Serco Group expects earnings to increase in 2024 despite forecasting flat revenues for the year, as the group ramps-up its asylum and immigration services.
The outsourcing giant forecasts making a £260million underlying operating profit in 2024, supported by the ramp-up of new contracts, operational efficiencies and recent acquisitions.
But the company predicts annual turnover will total around £4.8billion due to its exit from specific low-margin contracts and the UK Government’s plans to reduce the number of asylum seekers in hotels.
Outlook: Serco forecasts making a £260million underlying operating profit in 2024
By comparison, Serco expects revenue to expand by 7 per cent this year, thanks partly to demand from the defence and immigration sectors.
This has helped offset the loss of pandemic-related work, which provided £1.1billion of the firm’s income across 2020 and 2021, but has now ended following the removal of lockdown curbs.
Serco managed about 20 per cent of all coronavirus testing sites across England and Northern Ireland, and employed half the call handlers operating on the NHS Test and Trace programme.
The business is now winning significant contracts from the immigration and justice sectors, especially in the UK.
It is also expanding into providing immigration services across Europe, buying Swiss-based ORS in September last year for £39million.
And on Thursday, Serco announced it would acquire European Homecare (EHC), an immigration services company in Germany, from Korte-Stiftung for €40million (£34million).
EHC employs about 2,000 people who work to provide accommodation, medical and social care, training, and education for more than 36,000 asylum seekers.
Mark Irwin, Serco’s chief executive, said: ‘This strategic acquisition will complement our ORS operations and strengthen our position as a leading partner in immigration services for European governments.’
‘There are complex and growing requirements for immigration and asylum seeker support services globally, and we have a strong track record of providing high standards of service.’
Irwin was promoted to his position at the beginning of 2023, having previously run Serco’s UK and Europe, and Asia-Pacific divisions.
He succeeded Rupert Soames, who stood down after an eight-year spell turning around a business whose reputation was heavily damaged by an electronic tagging scandal.
During his tenure, Serco sold off multiple divisions, changed its focus towards gaining public sector contracts, and expanded into Asia and North America.
Soames, a grandson of Sir Winston Churchill, was recently named the next president of the Confederation of British Industry, which itself has been shaken by controversy this year over sexual misconduct allegations.
Serco Group shares were 4.2 per cent higher at 161.8p on Thursday morning amid a broader rally across the London markets.
