Good day, ladies and gentlemen, and welcome to the Serco event. Currently, all participants are in listen-only mode. Later, we will conduct the question-and-answer sessions through the phone lines, and instructions will follow at that time. A reminder to all participants that this call is being recorded. I will now hand over to Mark Irwin, Group Chief Executive, to open the presentation. Please go ahead.
Good morning, everyone, and thank you for joining our call today. I'm joined in our London office by Nigel Crossley, Anthony Kirby, and members of our investor relations team, Paul Checketts and Jamie Hastings. We also have Tom Watson, who leads our North American business, and Terri Malone, who is the Chief Growth Officer of that division, on the call with us today. I trust everybody on the call has access to the presentation, so let's get started.
The order for the call this morning is that after my introductory comments, I'm going to ask Nigel to take us through the key financial details and how this fits into our M&A approach to the US market.
I will come back and talk a little bit more about the acquired business, and then Anthony will wrap up with his views on how this fits into the group portfolio and make some closing comments before we move to Q&A, and we are happy to take questions to any member of our team.
A reminder again, Tom leads our North American business, and Terri Malone, as well as being currently our Chief Growth Officer, I should point out that prior to joining us, Terri worked for Northrop and, in fact, was responsible for this part of their portfolio. Beyond the attendees on the call, we also have a number of other Serco colleagues who have experience in MTNS, and so we had a very good understanding of the target well before we entered the process.
Now, just before I hand over to Nigel, a quick few points for us to note. In all of our engagements with investors and analysts, we've been consistent in the articulation and application of our capital allocation framework, and we've spoken about the discipline that we exercise when it comes to M&A.
At the same time, we've been clear about our strategic intent to grow our U.S. business because of the size and attractiveness of that market within our international portfolio. And we've also indicated our commitment to grow our global defense business because we can participate so broadly across the defense services value chain in response to what we believe is a robust and long-term demand signal driven by geopolitical risk.
The acquisition that we announced today allows us to bring all of this together by adding capability through technology-enabled services to military training and satellite ground network operations optimization. It adds access to customers by growing our position with the U.S. Navy and, importantly, growing our position with U.S. non-Navy defense customers. In the transferring customer base, we will have about 39% of the portfolio with U.S. Army, 29% with U.S. Air Force, just over 10% with the U.S. Space Force, and then the balance with Navy and other joint commands.
We also believe that we've got the opportunity to both qualify a bigger U.S. pipeline and explore this capability across the group more broadly. And we'll talk about this a bit more as we go through the presentation. But first, let's go through the transaction details with Nigel.
Thank you, Mark, and good morning to everybody. I'll start off by walking through the details of the transaction. And we're acquiring the assets of Northrop Grumman's MTNS business on a cash-free, debt-free basis. The acquisition price is $327 million, which equates to a 9.6 times underlying operating profit multiple based on 2025's profit.
The business we are acquiring is expected to have revenues of GBP 300 million and both EBITDA and underlying operating profit of GBP 34 million for the full year of 2025, delivering an 11% margin. Overall, we have maintained our discipline on the acquisition economics, and the transaction will deliver attractive financial returns alongside the compelling operational and strategic benefits.
We expect mid-single-digit underlying EPS accretion in 2026, the first full year of ownership. The impact on EPS in 2025 will be dependent on the timing of the deal closing, as well as the transaction and integration costs.
Our current expectation is for the deal to close in the middle of the year following regulatory approvals. Return on invested capital is expected to equal the group's weighted average cost of capital in 2027, which is the second full year of ownership and will exceed it thereafter, and the acquisition will be funded off the group's balance sheet from existing cash and bank facilities.
The transaction will add approximately 0.9 times EBITDA to our leverage position, which leaves us comfortably within our target leverage range of one to two times EBITDA. The cash-generative nature of the group will enable delivering towards the bottom of the range by the end of the year. It's worth reflecting on the excellent progress we've made in our North America business over recent years. The financial performance on the slide speaks for itself.
Where prior to the acquisition of MTNS, the revenues of the business have more than doubled and profits have tripled. While three-quarters of the revenue growth has come from the acquisition, with the balance from organic growth, over 50% of the profit improvement over this period has come from organic growth and profit margin improvement activity.
This demonstrates the success of our M&A strategy, which is that acquisitions should provide access to new markets and bring new capabilities that broadens the opportunities for further organic growth and improved profitability. But equally important over the same period, we've transformed the business from a low-margin portfolio of contracts largely performing frontline installation work on industrial systems back in 2017. The acquisition of NSBU in 2019 added a strong US Navy business with a leading naval architecture capability performing upfront engineering and asset life management.
While the acquisition of WBB in 2021 added strong positions with the Air Force, Space Force, and the Army. Today, Serco is a leading provider of services to the US Navy and has growing positions with Army, Air Force, and Space Force, focused on government-side program support, high-end engineering, equipment support, and technology-enabled frontline services. The acquisition of MTNS will continue this growth, bring new capabilities and access to new markets and customers, and provide opportunities for future organic growth. I'm now going to hand back to Mark, who will take us through the strategic rationale for the acquisition.
Thanks, Nigel. Investors will know that we look at a lot of potential opportunities, particularly in the U.S. market. So why MTNS? At its core, this is a high-quality U.S. defense business that provides critical technology-enabled capability and solutions. We like the asset because it supports growth in a strategically prioritized geography, the U.S., and in a strategically prioritized sector, defense.
We believe it significantly enhances our expertise in synthetic training, exercise simulation, and satellite ground network comms, all attractive and faster-growing segments within defense. We see real growth synergies. Our position as a government services provider rather than an OEM will support the competitiveness of MTNS. We believe there's opportunity for us to scale internationally, and we recognize the value of the past performance of this portfolio and what that will do to increase the size and win probability of our Serco pipeline.
As you just heard from Nigel, your financial returns are strong. In 2026, mid-single-digit earnings are accretive. In 2027, our second full year of ownership, we expect ROIC to meet our weighted average cost of capital. At the half-year results, we spoke about our participation across the defense services value chain. What we've highlighted on this slide, which we've replicated from the half-year, is that MTNS fits very clearly into the two central capability areas.
The first is skills, training, and transition, and the second is next-generation technology. A bit more about what MTNS does. The most significant part of the business delivers integrated training solutions by providing modeling, simulation, training, and distributed mission operations services to the U.S. Air Force, as well as broad-spectrum training products and services for U.S. Army, U.S. Navy, and joint commands.
The portfolio includes large, long-term contracts, a track record of successful partnership with customers, and a highly qualified, highly experienced, and highly cleared workforce. I'll speak a little bit more about one of the contracts DMON in just a moment, but this is a key contract in the portfolio and important to note that it was recently rebid and has a 10-year period of service ahead of it.
More broadly, as a defense services provider, as I said before, we believe that we can use the lower indirect cost base of Serco to support MTNS to be more competitive, enhancing growth opportunities in the acquired pipeline, as well as in our existing pipeline by leveraging the qualifications that MTNS will add to us. And just before I hand over to Anthony, let me touch briefly on two of the core contracts in the portfolio.
The Distributed Mission Operations Network contract, or DMON, operates across more than 100 U.S. Air Force sites and has just been resecured, as I said, for another 10 years. In addition, the funding ceiling for this program has significantly increased in this latest award to $800 million. With DMON, we will actually own the network that connects a range of aircraft simulator platforms, allowing training missions to take place in a secure and realistic virtual environment.
Importantly, in the context of the new U.S. administration, this offers the DoD an efficient pathway to mission readiness without compromising training effectiveness. In the second contract that I would like to highlight, MCTP, so this is the Mission Command Training Program. This program delivers live, virtual, and constructive training to U.S. Army commanders at scale.
MTNS has been delivering this contract for 30 years by delivering to the U.S. Army a simulated advanced combat environment where LVC again offers the opportunity for both efficiency and effectiveness when compared to traditional training methods, so consistent with our investment thesis, this provides clear pathways for growth from a $300 million technology-enabled services platform, enabling the full range of support services for military personnel, and adding to the mission support services we already provide in the space domain for our defense customers, and as we've previously shared, the past performance is particularly important in a U.S. context as an enabler for growth in that market, and this will add both to defense and other federal government agency qualifications as we look to prosecute the very strong pipeline we've got in the region, so I'll now hand over to Anthony to wrap up before we open up for questions.
Mark, thank you. Before I talk briefly to what this acquisition means for Serco in the medium term, I want to reassure everybody that I've been heavily involved in co-creating the group strategy since 2017, most recently under Mark's leadership, and for the last two years, I've led the execution of that strategy across Europe and the UK. I recognize the immense value of our North American business to the group, the scale of the market, and the opportunities for Serco to grow there.
I've also spent time in the last few weeks refamiliarizing myself with the business, the last few months assessing the acquisition business case as a member of the executive committee, and consequently, I am very supportive of this acquisition. The acquisition strengthens Serco's portfolio both in North America and, importantly, across the whole group.
Equally, it broadens and deepens our reach into the Army, Air Force, and Space Force areas, which, as we've previously said, are all strategically important for us. Our defense business will have revenues of around GBP 2 billion and will account for around 40% of the group's total revenue, with margins higher than the group average.
We expect that the defense sector in both North America and internationally will see strong demand as governments continue to allocate and, in most cases, increase budgets to strengthen their defenses. The acquisition of MTNS will broaden the range of services that we can offer to defense customers in the mission-critical areas of training and space, providing increased future organic growth opportunities for Serco.
Following the acquisition, our North American business will have revenues of around $2 billion with 10% margins, a solid base from which we will continue to grow into the North American government services market, which is the largest and most profitable in the world, in which Serco still has a relatively small market share. So we do see continued opportunity for growth.
The new capabilities and access to customers that MTNS brings, coupled with referencing their past performance from technology-enhanced services, will both grow and strengthen our North American pipeline of new business opportunities, again providing increased future organic growth opportunities. So to summarize then, this acquisition provides strong financial returns, increases our exposure to the large, profitable U.S. defense market, and advances our expertise in synthetic training and space. This is a high-quality business with long-term attractive cash flows.
Serco's ownership improves MTNS's growth potential through enhanced cost competitiveness and enables international growth opportunities across the group. Serco North America will benefit from MTNS's technical capabilities and past performance citations, which strengthen our pipeline for future organic growth. With that, that brings the presentation to an end, and we'll now move over to Q&As.
Thank you. We will now begin the Q&A session. If you would like to ask a question on the phone lines, please signal by pressing star one on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question, please remember to unmute your device. Again, that is star one to ask a question, and your first question comes from the line of James Rose at Barclays. Please go ahead.
Hi there. Good morning. Thanks for taking my questions. I've got two fairly broad ones, please. The first is on MT&S's broader position within the market relative to competitors. How many credible competitors are there in this market, do you think? What's MT&S's position within that? And I mean, seeing as you sound like you've been familiar with this business for quite a long time already, what's the sort of external perception of MT&S?
Is it a sort of clear market leader? Is it mid-pack or a new entrant? And then secondly, if we think about growth opportunities for MT&S specifically, is this a specific part of customer spend which is growing and scaling rapidly? And what does MT&S's own pipeline of opportunities look like going forward?
James, I'll start, and then my colleagues from the U.S. can add. I think in terms of the position of this business, it is a market leader, and I think the evidence for that is in the longevity of the contracts that they have had.
I think also the integration that they have into the customer base is a significant barrier and a competitive advantage, so the contract that I spoke about to provide live, virtual, and constructive training to the U.S. Army is a contract that's been held for 30 years, and I think that speaks to the credibility of the business, and the same, we can go through this portfolio. DMON is actually about providing a network that connects disparate and dispersed assets across the DoD to enable the efficiency and the effectiveness of these live synthetic training exercises in a highly secure environment.
So we see these platforms and the fact that the technology around them has continued to evolve to give us a good position in the market currently, but also project potentially into further opportunities for growth. Tom or Terri, did you want to add anything specifically to that? And also perhaps touch on James's question on who else is in this segment within defense?
Yes, good morning. This is Tom Watson from the North American team. Yeah, this is a very strong competitor. This is a really, really strong book of business, and it brings both the capabilities, the training capabilities, the technology-enabled services, and very, very strong past performance, and so they've been a demonstrated strong competitor in the space. There are a number of large companies that compete for some of these large training contracts.
Add to that, Cubic, excuse me, Cubic, SAIC, CACI, Booz Allen Hamilton, HII, and a slew of others that compete for some of these large training opportunities and some different competition on the satellite side, satellite operations side, but this team has demonstrated strong confidence in holding on to long-term contracts and incrementally growing this portfolio.
The market itself is a strong and stable and growing market because it's all about readiness and training for readiness, but doing so in an efficient manner. The DMON example that Mark used is a perfect example where you could connect aircraft throughout the country, throughout the world via simulated network without having to launch aircraft. I mean, the safety aspects of that alone, but just the savings and cost, so you can train in a virtual environment without the costs of actual operations, makes it for a highly efficient market. So they've demonstrated a great ability to win new business as well as hold on to their long-term business.
When you couple that with the portfolio that we have today in North America, where we've got a really strong book of defense business, but also training opportunities, there's very little overlap in our portfolio today, but we'll be able to take the past performance and the technical capabilities and apply that to our existing markets now to be able to really drive growth, additional growth into the mid-digit long-term targets that the Serco Group has. Thank you.
Thanks, Tom. James, I would just add two very quick points to the end of that. This falls into an area of my discretionary expenditure, and as we heard from the incoming Secretary of Defense in the U.S., this focus on mission readiness, as you just heard from Tom, is high on the priority list of this administration, and I think that's evidenced in the fact that in the award of this DMON contract in December, so just a month or so ago, as it begins its next term, the funding ceiling on that has materially increased, running around 40%, and I think that shows, again, the capacity for the utilization of this type of training and the willingness of the DoD to fund it.
That's great. Thank you very much.
Your next question is from the line of Karl Green of RBC Capital Markets. Your line is open.
Yeah, thanks very much. Good morning. Just two questions from me. This acquisition obviously has significantly enhanced your positioning as regards to the U.S. Army. Can you just give some sort of sense as to the scale of opportunity that's been opened up as a result of this deal, just thinking about potential total addressable market and the kind of opportunities that might be coming down the pipeline there?
Then the second question, just more specifically on the MCTP contract, which I think you said is due for rebid in 2026. I mean, apart from the very strong and long tenure track record you've got, what would give you confidence in the rebid there? And again, specifically, what would be the timing of that and the nature of the contract? Is it IDIQ, or is it sort of more of a firm contract, please? Thank you.
So, Carl, just to start off with, this now almost doubles our position with the U.S. Army. We've recently announced a Serco award, which is also a training contract, several hundred million dollars, where we will be doing another aspect of physical readiness training for U.S. troops. So we're continuing to build the breadth of the types of training services that we provide to the U.S. Army. And importantly, we also see the translation of that to other services in the U.S., but also to departments of defense, ministries of defense in other key markets that we serve today. Terri, did you want to talk a little bit about what this does for pipeline and opportunity for us in the U.S. market?
Sure. There are a host of additional training programs in the Army, and coming under Serco's ownership and our services culture and infrastructure will position us really well to grow in Army training. MCTP is a large and important program. Positioning for that recompete, we're already thinking about it in our heads and looking forward to the day after actual close to activate some of those strategies. We have additional people currently at Serco who were involved in the MCTP program when they were at Northrop, so it puts us in a good spot to be able to position for that recompete, particularly coupled with our services infrastructure here in Serco.
And in addition to the Army training opportunities, and there are a plethora of them out there at the different Army bases and commands at different levels, at the battalion level, the brigade level, taking that sort of training into the other services and joint services and building on that is also important. And I'll just answer that final question you had. MCTP is a standalone contract, not an IDIQ contract. So it's a single award contract with predictable and regular revenues over the life of the contract.
Terri, can you maybe spend a minute or so just to talk about the complexity of MCTP and what that means in terms of solution from a potential alternate bidder?
Yeah. And so MCTP does some very interesting things because it has a technology underlying technological solutions underlying the actual delivery of trainings. So it's having large force exercises, bringing all kinds of Army participants to train together over a several-week period. And what the contractor who runs this program does is the planning of the entire exercises.
So you have a lot of subject matter expertise from an Army tactics and techniques perspective, and then bringing together an IT infrastructure that will allow communications across the various battlefields that are being trained, bringing in constructive and virtual aspects together with the live participants running that training, doing after-action reports, and continuing to evolve how you employ that training as technologies evolve as well.
Thanks, Terry.
Your next question comes from the line of Arthur Truslove from Citi. Please go ahead.
Hi there. Thanks, everyone. Three from me, if I may. First question. So the management of MTNS, I guess, how established are they and how long are they tied in for? I know you mentioned earlier that they've got a strong track record of maintaining contracts and just keen to understand how they're tied in, how they're incentivized, and how established they are.
Second question, it sounds like an interesting business. I don't know Northrop Grumman that well, but why would they want to sell this business? And third question, obviously, this acquisition's announced early in 2025. How does this influence the potential for buyback in respect of where we were at the end of 2024? I mean, I guess it would reduce the likelihood of any buyback, but sort of keen just to hear your perspectives on that. Thank you.
Arthur, thanks for the question. I'm going to hand to Tom to talk about management and also our plans for transition, and then we'll come back and answer the other two in order.
Yes, good morning. So regarding the management team, so this, first of all, remember, this is a carve-out. So this is a piece of a larger business unit. So the pieces that run this business unit, the key personnel, the managers for that team come with the acquisition. There are three key leaders for each of the three key business segments, and they're all long-term Northrop employees, some of them 20-year-plus employees, as well as a lot of the key personnel that have been on these programs are long-term employees. So we've got a plan around transition in terms of how we're going to bring them into Serco, where they're going to land in the organization, how it's going to be structured.
I think one of the really unique aspects to this acquisition is that, in addition to Terri that we have on the line, as she mentioned before, there's a number of key leaders already at Serco who were former Northrop Grumman employees who also were a part of this business. So we really know this business, and we really know these people really well.
We're going to talk a lot about the strategic fit and the value of the acquisition from a financial perspective, but there's a really key aspect on integration that I don't want to be missed on this call, and that's culture. We really think that this is an excellent cultural fit to our business. As I said, we know these people, we know the mission, we really understand the business really, really well.
But we're also talking about approximately 1,000 people, 50% of who are veterans, highly cleared, highly educated, and they know this business, they're passionate about the work that they do. And so they fit the profile very nicely of the North American team, which has a large veteran population and is very, very much mission-focused. So we have a very strong integration plan for the management team, and we know this business, we know the people really well, and we are very confident we can do a successfully strong integration and hold on to these key personnel. Thank you.
So our next question is from the line.
Sorry, just a couple more. Sorry. Apologies.
Yeah, back to you.
Just to answer your second question: why Northrop Grumman's selling. I think my first response would be probably best to us then, but what they've told us is that this is not a core part of their OEM business moving forward. We think that the business will benefit from being part of Serco, where our service is a core to defense training and is a key strategic priority area for us. So we think our cost base will be more competitive to bid and therefore win more business moving forward than what it was under Northrop Grumman.
And you can see a recent history there of that Northrop have disposed of service-oriented businesses now over a number of years. You see the establishment of companies like Peraton and others who have been formed from the sale of this type of asset from within that portfolio. So they continue their strategic plan to become a pure-play OEM defense business to international defense customers. Nigel on.
On buyback, Arthur, look, we've always been very clear in our capital allocation model that when we have surplus capital, we return that to shareholders quickly. We've defined surplus capital as when our leverage is less than one times. We can see from this acquisition that this will likely take us above one times leverage, but we will go through our balance sheet at the end of the year, and we will sit down with our board and have that discussion, and we'll provide a little bit more detail with our year-end results. Thank you very much.
Your next question is from the line of Joe Brent from Panmure Liberum. Please go ahead.
Good morning, gentlemen. Good morning. A few questions, first of all, from me. Firstly, on the cross-sale opportunity, what kind of restrictions are there around technology cross-selling, the technology-enabled services outside the U.S.?
So we think there's real opportunity for international expansion. Joe, there is already a small part of this portfolio which is international. And we also see demand for similar capability here in the U.K. There's actually a live procurement underway by the U.K. MoD currently for this type of combined virtual training that we would look at. So the demand is there, as I said earlier. We see the ability to leverage the technology base.
So there are 500 technologists as part of the almost 1,000-person team that comes across with this asset that can help us to develop those platforms, to evolve those platforms specific to jurisdictional requirements for the various defense customers that we've got. So this is not just aspirational. We see a practical opportunity when we overlay this with pipeline in other geographies.
Thank you, and just two more, please. On the cost of debt, could you talk us through the actual cost of debt and what you're doing with regards to, is there a swap in place to kind of de-risk the currency as well, and therefore, what's the kind of total cost of debt?
Yeah, so as far as debt's concerned, we actually have enough capacity on our balance sheet to manage that with the debt facilities and the cash we have in place today. What we are likely to do is go and strengthen our leverage position, sorry, our liquidity position, and we'll probably raise some debt shortly after our year-end results. We will take that debt out in U.S. dollars, which will offset and hedge the U.S. dollar cost of this. The likely cost at the moment is probably mid-six is where the cost of that debt would be.
Thank you, and then finally for me, a very obvious question, but a lot of commentary around DOGE and pressure from the likes of Elon Musk and others on the pricing in the defense industry broadly in the U.S. Interested to kind of get your view on that?
Joe, I think there are three key things for us. One, as I said earlier, this isn't non-discretionary. So we think these are sort of not immediate areas at best and quite difficult areas for them to reduce investment. It's also the output from these contracts is exactly aligned to what we heard from the Defense Secretary about mission readiness, about the qualification, the testing, and the credentialing of U.S. armed forces, and then I think the other part is also around the infrastructure here. The technology enablement of this really aligns with whether it's DOGE or other specific initiatives that the U.S. government is pursuing because it is highly efficient. As you heard from Tom and Terri before, this is about not putting aircraft up in the air.
It's about not moving people, but allowing them to come together to do very realistic training in a range of combat environments in the most efficient way. And so I think the proposition around this is really compelling, particularly so in the context of the new administration. The other thing is interoperability. So this thing they can take internationally. And so we can link not only, in the case of DMON, various aircraft platforms, but we can potentially do that across geographies and jurisdictions. And so we see real opportunity, as I said, to lead on the discussion of effectiveness and efficiency with equal strength.
Thank you.
Before we continue on to our next question, a quick reminder. If you would like to join the queue, please press star one. Your next question comes from the line of Sylvia Barker of J.P. Morgan. Please go ahead.
Thank you. Hi, morning, everyone. A couple of questions from me, please. Firstly, would you be able to define the addressable market, and how do you think about the size of that? Secondly, if we think about the business today outside of the two larger contracts, could you maybe give a little bit of background on how that's developed over the last few years? And if we think about the next few years, how quickly do you think that can grow organically? Thank you.
I'm going to hand to Terri in a second. Terri, as we go through this, we've spent a lot of time on the training piece, maybe just a minute or so on what is a mouthful of words when we talk about satellite ground communications optimization. Just bring that to life a little bit, and then we can talk about how that cascades into the potential pipeline of work and the opportunity in the market.
Sure. So to spend a minute on the satellite side, for a very long time, this business has focused on building software solutions that enable satellite communications to be used by the military. So systems that help to plan where satellites need to go to allow the military to use them most efficiently, to monitor those satellites, to ensure that the right communications are being sent to the right people at the right time.
So very advanced software development techniques combined with the understanding of satellite movement and Satcom in general. So taking that sort of ground capability and expanding that across different satellites and satellite constellations is a really exciting part about building out the space pipeline. So thinking about where else can we go in space, what else can we do? It is a very fast-growing part of the market here in the U.S. and even globally.
And that capability to optimize and handle the ground segment of ensuring that what the satellites do, the data that the satellites bring to bear is being used most effectively and efficiently across the user base is an exciting growth piece for Serco as we are looking at the bits of space that we currently have in our company and how we can now launch that pipeline farther in the U.S. Space Force and beyond. From a training market perspective, and it is one of the faster-growing pieces in the U.S. defense portfolio, growing more aligned to maybe the 4%-5% growth rate rather than the 2%-3%, which is the overall defense budget top line.
Opportunities that we see to be able to leverage is one of the most interesting things. We have a really strong position in the Navy here at Serco. So marrying the technology and the capabilities that are coming from the MTNS acquisition into a customer base that we have a really great presence within Serco is a really nice marriage that we take from there. So taking that capability, broadening the capability that's coming from MTNS across the customer space, and then being able to continue to advance the technologies that are coming with the acquisition to ensure we continue to do what Mark was talking about, make more efficient use of being able to ensure our troops are mission ready is an exciting growth part of the pipeline.
Sylvia, I would also just, in a broader context, when you think about the sort of remilitarization of the West, we think about that in the European context. If you think about in the context of the U.K.'s own acknowledgement that troop numbers are the lowest that they've been in more than 60 years, and that whole cycle of bringing military personnel on board, taking them through an effective training program, making sure that they're mission ready. This is both current market that is growing, as Terry said, and in some ways emerging market because of the needs that are driven by the geopolitical context that we live in.
Your next question comes from the line of Lawrence Jones of UBS. Please go ahead.
Hi, good morning. Thank you for taking my questions, two from me, if I may. Maybe firstly, could you just touch on the margin opportunity and the cost considerations with the carve-out? And then secondly, taking a step back and thinking longer term, what end goal do you see for the U.S. business in terms of size and capabilities going forward? Just thinking you've put a lot of capital to work in the U.S. over the years, and kind of what opportunities do you see left in that region? Thank you.
Let me take the first one of those, Lawrence. Look, what we're doing here is we're buying a basket of contracts, and it's coming across to us with no infrastructure. There's no back office with this. So what we're doing is we're bringing this business into ours, and we're bolting it onto our existing infrastructure, which is well set up. So there is capacity to take on that infrastructure without significant additional costs.
So basically, what we're doing here is leveraging our fixed cost base that we already have. And that's where the cost benefit comes under our ownership. So we think there's a piece of work to do to get through that integration, but we think that should be achievable through this year. And that should then get us to this 11% margin that we've talked about under our ownership. Size of the U.S. business?
So look, the size of the U.S. business, Lawrence, is we see it as a growing market. We see it as one of the most liquid in our portfolio across the group. Making these acquisitions and bolt-on acquisitions to build capability higher up the margin chain has been and will continue to be a strategic focus for us. So what I don't want to do at the moment is give you a number in terms of revenue of X billions and profit of X hundreds of millions at the moment. But this is clearly a strategically important part of the group for us, as I said earlier, and will remain so.
But as we move through the remainder of 2025, we'll be able to share a bit more of our expectations for growing the U.S. business and also by exporting some of the capabilities that we've acquired in the U.S. where we are able into other parts of the world.
And Lawrence, this takes us all over $2 billion now in the U.S. market at double-digit margins, and we still only have a relatively small market share. And so we see that opportunity, as Anthony just said, for us to just materially grow this business in the medium term in line with the goals that we've set out for the group.
Perfect. Thank you. And there are no further questions at this time. I will now hand back over to the Serco team for closing remarks.
So, just to wrap up again, thank you for everybody's time and attention. We appreciate your questions and the interest that you've shown. We're clearly excited about the announcement that we made today, the diligence that we applied to finding the right assets.
This one has checked every one of those boxes, and our focus now goes to getting through all of the regulatory requirements to get to close, to ensure that the integration of this is effective, and then to get Terri and her team growing as quickly as possible. But should you have any other questions after the call, please come back to Paul Checketts or Jamie Hastings, and we'll make sure that we can respond to anything that was not addressed during our call today. But thank you, everyone, and please stay safe.