Serco confident despite drop in first-half profit

City A.M. Reporter
BRITISH outsourcing group Serco said yesterday a raft of recent contract wins would help it to strong full-year revenue growth, after reorganisation costs and continued delays in the award of US federal work pushed first-half profit down 17 per cent.

The flow of much-anticipated public sector work in Serco’s core British market, which represents around half group profit, has been slowed by heavy austerity measures, while presidential elections have choked spending plans in the US.

While the US, where first-half revenue slipped 16 per cent, was likely to continue suffering from contract delays and cancellations in the near term, Serco said yesterday a host of new contracts in Britain would add to the £4.2bn of work already won across the group this year.

Serco’s contracts include running prisons and air traffic control centres around the world as well as the DLR, the light railway in East London that helped carry millions of spectators to the Olympic Games.

Serco said it had identified £31bn of further opportunities.

The £4.2bn of work won in the period compared with £2.5bn a year ago, while Serco said its order book – the value of future revenues based on all existing signed contracts – had increased to £19.4bn.

Serco reported adjusted first-half pretax profit of £102m, in line with analyst forecasts.

The group’s earnings in the period rose 4.3 per cent to £2.34bn, underpinned by last year’s acquisitions and good growth in Australasia and the Middle East.

The group now makes 46 per cent of its earnings overseas.