Wednesday 31 July 2019 4:45 pm

Serco continues to power ahead of outsourcing crowd after US deal

Serco shares rose today after it reported a nearly one-third jump in first-half underlying profit.

The outsourcer, which has increasingly looked overseas in recent years, said the increase was in part down to revenue growth in North America.

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Shares rose five per cent today.

The figures

Underlying profit rose 29 per cent to £50.6m. But the figure does not account for exceptional items which include a £22.9m charge relating to incorrect billing on a contract for electronic tagging.

Revenue rose six per cent to £1.5bn, while net debt reduced to £206.7m.

Why it’s interesting

In Serco’s last annual results, it finally returned to profitability after years in the doldrums. The firm continues to defy the woes of its peers in the outsourcing industry such as Interserve, which went into temporary administration earlier this year.

Earlier this year, Serco agreed on the acquisition of a US naval defence business for $225m, which it said will add to the “scale and capability of our US defence business”. 

This transaction is likely to go through faster than expected, chief executive Rupert Soames said today, with regulatory approval likely to be granted in the coming months.

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What Serco said

Chief executive Rupert Soames said: “The strategic advantage of having a strong international footprint shows clearly in these results, with strong revenue growth in North America and AsPac.

“I am also delighted to see the UK & Europe division reaping the benefit of the Carillion health facilities management acquisition completed in 2018.”