Serco disappoints (relatively)
Serco’s interim results today boasted earnings ahead 21%. This is a cracking result in recessionary times - but how does it measure up to Serco’s own high standards?
Earnings ahead 21% is bang in line with historic performance. Serco’s done this for most of its twenty years on the stock market. Keep it up for another twenty and Chris Hyman will have over a million colleagues (and even less free time).
Our cavil is Serco’s historic success is built on organic top-line growth. It’s been bidding and winning new contracts that has driven shareholder value.
But in this half-year, Serco relied as much on margin enhancement (ROS, 4.9% to 5.2%) as old-fashioned business development. In one sense, this is welcome - other postings here have been sniffy about Serco’s margins - but this blogger prefers Serco as a growth stock. Serco will have to mature one day, but surely not yet.
