Serco Group Share Price Rallied 5.72% on a Pre-Close Statement

The Serco Group plc (LON: SRP) share price rallied  5.72% after releasing its pre-close trading statement for its 2023 financial year. The company generated revenues worth at least £4.8bn in 2023, with a reported growth of around 7%, with organic revenue growth accounting for 4% of this increase.

The expected underlying operating profit for 2023 is £245 million, aligning with the previously provided guidance. Serco anticipates generating a free cash flow of £170 million, which is £20 million better than the earlier guidance. This improvement demonstrates a robust cash conversion rate of more than 90%.

The company is poised for a robust financial position, with adjusted net debt projected to be around £160 million. This level of leverage equates to approximately 0.7 times net debt to EBITDA, leaving Serco with a significant surplus capital by the end of the year.

For 2024, Serco expects its underlying operating profit to rise to approximately £260 million. This growth is attributed to the expansion of the underlying business and contributions from recent acquisitions. 

Serco has agreed to purchase European Homecare (EHC), a German-based company that provides immigration services for government clients. The deal, valued at €40 million (£34 million), involves acquiring EHC from Korte-Stiftung.

EHC is projected to generate around €150 million (£130 million) in revenue for the year ending December 31, 2023. The acquisition's finalisation is pending approval from competition authorities.

Since 1989, EHC has pioneered Germany's private immigration sector, offering comprehensive services, including housing, health and social care, and education and training programs. Today, it stands as a prominent private immigration service provider in Germany. 

Mark Irwin, Serco Group’s CEO, said: “Our strong focus on execution has delivered good performance in the second half, resulting in full-year outcomes that are better than those expected when we initially laid out guidance. For 2023, we will deliver growth in revenue, profit and cash, as well as an improvement in colleague safety and strengthened operational delivery of services to our customers.  We have also announced two strategic acquisitions, European Homecare, to accelerate growth in our immigration services portfolio, and Climatize, to deepen our advisory expertise in sustainable developments and operations. We expect to enter 2024 with a strong pipeline of new business opportunities and a robust balance sheet.”

Serco share price. 

The Serco share price rallied 5.72% to trade at 164.50p from Wednesday’s closing price of 155.60p.