Serco ups guidance on solid H1

Yesterday was a busy PR day for BPS specialist Serco with several bits of interesting news all out on the same day. Firstly, Serco's first-half trading update shows a company successfully navigating challenging market conditions while setting itself up for future growth. The government services provider posted H1 revenue of approximately £2.4bn, marking 2% growth with encouraging organic expansion.

The standout metric is its £3bn contract intake — a robust pipeline that signals strong client confidence in what the firm is doing. Underlying operating profit of at least £140m is maintaining a decent 5.9% margin (for largely blue-collar work), demonstrating operational discipline. The completed MT&S acquisition should also enhance Serco's defence capabilities amid rising global defence spending.

Given all of this, management upgraded organic revenue guidance from flat to 1% growth, reflecting better-than-expected immigration sector performance. The geographic mix shows North America leading the growth, driven by defence contracts, while Asia Pacific faces expected headwinds from contract completions. With adjusted net debt projected at £245m year-end and 1.2x leverage, Serco looks financially flexible. The 80% cash conversion target also aligns with its medium-term objectives.

New CEO Anthony Kirby's confidence appears well-founded given increasing demand across defence, justice, and citizen services. The defence sector weighting in new contracts particularly positions Serco well for sustained growth in these increasingly uncertain times.

Separately, Serco's announced the appointment of Keith Williams as its new Chair designate. Williams will take on the role at the beginning of 2026 and brings blue-chip credentials from British Airways, Royal Mail, and John Lewis—experience directly relevant to large-scale service operations and government relations. His succession of John Rishton, who oversaw Serco's operational turnaround, signals continuity in the company's strategic direction while adding fresh perspective for the next phase.

Also covered in the press is Serco Decarbonisation Push, which is now being extended through its Supply Chain. Serco's ‘Net Zero Standard for suppliers’ represents a progression of its Science Based Targets strategy. A three-pronged framework—requiring suppliers to set 2050 net zero goals, report comprehensive emissions data, and establish science-aligned targets, is designed to address scope 3 emissions that typically represent the largest carbon footprint component for service providers. With 95% supplier compliance targeted by 2028, this initiative positions Serco competitively for ESG-focused government contracts while potentially delivering operational efficiencies across its supply base.

Posted by: Marc Hardwick at 08:16

Tags: appointment   sustainability   trading update