There was finally a bit of good news from the outsourcing sector. Serco (SRP) expects underlying trading profits to come in around the top end of its guided range for 2017. Management expects underlying profits of £65m-£70m this year. In addition, closing net debt is expected to be towards the lower end of the £150m to £200m range.
Profits in the second half of the year are expected to be about 10 per cent higher than the same period in 2016, which analysts at Peel Hunt took to imply an even split of profits between the first and second halves of the year. Growth is expected to continue into 2018 and 2019, with continued margin improvements leading to underlying trading profit of around £80m in 2018 and 2019 profit broadly in line with consensus. Sharepad puts the consensus for adjusted trading profit at around £102m for 2019.
Serco has also signed the purchase agreement for its acquisition of a portfolio of health facilities management contracts from support services group Carillion (CLLN). They will be bought on a debt-free, cash-free basis and the total cost will be £47.7m. Full transition of operations is expected by the end of 2018. The contracts have annual revenues of around £90m and a weighted average remaining term of 14 years.
