Serco Group (SRP) H2 2024 earnings summary

Executive summary

• Achieved strong operational and financial performance in 2024, with accelerated trading momentum in the second half and continued progress on the Enterprise Growth Strategy.

• Revenue for FY24 was £4.8bn, down 2% vs. 2023, with underlying operating profit up £25m to £274m and margin up 60bp to 5.7%.

• Free cash flow reached £228m, with trading cash conversion at 109%.

• Strategic focus on Defence and North America, with Defence accounting for over 40% of order intake.

• Acquisition of US-based Mission Training & Satellite Ground Systems (MT&S) for $327m to strengthen defence tech capabilities.

Financial highlights

• Underlying operating profit rose 10% to £274m; margin improved to 5.7%.

• Second-half underlying operating profit up 30% year-over-year; second-half free cash flow was GBP 150 million.

• Organic revenue growth for the full year was -3%, but flat in the second half, offsetting a 5% headwind from lower U.K. immigration contract volumes.

• Underlying EPS (diluted) increased 9% to 16.67p; dividend per share up 22% to 4.16p.

• Underlying ROIC improved to 26.2% from 21.4%.

Outlook and guidance

• 2025 revenue expected to be similar to 2024, with underlying organic growth of 7% offset by a 7% reduction from U.K. and Australian immigration contracts.

• Underlying operating profit guidance for 2025 is £260m, with a slight reduction due to cost pressures.

• Free cash flow expected to be ~£135m, reflecting cash costs from Australian immigration exit.

• Net debt at end-2025 now expected to be just £10 million, an improvement of £50 million on previous guidance.

• Medium-term targets: revenue growth 4-6%, profit growth faster than revenue, margins 5-6%, and 80%+ cash conversion.