Serco boss makes the case for the restart of dividend payments

Serco boss Rupert Soames defended the restart of dividend payments on Thursday after a year in which the outsourcer secured £350 million in revenues from NHS Test and Trace.

He said Serco’s Covid-19 related work accounted for 1% of annual profits when offset by other areas of the business being shut down by the pandemic.

Soames added that the company felt “very strongly” shareholders should see returns on their investment after several years in which they injected £850 million of additional equity to prop up the business since its last dividend in 2014.

The award of 1.4p a share has been accompanied by a £100 one-off payment to frontline staff costing the company £5 million. Around 90% of Serco’s 55,000 staff work in places such as prisons, hospitals, ships, or trains.

Serco said it had repaid all the money given to it from the government in terms of furlough and liquidity support.

Soames told the BBC: “Covid-19 represents a tiny proportion of our profits. All the reasons for not paying a dividend have gone.”

NHS Test and Trace generated £350 million of revenues for Serco, with the company providing more than 25% of testing sites and half the Tier 3 tracing capacity.

Overall revenues rose 20% last year to £3.9 billion, leading to operating profits 75% higher at £179.2 million.

The company also lifted its profits guidance for 2021 by 6% today but said it expects revenues and profits to grow at a slower rate than in previous years.