FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
Global provider of government services, Serco Group, has reported a strong performance in its full year results 2024.
Group revenue of £4.8bn in 2024, was in line with guidance, underlying operating profit increased by 10% in the full year to £274m, although reported operating profit dropped to £130m, due to an exceptional £115m non-cash goodwill impairment charge in Asia Pacific.
Order intake increased by +7% to £4.9bn in 2024, with a book-to-bill ratio of 102%, and an order book of £13.3bn.
Serco also reports “good momentum” into 2025, with the Group’s focus remaining steadfast on reinforcing its market positioning by concentrating on growth, operational excellence and competitiveness.
The outlook for 2025 anticipates revenue will be similar to 2024 with underlying organic growth of 7% offsetting reductions in the UK and Australian immigration contracts. Underlying operating profit will reduce only slightly despite previously advised headwinds from immigration and higher UK national insurance contributions. The conversion of profit to cash will continue to be strong at over 80%, contributing to a strong balance sheet.
Serco has entered the year with the highest level of potential new work in its pipeline in more than a decade at £11.2bn, 11% higher than prior year end. Post the period end Serco secured a landmark UK Armed Forces Recruitment Service contract with an estimated value of £1.0bn over the initial seven-year term and up to £1.5bn should the Ministry of Defence elect to exercise all three one-year extension options beyond the initial term.
Serco’s acquisition of leading US Defence business, MT&S from Northrop Grumman has been agreed and is expected to complete in mid-2025, resulting in a US$2bn North America business delivering 10% margins, and a £2bn Defence business across the Group.
Mark Irwin, Serco Group Chief Executive, said: “Our 2024 results reflect another year of strong operational and financial delivery across the Group.
“We accelerated trading momentum through the second half of the year, which allowed us to achieve full year revenue in line with guidance, underlying operating profit up 10%, a 60 basis point increase in margins and deliver significantly more free cash flow than initially expected. We had excellent order intake of £4.9bn resulting in a robust £13bn order book, and we ended the year with a strong pipeline of qualified new business opportunities exceeding £11bn to underpin future growth.
“Our strong balance sheet has enabled delivery against all our capital allocation priorities by investing in organic business development, increasing our dividend by 22% and completing the planned share buyback of £140m; and, as announced in January, we have agreed the strategically important and financially compelling acquisition of MT&S from Northrup Grumman, which we expect to complete in mid-2025. MT&S will transform our capabilities in the critical areas of technology-enabled military training and satellite ground network software services. The combination of Serco and MT&S further enhances the growth potential of our US platform and our international defence business.
“Our people have always been at the heart of our business, and we are pleased that colleague engagement improved from already high levels, attrition rates are markedly reduced and importantly, we have achieved significant improvement in safety outcomes across the business. I am immensely proud of the commitment of all my Serco colleagues around the world and remain deeply grateful for their contribution to our success.
“In a global environment of continuous change and increasing complexity, Serco’s purpose to impact a better future by enabling more efficiency and greater agility in the delivery of critical services for governments has never been more relevant. We enter 2025 with confidence that we will continue to deliver profitable growth and make further progress in executing our strategy to create value for customers and shareholders.”
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