Serco shares (LON: SRP) plunged on Monday after it was revealed the government had taken back management of its atomic weapons development facility.
From June 30, 2021, the government will take over the Atomic Weapons Establishment (AWE), which has been run by Serco since 2000 and the contract was due to expire in 2025.
“Whilst a disappointment, the contract has been restructured in the past and with the next generation of nuclear deterrent infrastructure now building, bringing AWE to a close is not a total surprise to us,” said analysts at Shore Capital.
“The contribution emerging from Serco’s UK activities continues to diminish, on a trajectory to below 40% of the group – which we are pleased to see, de-risking Serco from a political perspective.”
Serco said it still expects profit measures to “remain broadly in line with current consensus and at similar levels to our expectations for 2020”.
A spokesperson from the Ministry of Defence said yesterday, when Sky Newss first reported the news: “The MOD routinely evaluates and reviews all major contracts as they near their end date, and we will not comment on speculation.”
In October, the group said it expected 30% profit growth thanks to Test and Trace, and US Medicaid. Serco boasted ‘strong revenue growth’, alongside ‘good cost control’ during the third quarter. This, it said, allowed it to upgrade its revenue guidance from £3.7 billion, to £3.9 billion, and its trading profit expectations from £135-150 million, to £160-165 million.