Outsourcing giant Serco: Shares spike as business pipeline “at its best for a decade”
British outsourcing giant Serco has said that its pipeline of business opportunities is at its strongest in over a decade thanks to a boost from North American defence contracts.
Shares subsequently spiked more this seven per cent in early trades.
The FTSE 250 firm told markets this morning that underlying operating profit was £270m in 2024, up nine per cent in the full year.
It has a “much improved order intake” in the second half of the year, resulting in an expected book-to-bill for the full year of 100 per cent.
Its pipeline of new business opportunities is set to end the year at its “highest level in more than a decade”, Serco said.
The company, which completed a £140m buyback programme this year, expects adjusted net debt now to be around £145m – £20m better than prior guidance – and revenue to be in line with 2024 at around £4.8bn.
While its has taken a five per cent hit due to lower revenue on its UK immigration contract, it has seen strong organic growth in North America after securing new contracts in the defence sector.
Mark Irwin, Serco chief executive, said: “We built stronger trading momentum in the second half of the year, particularly in our North America business, and delivered good margin gains through our relentless focus on performance improvement and disciplined execution. Our strong cash generation and balance sheet have enabled us to complete our largest ever share buyback during the year.”
“The outlook for 2025 is positive, with continued momentum in North America and new contracts mobilising, mitigating previously announced higher UK employment costs and lower revenues in immigration. Our European business has seen significant growth over the past two years, and we are optimistic about further growth opportunities across the EU.”
In the UK, Serco’s reach spans industries from defence and health to transport and justice.
It currently operates five adult prisons in the UK: HMP Ashfield, HMP Doncaster, HMP Dovegate, HMP Fosse Way, and HMP Thameside, and in October launched legal proceedings against the UK government over a prison services contract.
The company operates in 43 states, four Canadian provinces and 14 countries around the world.
In the last 12 months, Serco’s shares have been disappointing, dropping by 12.77 per cent. A month ago they dropped significantly after an Australian contract loss, and due to the impact of the Budget, particularly with regards to the hike in employers national insurance contributions.