Serco Group (SRP) Trading Update summary

2024 performance highlights

• Revenue expected at approximately £4.8bn, reflecting a 3% organic decline but with improving trends in H2, led by North America.

• Underlying operating profit anticipated at £270m, up 9% year-on-year, with a margin increase to 5.6%.

• Free cash flow guidance raised to £170m, with cash conversion at 90% and adjusted net debt at £145m, better than prior guidance.

• Order intake improved in H2, with book-to-bill at 100% and the new business pipeline at its highest in over a decade.

• £140m share buyback completed, totaling £340m returned to shareholders since 2021.

2025 outlook and guidance

• Revenue expected to remain flat at £4.8bn, despite a 7% reduction from UK and Australian immigration contracts; US defence expected to drive organic growth.

• Underlying operating profit forecast at £260m, with margin at 5.4%, as contract ramp-ups and portfolio improvements offset headwinds.

• Free cash flow projected at £135m, with adjusted net debt to fall to £60m by year-end.

• Net finance costs to rise to £42m, and effective tax rate to remain at 25%.

• Strong pipeline and market positioning expected to support further growth, especially in North America and Europe.

Operational and strategic developments

• Strong momentum in North America and new contract mobilisations are mitigating lower immigration revenues.

• Focus on operational excellence, cost competitiveness, and innovation to drive future opportunities.

• High rebid success rate in 2023 and H1 2024, though unsuccessful in rebidding Australian immigration contract.

• Significant improvement in safety outcomes and colleague engagement reported.

• Capital allocation priorities include supporting organic growth, increasing dividends, pursuing acquisitions, and returning surplus cash.