Serco making more money from COVID contracts than previously expected
Outsourcing giant Serco has revealed that it is on course to make more money than previously expected from COVID-19 contracts.
The company, which runs some of the government’s Test and Trace services, said that partly thanks to its pandemic work in the UK and Australia it was upgrading its full-year revenue guidance by about £100m.
It is the second time this year that Serco has bumped up the expected impact on its results from COVID-19 contracts.
February: Serco boss defends role in Test and Trace rollout
In February, chief executive Rupert Soames had told Sky News that “the idea that COVID has been a huge boon to our profits is simply not true”.
Serco’s latest trading update revealed that it now expects to report revenues for this year of around £4.4bn, up from £3.9bn in 2020 and ahead of a previous forecast of around £4.3bn.
The UK-listed group also said it expects underlying profits to climb from £163m last year to at least £225m – having previously pencilled in earnings of around £200m.
Shares rose by 2%.
Serco said that several factors were behind the improved performance, including that in the UK and Australia “volumes of work related to COVID-19 support to governments have been higher, and have continued for longer, than we anticipated”.
The company also said that other contracts across the business, notably immigration-related work in the UK and Australia, had performed better than expected.
Rupert Soames has previously played down the impact of the pandemic on Serco’s profits
In addition, it benefited from an extension by the US administration of a window in which Americans can sign up for the government’s affordable health care programme.
The company added that it expected to see much lower demand for its pandemic-related services next year, partially offset by growth in other areas.
Serco also said that, in recognition of the “extraordinary efforts of our colleagues around the world and the difficulties experienced by many as a consequence of the pandemic”, it would be paying a bonus to 52,000 workers after a similar move last year.
It is also paying money into a fund for support for “colleagues who would benefit from a little extra help at this difficult time”.
Together, the initiatives will cost Serco around £10m.
Serco previously upgraded its profit guidance, partly due to its Test and Trace workload, in June.