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Serco’s revenue increases for the first time since 2013 

In its full year results 2019 Serco has reported its revenue of £3.2 billion increased by 14.5%, comprising 8.2% organic growth, 4.8% contribution from acquisitions and 1.5% currency benefit.

Serco said there was “very strong” constant currency growth in Americas (+35%, of which +19% was organic) and Asia Pacific (+16%). UK & Europe (+5%) grew revenues for the first time since 2013; Middle East (-2%) did well in a difficult market.

Underlying Trading Profit of £120.2 million increased by £27.1 million or 29% (25% at constant currency) and reported operating profit increased by £22 million.

Order intake was very strong at a record £5.4 billion, representing around 170% of revenues; the three largest awards were for asylum accommodation and support services in the UK valued at £1.9 billion, Prisoner Escort and Custody Services also in the UK valued at £0.8 billion, and defence healthcare provision in Australia valued at £0.6 billion; over 40% of the order intake comprised new business, and the balance was existing work being rebid or extended.

Revenue guidance for 2020 is £3.4-3.5 billion, representing total growth of 6-8%, which assumes organic growth of around 4%.

Rupert Soames, Serco Group Chief Executive, said: “The results for 2019 represent the first year of revenue growth since 2013 and the second successive year of growth in profits, and we expect continued strong progress in 2020. Fifteen per cent revenue growth of which 8% was organic, 29% underlying profit growth and £5.4 billion of order intake compares favourably with a market growing at 2-3%.

“Free Cash Flow has increased significantly, and our leverage ratio is at the lower end of our target range. All this indicates that we have finally achieved escape velocity, leaving behind the gravitational pull of past mis-steps, and gives the Board confidence to recommend paying a dividend for the first time since 2014, which is an important milestone. We are immensely grateful to our committed and hardworking colleagues, our patient shareholders and our supportive customers who have helped us reach this point.

“The benefits of having a broad international presence, with over 60% of our revenues and 50% of our employees outside the UK, are once again evident.  We have delivered double-digit organic revenue growth in both our North America and Asia Pacific Divisions, and demonstrated the ability to execute strategically important acquisitions such as NSBU in markets with premium rates of growth. But 2019 is also notable as being the first time since 2013 that revenues have grown in the UK.

“Perhaps the most significant aspect of 2019, however, was the record £5.4 billion of order intake, representing 170% of annual revenues, and which resulted in our order book increasing to £14.1 billion, an increase of around 40% over the last three years. This is the third successive year our order intake has exceeded our revenues, and underlines the confidence governments have in Serco’s ability to deliver critical, sensitive and complex public services.”

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