Yahoo Finance Serco expects bigger profits thanks to Covid test-and-trace work
The outsourcing company Serco said has profits will be higher than expected in 2021 owing to greater demand from the UK government for its Covid-19 services, including test and trace.
Serco raised its full-year revenue guidance from £4.3bn to £4.4bn on Monday, helping underlying profits rise to at least £225m, up from previous forecasts of £200m.
The Hampshire-based company said the uplift could be explained by the fact the volume of its Covid-related work in the UK and Australia “has been higher and continued for longer than we anticipated”.
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Serco runs large parts of the UK’s largely privatised test-and-trace service, which is labelled NHS test and trace. The firm runs a fifth of Covid-19 testing sites and half the tier 3 contact tracers, who are mostly required to phone the contacts of people who have tested positive.
That work was extended in June, when the company won a £322m contract to keep Covid-19 test centres running in England and Northern Ireland for another 12 months, with an option to add another six more.
In an update on Monday, Serco said immigration-related contracts, particularly in the UK and Australia, had performed better than expected, as had healthcare insurance services in the US after Joe Biden’s administration extended the enrolment period for registering for subsidised health insurance coverage until mid-August.
Serco provides border control and immigration services in the UK, which includes running the controversial Yarl’s Wood immigration removal centre in Bedfordshire.
However, Serco warned that the driving forces behind its stronger-than-expected performance were unlikely to last. “We expect 2022 to see much lower demand for Covid-19 related services, partially offset by the impact of new work secured in 2021 and growth in our core non-Covid-19 related business,” the company said.
The outsourcing firm announced it would be spending £10m on additional payments for its 52,000 staff – worth £100 each – in response to their work during the pandemic, and would make a one-off contribution worth £4.8m to its people fund to help struggling employees.
Serco’s shares rose more than 1.9% on Monday morning to about 133p.
