Serco Group (LSE:SRP) reported first-half revenue of £2.5 billion, up 4% at constant currency, with underlying operating profit rising 9% to £157 million for the six months to 30 June.
The support services group to governments worldwide said organic growth reached 2%, driven by a 10% organic surge in its Defence division, while underlying operating margin improved 20 basis points to 6.2% on productivity gains and cost discipline. Free cash flow fell to £65 million from £91 million a year earlier, with cash conversion of 74% against 84% in 2025, though the company said it remains on track for full-year trading cash conversion of at least 80%.
Order intake totalled £2.5 billion, down from £3.2 billion, with book-to-bill at 100% versus 134% a year earlier, while the pipeline grew to £12.8 billion, its highest level in more than a decade.
Adjusted net debt stood at £228 million, with leverage of 0.75 times net debt to EBITDA, comfortably inside the group's 1-2x target range.
Serco raised its share buyback for the year to £150 million from £75 million, having already completed £75 million of purchases in July, and lifted its interim dividend 10% to 1.60p per share.
"The group achieved good profitable growth in the period, which reflects further strategic and operational execution, with continued double-digit organic growth in Defence," said chief executive Anthony Kirby.
North America saw procurement delays affect contract award timing, though Serco pointed to a record £8.1 billion regional pipeline and £3.2 billion of awards awaiting adjudication.
The company reiterated its full-year guidance for revenue, organic growth, profit and free cash flow, citing order book visibility, contract mobilisations in the UK and Australia, and an anticipated improvement in North American procurement.
News Intelligence what this means for the company
Serco delivered 9% underlying profit growth in H1 on 4% revenue expansion, with margin improvement to 6.2% driven by operational discipline—particularly a 10% organic surge in Defence. The company doubled its annual buyback to £150m and raised its interim dividend 10%, signalling confidence in cash generation despite a H1 free cash flow decline to £65m from £91m. Critically, the company reiterated full-year guidance, anchoring these shareholder returns to expected delivery on £160m free cash flow and £165m adjusted net debt by year-end.
The buyback doubling and dividend lift are material capital allocation moves—the £150m buyback represents 66% of H1 underlying operating profit and signals management's conviction in cash generation recovery. However, the H1 cash conversion miss (74% vs. 84% prior year, vs. 80%+ full-year target) and order intake decline (£2.5bn from £3.2bn) warrant close monitoring; the company's case rests on North American procurement delays reversing and mobilisations in UK/Australia delivering as guided.
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