Serco soars on news of £820m US health deal

Suzie Neuwirth
SERVICES company Serco’s shares jumped over six per cent yesterday, after news emerged that it had won a contract with the US Department of Health worth up to $1.25bn (£820m).

The deal was first posted on the federal contracting website and then confirmed by the FTSE 100-listed outsourcing firm.

The 12-month contract is to handle applications for a number of insurance affordability programmes including Medicaid and the Basic Health Program, effective from 1 July 2013.

“Shares hit a 12-year high in response to the news,” Chris Beauchamp, market analyst at IG, told City A.M.

“It’s quite an impressive sized deal and indicates that Serco is looking to expand abroad after conquering the UK market.”

Serco currently derives 16 per cent of its revenues from the US.

Serco – which maintains the Docklands Light Railway in London – posted adjusted pre-tax profit of £278.1m in its full-year results in March, up 7.3 per cent thanks to a record number of contract wins in 2012.

It secured new contracts worth £5.8bn last year, up from £5.1bn at the end of 2011, signing a ten-year deal with retailer Shop Direct Group worth £430m.

The company’s shares closed 6.5 per cent higher, making it the biggest riser on the FTSE 100.