Shares in Serco Group PLC (LON:SRP) edged higher at the opening bell this morning after the embattled outsourcing group saw its order intake jump once again in the first half of the year.
During the six months to 30 June, orders at the FTSE 250-listed group “increased substantially” to £2.4bn (H1 2016: £0.9bn), which includes £1.5bn for Grafton prison in Australia – its largest ever contract.
Orders have been strong for a while now
READ: Serco secures £1.5bn deal to run what will be Australia’s biggest prison, the group’s largest-ever contract by value
That follows on from a strong finish to 2016, and the £4bn of orders placed over the past 12 months is the largest since 2012 and represents a book-to-bill ratio of around 130%.
Anything over 100% is generally considered to be a positive sign and this marks the first time for five years that the ratio has surpassed that figure.
As of 30 June, the closing order book stood at £10.8bn compared to just £9.9bn at the end of 2016.
Profits fall as expected
READ: Serco Group keeps outlook unchanged, but cautious on "unpredictable markets"
In terms of the actual numbers, Serco reported a fall in revenues and profits, although it said a lot of this was down to tough comparatives from the same period of 2016.
Underlying profits fell 30% to £35.3mln (H1 2016: £50.6mln) on revenues of £1.51bn (H1 2016: £1.52bn). Earnings per share also dived to 1.55p from 3.3p a year earlier.
Pleasingly for investors though, the group maintained its full-year guidance and added it was on course to deliver savings of a further £20mln this year.
Serco expects to generate approximately £3.1bn in full-year revenues and an underlying trading profit of between £65mln and £70mln, although movement in currency changes since February may, if sustained, have a small negative effect.
‘On track to achieve full-year expectations’
“Notwithstanding the well-flagged decline in profits compared with the first half of 2016, trading in the first half of 2017 keeps us on track to achieve our expectations for the full year, and represents an improvement in underlying trading profit on the second half of 2016,” said chief executive Robert Soames.
"The most striking element is the order intake, which for two successive periods has been very strong, totalling some £4bn in the last twelve months, and we have succeeded in maintaining the pipeline at broadly similar levels despite strong order conversion.”
‘Sensibly cautious’
At the half-year update at the end of June, Serco told investors that it was still cautious over “unpredictable markets”, a concern it repeated again today.
“We remain sensibly cautious in the light of the political environment in several of our markets becoming markedly more unpredictable,” added Soames.
Shares are up 3.3% to 116.4p.