Serco profits slump as US budget wrangles mean postponed and reduced contracts and delayed work
Political wrangling over the US budget has hit profits at London-listed outsourcing company Serco, which runs everything from air-traffic control to nuclear facilities and prisons across the world.
The company said US government agencies had postponed contract awards, delayed work, and cancelled contracts because of the stalemate over the debt ceiling.
Serco chief executive, Chris Hyman, said the company does not expect a solution to the debt crisis “until the presidential election and until we have a new Congress in place”. He said the US market will continue to be “tough” in the second half, but that it will grow in the long-term. “People are screaming for work to be done, they are just trying to agree their funding.”
Overall, profits before tax and one-off items slumped 17% in the first half to £102m. In the UK, Serco saw a decline in welfare-to-work contracts but said that was offset by other contract wins, such as the deal to provide ferry services to the northern isles in Scotland.
Hyman said: “The UK is starting to move again. I’m cautiously optimistic about that. There were questions over whether the government would go deep into public sector reform. We’ve seen them do what they said.”
Last month, Serco won a £37m contract to provide community punishment programmes in London, becoming the first private company to take over a significant portion of work from the probation service.
The group won £4.2bn of contracts in the first half, up from £2.5bn in the same period last year, boosted by a £1.5bn joint venture with the Ministry of Defence to provide and maintain the UK’s nuclear warheads.
It also booked £15.7m of restructuring costs in the first half, which went towards creating a global business process outsourcing division to help it win more back-office work.