Cost-cutting Serco says UK economy improving

IT outsourcing behemoth Serco Group says the outlook for the UK economy is decidedly brighter as the nation feels its way through the economic gloom.

The services player reckons it is on track to meet 2012 targets with sales in the first half expected to grow 6 per cent, due to acquisitions made last year.

In a steady-as-she-goes trading update, Serco said the order book was valued at £17.9bn at the end of the last calendar year and that it has added £3.9bn of contract wins since.

The firm said growth for the year is likely to be "weighted towards the second half" as H1 reflects the "challenging environment in the US and some remaining UK headwinds".

Serco revealed it has expanded deals for health operations and has bagged contracts with Suffolk community health services and East Kent integrated facilities management worth around £140m.

Serco said it was the preferred bidder for a £350m agreement to operate a lifeline ferry service to the Northern Isles of Scotland and has penned a £175m contract with the Border Agency to provide accommodation-related services for asylum seekers.

The group's adjusted operating margin, before the implementation cost of restructuring, is expected to be "broadly flat" in the first half of the year compared to the same period in 2011.

The company is cutting 500 jobs in the UK as it rejigs the management matrix and rationalises back-office services, a move that was announced back in January.

Chief executive Christopher Hyman said: "The improving UK outlook and the delivery of cost efficiencies will see us meet expectations." ®