Docklands Rail Operator Serco’s Profit Rises on Deals Abroad

Serco Group Plc, the operator of London’s Docklands Light Railway, said 2010 earnings increased 21 percent as it developed new markets and won more business.

Pretax profit for the year climbed to 213.9 million pounds ($347 million) from 177.1 million pounds a year earlier, the Hook, England-based company said in a statement today. Revenue rose 9 percent to 4.33 billion pounds.

Local government authorities across the U.K. are dealing with reduced budgets as Prime Minister David Cameron’s coalition government plans to slash 81 billion pounds from public spending by 2015. Serco is helping the U.K. government identify how public services can be made competitive with more private- company involvement, it said in August.

Serco’s international business “has been the story for me for 2010,” Chief Executive Officer Christopher Hyman said in an interview. The company won a five-year order to run a monorail system in Dubai and an order for hazardous-materials handling with the U.S. Navy last year, according to the statement.

Contract wins in the U.K. included a 25-year, 650 million- pound environmental services deal with a local government, a 415 million-pound contract to operate a prison and a 10-year agreement with King’s College Hospital, according to the statement.

Sales Target

The company expects about 5 billion pounds in sales for the 2012 financial year, it said.

“It certainly won’t be a straight line to 2012, but we’ll see good growth, some growth in the U.K., and that should be enough to take us to that target,” Hyman said in the interview.

Serco rose as much as 25 pence, or 4.5 percent, to 579 pence in London, and traded at 557 pence at 11:15 a.m. local time, giving the company a market value of 2.75 billion pounds.

The company’s order book fell to 16.6 billion pounds from 17.1 billion pounds as it reduced the price of some contracts to meet government demands and removed an order for “flexible new deal” programs which help unemployed people, Hyman said.

Britain’s government stopped the program, which will be replaced by a new one in which Serco hopes to get work, Hyman said.

Cameron said in 2009 he wanted to see voluntary groups and smaller companies supplying more services to government, rather than just “the big players.”

Hyman said Serco is talking to “several hundred” small businesses and voluntary organizations about its work program with the government and has formed a pathology joint venture with the government. Only about 15 percent of the work that can be moved from the public sector to private providers has been shifted so far, he said.

“There’ll be enough work to go around for everyone,” Hyman said. “Competition is good.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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