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Serco boosted by acquisitions

Shares in support services group Serco surged 6 per cent today after profits rose 27 per cent and the company delivered a bullish assessment of its prospects.
The Hampshire-based company, which is involved in a number of hospital modernisation projects and rail schemes said market conditions remained strongly in its favour of expanding in the UK and overseas.

Boosted by the impact of two major acquisitions, Serco said revenues rose by 33.6 per cent to £1.07 billion in the six months to June 30, while profits before exceptional items improved to £43.7 million, from £34.4 million last time.

It said the acquisition in February and March of ITNET and RCI - both suppliers of IT and business management services - boosted revenues by £134.4 million and profits by £9.3 million.

Serco said it had a forward order book of £12.9 billion at the end of June with 99 per cent of its planned revenues target for 2005 already achieved. It has met 85 per cent of the target for 2006.

The company also said Northern Rail - its largest-ever contract -had delivered a strong operational performance in the first few months of the joint venture with NedRailways. It said it exceeded service performance targets.

Shares rose 15.25p to 268p, taking Serco to the top of the FTSE 250 Index risers board.

Contracts won during the period included a £1.2 billion joint venture deal to modernise three hospitals in Leicester and the building and running of an £80 million Defence Academy for the Ministry of Defence at Shrivenham.

Since the start of the second half, the company's joint venture with BNFL and Lockheed Martin signed a contract that has significantly increased the scale of its work for the MoD at the Atomic Weapons Establishment.

At the bottom-line profits were 21.5 per cent higher at £37.3 million while shareholders will receive an interim dividend of 0.91p a share, an increase of 12.3 per cent.

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