Immigration work helps Serco overcome end of UK Covid contracts

Serco has upgraded its revenue and profit forecasts for this year as the outsourcer’s income from immigration work offset the end of its Covid-19 and nuclear defence contracts.

The group, which manages services for governments worldwide, said it expected revenue to be between £4.3bn and £4.4bn, and underlying trading profit to be £225mn, in 2022.

The company in February forecast full-year revenue of between £4.1bn and £4.2bn, and underlying profit of £195mn. 

Serco shares rose 8 per cent in early trading on Thursday.

“We have had a strong start to the year, and it is pleasing to be able to increase reported profit guidance to levels approaching last year’s,” said chief executive Rupert Soames in a statement. Last year, Serco posted revenue of £4.4bn and underlying trading profit of £229mn. 

“We are having to replace with other work some £500mn of revenues and over £60mn of contract profits from the ending of Test & Trace and of the [Atomic Weapons Establishment] contract,” Soames added.

Serco ran about a fifth of the Covid testing sites in England and Northern Ireland and provided half of the call handlers for the Test and Trace system in England.

The UK’s Test and Trace programme ended in April and, as a result, related revenues will be around £220mn lower in the first half of 2022. Serco also cited a hit from the loss of its contract to manage facilities that develop warheads for Britain’s nuclear submarines.

However, the company said “immigration-related revenues” in the UK were likely to be about £100mn higher in the first half of 2022 than in the same period last year.