Serco Group Plc · LSE:SRP
Serco — FY2005 Earnings Presentation
39 slides from Serco's earnings presentation, Mar 1, 2006
Slide 1: 2005 Preliminary Results
2005 Preliminary Results Presented by Serco Group plc 1st March 2006
Slide 2: Agenda
Agenda Overview Kevin Beeston Financial results Andrew Jenner Business performance Chris Hyman Summary and outlook Kevin Beeston Q&A
Slide 3: 2005 Preliminary Results - Highlights
2005 Preliminary Results - Highlights 2005 Increase Organic Growth Revenue £2,260.3m 38.1% 19.4% Profit before tax* £91.5m 28.5% 13.1% Earnings per share* 14.09p 22.9% Dividend per share 2.97p 12.9% Group free cash flow £73.8m 32.3% *before amortisation of intangible assets
Slide 4: Service Driving Growth
Service Driving Growth Strong organic growth continues 19.4% organic revenue increase Substantial new contract wins £5.0bn signed/ preferred bidder Continued good group cash conversion 90% ITNET and RCI performing on target £23.6m profit pre-funding costs Record forward order book £13.4bn
Slide 5: Financial Results
Financial Results Andrew Jenner – Finance Director Financial performance Income statement Cash flow Net debt Pensions IFRS conversion Advise | Design | Integrate | Deliver
Slide 6: Income statement
Income statement Revenue Profit before tax including share of joint ventures and intangible amortisation 2,260 92 1,637 71 1,555 67 1,326 57 1,141 £m £m 45 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 restated restated Note: 2001 to 2003 under UK GAAP. 2004 restated under IFRS.
Slide 7: Income statement
Income statement 2005 2004 Year to 31 December £m £m increase (restated) Revenue 2,260.3 1,636.9 38.1% Gross profit 325.0 242.6 34.0% Administrative expenses (214.3) (166.2) 28.9% Investment revenue and finance costs (19.2) (5.2) Profit before tax and intangible amortisation 91.5 71.2 28.5% Intangib
Slide 8: Revenue growth
Revenue growth £312m £2,260m £143m £3m Other Organic acquisitions growth £191m RCI £1,637m £(26)m Disposals ITNET 2004 2005
Slide 9: Income Statement
Income Statement 2005 2004 Year to 31 December £m £m increase (restated) Revenue 2,260.3 1,636.9 38.1% Gross profit 325.0 242.6 34.0% Administrative expenses (214.3) (166.2) 28.9% Investment revenue and finance costs (19.2) (5.2) Profit before tax and intangible amortisation 91.5 71.2 28.5% Intangib
Slide 10: Profit before tax and intangible amortisation
Profit before tax and intangible amortisation £9.3m £91.5m £9.3m £0.8m Other Organic £71.2m £(13.4)m £14.3m acquisitions growth RCI Acquisition ITNET funding costs 2004 2005 Note: 2004 restated under IFRS.
Slide 11: Income Statement
Income Statement 2005 2004 Year to 31 December £m £m increase (restated) Revenue 2,260.3 1,636.9 38.1% Gross profit 325.0 242.6 34.0% Administrative expenses (214.3) (166.2) 28.9% Investment revenue and finance costs (19.2) (5.2) Profit before tax and intangible amortisation 91.5 71.2 28.5% Intangib
Slide 12: Group free cash flow
Group free cash flow 73.8 55.8 47.0 £m 23.5 19.4 14.2 9.7 8.9 (14.1) (11.5) 2001 2002 2003 2004 2005 half year full year
Slide 13: Group free cash flow
Group free cash flow 2005 2004 Year to 31 December £m £m (restated) Group EBITDA 107.6 75.6 Working capital movement (11.2) (5.3) Group operating cash flow 96.4 70.3 Interest (15.7) (3.8) Tax (1.0) (1.5) Expenditure on tangible / intangible assets (31.6) (23.4) Dividends from joint ventures 25.7 14.
Slide 14: Net cash flow
Net cash flow 2005 2004 Year to 31 December £m £m (restated) Group free cash flow 73.8 55.8 Acquisitions (281.7) (9.1) Other financing 269.4 (7.6) Dividends paid (12.5) (10.4) Non recourse debt financed assets (15.6) (25.2) Other 2.7 (0.4) Net change in cash - group 36.1 3.1
Slide 15: Group recourse net debt
Group recourse net debt 31 Dec 30 June 31 Dec 2005 2005 2004 As at £m £m £m (restated) Cash and cash equivalents 210.0 148.4 173.9 Other loans (453.1) (440.0) (168.4) Obligations under finance leases (20.9) (23.6) (20.8) Group recourse net debt (264.0) (315.2) (15.3)
Slide 16: Total net debt
Total net debt 2005 2004 As at 31 December £m £m (restated) Group recourse net debt (264.0) (15.3) JV recourse net cash / (debt) 18.0 (4.6) Total recourse net debt (246.0) (19.9) Group non recourse debt (326.8) (256.5) JV non recourse debt (22.4) (47.1) Total non recourse debt (349.2) (303.6) Total
Slide 17: Pensions
Pensions 2005 2004 As at 31 December £m £m (restated) Group schemes - non contract specific (200.4) (164.6) Contract specific schemes - reimbursable (84.9) (56.0) - not certain of reimbursement (21.3) (22.3) Net retirement benefit liabilities (306.6) (242.9) Intangible assets 19.0 21.2 Reimbursable
Slide 18: Group defined benefit pension scheme
Group defined benefit pension scheme As at 31 December 2005 £m Scheme assets 447.9 Scheme liabilities (592.1) Deferred tax 43.3 Net balance sheet position (100.9) Actions taken to manage the scheme liabilities – closed scheme to new members – increased employer contributions from 2003 – increased
Slide 19: Summary Implications of IFRS
Summary Implications of IFRS Underlying performance, cash flow and ability to pay dividends will be unaffected Impact on year on year earnings growth after transition likely to be minimal Fair value concept will introduce volatility into balance sheet On transition profit before tax princi
Slide 20: Summary
Summary Strong revenue and profit growth, organically and from acquisitions Acquisitions performing to expectations Strong operating cash conversion and free cash flow Impact of IFRS as expected
Slide 21: Business Performance
Business Performance Chris Hyman – Chief Executive 2005 highlights Market conditions Delivery programme Advise | Design | Integrate | Deliver
Slide 22: Operational Highlights - 2005, an excellent year
Operational Highlights- 2005, an excellent year Service builds business – Revenue growth of 38.1% and PBTA growth of 28.5% – Underlying, organic growth of 19.4% – Winning 90% of rebids and 50% of new bids Rapidly developing capabilities and markets – Acquisitions bringing new skills, new capabil
Slide 23: Civil Government
Civil Government Overall growth of 28% to £803.6m Sector accounted for 36% of 2005 revenue Sector consists of: – Home Affairs – IT Services, BPO and Local Government – Health – Education
Slide 24: Civil Government - Home Affairs
Civil Government - Home Affairs Growth – New contracts signed valued at >£160m – Cyclamen (£100m over 10 years) – Scottish Electronic Monitoring (£30m over 5 years, starts April 2006) – England & Wales Electronic Monitoring (contracts phased in April 2005) – Germany’s first private prison began op
Slide 25: Civil Government - IT Services, BPO & Local Government
Civil Government - IT Services, BPO & Local Government Solutions – £190.6m revenue, £14.3m PBTA before funding costs – Bradford - £160m to consortium over 10 years – DTI’s Small Business Service, £125m over 10 years – Extensions valued at >£20m with 4 London Boroughs – First shared service provisi
Slide 26: Civil Government - Health
Civil Government - Health 2005 Progress – Strong capability developed – Out of Hours Doctors services to one million people – Newham PCT managed health care service - £2m over 2 years – Feltham YOI health service provision - £4m over 3 years – Leicester Pathway preferred bidder £1.2bn Opportunit
Slide 27: Civil Government - Education
Civil Government - Education 2005 Progress – Continued improvement in results – Bradford and Walsall – E-learning, ICT and consultancy Opportunities – Education Bill – Children’s Services
Slide 28: Defence
Defence Overall growth of 52% to £565.5m Sector accounted for 25% of 2005 revenue Significant new business – Defence Academy Campus Integrator - £400m, 23 years – Defence Science and Technology Laboratories - £400m, 15 years – RCI acquisition delivered £143m revenue, £9.3m PBTA – Australian ga
Slide 29: Science
Science Overall growth of 18% to £342.4m Sector accounted for 15% of 2005 revenue 2005 highlights – Atomic Weapons Establishment extension - £350m over 3 years – Integrated Sensor Management System - £13m – Enhanced nuclear capabilities Opportunities – Nuclear Decommissioning Authority - £2b
Slide 30: Transport
Transport Overall growth of 59% to £548.7m Sector accounted for 24% of 2005 revenue 2005 Highlights – Rail: Northern Rail, Merseyrail exceeding service standards – Urban Transportation: DLR preferred bidder, TCC completed testing – Air: rebid programme successfully completed – Al Ain, Abu Dhab
Slide 31: Private Sector
Private Sector Reported within our four main segments Growth of 54% to £192m Accounts for 8% of 2005 revenue IT and BPO renewals and new contracts: – Microsoft – BMW – Cadbury Schweppes – Wales and West Utilities – Coca Cola Enterprises Ltd – European Central Bank – Signet plc – Airbus UK
Slide 32: Market Sector Analysis
Market Sector Analysis 2005 £2,260m Science 15% Defence 25% 2004 £1,637m Transport 24% Defence 23% Civil government 36% Science 18% Civil government 38% Transport 21% 2005 private sector revenue of £192m (2004: £125m)
Slide 33: Geographical Analysis
Geographical Analysis 2005 £2,260m North America 11% Asia Pacific 6% UK 74% Europe and Middle East 9% 2004 £1,637m North America 6% Asia Pacific 9% Europe and Middle East 11% UK 73%
Slide 34: High Visibility of Planned Revenue
High Visibility of Planned Revenue 2006 91% 75% 12% 4% 2007 77% 60% 12% 5% 2008 64% 47% 13% 4% order book extension and rebids preferred bidder
Slide 35: Future Focus
Future Focus Culture – Values based organisation Efficiency – Structure reviewed to keep close to the customer – Strategic sourcing delivering savings in purchasing costs – SAP roll out and shared services function Growth – Brand strengthening – New capabilities acquired – Selective bidding an
Slide 36: Summary and Outlook
Summary and Outlook Kevin Beeston - Chairman
Slide 37: Internal and external factors deliver growth
Internal and external factors deliver growth Strong 2005 growth Financial pressure Secure order book Ageing population Double digit Reputation revenue growth Security threat Capabilities Increasing Consumer demand margin Efficient processes Technology Client relations Strong market growth
Slide 38: Summary and Outlook
Summary and Outlook Summary Strong organic growth Enhanced capabilities and efficiency Acquisitions delivering Strong order book and bid pipeline Top ten contracts not due for renewal before end 2010 Markets moving in our favour Outlook Double digit growth and increasing margins
Slide 39: Questions & Answers
Questions & Answers