Serco Group’s share price (LON-SRP) was up 8% after the a global provider of government services, has released its trading update for 2024, reporting a strong second-half performance and outlining a resilient outlook for 2025.
Key Highlights for 2024
- Revenue: £4.8bn, reflecting a 3% organic decline. The second half showed improvement, with only a 1% decline compared to a 5% drop in H1.
- Underlying Operating Profit: £270m, up 9% year-on-year, with a margin increase of 50 basis points to 5.6%, driven by efficiency improvements.
- Free Cash Flow: Upgraded to £170m, with 90% cash conversion.
- Order Intake: Strong second-half momentum, achieving a book-to-bill ratio of ~100%. The business pipeline is at its highest in over a decade.
- Net Debt: Improved to £145m, better than prior guidance, with leverage at 0.6x EBITDA.
- Shareholder Returns: Completed a £140m share buyback, bringing the total returned to shareholders to £340m since 2021.
Outlook for 2025
- Revenue: Expected to remain flat at £4.8bn, despite a 7% revenue reduction from UK and Australian immigration contracts. Growth in U.S. defence and other sectors will offset declines.
- Underlying Operating Profit: Projected at £260m, a slight dip due to cost pressures and reduced immigration activity, with margins stable at 5.4%.
- Cash Flow and Debt: Free cash flow forecast at £135m, with net debt expected to reduce to £60m.
- Growth Areas: Continued strong performance in North America, with mid-single-digit growth in U.S. defence. European operations also show growth potential, bolstered by recent contract wins.
CEO Commentary
Mark Irwin, Serco Group CEO, emphasized the company’s operational improvements and robust financial position, highlighting the ability to navigate geopolitical and fiscal challenges. The outlook reflects confidence in growth opportunities through innovation, efficient execution, and strengthened government partnerships.
Strategic Position
With a solid pipeline of opportunities and a disciplined focus on operational excellence, Serco is well-positioned to support governments in key areas such as defence, justice, healthcare, and citizen services while delivering shareholder value through dividends, growth investments, and further buybacks.
This update underlines Serco’s resilience and adaptability in a dynamic global market.
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