Tuesday 28 February 2023

*UKHotViewsExtra* Serco flat as it moves forward under new leadership

SercoBusiness Process Outsourcer (BPO) Serco has had a good run of things over the last few years, significantly benefiting from Covid related contracts that raised revenue between 2019 (the last year without any Covid-related work) and 2022 by c.40%, and almost doubled Underlying Trading Profit (UTP) from £120m to £237m.

Serco was one of the UK’s biggest beneficiaries from Covid related work, which was always going to ‘punch a big hole’ in its P&L once the pandemic and associated Government spending wound down (see Covid cliff edge looms for Serco). Add to this the ending of its large AWE contract, and Serco has had to replace some £480m of revenues and over £60m of contract profits – no small feat. Given the scale of the challenge, a broadly flat year for 2022 should not be seen as a disappointment with revenue ex-Covid and currency up 11%.

Headline financials for FY 2022 saw Serco grow revenue by 2% to £4.53bn (FY 2021 £4.42bn) although this translates into a -1% decline when put in constant currency. Underlying Trading Profit was up 4% last year to £237m (FY 2021 £228.9m), although declined -3% in constant currency (this translates to a margin of 5.2% pretty typical of the works often ‘blue collar’ nature). Given that three-quarters of the Group’s UTP was derived from outside the UK it demonstrates the value of Serco’s decision to pivot towards international markets (particularly the US), taken a few years ago.

Serco now moves forward under the leadership of new CEO Mark Irwin who officially took over from Rupert Soames at the beginning of this year (see Serco CEO to retire). Soames had led a successful nine-year stabilisation and turnaround of the business that was impressively effective. Whilst the business is not expected to grow in 2023 – with revenue guidance of £4.6bn, UTP of c.£235m and organic revenue growth of 0% - Serco is targeting average annual growth of between 4-6% over the medium term.

TechMarketView clients, including subscribers to UKHotViewsPremium, can read more by downloading the full review of Serco’s FY results here *UKHotViewsExtra* Serco flat as it moves forward under new leadership.

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Posted by Marc Hardwick at '09:11' - Tagged: results