- 2024 targets confirmed
- Cash-flow forecast raised
- 2025 outlook ‘resilient’
On an off-day for markets, with the FTSE 100 and the All-Share down 1%, facilities management group Serco (SRP) was a rare bright spot following its year-end trading update.
The shares gained 8p or 6% to 147p, erasing much of their losses over the last month and indeed year-to-date.
SOLID 2024 PERFORMANCE
The group, which provides support services to governments around the world in the defence, health care, justice, space and transport sectors, confirmed its previous guidance for 2024 of revenue of £4.8 billion and underlying operating profit of around £270 million.
At the top line, that would represent a 3% decline on an organic basis, although there was a clear improvement in the second half with revenue down just 1% against 5% in the first half, with the impetus mainly coming from its operations in North America.
It was a similar story at the operating level, where the full-year increase of 9% was driven by a rise of more than 25% in the second half helped by an improving top line and an increase in margins due to efficiency and productivity gains.
Order intake was also ‘much improved’ in the second half, with the pipeline of new business opportunities set to end the year at the highest level in more than a decade.
The group also pleased investors with an increase in cash-flow guidance and a lower net debt target, which leaves leverage at just 0.6 times (EBITDA (earnings before interest, tax, depreciation and amortisation) against a target range of between one and two times.
‘RESILIENT’ 2025 OUTLOOK
For the year ahead, revenue is expected to be flat at around £4.8 billion despite reduced income from immigration contracts, while underlying operating profit is seen around £260 million and margins are seen holding around the 5.4% level.
The firm said it was well positioned for 2025 as the fiscal and geopolitical challenges facing governments ‘are creating opportunities to support our customers, as can be seen in our increased pipeline of potential new work’.
Chief executive Mark Irwin added some colour: ‘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.’
