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REG - Serco Group PLC - 2025 half year results

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RNS Number : 3152U  Serco Group PLC  07 August 2025

 

2025 half year results

Serco Group plc ("Serco" or the "Company")

7 August 2025

 

Strong first-half performance, continued momentum, new £50m share buyback

 

Highlights from strong first half:

 •            Revenue: £2.4bn, up 5% at constant currency, organic growth of 3% for the
              Group, 9% in North America.
 •            Underlying operating profit: £146m, up 2%; reported operating profit of
              £132m also 2% higher.
 •            Underlying operating margin: strong at 6.0% including 10.6% in North America.
 •            Underlying earnings per share: increased 12% to 9.60p.
 •            Order intake: very strong at £3.2bn; book-to-bill over 130% with continued
              good contract win rates. High weighting of awards to defence sector.
 •            Cash flow: healthy free cash flow of £91m, good trading cash conversion of
              84%.
 •            MT&S acquisition completed: integration progressing as planned.
 •            Strong financial position: adjusted net debt £259m, leverage of 0.9x net debt
              to EBITDA.

 

Continued momentum underpins confident outlook:

 •            Growing pipeline: £11.9bn, up 6% since end of 2024, highest in over a decade.
 •            Increased order book: £14.5bn, 9% higher than end of 2024.
 •            Shareholder returns: new £50m share buyback announced today, interim dividend
              per share of 1.45p, up 8% year-on-year.
 •            Defence momentum continues: 12% revenue growth in first half, with over 80% of
              order intake in the defence sector. MT&S acquisition adds scale and
              capability; well positioned for growth with rising national defence budgets
              and long-term global spending commitments.
 •            Well placed for full year: revenue and profit unchanged from prior guidance in
              June. First-half weighting of profit as previously disclosed.

 

Commenting on today's update, Anthony Kirby, Serco Group Chief Executive,
said:

"We have delivered a strong performance in the first half, thanks to the hard
work of our dedicated people, underpinning confidence in full-year guidance.

 

"Revenue growth, profit and cash generation have all been robust, reflecting
stronger organic growth, driven primarily by our defence-focused North
American business. During the period, order intake of £3.2bn delivered a
strong book-to-bill of more than 130%, which is heavily weighted to the
defence sector.

 

"I am pleased that this performance and our healthy financial position has
enabled the launch of a new £50m share buyback.

 

"Looking ahead, the depth of our portfolio, strong order book and growing
pipeline, give me confidence that we will continue to build on this momentum.
Around the world, the challenges governments face are becoming ever more
complex and acute, driving demand for our services, where we are well placed
in growing markets."

 

 Period ended 30 June                          2025      2024      Change at reported currency  Change at constant currency
 Reported revenue                              £2,419m   £2,359m   3  %                         5  %
 Underlying operating profit                   £146m     £142m     2  %                         4  %
 Reported operating profit                     £132m     £130m     2  %
 Underlying earnings per share (EPS), diluted  9.60p     8.54p     12  %
 Reported EPS, diluted                         8.60p     7.68p     12  %
 Interim dividend per share                    1.45p     1.34p     8  %
 Free cash flow                                £91m      £75m      21  %
 Net cash inflow from operating activities     £195m     £189m     3  %
 Adjusted net debt                             £259m     £131m     98  %
 Reported net debt                             £783m     £631m     24  %

 5  %

Underlying operating profit

£146m

£142m

 2  %

 4  %

Reported operating profit

£132m

£130m

 2  %

Underlying earnings per share (EPS), diluted

9.60p

8.54p

 12  %

Reported EPS, diluted

8.60p

7.68p

 12  %

Interim dividend per share

1.45p

1.34p

 8  %

Free cash flow

£91m

£75m

 21  %

Net cash inflow from operating activities

£195m

£189m

 3  %

Adjusted net debt

£259m

£131m

 98  %

Reported net debt

£783m

£631m

 24  %

 

Guidance for 2025

We update guidance for 2025 versus our pre-close trading statement on 26 June
when we improved both revenue and organic revenue growth expectations. Revenue
and profit guidance is unchanged from that, and incorporates total adverse
currency impacts for the year of £90m and £7m respectively. A first-half
weighting to profit is expected, reflecting the previously disclosed
second-half impacts from higher UK national insurance costs, the conclusion of
the Australian immigration contract and the usual seasonality within the North
American case management business. There is a small reduction in the
underlying effective tax rate, and after the new share buyback, the expected
number of shares will reduce and adjusted net debt will increase.

 

                                2024       2025               2025
                                Actual     Previous guidance  New guidance
 Revenue                        £ 4.8 bn   ~£4.9bn            ~£4.9bn
 Organic sales growth           (3)%       ~1%                ~1%
 Underlying operating profit    £ 274 m    ~£260m             ~£260m
 Net finance costs              £ 33 m     ~£48m              ~£48m
 Underlying effective tax rate  25 %       ~25%               ~23%
 Free cash flow                 £ 228 m    ~£130m             ~£130m
 Adjusted net debt              £ 100 m    ~£245m             ~£285m

NB: The guidance uses an average GBP:USD exchange rate of 1.31 in 2025,
GBP:EUR of 1.18 and GBP:AUD of 2.07. We expect a weighted average number of
shares in 2025 of 1,012m for basic EPS and 1,028m for diluted EPS.

 

For further information please contact Serco:

Jamie Hastings, Head of Investor Relations | +44 (0) 7718 195 074 |
jamie.hastings@serco.com

Scot Marchbank, Group Communications and Marketing Director | +44 (0) 7958 675
706 |scot.marchbank@serco.com

 

Presentation:

A presentation for institutional investors and analysts will be held at RBC
Capital Markets, 100 Bishopsgate, London, EC2N 4AA today at 10.00 UKT. The
presentation will be webcast live at
https://sparklive.lseg.com/SercoGroup/events/248fc532-c09d-47c4-8691-0e2a0c9b5eea/serco-2025-half-year-results
and subsequently available on demand.

 

To be able to ask questions please use our dial-in facility accessed on
https://registrations.events/direct/LON9243163

 

Notes to financial results summary table and highlights:

The trading performance and outlook for each Division are described on pages
11 to 15. Reconciliations and further detail of financial performance are
included in the additional information on pages 42 to 48. This includes full
definitions and explanations of the purpose of each non-IFRS Alternative
Performance Measure (APM) used by the Group.

 

About Serco

Serco brings together the right people, the right technology, and the right
partners to create innovative solutions that make a positive impact and
address some of the most urgent and complex challenges facing the modern
world.

 

With a primary focus on serving governments globally, Serco's services are
powered by more than 50,000 people working across defence, space, migration,
justice, healthcare, mobility, and customer services.

 

Serco's core capabilities include service design and advisory, resourcing,
complex programme management, systems integration, case management,
engineering, and asset & facilities management.

 

Underpinned by Serco's unique operating model, Serco drives innovation and
supports customers from service discovery through to delivery.

 

More information can be found at www.serco.com

 

LEI: 549300PT2CIHYN5GWJ21

 

Chief Executive's update

We have delivered a strong performance in the first half. Revenue growth,
profit and cash generation have all been robust, reflecting stronger organic
growth, driven primarily by our North American business and increased revenues
in the defence sector.

 

I am grateful to every one of my colleagues who have contributed to our strong
performance in the period. This performance reflects our focus on disciplined
execution and operational excellence as we build momentum for the future.

 

Our excellent first half order intake of £3.2bn represents a book-to-bill of
over 130%. The wins contributing to this strong performance included the
first-ever tri-service recruitment programme for the UK Armed Forces. This new
contract seeks to improve recruitment outcomes for all branches of the British
military, at a time when departments of defence around the world are facing
staffing challenges and seek to mobilise new recruits. In addition we secured
three major contracts, totalling over £1bn, with the UK Ministry of Defence
to deliver maritime services for the Royal Navy, contributing to first half
order intake which reflected a strong win rate.

 

In recent years we have focused on increasing our defence capabilities,
building on our 60 year history - through both organic and acquisitive growth
- which positions us well to benefit from recent market drivers. Our £2bn
global defence business generated over three quarters of our strong order
intake during the first half, underpinning our confidence in this market.

 

As defence customers seek expanded, modern, resilient, mission-ready
solutions, we are able to deploy our extensive experience, extended
capabilities and increasing scale to support them. We continue to see
significant opportunity in the sector, bolstered by our growing capabilities
from the acquisition of MT&S which completed during the first half and is
integrating in line with expectations.

 

Our commitment to operational excellence continues to create value, as we once
again report excellent contract retention rates of 95%, providing a strong
foundation for growth. Central in our approach to retention is adapting to
meet new demands in the market. A good example of how we are evolving our
services is the expanded strategic partnership with Mubadala, one of Abu
Dhabi's sovereign wealth funds. We expect partnerships across our divisions to
be key in driving sustainable growth in the medium term.

 

Our consistently strong order intake underpinned by our excellent retention
rates supported 9% organic revenue growth in our North American business in
the first half. Following the acquisition of MT&S, three quarters of the
US$2bn revenue in this division will be generated from the defence sector,
which grew at 14% in the period following sizeable contract awards in 2024.
Although we remain alive to recent policy changes in the region, we have not
seen a material impact on the business. Margins in North America are
particularly strong at 10.6% and we achieved a 12-basis point improvement
compared to the same period last year.

 

Across the Group, it is pleasing that we made good progress on profitability,
alongside revenue growth. Our first-half margin of 6% is at the top of end of
our target range, having delivered strong underlying operating profit of
£146m for the half year. In our Asia Pacific business, we have made progress,
where efficiency and improved contract performance led to margins almost
doubling compared to the first half in the prior year. An increase in national
insurance tax reduced the UK margin, which was also impacted by a longer
transition and higher costs associated with our Electronic Monitoring contract
which has significantly improved performance while monitoring a record volume
of service users.

 

We expect migration will provide governments globally with ongoing challenges.
Our migration services offering continues to evolve accordingly as we work
with our customers to provide solutions to these complex, multi-year
challenges and support them in delivering on their policies. Against this
background, we continue to see consistent demand for our UK immigration
services. On migration more broadly, we exited the Australian immigration
contract successfully, handing it over in good shape.

 

Fundamentally, strong operational outcomes have delivered a healthy financial
performance in the first half; this alongside supportive market drivers give
us confidence in our full-year guidance. In addition, good cash generation,
with 84% of profit converted to cash, has enabled us to reduce leverage at the
half year to below our target range, at less than 0.9x EBITDA after the
US$327m MT&S acquisition in the first half. Given this strong financial
position, we are pleased to have launched a new £50m share buyback, alongside
an increase in the interim dividend.

 

Looking ahead, we continue to build on the Group's momentum. Our strong order
book provides a high level of visibility, supported by a new business pipeline
which has grown to £11.9bn from the decade high £11.2bn reported in 2024,
having been replenished following a high level of awards.

 

Serco is an exceptional business, and one which I am immensely proud to lead.
We are well positioned for the opportunities ahead, driven by the clear
structural drivers of demand for our expertise in defence, migration, justice,
and citizen services, as governments increasingly need efficient partners of
scale to support public service delivery.

 

We, therefore, look forward with confidence to enhancing future growth and
delivering sustainable value to our shareholders, customers and colleagues, as
we continue to deliver mission critical and complex services as a partner of
choice for governments around the world.

 

Anthony Kirby

Group Chief Executive

 

Group Review

Summary of financial performance

 

Revenue, underlying operating profit and underlying earnings per share

Revenue for the period was £2,419m, an increase of 3%, or £60m, compared to
the £2,359m reported in 2024. Organic growth contributed 3% (£60m), with
acquisitions adding a further 2% (£47m). This was partially offset by a 2%
(£47m) currency drag. We delivered strong growth in defence, particularly in
North America, and in Citizen Services, where we are mobilising several
contract wins. In Justice & Immigration, higher than expected demand for
temporary accommodation meant the reduction in revenue in our UK immigration
contract was lower than we originally anticipated. As expected, the exit of
some contracts in Asia Pacific and the Middle East led to lower revenue in
these regions.

 

Underlying operating profit increased by 2% to £146m (2024: £142m), this
includes 2%, or £3m, adverse impact of currency. On a constant currency
basis, underlying operating profit increased by 4%. Profit increased in our
Defence business which includes the mobilisation of new contracts and an
initial contribution from the acquisition of MT&S. A strong margin of 6%
(2024: 6%) was maintained with support from continued efforts to improve
efficiency and productivity across the portfolio. This helped offset the
impact from higher national insurance contributions and additional costs in
relation to our Electronic Monitoring contract where the mobilisation period
has been extended.

 

Reported operating profit increased by 2% to £132m (2024: £130m) and after
including net finance costs and tax, which were slightly lower on a net basis,
reported profit increased by 5% to £89m (2024: £85m).

 

Diluted underlying earnings per share increased by 12% to 9.60p (2024: 8.54p).
The growth was higher than underlying profit after tax as our share buybacks
in 2024 led to a 6% reduction in our weighted average number of shares in the
period.

 

The revenue and underlying operating profit performances are discussed in more
detail in the Divisional Reviews.

 

Cash flow and net debt

Free cash flow was £91m (2024: £75m) representing a good cash conversion of
84%. This was better than we first expected for the period and it also
included some temporary timing benefits that will normalise in the second
half. Average working capital days were good, with debtor days of 18 (2024: 21
days) and creditor days of 20 (2024: 19 days). Including accrued income and
other unbilled receivables, days sales outstanding were 43 days (2024: 43
days). Of all UK supplier invoices, 94% were paid in under 30 days (2024: 94%)
and 98% were paid in under 60 days (2024: 97%). No working capital financing
facilities were utilised in this or the prior year.

 

Adjusted net debt was £259m at the end of June. This was an increase of
£159m since the year end (December 2024: £100m), largely driven by a £246m
cash outflow for the acquisition of MT&S and £29m of dividend payments,
partially offset by our positive free cash flow of £91m.

 

The period end adjusted net debt compares to a daily average of £199m (2024:
£157m) and a peak of £465m (2024: £212m). The difference between average
and peak figures reflect the timing of the outflow for the MT&S
acquisition. Working capital outflows that occur in a short timeframe such as
payroll, supplier payments, VAT payments on account also cause variability
between peak and average figures. Variances such as these are normal for the
Group.

 

Our measure of adjusted net debt excludes lease liabilities, which aligns
closely with the covenants on our financing facilities. Lease liabilities
totalled £524m at the end of June (December 2024: £530m), the majority being
leases on housing for asylum seekers under our Asylum Accommodation and
Support Services Contract (AASC). These leases are serviced with contracted
revenue from the customer and their terms do not extend beyond the expected
life of the contract.

 

As at the closing balance sheet date, our leverage for debt covenant purposes
was 0.9x EBITDA (2024: 0.6x). This compares with the covenant requirement for
net debt to be less than 3.5x EBITDA and our target range of 1-2x.

 

In April 2025, we issued US$250m (£193m) of US private placement loan notes
to support the funding of acquiring MT&S. The notes were split into three
series of US$100m, US$75m and US$75m with maturities of six, eight and ten
years respectively. The weighted average interest rate on the new loan notes
was fixed at 6.23%. The blended rate on US private placement loan notes in
issue at the end of June 2025 was 5.44% (December 2024: 4.88%).

 

Capital allocation and returns to shareholders

We aim to have a strong balance sheet with our target financial leverage of
1-2x net debt to EBITDA.

 

Consistent with this, the Board's capital allocation priorities are to:

 •            Invest in the business to support organic growth.
 •            Increase ordinary dividends to reward shareholders with a growing and
              sustainable income stream.
 •            Selectively invest in strategic acquisitions that add capability, scale or
              access to new markets, enhance the Group's future potential organic growth and
              have attractive returns.
 •            Return any surplus cash to shareholders through share buybacks or other means.

 

Our capital allocation framework was actively applied in the first half of
2025:

 •            Invest to support organic growth: we have strengthened our business
              development capabilities in multiple ways, including through expanding
              specialist sales teams, enhanced training programmes, and refreshed government
              relations efforts. Deploying new technology platforms and recruitment systems
              will improve efficiency and competitiveness, while new and expanded
              partnerships, such as ours with Solutions+ in the Middle East, will enhance
              future growth opportunities.
 •            Increase ordinary dividends: the Board has declared an interim dividend of
              1.45 pence per share, an increase of 8% compared to the prior period.
 •            Invest in acquisitions: in May, we acquired the Mission Training and Satellite
              Ground Network Communications Software business (MT&S) from Northrop
              Grumman. MT&S is a leading provider of services to the US military. We
              continue to assess other opportunities that are aligned to our strategy and
              provide potential to enhance future organic growth.
 •            Return surplus cash to shareholders: new £50m share buyback announced. This
              will bring total shareholder returns via buybacks since 2021 to around £390m.

 

Contract awards, order book, rebids and pipeline

Contract awards

Order intake for the first half was £3.2bn up from £1.9bn in the comparable
period of 2024, representing a book-to-bill rate of 134%. This included over
20 contract awards valued at £10m or more. UK & Europe accounted for
£2.5bn, or 78%, of the Group's total, while North America contributed £0.6bn
and Asia Pacific and Middle East secured a combined £0.1bn.

 

Our order intake was evenly split between new business and retention of
existing work. Pleasingly, the win rate by value for new work was 37%, and 95%
for retaining existing work, returning to the levels seen in 2023 and the
first half of 2024. The full-year 2024 rate of 75% was impacted by the
unsuccessful Australian immigration rebid.

 

UK & Europe had the strongest book-to-bill at 202%, driven by wins across
the Defence and Citizen Services businesses. In North America, as expected
following the very strong period of contract awards in 2024, there were fewer
decisions in the first half resulting in a book-to-bill of 79%. Our Middle
East business improved its book-to-bill rate from 93% at the end of 2024 to
148% by the end of June 2025. And in Asia Pacific, we experienced a
disappointing period for contract awards. We are progressing with our
transformation plan to optimise the business and to return the region to
growth in the medium term.

 

Notable contract wins included three agreements with the UK Ministry of
Defence to deliver maritime services for the Royal Navy under the Defence
Maritime Services Next Generation programme. Collectively, the contracts have
an estimated value of £1bn over a term of up to ten years. This is in
addition to the £1bn seven-year Armed Forces Recruitment Service (AFRS)
contract announced in February 2025 which could rise to £1.5bn if all
extension options are exercised. Mobilisation has commenced, with service
delivery scheduled to begin in early 2027. Elsewhere, in North America we
secured a five-year contract to continue providing support to the US Navy's
amphibious warfare ships and systems with an estimated value of US$105m. And
in the Middle East we successfully secured a five-year extension to our
long-standing guest experience partnership with Dubai Airport valued at
AED495m.

 

Order book

The order book increased to £14.5bn at the end of June (30 June 2024:
£13.5bn, 31 December 2024: £13.3bn). Our order book definition gives our
assessment of the future revenue expected to be recognised from the remaining
performance obligations on existing contractual arrangements. This excludes
unsigned extension periods, and the order book would be £2.3bn (2024:
£2.5bn) higher if option periods in our US business, which typically tend to
be exercised, were included. If joint venture work was included, this would
add a further £1.8bn (2024: £1.7bn).

 

Rebids

In our portfolio of existing work, we have around 66 contracts with annual
revenue of £5m or more where an extension or rebid will be required before
the end of 2027, with an aggregate annual revenue of £1.3bn. At around 30% of
the Group's 2025 revenue guidance, this proportion of work that will be up for
rebid is at the low end of the range we have seen over recent years. The
annual value of rebids is approximately £0.6bn in 2026 and £0.7bn in 2027.
The largest contract that is scheduled to be rebid in the next two years
represents around 2.5% of Group revenue. This is the only contract with annual
revenue of more than £100m, or 2% of Group revenue, scheduled to be rebid
before 2028.

 

New business pipeline

Our measure of pipeline includes only opportunities for new business that have
an estimated annual contract value (ACV) of at least £10m and which we expect
to bid and to be adjudicated within a rolling 24-month timeframe. We cap the
total contract value (TCV) of individual opportunities at £1bn, to lessen the
impact of single large opportunities. The definition does not include rebids
and extension opportunities, and in the case of framework, or call-off,
contracts such as Indefinite Delivery/Indefinite Quantity contracts (ID/IQ),
which are common in the US, we only take the value of individual task orders
into our pipeline as the customer confirms them. Our published pipeline is
thus a small proportion of the total universe of opportunities, as many
opportunities that have annual revenues less than £10m, are likely to be
decided beyond the next 24 months, or are rebids and extensions.

 

Our pipeline was £11.9bn at the end of June 2025, 6% higher than the £11.2bn
level at the end of December 2024. This remains the largest pipeline of
potential new work we have had in over a decade. The pipeline consists of over
60 bids with an average ACV of £31m and an average contract length of around
five years. The pipeline of opportunities for new business with an estimated
ACV of less than £10m totalled £2.9bn at the end of June (December 2024:
£2.0bn).

 

To enhance future growth opportunities in the Middle East, we are expanding
our strategic partnership with Solutions+, a Mubadala company, where we will
bring experience in delivering world-class public services along with
innovation and sustainability credentials to complement their deep regional
experience, building a national champion in facilities management in the UAE.

 

Acquisitions

We view acquisitions as an important part of our strategic toolkit, which if
deployed correctly, can add significant value to the business. They should
therefore be capable of delivering new opportunities for organic growth.
Generally speaking, we regard acquisitions as higher risk than organic growth,
so any potential opportunities have to meet our stringent criteria of being
both financially and strategically compelling. We judge potential acquisitions
against three criteria: Do they add new, or strengthen existing, capability?
Do they add scale which we can use to increase efficiency? Do they bring us
access to new and desirable customers and markets? We also recognise that
acquisition opportunities come in different shapes, sizes and sectors, and a
small one can be strategically important to a region, but not necessarily
significant at Group level. But large or small, the execution of all
acquisitions is centrally managed and follows the same rigorous process. Equal
focus and discipline are applied to post-acquisition value drivers such as
effective integration and value realisation from synergy and growth. Our
approach of selectively adding acquisitions to our organic strategy has
enabled us to accelerate growth, strengthen the business and improve its
future growth potential in North America and in Europe.

 

On 24 May 2025, the Group acquired the Mission Training and Satellite Ground
Network Communications Software business (MT&S) from Northrop Grumman, for
an enterprise value of US$327m (£242m). MT&S generates annual revenues of
approximately US$300m, increasing the annual revenue of our North America
business to US$2bn. This strategic acquisition significantly enhances Serco's
defence and space capabilities, adding advanced mission training services and
satellite ground network software to our portfolio. It also deepens our
engagement with the US Department of Defense, supporting programmes across the
US Army, Space Force, Air Force, Navy and Combatant Commands, with a team of
around 900 skilled professionals. The acquisition supports Serco's growth
ambitions within the international space sector, reinforcing our efforts to
expand our global footprint in regions such as the UK, Australia, and the
Middle East.

Guidance for 2025

Further to the pre-close trading statement on 26 June, guidance has been
updated to reflect the impact of the new £50m share buyback announced today.
This will increase net debt and reduce the number of shares in issue which, in
combination with a reduction in the expected underlying tax rate for the year,
will further improve underlying earnings per share.

 

Revenue: We expect revenue of around £4.9bn with organic revenue growth of
c.1% and a c.3% contribution from acquisitions, predominately due to MT&S.
New and expanded contracts in Defence, Justice and Citizen Services will more
than offset the reduced immigration revenues. This is both in the UK,
following the UK Government's efforts to reduce the number of hotels being
used to accommodate asylum seekers, and Australia, where we transitioned out
of our contract in the first half. The translational impact of currency is
expected to have a £90m adverse impact in the year.

 

Underlying operating profit: Underlying operating profit is expected to be
around £260m, with a first-half weighting to profit reflecting the
anticipated second-half impacts from the end of the Australian immigration
contract, a full six months of higher UK national insurance costs, and the
typical seasonality within our North American case management business. The
acquisition of MT&S will provide a seven-month financial contribution in
the year, estimated at around £7m which includes transaction and integration
costs of £8m. Currency translation for the year is estimated to have a £7m
adverse impact. The expected full-year margin of 5.3% is within our
medium-term target range of 5-6%.

 

Net finance costs and tax: Net finance costs are expected to be around £48m.
This is higher than 2024 due to the increased volume of leases, in relation to
immigration accommodation services in the UK, and higher debt interest
following the acquisition of MT&S. The underlying effective tax rate is
expected to be around 23%, lower than our medium-term expectations of 25%
following some one-time impacts in the year.

 

Financial position: Free cash flow is again expected to be strong at around
£130m in the year, in line with our medium-term target of converting at least
80% of profit into cash. We expect adjusted net debt to end the year at around
£285m which is higher than 2024 following the acquisition of MT&S and has
increased versus previous guidance to incorporate the new share buyback.

 

Surplus capital in 2025: Consistent with our capital allocation priorities, we
have a preferred financial leverage range of 1-2x net debt to EBITDA. If we
are below 1.0x leverage, we consider the business to be in a position of
having surplus capital, which will be returned to shareholders through share
buybacks or other means. As leverage at the end of the first half was 0.9x net
debt to EBITDA, placing the business in a position of surplus capital, a £50m
share buyback has been announced today and is expected to complete in 2025. We
will review the capital position again at the full year.

 

Summary of guidance for 2025

                                2024       2025               2025
                                Actual     Previous guidance  New guidance
 Revenue                        £ 4.8 bn   ~£4.9bn            ~£4.9bn
 Organic sales growth           (3)%       ~1%                ~1%
 Underlying operating profit    £ 274 m    ~£260m             ~£260m
 Net finance costs              £ 33 m     ~£48m              ~£48m
 Underlying effective tax rate  25 %       ~25%               ~23%
 Free cash flow                 £ 228 m    ~£130m             ~£130m
 Adjusted net debt              £ 100 m    ~£245m             ~£285m

 

NB: The guidance uses an average GBP:USD exchange rate of 1.31 in 2025,
GBP:EUR of 1.18 and GBP:AUD of 2.07. We expect a weighted average number of
shares in 2025 of 1,012m for basic EPS and 1,028m for diluted EPS.

 

Divisional Reviews

Serco's operations are reported through four geographic divisions: North
America, UK & Europe (UK&E), the Asia Pacific region and the Middle
East. Reflecting statutory reporting requirements, Serco's share of revenue
from its joint ventures and associates is not included in revenue, while
Serco's share of joint ventures and associates' profit after interest and tax
is included in underlying operating profit.

 

                                                                    North America  UK&E      Asia Pacific  Middle    Corporate    Total
                                                                                                           East      costs
 Period ended 30 June 2025                                          £m             £m        £m            £m        £m           £m
 Revenue                                                            720.8          1,253.5   355.3         88.9      -            2,418.5
 Change                                                             10  %          4  %      (8)  %        (15)  %                3  %
 Change at constant currency                                        13 %           4  %      (3)  %        (13)  %                5  %
 Organic change at constant currency                                9 %            2  %      (3)  %        (13)  %                3  %
                                                                                             .
 Underlying operating profit/(loss)                                 76.4           78.4      14.0          6.5       (29.5)       145.8
 Margin                                                             10.6  %        6.3  %    3.9  %        7.3  %    (1.2)  %     6.0  %
 Change                                                             11  %          (5)  %    79 %          14 %      29 %         2 %

 Amortisation and impairment of intangibles arising on acquisition  (8.2)          (6.1)     -             -         -            (14.3)
 Reported operating profit/(loss)                                   68.2           72.3      14.0          6.5       (29.5)       131.5

 Corporate
 costs

Total

Period ended 30 June 2025

£m

£m

£m

£m

£m

£m

Revenue

720.8

1,253.5

355.3

88.9

-

2,418.5

Change

 10  %

 4  %

 (8)  %

 (15)  %

 3  %

Change at constant currency

13 %

 4  %

 (3)  %

 (13)  %

 5  %

Organic change at constant currency

9 %

 2  %

 (3)  %

 (13)  %

 3  %

.

Underlying operating profit/(loss)

76.4

78.4

14.0

6.5

(29.5)

145.8

Margin

 10.6  %

 6.3  %

 3.9  %

 7.3  %

 (1.2)  %

 6.0  %

Change

 11  %

 (5)  %

79 %

14 %

29 %

2 %

Amortisation and impairment of intangibles arising on acquisition

(8.2)

(6.1)

-

-

-

(14.3)

Reported operating profit/(loss)

68.2

72.3

14.0

6.5

(29.5)

131.5

 

                                                                    North America  UK&E      Asia Pacific  Middle    Corporate    Total
                                                                                                           East      costs
 Period ended 30 June 2024                                          £m             £m        £m            £m        £m           £m
 Revenue                                                            656.4          1,210.6   387.4         104.9     -            2,359.3

 Underlying operating profit/(loss)                                 68.8           82.9      7.8           5.7       (22.8)       142.4
 Margin                                                             10.5  %        6.8  %    2.0  %        5.4  %    (1.0)  %     6.0  %

 Amortisation and impairment of intangibles arising on acquisition  (7.8)          (5.1)     -             -         -            (12.9)
 Reported operating profit/(loss)                                   61.0           77.8      7.8           5.7       (22.8)       129.5

 Corporate
 costs

Total

Period ended 30 June 2024

£m

£m

£m

£m

£m

£m

Revenue

656.4

1,210.6

387.4

104.9

-

2,359.3

 

Underlying operating profit/(loss)

68.8

82.9

7.8

5.7

(22.8)

142.4

Margin

 10.5  %

 6.8  %

 2.0  %

 5.4  %

 (1.0)  %

 6.0  %

Amortisation and impairment of intangibles arising on acquisition

(7.8)

(5.1)

-

-

-

(12.9)

Reported operating profit/(loss)

61.0

77.8

7.8

5.7

(22.8)

129.5

 

Reconciliations and further details of financial performance are included in
the additional information on pages 42 to 48. This includes full definitions
and explanations of the purpose of each non-IFRS Alternative Performance
Measure (APM) used by the Group. The Condensed Consolidated Financial
Statements and accompanying notes are on pages 20 to 41. Included in note 2 to
the Group's 2024 Consolidated Financial Statements are the Group's policies on
recognising revenue across the various revenue streams associated with the
diverse range of goods and services discussed within the Divisional Reviews.
The various revenue recognition policies are applied to each individual
circumstance as relevant, taking into account the nature of the Group's
obligations under the contract with the customer and the method of delivering
value to the customer in line with the terms of the contract.

 

The trading performance and outlook for each Division are described on pages
12 to 15. Reference to each Division's proportion of underlying operating
profit is based on the Group's underlying operating profit before corporate
costs. For the period ended June 2025 the Group's underlying operating profit
before corporate costs was £175.3m.

 

North America (29% of revenue, 43% of underlying operating profit)

 

                              2025     2024     Growth
 Period ended 30 June         £m       £m
 Revenue                      720.8    656.4    10  %
 Organic change               9 %      (3)  %
 Acquisitions                 4 %      -  %
 Currency                     (3) %    (3)  %
 Underlying operating profit  76.4     68.8     11  %
 Organic change               8 %      (10)  %
 Acquisitions                 5 %      -  %
 Currency                     (2) %    (3)  %
 Margin                       10.6  %  10.5  %  12 bp

Organic change

9 %

 (3)  %

Acquisitions

4 %

 -  %

Currency

(3) %

 (3)  %

Underlying operating profit

76.4

68.8

 11  %

Organic change

8 %

 (10)  %

Acquisitions

5 %

 -  %

Currency

(2) %

 (3)  %

Margin

 10.6  %

 10.5  %

12 bp

 

Revenue increased by 10% to £721m (2024: £656m), delivering a very strong
organic growth performance of 9% in addition to the 4% contribution from
acquisitions. There was a 3% adverse translational effect of currency. Growth
was led by the continued expansion in the defence sector following the high
levels of order intake in 2024. There were positive contributions from
mobilising new contracts as well as increased demand for IT network and
infrastructure services to the US Navy. Elsewhere, demand for case management
delivered growth in our Citizen Services business.

 

Underlying operating profit increased by 11% to £76m (2024: £69m). This was
driven by 8% organic growth, with acquisitions contributing 5% and a 2% drag
from currency. There was good progress on profit across all sectors including
the mobilisation and expanded contracts in the defence sector and efficiencies
in our case management portfolio. As a result, margins increased slightly from
10.5% to 10.6%.

 

Following the high level of contract awards in the second half of 2024, as
expected, fewer bids concluded in the first half of 2025. Order intake of
£0.6bn was robust and win rates for both new business and rebids remained
healthy. The largest order was for a contract to continue providing support to
the US Navy's amphibious warfare ships and systems. The five-year contract has
an estimated value of US$105m with services including engineering, ship design
management and integrated logistics support.

 

The acquisition of MT&S which completed in May, enhances our defence and
space capabilities, adding advanced mission training services and satellite
ground network software to our portfolio. It also deepens our engagement with
the US Department of Defense, supporting programmes across the US Army, Space
Force, Air Force, Navy and Combatant Commands, with a team of around 900
skilled professionals. There has been a good start to the transition and
integration of MT&S into the business.

 

The pipeline of major new bid opportunities due for decision within the next
24 months has more than doubled from £2.1bn at the end of 2024 to £4.6bn,
and includes around £800m of opportunities in relation to MT&S. Defence
continues to account for the majority of the North American pipeline with a
broad spread of types of work. There are a high number of contract awards due
to conclude in the second half of the year and while we have not seen any
significant delay to contracts awarded to Serco in the first half, we continue
to monitor the wider market closely. The US defence market remains one of
Serco's highest-priority target sectors. It benefits from the largest defence
budget globally, strong bipartisan political support for increased readiness,
and a clear strategic intent to strengthen military capabilities. These
underpin our confidence in the long-term growth potential of this market.

 

UK & Europe (52% of revenue, 45% of underlying operating profit)

 

                              2025     2024     Growth
 Period ended 30 June         £m       £m
 Revenue                      1,253.5  1,210.6  4  %
 Organic change               2 %      (5) %
 Acquisitions                 2 %      4 %
 Currency                     - %      - %
 Underlying operating profit  78.4     82.9     (5)  %
 Organic change               (8) %    8 %
 Acquisitions                 3 %      12 %
 Currency                     -  %     (1) %
 Margin                       6.3  %   6.8  %   (59) bp

Organic change

2 %

(5) %

Acquisitions

2 %

4 %

Currency

- %

- %

Underlying operating profit

78.4

82.9

 (5)  %

Organic change

(8) %

8 %

Acquisitions

3 %

12 %

Currency

 -  %

(1) %

Margin

 6.3  %

 6.8  %

(59) bp

 

Revenue increased by 4% to £1,254m (2024: £1,211m), including organic growth
of 2% with acquisitions contributing a further 2%. There was good organic
growth in our Defence and Citizen Services businesses following the
mobilisation of several major contracts. Higher than expected demand for
temporary accommodation in our UK immigration contract meant the decline in
revenue for our Justice & Immigration business was lower than we
originally expected.

 

Underlying operating profit decreased by 5% to £78m (2024: £83m) with the
contribution of European Homecare, the German immigration services business
acquired in March 2024 partially offsetting an organic decline of 8%. Margin
performance remained healthy at 6.3% (2024: 6.8%), although down 59bp on the
prior period. This included the impact from higher national insurance
contributions and additional costs in relation to our Electronic Monitoring
contract where the mobilisation period has been extended. Productivity
improvements in the second half, as the contract moves to its next phase of
operation, are expected to deliver better financial outcomes and place it in a
good position ahead of the anticipated increased demand for monitoring
services as part of UK justice reforms. Defence, a priority sector of ours,
showed growth in profitability and we're seeing good demand in our European
Space business. We are committed to continuously improving the business and
seeking opportunities to reduce cost and improve our efficiency in the future.

 

Underlying operating profit includes the profit contribution of joint
ventures, from which interest and tax have already been deducted. If the
proportional share of revenue from joint ventures was included and the share
of interest and tax cost was excluded, the overall divisional margin would
have been 5.5% (2024: 5.9%). The joint venture profit contribution increased
to £11.7m (2024: £11.2m) due to a change in the mix of services within VIVO,
our defence services joint venture.

 

Order intake was very strong at £2.5bn with a book-to-bill of 202%. We have
seen particular success in winning new work which made up approximately 55% of
order intake at a win rate by value of around 70%. We have maintained our
momentum on securing rebids and extensions with a win rate over 95%. Notable
contract wins included three agreements with the UK Ministry of Defence to
deliver maritime services for the Royal Navy under the Defence Maritime
Services Next Generation programme. Collectively the contracts have an
estimated value of £1bn over a term of up to ten years. This is in addition
to the £1bn seven-year Armed Forces Recruitment Service (AFRS) contract
announced in February 2025 which could rise to £1.5bn if all extension
options are exercised. Mobilisation has commenced, with service delivery
scheduled to begin in early 2027. We also extended our contract to provide
environmental waste services to Hart and Basingstoke and Deane councils, which
is worth approximately £100m.

 

The UK & Europe pipeline remains healthy at £4.7bn (2024: £6.4bn)
despite the high conversion rate in the period. Our opportunities are broad
covering all the key sectors we operate in including defence, justice &
immigration and citizen services.

 

Asia Pacific (15% of revenue, 8% of underlying operating profit)

 

                              2025    2024    Growth
 Period ended 30 June         £m      £m
 Revenue                      355.3   387.4   (8)  %
 Organic change               (3) %   (10) %
 Acquisitions                 -  %    - %
 Currency                     (5)  %  (4) %
 Underlying operating profit  14.0    7.8     79  %
 Organic change               90 %    (41) %
 Acquisitions                 - %     - %
 Currency                     (11) %  (3) %
 Margin                       3.9 %   2.0  %  193 bp

Organic change

(3) %

(10) %

Acquisitions

 -  %

- %

Currency

 (5)  %

(4) %

Underlying operating profit

14.0

7.8

 79  %

Organic change

90 %

(41) %

Acquisitions

- %

- %

Currency

(11) %

(3) %

Margin

3.9 %

 2.0  %

193 bp

 

Revenue reduced by 8% to £355m (2024: £387m), reflecting an organic
contraction of 3% and a 5% adverse currency effect. The decline follows the
successful transition out from providing onshore immigration services to the
Australian Government which concluded in the period. We also saw revenue
growth in our existing Justice and Defence portfolios.

 

Operational excellence and competitiveness programmes made strong progress in
the period. Underlying operating profit increased by 79% to £14m (2024:
£8m), a 193bp margin improvement to 3.9% (2024: 2.0%). Progress across the
portfolio, particularly in Justice and Defence, included operational
improvements and a significant reduction in the cost base. This is an
important step in our transformation plan to optimise the business following
the end of the immigration contract and to return the region to growth in the
medium term.

 

It was a disappointing period for contract awards and our primary focus
remains rebuilding the pipeline which stood at £0.8bn (2024: £1.7bn). The
reduction in the period follows a reassessment of the pipeline and in
particular our latest view for the tender to provide facilities management
services to the Australian Defence Force.

 

Middle East (4% of revenue, 4% of underlying operating profit)

 

                              2025     2024   Growth
 Period ended 30 June         £m       £m
 Revenue                      88.9     104.9  (15)  %
 Organic change               (13)  %  5%
 Acquisitions                 - %      -%
 Currency                     (2) %    (3)%
 Underlying operating profit  6.5      5.7    14  %
 Organic change               18  %    (17)%
 Acquisitions                 - %      1%
 Currency                     (4)  %   (3)%
 Margin                       7.3  %   5.4%   188 bp

Organic change

 (13)  %

5%

Acquisitions

- %

-%

Currency

(2) %

(3)%

Underlying operating profit

6.5

5.7

 14  %

Organic change

 18  %

(17)%

Acquisitions

- %

1%

Currency

 (4)  %

(3)%

Margin

 7.3  %

5.4%

188 bp

 

Revenue reduced by 15% to £89m (2024: £105m) of which 13% was an organic
decline and 2% due to adverse currency movements. There was increased demand
for fire and rescue services in Saudi Arabia, as well as defence support
services. However, these did not offset the revenue impact following the
conclusion of our air navigation contract in Dubai.

Underlying operating profit increased by 14% to £7m (2024: £6m) with margin
improving 188bp from 5.4% to 7.3%, despite the decline in revenue. This
follows our focus on improving the underlying performance of our portfolio and
securing new work at higher margins.

 

Order intake was around £0.1bn and includes a strategically important
contract extension at Dubai Airports valued at AED495m until December 2030.
The five-year extension builds on a long-standing guest experience
partnership , following the successful delivery of an initial five-year
term.

 

Our pipeline of major new bid opportunities in the Middle East continues to
grow and now totals around £1.7bn (December 2024: £1.0bn). In particular,
there are a number of opportunities within the transport sector in Saudi
Arabia. To enhance future growth opportunities in the Middle East, we are
expanding our strategic partnership with Solutions+, a Mubadala company, where
we will bring experience in delivering world-class public services along with
innovation and sustainability credentials to complement their deep regional
experience, building a national champion in facilities management in the UAE.

__________________________________________________________________________________________

 

Corporate costs

Corporate costs relate to typical central function costs of running the Group,
including executive, governance and support functions such as HR, finance and
IT. Where appropriate, these costs are stated after allocation of recharges to
operating divisions. The costs of Group-wide programmes and initiatives are
also incurred centrally.

 

Corporate costs increased by £6.7m to £29.5m (2024: £22.8m) and include
targeted short-term investments made in the period to support future
operational and productivity improvements.

 

Dividend

The Board has declared an interim dividend of 1.45 pence per share. The
dividend will be paid on 3 October 2025, with an ex-dividend date of 28 August
2025 and a record date of 29 August 2025.

 

Other Financial Information

                               Underlying    Non-underlying items  Reported   Underlying  Non-underlying items  Reported
                               2025          2025                  2025       2024        2024                  2024
                               unaudited     unaudited             unaudited  unaudited   unaudited             unaudited
 Period ended 30 June          £m            £m                    £m         £m          £m                    £m
 Revenue                           2,418.5   -                     2,418.5    2,359.3     -                     2,359.3
 Operating profit/(loss)       145.8         (14.3)                131.5      142.4       (12.9)                129.5
 Margin                        6.0 %                               5.4 %      6.0 %                             5.5 %
 Net finance costs             (19.4)        -                     (19.4)     (15.5)      -                     (15.5)
 Profit/(loss) before tax          126.4     (14.3)                112.1      126.9       (12.9)                114.0
 Tax (charge)/credit           (27.5)        4.0                   (23.5)     (33.0)      3.5                   (29.5)
 Effective tax rate            21.8 %                              21.0 %     26.0 %                            25.9 %
 Profit/(loss) for the period  98.9          (10.3)                88.6       93.9        (9.4)                 84.5
 Basic EPS                     9.74 p                              8.73 p     8.65p                             7.78p
 Diluted EPS                   9.60 p                              8.60 p     8.54 p                            7.68p

   -

   2,418.5

   2,359.3

   -

   2,359.3

Operating profit/(loss)

   145.8

   (14.3)

   131.5

   142.4

   (12.9)

   129.5

Margin

6.0 %

 

5.4 %

6.0 %

 

5.5 %

Net finance costs

   (19.4)

   -

   (19.4)

   (15.5)

   -

   (15.5)

Profit/(loss) before tax

     126.4

   (14.3)

   112.1

   126.9

   (12.9)

   114.0

Tax (charge)/credit

   (27.5)

   4.0

   (23.5)

   (33.0)

   3.5

   (29.5)

Effective tax rate

21.8 %

 

21.0 %

26.0 %

 

25.9 %

Profit/(loss) for the period

98.9

(10.3)

88.6

93.9

(9.4)

84.5

Basic EPS

9.74 p

 

8.73 p

8.65p

 

7.78p

Diluted EPS

9.60 p

 

8.60 p

8.54 p

 

7.68p

 

Non-underlying items

Non-underlying items in the period were a charge net of tax of £10.3m (2024:
£9.4m). This comprises amortisation and impairment of intangible assets
arising on acquisitions of £14.3m (2024: £12.9m), and non-underlying tax for
the year being a credit of £4.0m (2024: £3.5m).

 

Joint ventures and associates - share of results

During the period, the most significant joint ventures and associates in terms
of scale of operations were Merseyrail Services Holding Company Limited
(Merseyrail) and VIVO Defence Services Limited (VIVO). Both are incorporated
and operated in the UK.

 

Merseyrail generated revenue of £107.6m (2024: £108.8m), with the Group's
share of profits net of interest and tax for the year being £5.5m (2024:
£5.9m). The reduction in Merseyrail revenue and profits is primarily due to a
one-off commercial settlement received in 2024. The Group received dividends
of £5.0m (2024: £5.5m).

 

VIVO revenue for the period was £395.9m (2024: £514.8m) with the Group's
share of profits net of interest and tax for the year being £6.2m (2024:
£5.3m). The decline in VIVO's revenue is largely due to lower variable work
volumes within VIVO's accommodation contract for which the Group receives a
smaller share of profits. The increase in profit is due to the mix of margins
within different contracts. The Group received dividends of £7.1m (2024:
£nil).

 

Whilst the revenues and individual line items are not consolidated in the
Group Consolidated Income Statement, summary financial performance measures
for the Group's proportion of the aggregate of all joint ventures and
associates are set out below for information purposes.

 

 Period ended 30 June                                   2025    2024
                                                        £m      £m
 Revenue                                                236.5   267.6
 Operating profit                                       15.5    15.9
 Net finance income/(cost)                              0.1     (0.5)
 Income tax charge                                      (3.9)   (4.2)
 Profit after tax(1)                                    11.7    11.2
 Dividends received from joint ventures and associates  12.2    5.6

 2024
 £m

Revenue

236.5

267.6

Operating profit

15.5

15.9

Net finance income/(cost)

0.1

(0.5)

Income tax charge

(3.9)

(4.2)

Profit after tax(1)

11.7

11.2

Dividends received from joint ventures and associates

12.2

5.6

 1  For Merseyrail and other joint ventures and associates, these are the total
    results of the entity multiplied by the proportion of Group ownership. For
    VIVO, although the equity ownership is 50%, the share of profits from
    contracts operated by VIVO is either 25% or 50%. Therefore the Group portion
    of material joint ventures will not represent exactly 50% of their income and
    net assets.

 

Finance costs and investment revenue

Net finance costs recognised in the income statement were £19.4m (2024:
£15.5m), consisting of investment revenue of £3.5m, less finance costs of
£22.9m.

 

Investment revenue of £3.5m (2024: £3.8m) includes interest accruing on net
retirement benefit assets of £0.4m (2024: £0.9m), and interest income of
£3.1m (2024: £2.9m).

 

Finance costs of £22.9m (2024: £19.3m) include interest incurred on loans,
primarily the US private placement loan notes and the revolving credit
facility of £10.0m (2024: £7.6m), and lease interest expense of £11.6m
(2024: £9.1m), as well as other financing related costs including the impact
of foreign exchange on financing activities. The increase in lease interest
expense year-on-year is primarily due to the continuing increase in the number
of leases for dispersed properties required for our UK asylum accommodation
contract.

 

Net interest paid recognised in the cash flow statement was £17.0m (2024:
£12.2m), consisting of interest received of £3.1m (2024: £2.8m) less
interest paid of £20.1m (2024: £15.0m).

 

Tax

Underlying tax

An underlying tax charge of £27.5m (2024: £33.0m) has been recognised in the
period on underlying profits after net finance costs. The effective tax rate
of 21.8% is lower than at 30 June 2024 of 26.0% and 31 December 2024 of 25.1%.
The rate is lower than 30 June 2024 primarily due to one-time credits for the
release of tax provisions following finalisation of overseas tax audits and
securing other tax repayments previously too uncertain to recognise. In
contrast, the period to 30 June 2024 included increases in tax provisions
against audit outcomes. Other differences are due to variances in permanent
adjustments, overseas profits taxable at different rates, and profits of joint
ventures whose post-tax profits are consolidated into the Group profit before
tax.

 

The current underlying tax rate of 21.8% is lower than the UK statutory rate
of 25%. This is mainly due to: the impact of profits made by joint ventures
whose post-tax profits are included in the Group's profit before tax (reduces
the rate by 2.3%); a release of provisions following the resolution of audits
(reduces the rate by 1.3%); a credit in relation to prior year tax positions
now finalised, including a refund received in the Middle East (reduces the
rate by 0.3%); withholding tax reclaimed having been suffered in prior years
(reduces the rate by 1.1%); and various other statutory adjustments (reduces
the rate by 0.7%). These reductions are only partially offset by: the
recognition of deferred tax representing the probable withholding tax on
future distributions (increases the rate by 1.0%); higher rates of tax on
profits arising on international operations (increases the rate by 0.8%); and
the impact of losses made in companies overseas where forecast profits are
such that deferred tax is not recognised (increases the rate by 0.7%).

 

Non-underlying tax

A tax credit of £4.0m (2024: £3.5m) arises from the amortisation and
impairment of intangibles arising on acquisition.

 

Deferred tax

As at 30 June 2025, there is a net deferred tax asset of £172.2m (31
December 2024: £177.7m). This consists of a deferred tax asset of £220.3m
(31 December 2024: £229.8m) and a deferred tax liability of £48.1m (31
December 2024: £52.1m). A £173.8m UK deferred tax asset (31 December 2024:
£177.5m) and a £43.8m Australian deferred tax asset (31 December 2024:
£50.5m) are included within the deferred tax asset on the Group's balance
sheet as at 30 June 2025.

 

Taxes paid

Net corporate income tax of £13.4m was paid during the period, relating
primarily to operations in Asia Pacific (£1.6m), North America (£15.7m), and
Europe (£10.9m). Payments are offset by receipts in the Middle East (£0.2m),
and UK receipts arising from the sale of losses to joint ventures in relation
to the 2023 and 2024 years (£14.6m). UK net payments to tax authorities are
£nil for the period due to payments carried from prior years.

 

The amount of tax paid (£13.4m) differs from the tax charge in the period
(£23.5m) mainly because both receipts from joint ventures and taxes paid to
or received from tax authorities can arise in later periods to the associated
tax charge/credit. This is particularly the case with regards to movements in
deferred tax and provisions for uncertain tax positions.

 

Treasury risk management and operations

The Group's operations expose it to a variety of financial risks that include
access to liquidity, the effects of changes in foreign currency exchange
rates, interest rates and credit risk. The Group has a centralised treasury
function whose principal role is to seek to ensure that adequate liquidity is
available to meet the Group's funding requirements as they arise and that the
financial risk arising from the Group's underlying operations is effectively
identified and managed.

 

Treasury operations are conducted in accordance with policies and procedures
approved by the Board which are reviewed annually. Financial instruments are
only used for hedging purposes and speculation is not permitted. A monthly
report is provided to senior management outlining performance against key risk
management metrics, as required by the Treasury Policy.

 

Liquidity and funding

As at 30 June 2025, the Group had committed funding of £787.9m (31 December
2024: £629.2m), comprising £437.9m of US private placement loan notes, and a
£350.0m revolving credit facility which was undrawn. The US private placement
loan notes are repayable in bullet payments between October 2025 and April
2035. The Group does not engage in any external financing arrangements
associated with either receivables or payables.

 

In April 2025, we issued US$250m (£193.2m) of US private placement loan notes
to support the funding of the MT&S acquisition. The notes were split into
three series of US$100m, US$75m and US$75m with maturities of six, eight and
ten years respectively. The weighted average interest rate on the new loan
notes was fixed at 6.23%. The blended rate on US private placement loan notes
in issue at the end of June 2025 was 5.44% (December 2024: 4.88%). No notes
were repaid during the period.

 

The Group's revolving credit facility provides £350.0m of committed funding
for five years from the arrangement date in November 2022. The facility
includes an accordion option, providing a further £100.0m of funding
(uncommitted and therefore not incurring any fees) if required without the
need for additional documentation. This option has not been included in the
Group's assessment of available liquidity as approvals are required to access
the funding.

 

Interest rate risk

The Group has a preference for fixed rate debt to reduce the volatility of net
finance costs. The Group's Treasury Policy requires it to maintain a minimum
ratio of fixed rate debt to overall adjusted net debt, not to be lower than
50%, and for this proportion to increase as the ratio of EBITDA to interest
expense falls. As at 30 June 2025, £437.9m of debt was held at fixed rates
and adjusted net debt was £259.0m.

 

Foreign exchange risk

The Group is subject to currency exposure on the translation to Sterling of
its net investments in overseas subsidiaries. The Group seeks to manage this
risk, where appropriate, by borrowing in the same currency as those
investments. Group borrowings are predominantly denominated in Sterling and US
Dollars. The Group seeks to manage its currency cash flows to minimise foreign
exchange risk arising on transactions denominated in foreign currencies and
uses forward contracts where appropriate to hedge net currency cash flows.

 

Credit risk

Cash deposits and in-the-money financial instruments give rise to credit risk
on the amounts due from counterparties. The Group manages this risk by
adhering to counterparty exposure limits based on external credit ratings of
the relevant counterparty.

 

Net assets

As at 30 June 2025, the Consolidated Balance Sheet shown on page 23 had net
assets of £871.3m, a movement of £28.8m from the closing net asset position
of £842.5m as at 31 December 2024. This increase is a result of total
comprehensive income in the period of £53.4m offset by a cash dividend paid
of £28.6m.

 

Key movements since 31 December 2024 on the Consolidated Balance Sheet shown
on page 23 include:

 •            An increase in goodwill of £89.3m driven by £140.2m recognised on
              acquisition of MT&S, offset by £50.9m of adverse foreign exchange.
 •            An increase in other intangible assets of £72.2m including £89.3m arising on
              acquisition of MT&S, partly offset by amortisation of £18.4m.
 •            An increase in the net retirement benefit asset of £2.1m primarily in respect
              of the Serco Pension and Life Assurance Scheme (SPLAS); further details are
              provided in the pensions section below.
 •            Provisions have decreased by £13.1m predominantly due to the settlement of
              end of contract obligations following the exit of Serco's contract to deliver
              immigration services in Australia.
 •            Cash and cash equivalents have decreased by £9.4m. In the period the Group
              generated free cash flow of £90.5m and £193.2m from the net advance of
              loans. This was offset by £28.6m dividends to shareholders and £245.7m
              related to the acquisition of MT&S.
 •            Net loan balances have increased by £157.1m due to the issue of additional
              USPP notes of £193.2m partially offset by FX of £34.5m.
 •            The movement in contract assets, trade receivables and other assets, and,
              contract liabilities, trade payables and other liabilities are as a result of
              normal working capital movements.

 

Pensions

Serco's pension schemes had an accounting surplus before tax of £6.1m
(31 December 2024: £4.0m). The £2.1m increase comprises a £47.0m decrease
in scheme liabilities reflecting the impact of inflation, discount rates and
revised member data. This is offset by a reduction in scheme assets of £44.9m
due to market conditions reducing the value of liability matching assets.

 

The SPLAS 2024 triennial actuarial funding valuation was approved on 4 July
2025 and continues the Group commitment from the 2021 valuation to make
deficit recovery payments of £6.6m per year from 2022 to 2030.

 

The opening net asset position led to a net interest income within net finance
costs of £0.4m (2024: £0.9m).

 

Condensed Consolidated Financial Statements

Consolidated Income Statement

For the period ended 30 June 2025

 

                                                                             Underlying      Non-underlying items  Reported   Underlying  Non-underlying items  Reported
                                                                             2025            2025                  2025       2024        2024                  2024
                                                                             unaudited       unaudited             unaudited  unaudited   unaudited             unaudited
 Period ended 30 June                                                        £m              £m                    £m         £m          £m                    £m
 Revenue                                                                         2,418.5     -                     2,418.5    2,359.3     -                     2,359.3
 Cost of sales                                                                   (2,152.2)   -                     (2,152.2)  (2,098.9)   -                     (2,098.9)
 Gross profit                                                                    266.3       -                     266.3      260.4       -                     260.4
 Administrative expenses                                                     (132.2)         -                     (132.2)    (129.2)     -                     (129.2)
 Amortisation and impairment of intangibles arising on acquisition           -               (14.3)                (14.3)     -           (12.9)                (12.9)
 Share of results of joint ventures and associates, net of interest and tax  11.7            -                     11.7       11.2        -                     11.2
 Operating profit/(loss)                                                         145.8       (14.3)                131.5      142.4       (12.9)                129.5
 Investment revenue                                                          3.5             -                     3.5        3.8         -                     3.8
 Finance costs                                                               (22.9)          -                     (22.9)     (19.3)      -                     (19.3)
 Net finance costs                                                               (19.4)      -                     (19.4)     (15.5)      -                     (15.5)
 Profit/(loss) before tax                                                        126.4       (14.3)                112.1      126.9       (12.9)                114.0
 Tax (charge)/credit                                                         (27.5)          4.0                   (23.5)     (33.0)      3.5                   (29.5)
 Profit/(loss) for the period                                                98.9            (10.3)                88.6       93.9        (9.4)                 84.5
 Attributable to:
 Equity owners of the Company                                                98.9            (10.3)                88.6       93.6        (9.4)                 84.2
 Non-controlling interest                                                    -               -                     -          0.3         -                     0.3
 Earnings per share (EPS)
 Basic EPS                                                                   9.74 p                                8.73 p     8.65p                             7.78p
 Diluted EPS                                                                 9.60 p                                8.60 p     8.54 p                            7.68p

   -

   2,418.5

   2,359.3

   -

   2,359.3

Cost of sales

     (2,152.2)

   -

   (2,152.2)

   (2,098.9)

   -

   (2,098.9)

Gross profit

     266.3

   -

   266.3

   260.4

   -

   260.4

Administrative expenses

   (132.2)

   -

   (132.2)

   (129.2)

   -

   (129.2)

Amortisation and impairment of intangibles arising on acquisition

   -

   (14.3)

   (14.3)

   -

   (12.9)

   (12.9)

Share of results of joint ventures and associates, net of interest and tax

   11.7

   -

   11.7

   11.2

   -

   11.2

Operating profit/(loss)

     145.8

   (14.3)

   131.5

   142.4

   (12.9)

   129.5

Investment revenue

   3.5

   -

   3.5

   3.8

   -

   3.8

Finance costs

   (22.9)

   -

   (22.9)

   (19.3)

   -

   (19.3)

Net finance costs

     (19.4)

   -

   (19.4)

   (15.5)

   -

   (15.5)

Profit/(loss) before tax

     126.4

   (14.3)

   112.1

   126.9

   (12.9)

   114.0

Tax (charge)/credit

   (27.5)

   4.0

   (23.5)

   (33.0)

   3.5

   (29.5)

Profit/(loss) for the period

98.9

(10.3)

88.6

93.9

(9.4)

84.5

Attributable to:

Equity owners of the Company

   98.9

   (10.3)

   88.6

   93.6

   (9.4)

   84.2

Non-controlling interest

   -

   -

   -

   0.3

   -

   0.3

Earnings per share (EPS)

 

Basic EPS

9.74 p

8.73 p

8.65p

7.78p

Diluted EPS

9.60 p

8.60 p

8.54 p

7.68p

Consolidated Statement of Comprehensive Income

For the period ended 30 June 2025

 

                                                                                    2025       2024
                                                                                    unaudited  unaudited
                                                                                    £m         £m
 Profit for the period                                                              88.6       84.5

 Other comprehensive income/(loss) for the period:

 Items that will not be reclassified subsequently to profit or loss:
 Share of other comprehensive income in joint ventures and associates(1)            0.2        0.4
 Remeasurements of post-employment benefit obligations(2)                           1.6        (19.9)
 Income tax relating to components of other comprehensive income that will not      0.2        6.3
 be reclassified subsequently to profit or loss(2)

 Items that may be reclassified subsequently to profit or loss:
 Net exchange loss on translation of foreign operations(2)                          (38.3)     (2.3)
 Fair value gain on cash flow hedges during the period(2)                           1.1        0.2
 Total other comprehensive loss for the period                                      (35.2)     (15.3)

 Total comprehensive income for the period                                          53.4       69.2
 Attributable to:
 Equity owners of the Company                                                       53.4       68.9
 Non-controlling interest                                                           -          0.3

 1  Recorded in retained earnings in the Consolidated Statement of Changes in
    Equity.
 2  Recorded in other reserves in the Consolidated Statement of Changes in Equity.

 

Consolidated Statement of Changes in Equity

For the period ended 30 June 2025

 

                                                                        Share capital  Share premium account  Retained earnings  Other reserves  Total shareholders' equity  Non-controlling interest
                                                                        £m             £m                     £m                 £m              £m                          £m
 Audited balance as at 1 January 2024                                   22.1           463.1                  659.1              (110.3)         1,034.0                     (0.3)
 Total comprehensive income/(loss) for the period                       -              -                      84.6               (15.7)          68.9                        0.3
 Dividends paid                                                         -              -                      (24.5)             -               (24.5)                      -
 Shares purchased and held in own share reserve                         -              -                      -                  (22.8)          (22.8)                      -
 Shares committed to be purchased and held in Treasury until cancelled  -              -                      -                  (12.6)          (12.6)                      -
 Shares purchased and held in Treasury until cancelled                  -              -                      -                  (57.6)          (57.6)                      -
 Cancellation of shares held in Treasury                                (0.5)          -                      (42.2)             42.7            -                           -
 Expense in relation to share-based payments                            -              -                      -                  7.8             7.8                         -
 Tax credit on items taken directly to equity                           -              -                      -                  1.5             1.5                         -
 Unaudited balance as at 30 June 2024                                   21.6           463.1                  677.0              (167.0)         994.7                       -

 Audited balance as at 1 January 2025                                   20.5           463.1                  524.3              (165.4)         842.5                       -
 Total comprehensive income/(loss) for the period                       -              -                      88.8               (35.4)          53.4                        -
 Dividends paid                                                         -              -                      (28.6)             -               (28.6)                      -
 Shares purchased and held in own share reserve                         -              -                      -                  (5.0)           (5.0)                       -
 Expense in relation to share-based payments                            -              -                      -                  7.5             7.5                         -
 Tax credit on items taken directly to equity                           -              -                      -                  1.5             1.5                         -
 Unaudited balance as at 30 June 2025                                   20.5           463.1                  584.5              (196.8)         871.3                       -

 

Consolidated Balance Sheet

For the period ended 30 June 2025

 

                                                 At 30 June      At 31 December 2024
                                                 2025
                                                 unaudited       audited
                                                 £m              £m
 Non-current assets
 Goodwill                                        915.5           826.2
 Other intangible assets                         173.6           101.4
 Property, plant and equipment                   59.5            56.8
 Right of use assets                             507.0           514.9
 Interests in joint ventures and associates      24.7            25.1
 Trade and other receivables                     23.3            26.3
 Derivative financial instruments                1.2             -
 Deferred tax assets                             220.3           229.8
 Retirement benefit assets                       16.3            15.2
                                                 1,941.4         1,795.7
 Current assets
 Inventories                                     21.9            24.1
 Contract assets                                 343.6           300.0
 Trade and other receivables                     341.3           331.5
 Current tax assets                              13.8            25.2
 Cash and cash equivalents                       173.6           183.0
 Derivative financial instruments                0.7             0.8
                                                 894.9           864.6
 Total assets                                    2,836.3         2,660.3
 Current liabilities
 Contract liabilities                            (54.1)          (37.5)
 Trade and other payables                        (586.3)         (595.0)
 Derivative financial instruments                (0.6)           (6.6)
 Current tax liabilities                         (24.9)          (35.9)
 Provisions                                      (104.6)         (108.9)
 Obligations under leases                        (176.6)         (168.3)
 Loans                                           (35.2)          (38.8)
                                                 (982.3)         (991.0)
 Non-current liabilities
 Contract liabilities                            (86.6)          (60.7)
 Trade and other payables                        (19.2)          (21.5)
 Derivative financial instruments                (0.8)           (0.6)
 Deferred tax liabilities                        (48.1)          (52.1)
 Provisions                                      (72.6)          (81.4)
 Obligations under leases                        (346.9)         (361.7)
 Loans                                           (398.3)         (237.6)
 Retirement benefit obligations                  (10.2)          (11.2)
                                                 (982.7)         (826.8)
 Total liabilities                               (1,965.0)       (1,817.8)
 Net assets                                      871.3           842.5
 Equity
 Share capital                                   20.5            20.5
 Share premium account                           463.1           463.1
 Retained earnings                               584.5           524.3
 Other reserves                                  (196.8)         (165.4)
 Total equity                                    871.3           842.5

At 31 December 2024

unaudited

audited

£m

£m

Non-current assets

 

Goodwill

915.5

826.2

Other intangible assets

173.6

101.4

Property, plant and equipment

59.5

56.8

Right of use assets

507.0

514.9

Interests in joint ventures and associates

24.7

25.1

Trade and other receivables

23.3

26.3

Derivative financial instruments

1.2

-

Deferred tax assets

220.3

229.8

Retirement benefit assets

16.3

15.2

1,941.4

1,795.7

Current assets

 

Inventories

21.9

24.1

Contract assets

343.6

300.0

Trade and other receivables

341.3

331.5

Current tax assets

13.8

25.2

Cash and cash equivalents

173.6

183.0

Derivative financial instruments

0.7

0.8

894.9

864.6

Total assets

 

2,836.3

2,660.3

Current liabilities

 

Contract liabilities

(54.1)

(37.5)

Trade and other payables

(586.3)

(595.0)

Derivative financial instruments

(0.6)

(6.6)

Current tax liabilities

(24.9)

(35.9)

Provisions

(104.6)

(108.9)

Obligations under leases

(176.6)

(168.3)

Loans

(35.2)

(38.8)

(982.3)

(991.0)

Non-current liabilities

 

Contract liabilities

(86.6)

(60.7)

Trade and other payables

(19.2)

(21.5)

Derivative financial instruments

(0.8)

(0.6)

Deferred tax liabilities

(48.1)

(52.1)

Provisions

(72.6)

(81.4)

Obligations under leases

(346.9)

(361.7)

Loans

(398.3)

(237.6)

Retirement benefit obligations

(10.2)

(11.2)

(982.7)

(826.8)

Total liabilities

 

(1,965.0)

(1,817.8)

Net assets

 

871.3

842.5

Equity

 

Share capital

20.5

20.5

Share premium account

463.1

463.1

Retained earnings

584.5

524.3

Other reserves

(196.8)

(165.4)

Total equity

 

871.3

842.5

 

Condensed Cash Flow Statement

For the period ended 30 June 2025

 

                                                                2025       2024
                                                                unaudited  unaudited
                                                                £m         £m
 Net cash inflow from operating activities                      194.6      189.0
 Investing activities
 Interest received                                              3.1        2.8
 Dividends received by joint ventures and associates            12.2       5.6
 Loan repaid by joint venture                                   -          10.0
 Purchase of other intangible assets                            (6.1)      (3.8)
 Purchase of property, plant and equipment                      (10.5)     (12.9)
 Proceeds from disposal of property, plant and equipment        0.4        0.4
 Acquisition of subsidiaries, net of cash acquired              (245.7)    (19.3)
 Other investing activities                                     (0.1)      0.1
 Net cash outflow from investing activities                     (246.7)    (17.1)
 Financing activities
 Interest paid                                                  (20.1)     (15.0)
 Capitalised finance costs paid                                 (2.2)      (1.0)
 Advances of loans                                              193.2      118.2
 Repayments of loans                                            -          (52.8)
 Capital element of lease repayments                            (75.9)     (66.9)
 Cash movements on finance related derivatives                  (13.4)     (0.3)
 Dividends paid to shareholders                                 (28.6)     (24.5)
 Purchase of own shares for Employee Share Ownership Trust      (5.0)      (22.8)
 Own shares repurchased                                         -          (57.6)
 Net cash inflow/(outflow) from financing activities            48.0       (122.7)
 Net (decrease)/increase in cash and cash equivalents           (4.1)      49.2
 Cash and cash equivalents at beginning of period               183.0      94.4
 Net exchange loss                                              (5.3)      (1.2)
 Cash and cash equivalents at end of period                     173.6      142.4

 

Notes to the Condensed Consolidated Financial Statements

1.   Basis of preparation and accounting policies

 

Basis of preparation

These Condensed Consolidated Financial Statements for the six months ended 30
June 2025 have been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the UK Financial Conduct Authority and with UK adopted
International Accounting Standard 34 'Interim financial reporting'. These
Condensed Consolidated Half-Year Financial Statements do not include all of
the information required for full annual Consolidated Financial Statements and
should be read in conjunction with the Group's Annual Report and Financial
Statements for the year ended 31 December 2024, which has been prepared in
accordance with UK-adopted international accounting standards in conformity
with the requirements of the Companies Act 2006.

 

These Condensed Consolidated Half-Year Financial Statements do not constitute
statutory financial statements within the meaning of Section 434 of the
Companies Act 2006. Statutory financial statements for the year ended 31
December 2024 were approved by the Board of Directors on 26 February 2025 and
delivered to the Registrar of Companies. The report of the auditor on those
accounts was (i) unqualified, (ii) did not draw attention to any matters by
way of emphasis, and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.

 

These Condensed Consolidated Half-Year Financial Statements are unaudited but
have been reviewed by Ernst & Young LLP, the Company's auditors in
accordance with International Standard on Review Engagements (UK) 2410 'Review
of Interim Financial Information performed by the Independent Auditor of the
Entity', issued by the Auditing Practices Board.

 

Going concern

In assessing the basis of preparation of the condensed set of financial
statements for the period ended 30 June 2025 the Directors have considered
the principles of the Financial Reporting Council's 'Guidance on the Going
Concern Basis of Accounting and Related Reporting, including Solvency and
Liquidity Risks, 2025'; particularly in assessing the applicability of the
going concern basis, the review period and disclosures. The assessment period
for the purposes of considering going concern is to 31 August 2026.

 

As at 30 June 2025, the Group's principal debt facilities comprised a £350m
revolving credit facility maturing in November 2027 (of which £nil was
drawn), and £437.9m of US private placement notes (USPP notes), giving
£787.9m of committed credit facilities and available funds of £523.6m, being
the undrawn RCF plus cash of £173.6m. The principal financial covenant ratios
are consistent across the USPP notes and revolving credit facility, and are
outlined on page 46. As at 30 June 2025, the Group's primary restricting
covenant, its leverage ratio, is below the covenant of 3.5x and is below the
Group's target range of 1x-2x at 0.86x. The Group has net current liabilities
of £87.4m, the cash flows of which have been considered within the going
concern assessment.

 

The Directors have undertaken a rigorous assessment of going concern and
liquidity, taking into account financial forecasts, as well as the potential
impact of key uncertainties and sensitivities on the Group's future
performance. In making this assessment the Directors have considered the
Group's existing debt levels, the committed funding and liquidity positions
under its debt covenants, its ability to generate cash from trading activities
and its working capital requirements. The Directors have also identified a
series of mitigating actions that could be used to preserve cash in the
business should the need arise.

 

The basis of the assessment continues to be the Board-approved budget updated
to take account of known changes since, including the impact of the Group's
results for the six months to 30 June 2025. The budget is prepared annually
for the next two-year period and is based on a bottom-up approach to all of
the Group's existing contracts, potential new contracts and administrative
functions.

 

The Directors believe that appropriate sensitivities in assessing the Group's
ability to continue as a going concern are to model reductions in the Group's
win rates for bids and extensions, and reductions in profit margins. Due to
the diversity in the Group's operations, the Directors believe that a reverse
stress test of these sensitivities to assess the headroom available under the
Group's debt covenants and available liquidity provides meaningful analysis of
the Group's ability to continue as a going concern. Based on the headroom
available, the Directors are then able to assess whether the reductions
required to breach the Group's financial covenants, or exhaust available
liquidity, are plausible.

 

This shows that, even after assuming that the US private placement loan of
£36.5m due to mature during the assessment period is repaid, and that no
additional refinancing occurs after the date of approval of the financial
statements, the Group can afford to be unsuccessful on 60% of its bids and
extensions, combined with a profit margin 200 basis points below the Group's
forecast, and still retain sufficient liquidity to meet all liabilities as
they fall due and remain compliant with the Group's financial covenants.

 

In respect of win rates, rebids and extensions have a more significant impact
on the Group's revenue than new business wins during the assessment period.
The Group has won more than 85% of its rebids and extensions and available
contract extensions by volume over the last two years, therefore a reduction
of 60% or more to the budgeted bid and extension win rate is not considered
plausible.

 

Consequently, the Directors are confident that the Group and Company will have
sufficient funds to continue to meet its liabilities as they fall due for the
period to 31 August 2026 and therefore have prepared the financial statements
on a going concern basis.

 

Accounting policies

No new or amended accounting standards had a material impact on the Group for
the period ended 30 June 2025.

 

There have been no changes to the Group's accounting policies during the
period ended 30 June 2025.

 

Estimates and judgements

In preparing these Condensed Consolidated Financial Statements, the Group has
applied the same critical accounting judgements and key sources of estimation
uncertainty as disclosed in the audited financial statements for the year
ended 31 December 2024.

 

However, the following item has been updated during the period:

 

Deferred Tax

Deferred tax assets are recognised for unused tax losses and other timing
differences to the extent that it is probable that future taxable profits will
be available against which these deductions can be utilised. Significant
management judgement is required to determine the amount of deferred tax asset
that can be recognised, based upon the likely timing and the level of future
taxable profits.

 

Following the revised expectations regarding the Australian Base Services bid
(see note 7), the probability of sufficient profits to enable tax asset
utilisation has been reassessed. A deferred tax asset in respect of the
Australian business as at 30 June 2025 of £43.8m (December 2024: £50.5m)
continues to be recognised in full for temporary differences in line with IAS
12 'Income Taxes'. After considering the current forecasts of the Group's
Australian entities and as tax losses in Australia do not expire, the
Directors remain confident that the full deferred tax asset will be realised,
although there is judgement associated with the period of time over which it
will be utilised. The Australian business has consistently delivered taxable
profits, and current forecasts indicate that this will continue. The
Australian business has made good progress on restructuring its operations
following the loss of the immigration contract announced in November 2024 and
continues to focus on its ability to win new contracts within the region,
however growth within the portfolio is an area of estimation uncertainty.
Based on the forecasts and sensitivities prepared, the deferred tax asset will
be fully utilised over a period potentially to 2035, which would be longer
than the five-year period used for strategic planning purposes.

 

2. Segmental information

The Group's operating segments reflecting the information reported to the
Board in 2024 under IFRS 8 Operating Segments are consistent with those
reported in the Group's 2024 audited financial statements.

 

An analysis of the Group's revenue from its key market sectors is as follows:

 Period ended 30 June 2025                 UK&E      North America  Asia Pacific  Middle East  Total
                                           £m        £m             £m            £m           £m
 Key sectors
 Defence                                   194.5     514.9          89.8          15.3         814.5
 Justice & Immigration                     692.1     -              120.6         -            812.7
 Transport                                 60.5      37.4           13.4          33.9         145.2
 Health & Other Facilities Management      113.2     -              77.1          27.9         218.2
 Citizen Services                          193.2     168.5          54.4          11.8         427.9
                                           1,253.5   720.8          355.3         88.9         2,418.5

 

 Period ended 30 June 2024                 UK&E      North America  Asia Pacific  Middle East  Total
                                           £m        £m             £m            £m           £m
 Key sectors
 Defence                                   174.5     452.9          86.7          12.4         726.5
 Justice & Immigration                     710.9     -              156.1         -            867.0
 Transport                                 62.8      43.9           4.5           41.3         152.5
 Health & Other Facilities Management      106.6     -              82.9          38.9         228.4
 Citizen Services                          155.8     159.6          57.2          12.3         384.9
                                           1,210.6   656.4          387.4         104.9        2,359.3

   452.9

   86.7

   12.4

   726.5

Justice & Immigration

   710.9

   -

   156.1

   -

   867.0

Transport

   62.8

   43.9

   4.5

   41.3

   152.5

Health & Other Facilities Management

   106.6

   -

   82.9

   38.9

   228.4

Citizen Services

   155.8

   159.6

   57.2

   12.3

   384.9

   1,210.6

   656.4

   387.4

   104.9

   2,359.3

 

The following is an analysis of the Group's revenue, results, assets and
liabilities by reportable operating segment:

 Period ended 30 June 2025                                                     UK&E      North America  Asia Pacific  Middle East  Corporate  Total
                                                                               £m        £m             £m            £m           £m         £m
 Revenue                                                                       1,253.5   720.8          355.3         88.9         -          2,418.5
 Result
 Underlying operating profit/(loss)                                            78.4      76.4           14.0          6.5          (29.5)     145.8
 Amortisation and impairment of intangibles arising on acquisition             (6.1)     (8.2)          -             -            -          (14.3)
 Operating profit/(loss)                                                       72.3      68.2           14.0          6.5          (29.5)     131.5
 Net finance cost                                                                                                                             (19.4)
 Profit before tax                                                                                                                            112.1
 Tax charge                                                                                                                                   (23.5)
 Profit for the period                                                                                                                        88.6
 Supplementary information
 Share of profits in joint ventures and associates, net of interest and tax    11.7      -              -             -            -          11.7
 Total depreciation and impairment of plant, property and equipment and right  (73.3)    (10.7)         (3.2)         (0.6)        -          (87.8)
 of use assets
 Amortisation and impairment of intangible assets                              (2.9)     (0.4)          (0.6)         (0.1)        -          (4.0)

 

 Period ended 30 June 2024                                                     UK&E      North America  Asia Pacific  Middle East  Corporate  Total
                                                                               £m        £m             £m            £m           £m         £m
 Revenue                                                                       1,210.6   656.4          387.4         104.9        -          2,359.3
 Result
 Underlying operating profit/(loss)                                            82.9      68.8           7.8           5.7          (22.8)     142.4
 Amortisation and impairment of intangibles arising on acquisition             (5.1)     (7.8)          -             -            -          (12.9)
 Operating profit/(loss)                                                       77.8      61.0           7.8           5.7          (22.8)     129.5
 Net finance cost                                                                                                                             (15.5)
 Profit before tax                                                                                                                            114.0
 Tax charge                                                                                                                                   (29.5)
 Profit for the period                                                                                                                        84.5
 Supplementary information
 Share of profits in joint ventures and associates, net of interest and tax    11.2      -              -             -            -          11.2
 Total depreciation and impairment of plant, property and equipment and right  (59.7)    (9.9)          (4.2)         (0.9)        -          (74.7)
 of use assets
 Amortisation and impairment of intangible assets                              (2.8)     (0.6)          (0.5)         (0.1)        -          (4.0)

 

 Period ended 30 June 2025                   UK&E      North America  Asia Pacific  Middle East  Corporate  Total
                                             £m        £m             £m            £m           £m         £m
 Segment assets
 Interests in joint ventures and associates  24.3      -              -             0.4          -          24.7
 Other segment assets(1)                     1,097.3   1,087.1        104.7         68.8         44.1       2,402.0
 Total segment assets                        1,121.6   1,087.1        104.7         69.2         44.1       2,426.7
 Unallocated assets(2)                                                                                      409.6
 Consolidated total assets                                                                                  2,836.3
 Segment liabilities
 Segment liabilities                         (944.5)   (173.0)        (203.9)       (61.5)       (74.2)     (1,457.1)
 Unallocated liabilities(2)                                                                                 (507.9)
 Consolidated total liabilities                                                                             (1,965.0)
 Supplementary information
 Additions to non-current assets(3)          76.4      246.0          1.9           1.4          -          325.7
 Segment non-current assets                  802.2     852.8          29.2          21.7         14.0       1,719.9
 Unallocated non-current assets                                                                             221.5

 1  The Corporate segment assets and liabilities include balance sheet items which
    provide benefit to the wider Group, including defined benefit pension schemes.
 2  Unallocated assets and liabilities include deferred tax, current tax, cash and
    cash equivalents, derivative financial instruments and loans.
 3  Additions to non-current assets reflects additions and amounts arising on
    acquisition for goodwill, other intangible assets, property plant and
    equipment and right of use assets.

 Year ended 31 December 2024                    UK&E      North America  Asia Pacific  Middle East  Corporate  Total
                                                £m        £m             £m            £m           £m         £m
 Segment assets
 Interests in joint ventures and associates(5)  24.7      -              -             0.4          -          25.1
 Other segment assets(1)                        1,052.2   886.7          136.1         68.6         52.7       2,196.3
 Total segment assets(4)                        1,076.9   886.7          136.1         69.0         52.7       2,221.4
 Unallocated assets(2)                                                                                         438.9
 Consolidated total assets(5)                                                                                  2,660.3
 Segment liabilities
 Segment liabilities(4)                         (921.9)   (169.6)        (213.6)       (61.6)       (79.4)     (1,446.1)
 Unallocated liabilities(2)                                                                                    (371.7)
 Consolidated total liabilities                                                                                (1,817.8)
 Supplementary information
 Additions to non-current assets(3)             280.6     22.5           9.3           11.4         0.2        324.0
 Segment non-current assets                     826.8     686.5          32.4          22.8         -          1,568.5
 Unallocated non-current assets                                                                                230.2

 1  The Corporate segment assets and liabilities include balance sheet items which
    provide benefit to the wider Group, including defined benefit pension schemes
    and corporate intangible assets.
 2  Unallocated assets and liabilities include deferred tax, current tax, cash and
    cash equivalents, derivative financial instruments and loans.
 3  Additions to non-current assets reflects additions and amounts arising on
    acquisition for goodwill, other intangible assets, property plant and
    equipment and right of use assets.
 4  In 2024, central managed assets and liabilities were moved from corporate to
    UK&E to reflect an internal restructure of overhead functions
    predominately used by UK&E
 5  An adjustment has been made to the interest in joint ventures and associates
    within the UK&E segment as at 31 December 2024. The amount previously
    disclosed in this note of £27.7m did not reflect the amount correctly
    recorded in the statement of financial position of £24.7m

 

3. Acquisitions

On 24 May 2025, the Group acquired the Mission Training and Satellite Ground
Network Communications Software business (MT&S) from Northrop Grumman, for
an enterprise value of US$327m (£242m). MT&S generates annual revenues of
approximately US$300m, increasing the annual revenue of our North America
business to US$2bn. This strategic acquisition significantly enhances Serco's
defence and space capabilities, adding advanced mission training services and
satellite ground network software to our portfolio. It also deepens our
engagement with the US Department of Defense, supporting programmes across the
US Army, Space Force, Air Force, Navy and Combatant Commands, with a team of
around 900 skilled professionals. The acquisition supports Serco's growth
ambitions within the international space sector, reinforcing our efforts to
expand our global footprint in regions such as the UK, Australia, and the
Middle East.

 

The operating results, assets and liabilities have been recognised effective
24 May 2025 and contributed £23.6m of revenue and £3.0m of operating profit
including an appropriate allocation of charges for shared support services and
fully allocated overheads, to the Group's result during the six months to
30 June 2025.

 

The total impact of acquisitions to the Group's cash flow position in the
period was as follows:

                                                                  MT&S
                                                                  £m
 Enterprise value(1)                                              241.6
 Provisional working capital and completion account finalisation  4.1
 Acquisition of business, net of cash acquired                    245.7

 1  Enterprise value reflects the consideration prior to working capital and fair
    value adjustments on the acquisition date. In local currency the enterprise
    value was US$327.0m and the consideration paid was US$332.6m.

 

The provisional fair value of assets and liabilities acquired during the
period are summarised below:

                                                           MT&S
 Provisional fair value(1)                                 £m
 Other intangible assets(2)                                89.3
 Property, plant and equipment                             2.2
 Right of use assets(3)                                    6.4
 Contract assets, trade and other receivables(4)           20.9
 Contract liabilities, trade and other payables            (6.4)
 Provisions                                                (0.5)
 Lease obligations(3)                                      (6.4)
 Net assets acquired(5)                                    105.5
 Goodwill(6)                                               140.2
 Acquisition date fair value of consideration transferred  245.7

 1  Due to the limited time since the acquisition was completed and ongoing work
    to finalise the completion accounts, the fair values of the acquired assets
    and liabilities have been determined on a provisional basis in accordance with
    IFRS 3. During the measurement period, which is expected to be less than the
    12 months from the acquisition date permitted by IFRS 3, the Group may revise
    these provisional fair values as further information becomes available.
 2  Other intangible assets is the fair value of customer relationships acquired
    using our best estimate of forecast cash flows discounted to present value.
 3  The Group measured the acquired lease liabilities using the present value of
    the remaining lease payments at the date of acquisition. The right of use
    assets were measured at an amount equal to the lease liabilities and adjusted
    to reflect the favourable/ unfavourable terms of the lease relative to market
    terms.
 4  The fair value of acquired contract assets, trade and other receivables was
    £20.9m. The gross contractual amount was £21.7m, with a loss allowance of
    £0.8m recognised on acquisition.
 5  The fair value of the net assets acquired are prepared on a provisional basis
    in accordance with IFRS 3. During the measurement period, expected to be 12
    months from acquisition date, the Group may amend the fair value.
 6  The goodwill for MT&S is attributable to the workforce, expanding
    capabilities of the Group in the defence sector and the cost synergies
    expected to arise as a result of the acquisition. Goodwill has been allocated
    to the North America CGU. All £140.2m of the goodwill balance is expected to
    be deductible for tax purposes equally over a 15-year period.

 

The total costs associated with the MT&S acquisition for the period ended
30 June 2025 were £3.3m (year ended 31 December 2024: £1.2m) and have been
recognised in administrative expenses.

 

Based on estimates made of the half-year impact of the acquisition of
MT&S, had this taken place on 1 January 2025, Group revenue and underlying
operating profit for the period would have increased by approximately £83.7m
and £11.7m respectively, taking total Group revenue to £2,502.2m and total
Group underlying operating profit to £157.5m.

 

4. Non-underlying items

Non-underlying items consist of:

 •            IAS 1 Presentation of Financial Statements sets out disclosure requirements
              regarding fair representation of information and the composition, labelling,
              prominence and consistency of additional line items and subtotals in financial
              statements. IAS 1 paragraph 97 requires separate disclosure of the nature and
              amount of material items of income or expense. The company uses the term
              'exceptional items' to categorise those items which require disclosure under
              IAS 1 paragraph 97, but this is not a term defined by IFRS. These items are
              separately disclosed. A level of judgement is involved in determining what
              items are classified as exceptional items. Management considers exceptional
              items to be outside of normal practice of the business (i.e. the financial
              impact is unusual or rare in occurrence), and are material to the results of
              the Group by virtue of their size or nature, and are suitable for separate
              presentation and detailed explanation. There is a level of judgement required
              in determining which items are exceptional on a consistent basis and require
              separate disclosure. There were no exceptional items in the period ended
              30 June 2025 (2024: none).
 •            Amortisation and impairment of intangible assets arising on acquisition: These
              charges are disclosed separately because they are based on judgements about
              the value and economic life of assets that would not be capitalised in normal
              operating practice.

                                                                           2025    2024
 Period ended 30 June                                                      £m      £m
 Amortisation of customer relationship intangibles arising on acquisition  (14.3)  (10.9)
 Impairment of customer relationship intangibles arising on acquisition    -       (2.0)
 Amortisation and impairment of intangible assets arising on acquisition   (14.3)  (12.9)
 Total non-underlying items before tax                                     (14.3)  (12.9)
 Non-underlying tax credit                                                 4.0     3.5
 Total non-underlying items net of tax                                     (10.3)  (9.4)

 

5. Tax

The tax charge for the period ended 30 June 2025 is calculated using the
full-year forecast effective tax rate by taxable entity which is then applied
to the actual profit for the period in each taxable entity. The tax impacts of
items specific to the period are then included to provide the half year actual
tax charge.

 

A total tax charge of £23.5m includes an underlying tax charge of £27.5m and
a tax credit on amortisation of intangibles arising on acquisition of £4.0m.

 

The current total tax rate of 21% is lower than the UK statutory rate of 25%.
This is mainly due to the impact of profits made by joint ventures whose
post-tax profits are included in the Group's profit before tax; credits
arising following the conclusion of audits that have been provided for in
prior years; and the finalisation of prior year tax positions. These
reductions are only partially offset by higher rates of tax on profits arising
on international operations and the impact of losses made in companies
overseas where forecast profits are such that deferred tax is not recognised.

 

6. Earnings per share

Basic earnings per share is calculated by dividing the profit after tax
attributable to owners of the Company by the weighted average number of shares
in issue after deducting the Group's own shares held by employee share
ownership trusts, deducting treasury shares and adding back vested share
options not exercised.

 

In calculating the diluted earnings per share, unvested share options
outstanding have been taken into account where the impact of these is
dilutive.

 

The calculation of the basic and diluted EPS is based on the following data:

 

 Period ended 30 June                                                       2025      2024
 Number of shares                                                           millions  millions
 Weighted average number of ordinary shares for the purpose of basic EPS    1,015.0   1,082.0
 Effect of dilutive potential ordinary shares: Shares under award           15.1      14.1
 Weighted average number of ordinary shares for the purpose of diluted EPS  1,030.1   1,096.1

 

Earnings per share

                                               Earnings  Per share amount  Earnings  Per share amount
 Period ended 30 June                          2025      2025              2024      2024
 Basic EPS                                     £m        pence             £m        pence
 Earnings for the purpose of basic EPS         88.6      8.73              84.2      7.78
 Effect of dilutive potential ordinary shares  -         (0.13)            -         (0.10)
 Diluted EPS                                   88.6      8.60              84.2      7.68

7. Goodwill

As at 30 June 2025 the carrying value of goodwill was £915.5m (31 December
2024: £826.2m). The net increase is due to the goodwill arising on the
acquisition of MT&S of £140.2m offset by the impact of foreign exchange
of £50.9m.

 

Goodwill is stated at cost less any provision for impairment and is compared
against the associated recoverable amount at least annually. The value of each
cash generating unit (CGU) is based on value in use calculations derived from
forecast cash flows based on past experience, adjusted to reflect market
trends, economic conditions and key risks. These forecasts include an estimate
of new business wins and an assumption that the final year forecast continues
on into perpetuity at a CGU-specific growth rate.

 

Goodwill is required to be tested for impairment at least once every financial
year, irrespective of whether there is any indication of impairment. The
annual impairment review typically takes place in the final quarter of the
year. However, if there are indicators of impairment, an earlier review is
also required.

 

In assessing for indicators of impairment, the Group has gathered information
internally and externally at a global level and based on the individual
geographies in which the Group operates. Factors that were considered
included, but were not limited to:

 •            any obsolescence indicators within the Group's physical assets;
 •            any plans to dispose of CGUs or significant portions of CGUs;
 •            indicators of worse than expected financial and bidding performance to an
              extent that would have caused an impairment had they been known at the time of
              the latest full impairment review;
 •            unfavourable market conditions and valuations; and
 •            carrying amounts of net assets in excess of market capitalisation.

 

There have been no indicators of impairment identified since the full
impairment test undertaken as at 31 December 2024. However, whilst an
impairment of £114.5m was recognised in respect of the Asia Pacific CGU in
2024, some of the remaining risks outlined in the 2024 Annual Report and
Accounts remain.

 

Asia Pacific CGU

As disclosed in the 31 December 2024 Consolidated Financial Statements, an
adverse outcome of the Base Services bid could result in a further impairment
of the Asia Pacific goodwill balance. Based on interactions with the
Australian Defence Force, management believe that the probability of being
successful in respect of the Base Services contract has reduced to a level
where any contribution assumed from this contract has been removed from the
long-term forecast for the business. As a result of this, and the exit of the
Australian immigration contract, in the period to 30 June 2025 the Division
has made progress in delivering sustained overhead reductions to reflect the
contract portfolio which exists and to ensure the Division remains competitive
in bid submissions.

 

A review of the overhead cost structure within the Division was anticipated in
the event new information became available regarding the Base Services bid.
Those planned and delivered to 30 June 2025 are expected to offset the cash
flows assumed for Base Services within the five-year plan used for the
31 December 2024 impairment assessment, as the win rate applied to a Base
Services win was risk-weighted. Consequently, the Directors have concluded
that there is no indicator of impairment and that a full impairment test at
30 June 2025 is not required.

 

8. Analysis of net debt

The analysis below provides a reconciliation between the opening and closing
positions in the balance sheet for liabilities arising from financing
activities together with movements in derivatives relating to the items
included in net debt. There were no changes in fair value noted in either the
current or prior period.

 

                                                At 1 January 2025  Cash flow(1)  Acquisitions(2)  Exchange differences  Non-cash movements(3)  At 30 June 2025
                                                £m                 £m            £m               £m                    £m                     £m
 Loans payable                                  (276.3)            (193.2)       -                34.5                  1.5                    (433.5)
 Lease obligations                              (530.0)            75.9          (6.4)            3.1                   (66.1)                 (523.5)
 Liabilities arising from financing activities  (806.3)            (117.3)       (6.4)            37.6                  (64.6)                 (957.0)
 Cash and cash equivalents                      183.0              (4.1)         -                (5.3)                 -                      173.6
 Derivatives relating to net debt               (6.4)              -             -                7.3                   -                      0.9
 Net debt                                       (629.7)            (121.4)       (6.4)            39.6                  (64.6)                 (782.5)

 1  In April 2025, we issued US$250m (£193.2m) of US private placement loan notes
    to support the funding of the MT&S acquisition. The notes were split into
    three series of US$100m, US$75m and US$75m with maturities of six, eight and
    ten years respectively. The weighted average interest rate on the new loan
    notes was fixed at 6.23%. The blended rate on US private placement loan notes
    in issue at the end of June 2025 was 5.44% (December 2024: 4.88%).
 2  Acquisitions represent the net cash/(debt) acquired on acquisition.
 3  Non-cash movements on loans payable relate to movement in capitalised finance
    costs in the period. For lease obligations non-cash movements relate to the
    net impact of entering into new leases and exiting certain leases before the
    end of the lease term without payment of a cash termination cost.

9. Provisions

                                            Employee related  Property  Contract  Claims  Other  Total
                                            £m                £m        £m        £m      £m     £m
 At 1 January 2025                          79.8              19.8      19.8      25.5    45.4   190.3
 Arising on acquisition                     -                 -         0.2       -       0.3    0.5
 Charge capitalised in right of use assets  -                 1.1       -         -       -      1.1
 Charged to income statement                7.9               1.1       2.3       4.7     6.1    22.1
 Released to income statement               (0.5)             (0.4)     (0.5)     (2.1)   (2.1)  (5.6)
 Utilised during the period                 (17.7)            (0.9)     (1.2)     (2.3)   (6.2)  (28.3)
 Exchange differences                       (3.5)             0.3       -         -       0.3    (2.9)
 At 30 June 2025                            66.0              21.0      20.6      25.8    43.8   177.2
 Analysed as:
 Current                                    44.6              4.4       9.9       5.3     40.4   104.6
 Non-current                                21.4              16.6      10.7      20.5    3.4    72.6
                                            66.0              21.0      20.6      25.8    43.8   177.2

 

Employee-related provisions include amounts for long-term service awards and
terminal gratuity liabilities which have been accrued and are based on
contractual entitlement, together with an estimate of the probabilities that
employees will stay until rewards fall due and receive all relevant amounts.
The provisions will be utilised over various periods driven by attrition and
demobilisation of contracts, the timing of which is uncertain. There are also
amounts included in relation to restructuring.

 

The majority of property provisions relate to leased properties and are
associated with the requirement to return properties to either their original
condition, or to enact specific improvement activities in advance of exiting
the lease. Dilapidations associated with leased properties are held as a
provision until such time as they fall due, with the longest running lease
ending in March 2037.

 

A contract provision is recorded when a contract is deemed to be unprofitable
and therefore is considered onerous. The present value of the estimated future
cash outflow required to settle the contract obligations as they fall due over
the respective contracts has been used in determining the provision.

 

Claims provisions relate to claims made against the Group. These claims are
varied in nature, although they typically come from either the Group's service
users, claimants for vehicle-related incidents or the Group's employees. While
there is some level of judgement on the amount to be recorded, in almost all
instances the variance to the actual claim paid out will not individually be
material; however, the timing of when the claims are reported and settled is
less certain as a process needs to be followed prior to the amounts being
paid.

 

Included within other provisions:

 •            £18.8m (31 December 2024: £20.5m) relates to legal and other costs that the
              Group expects to incur over an extended period, in respect of past events for
              which a provision has been recorded, none of which are individually material.
 •            £25.0m (31 December 2024: £24.9m) relates to a provision in respect of a
              contingent liability recognised on the acquisition of EHC. The Directors have
              assessed that a present obligation exists in respect of the treatment of
              certain historic transactions and have measured the fair value of these as
              required by IFRS 3 Business Combinations notwithstanding that the outflow of
              economic benefits is not probable. This provision will be reassessed at each
              reporting date as the risk associated with the contingent liability in due
              course expires.

 

Individual provisions are only discounted where the impact is assessed to be
significant. Currently, the effect of discounting is not material.

 

10. Contingent liabilities

The Group and its subsidiaries have provided certain guarantees and
indemnities in respect of performance and other bonds, issued by its banks on
its behalf in the ordinary course of business. The total commitment
outstanding as at 30 June 2025 was £254.8m (31 December 2024: £278.4m).

 

The Group has guaranteed overdrafts, finance leases and bonding facilities of
its joint ventures and associates up to a maximum value of £5.7m (31 December
2024: £5.7m). The actual commitment outstanding at 30 June 2025 was £5.7m
(31 December 2024: £5.7m).

 

The Group is also aware of other claims and potential claims which involve or
may involve legal proceedings against the Group although the timing of
settlement of these claims remains uncertain. The Directors are of the
opinion, having regard to legal advice received and the Group's insurance
arrangements, that it is unlikely that these matters will, in aggregate, have
a material effect on the Group's financial position.

 

11. Financial risk management

The vast majority of financial instruments are held at amortised cost. The
classification of the fair value measurement falls into three levels, based on
the degree to which the fair value is observable. The levels are as follows:

 

 •            Level 1: Inputs derived from unadjusted quoted prices in active markets for
              identical assets or liabilities.
 •            Level 2: Inputs that are observable for the asset or liability, either
              directly or indirectly, other than quoted prices included within Level 1.
 •            Level 3: Inputs are unobservable inputs for the asset or liability.

 

Based on the above, the derivative financial instruments held by the Group as
at 30 June 2025 and the comparison fair values for loans are all considered
to fall into Level 2. The contingent consideration and contingent liabilities
on previous acquisitions are considered to fall into Level 3. Market prices
are sourced from Bloomberg and third party valuations. The valuation models
incorporate various inputs including foreign exchange spot and forward rates
and interest rate curves.

 

There have been no transfers between levels in the period.

 

The Group held the following financial instruments which fall within the scope
of IFRS 9 Financial Instruments:

                                                                                Carrying    Fair      Carrying     Fair
                                                                                amount      value     amount       value
                                                                                At 30       At 30     At 31        At 31
                                                                                June        June      December     December
                                                                                2025        2025      2024         2024
                                                                                £m          £m        £m           £m
 Financial assets - current
 Derivatives designated as FVTPL (Level 2)
 Forward foreign exchange contracts                                             0.2         0.2       0.8          0.8
 Derivative instruments in designated hedge accounting relationships (Level 2)
 Forward foreign exchange contracts                                             0.5         0.5       -            -
 Financial assets at amortised cost
 Cash and bank balances(1)                                                      173.6       173.6     183.0        183.0
 Trade receivables(1)                                                           240.3       240.3     228.2        228.2
 Amounts owed by joint ventures and associates(1)                               0.6         0.6       -            -

 Financial assets - non-current
 Derivatives designated as FVTPL (Level 2)
 Forward foreign exchange contracts                                             0.7         0.7       -            -
 Derivative instruments in designated hedge accounting relationships (Level 2)
 Forward foreign exchange contracts                                             0.5         0.5       -            -

 Financial liabilities - current
 Derivatives designated as FVTPL (Level 2)
 Forward foreign exchange contracts                                             (0.4)       (0.4)     (6.4)        (6.4)
 Derivative instruments in designated hedge accounting relationships (Level 2)
 Forward foreign exchange contracts                                             (0.2)       (0.2)     (0.2)        (0.2)
 Financial liabilities at fair value (Level 3)
 Contingent consideration                                                       (5.6)       (5.6)     (3.2)        (3.2)
 Contingent liabilities on acquisition                                          (25.0)      (25.0)    (24.9)       (24.9)
 Financial liabilities at amortised cost
 Trade payables(1)                                                              (115.3)     (115.3)   (92.3)       (92.3)
 Loans                                                                          (35.2)      (34.9)    (38.8)       (38.8)

 Financial liabilities - non-current
 Derivatives designated as FVTPL (Level 2)
 Forward foreign exchange contracts                                             -           -         (0.3)        (0.3)
 Derivative instruments in designated hedge accounting relationships (Level 2)
 Forward foreign exchange contracts                                             (0.8)       (0.8)     (0.3)        (0.3)
 Financial liabilities at fair value (Level 3)
 Contingent consideration                                                       (4.3)       (4.3)     (6.2)        (6.2)
 Financial liabilities at amortised cost
 Loans                                                                          (398.3)     (392.9)   (237.6)      (225.2)

 Fair
 value

 Carrying
 amount

 Fair
 value

 At 30
 June
 2025

 At 30
 June
 2025

 At 31
 December
 2024

 At 31
 December
 2024

£m

£m

£m

£m

Financial assets - current

 

Derivatives designated as FVTPL (Level 2)

Forward foreign exchange contracts

0.2

0.2

0.8

0.8

Derivative instruments in designated hedge accounting relationships (Level 2)

Forward foreign exchange contracts

0.5

0.5

-

-

Financial assets at amortised cost

Cash and bank balances(1)

173.6

173.6

183.0

183.0

Trade receivables(1)

240.3

240.3

228.2

228.2

Amounts owed by joint ventures and associates(1)

0.6

0.6

-

-

Financial assets - non-current

 

Derivatives designated as FVTPL (Level 2)

Forward foreign exchange contracts

0.7

0.7

-

-

Derivative instruments in designated hedge accounting relationships (Level 2)

Forward foreign exchange contracts

0.5

0.5

-

-

Financial liabilities - current

 

Derivatives designated as FVTPL (Level 2)

Forward foreign exchange contracts

(0.4)

(0.4)

(6.4)

(6.4)

Derivative instruments in designated hedge accounting relationships (Level 2)

Forward foreign exchange contracts

(0.2)

(0.2)

(0.2)

(0.2)

Financial liabilities at fair value (Level 3)

Contingent consideration

(5.6)

(5.6)

(3.2)

(3.2)

Contingent liabilities on acquisition

(25.0)

(25.0)

(24.9)

(24.9)

Financial liabilities at amortised cost

Trade payables(1)

(115.3)

(115.3)

(92.3)

(92.3)

Loans

(35.2)

(34.9)

(38.8)

(38.8)

Financial liabilities - non-current

 

Derivatives designated as FVTPL (Level 2)

Forward foreign exchange contracts

-

-

(0.3)

(0.3)

Derivative instruments in designated hedge accounting relationships (Level 2)

Forward foreign exchange contracts

(0.8)

(0.8)

(0.3)

(0.3)

Financial liabilities at fair value (Level 3)

Contingent consideration

(4.3)

(4.3)

(6.2)

(6.2)

Financial liabilities at amortised cost

Loans

(398.3)

(392.9)

(237.6)

(225.2)

 1  Management estimate that the carrying amounts of cash, trade receivables and
    trade payables approximate to their fair value due to the short-term maturity
    of these instruments.

 

12. Retirement benefit schemes

 

 Period ended 30 June                            2025    2024
 Recognised in the income statement              £m      £m
 Current service cost - employer                 3.7     3.5
 Past service cost - employer                    (0.4)   -
 Administrative expenses and taxes               1.1     0.4
 Recognised in arriving at operating profit      4.4     3.9
 Interest income on scheme assets - employer     (24.1)  (23.7)
 Interest cost on scheme liabilities - employer  23.7    22.8
 Finance income                                  (0.4)   (0.9)
 Total recognised in the income statement        4.0     3.0

                                                            2025    2024
 Included within the statement of comprehensive income      £m      £m
 Actual return on scheme assets                             (15.0)  (24.6)
 Less: interest income on scheme assets                     (24.1)  (23.7)
 Net return on scheme assets                                (39.1)  (48.3)
 Effect of changes in demographic assumptions               3.5     2.3
 Effect of changes in financial assumptions                 29.4    27.5
 Effect of experience adjustments                           7.8     (1.4)
 Total recognised in the statement of comprehensive income  1.6     (19.9)

 

The assets and liabilities of the schemes are:

 

                                  Fair value of    Present value of scheme liabilities  Surplus/(deficit)  Fair value of    Present value of scheme liabilities  Surplus/(deficit)
                                  scheme assets                                                            scheme assets
                                  At 30            At 30                                At 30              At 31            At 31                                At 31
                                  June             June                                 June               December         December                             December
                                  2025             2025                                 2025               2024             2024                                 2024
                                  £m               £m                                   £m                 £m               £m                                   £m
 SPLAS(1)                         780.7            (766.3)                              14.4               822.8            (810.0)                              12.8
 ORS                              85.7             (95.5)                               (9.8)              83.2             (93.9)                               (10.7)
 RPS                              57.1             (55.2)                               1.9                58.4             (57.4)                               1.0
 Other Schemes in surplus         -                -                                    -                  4.0              (2.6)                                1.4
 Other schemes in deficit         1.1              (1.5)                                (0.4)              1.1              (1.6)                                (0.5)
 Net retirement benefit asset(2)  924.6            (918.5)                              6.1                969.5            (965.5)                              4.0

Present value of scheme liabilities

Surplus/(deficit)

 Fair value of
 scheme assets

Present value of scheme liabilities

Surplus/(deficit)

 

 At 30
 June
 2025

 At 30
 June
 2025

 At 30
 June
 2025

 At 31
 December
 2024

 At 31
 December
 2024

 At 31
 December
 2024

£m

£m

£m

£m

£m

£m

SPLAS(1)

780.7

(766.3)

14.4

822.8

(810.0)

12.8

ORS

85.7

(95.5)

(9.8)

83.2

(93.9)

(10.7)

RPS

57.1

(55.2)

1.9

58.4

(57.4)

1.0

Other Schemes in surplus

-

-

-

4.0

(2.6)

1.4

Other schemes in deficit

1.1

(1.5)

(0.4)

1.1

(1.6)

(0.5)

Net retirement benefit asset(2)

924.6

(918.5)

6.1

969.5

(965.5)

4.0

 1  The SPLAS Trust Deed gives the Group an unconditional right to a refund of
    surplus assets assuming the gradual settlement of plan liabilities over time
    until all members have left the plan. Pension assets are deemed to be
    recoverable and there are no adjustments in respect of minimum funding
    requirements as economic benefits are available to the Group either in the
    form of future refunds or in the form of possible reductions in future
    contributions.
 2  Net retirement benefit asset (before tax) is split between schemes with a
    pension asset totalling £16.3m (31 December 2024: £15.2m) and a pension
    liability totalling £10.2m (31 December 2024: £11.2m).

 

Actuarial assumptions:

The assumptions set out below are for SPLAS, which reflects 84% (31 December
2024: 85%) of total assets and 83% (31 December 2024: 84%) of total
liabilities of the defined benefit pension schemes in which the Group
participates. The significant actuarial assumptions with regards to the
determination of the defined benefit obligation are set out below.

                                    At 30 June 2025   At 31 December 2024
 Significant actuarial assumptions  %                 %
 Discount rate                      5.60              5.50
 Rate of salary increases           2.70              3.05
 RPI Inflation                      2.90              3.15
 CPI Inflation                      2.20              2.55

 

                                    At 30 June 2025   At 31 December 2024
 Post-retirement mortality(1)       years             years
 Current pensioners at 65 - male    20.8              20.8
 Current pensioners at 65 - female  23.6              23.6
 Future pensioners at 65 - male     22.8              22.8
 Future pensioners at 65 - female   25.7              25.7

 1  The mortality assumptions reflect the latest available mortality tables
    CMI_2023 (31 December 2024: CMI_2023).

 

In June 2025, the Department for Work and Pensions (DWP) announced forthcoming
legislation to address legal uncertainties arising from the Court of Appeal's
decision in Virgin Media Limited v NTL Pension Trustees Limited. The ruling
raised concerns about the validity of historic benefit changes in occupational
pension schemes under Section 37 of the Pension Schemes Act 1993. To provide
clarity and legal certainty, the government will introduce legislation
allowing pension schemes to retrospectively obtain written actuarial
confirmation that past benefit changes complied with statutory requirements.

 

Prior to the DWP announcement, the trustees of the Group's UK pension schemes
had taken initial legal advice and reviewed historic amendments. There were a
small number of amendments identified but these will need further review to
assess whether any of these amendments will require section 37 certificates.
Where the certificates are required, the trustees plan to take retrospective
action on these amendments. As a result, no material impact is expected on the
Group's financial position or results.

 

13. Related party transactions

Transactions between the Company and its wholly-owned subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its joint venture
undertakings and associates are disclosed below. During the period, Group
companies entered into the following transactions with joint ventures and
associates:

 

                                                      Transactions for the period ended  Current balance outstanding at  Non-current balance outstanding at  Transactions for the period ended  Current balance outstanding at  Non-current balance outstanding at
                                                      30 June                            30 June                         30 June                             30 June                            31 December                     31 December
                                                      2025                               2025                            2025                                2024                               2024                            2024
                                                      £m                                 £m                              £m                                  £m                                 £m                              £m
 Sale of goods and services
 Joint ventures                                       6.3                                0.6                             -                                   10.3                               (0.2)                           -
 Other transactions
 Loan receivable from joint ventures                  -                                  -                               -                                   10.0                               -                               -
 Dividends received - joint ventures                  12.2                               -                               -                                   5.6                                -                               -
 Receivable from consortium for tax - joint ventures  4.3                                4.9                             4.3                                 7.3                                9.4                             10.1
 Total                                                22.8                               5.5                             4.3                                 33.2                               9.2                             10.1

 

Sales of goods and services to joint ventures relates to services provided
including administrative and back office activities to VIVO. The figures for
the period ended 30 June 2024 include a loan receivable balance from VIVO that
was repaid in the period; there is no outstanding balance in the period ended
30 June 2025.

 

14. Notes to the Consolidated Cash Flow statement

 

                                                            Underlying  Non-underlying items  Reported  Underlying  Non-underlying items  Reported
                                                            2025        2025                  2025      2024        2024                  2024
 Period ended 30 June                                       £m                                          £m          £m                    £m
                                                                        £m                    £m
 Profit before tax                                          126.4       (14.3)                112.1     126.9       (12.9)                114.0
 Net finance costs                                          19.4        -                     19.4      15.5        -                     15.5
 Operating profit for the period                            145.8       (14.3)                131.5     142.4       (12.9)                129.5
 Adjustments for:
 Share of profits in joint ventures and associates          (11.7)      -                     (11.7)    (11.2)      -                     (11.2)
 Share-based payment expense                                7.5         -                     7.5       7.8         -                     7.8
 Impairment of intangible assets                            -           -                     -         -           2.0                   2.0
 Amortisation of intangible assets                          4.1         14.3                  18.4      4.0         10.9                  14.9
 Impairment of property, plant and equipment                -           -                     -         (0.3)       -                     (0.3)
 Depreciation of property, plant and equipment              8.8         -                     8.8       8.0         -                     8.0
 Depreciation of right of use assets                        79.2        -                     79.2      66.9        -                     66.9
 Profit on disposal of property, plant and equipment        (0.2)       -                     (0.2)     (0.1)       -                     (0.1)
 Decrease in provisions                                     (11.8)      -                     (11.8)    (3.9)                             (3.9)
 Other non-cash movements                                   0.1         -                     0.1       -           -                     -
 Total non-cash items                                       76.0        14.3                  90.3      71.2        12.9                  84.1
 Operating cash inflow before movements in working capital  221.8       -                     221.8     213.6       -                     213.6
 Decrease/(increase) in inventories                         1.8         -                     1.8       (0.8)                             (0.8)
 Increase in receivables                                    (51.0)      -                     (51.0)    (17.6)      -                     (17.6)
 Increase in payables                                       35.4        -                     35.4      9.3         -                     9.3
 Movements in working capital                               (13.8)      -                     (13.8)    (9.1)       -                     (9.1)
 Cash generated by operations                               208.0       -                     208.0     204.5       -                     204.5
 Tax paid                                                   (13.4)      -                     (13.4)    (15.5)      -                     (15.5)
 Net cash inflow from operating activities                  194.6       -                     194.6     189.0       -                     189.0

 £m

£m

£m

£m

Profit before tax

126.4

(14.3)

112.1

126.9

(12.9)

114.0

Net finance costs

19.4

-

19.4

15.5

-

15.5

Operating profit for the period

145.8

(14.3)

131.5

142.4

(12.9)

129.5

Adjustments for:

Share of profits in joint ventures and associates

(11.7)

-

(11.7)

(11.2)

-

(11.2)

Share-based payment expense

7.5

-

7.5

7.8

-

7.8

Impairment of intangible assets

-

-

-

-

2.0

2.0

Amortisation of intangible assets

4.1

14.3

18.4

4.0

10.9

14.9

Impairment of property, plant and equipment

-

-

-

(0.3)

-

(0.3)

Depreciation of property, plant and equipment

8.8

-

8.8

8.0

-

8.0

Depreciation of right of use assets

79.2

-

79.2

66.9

-

66.9

Profit on disposal of property, plant and equipment

(0.2)

-

(0.2)

(0.1)

-

(0.1)

Decrease in provisions

(11.8)

-

(11.8)

(3.9)

(3.9)

Other non-cash movements

0.1

-

0.1

-

-

-

Total non-cash items

76.0

14.3

90.3

71.2

12.9

84.1

Operating cash inflow before movements in working capital

221.8

-

221.8

213.6

-

213.6

Decrease/(increase) in inventories

1.8

-

1.8

(0.8)

(0.8)

Increase in receivables

(51.0)

-

(51.0)

(17.6)

-

(17.6)

Increase in payables

35.4

-

35.4

9.3

-

9.3

Movements in working capital

(13.8)

-

(13.8)

(9.1)

-

(9.1)

Cash generated by operations

208.0

-

208.0

204.5

-

204.5

Tax paid

(13.4)

-

(13.4)

(15.5)

-

(15.5)

Net cash inflow from operating activities

194.6

-

194.6

189.0

-

189.0

15. Post balance sheet events

 

Dividends

Subsequent to the period-end, the Board has declared an interim dividend in
respect of the period ended 30 June 2025 of 1.45 pence per share.

 

Serco share buyback

The Group has announced its intention to commence a share buyback of up to
£50m. Consistent with the Group's capital allocation policy, the objective of
the programme is to provide additional returns to shareholders as well as aid
the Group in meeting its medium-term leverage targets. The buyback programme
is expected to complete in 2025 with the shares either held in treasury or
cancelled.

 

Change of ownership

On 1 August 2025, Serco Holdings Limited, a subsidiary of Serco Group plc,
entered into an agreement to reduce its shareholding in Khadamat Facilities
Management LLC ('Khadamat') from 49% to 45%. The results of Khadamat as a
joint operation from 1 January 2025 to 30 June 2025 and the comparable period
were consolidated on a proportional basis. Following the change in ownership,
Khadamat will no longer be proportionally consolidated and will be subject to
the equity method of accounting. The material impact to the Group's financial
statements as a result of this transaction is to remove revenue from the
Group's results, which is estimated to be £60m per year. The impact to net
profit and net assets is not material to the Group.

 

Additional information

 

Key performance indicators

We use key performance indicators (KPIs) to monitor our performance, ensuring
that we have a balance and an appropriate emphasis to both financial and
non-financial aspects.

 Key Performance Indicators                    Relevance to strategy
 Underlying operating profit (UOP)             The level of absolute UOP and the relationship of UOP with revenue - i.e. the
                                               margin we earn on what our customers pay us - is at the heart of our
                                               aspiration to be profitable and sustainable. We believe the delivery of
                                               strategic success has potential to support annual revenue growth of 4-6%, in
                                               the medium term, and trading margins of 5-6%.
 Underlying earnings per share (EPS), diluted  EPS builds on the relevance of UOP and further reflects the strength and costs
                                               of our financial funding and tax arrangements. EPS is, therefore, a measure of
                                               financial return for our shareholders.
 Free cash flow (FCF)                          FCF is a reflection of the sustainability of the organisation, by showing how
                                               much of our effort turns into cash to reinvest into the business or to deploy
                                               in other ways. Our philosophy is that we should only win business that
                                               generates appropriate cash returns and we apply disciplined management of our
                                               working capital cash flow cycles.
 Underlying return on invested capital (ROIC)  ROIC measures how efficiently the Group uses its capital to generate returns
                                               from its assets. To be a sufficiently profitable and sustainable business, a
                                               return must be achieved that is appropriately above a cost of capital hurdle
                                               reflective of the typical returns required by our weighting of equity and debt
                                               capital.
 Pipeline of larger new bid opportunities      The pipeline provides a measure of potential for winning new business and,
                                               therefore, is a major input to being profitable and sustainable. The size of
                                               the pipeline and our win-rate on the bids within it are at the heart of our
                                               strategy to grow the business.
 Order book                                    The order book reflects progress with winning and retaining good business and,
                                               as a store of future value, it is a key measure to ensure that the Group is
                                               profitable and sustainable. The value of how much is added to the order book
                                               compared to how much revenue we are billing our customers - the book-to-bill
                                               ratio - is important to achieving long-term growth.

 

Alternative Performance Measures (APMs) reconciliations

 

Overview

In general, APMs are presented externally to meet investors' requirements for
further clarity and transparency of the Group's financial performance. The
APMs are also used internally in the management of our business performance,
budgeting and forecasting, and for determining Executive Directors'
remuneration and that of other Management throughout the business.

 

APMs are non-IFRS measures. Where additional revenue is being included in an
APM, this reflects revenues presented elsewhere within the reported financial
information, except where amounts are recalculated to reflect constant
currency. Where items of income or expense are being excluded in an APM, these
are included elsewhere in our reported financial information as they represent
actual income or expense of the Group, except where amounts are recalculated
to reflect constant currency. As a result, APMs allow investors and other
readers to review different kinds of revenue, profits and costs and should not
be used in isolation. Commentary including in the Group and Divisional Review,
as well as the condensed Consolidated Financial Statements and their
accompanying notes, should be referred to in order to fully appreciate all the
factors that affect our business. We strongly encourage readers not to rely on
any single financial measure, but to carefully review our reporting in its
entirety.

 

Definitions of the Group's APMs is shown in the glossary on pages 47 to 48 and
the reconciliations for each measure are shown as follows:

 

Alternative revenue measures

A reconciliation of reported revenue to the alternative revenue measures is as
follows:

 

                                                   Statutory revenue  Statutory revenue  Organic    Organic    Revenue plus share of joint ventures and associates  Revenue plus share of joint ventures and associates
                                                                                         revenue    revenue
                                                   2025               2024               2025       2024       2025                                                 2024
 Period ended 30 June                              £m                 £m                 £m         £m         £m                                                   £m
 Alternative revenue measure at constant currency  2,465.7            2,359.3            2,419.1    2,359.3    2,702.2                                              2,626.9
 Foreign exchange differences                      (47.2)             -                  (45.1)     -          (47.2)                                               -
 Alternative revenue measure at reported currency  2,418.5            2,359.3            2,374.0    2,359.3    2,655.0                                              2,626.9
 Impact of relevant acquisitions or disposals      -                  -                  44.5       -          -                                                    -
 Share of joint venture and associates             -                  -                  -          -          (236.5)                                              (267.6)
 Reported revenue at reported currency             2,418.5            2,359.3            2,418.5    2,359.3    2,418.5                                              2,359.3

 Organic
 revenue

Revenue plus share of joint ventures and associates

Revenue plus share of joint ventures and associates

2025

2024

2025

2024

2025

2024

Period ended 30 June

£m

£m

£m

£m

£m

£m

Alternative revenue measure at constant currency

2,465.7

2,359.3

2,419.1

2,359.3

2,702.2

2,626.9

Foreign exchange differences

(47.2)

-

(45.1)

-

(47.2)

-

Alternative revenue measure at reported currency

2,418.5

2,359.3

2,374.0

2,359.3

2,655.0

2,626.9

Impact of relevant acquisitions or disposals

-

-

44.5

-

-

-

Share of joint venture and associates

-

-

-

-

(236.5)

(267.6)

Reported revenue at reported currency

2,418.5

2,359.3

2,418.5

2,359.3

2,418.5

2,359.3

Alternative profit measures

A reconciliation of underlying operating profit to reported operating profit
is as follows:

 

                                                                    2025    2024
 Period ended 30 June                                               £m      £m
 Underlying operating profit at constant currency                   148.8   142.4
 Foreign exchange differences                                       (3.0)   -
 Underlying operating profit at reported currency                   145.8   142.4
 Amortisation and impairment of intangibles arising on acquisition  (14.3)  (12.9)
 Reported operating profit at reported currency                     131.5   129.5

 

Underlying EPS

A reconciliation of underlying EPS to reported EPS is as follows:

                                                                       2025       2024     2025       2024
 Period ended 30 June                                                  basic      basic    diluted    diluted
                                                                       pence      pence    pence      pence
 Underlying EPS                                                        9.74       8.65     9.60       8.54
 Non-underlying items:
 Net impact of non-underlying operating items, non underlying tax and  (1.01)     (0.87)   (1.00)     (0.86)
 amortisation and impairment of intangibles arising on acquisition
 Reported EPS                                                              8.73   7.78     8.60       7.68

 basic
 pence

 diluted
 pence

 diluted
 pence

Underlying EPS

   9.74

   8.65

   9.60

   8.54

Non-underlying items:

Net impact of non-underlying operating items, non underlying tax and
amortisation and impairment of intangibles arising on acquisition

   (1.01)

   (0.87)

   (1.00)

   (0.86)

Reported EPS

     8.73

   7.78

   8.60

   7.68

 

Alternative cash flow measures

A reconciliation of underlying operating profit, net cash inflow from
underlying operating activities, free cash flow and trading cash flow is as
follows:

 

                                                                                 2025    2024
 Period ended 30 June                                                            £m      £m
 Underlying operating profit                                                     145.8   142.4
 Less: Share of profit from joint ventures and associates                        (11.7)  (11.2)
 Movement in provisions                                                          (11.8)  (3.9)
 Depreciation, amortisation and impairment of property, plant and equipment and  12.9    11.7
 intangible assets
 Depreciation of right of use assets                                             79.2    66.9
 Working capital movements                                                       (13.8)  (9.1)
 Tax paid                                                                        (13.4)  (15.5)
 Other non-cash movements                                                        7.4     7.7
 Net cash inflow from underlying operating activities                            194.6   189.0
 Dividends from joint ventures and associates                                    12.2    5.6
 Net interest paid                                                               (17.0)  (12.2)
 Capitalised finance costs paid                                                  (2.2)   (1.0)
 Capital element of lease repayments                                             (75.9)  (66.9)
 Proceeds received from exercise of share options                                -       -
 Purchase of own shares to satisfy share awards                                  (5.0)   (22.8)
 Purchase of intangible and tangible assets net of proceeds from disposal        (16.2)  (16.4)
 Free cash flow                                                                  90.5    75.3
 Add back:
 Tax paid                                                                        13.4    15.5
 Net interest paid                                                               17.0    12.2
 Capitalised finance costs paid                                                  2.2     1.0
 Trading cash flow                                                               123.1   104.0
 Underlying operating profit                                                     145.8   142.4
 Trading cash conversion                                                         84  %   73  %

 73  %

Free cash flow to adjusted net debt

A reconciliation from free cash flow to adjusted net debt is as follows:

 

                                                                               2025       2024
 Period ended 30 June                                                          £m         £m
 Free cash flow                                                                    90.5   75.3
 Net cash outflow on acquisition and disposal of subsidiaries, joint ventures  (245.7)    (19.3)
 and associates
 Dividends paid to shareholders                                                (28.6)     (24.5)
 Purchase of own shares                                                        -          (57.6)
 Loans repaid from joint venture                                               -          10.0
 Capitalisation and amortisation of loan costs                                 1.5        0.5
 Cash movements on hedging instruments                                         (13.4)     (0.3)
 Foreign exchange gain/(loss) on adjusted net debt                             36.5       (6.2)
 Movement in adjusted net debt                                                 (159.2)    (22.1)
 Opening adjusted net debt - 1 January                                         (99.8)     (108.7)
 Closing adjusted net debt                                                     (259.0)    (130.8)

   75.3

Net cash outflow on acquisition and disposal of subsidiaries, joint ventures
and associates

   (245.7)

   (19.3)

Dividends paid to shareholders

   (28.6)

   (24.5)

Purchase of own shares

   -

   (57.6)

Loans repaid from joint venture

   -

   10.0

Capitalisation and amortisation of loan costs

   1.5

   0.5

Cash movements on hedging instruments

   (13.4)

   (0.3)

Foreign exchange gain/(loss) on adjusted net debt

   36.5

   (6.2)

Movement in adjusted net debt

   (159.2)

   (22.1)

Opening adjusted net debt - 1 January

   (99.8)

   (108.7)

Closing adjusted net debt

   (259.0)

   (130.8)

 

Reported net debt to adjusted net debt

Reported net debt includes all lease liabilities, including those recognised
under IFRS 16 Leases. A reconciliation of adjusted net debt to reported net
debt is as follows:

 

                                   At 30 June    At 31 December
                                   2025          2024
                                   £m            £m
 Cash and cash equivalents         173.6         183.0
 Loans payable                     (433.5)       (276.4)
 Lease liabilities                 (523.5)       (530.0)
 Derivatives relating to net debt  0.9           (6.4)
 Reported net debt                     (782.5)   (629.8)
 Add back: Lease liabilities       523.5         530.0
 Adjusted net debt                     (259.0)   (99.8)

   183.0

Loans payable

   (433.5)

   (276.4)

Lease liabilities

   (523.5)

   (530.0)

Derivatives relating to net debt

   0.9

   (6.4)

Reported net debt

     (782.5)

   (629.8)

Add back: Lease liabilities

   523.5

   530.0

Adjusted net debt

     (259.0)

   (99.8)

 

Return on invested capital (ROIC)

                                                            At 30 June  At 31 December  At 30 June
                                                            2025        2024            2024
                                                            £m          £m              £m
 ROIC excluding right of use assets
 Non current assets
 Goodwill                                                   915.5       826.2           938.5
 Other intangible assets - owned                            173.6       101.4           117.2
 Property, plant and equipment - owned                      59.5        56.8            55.7
 Interest in joint ventures                                 24.7        25.1            38.1
 Contract assets, trade and other receivables               23.3        26.3            23.1
 Current assets
 Inventory                                                  21.9        24.1            24.9
 Contract assets, trade and other receivables               684.9       631.5           655.7
 Total invested capital assets                              1,903.4     1,691.4         1,853.2
 Current liabilities
 Contract liabilities, trade and other payables             (640.4)     (632.5)         (622.5)
 Non current liabilities
 Contract liabilities, trade and other payables             (105.8)     (82.2)          (80.4)
 Total invested capital liabilities                         (746.2)     (714.7)         (702.9)
 Invested capital                                           1,157.2     976.7           1,150.3
 Two point average of opening and closing invested capital  1,153.8     1,043.8         1,152.9
 Underlying operating profit 12 months                      276.9       273.5           243.2
 Underlying ROIC %                                          24.0  %     26.2  %         21.1  %

 26.2  %

 21.1  %

 

Debt covenants

The principal financial covenant ratios are consistent across the US private
placement loan notes and revolving credit facility, with a maximum
consolidated total net borrowings (CTNB) to covenant EBITDA of 3.5 times and
minimum covenant EBITDA to covenant net finance costs of 3.0 times, tested
semi-annually. A reconciliation of the basis of calculation is set out in the
table below.

 

The covenants exclude the impact of IFRS 16 Leases on the Group's results.

                                                                                  30 June     31 December  30 June
                                                                                  2025        2024         2024
 For the 12 months ended                                                          £m          £m           £m
 Operating profit                                                                     132.1   130.1        213.4
 Remove: Exceptional items                                                        114.5       114.5        (2.6)
 Remove: Amortisation and impairment of intangibles arising on acquisition        30.3        28.9         32.4
 Exclude: Share of joint venture post-tax profits                                 (23.4)      (22.8)       (22.2)
 Include: Dividends from joint ventures                                           37.3        30.8         22.0
 Add back: Net non-exceptional charges/(releases) to OCPs                         5.9         5.7          9.1
 Add back: Net covenant OCP utilisation                                           (2.1)       (2.7)        (2.8)
 Add back: Depreciation, amortisation and impairment of owned property, plant     26.4        25.1         19.5
 and equipment and non acquisition intangible assets
 Add back: Depreciation, amortisation and impairment of property, plant and       4.2         4.4          4.2
 equipment and non acquisition intangible assets held under finance leases - in
 accordance with IAS17 Leases
 Add back: Foreign exchange on investing and financing arrangements               (0.5)       (2.1)        (1.9)
 Add back: Share-based payment expense                                            14.9        15.2         14.2
 Net other covenant adjustments to EBITDA                                         (13.0)      (15.0)       (16.4)
 Pro-forma annualised impact of acquisition                                       25.7        -            -
 Covenant EBITDA                                                                      352.3   312.1        268.9
 Net finance costs                                                                37.0        33.1         29.1
 Exclude: Net interest receivable on retirement benefit obligations               1.4         1.9          2.5
 Exclude: Movement in discount on deferred consideration                          (0.9)       (0.8)        -
 Exclude: Foreign exchange on investing and financing arrangements                (0.5)       (2.1)        (1.9)
 Other covenant adjustments to net finance costs                                  (22.1)      (19.6)       (16.3)
 Covenant net finance costs                                                           14.9    12.5         13.4
 Adjusted net debt                                                                259.0       99.8         130.8
 Obligations under finance leases - in accordance with IAS17 Leases               11.2        13.1         15.2
 Recourse net debt                                                                270.2       112.9        146.0
 Add back: Disposal vendor loan note, encumbered cash and other adjustments       5.3         (3.7)        3.4
 Covenant adjustment for average FX rates                                         26.5        (5.9)        1.2
 CTNB                                                                                 302.0   103.3        150.6
 CTNB / Covenant EBITDA (not to exceed 3.5x)                                      0.86 x      0.33 x       0.56 x
 Covenant EBITDA / Covenant net finance costs (at least 3.0x)                     23.6 x      25.0 x       20.1 x

   130.1

   213.4

Remove: Exceptional items

   114.5

   114.5

   (2.6)

Remove: Amortisation and impairment of intangibles arising on acquisition

   30.3

   28.9

   32.4

Exclude: Share of joint venture post-tax profits

   (23.4)

   (22.8)

   (22.2)

Include: Dividends from joint ventures

   37.3

   30.8

   22.0

Add back: Net non-exceptional charges/(releases) to OCPs

   5.9

   5.7

   9.1

Add back: Net covenant OCP utilisation

   (2.1)

   (2.7)

   (2.8)

Add back: Depreciation, amortisation and impairment of owned property, plant
and equipment and non acquisition intangible assets

   26.4

   25.1

   19.5

Add back: Depreciation, amortisation and impairment of property, plant and
equipment and non acquisition intangible assets held under finance leases - in
accordance with IAS17 Leases

   4.2

   4.4

   4.2

Add back: Foreign exchange on investing and financing arrangements

   (0.5)

   (2.1)

   (1.9)

Add back: Share-based payment expense

   14.9

   15.2

   14.2

Net other covenant adjustments to EBITDA

   (13.0)

   (15.0)

   (16.4)

Pro-forma annualised impact of acquisition

   25.7

   -

   -

Covenant EBITDA

     352.3

   312.1

   268.9

Net finance costs

   37.0

   33.1

   29.1

Exclude: Net interest receivable on retirement benefit obligations

   1.4

   1.9

   2.5

Exclude: Movement in discount on deferred consideration

   (0.9)

   (0.8)

   -

Exclude: Foreign exchange on investing and financing arrangements

   (0.5)

   (2.1)

   (1.9)

Other covenant adjustments to net finance costs

   (22.1)

   (19.6)

   (16.3)

Covenant net finance costs

     14.9

   12.5

   13.4

Adjusted net debt

   259.0

   99.8

   130.8

Obligations under finance leases - in accordance with IAS17 Leases

   11.2

   13.1

   15.2

Recourse net debt

   270.2

   112.9

   146.0

Add back: Disposal vendor loan note, encumbered cash and other adjustments

   5.3

   (3.7)

   3.4

Covenant adjustment for average FX rates

   26.5

   (5.9)

   1.2

CTNB

     302.0

   103.3

   150.6

CTNB / Covenant EBITDA (not to exceed 3.5x)

0.86 x

0.33 x

0.56 x

Covenant EBITDA / Covenant net finance costs (at least 3.0x)

23.6 x

25.0 x

20.1 x

 

Glossary

 

Adjusted net debt

The adjusted net debt measure more closely aligns with the covenant measure
for the Group's financing facilities than reported net debt because it
excludes all lease liabilities recognised under IFRS 16 Leases. Principally as
a result of the Asylum Accommodation and Support Services Contract (AASC), the
Group has entered into a significant number of leases which contain a
termination option. The use of adjusted net debt removes the volatility that
would result from the estimation of lease periods and the recognition of
liabilities associated with such leases where the Group has the right to
cancel the lease. Though the intention is not to exercise the options to
cancel the leases, it is available, unlike other debt obligations.

 

Constant currency

Constant currency is calculated by translating non-Sterling values for the
period ended 30 June into Sterling at the average exchange rates for the prior
year. Constant currency and reported currency are equal for the prior year
numbers.

 

Employee engagement

We use a specialist third party provider to run Viewpoint, our global employee
engagement survey. The survey covers employees, excluding our joint ventures,
and measures engagement in two key areas: how happy employees are working at
Serco and their intention to recommend Serco to others. Our engagement score
incorporates all respondents' perceptions and shows the overall average view
of these two areas when we survey.

 

Exceptional items

IAS 1 Presentation of Financial Statements sets out disclosure requirements
regarding fair representation of information and the composition, labelling,
prominence and consistency of additional line items and subtotals in financial
statements. IAS 1 paragraph 97 requires separate disclosure of the nature and
amount of material items of income or expense. The company uses the term
'exceptional items" to categorise those items which require disclosure under
IAS 1 paragraph 97, but this is not a term defined by IFRS. A level of
judgement is involved in determining what items are classified as exceptional
items. Management considers exceptional items to be outside of normal practice
of the business (i.e. the financial impact is unusual or rare in occurrence),
and are material to the results of the Group by virtue of their size or
nature, and are suitable for separate presentation and detailed explanation.
There is a level of judgement required in determining which items are
exceptional on a consistent basis and require separate disclosure.

 

Free cash flow (FCF)

Free cash flow is the net cash flow from operating activities adjusted to
remove the impact of non-underlying cash flows from operating activities,
adding dividends we receive from joint ventures and associates and deducting
net interest, net capital expenditure on tangible and intangible asset
purchases and the purchase of own shares to satisfy share awards.

 

Invested capital

Invested capital represents the assets and liabilities considered to be
deployed in delivering the trading performance of the business. Invested
capital assets are: goodwill and other intangible assets; property, plant and
equipment; interests in joint ventures and associates; contract assets, trade
and other receivables; and inventories. Invested capital liabilities are
contract liabilities, trade and other payables. Invested capital is calculated
as a two-point average of the opening and closing balance sheet positions. The
invested capital of the Group used in underlying ROIC are for those items for
which resources are or have been committed. This excludes right of use assets
recognised under IFRS 16 Leases as many have termination options and
commitments for expenditure in future years.

 

Order book

The order book reflects the estimated value of future revenue based on all
existing signed contracts, excluding Serco's share of joint ventures and
associates. It excludes contracts at the preferred bidder stage and excludes
the award of new Multiple Award Contracts (MACs), Indefinite
Delivery/Indefinite Quantity (IDIQ) contracts or framework vehicles, where
Serco cannot estimate with sufficient certainty its expected future value of
specific task orders that may be issued under the IDIQ or MAC; in these
situations the value of any task order is recognised within the order book
when subsequently won. The definition is aligned with IFRS15 disclosures of
the future revenue expected to be recognised from the remaining performance
obligations on existing contractual arrangements and therefore excludes
unsigned extension periods and option periods in our US business. Order intake
is the value of business which has been won during the year and typically
includes Serco's share of order intake from its joint ventures and option
periods in our US business.

 

Organic

Organic measures exclude the impact of relevant acquisitions or disposals
(European Homecare, Climatize and MT&S). The prior year figures are
recalculated on a consistent basis with the relevant acquisitions or disposals
removed in the current year and therefore may not agree to the organic revenue
previously reported.

 

Net debt

Net debt is a measure to reflect the net indebtedness of the Group and
includes all cash and cash equivalents and any debt or debt-like items,
including any derivatives entered into in order to manage risk exposures on
these items. Net debt brings together the various funding sources that are
included on the Group's Consolidated Balance Sheet and the accompanying notes.
Net debt includes all lease liabilities, whilst adjusted net debt is derived
from net debt by excluding liabilities associated with leases.

 

Non-underlying items

Included in non-underlying items are exceptional items as well as amortisation
and impairment of intangibles arising on acquisitions, because these charges
are based on judgements about the value and economic life of assets that, in
the case of items such as customer relationships, would not be capitalised in
normal operating practice.

 

Pipeline of large new bid opportunities

Pipeline of large new bid opportunities reflects the estimated aggregate value
at the end of the reporting period of new bid opportunities with annual
contract value (ACV) greater than £10m and which we expect to bid and be
awarded within a rolling 24-month timeframe. It does not include re-bids or
extensions of existing business and the total contract value (TCV) of
individual opportunities is capped at £1bn; also excluded is the potential
value of framework agreements, prevalent in the US in particular where there
are numerous arrangements classed as IDIQ. In this case only the potential
value of any individual task order is included.

 

Revenue plus share of joint ventures and associates

This alternative measure includes the share of revenue from joint ventures and
associates for the benefit of reflecting the overall change in scale of the
Group's ongoing operations, which is particularly relevant for evaluating
Serco's presence in market sectors such as defence and transport. The
alternative measure allows the performance of the joint venture and associate
operations themselves, and their impact on the Group as a whole, to be
evaluated on measures other than just the post-tax result.

 

Trading cash conversion

In order to calculate an appropriate cash conversion metric equivalent to UOP,
trading cash flow is derived from FCF by excluding capitalised finance costs,
interest, non-cash R&D expenditure and tax items. Trading cash conversion
therefore provides a measure of the efficiency of the business in terms of
converting profit into cash before taking account of the impact of capitalised
finance costs, interest, non-cash R&D expenditure, tax and non-underlying
items.

 

Underlying earnings per share (EPS), diluted

Underlying EPS reflects the underlying operating profit measure after
deducting underlying net finance costs and tax. It takes into account any
non-controlling interests share of the result for the period, and divides the
remaining result that is attributable to the equity owners of the Company by
the weighted average number of ordinary shares outstanding, including the
potential dilutive effect of share options, in accordance with IFRS.
Underlying net finance costs and tax are used to calculate underlying EPS to
remove the impact of typical non-recurring or out of period items.

 

Underlying operating profit (UOP)

Underlying operating profit is defined as IFRS operating profit excluding
non-underlying items (as described above). Consistent with IFRS, it includes
Serco's share of profit after interest and tax of its joint ventures and
associates.

 

Underlying return on invested capital (ROIC)

ROIC is calculated as UOP for the period divided by the invested capital
balance (as described above).

Principal risks and uncertainties

 

Risk Management

Since the date of the approval of the Annual Report and Financial statements
our risk management process has continued to operate as described on page 62
of our 2024 Annual Report.

 

The Group Executive Committee and the Risk Committee completed their annual
review of our existing principal and emerging risks in line with our ERM
framework. As a result, whilst all risks remain valid there has been a new
principal risk added and some reshaping of the existing risks proposed. These
were approved at the Risk Committee on 4 August 2025 and remain valid for the
remaining half of the financial year. These and any emerging risks remain
under review on a quarterly basis by the Risk Committee.

 

The following summarises the updated Principal Risk profile for the Group:

 •    Failure to grow profitably: Failure to win material bids or renew material
      contracts profitably, or a lack of opportunities in our chosen markets;
 •    Major information security breach (including cyber-attack, data protection and
      IT service disruption): Loss or compromise of personal, sensitive or
      commercial information or wilful damage;
 •    Impact of emerging technology (including AI and other disruptive technology):
      Failure to anticipate and invest in the right technology and capability to
      remain competitive;
 •    Contract performance, non-compliance or misreporting: Failure to deliver
      internal and customer financial and contractual requirements and to meet
      agreed service performance levels and report against them accurately;
 •    Impacts of significant policy change on our strategy and current portfolio:
      Ability to influence and respond to changing customer requirements and
      ideology shifts;
 •    Significant failure of the supply chain and/or sub-contractor network: Failure
      that may result in Serco being unable to meet customer obligations, perform
      business critical operations or win new business;
 •    Failure to act with integrity: Engagement in significant corrupt, illegal or
      dishonest acts;
 •    Health, safety and wellbeing: The diversity of our operations and the inherent
      risks in our operations in both work and public environments;
 •    Catastrophic incident: Focusing on the risk of an event as a result of our
      actions or failure to respond to an event that results in multiple fatalities,
      severe property/asset damage or loss or very serious long term environmental
      damage; and
 •    Material legal and regulatory compliance failure: Significant loss and damage
      to the Group including exposure to regulatory prosecution, reputational damage
      and the potential loss of licences and authorisations.

 

Further detail on our principal risks and uncertainties as articulated as at
year end 2024 and the associated controls and mitigations can be found on page
65 in our 2024 Annual Report.

 

Statement of Directors' Responsibilities

We confirm that to the best of our knowledge:

 •    The condensed set of financial statements has been prepared in accordance with
      IAS 34 Interim Financial Reporting as adopted for use in the UK;
 •    The interim management report includes a fair review of the information
      required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
      being an indication of important events that have occurred during the first
      six months of the financial year and their impact on the Condensed
      Consolidated Financial Statements and a description of the principal risks and
      uncertainties for the remaining six months of the year;
 •    The interim management report includes a fair review of the information
      required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
      being related party transactions that have taken place in the first six months
      of the current financial year and that have materially affected the financial
      position or performance of the entity during that period; and any changes in
      the related party transactions described in the last annual report that could
      do so.

 

By order of the Board:

 Anthony Kirby          Nigel Crossley
 Group Chief Executive  Group Chief Financial Officer
 6 August 2025          6 August 2025

 

INDEPENDENT REVIEW REPORT TO SERCO GROUP PLC

 

Conclusion

We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2025 which comprises the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Changes in
Equity, the Consolidated Balance Sheet, the Condensed Cash Flow Statement and
related notes 1 to 15. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.

 

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2025 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.

 

Basis for Conclusion

We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.

 

As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".

 

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.

 

This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.

 

Responsibilities of the Directors

The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.

 

In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.

 

Auditor's Responsibilities for the Review of the Financial Information

In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.

 

Use of Our Report

This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.

 

Ernst & Young LLP

Reading

06 August 2025

 

Forward looking statements

This announcement contains statements which are, or may be deemed to be,
"forward looking statements" which are prospective in nature. All statements
other than statements of historical fact are forward looking statements.
Generally, words such as "expect", "anticipate", "may", "could", "should",
"will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" or, in
each case, their negative or other variations or comparable terminology
identify forward looking statements. By their nature, these forward looking
statements are subject to a number of known and unknown risks, uncertainties
and contingencies, and actual results and events could differ materially from
those currently being anticipated as reflected in such statements. Factors
which may cause future outcomes to differ from those foreseen or implied in
forward looking statements include, but are not limited to: general economic
conditions and business conditions in Serco's markets; contracts awarded to
Serco; customers' acceptance of Serco's products and services; operational
problems; the actions of competitors, trading partners, creditors, rating
agencies and others; the success or otherwise of partnering; changes in laws
and governmental regulations; regulatory or legal actions, including the types
of enforcement action pursued and the nature of remedies sought or imposed;
the receipt of relevant third party and/or regulatory approvals; exchange rate
fluctuations; the development and use of new technology; changes in public
expectations and other changes to business conditions; wars and acts of
terrorism; cyber-attacks; and pandemics, epidemics or natural disasters. Many
of these factors are beyond Serco's control or influence. These forward
looking statements speak only as of the date of this announcement and have not
been audited or otherwise independently verified. Past performance should not
be taken as an indication or guarantee of future results and no representation
or warranty, express or implied, is made regarding future performance. Except
as required by any applicable law or regulation (including under the UK
Listing Rules and the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority), Serco expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward
looking statements contained in this announcement to reflect any change in
Serco's expectations or any change in events, conditions or circumstances on
which any such statement is based after the date of this announcement, or to
keep current any other information contained in this announcement.
Accordingly, undue reliance should not be placed on the forward looking
statements.

 

 

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