‘Eeyore’ Serco puts dividends back on horizon due to bulging order book

Serco was upbeat about rewarding long-suffering shareholders on Thursday despite difficult conditions in the UK.

The prisons-to-hospitals outsourcer’s chief executive Rupert Soames, who described the mood as “miserably cheerful, like Eeyore”, said dividends were on the cards again.

Serco, which makes 40% of sales from the UK, said sales in 2020 would rise 5% due to new contracts, including a £1.9bn deal to house asylum-seekers in Britain. Free cash flow also turned positive for the first time in three years.

Soames, the grandson of Sir Winston Churchill, has never paid a dividend to investors but said prospects were increasing. “There’s an aviation term called being on short finals, which means you’re just coming into land approaching the runway. We are reaching the landing point where we will be able to pay dividends.

“It’s been a miserable four years for shareholders but they can now see some light at the end of the tunnel. In 2014 we were early adopters of financial carnage. Finally the old tanker seems to be turning and we now have positive cash flow and increasing profits. It does feel a bit of a turning point.”

He declined to specific when the payout might resume. Despite the UK drag, around 80% of order intake this year came from overseas.

“We are not fussy about where contracts come from,” Soames said.