Serco Group Surges on Excellent Results

LONDON -- Serco Group  (LSE: SRP  ) -- the international outsourcing and service company -- is currently up more than 11% following the release of its full-year results for 2012. In that year, the company achieved a record level of contract wins, contributing to 5.8 billion pounds of awards, up almost 14% on 2011. This gives a forward order book worth 19.1 billion pounds, up almost 7% on the previous year.

The company's strength in Africa, the Middle East, Asia, and Australia as well as the successful launch of its Business Process Outsourcing division helped to offset a downturn in U.S. federal contracts.

Total revenue saw growth of almost 6%, to just under 5 billion pounds, with an increase in adjusted operating profit of close to 10%, and earnings per share rising 7.5%, to almost 43 pence.

Serco proposes to raise its dividend 20%, to 10.1 pence per share, making its current yield around 1.5%. The board also expressed the intent to further increase the payout ratio (by reducing dividend cover, from the current 4.7 times to a still comfortable level of between 2.5 and 3 times) over the next three years.

Commenting on the results, chief executive Christopher Hyman said:

Serco improves the quality and efficiency of services that matter to millions of people around the world, helping our customers to focus their precious resources on what they do best. To continue developing our business we are providing more support to our existing customers, offering more to emerging markets and improving our ability to provide more complex services. This has resulted in a strong year for us in 2012 despite some very real challenges; we won more work than ever, we entered new markets, we built more capabilities and we established a global BPO business. 

Our unique breadth and depth leaves us strongly positioned to meet the growing demand from around the world for our skills and services. This confidence in our business prospects underpins our new dividend policy and commitment to a higher payout ratio over the coming years.

Serco is now up 7% for the year to date, and almost 10% on this time last year, but still remains over 6% on two years ago, suggesting its recovery potentially has some way yet to go.

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