Serco pre-close trading update
Summary by AI BETAClose X
Resilient first-half performance; further margin progression, full-year guidance reiterated
25 June 2026
Serco, the international provider of critical government services, today provides its scheduled trading update for the first six months of 2026.
Good first-half performance expected:
· Revenue: c.£2.5bn, an increase of c.3%, with organic growth of around 1%, including strong growth in UK & Europe.
· Underlying operating profit: c.£155m, with continued productivity improvements and revenue mix delivering margin progression above 6%.
· Pipeline and order intake: pipeline increased to £12.5bn including expansion in North America; over £2bn of contract awards and extensions; order intake of over £500m in Asia Pacific.
· Financial position: adjusted net debt expected to be c.£250m at the end of June, with leverage below 1.0x. The current £75m share buyback to conclude by the end of July.
· Revolving credit facility: refinancing completed in June with the facility increased to £400m and maturity extended to June 2031, which further strengthens the Group's liquidity and financial flexibility.
Confidence in full-year guidance:
· Full-year revenue: guidance for c.£5bn with organic growth of around 3% maintained. UK & Europe is delivering strong sequential organic growth, supported by contract mobilisations in Defence and Justice. In North America, the delays in the procurement environment seen towards the end of 2025 have continued into the first half, though the pipeline of potential new work has expanded further, underscoring our confidence in the region.
· Underlying operating profit: guidance of c.£300m unchanged, with a c.6% margin which is at the upper end of our 5-6% medium term target.
· Financial position: strong free cash flow of £160m expected, with leverage below 1.0x. The Board will review the Group's capital position at the half year.
Commenting on today's update, Anthony Kirby, Serco Group Chief Executive, said:
"The Group has delivered a good first half, with revenue and margin increases including strong organic growth in UK & Europe and progress in our Asia Pacific business. While procurement delays in the US have continued into the first half, we remain confident in the structural drivers of demand which have supported further expansion of our North American pipeline.
"At a time when governments are navigating geopolitical tensions and conflict, our global footprint and sector diversity remains a core strength for Serco, with over half our profits coming from our international business, ensuring financial and operational resilience.
"Our excellent contract retention rates, a strong and growing pipeline, good operational delivery and a robust order book gives us confidence in delivering growth and value for our shareholders in the years to come. As ever, I am grateful for the dedication of our 50,000 colleagues who deliver critical government missions globally, every day."
Good first-half performance; full-year guidance maintained
Revenue: We expect revenue for the first half to be around £2.5bn, c.3% higher than 2025. Organic growth is anticipated to be around 1%, with a c.2% net impact of acquisitions and disposals. Performance in the UK has been strong, supported by contract mobilisations in Defence, improved contract performance in Justice, and higher than expected revenue in immigration-related services. We expect North America to deliver good revenue growth, with the contribution from MT&S more than offsetting the impact of continued procurement delays and against a strong comparative in the first half of 2025. The North American pipeline continues to strengthen reflecting continuing, long-term demand.
In the Middle East, revenue was partially affected by the regional conflict, which has led to some reductions in activity and rescoping of contracts as we work with customers to deliver critical services. There has been a promising start to our partnership with Mubadala, with the signing of several new facilities management and asset support contracts, including with United Arab Emirates University, M42 and Tawazun. As expected, Asia Pacific's revenue declined due to the end of the immigration contract. However, encouraging progress has been made in positioning the region for growth with significant order intake of more than £500m, including five-year extensions for both Acacia Prison and Adelaide Remand Centre, and a one-year extension to provide health services to the Australian Defence Force.
For the year as a whole, revenue guidance is unchanged at c.£5bn, including organic growth of around 3%. The higher organic growth expected in the second half reflects contract mobilisations and expansions in the UK and Australia, the annualisation of the Asia Pacific immigration contract exit, and an expected improvement in the procurement environment in North America.
Underlying operating profit: We expect underlying operating profit to be c.£155m in the first half, up approximately 6% year-on-year. This reflects good operational performance, continued delivery of productivity and efficiency programmes, and disciplined cost control, together with a full period contribution from MT&S. These are expected to more than offset the combined headwind from higher UK National Insurance contributions and the Asia Pacific immigration contract exit in the prior year.
For the full year, guidance for underlying operating profit is unchanged at around £300m, approximately 10% higher than the £272m reported in 2025. The good progress made on margins in the first half underpins an expected c.6.0% margin for the full year, or around 40 basis points higher than 2025. As usual, the second-half margin is expected to moderate relative to the first half including revenue mix effects, while still improving on the comparable period in the second half of 2025.
Financial position: We expect adjusted net debt to be around £250m at the end of June, with leverage below 1.0x. The current £75m buyback is ongoing and will conclude by the end of July, after which the Board will review the Group's capital position. Adjusted net debt is expected to reduce to around £165m by the end of the year reflecting our unchanged guidance for strong free cash flow of approximately £160m. As in previous years, cash generation is expected to be weighted to the second half.
North America CEO transition: Michael LaRouche, CEO of Serco's North America division, has informed us of his intention to take up a CEO role at an international business with a US listing. Michael will remain with Serco to ensure an orderly transition, and a process to appoint his successor is well underway.
Revolving credit facility: We refinanced our revolving credit facility during the period with a new 5-year facility maturing in June 2031, and increased committed standby liquidity from £350m to £400m.
|
Guidance |
|
2025 |
2026 |
|
|
|
|
Actual |
Unchanged guidance |
|
|
Revenue |
|
£4.9bn |
~£5.0bn |
|
|
Organic sales growth |
|
1% |
~3% |
|
|
Underlying operating profit |
|
£272m |
~£300m |
|
|
Net finance costs |
|
£45m |
~£52m |
|
|
Underlying effective tax rate |
|
23% |
~25% |
|
|
Free cash flow |
|
£219m |
~£160m |
|
|
Adjusted net debt |
|
£206m |
~£165m |
|
NB: Guidance uses an average GBP:USD exchange rate of 1.34 in 2026, GBP:EUR of 1.15 and GBP:AUD of 1.90. We expect a weighted average number of shares in 2026 of 980m for basic EPS and 1,000m for diluted EPS.
Sector disclosure
From the 2026 half-year results onwards, we will simplify the additional disclosures provided by sector to align with the capability and investment priorities set out at the 2025 full-year results. These sectors will remain Defence, Justice & Immigration and Citizen Services, with Transport and Health now included within Citizen Services. There are no other changes to sector classification, and restated comparatives for 2024 and 2025 are available on our website at www.serco.com/investors/sectors.
Ends.
For further information, please contact:
Jamie Hastings, Head of Investor Relations | +44 (0) 7718 195 074 | jamie.hastings@serco.com
Scot Marchbank, Group External Communications Director | +44 (0) 7958 675 706 | scot.marchbank@serco.com
About Serco
Serco brings together the right people, the right technology and the right partners to create innovative solutions that make a positive impact and address some of the most urgent and complex challenges facing the modern world.
With a primary focus on serving governments globally, Serco's services are powered by more than 50,000 people working across defence, space, migration, justice, healthcare, mobility and customer services.
Serco's core capabilities include service design and advisory, resourcing, complex programme management, systems integration, case management, engineering, and asset & facilities management.
Underpinned by Serco's unique operating model, Serco drives innovation and supports customers from service discovery through to delivery.
More information can be found at www.serco.com.
Forward looking statements
This announcement contains statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature. All statements other than statements of historical fact are forward looking statements. Generally, words such as "expect", "anticipate", "may", "could", "should", "will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" or, in each case, their negative or other variations or comparable terminology identify forward looking statements. By their nature, these forward looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements. Factors which may cause future outcomes to differ from those foreseen or implied in forward looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws and governmental regulations; regulatory or legal actions, including the types of enforcement action pursued and the nature of remedies sought or imposed; the receipt of relevant third party and/or regulatory approvals; exchange rate fluctuations; the development and use of new technology; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks; and pandemics, epidemics or natural disasters. Many of these factors are beyond Serco's control or influence. These forward looking statements speak only as of the date of this announcement and have not been audited or otherwise independently verified. Past performance should not be taken as an indication or guarantee of future results and no representation or warranty, express or implied, is made regarding future performance. Except as required by any applicable law or regulation (including under the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this announcement, or to keep current any other information contained in this announcement. Accordingly, undue reliance should not be placed on the forward looking statements.
LEI: 549300PT2CIHYN5GWJ21
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 5 hours ago Oxford Nanopore Technologies
- 6 hours ago AVI Global Trust
- 6 hours ago LSL Property Services
- 6 hours ago Bluebird Merchant Ventures (DI)
- 6 hours ago Power Probe PLC