Serco reiterates annual outlook as UK and Europe growth offsets U.S. procurement delays
Demand for government outsourcing contracts continues to support Serco's business as higher defence spending lifts activity across several markets. The company says strength in its UK home market and Europe is balancing procurement delays that persist in the U.S.
Highlights
- Serco expects first-half 2025 revenue to rise 3% to £2.5 billion and underlying operating profit to increase 6% to about £155 million.
- Serco reiterates 2025 full-year guidance of approximately £5 billion revenue and £300 million underlying operating profit, matching analyst estimates despite ongoing U.S. procurement delays.
- Serco shares are down 16% year to date, underperforming the FTSE 250 midcap index's 3% gain, due to regional pressures and mixed contract growth.
First-half performance and full-year guidance
As reported by Reuters, Serco reiterates its full-year forecast after expecting first-half revenue to rise about 3% from the same period in 2025 to 2.5 billion pounds, while underlying operating profit increases 6% to around 155 million pounds.The British outsourcing group expects full-year revenue of about 5 billion pounds, with organic growth of around 3%, and underlying operating profit of about 300 million pounds. That forecast is in line with the average analyst estimate in a company-compiled poll.
Serco says procurement delays in the U.S. continue into the first half, but it remains confident in structural demand drivers that support further expansion of its North American pipeline.
Regional pressures and market impact
Serco, which provides defence, security, immigration, healthcare and transport services to governments, benefits from increased contract activity as countries raise defence spending amid geopolitical tensions. Growth in the UK and Europe is helping to offset slower procurement activity in the U.S.The company's Middle East business, which contributes roughly 4% of revenue, is partially affected by regional conflict, resulting in some activity reductions and revised contracts. Even so, the broader mix of public sector services across regions is supporting the group's annual targets.
Shares in the FTSE 250 company are down about 16% year to date, underperforming the midcap index, which is up about 3% over the same period.
In our earlier article on Brent crude prices retreating as investors treated the U.S.-Israel conflict with Iran as a contained risk, we noted that oil’s wartime spike had largely unwound alongside a calmer tone in government bond markets. We also highlighted that easing supply-disruption fears helped steady sentiment, even as lingering risks around the Strait of Hormuz remained on investors’ radar.
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