Serco upgrades profit forecasts by millions after Covid test and trace contract boom
A boom in business from its work running the government’s Covid test and trace system today led Serco to bump up its profit forecasts by millions of pounds.
Serco runs about a quarter of the fixed and mobile test sites and phones those who have been in contact with people who have tested positive.
Serco said that volumes of testing and tracing contract work had been strong and predicted demand would last for longer than it had previously anticipated.
That, along with strong performances at other Serco businesses, meant it was increasing its guidance to the City for 2021 profit by £15 million to around £200 million. Most of the extra windfall was from test and trace work.
Serco also today announced a £900 million contract win for its defence division. Its 50:50 joint venture with Engie has been awarded Ministry of Defence contracts to provide asset and facilities management services to UK military establishments in the South West and Central regions.
These are the biggest regions for the contract, with other parts of the country expected to be announced by the MoD later today.
The work was previously done by a consortium of Amey and Carillion, but Amey took the whole project on when Carillion went bust.
The contract is for £900 million of standard maintenance of facilities but up to £3.4 billion when occasional major works such as resurfacing runways or constructing new buildings are factored in.
It is the first big contract win for the joint venture that was formed about 18 months ago and called Vivo Defence Services. The pair are bidding for two other major defence contracts - running military housing stock and training.
As it is a joint venture, half of VIVO’s profit after tax from the contracts will accrue to Serco.
On test and trace, Serco is one of the two main companies, the other being France’s Sitel, which run Britain’s contact centres. It is one of four, including G4S, Mitie and Compass’s Levy division, which run drive through and walk-in testing centres offering PCR tests and handing out lateral flow tests.
Commenting on the defence contract award, Rupert Soames Group Chief Executive said: “Serco has a proud 50-year history of supporting the UK’s Armed Forces, with contracts supporting activities at many military bases, including Brize Norton, Fylingdales, Yeovilton and Northolt, as well as supporting the Royal Navy at Portsmouth, Plymouth, Faslane and Kyle of Lochalsh, and the UK Government’s Skynet secure satellite communications system.
“VIVO combines Serco’s expertise and understanding of the MOD with ENGIE’s deep expertise in facilities management and we look forward to working together to support the UK Armed Forces.”
Following a six-month mobilisation phase, the core work is scheduled to start in February 2022, and we expect the additional project work to ramp up during the course of 2022.
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