Serco share price surges as company reiterates profit forecast

Shares in Serco Group Plc (LON:CRP) has jumped in today’s trading following the release of a half-year trading update that reaffirmed the company’s profit and revenue forecasts for the current year.The outsourcing firm said that full year revenue was likely to be around £3.5 billion, with trading profit around £90 million.

Serco revealed that trading in the first six months of the year had been a little better than expected. The company added that it anticipated first-half revenue of “not less than £1.7bn”, down from £2 billion in the corresponding period a year earlier. The company also said it had signed contracts with a total value of around £1 billion in the relatively quiet first half.
The reiteration of the earlier forecasts signals that Serco’s recovery efforts have started to produce results. The company is undergoing a mass overhaul after a disastrous period of contract problems and scandals that have hurt its relationship with the UK government. In March the company tapped shareholders for cash after a profit collapse and warned that it was unlikely to see a return to sales growth for another three years.
“We have ended the first half in reasonably good order and are making progress in implementing our plans,” Serco chief executive officer Rupert Soames commented. “Whilst our recovery is at an early stage, and there will be bumps along the road, I am confident that we are doing the right things, with a stronger balance sheet and supported by an excellent management team.”
In today’s trading, Serco shares soared 10 percent to 129.80p, as of 11:41 BST, trimming their year-to-date decline to 19.2 percent. The company’s market capitalisation currently stands at £1.43 billion.
The 17 analysts offering 12 month price targets for Serco have a median target of 137.67p, with a high estimate of 234.85p and a low estimate of 85.03p. As of June 26, 2015, the consensus forecast amongst 29 polled investment analysts covering Serco had it that the company will underperform the market. This consensus estimate has been maintained since March 01, 2015, when the sentiment of investment analysts deteriorated from “hold”.
As of 13:37 BST, Wednesday, 01 July, Serco Group plc share price is 127.75p.