Britain’s Serco views 2017 profit at top end of range
EDINBURGH: Serco said its fullyear underlying trading profit would come in around the top end of its guidance range after the British outsourcer secured a number of key contracts and reduced costs.
However, the group – which runs public services in defence, justice, immigration, transport and health – flagged a number of potential pitfalls for the years ahead, due to weakness in its home market and an unpredictable bid pipeline.
It said the timing of reaching a long-term goal of 5% to 7% revenue growth would depend on “when demand reverts to trend in our target markets.”
“Some markets, and in particular the UK, are currently growing more slowly than their former trend rate,” Rupert Soames, Serco’s chief executive, said in a statement.
“Our ambitions of 5% to 7% revenue growth and 5% to 6% margin remain intact, but the timing of achieving these remains subject to seeing improvements in the trading conditions across our markets.”
It said its pipeline of new bid opportunities, currently worth £4bil to £5bil, would be “noticeably lower” by the year end, and cautioned that reloading it was “unlikely to be a smooth progression given the effect of the timing and scale of individual opportunities”.
Serco said 2017 underlying trading profit would be around the top end of a previous guidance range of £65mil-£70mil at the end of the year, while revenues would be just under £3bil.
Shares were indicated to open higher, having fallen almost 16% versus a flat FTSE 100 share index in the last three months.
The group is grappling with global political uncertainty which is hampering the pace of decision-making in the public and private sector and increasing pressure on margins, a trend which has affected outsourcers generally.
Serco is undergoing an overhaul started three years ago after a series of profit warnings prompted a reset of strategy.
Later yesterday, it holds a Capital Markets presentation on two of its key sectors – justice and immigration, and defence. — Reuters