Jail and hospital cheer boosts Serco

PROFITS better than expected and an optimistic assessment of new market opportunities took shares in Serco, the business services group, nearly 9 per cent higher to 1,450p.

Pre-tax profits rose 30.7 per cent to pounds 9.4m in the year to December. The company said that growth was satisfactory in all its areas of business. Serco, the market leader in contracted-out services, has a wide variety of maintenance contracts for customers ranging from Marks and Spencer to the Ministry of Defence.

Turnover rose 20 per cent to pounds 175.7m, including pounds 11.3m through acquisitions.

Serco has won its first contract to operate a prison, and at the end of 1993 was chosen to provide full 'hotel' services - all the non- medical services - at St Mary's Hospital, Paddington. Richard White, chief executive, said: 'These new markets are beginning to produce results.'

Serco is setting up an institute to develop the group's services and train employees. Mr White said the reason was the increasing sophistication of its markets: 'The key to success in all our businesses is our management capability.'

Jeremy Allen, an analyst at Kleinwort Benson, said: 'Serco has a fantastic track record, and contracting out is a real growth area.' The dividend for the year was 17p, up from 14p in 1992. Earnings per share advanced 25 per cent to 47.1p. Serco plans a capitalisation issue of four additional shares for every existing one to improve marketability.