Serco shares soar on profits boost and Carillion deal
Underlying trading profits are expected to hit the peak of a £65 million to £70 million range.
Shares in Serco have surged after the outsourcing giant snapped up a large slice of Carillion’s healthcare division and said profits would hit the top end of targets.
The group said annual underlying trading profits are expected to come in at the peak of a £65 million to £70 million range, causing stock to climb 12% in morning trading on the London Stock Exchange.
In a double announcement, Serco also sealed a £47.7 million deal to take over a string of healthcare contracts from Carillion spanning five acute hospital trusts and another 20 public sector organisations.
The move will bolster its UK healthcare business, which has revenues of £240 million after securing contracts at Barts Health NHS Trust and University Hospital Southampton.
Group chief executive Rupert Soames said it had been a “good year” for orders and he expects profits to “grow strongly” across 2018 and 2019.
He added: “Beyond 2019, our long-term ambitions for margins and revenue growth remain intact, but the timing of achieving these remains subject to seeing improvements in the trading conditions across our markets.”
Annual revenues are expected to be just shy of £3 billion, falling slightly compared to last year in response to currency movements, volume and timing effects.
It added that orders for the year would hit more than £3 billion, thanks in part to the group’s largest contract win in history at Grafton prison in Australia.
On the Carillion deal, Mr Soames added: “The health sector is one of the fastest-growing areas of government spending worldwide, and our customers face immense challenges catering for the ever-increasing demands of ageing populations.
“Serco’s existing health operations already generate revenue of over £350 million, employ over 8,000 people, and provide services to such world-famous institutions as St Barts in the UK, the Cleveland Clinic in Abu Dhabi, the Prince of Wales Hospital in Hong Kong and Fiona Stanley Hospital in Australia.”
Secro employs more than 50,000 people across five sectors, including defence, justice and immigration, transport, health and citizen services.