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Serco reinstates full year guidance following strong first half performance

The outsourcing firm said its first-half performance had been driven partially by the Naval Systems Business Unit purchased from Alion in North America last August

Serco Group - Serco reinstates full year guidance, expects very strong performance for first half

Serco Group PLC (LON:SRP) has reinstated guidance for its 2020 financial year following what it said was a “very strong performance” in the first half.

For the period ending July 1, 2020, the FTSE 250-listed outsourcing firm said it expected to deliver revenue growth of 23% alongside an underlying trading profit of between £75mln-£80mln, around 50% higher than a year ago, driven primarily by the company’s overseas businesses and its acquisition of the Naval Systems Business Unit of Alion in North America last August.

READ: Serco expects “continued demand” amid coronavirus pandemic

While the firm said it had experienced “significant operational challenges” as a result of the coronavirus pandemic, it has seen a limited financial impact as losses in some of its segments were offset by additional work elsewhere. Serco also reported a “strong order intake” of around £1.8bn.

“[Coronavirus] has had little overall impact on our profits in the first half; although we are sustaining significant losses in some areas of our business, notably in Leisure and Transport, these have so far been largely offset by additional work in Citizen Services”, Serco chief executive Rupert Soames said in a closed period trading update.

As a result of the first half performance, the company reinstated guidance for the full year, which it originally withdrew in early April around the peak of the coronavirus outbreak.

The new guidance predicts an underlying trading profit for the year of around £145mln compared to previous expectations of between £135mln-£150mln, while revenues are expected to be around £3.7bn compared to £3.4bn-£3.5bn previously.

“Being able to reinstate guidance for the full year reflects the resilience of our business, which depends for its revenues on governments rather than businesses or consumers, our strong order book, and growing confidence that our people and systems can adapt effectively to the challenges of [coronavirus]”, Soames said.

“Clearly, there is a more than normal degree of risk in our guidance, but we feel it better that we give some indication rather than none", the CEO added.

Quick facts: Serco Group

Price: 127.2 GBX

Market: LSE
Market Cap: £1.57 billion

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