Serco interim numbers on target but lack of progress on BPO unit sale
Profits in the first half of the year at Serco were flat compared to the same period last year but "a little better" than predicted, though management have not altered their expectations for the full year.
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After a very difficult 2014, the FTSE 250-listed outsourcing company is focusing on rationalising and restructuring the business in 2015 as well as rebuilding its sales pipeline.
But Serco's interim trading update contained no concrete developments on much of the above, nor on the much anticipated sale of its offshore private sector business process outsourcing business, only to say it was "considering a number of alternative options" and was making progress on managing the process of exiting loss-making contracts from this subsidiary.
Progress towards financial targets were more solid with revenues will be down roughly 15% to not less than £1.7bn in line with full year guidance of £3.5bn, with trading profits flat at not less than £45m.
The lower sales reflect reduced volumes and rates from Serco's contract with Australian Immigration Services and previously disclosed ending of contracts such as the Docklands Light Railway and the National Physical Laboratory in the UK, as well as certain US intelligence agency IT support services and visa processing work.
With free cash outflow for the full 2015 financial year expected to be approximately £150m, net debt at the end of the 30 June half year will be close to £350m, down from £682m in six months.
"We have ended the first half in reasonably good order and are making progress in implementing our plans," said chief executive Rupert Soames.
"Whilst our recovery is at an early stage, and there will be bumps along the road, I am confident that we are doing the right things, with a stronger balance sheet and supported by an excellent management team."
Serco, which signed around £1bn of contracts during a relatively quiet period for major bids, said it was still in the remainder of the private sector BPO business, meaning the run rate from this business will tail off significantly in 2016.
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