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UK Stocks: Serco (SRP) Shares Gain After Upgraded Guidance
Global Markets

UK Stocks: Serco (SRP) Shares Gain After Upgraded Guidance

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The British public services company Serco upgraded its full-year guidance today, driven by strong performance in the first half.

In key news on UK stocks, Serco Group PLC (GB:SRP) shares gained over 3%, as of writing, after the company upgraded its full-year profit guidance for FY24. The increased outlook was backed by its strong performance in the first half. For the full-year Fiscal 2024, the company raised its underlying operating profit guidance by £10 million to £270 million, marking a 9% growth over 2023.

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Serco Group is a services company mainly catering to the public sector.

Serco’s First-Half Trading Update

For the first half, Serco expects revenue of £2.4 billion, which is in line with its expectations. However, this estimate is 4% below the £2.5 billion reported in the previous fiscal year.

Moreover, the underlying operating profit is expected to be around £140 million compared to £148 million in the first half of the prior year. Serco now expects its second-half operating profits to grow by nearly 30% year-over-year, helping the company achieve its yearly guidance. The profit growth will be mainly driven by new contracts, acquisitions, and operational efficiency across the company’s portfolio.

The company further stated that it is on track with its share buyback plan and will complete £60 million out of the total £140 million programme by the end of June.

Additionally, Serco expects its free cash flow for the full year to be higher along with reduced financial leverage compared to previous guidance. Adjusted net debt is expected to fall to £165 million in FY24, down from the prior guidance of £175 million.

Serco will announce its first-half results for FY24 on August 1.

What is the Price Prediction for Serco Stock?

According to TipRanks’ consensus, SRP stock has received a Moderate Buy rating based on one Buy and one Hold recommendation. The Serco share price target of 205p is 14.2% lower than the current trading level.

It is important to note here that these ratings were updated before this update and could potentially change.

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