Serco warns that sluggish sales in US will lead to a revenue dip

OUTSOURCER Serco yesterday gave a downbeat trading update in which it said the US market was sluggish.

The company, whose contracts include running prisons and the Docklands light railway, said it expected revenues to dip in the first half before picking up.

It said the UK was proving resilient compared with its business across the Atlantic.

The FTSE 100 company said in a statement: “In our regional frontline operations we have seen further strong growth, an improving outlook in the UK, but conditions in the US federal market remain very tough for our Americas division. Accordingly, for the first half of the year, we expect a small reduction in the group’s organic revenue.”

Robin Speakman, an analyst at Shore Capital, said: “We believe earnings per share is set to decline by up to 20 per cent on the first half … but we expect a strong second half performance to follow, led by a lower cost base and the noted contractual success.”

Serco, which will release its half year results on 29 August, added: “Our financial performance (including revenue growth, margin progression and free cash generation) will be weighted to the second half of the year when we expect a strong financial result.

“This reflects excellent performance over the last few months in securing new contract awards that will flow through to organic revenue growth; the successful conclusion of our change programme; and the benefit of recent acquisitions.”

Analyst David Brockton at Espirito said: “While we expect to make no material change to our forecasts, the balance of risk would appear to remain to the downside.”

Shares in Serco fell 1.9 per cent to 529.5p yesterday.