Serco surges as trading improves

28th Sep 2018 09:31

(Sharecast News) - Public sector outsourcing specialist Serco surged on Friday as it made an unscheduled announcement confirming that trading is set to be stronger than previous guidance for revenues, profitability and cash flow with net debt set to end the year at a lower level too.Revenue guidance was lifted to around £2.8bn, up from previous guidance for £2.7-2.8bn, with underlying trading profits now expected to grow 30-40% year on year to £90-95m, up from the £80m indicated before.An expected early repayment from a 2015 vendor loan note means net debt at the end of the year should come in at the lower end of the original £200-250m guidance range, with directors having previously pointed towards the mid-to-upper end. As a result, leverage is seen ending the year at less than 1.5 times EBITDA."Strong operating performance, together with transformation savings and other cost efficiencies, have resulted in trading in the first few months of the second half being better than we anticipated," Serco said.Management also believe "a number of non-recurring trading items such as end-of-contract settlements and other commercial negotiations will contribute to a stronger outcome for 2018 than we expected, and one which will be meaningfully ahead of current market consensus".While the 2018 financial year will be boosted, the one-off nature of much of this trading performance is not set to flow into the 2019 trading year, for which a detailed budget process has only just begun."We will update markets on our thinking for 2019 at the time of our pre-close statement on 13 December," directors said.Shares in Serco jumped 15% to 101.8p on Friday morning, returning to where they stood at the end of August.