- First half tops expectations
- Full-year guidance increased
- Medium-term targets maintained
Investors in Serco (SRP) received a pleasant surprise as the business services group revealed first-half profits were ‘ahead of plan’ and full-year profits, free cash flow and leverage would all be better than previously expected.
The shares, which had drifted off their highs in the last couple of months, tacked on 12p or 7% to 185p.
RAISING GUIDANCE
For the first six months of this year the firm expects to report revenue of around £2.4 billion, in line with its original forecast, but thanks to improved productivity an increase in margins it now sees underlying operating profit ahead of plan at £140 million.
As a result, full-year operating profit is seen some 4% or £10 million higher than originally estimated at £270 million, with second-half earnings seen nearly 30% higher than last year.
The year overall is seen benefitting from new contracts ramping up, operation improvements across the existing portfolio and a contribution from acquisitions.
Full-year free cash flow is expected to be around £150 million, below 2023 but not by as much as originally forecast, while adjusted net debt is seen at £165 million which is £10 million better than previously guided.
QUALITY PIPELINE
‘We have delivered a good performance in the first half, with progress in improving productivity and the underlying performance of our portfolio allowing us to increase our profit guidance for the full year’, commented chief executive Mark Irwin.
‘As we enter the second six months of the year, while mindful of a potential impact internationally from elections in 2024, we remain optimistic about the quality of our pipeline of potential new work to support our medium-term growth targets.’
