Thursday 23 May 2019 9:19 am | Updated: Wednesday 05 June 2019 8:29 am

Serco shares rise as outsourcer seals £178m US Navy contractor buyout

Serco shares rose eight per cent this morning as the government outsourcer announced it had struck a $225m (£178m) deal to buy a contractor to the US Navy.

The FTSE 250 company, which already employs thousands of people in the US working on defence, said it would buy engineering firm Alion’s naval unit in a move which chief exec Rupert Soames said “materially adds to the scale and capability of our US defence business”. Alion’s Naval Systems Business Unit (NSBU) employs around 1,000 people.

Serco is issuing new shares this morning to part-fund the deal, as well as tapping its banks for £75m. It said the acquisition of NSBU would boost its earnings from next year, after it turned over $336m in 2018.

NSBU has an order book of around $600m and a new business pipeline of over $2bn. Serco’s own North American defence revenues last year were $453m.

Soames said Serco has been providing services to the US Navy for nearly 30 years, “so we know this market well”.

“We greatly look forward to welcoming our new colleagues to Serco. The current management team of NSBU will continue to run the business and lead the integration into Serco, and we know they are as excited as we are by the opportunity to create a major new supplier of maritime engineering services, combining our joint capabilities in ship and systems design, modification and sustainment.”

Serco has been pushing to expand its presence overseas for several years now, and 80 per cent of its £1.6bn of contract wins in the first half of 2018 were outside the UK.

City A.M. understands the firm’s directors still do not fancy the prospects of British outsourcers on home soil amid weak trading conditions, more than a year on from the dramatic collapse of public sector contracting giant Carillion.