Serco Group (SRP) Trading Update summary

First half performance and financial highlights

• Revenue for H1 2024 expected at £2.4bn, aligning with forecasts but 4% lower than H1 2023 due to contract exits and currency impacts.

• Underlying operating profit for H1 is ahead of plan at approximately £140m, with a margin of 5.8%.

• Share buyback of about £60m completed by June, as part of a £140m programme.

• Adjusted net debt at end of June expected around £135m, with leverage at 0.6x net debt to EBITDA.

Upgraded full year 2024 guidance

• Underlying operating profit guidance raised by £10m to £270m, a 9% increase over 2023.

• Full year revenue expected at £4.8bn, with a 3% organic contraction, 2% from acquisitions, and 1% currency drag.

• Free cash flow now expected at £150m, above prior guidance but below 2023 due to prior year working capital benefits.

• Adjusted net debt for year-end forecast at £165m, £10m better than previous guidance.

• Trading cash conversion expected to meet medium-term target of at least 80% of profit into cash.

Operational and strategic developments

• Growth in international immigration services and defence partially offset declines in other areas.

• Margin improvement driven by productivity gains and portfolio performance.

• New contracts and operational efficiencies expected to boost second half profit by nearly 30% over H2 2023.

• Ongoing share buyback and strong financial position support capital allocation priorities.

• Management remains optimistic about the pipeline despite potential international election impacts.