Serco Group (LSE:SRP) shares climbed 4.9% on Wednesday after the government services provider lifted its profit outlook for 2025 and issued a stronger-than-expected forecast for 2026. The upgrade reflects solid contract delivery and continued efficiency gains across the business.

The company now expects underlying operating profit of around £270 million in 2025, an increase from its previous £260 million guidance, despite adverse currency impacts of roughly £6 million. Revenue is forecast to reach £4.9 billion, representing 3% growth on a constant-currency basis, including 1% organic growth.

Free cash flow expectations were also raised sharply, with guidance increased to £170 million from £130 million previously.

“The Group has demonstrated significant strategic and operational progress throughout the year, as we continue our focus on operational excellence, competitiveness and sustainable growth,” said Anthony Kirby, Serco Group Chief Executive. “I am pleased with the strong performance across financial and non-financial metrics, reflecting the hard work and dedication of all my colleagues around the world.”

Looking ahead to 2026, Serco expects revenue to rise to approximately £5.0 billion, supported by improved organic growth of around 3%, largely driven by defence-related contracts. Underlying operating profit is projected to reach about £300 million, delivering a margin of roughly 6.0%, which sits at the upper end of the company’s medium-term target range.

Order intake for 2025 is expected to remain strong at around £5.5 billion, implying a book-to-bill ratio of at least 110%. Around two-thirds of contract awards were secured within the defence sector, with a particular focus on the UK and North American markets. The company also reported that its pipeline has reached a new decade-high level, reflecting sustained demand for outsourced government services.

Serco additionally confirmed that Mark Reid will take over as Group Chief Financial Officer on 6 March 2026, replacing Nigel Crossley, who will retire after 11 years with the group.

The balance sheet remains robust, with adjusted net debt expected to be approximately £265 million at the end of 2025. This equates to leverage of around 0.9 times net debt to EBITDA, comfortably below the company’s medium-term target range of 1–2 times.

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