Trade tough in US for Serco but outsourcer sees £1.4bn worth of work kick in

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Outsourcer Serco Group said it is on track to meet its full-year guidance after earlier contract wins kicked in to boost second-half revenue.

Reorganisation costs and delays in the award of federal work in the United States pushed group organic revenue down two per cent in the first half of the year and while the firm said US trading would remain tough, it anticipates a pick-up in UK and emerging markets.

Serco, which runs services around the world from air traffic centres to prisons, said it had won £1.4bn worth of new work since the end of July, bringing its total for the year to date up to £5.4bn.

New contracts include a £46m deal to upgrade US military vehicles in the Middle East, £140m to deliver NHS health services in Suffolk, and a £170m BPO commission to provide customer support for life and pensions company AEGON.

The group said it expects to see an improvement in its core UK market, where the Government is considering new ways to run public services at cheaper costs.

Paul Pindar, chief executive of rival outsourcer Capita, said that he sees a pick-up in public sector work in Britain before the next election in 2015.

Serco said that it expects its global business process outsourcing division, bolstered by last year’s £385m acquisition of Indian firm Intelenet, to perform particularly well in the second half.

The group said in early November that its business process outsourcing division boss, Tom Riall, is leaving to take up a new role at Priory Healthcare group. He will remain at the business in the near term.

Serco is expected to post a full year pre-tax profit of £269m, according to a poll of 21 analy- sts.

Analysts at Investec said in a note: “Serco has reported an in-line third quarter interim management statement, with no changes made to guidance issued at the interims in August.

“Management continue to anticipate a return to growth in the second half, although we note the US market remains ‘very difficult’, while the cash pressure from a higher level of working capital investment remains.”