Serco Group Plc (LON:SRP) has provided an update on trading, reporting increased pipeline and order intake, maintaining full-year guidance and highlighting a strengthened financial position.
Pipeline and order intake: pipeline increased to £12.5bn including expansion in North America; over £2bn of contract awards and extensions; order intake of over £500m in Asia Pacific.
Financial position: adjusted net debt expected to be c.£250m at the end of June, with leverage below 1.0x. The current £75m share buyback to conclude by the end of July.
Revolving credit facility: refinancing completed in June with the facility increased to £400m and maturity extended to June 2031, which further strengthens the Group’s liquidity and financial flexibility.
Confidence in full-year guidance:
Full-year revenue: guidance for c.£5bn with organic growth of around 3% maintained. UK & Europe is delivering strong sequential organic growth, supported by contract mobilisations in Defence and Justice. In North America, the delays in the procurement environment seen towards the end of 2025 have continued into the first half, though the pipeline of potential new work has expanded further, underscoring our confidence in the region.
Underlying operating profit: guidance of c.£300m unchanged, with a c.6% margin which is at the upper end of our 5-6% medium term target.
Financial position: strong free cash flow of £160m expected, with leverage below 1.0x. The Board will review the Group’s capital position at the half year.
Commenting on today’s update, Anthony Kirby, Serco Group Chief Executive, said:
“The Group has delivered a good first half, with revenue and margin increases including strong organic growth in UK & Europe and progress in our Asia Pacific business. While procurement delays in the US have continued into the first half, we remain confident in the structural drivers of demand which have supported further expansion of our North American pipeline.
“At a time when governments are navigating geopolitical tensions and conflict, our global footprint and sector diversity remains a core strength for Serco, with over half our profits coming from our international business, ensuring financial and operational resilience.
“Our excellent contract retention rates, a strong and growing pipeline, good operational delivery and a robust order book gives us confidence in delivering growth and value for our shareholders in the years to come. As ever, I am grateful for the dedication of our 50,000 colleagues who deliver critical government missions globally, every day.”
Good first-half performance; full-year guidance maintained
Revenue: We expect revenue for the first half to be around £2.5bn, c.3% higher than 2025. Organic growth is anticipated to be around 1%, with a c.2% net impact of acquisitions and disposals. Performance in the UK has been strong, supported by contract mobilisations in Defence, improved contract performance in Justice, and higher than expected revenue in immigration-related services. We expect North America to deliver good revenue growth, with the contribution from MT&S more than offsetting the impact of continued procurement delays and against a strong comparative in the first half of 2025. The North American pipeline continues to strengthen reflecting continuing, long-term demand.
In the Middle East, revenue was partially affected by the regional conflict, which has led to some reductions in activity and rescoping of contracts as we work with customers to deliver critical services. There has been a promising start to our partnership with Mubadala, with the signing of several new facilities management and asset support contracts, including with United Arab Emirates University, M42 and Tawazun. As expected, Asia Pacific’s revenue declined due to the end of the immigration contract. However, encouraging progress has been made in positioning the region for growth with significant order intake of more than £500m, including five-year extensions for both Acacia Prison and Adelaide Remand Centre, and a one-year extension to provide health services to the Australian Defence Force.
For the year as a whole, revenue guidance is unchanged at c.£5bn, including organic growth of around 3%. The higher organic growth expected in the second half reflects contract mobilisations and expansions in the UK and Australia, the annualisation of the Asia Pacific immigration contract exit, and an expected improvement in the procurement environment in North America.
Underlying operating profit: We expect underlying operating profit to be c.£155m in the first half, up approximately 6% year-on-year. This reflects good operational performance, continued delivery of productivity and efficiency programmes, and disciplined cost control, together with a full period contribution from MT&S. These are expected to more than offset the combined headwind from higher UK National Insurance contributions and the Asia Pacific immigration contract exit in the prior year.
For the full year, guidance for underlying operating profit is unchanged at around £300m, approximately 10% higher than the £272m reported in 2025. The good progress made on margins in the first half underpins an expected c.6.0% margin for the full year, or around 40 basis points higher than 2025. As usual, the second-half margin is expected to moderate relative to the first half including revenue mix effects, while still improving on the comparable period in the second half of 2025.
Financial position: We expect adjusted net debt to be around £250m at the end of June, with leverage below 1.0x. The current £75m buyback is ongoing and will conclude by the end of July, after which the Board will review the Group’s capital position. Adjusted net debt is expected to reduce to around £165m by the end of the year reflecting our unchanged guidance for strong free cash flow of approximately £160m. As in previous years, cash generation is expected to be weighted to the second half.
North America CEO transition: Michael LaRouche, CEO of Serco’s North America division, has informed us of his intention to take up a CEO role at an international business with a US listing. Michael will remain with Serco to ensure an orderly transition, and a process to appoint his successor is well underway.
Revolving credit facility: We refinanced our revolving credit facility during the period with a new 5-year facility maturing in June 2031, and increased committed standby liquidity from £350m to £400m.
NB: Guidance uses an average GBP:USD exchange rate of 1.34 in 2026, GBP:EUR of 1.15 and GBP:AUD of 1.90. We expect a weighted average number of shares in 2026 of 980m for basic EPS and 1,000m for diluted EPS.
