Outsourcer Serco 's (SRP) results showed it isn't out of the woods yet, triggering an 18 per cent decline in the share price on their release. Analysts concluded that the markets had been too optimistic about a recovery in margins, which remained stubbornly immobile. But there remains some room for optimism. In August, the company raised guidance on underlying trading profit to reach at least £80m, following an earlier raise in May. In the event, this came in at £82.1m, even with the £19m impact from exiting its private sector outsourcing business.
Describing the pipeline for future work, chief executive Rupert Soames referred to six large contracts the group is in contention for as "elephants lurking in the savannah". Winning at least one of these will be important for the group, as it expects the value of its pipeline to decline in 2017. Its value stood at £8.4bn at period end (two years after its nadir of £5bn), and £7bn is due to be decided in the coming year. The future of the US Affordable Care Act is a material concern, as the current contract accounts for 30 per cent of the group's Americas revenue.
Analysts at Peel Hunt are forecasting sales of £3.14bn in 2017, compared with £3.05bn in 2016 (includes discontinued operations).
SERCO (SRP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 117.1p | MARKET VALUE: | £1.29bn | |
| TOUCH: | 117.1-117.2p | 12-MONTH HIGH: | 151p | LOW: 79p |
| DIVIDEND YIELD: | nil | PE RATIO: | 73 | |
| NET ASSET VALUE: | 36p* | NET DEBT: | 27% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 4.91 | 281 | 48.9 | 10.1 |
| 2013 | 4.28 | 108 | 20.1 | 10.6 |
| 2014 | 3.60 | -991 | -151 | 3.1 |
| 2015 | 3.18 | -69.4 | -8.8 | nil |
| 2016 | 3.01 | 29.6 | 1.6 | nil |
| % change | -5 | - | - | - |
*Includes intangible assets of £662m, or 60p a share | ||||
