Serco forecasts revenue jump

Outsourcing firm Serco said it expected revenues to increase to about £5bn by the end of 2012, buoyed by strong demand from cost-cutting governments and local authorities.

Serco, which runs London's cycle hire scheme, several prisons in Britain and Dubai's recently-opened metro, said it had signed £3.7bn worth of contracts over the course of the year, including contracts with the United States Navy.

Last week Serco said it had struck a deal with the British government to cut the cost of its contracts after an earlier attempt to make its smaller suppliers shoulder the burden of savings backfired on the group.

Shares in Serco climbed 4.3 per cent after the announcement.

"In the current economic environment, there remains strong global demand for the efficient delivery of essential services," Serco said.

"We continue to expect an increase in revenue to approximately £5bn and in adjusted operating profit margin to approximately 6.3 per cent by the end of 2012," the firm added.

Execution Noble analyst David Brockton said the statement, as well as last week's memorandum of understanding with the government, should help plough confidence back into the firm.