Serco lifts full-year profit guidance after 'good' progress in H1

(Sharecast News) - Serco lifted its full-year profit guidance on Thursday following "good" progress in the first half. In an update for the first six months of the year, the outsourcer said it now expects underlying operating profit of £270m for 2024, up £10m on previous guidance. It also expects free cash flow to be better and financial leverage to be lower than prior guidance.

Chief executive Mark Irwin said: "We continue to explore new ways to bring together the right people, the right technology and the right partners to help governments around the world respond to the complex and difficult challenges they face.

"As we enter the second six months of the year, while mindful of a potential impact internationally from elections in 2024, we remain optimistic about the quality of our pipeline of potential new work to support our medium-term growth targets."

Group revenues for the first six months are expected to be down around 4% on the same period a year earlier at £2.4bn. Serco said it has seen continued growth in its international immigration services platform, supported by the acquisition of European Homecare in early March, despite some reduced volume variable work in Australia.

Along with growth in defence and justice, this has partially offset declines in other areas, in particular lower revenue from the new Centers for Medicare & Medicaid Services (CMS) contract and its previously-announced exit from some low margin contracts in the UK.

The company said it's on track to meet revenue guidance for the full year of £4.8bn, slightly below the £4.9bn generated in 2023.

First half underlying operating profit is set to be better than expected at about £140m, down from £148m in the same period a year earlier. Serco put the lower profit down to the new CMS contract, immigration volumes in Australia, mobilisation costs on new work, and the prior year benefiting from a £6m one off settlement.