Serco Group (LON:SRP) reported what management described as a “strong year” in 2025, highlighting steady revenue growth, resilient margins and continued cash generation alongside progress in defense, justice and immigration, and citizen services. Chief Executive Officer Anthony Kirby said the year was defined by “disciplined execution, strong operational delivery, and continued strategic progress,” while Chief Financial Officer Nigel Crossley noted performance came “despite a number of anticipated headwinds.”
Kirby also announced Crossley will retire after more than 11 years with the company, including five as CFO, and introduced Mark Reid as his successor, who is expected to join the board in the coming days.
2025 results: revenue up to £4.9 billion, order intake £5.5 billion
Order intake totaled £5.5 billion, representing a 114% book-to-bill ratio, with more than two-thirds coming from the defense business, according to Kirby. Serco ended the year with a £12.1 billion pipeline, which Kirby called the highest the company has seen in a decade. The company’s new business win rate was reported as over 30%.
Cash conversion was described as “exceptional,” with 2025 cash flow of £290 million and trading cash conversion of 112%. Crossley said the year also benefited from higher-than-usual mobilization activity and associated deferred revenue. Adjusted net debt increased to £206 million, from £100 million at the end of the prior year, driven by the £245 million acquisition of MT&S and shareholder returns, partially offset by cash generation. Year-end leverage was 0.7x EBITDA, below Serco’s stated 1x to 2x target range.
Regional performance: strength in North America and UK & Europe offsets Asia Pacific declines
In North America, Serco reported revenue of £1.46 billion, up 10%, driven by 4% organic growth and a 9% contribution from MT&S, partially offset by currency headwinds. Organic growth was led by defense, as 2024 order intake flowed into 2025 revenue, with higher activity in defense personnel services, mission training, and IT network and infrastructure services for the U.S. Navy. Underlying operating profit rose to £144 million, up 5%, and margins remained around 10% despite contract mobilization and a £6 million one-off MT&S transaction integration cost. Crossley said margins should recover as contracts mature, supported by efficiency and portfolio mix.
North America order intake was £1.4 billion, with 90% from defense. Management cited a 37% new business win rate, while rebid win rates were lower than normal due to the loss of a low-margin traffic control contract. The North America pipeline more than doubled to £5 billion. On U.S. market conditions, Kirby said shutdown-related impacts were limited, though decisions were “slightly slower” due to fewer federal employees making decisions, and he expected this to persist “for a little bit into 2026.”
In UK and Europe, Serco posted revenue of £2.58 billion, up 6%, driven by 5% organic growth and a 1% contribution from the EHC acquisition in Germany. Growth reflected ramp-up of major defense and citizen services contracts, including Armed Forces Recruiting, marine services for the Royal Navy, and continued progress on Electronic Monitoring. Serco also noted lower immigration revenues due to “harder borders in Europe” and changes in U.K. accommodation mix, although the pace of U.K. revenue reduction was slower than expected. Underlying operating profit was £149 million, flat year over year, with a 5.8% margin. Order intake was £3.7 billion, a 145% book-to-bill, and the division won 60% of new business bids and 97% of rebids.
Asia Pacific revenue declined to £655 million, down 18%, including a 12% organic decline primarily linked to the exit of the Australian immigration contract, plus the disposal of the Hong Kong business and currency impacts. Underlying operating profit increased to £24 million, up 3% at constant currency, and margin improved to 3.7%, supported by cost control and operational improvements. Serco highlighted a six-year contract win for justice transport services in Victoria and cited a 91% rebid win rate. Crossley said the region has made progress on right-sizing and underperforming contracts, but rebuilding growth will take time given long lead times.
In the Middle East, revenue fell to £177 million, down 18%, reflecting the end of a low-margin air navigation services contract in Dubai, lower variable project work, and the accounting impact of the Mubadala partnership. Underlying operating profit declined to £13 million and margin fell to 7.1%. Serco reported a £0.5 billion pipeline in the region and said it was encouraged by opportunities emerging from its joint venture structure with Mubadala.
Strategy: sharpening focus on defense, justice & immigration, and citizen services
Kirby said Serco refined its strategic direction in 2025 to prioritize geographies and sectors where it can deliver the most value and where its capabilities are strongest. He highlighted North America and the UK and Europe as the company’s “most addressable and scalable markets,” while stating the company still expects Asia Pacific and the Middle East to grow over time, with disciplined capital deployment.
Management emphasized three growth sectors:
- Defense: Kirby said defense now accounts for around 40% of group revenue, including joint ventures. Serco highlighted work including the U.K. Early Warning Radar at RAF Fylingdales, support to the U.S. Space Force in Greenland, and personnel services spanning recruitment, readiness, training, housing and veteran transitions. Crossley noted defense margins are above the group average, though the company did not provide a profit split.
- Justice and immigration: Serco said it supports and accommodates over 100,000 asylum seekers and refugees across its operating countries. In the U.K., Kirby highlighted the company’s Electronic Monitoring operations, stating Serco monitors 28,000 individuals in the community and citing that the scheme has “proven to reduce reoffending by around 20%.” He said the business is now performing above expectations operationally after an extended mobilization period.
- Citizen services: Kirby pointed to technology-enabled efficiency in services that remain people-led. Examples cited included work for the U.S. Centers for Medicare & Medicaid Services, where Serco manages around 10 million customer notices a year, and a U.K. Restart Scheme pilot where AI-enabled tools reduced administration time by around 75% and improved case note quality by nearly 20%.
On questions about other activities, Kirby said health and transport fall under citizen services, but Serco is not actively deploying growth capital into what he described as “lower margin” areas. He said the company intends to retain and rebid existing transport contracts.
Capital allocation: dividend increase and new £75 million buyback
Serco recommended a full-year dividend of 4.5p per share, an 8% increase from the prior year. The company completed a £50 million share buyback in the second half of 2025 and announced a further £75 million buyback to be executed in the first half of 2026. Crossley said that including the new program, Serco will have returned around £650 million to shareholders through buybacks and dividends since 2021.
Crossley also emphasized the company’s focus on receivables discipline, saying Serco has reduced days sales outstanding by 20 days over five years, equating to around £250 million of working capital improvement over that period, while noting opportunities for further gains are now limited.
2026 outlook: revenue around £5.0 billion and operating profit around £300 million
For 2026, Serco’s guidance was described as largely unchanged from its pre-close statement. The company expects:
- Revenue of around £5.0 billion, implying 3% organic growth
- Underlying operating profit of around £300 million, more than 10% higher year over year, with margin around 6%
- Net finance costs of around £52 million, reflecting interest on debt used to fund MT&S and the cost of the new buyback
- Free cash flow of around £160 million
- Adjusted net debt expected to end 2026 at £165 million
Management said revenue growth will be supported by a full-year contribution from MT&S and contract ramp-ups, offset by expected reductions in immigration activity in both the U.K. and Australia, which Serco expects to represent around a 3% organic headwind.
In closing remarks during Q&A, Kirby said elevated geopolitical instability is likely to drive increased defense spending and greater spending on migration-related services, which he characterized as a net positive for Serco’s core markets.
