OUTSOURCING firm Serco will start paying a dividend to shareholders due to soaring profits and a post-Covid outlook that promises future growth, the company says.

Bosses issued a profits upgrade for 2021 and said now is the time to make the 1.4p-a-share payments to investors – having faced criticism over previous plans for the payouts.

READ MORE: Serco profits 'to exceed expectations' despite Test and Trace failings

They said previously claimed furlough cash has been repaid, a £5 million bonus was shared among 50,000 frontline workers, while levels of profit from winning Covid-19 contracts was minimal.

Chief executive Rupert Soames said that although underlying trading profit had jumped 36% to £163 million in 2020, only around £2m came from winning Covid-19 contracts – the rest coming from “normal operations of the business”.

The National:

Serco added around £400m to its revenues from Covid-19 services, including operating more than 25% of NHS Test & Trace sites and half the Tier 3 tracing capacity in England.

Soames added: “Although these contracts are at lower margins than we would normally accept for this type of work, they generated nearly £350m of revenue, so made a material contribution and helped to reduce the impact of losses in Transport, Health and Leisure.”

Serco’s work in council leisure centres, its Merseyrail joint venture and extra costs incurred from making existing health contracts Covid-secure took a toll of around £35m, he said.

The company added it expects to benefit more broadly from the pandemic because “Covid-19 has reconnected hundreds of millions of people worldwide with government services and reminded them of the value of well-organised service delivery”.

READ MORE: Nearly half of public don't trust Serco to deliver virus testing scheme

“This will make government more confident in promoting services to citizens. But the fact is that deficits and levels of government debt have increased to levels not seen outside world war, and governments will be sharply focused on delivering ‘more and better for less’. This is positive for our market.”

Serco also saw its Asylum Seeker (AASC) contract swing to a profit as it won an eight-year deal valued at just over £200m to manage the Gatwick Immigration Removal Centres.

There was demand for immigration services in Australia, including mobilising quarantine hotels in Western Australia, and a US contract with the Federal Emergency Management Agency also saw growth, the company added.

The company said the dividend situation had changed since talk of restarting payments were first floated in April last year.

Soames said previous criticism that government support had been taken at the same time as making payments to shareholders was resolved.

READ MORE: Test & Trace has failed, so what penalties will Serco face?

He added: “We have refunded all employment and liquidity support paid to Serco by governments, with the exception of £12m in the USA, for which there is no mechanism for early repayment, so will be repaid as scheduled in 2021 and 2022.”

On the profits made from government Covid-19 contracts, he said: “Whilst the profits arising from our work on Covid-19 are ephemeral, they do not represent a material proportion of our profits in the year (net, around 1% of underlying trading profit).”

He added that a £5m bonus had been shared among staff and the company had enough cash to make the dividend payments, concluding: “In the light of these four considerations, the board feels it appropriate to recommend the payment of a final dividend in respect of 2020 of 1.4p per share.”

Revenues for the year hit £3.9 billion, with underlying trading profits of £163m. Revenues guidance for this year was upgraded from £4.1bn to £4.2bn, with underlying trading expected to hit £175m, compared with previous estimates of £165m.

Pascale Robinson, campaigns officer at We Own It, said: "People will be rightly outraged to hear that Serco has just started paying out dividends to its shareholders. They've pocketed millions of taxpayer's cash to deliver a contact tracing system that has clearly failed to deliver and put people's lives needlessly at risk.

"Meanwhile the company's CEO Rupert Soames has the gall to claim that Serco's management of contact tracing has been a 'remarkable success' - when we know that the opposite is true.

"Instead of doling out dividends, Serco should do the right thing, recognise its total failure and give back the money that it has taken in coronavirus contracts. And the Government should face reality, kick Serco out of the Test and Trace system and hand it over to local public health teams who have the skills, knowledge and experience to do it well."