Serco increases scale of share buyback as defence underpins sales rise
Serco Group PLC on Thursday increased the size of its share buyback after reporting improved first-half profitability.
The Hampshire, England-based government services outsourcing provider said pretax profit increased 8.4% to £121.5 million in the six months ended June 30 from £112.1 million the year prior.
Revenue grew 3.7% to £2.51 billion from £2.42 billion a year earlier, in line with guidance for around £2.5 billion provided in June, or by 4% at constant currency. This included strong Defence organic growth of 10%.
Diluted earnings per share rose 10% to 9.50 pence from 8.60p.
The dividend was boosted 10% to 1.60p per share from 1.45p. In addition, Serco raised the size of its share buyback to £150 million from £75 million.
Free cash flow of £65 million was lower than last year's £91 million, but Serco said it is on track for full-year trading cash conversion of at least 80%, in line with its medium-term target.
Chief Executive Anthony Kirby said: "The group achieved good profitable growth in the period, which reflects further strategic and operational execution, with continued double-digit organic growth in Defence, progress in Asia Pacific, and contract performance and productivity enhancements across the business."
Looking ahead, Serco reiterated full-year revenue, profit and free cash flow guidance.
CEO Kirby said this reflects "excellent retention rates, order book visibility, contract mobilisations in the UK and Australia, and an anticipated improvement in the North America procurement environment."
Shares in Serco rose 6.5% to 258.40p each in London on Thursday.
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