Serco pays taxes early as revenues rise on government contract work

Government outsourcer Serco today pledged not to take state support after posting a surge in revenues.

The company, which handles immigration, defence and IT contracts, intends to pay back £48 million in deferred taxes, principally VAT, early, by the end of the year.

Boss Rupert Soames told the Standard: “The government is doing all it can to make sure companies did not run out of cash. We are fine on cash and when we feel we are out of the woods we will pay that back early, all being well by the end of the year.”

Serco, which received £5 million of support through the furlough scheme, also won’t be using the Government's £1000 job retention bonus, saying it doesn’t want to take money from taxpayers to fund services paid for by then. The company said: "We do not intend to take advantage of the UK government's £1,000 per person re-employment incentive as we do not think it right that we should take money from the taxpayer to employ people who will be delivering services paid for by the taxpayer."

Soames said investments in recent years had allowed the company to mobilise rapidly to respond to the crisis across the gloobe. "We commissioned the UK's first drive-through test centre in two days; in Australia accommodation was provided for more than 1,300 quarantined travellers on one week's notice; and as part of the NHS Test & Trace programme we mobilised 10,500 contact tracers in a four-week period," he said.

Revenues rose 24% to £1.8 billion in the first-half, with profits up 53% to £77.6 million. Soames said Covid had had a “net zero” effect on profits – it has picked up contracts including helping with virus testing, but has seen revenues fall in its leisure centres and rail businesses, and added costs in its health arm.

Serco apologised in May after it accidentally shared almost 300 email addresses of new recruits to the Government’s coronavirus contract-tracing programme.

Serco shares, up strongly since the outbreak, fell 22p to 147p on a cautious outlook for 2021.

In a Buy note, Peel Hunt analyst Christopher Bambury said: "With FY20 guidance similar to pre-Covid levels, this reflects the resilience of the business. Serco has good headroom against both leverage covenants and facilities, and forecast leverage is low."