Serco Group plc (LSE:SRP) reported a solid first-half performance, with revenue increasing 4% to £2.5 billion and underlying operating profit rising 9% at constant currency to £157 million. The improvement was driven by 10% organic growth in the Defence division and a more favourable mix of higher-margin contracts. Underlying operating margin increased to 6.2%, while the company maintained a strong balance sheet with leverage of 0.75 times EBITDA. Reflecting confidence in its financial position, Serco increased its 2026 share buyback programme to £150 million and raised its interim dividend by 10%.
Management reaffirmed its full-year guidance, forecasting revenue of around £5 billion, organic growth of approximately 3% and underlying operating profit of about £300 million. Free cash flow is expected to reach around £160 million for the full year despite lower cash generation during the first half. Serco also highlighted a £12.8 billion bid pipeline, with significant opportunities across the defence sector and North America. The company continues to simplify its operations by focusing on its three core markets—Defence, Justice & Immigration, and Citizen Services—while making progress on major contracts that are expected to support long-term profitability and sustainable growth.
The investment outlook remains positive, supported by strong cash generation, a healthy balance sheet and an attractive valuation based on a low price-to-earnings ratio. Technical indicators also remain favourable, with the shares continuing to trade in an upward trend. Management’s outlook is supported by a robust pipeline and expectations for further profit growth, although exposure to immigration-related contracts, higher financing costs and the execution of large projects remain potential risks.
About Serco Group plc
Serco Group plc is an international provider of outsourced public services, employing more than 50,000 people across sectors including defence, space, migration, justice, healthcare, transport and customer services. The company partners with governments around the world to deliver essential public services through long-term contracts.
Its capabilities include programme management, systems integration, engineering, advisory services, asset management and operational support, enabling governments to improve service delivery while managing complex infrastructure and public sector operations.
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