REG - Serco Group PLC - Serco completes acquisition of MTS

SercoAnnouncement

27/05/2025 07:00

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RNS Number : 0840K  Serco Group PLC  27 May 2025

 

MT&S acquisition completed

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

27 May 2025

 

Completion of MT&S acquisition

Serco Inc, a US subsidiary of Serco, has completed the acquisition of Northrop
Grumman's mission training and satellite ground network communications
software business (MT&S) following receipt of the necessary regulatory
approvals.  MT&S provides the US military with advanced mission training
services, and software that enhances satellite ground network efficiency.

 

As previously announced, MT&S is expected to generate revenue of around
$300m (£225m)(1) and underlying operating profit of $34m (£25m)(1) in 2025,
before transaction and integration costs.

 

Following completion, Serco will benefit from approximately seven months of
MT&S' financial performance in 2025, contributing an estimated $175m
(£130m) of revenue and $20m (£15m) of underlying operating profit, with
transaction and integration costs expected to be around $10m (£8m).  The
transaction will be mid-single digit accretive to underlying EPS in 2026, the
first full year of ownership.

 

Anthony Kirby, Group Chief Executive, said: "Following this acquisition,
defence will be our largest sector, representing approximately 40% of Group
revenue(1), with operations in all our major geographies.  North America will
represent approximately 50% of Group underlying operating profit.

 

"This acquisition, our fifth in defence since 2019, strengthens our position
for future organic growth through increased scale, our breadth of solutions
and builds upon the excellent new business and retentions we have secured in
defence so far in 2025."

 

Updated guidance for 2025

We update guidance to reflect the anticipated seven-month financial
contribution from MT&S, associated transaction and integration costs, as
well as recent exchange rates.  Since our last issued guidance on 27
February, the adverse translational impact of currency movements for 2025 is
estimated to be £90m for revenue and £7m for underlying operating profit.

 

                                2024      2025            2025      2025     2025
                                Actual    Prior guidance  MT&S      FX       New guidance
 Revenue                        £4,787m   ~£4.8bn         £130m     (£90m)   ~£4.8bn
 Organic sales growth           (3)%      ~0%             -         -        ~0%
 Underlying operating profit    £274m     ~£260m          £7m       (£7m)    ~£260m
 Net finance costs              £33m      ~£40m           £9m       (£1m)    ~£48m
 Underlying effective tax rate  25%       ~25%            -         -        ~25%
 Free cash flow                 £228m     ~£135m          (£2m)     (£3m)    ~£130m
 Adjusted net debt              £100m     ~£10m           £260m     (£25m)   ~£245m

 

NB: Guidance uses an average GBP:USD exchange rate of 1.31 in 2025, GBP:EUR of
1.18 and GBP:AUD of 2.07.  The GBP:USD spot rate of 1.34 has been used for
acquisition consideration and the estimated financial contribution of MT&S
for 2025. We expect a weighted average number of shares in 2025 of 1,015m for
basic EPS and 1,035m for diluted EPS.

 

A pre-close trading update is scheduled for 26 June 2025.

Notes

(1) Estimated calendar year 2025 revenue, underlying operating profit assuming
the business was under Serco ownership and included in numbers from 1 January
2025.

(2) Revenue mix including Serco's share of joint ventures.

 

Ends.

 

 

For further information, please contact:

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

 

 

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 (http://www.serco.com)

 

LEI: 549300PT2CIHYN5GWJ21

 

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