Friday 16 October 2020 8:59 am

Serco lifts annual outlook after Covid contract wins

Serco (SRP) raised its full-year forecasts after contract extensions in the UK and cost-cutting measures boosted its third quarter results. 

In an unscheduled trading statement, the contractor said it had achieved strong revenue growth in the third quarter, with all regions performing better than expected. 

Read more: Serco profit jumps on crisis demand but shares fall flat

Serco said it had seen a strong performance in the US, including its Centre for Medicare and Medicaid Services contract, while in the UK the contractor has been awarded an extension to its work on the NHS Test and Trace system. 

As a result it is upgrading its revenue guidance from £3.7bn to around £3.9bn and lifting its forecast for underlying trading profit to £160m-£165m. 

Dividend payments

The firm also said it may restart dividend payments and will make the decision at the end of the year.

The group’s work on public sector services has helped shield Serco from the economic impact of the pandemic, as its government contracts offset the weakness in its transport services.

But Serco has not been immune to criticism for its role in the widely criticised Test and Trace app. The outsourcer was handed a £108m contract earlier this year as part of the government’s contact tracing work but has reportedly subcontracted dozens of firms to conduct the majority of the work.

It addressed these concerns in today’s impromptu statement clarifying it is “not responsible for the whole programme and/or that we have failed in our obligations.”

“Serco is proud to be playing a part in the NHS Test and Trace programme; we now employ, directly or indirectly, around 9,000 people supporting the programme. However, the part we play, although important, is limited and specific.”

Read more: Serco boss defends ‘remarkable’ coronavirus test and trace system

Shares in Serco jumped 11.4 per cent.

Shore Capital analysts said the “indications on performance for the current year as set out in the statement lead to confidence that the underlying trading position of the group is set to roll positively” into next year.