Serco chief commits to London listing and says global ‘complexity’ likely to hike demand

Outsourcer Serco’s chief exec believes a world of growing “complexity” is likely to stimulate demand for the contractor’s solutions, he told City A.M. this afternoon, whilst also committing to maintaining the firm’s London listing.

Mark Irwin said that the “four drivers” of demand for the firm’s services – growing government costs, a need to reduce government debt, voter intolerance of higher taxes and rising expectations of quality – were if anything becoming more important to global governments.

“Perhaps it’s more intense – not just because of the four key drivers we’ve identified previously, but because of the complexity geopolitical risk, the challenge with labour and skill availability relative to where there’s demand, challenges around technology and where government enters the AI race.

“All these factors compound, and governments need help – additional capacity and capabiity that helps them to manage in a fiscally responsible way and serve their citizens.”

Serco, which provides services to governments in the form of everything from the operation of air defence radars to immigration detention centres, is likely to be well-positioned as demands on governments grow.

Immigration in particular is expected to increase in the years to come, driven in part by climate change in more impoverished parts of the world.

We’re aware of the trading multiples – but that’s not on our agenda

Mark Irwin on his firm’s London listing versus New York

Serco’s share price shot up 5 per cent today on the back of a positive set of results.

For the full-year, revenue grew slightly by seven per cent to £4.8bn, and underlying profit grew five per cent to £249m. 

Underlying earnings per share increased by 10 per cent to 15.4p. The company also revealed shareholders can expect a final dividend per share of 2.27p – up 18 per cent on last year’s figure and 3.4p per share for the full year.

In an update this morning, the firm said it expects revenue in 2024 to be slightly below 2023, coming in at £4.8bn.

Irwin also said Serco, which acquired a German and Emirati outfit over the past year, would consider further acquisitions in the coming year to meet demand but said that M&A was inherently “more risky” than inorganic growth.

Irwin, who replaced Rupert Soames at the top of the company, also batted away questions about whether Serco – which makes half of its profit in north America – could be tempted to move its stock market listing to the US.

Gambling giant Flutter is set to move its primary listing to New York in the near future whilst other CEOs have complained about poor valuations in London compared to the US.

Asked if he’d ever cast envious eyes at Wall Street, Irwin demurred.

“We’re aware of the trading multiples – but that’s not on our agenda,” the Aussie-born chief said.