REG - Serco Group PLC - Trading update

SercoAnnouncement

15/11/2021 07:05

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211115:nRSO3106Sa&default-theme=true

RNS Number : 3106S  Serco Group PLC  15 November 2021

Trading update

15 November 2021

 

Serco today provides an update to 2021 guidance, following stronger than
expected recent trading.

 

Recent trading

Trading has been stronger than we expected in recent months, and we now expect
revenue to be around £4.4bn, and Underlying Trading Profit to be not less
than £225m.  Several factors have driven this improved performance, most of
which are unlikely to repeat.  First, in the UK and Australia, volumes of
work related to Covid-19 support to governments have been higher, and have
continued for longer, than we anticipated.  Second, a number of contracts
across the business have performed better than we expected, notably
immigration-related contracts in the UK and Australia, and our healthcare
insurance eligibility services contract (CMS) in the United States, where the
decision of the Biden administration to extend the open enrolment period has
resulted in additional volumes.  Finally, a number of commercial discussions
that we had expected to complete in 2022 are now anticipated to be finalised
in the current financial year.  Cash generation has also remained strong.

 

Recognising the extraordinary efforts of our colleagues around the world and
the difficulties experienced by many as a consequence of the pandemic, we will
be making an ex-gratia payment to around 52,000 employees, as we did in 2020,
and in addition we will be making a significant one-off commitment to our
recently established Serco People Fund. The fund provides cash and other
support to colleagues who would benefit from a little extra help at this
difficult time.  Together, these initiatives will cost the company around
£10m in the current year.

 

Our revised guidance for 2021 is set out below:

 

                                  2020     2021             2021

Actual
Prior guidance
Latest guidance
 Revenue                          £3.9bn   ~£4.3bn          ~£4.4bn
 Organic sales growth             16%      ~6%              ~10%
 Underlying Trading Profit        £163m    ~£200m           ≥£225m
 Net Finance Costs                £26m     ~£28m            ~£26m
 Underlying effective tax rate    23%      ~25%             ~25%
 Free Cash Flow                   £135m    ~£120m           ~£150m
 Adjusted Net Debt                £58m     ~£250m           ~£220m

  Notes: The guidance uses an average GBP:USD exchange rate of 1.38 in 2021
and GBP:AUD of 1.83.

 

Outlook for 2022

We are yet to complete our budget process for 2022, and we will be working
over the coming weeks to finalise individual budgets and gain Board approval.
 We expect to be ready to give our usual detailed guidance for the year ahead
in conjunction with our Capital Markets Day on 2 December.  At this point, we
do not expect the guidance for revenue and trading profit for 2022 to be
materially different to current analysts' consensus*.  We expect 2022 to see
much lower demand for Covid-19 related services, partially offset by the
impact of new work secured in 2021 and growth in our core non-Covid-19 related
business.

 

*Serco-compiled consensus is £4.2bn of revenue and £196m of Underlying
Trading Profit.  Bloomberg consensus is £4.2bn of revenue and £192m of
Underlying Trading Profit as at 12 November 2021.

 

This announcement contains inside information.

 

Ends

 

For further information please contact:

Paul Checketts, Head of Investor Relations, tel: +44 (0) 7718 195 074 or
email: paul.checketts@serco.com (mailto:paul.checketts@serco.com)

Marcus De Ville, Head of Media Relations, tel: +44 (0) 7738 898 550 or email:
marcus.deville@serco.com (mailto:marcus.deville@serco.com)

 

About Serco

Serco is a leading provider of public services. Our customers are governments
or others operating in the public sector.  We gain scale, expertise and
diversification by operating internationally across five sectors and four
geographies: Defence, Justice & Immigration, Transport, Health and Citizen
Services, delivered in UK & Europe, North America, Asia Pacific and the
Middle East.

 

More information can be found at www.serco.com (http://www.serco.com)

 

LEI: 549300PT2CIHYN5GWJ21

 

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" and
similar expressions 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 presentation 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, Serco expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward looking statements
contained in this presentation 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 presentation, or to keep current any
other information contained in this presentation.  Accordingly, undue
reliance should not be placed on the forward-looking statements.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTEAFFLFAXFFAA