Trading update

15 November 2021

Serco today provides an update to 2021 guidance, following stronger than expected recent trading.

Recent trading

Trading has been stronger than we expected in recent months, and we now expect revenue to be around £4.4bn, and Underlying Trading Profit to be not less than £225m.  Several factors have driven this improved performance, most of which are unlikely to repeat.  First, in the UK and Australia, volumes of work related to Covid-19 support to governments have been higher, and have continued for longer, than we anticipated.  Second, a number of contracts across the business have performed better than we expected, notably immigration-related contracts in the UK and Australia, and our healthcare insurance eligibility services contract (CMS) in the United States, where the decision of the Biden administration to extend the open enrolment period has resulted in additional volumes.  Finally, a number of commercial discussions that we had expected to complete in 2022 are now anticipated to be finalised in the current financial year.  Cash generation has also remained strong.

Recognising the extraordinary efforts of our colleagues around the world and the difficulties experienced by many as a consequence of the pandemic, we will be making an ex-gratia payment to around 52,000 employees, as we did in 2020, and in addition we will be making a significant one-off commitment to our recently established Serco People Fund. The fund provides cash and other support to colleagues who would benefit from a little extra help at this difficult time.  Together, these initiatives will cost the company around £10m in the current year.

Our revised guidance for 2021 is set out below:

  Notes: The guidance uses an average GBP:USD exchange rate of 1.38 in 2021 and GBP:AUD of 1.83.

Outlook for 2022

We are yet to complete our budget process for 2022, and we will be working over the coming weeks to finalise individual budgets and gain Board approval.  We expect to be ready to give our usual detailed guidance for the year ahead in conjunction with our Capital Markets Day on 2 December.  At this point, we do not expect the guidance for revenue and trading profit for 2022 to be materially different to current analysts' consensus*.  We expect 2022 to see much lower demand for Covid-19 related services, partially offset by the impact of new work secured in 2021 and growth in our core non-Covid-19 related business.

*Serco-compiled consensus is £4.2bn of revenue and £196m of Underlying Trading Profit.  Bloomberg consensus is £4.2bn of revenue and £192m of Underlying Trading Profit as at 12 November 2021.

This announcement contains inside information.

Ends

For further information please contact:

Paul Checketts, Head of Investor Relations, tel: +44 (0) 7718 195 074 or email: paul.checketts@serco.com

Marcus De Ville, Head of Media Relations, tel: +44 (0) 7738 898 550 or email: marcus.deville@serco.com

About Serco

Serco is a leading provider of public services. Our customers are governments or others operating in the public sector.  We gain scale, expertise and diversification by operating internationally across five sectors and four geographies: Defence, Justice & Immigration, Transport, Health and Citizen Services, delivered in UK & Europe, North America, Asia Pacific and the Middle East.

More information can be found at www.serco.com

LEI: 549300PT2CIHYN5GWJ21

Forward looking statements

This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature.  All statements other than statements of historical fact are forward-looking statements.  Generally, words such as "expect", "anticipate", "may", "could", "should", "will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" and similar expressions identify forward looking-statements.  By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements.  Factors which may cause future outcomes to differ from those foreseen or implied in forward-looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws and governmental regulations; regulatory or legal actions, including the types of enforcement action pursued and the nature of remedies sought or imposed; the receipt of relevant third party and/or regulatory approvals; exchange rate fluctuations; the development and use of new technology; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks; and pandemics, epidemics or natural disasters.  Many of these factors are beyond Serco's control or influence.  These forward-looking statements speak only as of the date of this presentation and have not been audited or otherwise independently verified.  Past performance should not be taken as an indication or guarantee of future results and no representation or warranty, express or implied, is made regarding future performance.  Except as required by any applicable law or regulation, Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this presentation to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this presentation, or to keep current any other information contained in this presentation.  Accordingly, undue reliance should not be placed on the forward-looking statements.