Shares in outsourcing firm Serco (SRP) hit a two-year high, up 8% to 147p, after it delivers an upbeat first half trading update.
Thanks to strong order intake in the last six months, full year revenues are now expected to be at the top end of the forecast range of £2.9bn to £3bn.
THREE YEARS ON THE BOUNCE
New orders in the first half were more than £3bn which is higher than the firm’s projected full year revenues. This marks the third year in a row that the book-to-bill ratio as it’s known is above one to one.
Revenues for the first half are expected to be £1.5bn while underlying trading profits will be around £50m, 20% higher than the same period a year ago.
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Chief executive Rupert Soames is in ebullient mood.
‘Following a strong 2018, which marked an inflection point for Serco after several years of decline, we expect to report another good performance in the first half of 2019.’
Interestingly, and encouragingly for investors, Soames also confirms margins improving on the first half last year.
US ACCELERATION
The company has seen strong revenue growth in North America and last month added ‘materially’ to its scale and capabilities in the US market with the purchase of the NSBU ship- and submarine-building business, which we covered here.
While the focus has been on foreign markets, understandably given the weak spending environment in both the private and public sector in the UK, it’s worth noting that the health facilities management business acquired from Carillion and integrated in the third quarter last year is paying its way.
Of the 6% revenue growth in the first half of this year, a third is down to the Carillion business while the rest is due to organic growth in the US and Asia.
