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(Alliance News) - Serco Group PLC on Thursday recorded good first-half results thanks to contracts won in the year prior and does not believe the company will see too much change in the future.
The Hook, England-based public services provider said its pretax profit for the first half of 2020 leapt to GBP76.4 million from GBP6.7 million a year prior. Revenue jumped 24% to GBP1.82 billion from GBP1.48 billion.
Serco's strong financial performance in the first half was credited to contract wins made in 2019 and the acquisition of the naval systems business unit of Alion Science last August.
Contracts won in 2019 included a ten-year contract worth GBP800 million for an escort & custody services contract with the UK Ministry of Justice, a multi-year contract with the US Air Force to deliver IT services worth up to USD82 million, and a GBP450 million Northern Isles ferry services contract.
Covid-19 has had little effect on profit. Although there have been some dramatic impacts, positive and negative, on individual contracts, in aggregate the "ups" on profits have balanced the "downs", the company said.
Serco has decided to defer the decision to pay both an interim dividend for the first half as well as the final dividend for 2019.
The dividend payments will depend on whether Serco can repay deferred taxes to the UK government after deferring these to preserve liquidity at the onset of the Covid-19 pandemic. Serco is looking to pay the deferred taxes by the end of the year.
In the short-term, Serco warned that secondary waves of Covid-19 are an evident threat that could have a disruptive impact on workplaces and subsequently revenue and profit.
In the medium and long-term, Chief Executive Rupert Soames said that the company is inclined to believe that more will stay the same than will be different. He said he doesn't believe that governments will consider doing more in-house rather than outsourcing, as the private sector has proven its worth in its response and support of governments in emergency requirements throughout the pandemic.
The company reinstated its guidance for the year on June 17, saying it expects a revenue of approximately GBP3.7 billion, up 16% from last year's GBP3.2 billion.
Serco's guidance is similar to its pre-pandemic levels as it saw good success in winning work from governments to support Covid-19 responses, which offset the negative impacts of Covid-19 on other parts of the business.
Soames said: "In summary, we are not complacent. We are thinking very carefully about the future, and so far our conclusion is that whilst the pandemic will bring significant short term disruption and risk, in the long term whilst the crisis will bring much change, more will stay the same than will change."
Serco shares were down 11% at 150.95 pence on Thursday morning in London.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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