Serco on track to hit targets

GOVERNMENT moves to cut costs by contracting out services have paid off for support service group Serco, putting it on course to hit targets and boosting its shares.

The group’s stock rose 8.5p to 571.5p after it said it was on track to boost revenue to about £5bn by the end of 2012 and to lift operating profit margins by 6.3 per cent.

Serco, which runs London’s cycle hire scheme and Docklands Light Railway, several prisons and Dubai’s recently opened underground system, also said it was on track to hit its financial targets this year.

Chief executive Christopher Hyman said pressure on governments to reduce budget deficits was resulting in more business for the firm.

“There remains strong global demand for the efficient delivery of essential services,” he said.

Serco last week struck a deal with ministers to reduce the cost of its contracts after an earlier bid to make some suppliers shoulder the burden of savings backfired on the group.

The company had to apologise to sub-contractors after angering the government by writing to suppliers demanding rebates on contracts in the first half of 2010.

The group has won orders worth £4.5bn in the year to date, including a £650m environmental services deal with a council in the West Midlands and a £110m contract with King’s College hospital.

The group said passengers on the Dubai Metro had made more than 30m journeys in its first year, while more than 100,000 people had joined London’s bike scheme.

In the US, the US navy handed it two deals worth a total of $130m to provide logistics support and to manage hazardous materials.