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Serco has increased its bet on German demand for immigration services with the acquisition of private provider European Homecare for €40mn, as it forecast a rise in revenue and profit this year.
The deal is the London-listed contractor’s second in continental Europe in just over 12 months, after it bought Swiss immigration services company ORS in September 2022, which also operates in Germany.
Serco’s chief executive Mark Irwin said on Thursday that European Homecare “would complement our ORS operations” and give it a stronger foothold in Europe. The move came as Serco forecast a revenue hit from UK government plans to reduce the number of asylum seekers accommodated in hotels.
“There are complex and growing requirements for immigration and asylum seeker support services globally,” Irwin said. “Increasing our presence in Germany will expand the immigration support we already provide to government customers in the UK, Australia and across Europe.”
Serco, which manages services for governments worldwide, is expecting acquisitions and strong demand for immigration and defence services to push revenue up 7 per cent to £4.8bn in the current financial year. Underlying operating profits are projected to rise 3 per cent to £245mn.
However the contractor is expecting flat revenues in its 2024 financial year, partly due to the government’s decision to end contracts with 50 of the 400 hotels it uses to house prospective asylum seekers by the end of January.
Serco said that as a result of that change, and factors including exits from old contracts, revenue would remain the same.
Serco, however, expects underlying profits to increase 6 per cent to £260mn in 2024, helped by acquisitions such as European Homecare. Shares rose 4.2 per cent in morning trading on Thursday in London.
European Homecare is a private provider of immigration services in Germany with more than 2,000 employees. The company manages more than 100 facilities and provides accommodation and support to more than 36,000 people seeking asylum. The group’s revenue is expected to be about €150mn in the year ending December 31, and Serco is acquiring the business from Korte-Stiftung.
Serco said new contracts and the contribution from deals would help offset “lower immigration volumes in the UK and Australia”. Although it said “ongoing demand” for immigration services in Britain would contribute to underlying profit growth in the current financial year, immigration volume growth had eased in the second half.
The company added it would be affected by a change in contract mix “as we support the UK government’s efforts to reduce the number of asylum seekers being accommodated in hotels”.
Serco said growth in its immigration and defence sectors had “more than offset” the loss of Covid-related work this year.
The company ran about a fifth of the Covid-19 testing sites in England and Northern Ireland. It also provided half of the call handlers for the test-and-trace system in England.
Source: Economy - ft.com
