Government service provider Serco Group has given an unscheduled update on its trading outlook for 2020.
Its revamped figures show that the group expects a trading profit before any one-off costs of between £160 million and £165 million, against the previous estimates of £135 million to £150 million. Full-year revenue is now anticipated to be about £3.9 billion – a jump from the £3.7 billion previously foreseen.
Cash generation in the third quarter had also been better than expected and the group now expects adjusted net debt to be between £100 million and £150 million at the end of December with leverage of around 0.6x.
It adds that the range of outcomes on these numbers – up or down – is wider than would normally be the case at this time of year as on some contracts clients are adjusting their requirements week by week in response to the challenges posed by Covid-19.
Serco says its businesses in worldwide regions were performing better than expected and it has increased its forecasts for 2020. It adds that in both the group and divisions, effective cost control and the ability of its systems to respond efficiently to increased demand has helped to increase margins.
In the UK it has been awarded extensions to contracts to provide test sites and call handlers for NHS Test & Trace. The group has also seen increases in the number of asylum seekers it is looking after on behalf of the Home Office, and its new prisoner escorting contract has been mobilised.
Looking to 2021, Serco reiterates its half-year results warning that the current crisis makes forecasting “extremely difficult”, but says it expects the uncertainties of 2020 to persist into 2021 “as the world grapples with recurring outbreaks of infection”.
Addressing recent criticism of its role in the NHS Test & Trace programme, Serco says there has been much comment on its role, “including suggestions that we are responsible for the whole programme and/or that we have failed in our obligations”.
“Serco is proud to be playing a part in the NHS Test & Trace programme; we now employ, directly or indirectly, around 9,000 people supporting the programme. However, the part we play, although important, is limited and specific. Serco contributes to two parts of the process: at the start, we are one of five suppliers running fixed and mobile sites where people go to get tested. We currently manage about 25 per cent of the 500 sites in the UK, and over the last six months those sites have successfully delivered 1.7 million, or 30 per cent, of the 5.7 million tests carried out under Pillar 2 of the programme.
“At the end of the Test & Trace process, and on the tracing side, we are one of two prime contractors responsible for reaching the people identified to us by NHS Professionals as having been in contact with people who have tested positive. We are not involved in other parts of the process, for instance, the design and management of the overall programme, the NHS App, the IT systems, the booking of tests, the provision of test kits, the test laboratories, delivering test results, or the identification of contacts of people who have tested positive.
“We believe that our operational delivery has been outstanding and that we have delivered our obligations to the customer to their satisfaction, evidenced by the fact that they have extended our contracts for both test sites and tracing call capacity.”