Serco soars on hint of further dividend hikes

OUTSOURCER Serco topped the FTSE 100 yesterday as it cheered investors with a 20 per cent hike in its dividend.

The blue chip outsourcer upped its dividend to 10.1p a share, hinting that it would pay out a bigger proportion of earnings to shareholders in the future, which sent its shares up yesterday.

Adjusted pre-tax profit for Serco, which maintains the DLR, rose by 7.3 per cent to hit £278.1m over the full year, boosted by a record number of contract wins in 2012.

It inked new contracts worth £5.8bn last year, up from £5.1bn at the end of 2011, flattered particularly by a business process outsourcing contract with retailer Shop Direct Group, worth £430m over ten years.

Serco’s order book rose to £19.1bn at the end of last year, with 92 per cent of revenue visible for this year, which cheered investors yesterday.

However, the services firm painted a mixed picture across its different markets. Its core UK market returned to growth, as Serco posted a two per cent rise in revenue to £2.5bn over the year, but the FTSE firm posted a 14 per cent plunge in the US – where it makes about a fifth of its sales – as it was hit by ongoing concerns over government spending.

Following on from a buoyant end to 2012, Serco was more cautious for this year, expecting a “modest improvement” in organic growth over 2013.

Shares closed up 8.89 per cent yesterday at 630.5p, making it the biggest riser on the FTSE 100.