It's been a long road back for Serco (SRP). The outsourcer's shares still trade below where they were a year ago, when they plunged 18 per cent following a lack of progress on margins. Since then, the group has struggled against general bearishness about the outsourcing sector, exacerbated by the dramatic collapse of Carillion (CLLN) and recent troubles at Capita (CPI) and Interserve (IRV).
So, given the general industry malaise, and a previous succession of profit warnings, Serco’s performance in 2017 was commendable. It delivered underlying trading profit of £69.8m, right at the top of its £65m-£70m guidance, and revealed net debt of £141m, a full £9m below the low end of the previously guided target range. Investors welcomed the news, even though the group again suspended its dividend for the year.
Efforts to improve efficiency have continued, with the group stripping out a further £20m in costs during the year. It has now removed over £100m in overheads, which is expected to lead to margin improvements in 2018. As a result, analysts at Peel Hunt have increased their adjusted pre-tax profit forecast and now expect £65m in 2018, giving EPS of 4p, from £62.5m and 3p previously (from £69.8m and 3.42p in 2017).
| SERCO (SRP) | ||||
| ORD PRICE: | 95p | MARKET VALUE: | £1.04bn | |
| TOUCH: | 94.8-95p | 12-MONTH HIGH: | 133p | LOW: 82p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 28p* | NET DEBT: | 46% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 4.28 | 108 | 20.1 | 10.6 |
| 2014 | 3.60 | -991 | -151 | 3.1 |
| 2015 | 3.18 | -69 | -8.80 | nil |
| 2016** | 3.01 | 30 | 1.55 | nil |
| 2017 | 2.95 | 19 | -0.02 | nil |
| % change | -2 | -35 | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £618m, or 56p a share **Restated | ||||
