Serco’s immigration contracts offset end of its Covid work boom
Serco resilient as new immigration contracts offset the end of its Covid-related work boom
- Reported turnover at the outsourcing specialist rose by 2% to £4.53bn in 2022
- The firm said the end of Covid-related work cost it around £480m in revenues
- Serco ran around 20% of Covid-19 testing sites in England and Northern Ireland
Outsourcing specialist Serco saw sales inch up last year despite its Covid-19 contracts winding down.
Reported turnover at the group rose by 2 per cent to £4.53billion in 2022, having expanded by double-digit percentages in the previous two years on the back of extensive pandemic-related work.
The Hampshire-headquartered firm ran around 20 per cent of all coronavirus testing sites in England and Northern Ireland, as well as half the call-handers serving on the controversial NHS Test and Trace programme.
Pandemic work: Serco ran around a fifth of all Covid-19 testing sites in England and Northern Ireland, as well as half the call-handers serving on the NHS Test and Trace programme
All Covid-derived work concluded last year, which Serco said cost an estimated £480million, but it has offset the lost revenue with multiple new contract gains from other industries.
In Britain and Europe, where it derives most business, the company benefited from high demand for immigration services, including its decade-long Home Office deals to provide accommodation for asylum seekers.
Serco also enjoyed significant income from its work in the citizen services, transport and defence sectors, such as a £350million contract with the UK Department of Work & Pensions to help people find jobs under the Restart scheme.
Serco Group shares were the third-best performer on the FTSE 250 Index on Tuesday, rising by 4.7 per cent to 156p.
On top of this, the group won tenders to manage the Fosse Way prison in Leicester, and contract extensions to run London’s Santander cycle hire scheme and support the maintenance of the Hercules C130-J military aircraft at RAF Brize Norton.
Outside the UK, it received £950million in new business wins, mostly in the form of defence deals, from clients in North America, double the amount secured in 2021, and successfully rebid to supply air traffic control services for the United Arab Emirates and Riyadh International Airport in Saudi Arabia.
However, Serco’s underlying trading profit only grew by 4 per cent, partly due to the end of its Covid-related work and Atomic Weapons Establishment contract in the UK.
The company’s overall operating earnings remained flat at £217.2million, while profits for the period plummeted by almost half to £155million as a result of receiving a £111.9million tax credit the previous year.
Nonetheless, recently-appointed chief executive Mark Irwin stated he was ‘immensely proud of the achievements of all my Serco colleagues around the world during 2022 in another year of profound global challenges.’
Irwin took up his post at the beginning of January, replacing Rupert Soames, who helped transform Serco from a firm beset by major scandals and nearing collapse when he arrived into a thriving government services contractor.
His tenure saw Serco shed costs, sell off unprofitable divisions, like its foreign business processing arm, which private equity house Blackstone bought, and prioritise winning public sector contracts.
By the start of the pandemic, Serco had attained its first annual revenue growth in six years and declared its first dividend payout in five years.
On Tuesday, the company announced that it was recommending a 19 per cent hike to its full-year dividend, alongside a £90million share buyback plan for shareholders as a reflection of its performance.