Serco Shares Rise: Full-Year Profit Guidance Lifted, New CFO Appointed

Serco Group plc (SRP.L) shares rose over 3% in early Wednesday trading after the international provider of critical government services updated its financial outlook for 2025, raising profit and cash flow guidance while also providing initial projections for 2026.

The company simultaneously announced the appointment of Mark Reid as Group Chief Financial Officer, succeeding the retiring Nigel Crossley.

The company now anticipates revenue of approximately £4.9 billion for 2025, representing a 3% increase at constant currency, including 1% organic growth.

Underlying operating profit is expected to reach around £270 million, up from £260 million, translating to a margin of 5.5%. Free cash flow guidance has been increased to £170 million, with leverage at approximately 0.9x net debt to EBITDA.

Serco's order intake remains robust, with approximately £5.5 billion in contract awards and a book-to-bill ratio of at least 110%. Defence contracts account for around two-thirds of these awards, primarily in the UK and North America.

The company's pipeline has expanded to a new decade high, driven by continued demand for its services in complex operating environments. Shareholder returns have been a key focus, with the latest £50 million share buyback completed, bringing the total returned to shareholders via buybacks since 2021 to £390 million.

Looking ahead to 2026, Serco anticipates revenue of approximately £5.0 billion, including improved organic growth of around 3%, weighted towards defence.

Initial guidance for underlying operating profit is around £300 million, with an expected margin of approximately 6.0%, driven by contract ramp-ups, MT&S integration, and productivity improvements. Adjusted net debt is projected to be around £150 million for 2026.

Driver Breakdown:

• Defence Sector Strength: A significant portion of new contract wins are in the defence sector, particularly in the UK and North America, reflecting strong demand for Serco's services in this area.
• Operational Efficiency: Initiatives focused on operational excellence have led to a reduction in safety incidents, improved attrition rates, and strong colleague engagement, contributing to improved profitability.
• Strategic Acquisitions: The successful integration of MT&S has expanded Serco's defence capabilities and is expected to contribute to future growth.

Anthony Kirby, Serco Group Chief Executive, stated, “The Group has demonstrated significant strategic and operational progress throughout the year, as we continue our focus on operational excellence, competitiveness and sustainable growth.”

Meanwhile, the company announced the appointment of Mark Reid as Group CFO, succeeding Nigel Crossley. Reid brings over 20 years of international finance experience, including his recent role as Group CFO at Proximus. Nigel Crossley will step down after 11 years with the company, having overseen a period of financial growth and stability.