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25 Feb 2021 | 08:57

Serco to resume dividend payouts for first time since 2014

(Sharecast News) - Serco is to resume paying dividends following a six-year break, after NHS Test and Trace contracts contributed to a strong set of full-year numbers. Revenues in the year to 31 December were £3.88bn, a 20% jump, while the underlying trading profit came in at £163.1m, a 36% improvement on the previous year. Underlying earnings per share rose 37% to 8.43p.

The results were boosted by Serco's acquisition, in 2019, of US naval and submarine specialist NSBU, and by winning a number of NHS Test and Trace contracts. Serco provided more than a quarter of testing sites and half of the Tier 3 tracing capacity during the year.

The firm said: "Although these contracts are at lower margins that we would normally accept for this type of work, they generated nearly £350m of revenue, so made a material contribution and helped to reduce to impact the losses in transport, health and leisure."

The board has therefore recommended restarting dividend payouts, last made in 2014, with a final payment of 1.4p.

Serco defended the decision, saying it had refunded all the employment and liquidity support it had received from governments, with the exception of £12m in the US, where there is no early repayment mechanism.

It also noted: "While the profits arising from our work on Covid-19 are ephemeral, they do not represent a material proportion of our profits in the year - net, around 1% of underlying trading profit."

Looking ahead, the firm now expects 2021 final revenues to come in around £4.2bn, compared to previous guidance for £4.1bn, following a strong start to the year.

But it cautioned: "After dramatic growth of the last three years, with 33% compound annual growth in underlying trading profit, we see 2021 as being a year of more normal rates of growth in revenues and profits." It is now predicting underlying trading profit to come in around £175m, compared to its initial forecast for £165m.

As at 0830 GMT, shares in Serco where ahead 5% at 136.0p.
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