This article first appeared on GuruFocus .
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Revenue:GBP4.9 billion, up 3% at constant currency.
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Underlying Operating Profit:GBP272 million, with a margin of 5.6%.
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Cash Conversion:112%, reflecting disciplined working capital management.
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Order Intake:GBP5.5 billion, representing a book-to-bill ratio of 114%.
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Defense Contracts:GBP3.5 billion secured, highlighting strong defense platform.
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Pipeline:GBP12.1 billion, the highest in a decade.
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Return on Invested Capital:26%.
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Adjusted Net Debt:GBP206 million, with leverage of 0.7 times EBITDA.
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Dividend:Full-year dividend of 4.5p per share, an 8% increase.
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Share Buyback:GBP75 million announced for the first half of 2026.
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North America Revenue:GBP1.46 billion, with 10% growth.
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UK and Europe Revenue:GBP2.58 billion, with 6% growth.
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Asia Pacific Revenue:GBP655 million, down 18%.
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Middle East Revenue:GBP177 million, down 18%.
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Free Cash Flow:Expected to be around GBP160 million for 2026.
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Release Date: March 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Serco Group PLC ( SCGPY ) reported a strong financial performance for 2025, with revenue increasing to GBP4.9 billion, up 3% at constant currency.
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The company achieved a robust order intake of GBP5.5 billion, representing a book-to-bill ratio of 114%, with significant contributions from the Defense sector.
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Serco Group PLC ( SCGPY ) maintained a high contract retention rate of over 90%, demonstrating strong customer trust and satisfaction.
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The company successfully integrated MT&S, enhancing its defense capabilities and contributing GBP9 million in operating profit within the first seven months.
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Serco Group PLC ( SCGPY ) announced a further GBP75 million share buyback, reflecting confidence in its financial position and commitment to returning surplus capital to shareholders.
Negative Points
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The exit from the Australian immigration contract led to an 18% revenue decline in the Asia Pacific region.
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The Middle East division experienced an 18% revenue reduction due to the conclusion of a low-margin air navigation services contract and lower variable project work.
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The company faced higher national insurance costs in the UK, impacting overall profitability.
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There was a temporary delay in contract awards in North America due to the US government shutdown, affecting order intake.
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The competitive landscape in the UK remains stagnant, with no significant changes in the number of competitors in bidding processes.
Q & A Highlights
Q: Can you discuss the notable contract implementation costs for 2025 and expectations for 2026? A: (Nigel Crossley, CFO) We've had a busy year with significant wins, particularly in the UK. Costs were higher than usual, around GBP20 million, due to protracted mobilization on Electronic Monitoring and the Armed Forces Recruiting Programme.
Q: How is the competitive landscape evolving in the UK, especially with better margins? A: (Anthony Kirby, CEO) The competitive landscape in the UK has remained relatively stagnant over the years. We typically face five to six competitors depending on the sector and services being procured.
Q: What are the expectations for the UK migration model, considering the large centers being suggested? A: (Anthony Kirby, CEO) Migration flows are likely to continue due to enduring structural drivers. We work closely with customers to provide innovative solutions, focusing on reducing reliance on hotels and standing up medium and large sites as needed.
Q: Can you provide an update on the contract and acquisition pipeline? A: (Anthony Kirby, CEO) We have a strong financial position to pursue acquisitions, particularly in the US, Europe, and the UK. The contract pipeline includes opportunities up to GBP1 billion, with a good spread across sectors and sizes.
Q: What is the outlook for the Asia Pacific business post-Australian immigration contract exit? A: (Nigel Crossley, CFO) We've made progress in rightsizing the organization and improving contract performance. Growth is a focus, and while it requires patience, early signs are encouraging with strong rebid win rates and new contracts.
Q: How is the US market activity following the slowdown or pause last year? A: (Anthony Kirby, CEO) The US pipeline has doubled in size, with significant wins in late 2024. While decision-making has slowed slightly due to fewer federal employees, the number of opportunities remains robust.
Q: Can you elaborate on the impact of elevated geopolitical tensions on your business? A: (Anthony Kirby, CEO) Geopolitical instability often leads to increased defense spending and migration flows, which are positive for our business. We are prepared to support customers in these areas as structural drivers continue.
Q: What is the profit contribution from defense, given it accounts for 40% of revenue? A: (Nigel Crossley, CFO) While we don't provide specific profit numbers, the average margin in defense is above the group average and is expected to improve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
