UPDATE 2-Serco H1 profit up 21 pct, buys SI International

(Adds detail from conference call, broker comment)

By Philip Waller

LONDON, Aug 27 (Reuters) - British support services group Serco Plc (SRP.L) reported a 21 percent rise in first-half profit and said it was buying U.S. government services provider SI International SINT.O for $423 million.

Serco said pretax profit in the six months to June 30 rose to 62.8 million pounds ($115.9 million) from 52 million the year before, on a 10.5 percent rise in revenue to 1.49 billion.

Serco said the acquisition of SI International would give it a strong platform for growth across the U.S. armed forces and civil federal government agencies.

Chief Executive Christopher Hyman told reporters in a conference call that Serco expects to start achieving annual cost savings of $10 million in the second full year after completion.

SI, which does business with the U.S. Air Force, space agency NASA and other government organisations, has a turnover of more than $500 million and a workforce of about 4,500 people.

Serco expects to achieve the savings by efficiency measures such as combining the two groups' head offices, Hyman said. It was too early to say whether there would be job cuts, he said, although the company hopes to grow the business.

"This is a growth opportunity and we're buying it to expand it, not to make it smaller," he said.

The proportion of the group's revenues generated by its U.S. operations would rise to 20 percent from 12 percent previously following the deal, Hyman said.

In its results statement, Serco said adjusted pretax profit climbed 19.8 percent to 67.3 million pounds from 56.2 million beforehand.

The group increased its interim dividend per share by 20.3 percent to 1.48 pence.

It said it had signed contracts worth 2 billion pounds during the period and it was preferred bidder on 800 million pounds of contracts. Its order book stood at 15.1 billion pounds at June 30.

The group reiterated guidance relating to its current business for a 30 basis point increase in its adjusted pretax profit margin in 2008 and 2009.

It said it remained confident of double-digit revenue growth for 2008 and the foreseeable future.

"We have made a strong start to 2008 and we see excellent growth opportunities ahead as our customers experience increasing global economic and social pressures," Hyman said in the statement.