Shares of FTSE 250-listed Serco Group (GB:SRP) soared over 6% as of writing following a trading update that showcased strong 2024 performance and a positive outlook for 2025. The company highlighted stronger trading in the second half and expects its underlying operating profit to increase by 9% year-on-year to £270 million in 2024. This is primarily driven by a more than 25% increase in second-half profit compared to 2023. Meanwhile, its revenue is expected to be approximately £4.8 billion, in line with the company’s guidance.
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Serco Group serves the UK public sector across areas like citizen services, defence, justice, immigration, healthcare, and transport.
Serco Group Reports Stronger Second Half
Along with underlying profit growth, Serco Group’s order intake significantly improved in the second half. This resulted in an expected book-to-bill ratio of around 100% for the year. The company also marks its highest pipeline of new business in over ten years by year-end. Moreover, Serco reported a 50-basis-point increase in margins to 5.60% in 2024.
The company also stated that its £140m buyback program has been completed, bringing the total amount returned to shareholders through buybacks to £340m since 2021.
Serco Remains Confident for 2025
Looking ahead in 2025, Serco remains confident in its outlook, fueled by sustained growth in North America and the commencement of new contracts. In 2025, the company expects its revenue to be around £4.8 billion, similar to 2024 level. Within its segments, revenue from immigration contracts in the UK and Australia is expected to decrease, while strong organic growth is anticipated in the U.S. defence sector.
Additionally, it expects an underlying operating profit of £260 million in 2025, with margins within the medium-term target range of 5% to 6%.
What Is the Stock Market Forecast for Serco?
On TipRanks, SRP stock has received a Moderate Buy rating backed by three Buy and two Hold recommendations. The Serco Group share price target is 208.75p, which is 41% higher than the current trading levels.
