Serco’s immigration contracts offset end of its Covid work boom
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Serco resilient as new immigration contracts offset end of Covid-related job boom
- Reported revenue at the outsourcing specialist increased 2% in 2022 to £4.53 billion
- The company said the end of Covid-related work has cost it around £480m in revenue
- Serco managed about 20% of the Covid-19 testing sites in England and Northern Ireland
Outsourcing specialist Serco saw turnover rise last year despite the expiring covid-19 contracts.
Reported sales at the group rose 2 per cent to £4.53 billion in 2022, following double-digit growth in the previous two years due to extensive pandemic-related work.
The Hampshire-headquartered company ran about 20 per cent of all coronavirus testing sites in England and Northern Ireland, as well as half of the call handers that were part of the controversial NHS Test and Trace programme.
Pandemic work: Serco ran about a fifth of all Covid-19 test sites in England and Northern Ireland, as well as half of the call handers on the NHS Test and Trace program
All of the Covid-derived work was completed last year, costing Serco an estimated £480 million, but it has made up for lost revenue with multiple new contract wins from other industries.
In the UK and Europe, where it does most of its business, the company benefited from strong demand for immigration services, including the decade-long Home Office agreements to accommodate asylum seekers.
Serco also enjoyed significant income from his work in the civilian services, transport and defense sectors, including a £350 million contract with the UK Department of Work and Pensions to help people find jobs under the Restart scheme.
Shares Serco Group were the third best performer on the FTSE 250 Index on Tuesday, rising 4.7 percent to 156p.
In addition, the group won tenders to manage Leicester’s Fosse Way prison, contract extensions for London’s Santander cycle hire scheme and support for the maintenance of the Hercules C130-J military aircraft at RAF Brize Norton.
Outside the UK, it received £950 million in new business wins, mainly in the form of defense deals, from customers in North America, double the amount secured in 2021, and successfully rebid to provide air traffic control services for the United States. Arab Emirates and Riyadh International Airport in Saudi Arabia.
However, Serco’s underlying trading profit only grew 4 percent, partly due to the end of its Covid-related work and the Atomic Weapons Establishment contract in the UK.
The company’s total operating income remained flat at £217.2m, while profit for the period plummeted by nearly half to £155m following a tax credit of £111.9m last year.
Nevertheless, recently appointed CEO Mark Irwin stated that he was “tremendously proud of the achievements of all my Serco colleagues around the world in 2022, another year of great global challenges.”
Irwin took office in early January, replacing Rupert Soames, who helped transform Serco from a company beset by major scandals and on the verge of collapse as he arrived into a thriving government services contractor.
His tenure saw Serco cut costs, sell off unprofitable divisions such as its foreign business processing arm, which bought private equity house Blackstone, and prioritize winning contracts in the public sector.
At the start of the pandemic, Serco had achieved its first annual revenue growth in six years and announced its first dividend payment in five years.
On Tuesday, the company announced it is recommending a 19 per cent increase in its dividend for the full year, alongside a £90 million share buyback plan for shareholders to reflect its performance.