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Britain's Serco boosts profit outlook as immigration work booms

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·2-min read
FILE PHOTO: A drive-through testing centre following the outbreak of the coronavirus disease (COVID-19) in Bolton, Britain
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By Sachin Ravikumar

(Reuters) - British public services outsourcer Serco boosted its forecasts for annual profit and revenue in a surprise move on Thursday buoyed by stronger demand for immigration services from governments in the UK and Australia.

Serco now expects underlying trading profit of 225 million pounds ($283 million) in 2022, some 30 million pounds above of its previous estimate.

It now expects 2022 revenue of 4.3 billion-4.4 billion pounds, up from its earlier estimate of up to 4.2 billion. The company made 4.4 billion pounds in revenue last year.

Shares in the FTSE 250 firm were up nearly 10% to 167.6 pence on the London Stock Exchange by 1030 GMT following the news.

Serco, led by former British Prime Minister Winston Churchill's grandson Rupert Soames, provides border control, immigration and defence services to governments, as well as a range of other work in healthcare and transport.

The company said its work on Britain's COVID-19 test-and-trace programme had ended but it should largely offset that lost revenue from other government work around the world, particularly as immigration-related services see higher demand.

"It's very difficult to process the number of people that they have seeking immigration status in the UK and Australia," Soames said in an interview, noting the easing of COVID restrictions was driving up demand

Serco's UK & Europe business should benefit from around 100 million pounds of additional revenue from immigration compared with last year, as well as from Britain's Restart Scheme, a job support programme, the company said. The UK is Serco's largest market by revenue.

"Serco's relationship with the government has strengthened during the (COVID) crisis," analysts at Liberum wrote in a note. "We expect Serco to win its fair share of contracts over the next year."

($1 = 0.7961 pounds)

(Reporting by Sachin Ravikumar in Bengaluru; editing by Subhranshu Sahu and Jason Neely)

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