Companies

Serco buys U.S. defence supplier NSBU for $225 mln in boost to earnings

Credit: REUTERS/DARREN STAPLES

Serco will buy Alion's Naval Systems Business Unit (NSBU), which supplies ship and submarine engineering services to the U.S. Navy, for $225 million, the British outsourcer said on Thursday, adding it expected the deal to boost its earnings from the first year.

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EDINBURGH, May 23 (Reuters) - Serco SRP.L will buy Alion's Naval Systems Business Unit (NSBU), which supplies ship and submarine engineering services to the U.S. Navy, for $225 million, the British outsourcer said on Thursday, adding it expected the deal to boost its earnings from the first year.

The purchase of NSBU is a "significant addition to the capability and scale of Serco's defence business," CEO Rupert Soames saidin a statement.

From its first full year of ownership in 2020, NSBU is expected to contribute revenue of approximately $370 million, EBITDA of $28 million and underlying trading profit of $20 million.

That meant an increase in the market consensus for underlying earnings per share of 7% to 9%, Serco said.

The U.S. Navy has recently announced plans to increase its fleet to 355 ships from 280 by 2034, implying long-term demand for the group's newly enhanced knowhow, Soames said.

NSBU will almost double Serco's capabilities in U.S. defence and, financed through debt and equity, will not endanger a leverage target range of 1 to 2 times earnings before interest, taxes, depreciation and amortisation.

Serco, which provides services across defence, security, health and transport, has focused on winning public business abroad and cutting costs to weather a slowdown in UK outsourcing partly caused by Brexit uncertainty.

Britain accounted for about two fifths of Serco's revenue in 2018 down from about 55 percent in 2014.

(Reporting by Elisabeth O'Leary; editing by Mark Potter and Jason Neely)

((elizabeth.oleary@tr.com; +44 131 248 9208; Reuters Messaging: elizabeth.oleary.thomsonreuters.com@reuters.net))

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