US headwinds to weigh on Serco's first half

Outsourcing specialist Serco says it is on track to meet its 2012 full-year expectations but has warned that its first-half performance will reflect the challenging environment in the US.

The firm has been awarded £3.9bn of contracts in the year-to-date, comprising signed contracts valued at £2.9bn and preferred bidder appointments valued at £1.0bn.

In the UK, the company has won a number of large contracts for its health operations, transport and defence.

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However, as previously indicated and similar to the previous six month-period, the group said that revenues in the US will be "significantly lower" than last year as budgetary challenges continue to disrupt the industry.

"The start of the year has been pleasing, with a number of significant contract awards. These support our view of achieving a stronger financial performance in the second half of 2012," said Chief Executive Officer Christopher Hyman.

"Conditions for the US federal market and hence our Americas division currently remain very tough, but for the year as a whole we anticipate that further strong growth in AMEAA, the improving UK outlook, and the delivery of cost efficiencies will see us meet expectations," he said.

The group reiterated that revenue growth, margin progression and free cash generation will be weighted towards the second half.

For the first half, organic revenues are expected to be flat. Acquisitions completed during last year should add around 6% to group reported revenue though.

"Improving conditions around the world, should they continue, would allow the group to anticipate a modest improvement in the rate of organic revenue growth in 2013 and further improvement into the medium term. This would support the continued delivery of strong financial performance by Serco," the statement said.

BC