intake in the first half of this year has been very strong at over GBP3 billion, already exceeding our revenue forecast for the whole of 2019," added Soames.
The company will publish its half year results on July 31.
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