Outsourcer Serco Group PLC (LSE:SRP), which has a hand in prison and immigration services, expects to close 2023 with at least £4.8 billion in revenue, keeping in line with previous targets.
According to a Thursday operational update, revenues will show reported growth of around 7%, or 4% on an organic basis.
Operating profit for 2023 is forecast to be £245 million, with an anticipated free cash flow of £170 million, surpassing previous expectations with a cash conversion rate exceeding 90%.
The books are well leveraged, with a 0.7-times net debt to EBITDA ratio.
Looking ahead to 2024, Serco anticipates its underlying operating profit to increase to around £260 million, attributed to the expansion of the underlying business and contributions from recent acquisitions.
Speaking of which, Serco also announced the acquisition of European Homecare from Korte-Stiftung for €40 million (£34 million), a specialist provider in what Serco dubbed the “German immigration market”.
“This strategic acquisition will complement our ORS operations and strengthen our position as a leading partner in immigration services for European governments,” said chief executive Mark Irwin.
Irwin took over from former Serco boss and Winston Churchill’s grandson Rupert Soames earlier this year. City veteran Soames will take the helm at the scandal-plagued CBI in 2024.
On the trading update, Irwin stated: “Our strong focus on execution has delivered good performance in the second half, resulting in full-year outcomes that are better than those expected when we initially laid out guidance.
“For 2023, we will deliver growth in revenue, profit and cash, as well as an improvement in colleague safety and strengthened operational delivery of services to our customers.”