Following its disappointing first half (see here) in which revenues declined 2% organically, IT-enabled support services (ITeSS) and BPS giant Serco said that it is seeing the improvement in performance in H2 as expected.
Consequently, FY12 results will be in line with expectations. That means 3% organic growth in the full year, and organic growth of c8-10% in H212. Apparently this will be achieved by ‘excellent performances’ in Serco’s new BPO division and the AMEAA region, which is offsetting the challenging US market conditions, according to CE Chris Hyman. In the year to date, Serco has signed contracts worth £5.4bn, and is preferred bidder on a further £200m worth of business.
In the new Global Services BPO division, organic growth is going to come from a £170m contract with AEGON for life and pensions services (see Serco adds up value of Aegon deal), and its £430m contract with catalogue retailer Shop Direct Group (see Serco wins retail BPO megadeal).
In more traditional Serco front line services activities, there have been a number of deals that will also contribute to the organic growth. These include a £350m contract to operate ferry services to the Northern Isles of Scotland,a £140m Suffolk community health contract, COMPASS, a £175m asylum seeker support services contract, a c£70m contract for delivery of the new National Citizen Service in six regions, the London Community Payback contract worth £38m and expansions and extensions to Defence multi-activity contracts (MACs) worth £30m. As an interesting aside, in its AMEAA region, Serco has been selected as preferred bidder for its first frontline services contract in India, to operate and maintain a new bus service in the city of Indore.
Front line services are increasingly relevant to us. Software and IT is often embedded within these deals to make the service delivery more efficient and effective. Serco is the largest player in this space in the UK, and competes with the likes of Carillion, Mitie, G4S, Balfour Beatty, Interserve, and increasingly Capita, as it broadens its focus into areas like the Police and healthcare support activities.
In our new report IT-enabled support services: opportunities in a converging market subscribers to TechMarketView's BusinessProcessViews research stream can read our analysis of this emerging market, which is driving convergence with our core BPS space.