2025 half year results

Companies

Serco Group (SRP)

UK 100

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•	Revenue: £2.4bn, up 5% at constant currency, organic growth of 3% for the Group, 9% in North America.
•	Underlying operating profit: £146m, up 2%; reported operating profit of £132m also 2% higher.
•	Underlying operating margin: strong at 6.0% including 10.6% in North America.
•	Underlying earnings per share: increased 12% to 9.60p.
•	Order intake: very strong at £3.2bn; book-to-bill over 130% with continued good contract win rates. High weighting of awards to defence sector.
•	Cash flow: healthy free cash flow of £91m, good trading cash conversion of 84%.
•	MT&S acquisition completed: integration progressing as planned.
•	Strong financial position: adjusted net debt £259m, leverage of 0.9x net debt to EBITDA.

•	Growing pipeline: £11.9bn, up 6% since end of 2024, highest in over a decade.
•	Increased order book: £14.5bn, 9% higher than end of 2024.
•	Shareholder returns: new £50m share buyback announced today, interim dividend per share of 1.45p, up 8% year-on-year.
•	Defence momentum continues: 12% revenue growth in first half, with over 80% of order intake in the defence sector. MT&S acquisition adds scale and capability; well positioned for growth with rising national defence budgets and long-term global spending commitments.
•	Well placed for full year: revenue and profit unchanged from prior guidance in June. First-half weighting of profit as previously disclosed.

	2024	2025	2025
	Actual	Previous guidance	New guidance
Revenue	£ 4.8 bn	~£4.9bn	~£4.9bn
Organic sales growth	(3)%	~1%	~1%
Underlying operating profit	£ 274 m	~£260m	~£260m
Net finance costs	£ 33 m	~£48m	~£48m
Underlying effective tax rate	25 %	~25%	~23%
Free cash flow	£ 228 m	~£130m	~£130m
Adjusted net debt	£ 100 m	~£245m	~£285m

•	Invest in the business to support organic growth.
•	Increase ordinary dividends to reward shareholders with a growing and sustainable income stream.
•	Selectively invest in strategic acquisitions that add capability, scale or access to new markets, enhance the Group's future potential organic growth and have attractive returns.
•	Return any surplus cash to shareholders through share buybacks or other means.

•	Invest to support organic growth: we have strengthened our business development capabilities in multiple ways, including through expanding specialist sales teams, enhanced training programmes, and refreshed government relations efforts. Deploying new technology platforms and recruitment systems will improve efficiency and competitiveness, while new and expanded partnerships, such as ours with Solutions+ in the Middle East, will enhance future growth opportunities.
•	Increase ordinary dividends: the Board has declared an interim dividend of 1.45 pence per share, an increase of 8% compared to the prior period.
•	Invest in acquisitions: in May, we acquired the Mission Training and Satellite Ground Network Communications Software business (MT&S) from Northrop Grumman. MT&S is a leading provider of services to the US military. We continue to assess other opportunities that are aligned to our strategy and provide potential to enhance future organic growth.
•	Return surplus cash to shareholders: new £50m share buyback announced. This will bring total shareholder returns via buybacks since 2021 to around £390m.

•	An increase in goodwill of £89.3m driven by £140.2m recognised on acquisition of MT&S, offset by £50.9m of adverse foreign exchange.
•	An increase in other intangible assets of £72.2m including £89.3m arising on acquisition of MT&S, partly offset by amortisation of £18.4m.
•	An increase in the net retirement benefit asset of £2.1m primarily in respect of the Serco Pension and Life Assurance Scheme (SPLAS); further details are provided in the pensions section below.
•	Provisions have decreased by £13.1m predominantly due to the settlement of end of contract obligations following the exit of Serco's contract to deliver immigration services in Australia.
•	Cash and cash equivalents have decreased by £9.4m. In the period the Group generated free cash flow of £90.5m and £193.2m from the net advance of loans. This was offset by £28.6m dividends to shareholders and £245.7m related to the acquisition of MT&S.
•	Net loan balances have increased by £157.1m due to the issue of additional USPP notes of £193.2m partially offset by FX of £34.5m.
•	The movement in contract assets, trade receivables and other assets, and, contract liabilities, trade payables and other liabilities are as a result of normal working capital movements.

	2025	2024
	unaudited	unaudited
	£m	£m
Profit for the period	88.6	84.5

Other comprehensive income/(loss) for the period:

Items that will not be reclassified subsequently to profit or loss:
Share of other comprehensive income in joint ventures and associates¹	0.2	0.4
Remeasurements of post-employment benefit obligations²	1.6	(19.9)
Income tax relating to components of other comprehensive income that will not be reclassified subsequently to profit or loss²	0.2	6.3

Items that may be reclassified subsequently to profit or loss:
Net exchange loss on translation of foreign operations²	(38.3)	(2.3)
Fair value gain on cash flow hedges during the period²	1.1	0.2
Total other comprehensive loss for the period	(35.2)	(15.3)

Total comprehensive income for the period	53.4	69.2
Attributable to:
Equity owners of the Company	53.4	68.9
Non-controlling interest	-	0.3

1	Recorded in retained earnings in the Consolidated Statement of Changes in Equity.
2	Recorded in other reserves in the Consolidated Statement of Changes in Equity.

	Share capital	Share premium account	Retained earnings	Other reserves	Total shareholders' equity	Non-controlling interest
	£m	£m	£m	£m	£m	£m
Audited balance as at 1 January 2024	22.1	463.1	659.1	(110.3)	1,034.0	(0.3)
Total comprehensive income/(loss) for the period	-	-	84.6	(15.7)	68.9	0.3
Dividends paid	-	-	(24.5)	-	(24.5)	-
Shares purchased and held in own share reserve	-	-	-	(22.8)	(22.8)	-
Shares committed to be purchased and held in Treasury until cancelled	-	-	-	(12.6)	(12.6)	-
Shares purchased and held in Treasury until cancelled	-	-	-	(57.6)	(57.6)	-
Cancellation of shares held in Treasury	(0.5)	-	(42.2)	42.7	-	-
Expense in relation to share-based payments	-	-	-	7.8	7.8	-
Tax credit on items taken directly to equity	-	-	-	1.5	1.5	-
Unaudited balance as at 30 June 2024	21.6	463.1	677.0	(167.0)	994.7	-

Audited balance as at 1 January 2025	20.5	463.1	524.3	(165.4)	842.5	-
Total comprehensive income/(loss) for the period	-	-	88.8	(35.4)	53.4	-
Dividends paid	-	-	(28.6)	-	(28.6)	-
Shares purchased and held in own share reserve	-	-	-	(5.0)	(5.0)	-
Expense in relation to share-based payments	-	-	-	7.5	7.5	-
Tax credit on items taken directly to equity	-	-	-	1.5	1.5	-
Unaudited balance as at 30 June 2025	20.5	463.1	584.5	(196.8)	871.3	-

Period ended 30 June 2025	UK&E	North America	Asia Pacific	Middle East	Total
Period ended 30 June 2025	£m	£m	£m	£m	£m
Key sectors
Defence	194.5	514.9	89.8	15.3	814.5
Justice & Immigration	692.1	-	120.6	-	812.7
Transport	60.5	37.4	13.4	33.9	145.2
Health & Other Facilities Management	113.2	-	77.1	27.9	218.2
Citizen Services	193.2	168.5	54.4	11.8	427.9
	1,253.5	720.8	355.3	88.9	2,418.5

Period ended 30 June 2024	UK&E	North America	Asia Pacific	Middle East	Corporate	Total
Period ended 30 June 2024	£m	£m	£m	£m	£m	£m
Revenue	1,210.6	656.4	387.4	104.9	-	2,359.3
Result
Underlying operating profit/(loss)	82.9	68.8	7.8	5.7	(22.8)	142.4
Amortisation and impairment of intangibles arising on acquisition	(5.1)	(7.8)	-	-	-	(12.9)
Operating profit/(loss)	77.8	61.0	7.8	5.7	(22.8)	129.5
Net finance cost						(15.5)
Profit before tax						114.0
Tax charge						(29.5)
Profit for the period						84.5
Supplementary information
Share of profits in joint ventures and associates, net of interest and tax	11.2	-	-	-	-	11.2
Total depreciation and impairment of plant, property and equipment and right of use assets	(59.7)	(9.9)	(4.2)	(0.9)	-	(74.7)
Amortisation and impairment of intangible assets	(2.8)	(0.6)	(0.5)	(0.1)	-	(4.0)

1	The Corporate segment assets and liabilities include balance sheet items which provide benefit to the wider Group, including defined benefit pension schemes.
2	Unallocated assets and liabilities include deferred tax, current tax, cash and cash equivalents, derivative financial instruments and loans.
3	Additions to non-current assets reflects additions and amounts arising on acquisition for goodwill, other intangible assets, property plant and equipment and right of use assets.

Year ended 31 December 2024	UK&E	North America	Asia Pacific	Middle East	Corporate	Total
Year ended 31 December 2024	£m	£m	£m	£m	£m	£m
Segment assets
Interests in joint ventures and associates⁵	24.7	-	-	0.4	-	25.1
Other segment assets¹	1,052.2	886.7	136.1	68.6	52.7	2,196.3
Total segment assets⁴	1,076.9	886.7	136.1	69.0	52.7	2,221.4
Unallocated assets²						438.9
Consolidated total assets⁵						2,660.3
Segment liabilities
Segment liabilities⁴	(921.9)	(169.6)	(213.6)	(61.6)	(79.4)	(1,446.1)
Unallocated liabilities²						(371.7)
Consolidated total liabilities						(1,817.8)
Supplementary information
Additions to non-current assets³	280.6	22.5	9.3	11.4	0.2	324.0
Segment non-current assets	826.8	686.5	32.4	22.8	-	1,568.5
Unallocated non-current assets						230.2

	MT&S
	£m
Enterprise value¹	241.6
Provisional working capital and completion account finalisation	4.1
Acquisition of business, net of cash acquired	245.7

	MT&S
Provisional fair value¹	£m
Other intangible assets²	89.3
Property, plant and equipment	2.2
Right of use assets³	6.4
Contract assets, trade and other receivables⁴	20.9
Contract liabilities, trade and other payables	(6.4)
Provisions	(0.5)
Lease obligations³	(6.4)
Net assets acquired⁵	105.5
Goodwill⁶	140.2
Acquisition date fair value of consideration transferred	245.7

1	Due to the limited time since the acquisition was completed and ongoing work to finalise the completion accounts, the fair values of the acquired assets and liabilities have been determined on a provisional basis in accordance with IFRS 3. During the measurement period, which is expected to be less than the 12 months from the acquisition date permitted by IFRS 3, the Group may revise these provisional fair values as further information becomes available.
2	Other intangible assets is the fair value of customer relationships acquired using our best estimate of forecast cash flows discounted to present value.
3	The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right of use assets were measured at an amount equal to the lease liabilities and adjusted to reflect the favourable/ unfavourable terms of the lease relative to market terms.
4	The fair value of acquired contract assets, trade and other receivables was £20.9m. The gross contractual amount was £21.7m, with a loss allowance of £0.8m recognised on acquisition.
5	The fair value of the net assets acquired are prepared on a provisional basis in accordance with IFRS 3. During the measurement period, expected to be 12 months from acquisition date, the Group may amend the fair value.
6	The goodwill for MT&S is attributable to the workforce, expanding capabilities of the Group in the defence sector and the cost synergies expected to arise as a result of the acquisition. Goodwill has been allocated to the North America CGU. All £140.2m of the goodwill balance is expected to be deductible for tax purposes equally over a 15-year period.

	2025	2024
Period ended 30 June	£m	£m
Amortisation of customer relationship intangibles arising on acquisition	(14.3)	(10.9)
Impairment of customer relationship intangibles arising on acquisition	-	(2.0)
Amortisation and impairment of intangible assets arising on acquisition	(14.3)	(12.9)
Total non-underlying items before tax	(14.3)	(12.9)
Non-underlying tax credit	4.0	3.5
Total non-underlying items net of tax	(10.3)	(9.4)

	Earnings	Per share amount	Earnings	Per share amount
Period ended 30 June	2025	2025	2024	2024
Basic EPS	£m	pence	£m	pence
Earnings for the purpose of basic EPS	88.6	8.73	84.2	7.78
Effect of dilutive potential ordinary shares	-	(0.13)	-	(0.10)
Diluted EPS	88.6	8.60	84.2	7.68

•	any obsolescence indicators within the Group's physical assets;
•	any plans to dispose of CGUs or significant portions of CGUs;
•	indicators of worse than expected financial and bidding performance to an extent that would have caused an impairment had they been known at the time of the latest full impairment review;
•	unfavourable market conditions and valuations; and
•	carrying amounts of net assets in excess of market capitalisation.

	At 1 January 2025	Cash flow¹	Acquisitions²	Exchange differences	Non-cash movements³	At 30 June 2025
	£m	£m	£m	£m	£m	£m
Loans payable	(276.3)	(193.2)	-	34.5	1.5	(433.5)
Lease obligations	(530.0)	75.9	(6.4)	3.1	(66.1)	(523.5)
Liabilities arising from financing activities	(806.3)	(117.3)	(6.4)	37.6	(64.6)	(957.0)
Cash and cash equivalents	183.0	(4.1)	-	(5.3)	-	173.6
Derivatives relating to net debt	(6.4)	-	-	7.3	-	0.9
Net debt	(629.7)	(121.4)	(6.4)	39.6	(64.6)	(782.5)

1	In April 2025, we issued US$250m (£193.2m) of US private placement loan notes to support the funding of the MT&S acquisition. The notes were split into three series of US$100m, US$75m and US$75m with maturities of six, eight and ten years respectively. The weighted average interest rate on the new loan notes was fixed at 6.23%. The blended rate on US private placement loan notes in issue at the end of June 2025 was 5.44% (December 2024: 4.88%).
2	Acquisitions represent the net cash/(debt) acquired on acquisition.
3	Non-cash movements on loans payable relate to movement in capitalised finance costs in the period. For lease obligations non-cash movements relate to the net impact of entering into new leases and exiting certain leases before the end of the lease term without payment of a cash termination cost.

	Employee related	Property	Contract	Claims	Other	Total
	£m	£m	£m	£m	£m	£m
At 1 January 2025	79.8	19.8	19.8	25.5	45.4	190.3
Arising on acquisition	-	-	0.2	-	0.3	0.5
Charge capitalised in right of use assets	-	1.1	-	-	-	1.1
Charged to income statement	7.9	1.1	2.3	4.7	6.1	22.1
Released to income statement	(0.5)	(0.4)	(0.5)	(2.1)	(2.1)	(5.6)
Utilised during the period	(17.7)	(0.9)	(1.2)	(2.3)	(6.2)	(28.3)
Exchange differences	(3.5)	0.3	-	-	0.3	(2.9)
At 30 June 2025	66.0	21.0	20.6	25.8	43.8	177.2
Analysed as:
Current	44.6	4.4	9.9	5.3	40.4	104.6
Non-current	21.4	16.6	10.7	20.5	3.4	72.6
	66.0	21.0	20.6	25.8	43.8	177.2

•	Level 1: Inputs derived from unadjusted quoted prices in active markets for identical assets or liabilities.
•	Level 2: Inputs that are observable for the asset or liability, either directly or indirectly, other than quoted prices included within Level 1.
•	Level 3: Inputs are unobservable inputs for the asset or liability.

	2025	2024
Included within the statement of comprehensive income	£m	£m
Actual return on scheme assets	(15.0)	(24.6)
Less: interest income on scheme assets	(24.1)	(23.7)
Net return on scheme assets	(39.1)	(48.3)
Effect of changes in demographic assumptions	3.5	2.3
Effect of changes in financial assumptions	29.4	27.5
Effect of experience adjustments	7.8	(1.4)
Total recognised in the statement of comprehensive income	1.6	(19.9)

	At 30 June 2025	At 31 December 2024
Significant actuarial assumptions	%	%
Discount rate	5.60	5.50
Rate of salary increases	2.70	3.05
RPI Inflation	2.90	3.15
CPI Inflation	2.20	2.55

	At 30 June 2025	At 31 December 2024
Post-retirement mortality¹	years	years
Current pensioners at 65 - male	20.8	20.8
Current pensioners at 65 - female	23.6	23.6
Future pensioners at 65 - male	22.8	22.8
Future pensioners at 65 - female	25.7	25.7

	Transactions for the period ended	Current balance outstanding at	Non-current balance outstanding at	Transactions for the period ended	Current balance outstanding at	Non-current balance outstanding at
	30 June	30 June	30 June	30 June	31 December	31 December
	2025	2025	2025	2024	2024	2024
	£m	£m	£m	£m	£m	£m
Sale of goods and services
Joint ventures	6.3	0.6	-	10.3	(0.2)	-
Other transactions
Loan receivable from joint ventures	-	-	-	10.0	-	-
Dividends received - joint ventures	12.2	-	-	5.6	-	-
Receivable from consortium for tax - joint ventures	4.3	4.9	4.3	7.3	9.4	10.1
Total	22.8	5.5	4.3	33.2	9.2	10.1

Key Performance Indicators	Relevance to strategy
Underlying operating profit (UOP)	The level of absolute UOP and the relationship of UOP with revenue - i.e. the margin we earn on what our customers pay us - is at the heart of our aspiration to be profitable and sustainable. We believe the delivery of strategic success has potential to support annual revenue growth of 4-6%, in the medium term, and trading margins of 5-6%.
Underlying earnings per share (EPS), diluted	EPS builds on the relevance of UOP and further reflects the strength and costs of our financial funding and tax arrangements. EPS is, therefore, a measure of financial return for our shareholders.
Free cash flow (FCF)	FCF is a reflection of the sustainability of the organisation, by showing how much of our effort turns into cash to reinvest into the business or to deploy in other ways. Our philosophy is that we should only win business that generates appropriate cash returns and we apply disciplined management of our working capital cash flow cycles.
Underlying return on invested capital (ROIC)	ROIC measures how efficiently the Group uses its capital to generate returns from its assets. To be a sufficiently profitable and sustainable business, a return must be achieved that is appropriately above a cost of capital hurdle reflective of the typical returns required by our weighting of equity and debt capital.
Pipeline of larger new bid opportunities	The pipeline provides a measure of potential for winning new business and, therefore, is a major input to being profitable and sustainable. The size of the pipeline and our win-rate on the bids within it are at the heart of our strategy to grow the business.
Order book	The order book reflects progress with winning and retaining good business and, as a store of future value, it is a key measure to ensure that the Group is profitable and sustainable. The value of how much is added to the order book compared to how much revenue we are billing our customers - the book-to-bill ratio - is important to achieving long-term growth.

•	Failure to grow profitably: Failure to win material bids or renew material contracts profitably, or a lack of opportunities in our chosen markets;
•	Major information security breach (including cyber-attack, data protection and IT service disruption): Loss or compromise of personal, sensitive or commercial information or wilful damage;
•	Impact of emerging technology (including AI and other disruptive technology): Failure to anticipate and invest in the right technology and capability to remain competitive;
•	Contract performance, non-compliance or misreporting: Failure to deliver internal and customer financial and contractual requirements and to meet agreed service performance levels and report against them accurately;
•	Impacts of significant policy change on our strategy and current portfolio: Ability to influence and respond to changing customer requirements and ideology shifts;
•	Significant failure of the supply chain and/or sub-contractor network: Failure that may result in Serco being unable to meet customer obligations, perform business critical operations or win new business;
•	Failure to act with integrity: Engagement in significant corrupt, illegal or dishonest acts;
•	Health, safety and wellbeing: The diversity of our operations and the inherent risks in our operations in both work and public environments;
•	Catastrophic incident: Focusing on the risk of an event as a result of our actions or failure to respond to an event that results in multiple fatalities, severe property/asset damage or loss or very serious long term environmental damage; and
•	Material legal and regulatory compliance failure: Significant loss and damage to the Group including exposure to regulatory prosecution, reputational damage and the potential loss of licences and authorisations.

•	The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK;
•	The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Condensed Consolidated Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year;
•	The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Anthony Kirby	Nigel Crossley
Group Chief Executive	Group Chief Financial Officer
6 August 2025	6 August 2025