Serco Shares (LON: SRP) Rebound From Lows as FTSE 100 Continues Decline

Support services group company Serco's shares (LON: SRP) have retaken the 150 level after a day in which the price added 8.15%. The SRP price had just come off new 52 week low's on Tuesday of 136.20, as broader UK markets continue to come under pressure. The FTSE 100 declined 1.18% to dip under 8,100 after a week which has seen the blue chip index fall 2.55%.

On a year-to-date basis, Serco's share price remains down 7.63%. The financial outlook for the year indicates solid benchmarks, with expectations of achieving a revenue of £4.8 billion alongside an underlying operating profit of approximately £270 million. This stability comes despite an anticipated organic revenue decline of 3% for the full year. Positive developments, however, are projected for the second half with North American operations significantly driving results.

In terms of profitability, Serco's full-year operating profit saw a rise of 9%, boosted by a substantial second-half increase exceeding 25%. Additionally, Serco's second-half order intake experienced a sharp improvement, positioning the company for a projected ten-year high in business opportunities.

A crucial factor underpinning Serco’s current success is its enhanced financial guidance. Notably, the company has increased cash-flow expectations while setting a lower net debt target. This results in a leverage ratio of 0.6 times its EBITDA, indicating strong financial health.

The outlook for 2025 remains positive with Serco forecasting a maintained revenue of £4.8 billion, alongside an underlying operating profit of £260 million. CEO Mark Irwin attributed this stability to North American gains and new contracts, which are expected to counterbalance rising UK costs and reduced immigration revenue.

Serco stands out at a time when broader market conditions are less favorable. The company's focused growth strategy and effective management of resources have contributed to this positive market performance.