Company Announcements

Closed period trading update

Source: RNS
RNS Number : 5554D
Serco Group PLC
30 June 2021

Closed period trading update: strong first half and full year performance expected


30 June 2021



Serco Group plc, the international provider of services to governments, today provides its scheduled closed period update of trading for the first six months of 2021, together with updated guidance for 2021 as a whole.  Serco will be in a closed period between 5 July 2021 and publication of the interim results for the first half of 2021 on Thursday 5 August 2021.


Highlights of expected first half performance

·      Reported revenue growth of 19%; organic revenue growth of around 15%.

·      Underlying Trading Profit more than 50% higher than the first half of 2020 at £120m-£125m.

·      All four regions trading ahead of last year.  Underlying Trading Profit margin likely to be greater than 5%.

·     ~£3.8bn of order intake, a book-to-bill ratio of around 170% in the first half, and just under 120% on a rolling 12-month basis.

·    Robust financial position with adjusted net debt expected to be around £275m; leverage towards the bottom end of our target range of 1-2 times net debt : EBITDA.


Commenting on today's update, Rupert Soames, Serco Group Chief Executive, said:


"Serco's performance in the first half underlines the trust governments around the world place in us, and our ability to respond at scale and pace to rapidly-changing requirements.  We expect to deliver revenue growth in the first half of nearly 20%, and Underlying Trading Profit growth of more than 50%; just as pleasing, our order intake will be at record levels at almost £4bn, including large new contracts with the UK Ministry of Defence, the Department of Work & Pensions and the Royal Canadian Airforce.  Despite being exceptionally busy responding to strong demand for our services, we also completed two important acquisitions in the United States and Australia in the period. 


For the year as a whole, we expect to deliver Underlying Trading Profit of around £200m, or nearly 30% growth in constant currency.  Profits will be weighted to the first half, and will include contributions from the WBB and FFA acquisitions, which will enable us to absorb the impact of the end of the AWE contract, the mobilisation costs of the recently-signed DWP contract and an expected reduction in Covid-19 related activities.  We also intend to take advantage of the current strong trading to temporarily increase our rate of investment in our systems platform, cyber resilience, and business development spend to respond to a strong pipeline of opportunities."


Expected outcome for the first half of 2021 and guidance for the full year


Revenue: We expect revenue of around £2.2bn in the first half of 2021, 19% higher than the £1.8bn reported in the first half of 2020; about £340m of our first half revenues are expected to be related to Covid-19, which compares to £80m in the prior year. The acquisitions of FFA and WBB have added 5% to our revenue, while currency is expected to have a 1% adverse impact.  Our organic revenue growth is expected to be in the region of 15% for the first half, making it the third successive half-year period where organic growth has been at 15% or above.  We have seen particularly strong revenue growth in the first half in the UK and Australia.  Whilst it is not realistically possible to accurately forecast Covid-19 related revenues, given the constantly evolving situation, our expectation is that revenues related to Covid-19 will drop significantly in the second half.  Notwithstanding this, we expect revenue to show growth in the second half versus the same period in 2020.


Underlying Trading Profit (UTP): We expect first half UTP of between £120m and £125m, more than 50% higher than the £78m reported last year.  Acquisitions will contribute around £7m or 8% of the UTP growth, while currency is expected to be a 4% drag. The organic growth in UTP has been driven by continued strong demand for our Covid-19 work and growth in a range of other contracts, notably in Justice & Immigration and Citizens Services.  The net impact of Covid-19 will be stronger than 2020 as a result of both increased volumes on Covid-19 contracts, and as those parts of the business that saw significant losses last year - notably Leisure, Transport and Health - show signs of improvement.


For the year as a whole, we continue to expect UTP of around £200m, which implies a larger first half weighting but strong growth on 2020 overall.  In the second half we anticipate a lower level of Covid-19 work, our AWE and Dubai Metro contracts will end, the new DWP Restart contract will be loss-making as it mobilises, and £3m of profit on sale from the divestment of our US parking business in the first half will not recur.  In addition, we intend to use the current strong trading to temporarily increase investment across a variety of projects to improve the resilience of the business and support future growth.  These include workforce management, upgraded IT systems, enhanced cyber-security and additional business development spend as our pipeline of opportunities is currently strong.


Financial position: We expect adjusted net debt to be around £275m at the end of June and leverage towards the bottom end of our target range of 1-2 times net debt : EBITDA. This is better than our previous guidance of 1.6x due to higher profits and because cash generation has been strong so far this year, helped by expedited payment terms by several customers as they seek to support their supply chains.  The second half is unlikely to see such strong operating cashflow as profits will be lower, customers will revert to more normal payment terms, and we will repay deferred payroll taxes in Americas.


Order intake: Order intake has been extremely strong in the first half at around £3.8bn, moving our book-to-bill to around 170% for the half, and just under 120% for the rolling 12-months. Amongst contracts signed were a number of contracts by the Defence Infrastructure Organisation (DIO) awarded to our VIVO JV with Engie, which together we estimate will have a value to Serco approaching £2bn over their initial seven-year term.  The order intake also includes our DWP Restart contract, which has an estimated value of £350m, the £400m Goose Bay contract renewal and our recently-announced Testing contract award, which will be valued in our order book at £190m.


Guidance for the 2021 financial year


Our latest guidance for 2021 is:


Prior guidance*

New guidance




Organic sales growth



Underlying Trading Profit



Net finance costs



Underlying effective tax rate



Free cash flow



Adjusted net debt




Notes: Guidance on the full range of metrics was last given on 27 April 2021 but UTP guidance was increased from £185m to £200m on 14 June 2021, ahead of this fuller trading update. The guidance uses an average GBP:USD exchange rate of 1.40 in 2021 and GBP:AUD of 1.82 in 2021. We expect a weighted average number of shares of 1,246m for diluted EPS.





For further information please contact:

Paul Checketts, Head of Investor Relations, tel: +44 (0) 7718 195 074 or email:

Marcus De Ville, Head of Media Relations; tel +44 (0) 7738 898 550 or email:


About Serco

Serco is a leading provider of public services. Our customers are governments or others operating in the public sector.  We gain scale, expertise and diversification by operating internationally across five sectors and four geographies: Defence, Justice & Immigration, Transport, Health and Citizen Services, delivered in UK & Europe, North America, Asia Pacific and the Middle East.


More information can be found at



Forward looking statements

This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature.  All statements other than statements of historical fact are forward-looking statements.  Generally, words such as "expect", "anticipate", "may", "could", "should", "will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" and similar expressions identify forward looking-statements.  By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements.  Factors which may cause future outcomes to differ from those foreseen or implied in forward-looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws and governmental regulations; regulatory or legal actions, including the types of enforcement action pursued and the nature of remedies sought or imposed; the receipt of relevant third party and/or regulatory approvals; exchange rate fluctuations; the development and use of new technology; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks; and pandemics, epidemics or natural disasters.  Many of these factors are beyond Serco's control or influence.  These forward-looking statements speak only as of the date of this announcement and have not been audited or otherwise independently verified.  Past performance should not be taken as an indication or guarantee of future results and no representation or warranty, express or implied, is made regarding future performance.  Except as required by any applicable law or regulation, Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this announcement, or to keep current any other information contained in this announcement.  Accordingly, undue reliance should not be placed on the forward-looking statements.


LEI code: 549300PT2CIHYN5GWJ21


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