Serco Group (LON:SRP) Posts Earnings Results

Key Points

• Strong first-half results: Constant-currency revenue rose 4% to £2.5 billion, underlying operating profit increased 8% to £157 million, and the margin reached a 10-year high of 6.2%. Serco maintained its full-year revenue, profit and cash-flow guidance.
• Higher shareholder returns and growth potential: Serco increased its 2026 share-buyback program to £150 million, with total expected shareholder returns approaching £200 million. A record £12.8 billion pipeline, strong defence growth and low leverage support further expansion and potential acquisitions.
• Regional and procurement headwinds remain: Asia-Pacific and Middle East revenue declined due to contract exits, conflict and transitions, while delays in U.S. federal awards continue. Analysts maintained a consensus “Hold” rating with an average price target of GBX 264.50.

Serco Group (LON:SRP - Get Free Report) posted its quarterly earnings data on Thursday. The company reported GBX 9.69 earnings per share for the quarter, Digital Look Earnings reports. Serco Group had a return on equity of 16.69% and a net margin of 2.97%.

Here are the key takeaways from Serco Group's conference call:

• Strong first-half performance: Revenue rose 4% on a constant-currency basis to £2.5 billion, underlying operating profit increased 8% to £157 million, and margin reached a 10-year high of 6.2%. Free cash flow was £65 million, with management reiterating full-year revenue, profit, and cash-flow guidance.
• Serco increased its 2026 share buyback to £150 million, including an additional £75 million for the second half, taking total expected shareholder returns for the year to just under £200 million. Leverage remained low at 0.7x EBITDA, preserving capacity for acquisitions and further returns.
• Growth prospects remain supported by a record £12.8 billion group pipeline, retention above 95%, and strong defence momentum, including 10% organic growth across the defence business. North America’s pipeline exceeded £8 billion, while the U.K. and Europe benefited from a 30% increase in defence revenue and successful contract mobilizations.
• Asia-Pacific revenue fell 14% following the exit from the Australian immigration contract, while Middle East revenue declined 25% amid regional conflict and contract transitions. U.K. and European immigration volumes also remain a headwind, although management said the impact is currently smaller than previously expected.
• Procurement delays continue to affect the timing of U.S. federal awards, with £3.2 billion of bids awaiting decisions and midterm elections approaching in November. Management expects conditions to improve gradually but emphasized that its 2026 guidance does not depend on a recovery in the U.S. procurement cycle.

Serco Group Price Performance

SRP stock traded up GBX 13.08 during midday trading on Thursday, hitting GBX 255.68. The company's stock had a trading volume of 2,500,717 shares, compared to its average volume of 13,173,225. Serco Group has a 12 month low of GBX 211.80 and a 12 month high of GBX 325.80. The company has a quick ratio of 0.98, a current ratio of 0.93 and a debt-to-equity ratio of 104.09. The firm has a market capitalization of £2.50 billion, a price-to-earnings ratio of 18.17, a price-to-earnings-growth ratio of 3.06 and a beta of 0.50. The company has a 50 day moving average of GBX 239.73 and a two-hundred day moving average of GBX 275.30.

Analysts Set New Price Targets

Several equities analysts have weighed in on SRP shares. Jefferies Financial Group reaffirmed a "hold" rating and set a GBX 230 price target on shares of Serco Group in a report on Thursday, June 25th. Deutsche Bank Aktiengesellschaft reaffirmed a "hold" rating and issued a GBX 255 target price on shares of Serco Group in a report on Friday, June 26th. Two research analysts have rated the stock with a Buy rating and three have assigned a Hold rating to the company. Based on data from MarketBeat.com, the company presently has an average rating of "Hold" and a consensus target price of GBX 264.50.

Serco Group Company Profile

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