Serco profits soar on govt demand for Covid-related services

UK outsourcer Serco said interim profits rose 53% on the back of demand from governments for its services during the coronavirus pandemic and purchase of a US naval systems unit last year.

The company, heavily involved in the public sector, said underlying trading profit rose to £77.6m from £50.6m a year earlier.

Revenue grew 24% to £1.8bn, with organic growth of 15% and a 9% uplift from the Naval Systems Business Unit of Alion in North America. Reported Operating profit increased by £72m to £89m as a result of the strong increase in underlying profit and exceptional items.

"Covid-19 has had little effect on profits; although there have been some dramatic impacts, positive and negative, on individual contracts, in aggregate the ‘ups’ on profits have balanced the ‘downs’," said chief executive Rupert Soames.

Serco, which provides services such as managing immigrant removal centres, said revenue from Covid-19 related contracts came to £130m. It supplied drive-through test centres in the UK and quarantine accommodation to travellers in Australia.

The company had declared its first dividend since 2014 before the virus outbreak, but pulled it due to the uncertainties arising from the pandemic and said it would decide on the payout later in the year.

Full year guidance for revenue of £3.7bn and underlying trading profit of £135m - £150m was maintained.

“Nothing in recent weeks has changed our view, although…Covid-19 has introduced a greater degree of risk around our guidance than would normally be the case,” the company said.