Serco increases bet on German immigration market

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Serco has increased its bet on German demand for immigration services with the acquisition of private provider European Homecare for €40mn, as the outsourcer forecast increases in revenue and profit.

The deal is the London-listed contractor’s second in continental Europe in just over a year, after it bought Swiss immigration services company ORS in September 2022, which also operates in Germany.

On Thursday Serco chief executive Mark Irwin said European Homecare “would complement our ORS operations” and give it a stronger foothold in Europe.

“There are complex and growing requirements for immigration and asylum seeker support services globally,” he said. “Increasing our presence in Germany will expand the immigration support we already provide to government customers in the UK, Australia and across Europe.”

Serco, which manages services for governments worldwide, said acquisitions and strong demand for immigration and defence services would help push revenue up 7 per cent to £4.8bn in the current financial year.

The company is expecting underlying operating profits to rise 3 per cent to £245mn. Shares rose 4.2 per cent in morning trading in London.

European Homecare is a private provider of immigration services in Germany with more than 2,000 employees. The company manages over 100 facilities and provides accommodation and support to more than 36,000 people seeking asylum. The group’s revenue is expected to be about €150mn in the year ending December 31, and Serco is acquiring the business from Korte-Stiftung.

The push into Europe comes as Serco said it had experienced a slowdown in immigration volumes in the UK.

The company said that although “ongoing demand” for immigration services in the UK would contribute to growth in underlying profits in the current financial year, immigration volume growth had eased in the second half.

Serco said it would also be affected next year by the government’s “efforts to reduce the number of asylum seekers being accommodated in hotels”. The UK is preparing to end contracts with 50 of the 400 hotels it uses to house prospective asylum seekers by the end of January.

As a result of that change, and factors including exits from old contracts, revenue is likely to be around £4.8bn in its 2024 financial year, the same as in 2023.

Serco said it anticipated that underlying operating profit would grow 6 per cent in 2024.

The outsourcer said growth in its immigration and defence sectors had “more than offset” the loss of Covid-19 related work this year.

The company ran about a fifth of the Covid-19 testing sites in England and Northern Ireland. It also provided half of the call handlers for the test-and-trace system in England.