Support services group Serco (SRP) has posted a jump in first-half profits and announced a £229 million US acquisition after shedding 170 staff members at its Birmingham operations.
Serco confirmed it had made 170 compulsory redundancies at Serco Solutions in Wythall and redeployed 106 people following a reduction in the use of outside contractors.
But the firm, which acquired Birmingham technology firm ITNet in a £235 million deal in 2003, said pretax profits in the six months to June 30 rose to £62.8 million, up from £52 million the year before, with revenue up 10.5 per cent to £1.49 billion.
In its results statement, Serco said it remained confident of double-digit revenue growth for 2008 and the foreseeable future.
Serco aims to help governments improve services across areas such as justice to healthcare, education to defence and its work ranges from the management of facilities, projects and IT systems, through to the creation of entirely new businesses.
The firm cited government efficiency programmes, demand for better public services and global challenges including migration, climate change, security and congestion as factors driving demand for its services.
Serco Group chief executive Christopher Hyman said: “We have made a strong start to 2008 and we see excellent growth opportunities ahead as our customers experience increasing global economic and social pressures.”
Cazenove said Serco’s earnings per share, which rose 21.3 per cent to 9.35 pence, were five per cent better than forecast.
The broker said it was maintaining its full year estimates for the group, prior to the SI deal, adding the better-than-expected interim result gave it comfort.
Serco has also announced the acquisition of SI International, a Nasdaq-listed provider of information services, outsourcing, technology and network solutions to the US Department of Defense and civil government agencies.
The group said the deal creates a strong foundation for growth and delivery of higher value services into the US government services market.
“In the US market, the proposed acquisition of SI International will enhance our scale, capabilities, relationships and market access in the world’s largest contracting market,” said Mr Hyman.
He said Serco expected to start achieving annual cost savings of £5.42 million in the second full year after completion.
SI, which does business with the US Air Force, space agency NASA and other government organisations, has a turnover of more than £271 million and a workforce of about 4,500 people.
Mr Hyman said Serco expected to achieve the savings by efficiency measures such as combining the two groups’ head office but added it was too early to say whether there would be job cuts.
“This is a growth opportunity and we’re buying it to expand it, not to make it smaller,’’ he said, adding that the proportion of the group’s revenues generated by its US operations would rise to 20 per cent from 12 per cent previously following the deal.
The UK provides 74 per cent of Serco’s business and it also has operations in Continental Europe, the Middle East and Asia Pacific.
Serco recently won a new 12-year contract to run education and children’s services in Walsall.
The deal, an extension of contracts that have been in place since 2001, is valued at about £345 million.
Under the new contract, Serco will work with the town council “to ensure that children and young people achieve the best possible educational outcomes, and also to provide support to the most vulnerable children and their families”.