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Serco boss hails 'encouraging' update as firm eyes 'sharp increase' in profits

Published 25/05/2016

Serco chief executive Rupert Soames said it was
Serco chief executive Rupert Soames said it was "encouraging" that the firm was able to upgrade its guidance

Outsourcing giant Serco is eyeing a "sharp increase" in profits after securing a better-than-expected return on a number of contracts.

The FTSE 250 company said it now expected annual underlying trading profits to be £15 million higher at £65 million, while revenues would also step up by about £100 million to £2.9 billion.

But it said the boost would only impact the first half of the year and was unlikely to be repeated in the future.

Group chief executive Rupert Soames said it was "encouraging" that the firm was able to upgrade its guidance.

He added: " We must remain cognisant that, with underlying margins currently around 2%, our profits are a sliver of reward between two very large numbers - revenue and costs - tiny percentage movements in which can lead to large percentage movements in profits.

"There remains much to do in order to complete our transformation this year and next, but we are continuing to make good progress on the roadmap we have set out through to 2020."

The firm said the profits jump came after contracts with Virginia Department of Transportation and Soldier for Life Transition Assistance Program ran for longer than expected.

It was also helped after some contracts which had already ended - including Northern Rail - had a better final settlement than it had initially pencilled in.

It added that some deals had also performed better than first thought, while it deferred some spending to next year and the foreign exchange rate was going in its favour.

Serco will announce its half-year results on August 4.

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