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Serco reports 27% rise in profits Serco reports 27% rise in profits
(7 months later)
Serco, one of Britain's biggest prison and healthcare outsourcing companies, has insisted its work for the financially stretched UK government has not grown any more lucrative in the last 12 months – despite a string of contract awards, a 25% increase in staff and a rise in its profit margin.Serco, one of Britain's biggest prison and healthcare outsourcing companies, has insisted its work for the financially stretched UK government has not grown any more lucrative in the last 12 months – despite a string of contract awards, a 25% increase in staff and a rise in its profit margin.
Major contract awards last year included an expansion to Serco's category B private prison, located alongside Belmarsh in south-east London, and a contract to run Suffolk Community Healthcare. The group also retained responsibility for jointly running Britain's nuclear warheads store at Aldermaston, Berkshire, and won six National Citizen Service contracts – part of David Cameron's "big society" initiative. Around the world, Serco achieved record levels of new contracts, with a total value of £5.6m, though just over half its business remains in the UK where its work is dominated by public sector contracts.Major contract awards last year included an expansion to Serco's category B private prison, located alongside Belmarsh in south-east London, and a contract to run Suffolk Community Healthcare. The group also retained responsibility for jointly running Britain's nuclear warheads store at Aldermaston, Berkshire, and won six National Citizen Service contracts – part of David Cameron's "big society" initiative. Around the world, Serco achieved record levels of new contracts, with a total value of £5.6m, though just over half its business remains in the UK where its work is dominated by public sector contracts.
Chief executive Chris Hyman said the group's UK workforce grew by more than 10,000 to 53,000 in 2012. However, many of these new Serco employees will have been transferred from existing posts before the jobs were outsourced. A month after winning the Suffolk NHS contract last October Serco announced it planned to cut 17% of the workforce or 137 jobs.Chief executive Chris Hyman said the group's UK workforce grew by more than 10,000 to 53,000 in 2012. However, many of these new Serco employees will have been transferred from existing posts before the jobs were outsourced. A month after winning the Suffolk NHS contract last October Serco announced it planned to cut 17% of the workforce or 137 jobs.
Announcing pretax profits up 27% to £302m, Serco said its operating margin has grown from 6.2% to 6.4%. For Serco's operations in its UK and European division, margins rose from 6.8% to 6.9%. However Hyman insisted this was in spite of depressed margins from public sector contracts in the UK.Announcing pretax profits up 27% to £302m, Serco said its operating margin has grown from 6.2% to 6.4%. For Serco's operations in its UK and European division, margins rose from 6.8% to 6.9%. However Hyman insisted this was in spite of depressed margins from public sector contracts in the UK.
Serco came under fire two years ago after a controversial letter from finance director Andrew Jenner to its suppliers was leaked. It appeared to show Serco leaning on these smaller companies with demands for a rebate after it had reached an agreed with government ministers on the levels of profits it would take on public sector work.Serco came under fire two years ago after a controversial letter from finance director Andrew Jenner to its suppliers was leaked. It appeared to show Serco leaning on these smaller companies with demands for a rebate after it had reached an agreed with government ministers on the levels of profits it would take on public sector work.
On Tuesday, Hyman said: "The [UK] public sector margin has gone down. In the last few years that business has had a tough time, and we are supportive of our [largest] customer. Margins in the public sector are around 5% to 6% – it has always been so and actually we've seen those margins under considerable pressure and they will remain so for the next few years.On Tuesday, Hyman said: "The [UK] public sector margin has gone down. In the last few years that business has had a tough time, and we are supportive of our [largest] customer. Margins in the public sector are around 5% to 6% – it has always been so and actually we've seen those margins under considerable pressure and they will remain so for the next few years.
"We've talked about margins being flat this year – that's after some extremely good growth in the private sector [where margins have been] around 12% – about double the public sector margin. With the government's review [of major contractors in 2010] we contributed our fair share to that when the government said: 'We need people to play their part.'""We've talked about margins being flat this year – that's after some extremely good growth in the private sector [where margins have been] around 12% – about double the public sector margin. With the government's review [of major contractors in 2010] we contributed our fair share to that when the government said: 'We need people to play their part.'"
Among pAmong p
rivate sector contract awards for Serco in the UK last year were outsourcing deals with Easyjet and with Sir David and Sir Frederick Barclay's online and mail order business Shop Direct.rivate sector contract awards for Serco in the UK last year were outsourcing deals with Easyjet and with Sir David and Sir Frederick Barclay's online and mail order business Shop Direct.
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