Recession-proof Serco gains 37%

SHARES in Serco rose 9p to 580p yesterday after the facilities management company reported a 37 per cent rise in pre-tax profits to pounds 3.39m for the six months to 30 June, up from pounds 2.48m a year ago.

Richard White, group managing director, said that the increase was largely due to organic growth in its facilities management and services business.

Serco is insulated from recession because more than 70 per cent of its turnover comes from managing and servicing Government facilities such as the RAF's Fylingdales radar base in North Yorkshire.

But Mr White believed demand for its services was growing, even in the private sector.

'I believe that we are in a marketplace that is going to continue to grow, and if anything the recession focuses people's minds on making sure that their support activities are efficient,' Mr White said.

Excluding the effect of the acquisitions of IAL, an aviation services business bought in April, and three local authority service companies bought in 1991, pre-tax profits rose by 19 per cent from a year earlier.

Turnover rose by 40 per cent to pounds 65.36m from pounds 46.79m last year.

Basic earnings per share rose to 17.4p from 15.1p, while fully diluted earnings were 17.1p against 14.8p. The interim dividend has been lifted by 15.4 per cent to 4.5p from 3.9p.

Serco's pre-tax profits have risen at a similar rate to this year's underlying 19 per cent over the past few years.

Mr White said: 'The markets seem to remain very strong as we see them, and we would expect the sort of growth that we have seen in the past to continue.'

He said he had a large degree of confidence because between 80 and 90 per cent of this year's business would continue into next year under long-term contracts.

Serco recently entered into a joint venture with a Hong Kong company to service two of the colony's cross-harbour tunnels. The contract is worth HKdollars 170m ( pounds 11m) over five years.