Covid contracts drive Serco to bumper profits and revenues

Serco’s contracts running the Government’s Covid-19 test-and-trace system have helped the outsourcing firm to surpass revenue and profit targets.

The company saw shares rise after it upgraded its performance guidance on Monday, as it also benefited from increased immigration work.

It told investors that it now expects to see £4.4 billion in revenues for the current financial year, ahead of its previous £4.3 billion forecast.

Serco also said it is on track to report underlying profits of at least £225 million, up from its previous forecast of £200 million.

The Hampshire-based outsourcer said several factors helped drive the improved performance, including “higher than anticipated” volumes of Covid-19 support work in the UK and Australia.

A number of immigration-related contracts also performed “better than we expected”, it added.

The business also benefited from additional volumes across its healthcare insurance eligibility services contract in the US after the Biden administration extended its open enrolment period.

Serco said it will give further guidance at its Capital Market Day next month but said it expects next year’s figures to be broadly in line with current analyst expectations.

It said Covid-19 related revenues will reduce next year but it expects these to be offset somewhat by other areas.

The company said: “We expect 2022 to see much lower demand for Covid-19 related services, partially offset by the impact of new work secured in 2021 and growth in our core non-Covid-19 related business.”

Shares in the business were 4.4% higher at 136.5p after early trading.