Serco defies outsourcing gloom with strong profit forecasts

Government contractor Serco on Thursday defied the recent gloom in Britain’s outsourcing sector and stuck to upgraded profit forecasts.

Chief executive Rupert Soames, who is leading a turnaround of the FTSE 250 firm, said it had had a strong 2018 after “reducing our costs, stabilising revenues, and winning a number of important contracts”.

He hailed a number of large international contract renewals that boosted the business, including work worth £75 million to provide support for the Australian Defence Force’s military base in the Middle East.

The outsourcer said underlying trading profit in the year to December 31 will increase 30%-40% to between £90 million and £95 million, and rise further next year. That is up from guidance of £80 million at the start of 2018.

The City cheered the news, with shares up 6.9p, or more than 7%, to 96.3p.

Serco’s rise comes despite a difficult year for the sector with Carillion’s collapse and Interserve seeking a rescue deal.

Soames said the Government is “beginning to get tough with suppliers that don’t pay subcontractors on time”.