Serco lifts revenue, profit guidance

15th Dec 2022 07:28

(Sharecast News) - UK government outsourcer Serco lifted 2022 revenue guidance slightly, adding that revenue the following year would increase.

The company on Thursday said 2022 revenue would be around £4.5bn from prior estimates of £4.3-£4.4bn, despite a £480m fall in Covid-19-related sales, although this was partially offset by organic growth in the rest of Serco's operations.

Underlying trading profit for 2022 was expected to be around £235m, up from previous guidance of £230m, with the same amount expected for next year.

Serco provides services including running immigrant detention and removal centres. It said that strong demand for immigration related services, which led to a profits upgrade earlier in the year, had continued in the UK, whilst moderating in Australia as Covid restrictions were relaxed.

However, it added that US profit margins had been weakened in the second half due to the seasonality of case management work.

"Shares in Serco have gained more than 10% year-to-date, outperforming the FTSE 100 which is less than 1% lower since the start of January," said Interactive Investor head of investment Victoria Scholar.

"In the first half of the year, it performed better than expected thanks to more immigration contracts. However like many businesses it is facing headwinds from inflation with costs on the rise. Plus, having enjoyed strong demand for covid related services during the pandemic, Serco has seen this tailwind taper off over the last year."

Reporting by Frank Prenesti for Sharecast.com