Serco ups revenues but rivals’ strength damages margins
Serco, operator of the Boris bikes scheme and Docklands Light Railway, today says more competition from rival outsourcers is damaging business.
A bevy of new contract wins at the end of last year means it will report strong revenue growth for the first half, “driven in part by last year’s record level of contract awards, many of which only started part way through last year”, the services giant said. That would have been enough to see Serco beat City expectations.
But the outsourcer warned: “The strong pipeline and market opportunities in the global services division, the level of investment in contract bidding and new market development activity has increased.”
More competition from rivals has pushed down margins in the first six months of this year, Serco added. That’s cancelling out the impact of stronger revenues — including winning contracts worth £900 million since the start of this year — to put operating profit back in line with expectations.
The outsourcer won an extension to its contract to run the DLR earlier this year, putting it in charge of the network until September 2014.
But Serco faced controversy last month when one of the London prisons it runs on behalf of the Government was branded a “shambolic failure”. A report found Thameside jail had to be “locked down” within months of opening last year because of a high number of assaults.
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