Serco shares up as it looks set to achieve new profit forecasts

SERCO has bucked the woes in the outsourcing sector as the group said it remains on track to hit recently raised profit forecasts for the year.

Shares in the group jumped nine per cent after it said profits had grown “strongly” on 2018 and predicted further improvement next year amid an overhaul launched three years ago.

Its cheer comes as rivals are feeling the pressure in a tough sector, with government contractor Interserve this week revealing it is holding talks with its lenders to slash its debts amid trading woes.

It has been a difficult year for outsourcers, kicked off by the collapse of Carillion in January. But in a bullish update, Serco chief executive Rupert Soames said: “As we predicted when we set out our five-year strategy in 2015, profits have grown strongly in 2018 with margins increasing as a result of improved operational performance and cost reduction.

“With revenues no longer reducing, cash generation turning positive and the benefit of a strong balance sheet, we expect further improvement in 2019.”

As outlined in September’s profit upgrade, the outsourcer expects to book a full-year underlying trading profit of £90 million to £95m, up from previous forecasts of £80m, a 30% - 40% hike on 2017.

Revenue is expected for the year at £2.8 billion, around 4% lower than in 2017.