Serco Group (LSE:SRP) PLC, the controversial outsourcing group, has upgraded its full-year guidance.
The company saw its shares rise 9.2% to 166.9p after it said it had experienced a stronger than expected first four months of 2022, helped by favourable exchange rate movements.
The company, perhaps best known for an overcharging scandal in 2013 that saw it return more than £100mln to the government, said it now expects underlying trading profit will be £20mln higher than previous guidance at around £215mln on a constant currency basis, down from £229mln in 2021. Factoring in favourable exchange rate movements, the underlying trading profit is expected to be around £235mln.
Serco's CEO says we're ideological for opposing their part in track and trace.
Lets recap. Serco have:
1. Been fined £22.9mil for overcharging the gov't
2. Been fined £750,000 for a worker's death & risking lives https://t.co/VwlewqqLFJ
— Pascale Robinson (@PascaleRobinson) June 18, 2020
The outsourcing company, which earned a packet from government contracts such as the shambolic test and trace Covid-19 programme , said its work on the programme ended in April, as a result of which related revenues are likely to be about £220mln lower in the first half of 2022 than they were in the first half of last year.
The group said it expects to replace most of this lost revenue with other government work around the world, meaning first-half revenues are likely to be little changed year-on-year.
6. Been investigated for running 'unsafe' GP services
7. Falsified data 252 times on this contract
7. Run drivethrough covid testing centres where the wait is 2 hours
8. Shared the emails of staff on this very contract.
Definitely not a shocking list of failures: pure ideology.
— Pascale Robinson (@PascaleRobinson) June 18, 2020
Margins in the first half are likely to be stronger than previously expected, at over 5%.
Net debt at the end of June is expected to clock in at around £170mln, compared to £178mln at the start of the year.
Serco is well protected against inflation, the company said.
“Although it is hard to forecast the precise impact on revenues and costs, the nature of our contractual arrangements with our customers means we do not expect costs to increase faster than revenues, although there will be timing differences between indexation and cost increases,” it explained.
"We have had a strong start to the year, and it is pleasing to be able to increase reported profit guidance to levels approaching last year's. To deliver this outcome, we are having to replace with other work some £500m of revenues and over £60m of contract profits from the ending of Test & Trace and of the AWE [Atomic Weapons Establishment] contract,” said Rupert Soames, the chief executive officer of Serco.
“We are able to do this because customers rely on us to deliver their critical programmes, and this has driven strong order intake over recent years on contracts that are now delivering revenues and profits. This is testimony to the effectiveness of our unique Business-to-Government platform, with its international footprint, its resilience, agility and efficiency, which allows us to respond rapidly to support the ever-changing priorities of the many governments we serve," he added.
Shares in Serco are up 24% year to date.