Growth in many parts of the business more than offsets wind-down of Test & Trace and exit from AWE. Profits up 6% and trading margin increased. Interim dividend increased by 18%.
Six months ended 30 June
2022
2021
Change at reported currency
Change at constant currency
Revenue(1)
1%
(1%)
Underlying Trading Profit (UTP)(2)
6%
2%
Trading Profit
6%
Operating Profit(2)
6%
Underlying Earnings Per Share (EPS), diluted(3)
7.71p
6.75p
14%
Reported EPS (i.e. after exceptional items), diluted
7.41p
18.77p
(61%)
Interim Dividend Per Share
0.94p
0.80p
18%
Free Cash Flow(4)
(26%)
Adjusted Net Debt(5)
(27%)
Reported Net Debt(6)
(8%)
Highlights
Revenues: strong growth across the business offsets revenue reductions from Test & Trace. Revenue excluding Test & Trace up 12%.
Underlying Trading Margin increases: up from 5.7% to 5.9%.
Underlying Trading Profit, Trading Profit and Operating Profit all up 6%. More than three-quarters of our profit earned outside of the
Underlying Earnings per Share up 14%: growing faster than UTP due to lower interest and tax.
Reported Earnings per Share: prior year included recognition of
Interim Dividend per Share up 18%.
Underlying trading profit cash conversion: >100%.
Reduced Adjusted Net Debt: down
Return on
Order book up
Healthy New Business Pipeline at
Full year guidance slightly increased to reflect trading in May and June, and additional FX benefit.
We did much better in the first half than we expected in January, and as a consequence also expect to do better than we originally anticipated in the full year. In the first six months we have maintained revenues year-on-year despite losing around
Our order book remains very strong at
Looking at the first half performance in the round - robust revenues despite the wind-down in Test & Trace, strong margins, large and growing order book, healthy pipeline, strong cash conversion and balance sheet - tells of the agility of Serco's Business-to-Government platform and the advantages of our differentiated business model and international footprint.
We employ around 57,000 people delivering services to governments and so the balance of supply and demand in labour markets is important to us. It is our sense that the dislocation in labour markets we saw last year is beginning to ease, as more people return to work, and we have seen a reduction in our vacancy levels. However, staff turnover remains high in some contracts, and unpredictable absence levels, driven by waves of Covid-19, mean that operational management of the business remains very demanding.
I am delighted to report that we have made significant progress on our diversity and equality strategy. Since 2017, the proportion of women in our senior leadership team (around 350 leaders) has increased from 17% to 33%, while the proportion of colleagues with a declared disability or health condition has more than doubled in recent years and now stands at 5%. In the
As a result of the recent surge in inflation we are increasing pay faster than we budgeted and we will be distributing an additional
Guidance for 2022
We significantly increased our guidance for the full year in an unscheduled trading update on 26 May. UTP guidance was raised by 15% from
2021
2022
Actual
Previous guidance
New guidance
Revenue
Unchanged
Organic sales growth
10%
~(5)%
Unchanged
Underlying Trading Profit
Net finance costs
Underlying effective tax rate
24%
~25%
~24%
Free Cash Flow
Adjusted Net Debt
NB: The guidance uses an average GBP:USD exchange rate of 1.25 in 2022 and GBP:AUD of 1.78, which is based on currency rates as
Looking ahead
Serco's resilience and strong trading performance stands in sharp contrast to a geo-political and economic landscape which continues to be miserable and dominated by the malign influence of two 'black swan' events. In
The concatenation of these two catastrophes will shape public policy for years to come. Governments are struggling to square promises to invest in energy transition and to 'build back better' with the realities of materially increased levels of public debt incurred mitigating the impact of Covid-19; the need to increase defence expenditure; and inflation, with its outriders of unplanned increases in debt service and other costs - notably in pay for public servants. In squaring these circles governments will need more than ever the innovation, efficiency and skilled operational management the private sector can bring to the effective delivery of public services.
We have got off to a much better start than we expected against the five-year plan we presented at our Capital Markets Day in
https://www.serco.com/media-and-news/2022/serco-group-plc-half-year-results-2022
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