(Alliance News) - Serco Group PLC said Wednesday it has seen a strong first half on the back of multiple Covid 19 related government contracts.
For the first half of 2021, the outsourcer expects to report revenue of GBP2.2 billion, up 19% from the GBP1.8 billion a year before.
Underlying trading profit is expected to grow by more than 50% to between GBP120 million and GBP125 million from the GBP78 million seen the year before.
"Serco's performance in the first half underlines the trust governments around the world place in us, and our ability to respond at scale and pace to rapidly-changing requirements," Chief Executive Rupert Soames said.
Serco also noted its record order intake of about GBP3.8 billion.
Soames continued: "Despite being exceptionally busy responding to strong demand for our services, we also completed two important acquisitions in the United States and Australia in the period."
The acquisitions of Facilities First Australia Holdings Pty Ltd and Whitney, Bradley & Brown Inc have added 5% to first half revenue, Serco said.
The outsourcer said its organic revenue growth is expected to be in the region of 15% for the first half, making it the third successive half-year period where organic growth has been at 15% or above.
It also noted that a bumper GBP340 million in revenue came from Covid contracts in the first half.
"Whilst it is not realistically possible to accurately forecast Covid-19 related revenues, given the constantly evolving situation, our expectation is that revenues related to Covid-19 will drop significantly in the second half. Notwithstanding this, we expect revenue to show growth in the second half versus the same period in 2020," Serco added.
Serco said its organic growth has been driven by the continued strong demand for its Covid-19 work.
Soames said: "For the year as a whole, we expect to deliver underlying trading profit of around GBP200 million, or nearly 30% growth in constant currency. Profits will be weighted to the first half, and will include contributions from the WBB and FFA acquisitions, which will enable us to absorb the impact of the end of the AWE Management contract, the mobilisation costs of the recently-signed UK Department for Work & Pensions ​contract and an expected reduction in Covid-19 related activities."
Serco has also guided for 2021 revenue of about GBP4.3 billion, in line with prior guidance, and up from GBP3.88 billion in 2020.
Irish stockbroker Davy added: "There are no surprises considering management had already increased guidance for 2021 on June 14 in its statement on the DIO contract wins and has announced further contracts since then. Earnings momentum for 2021 and 2022 and beyond has been strong, while free cash flow generation remains under-appreciated."
Serco is guiding for free cash flow in 2020 of GBP100 million.
Shares in Serco were 0.4% lower in London on Wednesday morning at 137.00 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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