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Serco ups profit guidance, mulls restarting dividend payments after UK test and trace contract extended

The extensions to its contracts to provide test sites and call handlers for test and trace are “an indication of our customer's satisfaction with the quality of work we have delivered”, the outsourcer said

Serco Group -

Serco Group PLC (LON:SRP), the outsourcing group that is running large parts of the UK government’s coronavirus (COVID-19) test-and-trace and virus testing services, has upgraded its full-year profit guidance after enjoying strong revenue growth and clamping down on costs in the past three months and said it may restart dividend payments.

In the UK, the FTSE 250-listed group has been awarded extensions to its contracts to provide test sites and call handlers for test and trace, which it claimed was “an indication of our customer's satisfaction with the quality of work we have delivered”. 

With cash generation in the third quarter of 2020 better than expected and after recently raising £154mln from US investors, the outsourcing group said it intends to soon repay the government VAT deferrals and make a decision about its previously withdrawn dividends.

For the full year, Serco said it now expects to generate revenue of around £3.9bn and an underlying trading profit of £160mln-£165mln, representing organic growth of around 15% and over 30% respectively.

The wide range for the profit guidance is because some contracts customers are adjusting their requirements week-by-week because of the shifting sands of coronavirus restrictions.

Serco, which also runs immigration detention centres in the UK and Australia and has a Medicare & Medicaid services contract in the US, said all of its regions worldwide are performing better than it had expected.

In the UK there have been increases in the number of asylum seekers looked after on behalf of the Home Office, while its new UK prisoner escorting contract has also started, and in Australia restrictions on movement as a result of COVID-19 has meant additional work.

Quick facts: Serco Group

Price: 131.4 GBX

LSE:SRP
Market: LSE
Market Cap: £1.62 billion
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