Serco pins growth hopes on new police contracts
NEW contracts to provide non-frontline services to West Midlands Police could represent strategic UK growth opportunities for support services group Serco.
Serco is one of several companies shortlisted for the West Midlands police operational support framework agreement.
The agreement would see Serco, which also has major contracts with local authorities in Sandwell and Shropshire, take responsibility for services which could include forensic investigation services and neighbourhood patrols.
The changing face of police services in the area has already been pinpointed as one of the key themes in this autumn’s election for a new Police Commissioner both in Birmingham and other parts of the region.
In its latest set of interim results, Serco highlighted the difficulties posed by sluggish markets.
It said its UK & Europe frontline services division had seen an organic revenue decline of 1% in the first half as the full force of economic headwinds began to take effect.
Added to this, conditions in the US market remained “very difficult” with a 16% decline in organic revenues for the Americas division as a whole.
The contract to supply the new police services, which in addition to West Midlands also includes the Surrey force, could be worth an estimated £3.5bn over seven years, making it a very appealing proposition to companies starved of growth elsewhere.
“This and similar opportunities are expected to see Serco well-placed to partner in the delivery of services considered non-core to frontline policing,” said Serco in its interim statement.
It is expected the contracts will be in place by February next year.
For the first half of 2012, reported group revenues were £2,341.7m, growth of 4.3%. Growth at constant currency was 4.2% but organic revenues, excluding acquisitions and currency effects, declined by 2.1% as a result of the impact of challenging US market conditions.
The period saw further very strong revenue growth in the AMEAA (Australasia, Middle East, Asia and Africa) region, up 22% organically although for the group as a whole this was offset by declines elsewhere. In the UK the Government’s shutdown of the Regional Development Agencies and other public sector cutbacks was highlighted as a contributory cause.
Christopher Hyman, Chief Executive of Serco, said: “I am pleased with the overall performance of the business over the last six months, particularly
the quality and efficiency of the services delivered by our people.
“As we continue to build Serco’s international portfolio, our newly established global Business Process Outsourcing division has already seen a high level of contract wins and many with private sector customers.
“Our business in Australasia and the Middle East continues to grow strongly and, while significant challenges in the US remain, we see conditions in the UK starting to improve. The recent level of new contract wins across the group will help us deliver the anticipated strong financial performance in the second half of the year.”
