(Alliance News) - Serco Group PLC, which provides outsourced services for governments, reiterated 2021 guidance and laid out new medium-term targets.
Ahead of a capital markets day being held on Thursday, Serco said it expects its addressable market to grow by around 2% to 3% per year over the medium-term, and it expects its own revenue will grow at twice this rate, at around 4% to 6% from a base year of 2022.
It is targeting margin growth of 50 to 100 basis points to 5% to 6%, as well as the conversion of at least 80% of operating profit into cash. With this improved cash flow, Serco plans to reduce dividend cover to around 3 times from 4 times.
Chief Executive Rupert Soames said reduced government spending on the pandemic will knock revenue and profit in 2022, but he anticipates good growth in the parts of the business not involved in Covid-19 related services.
"At our Capital Markets Event this afternoon we will show investors why we expect the market for government services to continue to be robust, and, from 2022 onwards, how our strong and differentiated position will enable us to grow our revenues faster than the market, our profits faster than our revenues, and our returns to shareholders faster than profits," said Soames.
Serco shares were up 0.8% at 134.90 pence early Thursday in London.
By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
Serco (SRP)