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Serco Group PLC on Thursday said defence sales, particularly in North America, underpinned ‘robust’ revenue growth in the first half of 2025. In response, shares in the company climbed 7.6% to 225.40 pence each in London on Thursday. Hampshire, England-based Serco is a government services outsourcing provider, focused on defence, justice & immigration, transport, health & other facilities management, and citizen services. Serco posted pretax profit of £112.1 million for the six months to June 30, down 1.7% from £114.0 million the year before, as finance costs increased 19% to £22.9 million from £19.3 million. Underlying operating profit grew 2.8% to £146 million from £142 million, or by 4% at constant currency. Revenue increased 2.5% to £2.42 billion from £2.36 billion, with organic growth of 3% and 9% in North America. Free cash flow improved 21% to £91 million from £75 million a year prior. ‘We have delivered a strong performance in the first half. Revenue growth, profit and cash generation have all been robust, reflecting stronger organic growth, driven primarily by our North American business and increased revenues in the defence sector,’ said Chief Executive Anthony Kirby. Order intake was ‘very strong’ at £3.2 billion, with a book-to-bill rate of over 130%, continued good contract win rates and a high weighting of awards to the defence sector, Serco said. The order book of £14.5 billion at June 30 was 9% higher than at the end of 2024. In defence, Serco said it continues to see ‘significant’ opportunity, bolstered by growing capabilities from the acquisition of MT&S, which completed during the first half and is integrating in line with expectations. Serco completed the £264 million acquisition of Northrop Grumman’s mission training and satellite ground network communications software business, MT&S, in May. MT&S provides the US military with advanced mission training services, and software that makes satellite ground networks more efficient. It supports programmes across the US Army, Space Force, Air Force, Navy, Combatant Commands and international partners. In May, Serco said MT&S will contribute an estimated $175 million of revenue and $20 million of underlying operating profit in 2025. On Thursday, Serco said that, including MT&S, three quarters of the $2 billion revenue in the North American division will be generated from the defence sector. ‘Although we remain alive to recent policy changes in the region, we have not seen a material impact on the business. Margins in North America are particularly strong at 10.6%, and we achieved a 12-basis point improvement compared to the same period last year,’ Serco added. The FTSE 250 listing said it is well placed for the full year and left revenue and profit guidance unchanged. In June, Serco had raised full year revenue guidance to £4.9 billion from £4.8 billion and predicted underlying operating profit of £260 million. In 2024, the company reported revenue of £4.79 billion and underlying operating profit of £274 million. ‘Around the world, the challenges governments face are becoming ever more complex and acute, driving demand for our services, where we are well placed in growing markets,’ observed CEO Kirby. Serco declared an interim dividend of 1.45 pence per share, up 8.2% from 1.34p a year before. Copyright 2025 Alliance News Ltd. All Rights Reserved.
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