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Serco - Full year results show underlying progress

Steve Clayton | 25 February 2016 | A A A
Serco - Full year results show underlying progress

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Serco Group plc Ordinary 2p

Sell: 131.70 | Buy: 132.00 | Change -3.90 (-2.87%)
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Serco have announced an underlying trading profit of £96m in their full year results, down 18% on last year but ahead of guidance given last March, causing shares to rise 10% in early trading.

Revenue declined 11%, to £3,514m, with the group reporting an operating loss of £54.8m for the year, a significant improvement on a loss of £1.3bn in 2014.

Net debt falls from £605m to £78m, following last year's rights issue and sale of the offshore BPO business, resulting in a net debt to EBITDA ratio of around 0.5x. Free cash outflow was £16m, better than previous guidance.

The group signed contracts worth £1.8bn in 2015. This includes £0.5bn of new business with the remainder made up of extensions to existing contracts or successful re-bidding. Win rates were about 50% for new bids and 90% for rebids/extensions, although by value this declined to 20% and 75% respectively.

Overall the value of the group order book fell by £1.6bn over the year to £10bn. The pipeline of larger new bid opportunities increased 30% to £6.5bn for 2016.

As expected the group will not pay a dividend this year, nor has it indicated when dividends will be resumed.


The group reiterates its previous guidance for 2016 with revenue expected to fall to approximately £2.8bn, visibility on 90% of which is provided by the current order book. Underlying trading profit is expected to fall to £50m.

The sale of the offshore BPO unit is expected to reduce revenues by £300m and underlying trading profit by over £20m. Contracts drawing to an end across the rest of the group are expected to hit revenues by a further £500m resulting in a £40m drop in profit.

Net debt at the end of 2016 is expected to be around £200m, equivalent to leverage of 2x EBITDA.

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