Public service provider giant raises its profit forecast by £30 million

Outsourcing giant Serco has hiked its full-year profits outlook as stronger-than-expected trading is helping it offset the hit from the end of the UK Government’s Covid-19 test and trace programme.

The firm now expects underlying trading profit of around £225 million this year – up £30m on previous guidance and “significantly” better than it feared in February.

It had warned over the impact from the end of test and trace – a loss of £220m worth of revenues in the first half and £260m in the second half.

But the group, whose operations include NorthLink Ferries and Caledonian Sleeper rail service, said it was now set to replace these lost revenues with increased work on immigration contracts and other global government programmes.

It believes this will help annual results approach levels seen in 2021.

Rupert Soames, Serco group chief executive, said: “We have had a strong start to the year, and it is pleasing to be able to increase reported profit guidance to levels approaching last year’s.

“To deliver this outcome, we are having to replace with other work some £500m of revenues and over £60m of contract profits from the ending of Test & Trace and of the AWE (Atomic Weapons Establishment) contract.

“We are able to do this because customers rely on us to deliver their critical programmes, and this has driven strong order intake over recent years on contracts that are now delivering revenues and profits.”

The firm is now pencilling revenues for the first half of 2022 of just over over £2bn.

Full-year revenues are expected to reach £4.3bn to £4.4bn, in line with the previous year.

The Serco group operates Northlink Ferries.