UK's Serco restores dividend after U.S. work powers profit jump

By Pushkala Aripaka

(Reuters) - British outsourcer Serco resumed its dividend and raised its 2021 forecasts on Thursday, after posting a 20% jump in annual revenue, bolstered by deals that expanded its U.S. operations and an increase in demand for COVID-19 and immigration services.

Serco expects 2021 revenue of about 4.2 billion pounds ($5.95 billion) and an underlying trading profit of around 175 million pounds, about 10 million pounds higher than previously expected.

Its 2020 profit rose 36% to 163.1 million pounds on sales up 20% at 3.88 billion, both in line with a company-provided consensus.

Although the UK outsourcing sector has seen the collapse of Carillion and Interserve, Serco has benefitted from a focus on the public sector, including the country's COVID-19 national test and trace programme.

Its shares rose as much as 10% in morning trade after it offered 1.4 pence dividend for 2020, its first since 2014 when it was forced to restructure after a string of contract failures and profit warnings.

Its performance last year was helped by contracts in Britain and Europe and its business supporting the U.S. Navy.

COVID-19 contracts in 2020 contributed just about 2 million pounds in profit despite revenue of nearly 400 million because of losses from contracts that ended and lower margins.

Regarding this year, CEO Rupert Soames told Reuters: "I think what will happen is ... we will have a very strong first half, but very quickly the test and trace volumes will start to slide away and reduce."

Soames, a grandson of former UK Prime Minister Winston Churchill who took the helm in 2014, said Serco expects its COVID-19-related revenue to be similar to 2020 levels.

($1 = 0.7056 pounds)

(Reporting by Pushkala Aripaka in Bengaluru; editing by Rashmi Aich and Jason Neely)