Serco Group PLC
LSE:SRP
Serco Group PLC
Serco Group PLC, a British multinational outsourcing company, has carved out a niche for itself by intertwining some of the most complex threads of public service delivery into a coherent and efficient tapestry. Founded in 1929 as a division of RCA, Serco has evolved into a leading contractor managing a vast array of services for governments and private entities around the globe. Its presence spans sectors such as defense, transport, health, justice, and immigration. By leveraging its extensive expertise, Serco manages everything from rail systems in the UK to air traffic control in the Middle East, demonstrating an adeptness in navigating regulatory environments and understanding the intricate demands of public services.
The financial heartbeat of Serco lies in its business model, focused on long-term contracts that provide stable revenue streams and growth opportunities. These contracts often arise from outsourcing agreements wherein Serco operates services more efficiently than governments or private sectors would do on their own. Serco excels by maintaining robust cost controls, innovative service solutions, and the ability to scale operations effectively. Through a careful balance of winning new contracts and renewing existing ones, Serco ensures a consistent flow of revenue, making it a critical partner in the delivery of essential public services and a significant player in the outsourcing industry.
Serco Group PLC, a British multinational outsourcing company, has carved out a niche for itself by intertwining some of the most complex threads of public service delivery into a coherent and efficient tapestry. Founded in 1929 as a division of RCA, Serco has evolved into a leading contractor managing a vast array of services for governments and private entities around the globe. Its presence spans sectors such as defense, transport, health, justice, and immigration. By leveraging its extensive expertise, Serco manages everything from rail systems in the UK to air traffic control in the Middle East, demonstrating an adeptness in navigating regulatory environments and understanding the intricate demands of public services.
The financial heartbeat of Serco lies in its business model, focused on long-term contracts that provide stable revenue streams and growth opportunities. These contracts often arise from outsourcing agreements wherein Serco operates services more efficiently than governments or private sectors would do on their own. Serco excels by maintaining robust cost controls, innovative service solutions, and the ability to scale operations effectively. Through a careful balance of winning new contracts and renewing existing ones, Serco ensures a consistent flow of revenue, making it a critical partner in the delivery of essential public services and a significant player in the outsourcing industry.
Revenue: Serco reported revenue of £4.5 billion for 2022, up just over 2%, with growth driven by acquisitions and strong performance in core business excluding COVID-related work.
Profit: Underlying trading profit was £237 million, up 4% from 2021, and exceeded both initial guidance (£195 million) and December pre-close indications.
Margins: Group profit margins remained stable at 5.2%; international regions delivered increased profits and margins, now accounting for 75% of group profit before corporate costs.
Cash Generation: Free cash flow was £159 million with cash conversion close to 100%; balance sheet remains strong with leverage at 0.8x EBITDA.
Dividends & Buybacks: Dividend per share increased 19% to £0.0286; £90 million share buyback completed in 2022, with a further £90 million buyback planned for 2023.
Guidance: 2023 guidance is maintained with revenue expected to be at least £4.6 billion, underlying trading profit of around £235 million, and free cash flow of about £120 million.
Order Intake & Pipeline: Order intake and pipeline remain strong, with a qualified pipeline of £8.4 billion and an order book of £14.8 billion.
Operational Highlights: Notable growth in North America and immigration services; successful integration of acquisitions and ongoing focus on technology and productivity improvements.
