2026 Half Year Results

2026 half year results

Serco Group plc ("Serco" or the "Company")

6 August 2026

 

Strong first-half performance, further margin progression, share buyback increased to £150m

 

Profitable growth and disciplined execution in line with expectations

•   Revenue: £2.5bn, up 4% at constant currency including 2% organic growth; strong Defence organic growth of 10%.

•   Underlying operating profit: £157m, up 9% at constant currency; reported operating profit of £145m, up 10%.

•   Underlying operating margin: 6.2%, with revenue mix, productivity improvements and cost discipline supporting 20 basis point improvement.

•   Cash flow: free cash flow of £65m (2025: £91m), on track for full year trading cash conversion of at least 80%, in line with our medium-term target.

•   Order intake: £2.5bn (2025: £3.2bn) with book-to-bill of 100% (2025: 134%).

•   Strong financial position: adjusted net debt £228m, leverage of 0.75x net debt to EBITDA.

•   Shareholder returns: increasing buyback from £75m to £150m for the year, of which £75m completed post period end in July. Interim dividend of 1.60 pence per share, up 10% year-on-year taking total capital allocated to dividend and buybacks to around £760m since 2021.

 

Strong delivery across strategic priorities supports 2026 guidance

•   Growth: pipeline increased to £12.8bn, up year-on-year with good exposure to North America region and global defence sector. Strong Asia Pacific book-to-bill of 188%. Some procurement timing delays in North America but good new business win rates and a strong pipeline of potential new work in the region.

•   Competitiveness: continued group-wide productivity and cost discipline underpinning margin outlook of c.6.0% in 2026. UK National Insurance contributions and Asia Pacific immigration contract exit absorbed in the first half. Continued to simplify our operating model focusing on the three sectors where we see the strongest long-term opportunities: Defence, Justice & Immigration and Citizen Services and with plans to bring Asia Pacific and the Middle East divisions under a single leadership structure.

•   Operational excellence: progress on contract mobilisations including the replacement of 24 support vessels for the Royal Navy and the improved operational performance of Electronic Monitoring in the UK. Operating resilience in the Middle East, supporting customers during regional instability.

•   On track for the full year: revenue, profit and free cash flow guidance reiterated.

 

Commenting on today's update, Anthony Kirby, Serco Group Chief Executive, said:

"Thanks to the dedication and delivery of more than 50,000 colleagues globally, the Group delivered another strong performance in the first half.

"The Group achieved good profitable growth in the period, which reflects further strategic and operational execution, with continued double-digit organic growth in Defence, progress in Asia Pacific, and contract performance and productivity enhancements across the business. This performance supports the new £75m share buyback announced today.

"Looking ahead, we are on track for our full-year guidance reflecting our excellent retention rates, order book visibility, contract mobilisations in the UK and Australia, and an anticipated improvement in the North America procurement environment. Our productivity and efficiency programmes underpin an expected year-on-year increase in profits.

"Our diverse portfolio, international footprint and breadth of capabilities position us well to capitalise on the continued structural drivers of demand for our services.

"Further progress across our strategic pillars of Growth, Competitiveness and Operational Excellence leaves us well positioned for 2026, providing us with a strong platform for sustainable growth and value creation in the years ahead."

Guidance for 2026

Our 2026 guidance for revenue, organic growth, profit and free cash flow is unchanged and we have updated net debt and the expected number of shares for the new share buyback. Net finance cost guidance has been reduced reflecting lower lease interest costs, more than offsetting the impact of the buyback.

 

NB: The guidance uses an average GBP:USD exchange rate of 1.34 in 2026, GBP:EUR of 1.15 and GBP:AUD of 1.90. We expect a weighted average number of shares in 2026 of 975m for basic EPS and 995m for diluted EPS.

 

 

 

For further information please contact Serco:

Jamie Hastings, Head of Investor Relations | +44 (0) 7718 195 074 | [email protected]

Scot Marchbank, External Communications Director | +44 (0) 7958 675 706 | [email protected]

 

Presentation:

A presentation for institutional investors and analysts will be held at RBC Capital Markets, 100 Bishopsgate, London, EC2N 4AA today at 10.00 UKT. The presentation will be webcast live at https://sparklive.lseg.com/SercoGroup/events/44d93bc8-6b7e-4346-8ac0-94f853b3145c/serco-2026-half-year-results and will subsequently be available on demand.

 

To be able to ask questions please use our dial-in facility accessed on https://registrations.events/direct/LON924314

 

Notes to financial results summary table and highlights:

The trading performance and outlook for each Division are described on pages 10 to 15. Pages 37 to 41 also include a definition of each of the non-IFRS Alternative Performance Measures (APMs) used by the Group together with a reconciliation of each APM to an IFRS measure and an explanation of why it is used.

 

About Serco

Serco brings together the right people, the right technology, and the right partners to create innovative solutions that make a positive impact and address some of the most urgent and complex challenges facing the modern world.

 

With a primary focus on serving governments globally, Serco's services are powered by more than 50,000 people working across defence, space, migration, justice, healthcare, mobility, and customer services.

 

Serco's core capabilities include service design and advisory, resourcing, complex programme management, systems integration, case management, engineering, and asset & facilities management.

 

Underpinned by Serco's unique operating model, Serco drives innovation and supports customers from service discovery through to delivery.

 

More information can be found at www.serco.com

 

LEI: 549300PT2CIHYN5GWJ21

 

Chief Executive's update

 

We have delivered another strong first-half performance, reflecting disciplined execution, consistent delivery and continued progress against our strategic priorities of Growth, Competitiveness and Operational Excellence. I would like to thank all Serco colleagues for their continued commitment and professionalism in delivering critical government missions, globally. Without them, our positive impact would not be possible.

 

Revenue for the period was £2.5bn, an increase of 4%. Following significant order intake last year, Defence performed particularly well in the period, delivering organic revenue growth of 10%. Our 9% constant currency increase in underlying operating profit to £157m and 6.2% margin extends our long-term track record of progression. This sustained performance reflects disciplined contract execution, productivity improvements, cost control and the continued shift of the portfolio towards higher-value services and markets.

 

Our strong financial position enabled us to complete our latest £75m share buyback programme by the end of July and announce a further £75m buyback for the second half.

 

Market demand signals remain strong with continued progression of our high quality, decade high pipeline and a robust book-to-bill. We continue to simplify the business to ensure we are focused on the sectors and geographies where we see the greatest long-term potential to deliver sustainable future growth. The outcomes of this clear, simplified approach are evident across our three strategic priorities.

 

Growth - performing well with a robust order intake and increasing pipeline

We have made good progress across our Growth strategic pillar. In Defence, the mobilisation of major programmes, including providing modernised support vessels to the Royal Navy in the UK contributed to strong organic growth. This is alongside the initial stages of Armed Forces Recruitment, which will go live in the first half of next year. A significant amount of our pipeline continues to be weighted towards Defence. This reinforces our confidence in the medium-term opportunity as governments continue to invest in national resilience, security and modern defence capabilities as they seek enhanced operational readiness.

 

In North America, procurement delays have continued to affect the timing of contract awards. However, the opportunity remains substantial as demonstrated by our record £8.1bn pipeline for the region. We are also encouraged by a number of important procurements advancing and some key protests now resolved. Recent awards include a new £83m ($109m) Error Rate Testing contract in Citizen Services for the Centers for Medicare & Medicaid Services (CMS), building on our AI-enabled eligibility determination support for the customer which stretches back over a decade. Furthermore, with £3.2bn of awards awaiting adjudication, we remain confident in the future performance of the region.

 

Overall, our pipeline increased to approximately £12.8bn, the highest level in more than a decade, with good exposure to the North America region and global defence sector. Combined with retention rates of 95% and order intake of approximately £2.5bn during the period, we are confident in the opportunities ahead.

 

Competitiveness - creating a simpler, more focused and more efficient business

Alongside delivering growth, we have continued to strengthen the competitiveness of the Group through simplification, portfolio management and disciplined cost control. We are focusing Serco's capital, leadership attention and operational capability on the markets and services where we see the strongest long-term opportunities.

 

Over the last twelve months, we have continued to sharpen the portfolio, including the divestment of small, non-core activities such as our ferry operation in Sweden and transport focused business in Hong Kong. While individually modest, these are a part of a broader discipline to simplify the Group and concentrate on sectors with the greatest opportunity - Defence, Justice & Immigration, and Citizen Services.

 

Progress in our Asia Pacific division has continued at pace with 188% book-to-bill in the first half. In parallel, we have taken further steps to simplify the way we operate. Our Asia Pacific and Middle East divisions will be brought under a single leadership structure, enabling us to deploy capability, expertise and resources more effectively across both markets in the pursuit of sustainable growth. In our UK Citizen Services business, we have brought together our Health, Environmental Services and Leisure businesses as part of a set of operating model actions to simplify and strengthen the organisation.

 

We have also maintained strong cost discipline, delivering a reduction in corporate costs during the first half. These actions are helping us build a more agile, focused and efficient organisation, better positioned to compete, capture growth opportunities and deliver value for customers and shareholders.

 

Operational Excellence - underpinning performance, retention and growth

Operational Excellence is central to how we create value, deliver and maintain the trust of our customers. During the first half, we continued to execute complex services reliably across our portfolio, while progressing the mobilisation of major programmes. This consistency of delivery is reflected in our strong contract retention, extension and expansion rates.

 

This operational performance was particularly evident in the Middle East, where colleagues continued to deliver critical services throughout a period of regional instability. Across airports, transport networks and customer facilities, our teams maintained service continuity and operational resilience despite a highly challenging environment. Alongside this, our Solutions+ partnership with Mubadala has continued to build momentum, securing new work and strengthening our position in a strategically important market.

 

Technology and innovation support both our service delivery and quality as well as our productivity improvements. We now have more than 40 live applications of AI across the Group, with many more in development. These solutions are improving customer outcomes as well as supporting efficiency and margin progress.

 

Serco helps governments achieve outcomes that matter: enhancing defence readiness and preparedness, supporting safer communities, powering critical public services and improving experiences for citizens. Our role is not simply to deliver services more efficiently; it is to help governments build capability, resilience and long-term public value. The combination of our scale, expertise and innovation remains an important differentiator for Serco and one of the reasons demand for our services continues to grow.

 

Outlook - guidance supported by order book, contract mobilisations and increased pipeline

Looking ahead, we are on track for our full-year guidance and are confident of strong financial and operational delivery in the second half. We have good visibility through our order book, growing pipeline and strong retention rates, supported by the mobilisation of major programmes and the anticipated improvement in the North American procurement environment.

 

The structural drivers of demand across our markets remain compelling. Governments continue to invest in national security, seek greater efficiency and resilience in public service delivery, and require partners capable of managing increasingly complex operations. We stand ready to help them do just that. Combined with our progress on Growth, Competitiveness, Operational Excellence and simplification, these factors leave us well positioned for the remainder of 2026 and provide a strong platform for sustainable growth and value creation in the years ahead.

 

Anthony Kirby

Group Chief Executive

 

Group Review

 

Summary of financial performance

 

Revenue, underlying operating profit and underlying earnings per share

Revenue was £2,508m, an increase of 4% compared with the £2,419m reported in the period to June 2025. Organic growth contributed 2%, with net acquisitions and disposals adding a further 2%. We continued to see strong growth in Defence, supported by the Mission Training and Satellite Ground Network Communications Software (MT&S) business acquired in May 2025. Defence delivered 10% organic growth overall, the strongest in the portfolio, including further infrastructure and facilities work for the US Army Corps of Engineers and progress in our UK maritime services contracts to deliver modernised support vessels for the Royal Navy. In Citizen Services, revenue declined which included lower case management volumes on the Centers for Medicare & Medicaid Services (CMS) contract in North America. As expected, revenue in Justice & Immigration was lower following the completion of our immigration contract in Australia, reduced demand for temporary accommodation in the UK, and lower demand for services in Europe.

 

Group underlying operating profit increased to £157m (2025: £146m), with 9% growth on a constant currency basis and a 1% adverse impact from currency. There was good progress on productivity and efficiency including lower corporate costs and improved outcomes on some contracts, particularly in the Justice sector. These helped mitigate the impact of higher UK National Insurance contributions, the exit from the Australian immigration contract, and reduced Immigration activity levels in UK & Europe. In North America, profit benefited from a full period contribution from MT&S. This resulted in a Group margin of 6.2% (2025: 6.0%).

 

Underlying profit after net finance costs and tax was £103m, compared with £99m in 2025, a 4% increase. Reported operating profit increased by 10% to £145m (2025: £132m).

 

Diluted underlying earnings per share increased by 6% to 10.17p (2025: 9.60p).

 

The revenue and underlying operating profit performances are discussed in more detail in the Divisional Reviews.

 

Cash flow and net debt

Free cash flow of £65m (2025: £91m) represents cash conversion of 74% (2025: 84%) and continues our good track record of cash generation and cash conversion. Average working capital days remained robust, with debtor days of 16 (June 2025: 18 days) and creditor days of 20 (June 2025: 20 days). Including accrued income and other unbilled receivables, days sales outstanding were 42 days (June 2025: 43 days). Of all UK supplier invoices, 96% were paid in under 30 days (2025: 94%) and 99% were paid in under 60 days (2025: 98%).

 

Adjusted net debt was £228m at the end of the period (December 2025: £206m). This was an increase of £22m since the year end, driven by outflows of £58m for our share buyback programme and £30m for dividend payments, offset by free cash flow. The period-end adjusted net debt compares to a daily average of £240m (June 2025: £199m) and a peak of £331m (June 2025: £465m). Working capital flows that occur within a short timeframe, such as customer receipt timings, payroll, supplier payments, and VAT payments on account, also cause variability between peak and average figures.

 

Our measure of adjusted net debt excludes lease liabilities, which aligns closely with the covenants on our financing facilities. Lease liabilities totalled £496m at the end of June (December 2025: £504m), the majority relating to leases on housing under our Asylum Accommodation and Support Services Contract. These leases are serviced with contracted revenue from the customer and there are no lease obligations beyond the expected life of the contract.

 

At the end of the period, our leverage for debt covenant purposes was 0.75x EBITDA (December 2025: 0.72x), below our target range of 1-2x and significantly below the covenant requirements for net debt to be less than 3.5x EBITDA.

 

The total amount of US private placement loan notes in issue at the end of June 2026 was £416m (December 2025: £409m) which had a blended interest rate of 5.64% (December 2025: 5.64%).

 

Capital allocation and returns to shareholders

We aim to have a strong balance sheet with our target financial leverage at 1-2x net debt to EBITDA.

 

Consistent with this, the Board's capital allocation priorities are to:

•   invest in the business to support organic growth;

•   increase ordinary dividends to reward shareholders with a growing and sustainable income stream;

•   selectively invest in strategic bolt-on acquisitions that add capability, market access, scale and enhance the Group's future potential organic growth and have attractive returns; and

•   return any surplus cash to shareholders through share buybacks or other means.

 

Our capital allocation framework was actively applied in the first half of 2026:

•   Invest to support organic growth: we have strengthened our growth platform during the first half through increased business development and government affairs activity, expanded thought leadership and market-shaping campaigns, and greater capability sharing across the Group. Simplifying our operating model and bringing teams closer together across geographies will improve competitiveness, while partnerships and continued investment in our priority sectors enhances future growth opportunities.

•   Increase ordinary dividends: the Board has declared an interim dividend of 1.60 pence per share, an increase of 10% compared to the prior period.

•   Invest in acquisitions: we continue to build the pipeline of potential acquisitions that are aligned to our strategy.

•   Return surplus cash to shareholders: our £75m share buyback concluded in July. A further £75m buyback will be undertaken in the second half. This will bring the total shareholder returns via buybacks since 2021 to £540m.

 

Contract awards, order book, rebids and pipeline

 

Contract awards

 

Order intake was £2.5bn, compared to £3.2bn in the first half of 2025, representing a book-to-bill rate of 100%. This included 23 contract awards valued at £10m or more. UK & Europe delivered an order intake of £1.2bn, or approximately 47% of the Group's total, while North America contributed £0.7bn, or around 29%, and Asia Pacific £0.6bn. New business accounted for 40% and retentions 60% of wins. The win rate by value for new work was 29% (compared to a 3 year average of 32%), and 95% (compared to a 3 year average 87%) for retaining existing work.

 

UK & Europe achieved a book-to-bill ratio of 86%, supported by contract awards from the UK Home Office and Ministry of Justice, as well as a further maritime contract with the UK Ministry of Defence. Notable wins in Citizen Services included two facilities management contract extensions with a combined value of more than £390m. In North America, order intake of £0.7bn reflects delays in customer procurement activity, resulting in a book-to-bill ratio of 92%. We expect the procurement environment to improve in the second half of the year.

 

In Asia Pacific, the book-to-bill was 188% after securing two five-year contract extensions for Acacia Prison in Western Australia and the Adelaide Remand Centre, together worth over £400m in Justice & Immigration. Within Defence, the Health Services contract for the Australian Defence Force was also extended for a further year.

 

Order book

The order book increased to £14.6bn at the end of June 2026 (December 2025: £14.5bn). Our order book definition gives our assessment of the future revenue expected to be recognised from the remaining performance obligations on existing contractual arrangements. This excludes unsigned extension periods. The order book would be £2.3bn (2025: £2.3bn) higher if option periods in our US business, which typically tend to be exercised, were included. If joint venture work was included, it would add a further £1.2bn (December 2025: £1.4bn).

 

Rebids

In our portfolio of existing work, we have around 78 contracts with annual revenue of £5m or more where an extension or rebid will be required before the end of 2028, with an aggregate annual revenue of £1.8bn. Contracts that will either need to be rebid or extended in 2026 have an annual contract value of around £0.2bn. The annual value of rebids is approximately £0.9bn in 2027 and £0.7bn in 2028. At around 40% of the Group's expected 2026 revenue, this is in line with our normal historical ranges and includes two rebids worth over £100m which is 2% of the Group's expected 2026 revenue.

 

New business pipeline

Our measure of pipeline includes only opportunities for new business that have an estimated annual contract value (ACV) of at least £10m and which we expect to bid and to be adjudicated within a rolling 24-month timeframe. We cap the total contract value (TCV) of individual opportunities at £1bn, to lessen the impact of single large opportunities. The definition does not include rebids and extension opportunities, and in the case of framework, or call-off, contracts such as indefinite delivery/indefinite quantity contracts (ID/IQ), which are common in the US, we only take the value of individual task orders into our pipeline as the customer confirms them. Our published pipeline is therefore a small proportion of the total universe of opportunities, as many opportunities exist that have annual revenues less than £10m, are likely to be decided beyond the next 24 months, or are rebids and extensions.

 

Our pipeline was £12.8bn at the end of June 2026, 6% higher than the £12.1bn level at the end of December 2025 and the highest level in over a decade. The pipeline consists of 65 bids, with an average ACV of £37m and an average contract length of around five years. The pipeline of opportunities for new business with an estimated ACV of less than £10m totalled £3.5bn at the end of the period (2025: £3.3bn).

Guidance for 2026

 

Further to the Pre-Close Trading Statement on 25 June, guidance has been updated to reflect the impact of the new £75m share buyback as well as lower net finance costs. There is no change to revenue, profit or free cash flow guidance.

 

Revenue: Guidance is unchanged at c.£5bn including organic growth of around 3%. The higher organic growth expected in the second half reflects contract mobilisations and expansions in the UK and Australia, the annualisation of the Asia Pacific immigration contract exit, and an expected improvement in the procurement environment in North America.

 

Underlying operating profit: Guidance is unchanged at c.£300m, 10% higher than 2025. The increase includes the full-year contribution from the acquisition of MT&S, contract ramp-ups, and our initiatives to improve productivity and efficiencies across the portfolio, partially offset by anticipated lower immigration activities. The good progress made on margins in the first half underpins an expected c.6.0% margin for the full year, or around 40 basis points higher than 2025. As usual, the second-half margin is expected to moderate relative to the first half including revenue mix effects, while still improving on the comparable period in the second half of 2025.

 

Net finance costs and tax: Net finance costs are expected to be c.£50m, slightly lower than anticipated at the beginning of the year due to lower than expected lease interest costs.

 

Financial position: We continue to expect good free cash flow at around £160m in the year, in line with our medium-term target of converting more than 80% of profit into cash. We expect adjusted net debt to end the year at approximately £240m following the new share buyback.

 

Surplus capital: Consistent with our capital allocation priorities, we have a preferred financial leverage range of 1-2x net debt to EBITDA. If we are below 1.0x leverage, we consider the business to be in a position of surplus capital, which will be returned to shareholders through share buybacks or other means. Leverage finished the period at 0.75x net debt to EBITDA, placing the business in a position of surplus capital. A further £75m share buyback has been announced and is expected to complete by the end of the year.

 

Summary of guidance for 2026

NB: The guidance uses an average GBP:USD exchange rate of 1.34 in 2026, GBP:EUR of 1.15 and GBP:AUD of 1.90. We expect a weighted average number of shares in 2026 of 975m for basic EPS and 995m for diluted EPS.

Divisional Reviews

 

 

The Condensed Consolidated Financial Statements and accompanying notes are on pages 19 to 36. Reconciliations and further details of financial performance are included in the additional information on pages 37 to 43. These include full definitions and explanations of the purpose of each non-IFRS Alternative Performance Measure (APM) used by the Group.

 

The trading performance and outlook of each Division is described on pages 11 to 14. Reference to each Division's proportion of underlying operating profit is based on the Group's underlying operating profit before corporate costs. For the period ended June 2026 the Group's underlying operating profit before corporate costs was £180.2m.

 

North America (31% of revenue, 47% of underlying operating profit)

 

 

Revenue increased by 8% to £775m (2025: £721m), reflecting 12% growth from the acquisition of MT&S and a 4% adverse currency translation impact. Defence delivered organic growth of 4% in addition to the contribution from MT&S, including further infrastructure works for the US Army Corps of Engineers. This was partly offset by lower revenue in Citizen Services, primarily due to reduced case management volumes, as well as the conclusion of an emergency response contract and an aviation contract.

 

Underlying operating profit increased by 10% to £84m (2025: £76m). This reflected organic growth of 2%, a 13% contribution from the acquisition of MT&S, and a 5% adverse impact from currency movements. Organic growth was driven by strong performance in Defence, partly offset by lower activity levels in Citizen Services. Margins improved to 10.8%, with the impact of the Citizen Services headwinds offset by lower acquisition and integration costs relating to the 2025 MT&S transaction.

 

Order intake of £0.7bn was slightly lower than expected as procurement delays in the US continued into the first half. However, win rates by value remained robust at 46% for new business and 79% for retentions delivering a book-to-bill ratio of 92%. We expect improvement in the second half, supported by multiple retention and new business decisions which are due with £3.2bn of awards awaiting adjudication. During the period, we secured an £83m (US$109m), seven-year Centers for Medicare and Medicaid Services (CMS) contract for error rate testing, and a £67m (US$90m), five-year contract supporting the US Army's planning, programming, and budgeting system. In Canada, we also secured a new contract to deliver employment services in Alberta expanding our employment services portfolio which includes operations in Ontario.

 

The pipeline of new bid opportunities due for decision within the next 24 months expanded significantly from £5.0bn at the end of 2025 to £8.1bn, including multiple opportunities exceeding £0.5bn. Defence continues to represent the majority of the North American pipeline and remains our priority sector, supported by the world's largest defence budget, strong bipartisan commitment to enhanced readiness, and a clear strategic focus on strengthening military capabilities. We are well positioned to compete in this liquid market and remain confident in the sector's long‑term growth potential.

 

During the period, Michael LaRouche, CEO of the North America division informed the Group of his intention to take up a CEO role at an international business with a US listing. A process to appoint his successor is well underway.

 

 

UK & Europe (54% of revenue, 46% of underlying operating profit)

 

 

Revenue rose by 8% to £1,359m (2025: £1,254m), driven by 29% organic growth in Defence and 8% organic growth in Citizen Services. This was supported by the commencement of our maritime support and vessel replacement contract for the UK Ministry of Defence in mid-2025, as well as the award of significant new project work at the Defence Academy and several other mobilisations. Revenue on our UK immigration contract declined less than expected; while immigration volumes in Europe were lower than last year.

 

Underlying operating profit increased by 7% to £84m (2025: £78m) with margins remaining healthy at 6.2% (2025: 6.3%) despite higher National Insurance costs. Profitability was supported by progress in Defence which included the ramp up of our maritime services contract, as well as improved outcomes within some Justice contracts where our Electronic Monitoring contract has continued to make progress. This helped mitigate the impact of lower immigration volumes in the UK and Europe. During the period we invested in the mobilisation of new contracts, including Armed Forces Recruitment.

 

Underlying operating profit includes the profit contribution of joint ventures, from which interest and tax have already been deducted. If the proportional share of revenue from joint ventures was included and the share of interest and tax cost was excluded, the overall Divisional margin would have been 5.3% (2025: 5.5%).

 

Order intake was £1.2bn, with a book-to-bill of 86%. New awards included a contact centre contract for the UK Home Office and Ministry of Justice and a further maritime contract for the UK Ministry of Defence. We also continued our strong rebids and extensions success rate, with a win rate of 98%. There were contract extensions at Norfolk and Norwich and James Cook hospitals, an extension of our Yarl's Wood contract and the retention of our contract to operate facilities on behalf of Sport England.

 

The pipeline reduced to £3.8bn (December 2025: £5.8bn) due to the conversion of new wins and loss of some opportunities. We continue to build the pipeline through the identification and qualification of new opportunities across all sectors.

 

Asia Pacific (12% of revenue, 4% of underlying operating profit)

 

 

Revenue declined in our Asia Pacific business by 14% to £307m (2025: £355m) following the transition out of the immigration contract in the first six months of the prior year and the divestment of our Hong Kong operations in September 2025. This was partly offset by progress on several contracts in Defence and Citizen Services and the start of a contract to operate Justice Transport Services in the state of Victoria.

 

Underlying operating profit decreased to £7m (2025: £14m), primarily reflecting a £9m reduction in relation to the immigration contract exit, together with some additional labour and mobilisation costs in the Justice portfolio. However good progress elsewhere resulted in margins only reducing to 2.2% (2025: 3.9%). Actions to streamline the business and enhance workforce efficiency continue to strengthen the platform ahead of the region returning to growth in the medium-term.

 

Encouraging progress has been made in positioning the region for growth with significant order intake of £0.6bn and a book-to-bill of 188% including five-year extensions for both Acacia prison in Western Australia and the Adelaide Remand Centre. In addition, the contract to support the Australian Taxation Office was extended for a further two years and a health services contract for the Australian Defence Force has been retained for a further year.

 

The pipeline is unchanged at £0.7bn (December 2025: £0.7bn) with a number of opportunities in Defence, Justice and Citizen Services sectors awaiting decisions.

 

 

Middle East (3% of revenue, 3% of underlying operating profit)

 

 

Revenue decreased by 25% to £67m (2025: £89m). The reduction was largely driven by the transition of contracts into the Mubadala strategic partnership, the rescoping of some contracts and reductions in activity due to the regional instability. We continue to focus on the growth of the advisory and consulting services in Saudi Arabia.

 

Underlying operating profit decreased by 12% to £5.7m (2025: £6.5m). Despite lower revenue, operating margin improved by 122 basis points to 8.5% (2025: 7.3%), reflecting the benefits of ongoing efficiency initiatives.

 

Given the disruption in the region, there were relatively few awards in the first half. Order intake was £11m on a standalone basis and £65m including opportunities secured through the Mubadala strategic partnership. Key awards included a university facilities management contract. The Mubadala partnership enhances access to a broader pipeline of opportunities and supports our long-term growth ambitions in the region.

 

The pipeline of identified opportunities is £0.3bn (December 2025: £0.5bn). The reduction compared with the prior year reflects the adjudication of several large opportunities together with the removal of delayed or cancelled bids.

 

Corporate costs

Corporate costs relate to typical central function costs of running the Group, including executive, governance and support functions such as HR, Legal, Finance and IT. Where appropriate, these costs are stated after allocation of recharges to operating Divisions. The costs of Group-wide programmes and initiatives are also incurred centrally.

 

Corporate costs have decreased by £6.0m to £23.5m due to tight cost control in the period (2025: £29.5m).

 

Dividend

The Board has declared an interim dividend of 1.60 pence per share (2025: 1.45 pence per share). The dividend will be paid on 2 October 2026, with an ex-dividend date of 27 August 2026 and a record date of 28 August 2026.

 

Other Financial Information

 

Non-underlying items

Non-underlying items in the year were a charge net of tax of £6.7m (2025: £10.3m). This comprises amortisation and impairment of intangible assets arising on acquisitions of £11.9m (2025: £14.3m), and non-underlying tax for the year being a credit of £5.2m (2025: £4.0m). The non-underlying tax credit relates to impairment of intangibles arising on acquisition (£3.1m) and capital losses arising from an intra-group transfer (£2.1m).

 

Joint ventures and associates - share of results

During the period, the most significant joint ventures and associates in terms of scale of operations were VIVO Defence Services Limited (VIVO) and Merseyrail Services Holding Company Limited (Merseyrail). Both are incorporated and operated in the UK.

 

VIVO oversees facilities management and service family accommodation housing maintenance on behalf of the Ministry of Defence's Defence Infrastructure Organisation. VIVO revenue for the period was £485.3m (2025: £395.9m) with the Group's share of profits net of interest and tax for the year being £7.8m (2025: £6.2m). The increase in VIVO's revenue and profits is due to an increase in the volume of accommodation maintenance work. The Group received dividends of £7.7m (2025: £7.1m).

 

Merseyrail generated revenue of £117.2m (2025: £107.6m), with the Group's share of profits net of interest and tax for the year being £5.7m (2025: £5.5m). The increase in Merseyrail revenue and profits is primarily due to increased journey numbers and increased station access at Everton's new stadium. The Group received dividends of £5.5m (2025: £5.0m).

 

The revenues and individual line items of joint ventures and associates are not consolidated in the Group Condensed Consolidated Income Statement. For information purposes, summary financial performance measures for the Group's proportion of the aggregate of all joint ventures and associates are set out below.

 

1.  For Merseyrail and other joint ventures and associates, these are the total results of the entity multiplied by the proportion of Group ownership. For VIVO, although the equity ownership is 50%, the share of profits from contracts operated by VIVO is either 25% or 50%. Therefore the Group portion of material joint ventures will not represent exactly 50% of their income and net assets.

 

Finance costs and investment income

Net finance costs recognised in the income statement were £23.3m (2025: £19.4m), consisting of investment income of £2.6m, less finance costs of £25.9m.

 

Investment income of £2.6m (2025: £3.5m) includes interest income on the Group's cash holdings of £2.3m (2025: £3.1m) and interest accruing on net retirement benefit assets of £0.3m (2025: £0.4m).

 

Finance costs of £25.9m (2025: £22.9m) include interest incurred on loans, primarily the US private placement loan notes and the revolving credit facility, of £12.1m (2025: £10.0m), and lease interest expense of £10.8m (2025: £11.6m), as well as other financing related costs including the impact of foreign exchange on financing activities. The increase in loan interest year-on-year is driven by the issue of US private placement loan notes in 2025.

 

Net interest paid recognised in the cash flow statement was £21.9m (2025: £17.0m), consisting of interest received of £2.0m (2025: £3.1m) less interest paid of £23.9m (2025: £20.1m).

 

Tax

Underlying tax

An underlying tax charge of £30.7m (2025: £27.5m) has been recognised in the period on underlying profits after finance costs. The effective tax rate (23.0%) is higher than at half year 30 June 2025 (21.8%) and year end 31 December 2025 (22.8%). The increase from 30 June 2025 is primarily due to the prior year reflecting one-time credits arising from the finalisation and settlement of overseas tax audits or disputes. Other differences are due to variances in permanent adjustments, profits taxable overseas at different rates, and profits of joint ventures whose post-tax profits are consolidated into the Group's profit before tax.

 

The current rate of 23.0% is lower than the UK statutory rate of 25%. This is primarily due to the impact of profits made by joint ventures whose post-tax profits are included in the Group's profit before tax (3.0% reduction). This is partially offset by current year movements in provisions for tax authority audits (0.7% increase) and accrued Pillar Two taxes (0.6% increase). The net effect of other smaller items, including the effect of differing global tax rates, movement in unrecognised deferred tax, and adjustments on finalisation of tax returns, amounts to a decrease of 0.3%.

 

Non-underlying tax

A tax credit of £5.2m (2025: £4.0m) arises from the amortisation and impairment of intangibles arising on acquisition (£3.1m) and on capital losses arising from an intra-group transfer (£2.1m).

 

Deferred tax assets

As at 30 June 2026 there is a net deferred tax asset of £163.8m (31 December 2025: £167.1m). This consists of a deferred tax asset of £204.3m (31 December 2025: £208.2m) and a deferred tax liability of £40.5m (31 December 2025: £41.1m). A £170.6m UK deferred tax asset (31 December 2025: £175.7m) and a £29.2m Australian deferred tax asset (31 December 2025: £27.7m) are included within the deferred tax asset on the Group's balance sheet as at 30 June 2026.

 

The UK deferred tax asset continues to be recognised on the basis of sustained profitability in the UK business which will enable future tax deductions and previous tax losses to be utilised. During the turnaround phase of the Australian business, Management has exercised caution and chosen to limit recognition of the Australian deferred tax asset to the length of the ordinary planning cycle of the Group, being five years. Accordingly, the only change in the Australian deferred tax asset since 31 December 2025 relates to foreign exchange movements arising on translation of the local currency balance.

 

Taxes paid

Net corporate income tax of £26.1m was paid during the period, relating to operations in: Asia Pacific (£4.8m), North America (£14.5m), Europe (£6.1m), Middle East (£1.0m), and UK (£3.8m). Receipts arose from the sale of losses to joint ventures in relation to 2024 (£4.1m).

 

Treasury risk management and operations

The Group's operations expose it to a variety of financial risks that include access to liquidity, the effects of changes in foreign currency exchange rates, interest rates and credit risk. The Group has a centralised treasury function whose principal role is to seek to ensure that adequate liquidity is available to meet the Group's funding requirements as they arise and that the financial risk arising from the Group's underlying operations is effectively identified and managed.

 

Treasury operations are conducted in accordance with policies and procedures approved by the Board which are reviewed annually. Financial instruments are only used for hedging purposes and speculation is not permitted. A monthly report is provided to senior management outlining performance against key risk management metrics, as required by the Treasury Policy.

 

Liquidity and funding

As at 30 June 2026, the Group had committed funding of £816m (2025: £759m), comprising £416m (December 2025: £409m) of US private placement loan notes, and a £400m (December 2025: £350m) revolving credit facility which was undrawn. The US private placement loan notes are repayable in bullet payments between October 2027 and April 2035. The Group does not engage in any external financing arrangements associated with either receivables or payables.

 

In June, the Group refinanced its revolving credit facility, increasing committed funding from £350m to £400m and extending the maturity until June 2031. The facility also includes an accordion option, providing a further £100m of funding (uncommitted and therefore not incurring any fees) if required without the need for additional documentation. This option has not been included in the Group's assessment of available liquidity as approvals are required to access the funding.

 

Interest rate risk

The Group has a preference for fixed rate debt to reduce the volatility of net finance costs. The Group's Treasury Policy requires it to maintain a minimum ratio of fixed rate debt to overall adjusted net debt that is not lower than 50%, and for this proportion to increase as the ratio of EBITDA to interest expense falls. As at 30 June 2026, £415.6m of Group's debt was held at fixed rates, representing 183% of adjusted net debt of £227.6m and therefore significantly exceeding the minimum Treasury Policy requirement.

 

Foreign exchange risk

The Group is subject to currency exposure on the translation to Sterling of its net investments in overseas subsidiaries. The Group seeks to manage this risk, where appropriate, by borrowing in the same currency as those investments. Group borrowings are predominantly denominated in Sterling and US Dollars. The Group seeks to manage its currency cash flows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts where appropriate to hedge net currency cash flows.

 

Credit risk

Cash deposits and in-the-money financial instruments give rise to credit risk on the amounts due from counterparties. The Group manages this risk by adhering to counterparty exposure limits based on external credit ratings of the relevant counterparty.

 

Net assets

As at 30 June 2026, the Condensed Consolidated Balance Sheet shown on page 22 had net assets of £869.7m, a decrease of £3.9m from the closing net asset position of £873.6m as at 31 December 2025. This decrease is a result of returns to shareholders totalling £105.8m, through share buybacks and dividend payments, offset by total comprehensive income in the period of £99.4m.

 

Key movements since 31 December 2025 on the Condensed Consolidated Balance Sheet shown on page 22 include:

•   An increase in goodwill of £11.5m driven by favourable foreign exchange.

•   A decrease in other intangible assets of £12.7m, primarily driven by an amortisation charge of £16.8m for the period, offset by additions.

•   Cash and cash equivalents have decreased by £17.1m. In the period the Group generated free cash flow of £65.0m, offset by £58.1m shares repurchased and £30.3m dividends to shareholders.

•   The net movement of £16.7m in contract assets, trade receivables and other assets, and, contract liabilities, trade payables and other liabilities are as a result of normal working capital movements.

 

Pensions

Serco's pension schemes have moved from an accounting surplus of £1.5m at 31 December 2025 to a deficit of £1.9m at 30 June 2026. The £3.4m movement comprises a £18.7m reduction in scheme assets due to market conditions lowering asset values. This is offset by a £15.3m reduction in scheme liabilities primarily from the impact of increased discount rates partially offset by increased inflation.

 

The Serco Pension and Life Assurance Scheme (SPLAS) 2024 triennial actuarial funding valuation continues the Group commitment from the 2021 valuation to make deficit recovery payments of £6.6m per year until March 2030.

 

The opening net asset position led to a net interest income within net finance costs of £0.3m (2025: £0.4m).

 

Condensed Consolidated Financial Statements

 

Condensed Consolidated Income Statement

For the period ended 30 June 2026

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income

For the period ended 30 June 2026

 

1.    Recorded in retained earnings in the Condensed Consolidated Statement of Changes in Equity.

2.    Recorded in other reserves in the Condensed Consolidated Statement of Changes in Equity.

 

 

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 June 2026

 

1.     A liability of £17.4m has been recognised within other payables in respect of share repurchases committed to, but not yet settled as at the reporting date, under the £75m share buyback programme announced on 5 March 2026. Under the terms of the arrangement, from the end of the reporting period until the completion date of 31 July 2026, the Group could not vary or terminate its instructions to the broker. See note 14 for further details on the post balance sheet event.

 

 

Condensed Consolidated Balance Sheet

For the period ended 30 June 2026

 

 

Condensed Consolidated Cash Flow Statement

For the period ended 30 June 2026

 

 

 

Notes to the Condensed Consolidated Financial Statements

1. Basis of preparation and accounting policies

 

Basis of preparation

These Condensed Consolidated Financial Statements for the six months ended 30 June 2026 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and with UK-adopted International Accounting Standard 34 'Interim financial reporting'. These Condensed Consolidated Financial Statements do not include all of the information required for full annual Consolidated Financial Statements and should be read in conjunction with the Group's Annual Report and Financial Statements for the year ended 31 December 2025, which has been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.

 

These Condensed Consolidated Financial Statements do not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 December 2025 were approved by the Board of Directors on 4 March 2026 and delivered to the Registrar of Companies. The report of the auditor on those accounts was (i) unqualified, (ii) did not draw attention to any matters by way of emphasis, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

These Condensed Consolidated Half-Year Financial Statements are unaudited but have been reviewed by Ernst & Young LLP, the Company's auditors, in accordance with International Standard on Review Engagements (UK) 2410 'Review of Interim Financial Information performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board.

 

Going concern

In assessing the basis of preparation of the condensed set of financial statements for the period ended 30 June 2026, the Directors have considered the principles of the Financial Reporting Council's 2025 'Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks)'. The going concern assessment period used in the assessment for these condensed financial statements is to 31 August 2027.

 

At 30 June 2026, the Group's principal debt facilities comprised a £400m revolving credit facility maturing in June 2031 (of which £nil was drawn) and £415.6m of US private placement notes, giving £815.6m of committed credit facilities and headroom of £582.2m, being the undrawn RCF plus cash of £182.2m. The principal financial covenant ratios are consistent across the US private placement loan notes and revolving credit facility. As at 30 June 2026, the Group's primary restricting covenant, its leverage ratio, is below the covenant of 3.5x and is below the Group's target range of 1x-2x at 0.75x. The Group has net current liabilities of £80.5m, which have been considered within the going concern assessment. The Group also has a shareholder guarantee with its joint venture, VIVO, which is unlikely to be called upon given its profits and cash reserves available.

 

The Directors have undertaken a rigorous assessment of going concern and liquidity, taking into account financial forecasts, as well as the potential impact of key uncertainties and sensitivities on the Group's future performance. In making this assessment the Directors have considered the Group's existing debt levels, the committed funding and liquidity positions under its debt covenants, its ability to generate cash from trading activities and its working capital requirements. The Directors have also identified a series of mitigating actions that could be used to preserve cash in the business should the need arise.

 

The basis of the assessment continues to be the Board-approved budget updated to take account of known changes since approval, including the impact of the Group's results for the six months to 30 June 2026. The budget is prepared annually for the next two-year period and is based on a bottom-up approach to all of the Group's existing contracts, potential new contracts and administrative functions.

 

The Directors believe that appropriate sensitivities in assessing the Group's ability to continue as a going concern are to model reductions in the Group's win rates for bids and extensions, and reductions in profit margins. Due to the diversity in the Group's operations, the Directors believe that a reverse stress test of these sensitivities to assess the headroom available under the Group's debt covenants and available liquidity provides meaningful analysis of the Group's ability to continue as a going concern. Based on the headroom available, the Directors are then able to assess whether the reductions required to breach the Group's financial covenants, or exhaust available liquidity, are plausible.

 

The reverse stress test shows that, after the date of approval of the financial statements, the Group can afford to be unsuccessful on 60% of its budgeted bids (including new business and rebids) and extensions, combined with a profit margin 175 basis points below the Group's forecast, and still retain sufficient liquidity to meet all liabilities as they fall due and remain compliant with the Group's financial covenants.

 

In respect of win rates, the Group has won 83% (FY25: 82%) of its rebids and available contract extensions by value over the last two years. It set its budget based on past experience and future expectations. Therefore, a reduction of 60% or more to the budgeted bids and extension rates is not considered plausible.

 

Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet their liabilities as they fall due for the period to 31 August 2027 and therefore have prepared the Condensed Consolidated Financial Statements on a going concern basis.

 

Accounting policies

No new or amended accounting standards had a material impact on the Group for the period ended 30 June 2026.

 

There have been no changes to the Group's accounting policies during the period ended 30 June 2026.

 

Estimates and judgements

In preparing these Condensed Consolidated Financial Statements, the Group has applied the same critical accounting judgements and the same key sources of estimation uncertainty exist as disclosed in the audited Annual Report and Accounts for the year ended 31 December 2025.

 

 

2. Segmental information

The Group's operating segments under IFRS 8 Operating Segments reflect the information reported to the Board in 2026 and are consistent with those reported in the Group's 2025 audited financial statements.

 

An analysis of the Group's revenue from its key market sectors is as follows:

 

1.  The Group undertook a review of its sector presentation for IFRS 15 revenue disaggregation to ensure it aligns with its strategic focus, as set out in the 2025 Annual Report and Accounts, on Defence, Justice & Immigration and Citizen Services as its core markets. Management now views and manages revenue based on these three sectors, with the disaggregation reflecting the underlying economic characteristics of each sector, including similarities in customer base, contract duration, timing of revenue recognition, and exposure to similar sources of uncertainty such as operational performance and inflation. The Group's previous disaggregation presented revenue at a more granular level than required. The change represents a revision to the presentation of revenue disaggregation and has no impact on total Group revenue, operating segment results or revenue recognition. Comparative information has been restated accordingly to ensure comparability across periods.

 

The following is an analysis of the Group's revenue, results, assets and liabilities by IFRS 8 operating segments:

 

 

1.  The Corporate segment assets and liabilities include balance sheet items which provide benefit to the wider Group, including defined benefit pension schemes.

2.  Unallocated assets and liabilities include deferred tax, cash and cash equivalents, derivative financial instruments and loans.

3.  Additions to non-current assets reflects additions and amounts arising on acquisition for goodwill, other intangible assets, property plant and equipment and right of use assets.

 

 

3. Non-underlying items

4. Tax

The tax charge for the six months ended 30 June 2026 is calculated using the full year forecasted effective tax rate by taxable entity which is then applied to the actual profit for the period in each taxable entity. The tax impacts of items specific to the period are then included to provide the half year actual tax charge.

 

A total tax charge of £25.5m includes an underlying tax charge of £30.7m and a non-underlying tax credit of £5.2m. The £5.2m credit arises on the amortisation and impairment of intangibles arising on acquisition (£3.1m) and on capital losses arising from an intra-group transfer (£2.1m).

 

The total effective tax rate of 21.0% is lower than the UK statutory rate of 25.0%. This is mainly due to the impact of profits made by joint ventures whose post-tax profits are included in the Group's profit before tax and the capital loss that arose on an intra-group transfer. These reductions are only partially offset by other movements, including movements in provisions for liabilities on tax authority audits and Pillar Two taxes.

 

5. Earnings per share

Basic earnings per share is calculated by dividing the profit after tax attributable to owners of the Group by the weighted average number of shares in issue, excluding treasury shares and unallocated shares held by employee share ownership trusts.

 

In calculating the diluted earnings per share, unvested share options outstanding have been taken into account where the impact of these is dilutive.

 

The calculation of the basic and diluted EPS is based on the following data:

 

 

Earnings per share

As at 30 June 2026 the carrying value of goodwill was £940.8m (31 December 2025: £929.3m). The net increase is due to a foreign exchange gain of £11.5m.

 

Goodwill is required to be tested for impairment at least once every financial year, irrespective of whether there is any indication of impairment. The annual impairment review typically takes place in the final quarter of the year. However, if there are indicators of impairment, an earlier review is also required.

 

In assessing for indicators of impairment, the Group has gathered information internally and externally at a global level and based on the individual geographies in which the Group operates. Factors that were considered included, but were not limited to:

 

•   any obsolescence indicators within the Group's physical assets;

•   any plans to dispose of GCGUs or significant portions of GCGUs;

•   indicators of worse-than-expected financial and bidding performance to an extent that would have caused an impairment had they been known at the time of the latest full impairment review;

•   unfavourable market conditions and valuations; and

•   carrying amounts of net assets in excess of market capitalisation.

 

There have been no indicators of impairment identified since the full impairment test undertaken as at 31 December 2025.

 

7. Analysis of net debt

The analysis below provides a reconciliation between the opening and closing positions in the balance sheet for liabilities arising from financing activities together with movements in derivatives relating to the items included in net debt.

 

1	Non-cash movements on loans payable relate to movement in capitalised finance costs in the year. For lease obligations non-cash movements relate to the net impact of entering into new leases and exiting certain leases before the end of the lease term without payment of a cash termination cost.

 

 

Employee-related provisions include amounts for long-term service awards and terminal gratuity liabilities which have been accrued and are based on contractual entitlement, together with an estimate of the probabilities that employees will stay until rewards fall due and receive all relevant amounts. The provisions will be utilised over various periods driven by attrition and demobilisation of contracts, the timing of which is uncertain. Employee-related provisions also include amounts related to restructuring.

 

The majority of property provisions relate to leased properties and are associated with the requirement to return properties to either their original condition, or to enact specific improvement activities in advance of exiting the lease. Dilapidations associated with leased properties are held as a provision until such time as they fall due, with the longest running lease ending in March 2036.

 

A contract provision is recorded when a contract is deemed to be unprofitable and therefore is considered onerous. The present value of the estimated future cash outflow required to settle the contract obligations as they fall due over the respective contracts has been used in determining the provision.

 

Claims provisions relate to claims made against the Group. These claims are varied in nature, although they typically come from either the Group's service users, claimants for vehicle-related incidents, or the Group's employees. While there is some level of judgement on the amount to be recorded, in almost all instances the variance to the actual claim paid out will not individually be material; however, the timing of when the claims are reported and settled is less certain as a process needs to be followed prior to the amounts being paid. Claims provisions include amounts expected to be recovered from insurers, for which the corresponding reimbursement asset has been recognised in other receivables.

 

Included within other provisions:

•   £16.5m relates to legal and other costs that the Group expects to incur over an extended period, in respect of past events for which a provision has been recorded, none of which are individually material.

•   £25.4m relates to a provision in respect of a contingent liability recognised on the acquisition of European Homecare GmbH. The Directors have assessed that a present obligation exists in respect of the treatment of certain historic transactions and have measured the fair value of these as required by IFRS 3 Business Combinations notwithstanding that the outflow of economic benefits is not probable. This provision will be reassessed at each reporting date as the risk associated with the contingent liability in due course expires.

 

Individual provisions are only discounted where the impact is assessed to be significant. Currently, the effect of discounting is not material.

 

9. Contingent liabilities

The Group and its subsidiaries have provided certain guarantees and indemnities in respect of performance and other bonds, issued by its banks on its behalf in the ordinary course of business. The total commitment outstanding as at 30 June 2026 was £211.3m (31 December 2025: £217.0m).

 

The Group has guaranteed overdrafts, finance leases and bonding facilities of its joint ventures and associates up to a maximum value of £5.7m (31 December 2025: £5.7m). The actual commitment outstanding at 30 June 2026 was £5.7m (31 December 2025: £5.7m)

 

In the normal course of business, the Group may be requested by customers or relevant authorities to provide information in relation to operational incidents arising under certain contracts. In this context, the Group is currently engaged in a small number of such matters, which are at an early stage of engagement and are limited to the provision of information. Based on previous similar incidents, enquiries can be ongoing for several years. No claims have been asserted against the Group in respect of these matters and no findings or determinations have been made. Based on the information currently available, the Group does not expect these matters to have a material impact. Accordingly, no provision has been recognised as management does not consider that a present obligation exists at the reporting date.

 

The Group is also aware of other claims and potential claims which involve or may involve legal proceedings against the Group although the timing of settlement of these claims remains uncertain. The Directors are of the opinion, having regard to legal advice received and the Group's insurance arrangements, that it is unlikely that these matters will, in aggregate, have a material effect on the Group's financial position.

 

10. Financial risk management

The vast majority of financial instruments are held at amortised cost.

 

The Group held the following financial assets which fall within the scope of IFRS 9 Financial Instruments:

1.  Management estimate that the carrying amounts of cash and trade receivables approximate to their fair value due to the short-term maturity of these instruments.

 

 

The Group held the following financial liabilities which fall within the scope of IFRS 9 Financial Instruments:

1.  Management estimate that the carrying amounts of trade payables approximate to their fair value due to the short-term maturity of these instruments.

 

The classification of the fair value measurement falls into three levels, based on the degree to which the fair value is observable. The levels are as follows:

•   Level 1: Inputs derived from unadjusted quoted prices in active markets for identical assets or liabilities.

•   Level 2: Inputs that are observable for the asset or liability, either directly or indirectly, other than quoted prices included within Level 1.

•   Level 3: Inputs are unobservable inputs for the asset or liability.

 

Based on the above, the derivative financial instruments held by the Group, the comparison fair values for loans, liability for own shares and the long-term employee compensation plan as at 30 June 2026 are all considered to fall into Level 2. The contingent consideration and contingent liabilities on previous acquisitions are considered to fall into Level 3. Market prices are sourced from Bloomberg and third-party valuations. The valuation models incorporate various inputs including foreign exchange spot and forward rates and interest rate curves. There have been no transfers between levels in the period.

11. Retirement benefit schemes

The Group contributes to defined benefit schemes for qualifying employees of its subsidiaries. They consist of the following schemes:

•   two UK funded schemes: Serco Pension and Life Assurance Scheme (SPLAS) and a non-contract specific section of the Railways Pension Scheme (RPS);

•   three non-UK schemes based in Switzerland that are available for the employees of ORS Service AG (ORS);

•   three funded public sector schemes in Australia; and

•   an unfunded scheme in Germany where the liabilities arising are recognised in full.

 

 

The assets and liabilities of the schemes are:

1.  The SPLAS Trust Deed gives the Group an unconditional right to a refund of surplus assets assuming the gradual settlement of plan liabilities over time until all members have left the plan. Pension assets are deemed to be recoverable and there are no adjustments in respect of minimum funding requirements as economic benefits are available to the Group either in the form of future refunds or in the form of possible reductions in future contributions.

2.  The net retirement benefit (liability)/asset is split in the balance sheet between schemes in surplus totalling £5.7m (2025: £9.6m) reported in retirement benefit assets and schemes in deficit totalling £7.6m (2025: £8.1m) reported in retirement benefit obligations.

 

Actuarial assumptions:

The assumptions set out below are for SPLAS, which reflects 83% of total liabilities and 83% of total assets of the defined benefit pension schemes in which the Group participates. The significant actuarial assumptions with regards to the determination of the defined benefit obligation are set out below.

	At 30 June	At 31 December
	2026	2025
Post-retirement mortality1	years	years
Current pensioners at 65 - male	21.1	20.9
Current pensioners at 65 - female	23.7	23.6
Future pensioners at 65 - male	23.0	22.9
Future pensioners at 65 - female	25.8	25.7

 

12. Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint venture undertakings and associates are disclosed below.

 

 

Sales of goods and services to joint ventures relate to services provided including administrative and back office activities to VIVO, while sales of goods and services to associates relate to contractual services provided on behalf of Khadamat. Joint venture receivable amounts outstanding have arisen from transactions undertaken during the general course of trading, are unsecured and will be settled in cash.

 

13. Notes to the Condensed Consolidated Cash Flow Statement

Subsequent to the period-end, the Board has declared an interim dividend in respect of the period ended 30 June 2026 of 1.60 pence per share.

 

Serco share buyback

On 31 July 2026, the Group completed the £75m share buyback programme announced on 5 March 2026 at a total cost of £75.5m, including associated fees. The total shares purchased during the programme was 28 million shares. At 30 June 2026, the Group had completed purchases of 21 million shares for a cost including fees of £58.1m and recognised a liability of £17.4m for the remaining commitment.

 

The Group has announced its intention to commence a further share buyback of up to £75m. Consistent with the Group's capital allocation policy, the objective of the programme is to provide additional returns to shareholders as well as aid the Group in meeting its medium-term leverage targets. The buyback programme is expected to complete by 31 December 2026 with the shares either held in treasury or cancelled.

 

Additional information

 

Key performance indicators

 

Alternative performance measures (APMs) reconciliations

 

Overview

In general, APMs are presented externally to meet investors' requirements for further clarity and transparency of the Group's financial performance. The APMs are also used internally in the management of our business performance, budgeting and forecasting, and for determining Executive Directors' remuneration and that of other Management throughout the business.

 

APMs are non-IFRS measures. Where additional revenue is being included in or excluded from an APM, this reflects revenues presented elsewhere within the reported financial information, except where amounts are recalculated to reflect constant currency. Where items of income or expense are being excluded in an APM, these are included elsewhere in our reported financial information as they represent actual income or expense of the Group, except where amounts are recalculated to reflect constant currency. As a result, APMs allow investors and other readers to review different kinds of revenue, profits and costs, and should not be used in isolation. Commentary included in the Group and Divisional Review, as well as the Condensed Consolidated Financial Statements and their accompanying notes, should be referred to in order to fully appreciate all the factors that affect our business. We strongly encourage readers not to rely on any single financial measure, but to carefully review our reporting in its entirety. Definitions of the Group's APMs are shown in the glossary on page 42 and the reconciliations for each measure are shown as follows:

 

Alternative revenue measures

A reconciliation of reported revenue to the alternative revenue measures is as follows:

 

 

 

Alternative profit measures

A reconciliation of underlying operating profit to reported operating profit is as follows:

 

 

Underlying EPS

A reconciliation of underlying EPS to reported EPS is as follows:

Alternative cash flow measures

A reconciliation of net cash inflow from operating activities, free cash flow and trading cash flow is as follows:

 

Free cash flow to adjusted net debt

A reconciliation from free cash flow to adjusted net debt is as follows:

 

 

Reported net debt to adjusted net debt

Reported net debt includes all lease liabilities, including those recognised under IFRS 16 Leases. A reconciliation of adjusted net debt to reported net debt is as follows:

 

 

Return on invested capital (ROIC)

 

Debt covenants

The principal financial covenant ratios are consistent across the US private placement loan notes and revolving credit facility, with a maximum consolidated total net borrowings (CTNB) to covenant EBITDA of 3.5 times and minimum covenant EBITDA to covenant net finance costs of 3.0 times, tested semi-annually. A reconciliation of the basis of calculation is set out in the table below.

 

The covenants exclude the impact of IFRS 16 Leases on the Group's results.

Glossary

 

Adjusted net debt

Constant currency

Free cash flow

Invested capital

Net debt

Non-underlying items

Non-underlying items are amortisation and impairment of intangibles arising on acquisitions, because these charges are based on judgements about the value and economic life of assets that, in the case of items such as customer relationships, would not be capitalised in normal operating practice.

Non-underlying tax

Non‑underlying tax refers to the tax effects of non‑underlying items, along with tax items that are themselves considered non‑underlying because they arise from discrete, non‑recurring events outside the Group's ordinary operating activities.

 

Order book

Organic

Organic measures exclude the impact of relevant acquisitions (MT&S) or disposals (Serco Hong Kong and Khadamat). The prior year figures are recalculated on a consistent basis with the relevant acquisitions or disposals removed in the current or prior period and therefore may not agree to the organic revenue previously reported.

 

Pipeline of large new bid opportunities

Revenue plus share of joint ventures and associates

Trading cash conversion

Underlying earnings per share (EPS), diluted

Underlying operating profit (UOP)

Underlying return on invested capital (ROIC)

ROIC is calculated as UOP for the period divided by the invested capital balance (as described above).

Principal risks and uncertainties

 

Risk Management

Since the date of the approval of the Annual Report and Financial statements our risk management process has continued to operate as described on page 66 of our 2025 Annual Report.

 

The Group Executive Committee and the Risk Committee completed their annual review of our existing principal and emerging risks in line with our ERM framework. All risks remain valid and were approved at the Risk Committee on 3 August 2026. Some further development work to simplify our Principal Risks is in progress that will be reviewed again at the October risk committee. These and any emerging risks remain under review on a quarterly basis by the Risk Committee.

 

The following summarises the updated Principal Risks for the Group:

•   Failure to grow profitably: Failure to win material bids or renew material contracts profitably, or a lack of opportunities in our chosen markets;

•   Major information security breach (including cyber-attack, data protection and IT service disruption): Loss or compromise of personal, sensitive or commercial information or wilful damage;

•   Impact of emerging technology (including AI and other disruptive technology): Failure to anticipate and invest in the right technology and capability to remain competitive;

•   Contract performance, non-compliance or misreporting: Failure to deliver internal and customer financial and contractual requirements and to meet agreed service performance levels and report against them accurately;

•   Impacts of significant policy change on our strategy and current portfolio: Ability to influence and respond to changing customer requirements and ideology shifts;

•   Significant failure of the supply chain and/or sub-contractor network: Failure that may result in Serco being unable to meet customer obligations, perform business critical operations or win new business;

•   Failure to act with integrity: Engagement in significant corrupt, illegal or dishonest acts;

•   Health, safety and wellbeing: The diversity of our operations and the inherent risks in our operations in both work and public environments;

•   Catastrophic incident: Focusing on the risk of an event as a result of our actions or failure to respond to an event that results in multiple fatalities, severe property/asset damage or loss or very serious long term environmental damage; and

•   Material legal and regulatory compliance failure: Significant loss and damage to the Group including exposure to regulatory prosecution, reputational damage and the potential loss of licences and authorisations.

 

Further detail on our principal risks and uncertainties as articulated as at year end 2025 and the associated controls and mitigations can be found on page 69 in our 2025 Annual Report.

 

Statement of Directors' Responsibilities

We confirm that to the best of our knowledge:

•   The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK;

•   The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Condensed Consolidated Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year;

•   The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

By order of the Board:

 

 

INDEPENDENT REVIEW REPORT TO SERCO GROUP PLC

 

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2026 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement and related notes 1 to 14. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2026 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE) issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.

Accordingly, we do not express an audit opinion.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with UK adopted International Accounting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

 

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

 

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

 

Responsibilities of the Directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

 

Auditor's Responsibilities for the Review of the Financial Information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

 

Use of Our Report

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

 

Ernst & Young LLP

Reading

05 August 2026

 

Forward-looking statements

 

This announcement contains statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. Generally, words such as "expect", "anticipate", "believe", "estimate", "may", "could", "should", "will", "continue", "aspire" "aim", "plan", "target", "goal", "ambition", "intend" or, in each case, their negative or other variations or comparable terminology identify forward-looking statements. By their nature, these forward-looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events may differ materially from those currently anticipated in such statements. Factors which may cause future outcomes to differ from those foreseen or implied in forward-looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to or lost by Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws or governments or to governmental regulations; regulatory or legal actions, including the nature of any enforcement action or remedies sought or imposed; the receipt of relevant third party and/or regulatory approvals; exchange rate fluctuations; the development and use of new technology; changes in public expectations or behaviour and other changes to business conditions; wars and acts of terrorism; cyber-attacks; climate change and related regulatory developments; and pandemics, epidemics or natural disasters. Many of these factors are beyond Serco's control or influence. For a description of the principal risks and uncertainties that may affect Serco's business, financial performance or results of operations, please refer to the Principal Risks and Uncertainties set out in this announcement.

 

Forward-looking statements are not guarantees of future performance. These forward-looking statements are based on information available, and assumptions made, as of the date of this announcement and have not been audited or otherwise independently verified. Past performance should not be taken as an indication or guarantee of future results and no representation or warranty, express or implied, is made in relation to future performance or otherwise. Except as required by any applicable law or regulation (including under the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this announcement, or to keep current any other information contained in this announcement. Accordingly, undue reliance should not be placed on the forward-looking statements. Any references in this publication to other reports or materials, including website addresses, are for the reader's interest only. Neither the content of Serco's website nor any website accessible from hyperlinks from Serco's website, including any materials contained or accessible thereon, are incorporated in or form part of this announcement. Serco is subject to the regulatory requirements of the Financial Conduct Authority of the United Kingdom.