Serco Group (LSE:SRP) PLC, the outsourcing firm, saw first-half revenues rise sharply, thanks largely to its work for governments on combatting the spread of COVID-19.
Revenue in the first six months of 2021 rose 19% to £2.16bn from £1.82bn in the first half of 2020, with organic growth of 15%.
About 17% of the group’s first-half revenues were directly associated with the work of supporting governments in their response to COVID-19.
I can't keep up was it 2,000 consultants from Serco or Deloitte that were getting 6k per day for their track and Trace work?
— Dave ????????#FBPE???????????????????? (@DavidSA68185447) August 4, 2021
Underlying profit before tax rose to £110.1mln from £64.9mln in the same period of 2020.
Underlying earnings per share rose 75% to 6.75p from 3.86p.
The board has proposed an interim dividend payment of 0.8p – its first interim dividend since 2014 – following on from the resumption of dividend payments earlier this year at the time of its full-year results.
Adjusted net debt widened to £225mln from £143mln a year earlier while free cash flow improved by 61% to £130mln from £81mln the year before.
Year-end net debt pre-IFRS 16 accounting adjustments is now expected to be around £250mln versus previous guidance of roughly £275mln.
The order book has risen to £14.1bn from £13.5bn at the end of 2020.
“We have had extremely strong order intake, and the book-to-bill ratio was 190%, which bodes well for the future. Our three largest divisions - Asia Pacific, North America and UK & Europe - all delivered good growth, and this reflects both the trust our government customers have shown in us during the pandemic, and Serco's ability to respond to their requirements with speed and at scale,” said Rupert Soames, the chief executive officer of Serco.
“For the year as a whole, we expect to deliver underlying trading profit of around £200mln, or nearly 30% growth in constant currency. Profits in the year will be weighted to the first half, and will include contributions from the WBB and FFA acquisitions, which will enable us to partially offset the impact of the end of the AWE contract in June, the mobilisation costs of the recently-signed DWP contract, an expected reduction in COVID-19 related activities, and investments in our operating platform,” Soames said.
“Our guidance for 2021 remains unchanged from that stated in our Pre-Close Update on 30 June 2021, except for cash and net debt, which has been updated following the very strong first-half performance,” he added.
Broker Peel Hunt said the profit before tax was in line with its forecast of £109mln.
It has made no change to its forecasts and restated its view that the shares, which are trading on 13.8 times projected earnings per share for 2021, are “too low”.
It has a target price of 162p; the shares currently trade at 140.4p, down 0.1%.