Serco expects profit growth for 2024, despite declining revenues

Serco Group expects profits to rise in 2024, despite revenue remaining flat for the year as the group ramps up its asylum and immigration services.

The outsourcing giant forecasts underlying operating profit of £260 million by 2024, supported by ramping up new business, operational efficiencies and recent acquisitions.

But the company predicts annual turnover will reach around £4.8 billion due to the end of specific low-margin contracts and the UK government's plans to reduce the number of asylum seekers in hotels.

By comparison, Serco expects sales to rise 7 percent this year, partly due to demand from the defense and immigration sectors.

This has helped offset the loss of pandemic-related work, which generated £1.1 billion of the company's revenue in 2020 and 2021, but has now ended following the lifting of lockdown measures.

Serco operated around 20 per cent of all coronavirus testing sites in England and Northern Ireland, and employed half of the call handlers operating in the NHS Test and Trace programme.

The company is now winning important contracts from the immigration and justice sectors, especially in Great Britain.

It is also expanding into providing immigration services across Europe, buying Swiss-based ORS for £39 million in September last year.

And on Thursday, Serco announced it would acquire European Homecare (EHC), an immigration services company in Germany, from Korte-Stiftung for €40m (£34m).

EHC employs approximately 2,000 people who provide housing, medical and social care, training and education to more than 36,000 asylum seekers.

Mark Irwin, CEO of Serco, said: 'This strategic acquisition will complement our ORS business and strengthen our position as a leading partner in immigration services for European governments.'

'There are complex and growing demands on immigration and asylum seeker support services worldwide, and we have a strong track record of providing high standards of service.'

Irwin was promoted to his role in early 2023, having previously led Serco's UK, Europe and Asia Pacific divisions.

He succeeded Rupert Soames, who resigned after an eight-year stint that turned around a company whose reputation had been badly damaged by an electronic tagging scandal.

During his tenure, Serco sold several divisions, shifted its focus to winning public sector contracts and expanded into Asia and North America.

Soames, a grandson of Sir Winston Churchill, was recently appointed the next president of the Confederation of British Industry, itself rocked this year by controversy over allegations of sexual misconduct.

Serco Group shares were 4.2 percent higher at 161.8p on Thursday morning, amid a broader rally in London markets.