Serco upgrades profit forecast as trading improves

The firm, which runs leisure centres in Shropshire and operates waste services in Sandwell, expects to book a full-year underlying trading profit of £90 million to £95 million, up from previous forecasts of £80 million, a 30 per cent to 40 per cent hike on 2017's figure.

Additionally, revenue is set to come in at the top of the range at £2.8 billion.

Serco put this down to a strong performance and cost savings, as well as fewer non-recurring trading items such as end-of-contract settlements.

The company also runs prisons, provides border security, and operates ferries and trains.

In more good news, net debt is now expected to be towards the lower end of a £200 million to £250 million range.

The positive update comes after Serco took a hit to sales in the first half of its financial year and warned that profitability will be knocked when it adopts healthcare contracts from Carillion.

The firm has booked revenues of £1.35 billion for the first half, down from £1.51 billion the year before – a drop of 10.6 per cent.

Serco has been working with Carillion's liquidators to take on some of the contracts held by the firm, which collapsed in January.

The outsourcer expects to take on the service contracts for six NHS hospital sites, bringing in roughly £70 million in extra revenue for the firm.

The new contracts are forecast to add around £4 million to Serco's underlying trading profit.

Serco said there will, however, be an impact on net profitability for 2018 because the company will bear the cost of taking on the contracts, although there will only be a trading contribution for part of the year.