Serco profit rises but warns over UK headwinds

City A.M. Reporter
British outsourcing group Serco posted a 21 per cent rise in full-year profit, helped by strong revenue growth in the Americas, while it admitted government cuts were hitting the UK market.

Serco, which runs London's cycle-hire scheme, several prisons in Britain and Dubai's metro, said pre-tax profit rose to £214m.

Shares in the FTSE 100 listed company, which raised its total dividend 17.6 per cent to 7.35 pence, were up 2.2 per cent after the announcement.

"We expect limited changes to our estimates following the results meeting. We do anticipate a post-results relief rally following the recent trauma seen in the UK public sector services market which these results demonstrate Serco has been unaffected by," Evolution Securities analyst Graham Brown said.

Serco, which has targeted an increase in revenues to about £5bn by the end of 2012, said 2010 revenue rose nine per cent to £4.33bn on strong performances in the Americas.

In Britain, Serco said austerity measures were being felt particularly in the defence and local government markets, causing headwinds, while other markets were thriving.

"We have seen tremendous growth in the international business, much of the success has been underpinned by our success in new markets," chief executive Chris Hyman said.

"We are continuing to focus on building the business in New Zealand, Australia, India and the Middle East and the US is a huge market."