Serco Group plc · LSE:SRP
Serco — FY2014 Earnings Presentation
97 slides from Serco's earnings presentation, Mar 12, 2015
Slide 1: 2014 Full Year Results + Strategy Review
2014 Full Year Results + Strategy Review Serco Group plc 12 March 2015
Slide 2: Disclaimer
Disclaimer This presentation is not for release, publication or distribution, directly or indirectly, in or into any jurisdiction in which such publication or distribution is unlawful. This presentation does not constitute or form part of, and should not be construed as, any offer, invitation or
Slide 3: Agenda
Agenda PART 1 OVERVIEW FY14 RESULTS Rupert Soames, CEO FY14 FINANCIAL REVIEW Angus Cockburn, CFO PART 2 STRATEGY OVERVIEW STRATEGY REVIEW Rupert Soames BREAK SERCO TRANSFORMATION Ed Casey, COO STRATEGY FINANCIALS AND FUNDING Angus Cockburn CONCLUDING THOUGHTS Rupert Soames Q&A ON FY14 RESULTS AND ST
Slide 4: FY 2014 Overview
FY 2014 Overview Rupert Soames Group Chief Executive
Slide 5: Very difficult 2014, now ready to start on road to recovery
Very difficult 2014, now ready to start on road to recovery Revenue, margin and balance sheet charges in line with revised expectations as set out on 10 November 2014 – Trading Loss of £632m includes £745m of provisions, impairments and other balance sheet charges – Operating loss of £1,317m inclu
Slide 6: FY14 Financial Review
FY14 Financial Review Angus Cockburn Chief Financial Officer
Slide 7: Background to FY14 financials and basis of preparation
Background to FY14 financials and basis of preparation Contract and Balance Sheet Review, supported by EY Fresh perspective and – Scoped all contracts, leading to 114 specific and 19 full reviews significant diligence – Covered contract level, divisional and Group balance sheet performed as part o
Slide 8: Income statement – impact of change in measures
Income statement – impact of change in measures Revenue measure £m FY14 FY13 now consistent with Adjusted Revenue 4,753 5,140 IFRS which excludes Exclude: Serco’s share of JV revenue (798) (856) share of JV revenue Revenue 3,955 4,284 Trading Profit measure no longer Adjusted Operating Profit before
Slide 9: New segmental structure
New segmental structure Previously four segments: three regional frontline services Number of segments divisions being UK&E (c50% of the Group), Americas and AMEAA reported increased and then Global Services containing all BPO services from four to six Splitting divisions – Separate UK&E into tw
Slide 10: Revenue – divisional analysis
Revenue – divisional analysis Revenue - growth composition Organic decline driven principally by DIBP (Disposed)/ volume reduction of £m FY13 Organic Acquired FX Total FY14 £125m (constant UK CG 1,074 (8%) (3%) - (11%) 962 currency), and net contract attrition in UK UK&E LRG 963 +3% (2%) (1%) - 960
Slide 11: Trading Profit – divisional analysis
Trading Profit – divisional analysis Trading Profit and Margin Profit impacts: DIBP volume reduction Before review items Review c£20m; contract £m FY13 Change FY14 items FY14 attrition c£50m (eg UK CG 115 10.7% (57) 58 6.0% (301) (243) EM, US, etc); COMPASS, PECS UK&E LRG 18 1.8% (15) 3 0.4% (94) (9
Slide 12: Income statement
Income statement Contract and Balance £m FY14 FY13 Sheet Review drives Trading Profit before review items 113 257 reported loss for the Review items charged to Trading Profit (745) - year Impairment of intangibles arising on acquisition (12) - £0.74bn of review Amortisation of intangibles arising on
Slide 13: Contract and Balance Sheet Review – overview
Contract and Balance Sheet Review – overview Review undertaken in H2 2014 with support of EY Total impact of Risk-based review of contracts and balance sheets across Serco Contract & Balance – 19 full scope reviews Sheet Review broadly – 114 specific scope reviews in line with November expectati
Slide 14: Review items
Review items £m Onerous contract Total impact of losses and Other Total charge related impairments to operating Contract & Balance impairments and charges profit Sheet Review broadly in line with November Items charged to Trading Loss: expectations OCPs for future year contract losses (433) - (433)
Slide 15: Onerous Contract Provisions (OCPs) and related charges
Onerous Contract Provisions (OCPs) and related charges £m Onerous contract £447m OCPs provisions for Related Total charge future year impairments to operating represent the contract losses and charges profit estimated cumulative future losses for 2015 Items charged to Trading Loss: to end of contrac
Slide 16: Exceptional items
Exceptional items Goodwill impairment £m FY14 FY13 represents c70% of Impact of Reviews charged as exceptional total exceptional items (per earlier slide) (541) - charge Impairment and related charges re GSR (37) (10) Key future cash flow impacts of other Provision for settlement re DLR pension defi
Slide 17: Tax
Tax Tax charge of £11m on pre-exceptional loss of £693m Limited tax credit in – £34m deferred tax credit recognised in AsPac; no credit currently FY14 despite being recognised on UK tax losses arising from the Reviews significant losses; no – £25m provision for changes in estimates of prior year t
Slide 18: EPS
EPS Significant impact in FY14 FY13 FY14 of Contract and Weighted average share count for basic EPS 521.5m 489.0m Balance Sheet Review Statutory EPS (258.4p) 20.1p Future focus to be on Add back: Impact of exceptional items 123.4p 12.6p Statutory EPS Statutory EPS before exceptional items (135.0p) 3
Slide 19: DPS and policy
DPS and policy Board recommendation not to pay a final dividend for the 2014 Board committed to financial year resuming dividend – DPS for the 2014 year represents the interim dividend of 3.10p payments and (2013: 3.10p interim + 7.45p final) adopting a Not anticipated that the Board will recomm
Slide 20: Trading and free cash flow
Trading and free cash flow Free cash flow similar £m FY14 FY13 to prior year Operating (loss)/profit before exceptionals (656) 236 Share of profit of joint ventures (30) (47) Reduction in profit Depreciation, amortisation and impairment 141 94 (net of non-cash Working capital movement 17 (137) items
Slide 21: Free cash to movement in net debt
Free cash to movement in net debt Closing net debt £m FY14 FY13 reduced by £63m in Free cash flow 62 63 the year Exceptional items (40) (103) Net (acquisition)/disposal of subsidiaries (5) 22 May 2014 placing Placing net proceeds 156 - proceeds offset the other cash outflows, Costs associated with t
Slide 22: Net debt and leverage
Net debt and leverage Pressure on covenant £m FY14 FY13 given EBITDA Net debt (inc. held for sale) (682) (745) reduction in year Less: non-recourse net debt 24 20 Recourse net debt (658) (725) Impact of Contract Less: encumbered cash (9) (10) and Balance Sheet Review would have Other covenant adjust
Slide 23: Balance sheet summary
Balance sheet summary Principal drivers of the £m FY14 FY13 balance sheet Goodwill 542 1,271 movement are the net Other intangible assets 119 186 asset reduction from Property, plant and equipment 38 177 the £1.3bn impact of Trade and other receivables 537 842 the Contract and Inventories 31 49 Bala
Slide 24: Return on invested capital
Return on invested capital Invested Capital £m FY14 FY13 significantly lower due Invested capital assets 1,269 2,533 to Reviews Invested capital liabilities (612) (678) Assets held for sale (net) 345 - ROIC based on Trading Loss for FY14 Invested Capital (IC) 1,002 1,855 is a significant Trading (Lo
Slide 25: 2014 Strategy Review
2014 Strategy Review Rupert Soames Group Chief Executive
Slide 26: Our strategy: be a focused B2G business
Our strategy: be a focused B2G business 1 Be a superb provider of public services by becoming the best managed company in the sector 2 Focus on 5 pillars across 4 geographies: Defence, Justice & Immigration, Transport, Health and Citizen Services, delivered in UK & Europe, North America, Middle East
Slide 27: Historically, Serco's strategy has been to grow through diversification
Historically, Serco’s strategy has been to grow through diversification The decade to 2010 was a time of bold expansion for Serco, with a series of acquisitions and strong organic growth. Double digit revenue and earnings CAGR. From 2008, conditions in core markets became tougher – Sharp public ex
Slide 28: 2010 strategy has not worked as anticipated
2010 strategy has not worked as anticipated Conception Serco was not able to add enough value to the private sector BPO businesses it acquired Serco’s sales and marketing engine was unsuited to selling to private sector clients Public sector not as receptive as expected to private sector pract
Slide 29: Contract portfolio offers opportunity
Contract portfolio offers opportunity Large number of contracts making small profits Opportunity: Reduce overhead burden Improve contract profitability Illustrative Cumulative Contract Profit Contribution Small number of significantly Small number of large profitable contracts loss making contra
Slide 30: Our challenges are in our control and resolvable over time
Serco faces a number of specific challenges, which are also opportunities Need to build a solid platform Constrained balance sheet Loss-making contracts Need to strengthen Group-wide reporting and management information Inefficient processes Opportunity to reduce the cost base and make bette
Slide 31: Strategy Review criteria and objectives
Strategy Review criteria and objectives Criteria - Strategy with greatest opportunity for value creation Balancing risk and reward Playing to our strengths Preference for markets with underlying structural growth Preference for simplicity and clarity Objective - Deliver long-term value to al
Slide 32: Our strategy: be a focused B2G business
Our strategy: be a focused B2G business 1 Be a superb provider of public services by becoming the best managed company in the sector Improve cost competitiveness Strengthen BD and risk management Drive operational excellence: management information systems and continuous improvement People:
Slide 33: Four Forces creating long term structural growth in the market
“Four Forces” creating long term structural growth in the market Growing costs: healthcare, ageing population and infrastructure Voters unwilling Public Rising expectations to tolerate Policy of service quality higher taxation Need to balance public income and expenditure, and reduce debt Fierce pre
Slide 34: We will focus on five pillars across four regions
We will focus on five pillars across four regions UK & Middle Australia & Sector Europe Americas East New Zealand Justice & Strong Exploring Strong Immigration Defence Strong Strong Foundation Strong Transport Strong Foundation Strong Exploring Citizen Strong Strong Foundation Foundation Services He
Slide 35: Accounting for 84% of our 2014 revenue of £4.8bn
Accounting for 84% of our 2014 revenue (inc. JVs) of £4.8bn UK & Middle Australia & Sector Europe Americas East New Zealand Other Justice & £297m £405m £702m Immigration Defence £803m £342m £33m £142m £1,321m Transport £555m £99m £159m £31m £845m Citizen £588m £267m £2m £43m £899m Services Healthcar
Slide 36: Justice & Immigration: What we do
Justice & Immigration: What we do Sector overview What we do Example contracts 2014 Revenues Custodial Services Prison operations and rehabilitation Thameside (UK) Auckland (NZ) £702m programmes Dovegate (UK) Justice & Immigration Acacia (W. Australia) 15% Wandoo Youth Reintegration (W Aus
Slide 37: Justice & Immigration: Market positioning
Justice & Immigration: Market positioning Market overview Market dynamics2 Competitive differentiators Market growth1 % Large and growing global prison Operational and commercial innovation population – Payment by results/responsible 2-5% 25-30% growth in 15 years prisoner – Strong community & v
Slide 38: Justice & Immigration: Strategy
Justice & Immigration: Strategy UK & EUROPE ASPAC AMERICAS Strong Strong Exploring Retain a leading position Monitor and explore opportunities to Build innovative solutions in core leverage Group markets and surrounding services expertise in immigration Build case for higher Grow through
Slide 39: Defence: What we do
Defence: What we do Sector overview What we do Example contracts 2014 Revenues Base and Operational Support Full service life cycle support to military Defence Academy Campus Integrator (UK) RAF Valley (UK) £1,321m inc JV bases, operations, acquisitions and programmes Army Career and Alumni Pr
Slide 40: Defence: Market positioning
Defence: Market positioning Market overview Market dynamics2 Competitive differentiators Market growth1 % Pressure on defence spending Expertise and experience to reduce costs – Strong track record of reference 4-6% UK MoD spending expected to contracts decline in real terms from about £41 – Exp
Slide 41: Defence: Strategy
Defence: Strategy UK & EUROPE AMERICAS MIDDLE EAST AUSTRALIA Strong Strong Foundation Strong Build pipeline Grow in existing Build on early success Improve performance of major opportunities framework contracts in training and base on ACPB and similar logistics support Strengthen engineeri
Slide 42: Transport: What we do
Transport: What we do Sector Overview What we do Example Contracts 2014 Revenues Rail and Ferries Full service management of light and Dubai Metro Northern Rail (UK) £845m heavy rail systems Mersey Rail (UK) Caledonian Sleeper (UK) Northern Isles Ferries (UK) Road Traffic Management Virg
Slide 43: Transport: Market positioning
Transport: Market positioning Market Overview Market dynamics2 Competitive differentiators Market growth1 % Population growth and urbanisation Experience and expertise driving growth in global rail, road – Outstanding operational track record 6-8% congestion and air passenger traffic – Strong capa
Slide 44: Transport: Strategy
Transport: Strategy UK AMERICAS MIDDLE EAST AUSTRALIA Strong Foundation Strong Exploring Maintain position in Build and grow from Consolidate regional Identify and win entry existing sectors strong early-mover leadership in ATC and project, based on through operational position in Intelligen
Slide 45: Citizen Services: What we do
Citizen Services: What we do Sector overview What we do Example Contracts 2014 Revenues Citizen Contact Front & middle office case management Centers for Medicare and Medicaid Services (US) £899m services for Government programmes Hertfordshire Council (UK) UCAS contact centre (UK) Driver Ev
Slide 46: Citizens' Services: Market positioning
Citizens’ Services: Market positioning Market Overview Market dynamics Competitive differentiators Market growth1 % Increasing demand for high Expertise and experience quality integrated citizen – User centric design processes supported 5-7% services by subject matter experts – Ability to recruit
Slide 47: Citizens' Services: Strategy
Citizens’ Services: Strategy UK AMERICAS ASPAC Strong Strong Foundation Build position in local Build on success of Codify best practice authorities contracts such as from UK and US Affordable Care Act, Widen offer Patents Office and Monitor welfare DES to build wider programmes in Focus
Slide 48: Healthcare: What we do
Healthcare: What we do Sector overview What we do Example contracts 2014 Revenues Non-Clinical Support Services Full service offering covering all non- Norfolk & Norwich hospital (UK) Fiona Stanley hospital (Australia) £256m clinical aspects of support to acute hospitals Forth Valley hospital
Slide 49: Healthcare: Market positioning
Healthcare: Market positioning Market overview Market dynamics2 Competitive differentiators Market growth1 % Hospitals running under severe budgetary Expertise and experience of new build PFI/PPP (UK, ASPAC) pressure 6-8% UK NHS expected to face funding gap of up to Approach based on improving
Slide 50: Healthcare: Strategy
Healthcare: Strategy UK AMERICAS MIDDLE EAST AUSTRALIA Strong Exploring Foundation Foundation Improve Explore market entry Target new hospital Build off success of underperforming opportunities for non- market Fiona Stanley to contracts clinical generate pipeline Develop non-clinical Exi
Slide 51: Encouraging number of development opportunities across the portfolio
Encouraging number of development opportunities across the portfolio UK & Middle Australia & Significant Sector Europe Americas East New Zealand Other development opportunities Justice & £297m £405m £702m Immigration Defence £803m £342m £33m £142m £1,321m Transport £555m £99m £159m £31m £845m Citize
Slide 52: The plan in a nutshell
The plan in a nutshell Our Ambition To be a superb provider of public services 2018-20 by being Thereafter grow revenues the best managed business in our sector Build out geographical footprint 2015-17 Move into new sub-segments Transform & rebuild margins Leverage scale and capability Ratio
Slide 53: Conclusion - Serco has a bright future
Conclusion - Serco has a bright future We have a strong core business providing public services − £4bn of revenues; present in the largest public sector services markets − Trusted supplier of critical services across a broad range of activities − We are well-placed to provide what the public sector
Slide 54: Strategy Implementation
Strategy Implementation Ed Casey Chief Operating Officer
Slide 55: Our strategy: be a focused B2G business
Our strategy: be a focused B2G business 1 Be a superb provider of public services by becoming the best managed company in the sector Improve cost competitiveness Strengthen BD and risk management Drive operational excellence: management information systems and continuous improvement People:
Slide 56: Reducing costs and using scale will lead to margin improvement
Reducing costs and using scale will lead to margin improvement Actions underway or complete Actions planned Markers of success Strategic review provided Centralisation and Target 2015 roadmap rationalisation of in-year cost base Establishment of powerful functional support reduction of £20m
Slide 57: Improved BD and risk management will lead to better growth
Improved BD and risk management will lead to better growth Actions underway or complete Actions planned Markers of success Updated and strengthened Greater proportion of Growth in pipeline management system investment in front end over next three including bid governance business development y
Slide 58: Improved management information leads to better management
Improved management information leads to better management Actions underway or complete Markers of success Monthly reviews undertaken at Divisional and Executive Better visibility levels looking at balanced business metrics to assess for management underlying performance Stronger – Business De
Slide 59: Building talent and capability will energise the company
Building talent and capability will energise the company Actions underway or complete Actions planned Markers of success Seven new appointments to Contract level training Strong leadership Exec Committee including for continuous teams – UK CG CEO improvement Reduced turnover – UK LRG CEO D
Slide 60: Exit non-core businesses through divestment
Exit non-core businesses through divestment Private Sector BPO Other Non-Core Businesses 2014 Revenue £359m UK Environmental & Leisure Businesses (2014 Revenue: Information memorandum £145m) issued early January for offshore, India Domestic and – Process well advanced other territories – Custo
Slide 61: Our strategy: be a focused B2G business
Our strategy: be a focused B2G business 1 Be a superb provider of public services by becoming the best managed company in the sector Improve cost competitiveness Strengthen BD and risk management Drive operational excellence: management information systems and continuous improvement People:
Slide 62: Strategy Financials and Funding
Strategy Financials and Funding Angus Cockburn Chief Financial Officer Serco Group plc
Slide 63: Agenda
Agenda Strengthening the Finance function Outlook and Guidance OCPs future impact Funding strategy, Rights Issue and refinancing Focus on sustainable shareholder value creation 63
Slide 64: Strengthening the Finance function
Strengthening the Finance function Beginning to change the emphasis and role of Finance as a function – Strong financial control environment – Key enabler to better understanding business performance Management accounts produced from contract to division to Group – In process of automating throu
Slide 65: 2015 revenue outlook
2015 revenue outlook 2015 revenue forecast – pre disposals – of c£3.5bn (2014: £4.0bn) – 10 November 2014 forecast of c£4bn was based on Adjusted Revenue, with definition change to Revenue now removing share of JVs; no material change in underlying assumptions 2015 forecast net reduction of 10-1
Slide 66: Revenue visibility and 'build'
Revenue visibility and ‘build’ Opening order book value represents the expected revenues from existing signed contracts Rebids/extensions of existing contracts due during the year represent revenue that is at risk until secured with a signed contract In-year incremental revenue comes from – In
Slide 67: 2015 Trading Profit outlook
2015 Trading Profit outlook 2015 Trading Profit forecast – pre disposals – of c£90m, c2.5% margin (2014: £113m, 2.9% margin, before review items) – 10 November 2014 forecast of c£100m was based on AOP, with definition change now including JV interest and tax costs 2015 forecast driven by – Adver
Slide 68: Evaluating the contracts with OCPs 1/2
Evaluating the contracts with OCPs 1/2 £447m of OCPs charged in 2014 reflecting estimate of anticipated future losses from 2015 to the end of each individual contractual obligation Assumed aggregate losses of £139m in 2015 on a revenue base of c£600m reflects a (23%) contract loss margin, improv
Slide 69: Evaluating the contracts with OCPs 2/2
Evaluating the contracts with OCPs 2/2 Estimated utilisation phasing of the £447m charge (which, together with a discount unwind of £21m, is a proxy for future cash outflow) is as follows: £bn 2015f 2016e 2017 onwards Total Utilisation 139 83 225 447 – 2015 higher than initial phasing estimates fo
Slide 70: 2015 Free Cash Flow outlook
2015 Free Cash Flow outlook 2015 Free Cash Flow forecast – pre disposals – forecast to be an outflow c£150m (2014: £62m inflow) 2015 forecast driven by – Adverse impact of lower Trading Profit/cash inflow from profitable contracts – Adverse impact of greater Trading Loss/cash outflow from loss-m
Slide 71: 2015 – other modelling assumptions
2015 – other modelling assumptions Further exceptional costs likely regarding costs of completing Strategy Review and the implementation of further restructuring programmes; refinancing fees Net finance costs (pre-exceptionals) – c£35m (2014: £37m) – Pre disposals consideration but assuming net
Slide 72: Outlook beyond
Outlook beyond Revenue 2015 forecast of £3.5bn, pre-disposals 2016: no formal guidance, given adjustment for disposals, etc; challenges remain given time required to rebuild currently weak pipeline; further rebids to secure Beyond: progress on returning over the longer term to sector growth ra
Slide 73: Refinancing
Refinancing Negotiations with private placement noteholders and lending banks complete – Maintained 100% support – Extended RCF maturity from 2017 to 2019 + 1 year extension option – Maintained private placement maturity profile out to 2024 – Maintained current financial covenants and increased fl
Slide 74: Covenants
Covenants Two key financial covenants unchanged – Net debt/EBITDA <3.5 times – EBITDA/Interest cover >3 times EBITDA continues to follow statutory profit definition, ie includes the credit to the income statement from OCP utilisation; net borrowings will though reflect the cash outflow on OCP-re
Slide 75: Facilities
Facilities Bank facilities include £200m of committed bonding lines Cash generated from disposals will be offered 1/3 : 2/3 between banks and US private placement noteholders, without incurring further makewhole payments £m Banks PP Total Committed facilities as at 31 December 2014 730 585 1,315
Slide 76: Funding strategy and leverage
Funding strategy and leverage Capital structure medium term leverage target of 1-2x net debt to EBITDA (based on covenant definition) to ensure strength and flexibility to delivery turnaround Increased need for a strong balance sheet given – Clear message from our customers that they are looking
Slide 77: Rights Issue details
Rights Issue details Size – Gross proceeds of approximately £555m, expected net proceeds of c£528m – Fully underwritten Structure – Shareholders are granted transferable subscription entitlements (“Rights”) – Applications will be made to the UKLA and to the LSE for the New Ordinary Shares (nil a
Slide 78: Expected timetable
Expected timetable Announcement of the Rights Issue 12 Mar 2015 Publication of Prospectus Start of GM notice period 26 Mar 2015 Record date 30 Mar 2015 General Meeting 31 Mar 2015 Dealing in Rights Issue shares (nil paid) commences 16 Apr 2015 Rights Issue closes Take-up announced 17
Slide 79: Focus on sustainable shareholder value creation
Focus on sustainable shareholder value creation Quality core - a more focused business with a clear strategic direction – While challenging 2015 and likely to remain so in 2016, customer demand and Serco’s strong positioning should support a market-driven return to growth and recovery in margins –
Slide 80: Concluding thoughts
Concluding thoughts Rupert Soames Group Chief Executive
Slide 81: Conclusion - Serco has a bright future
Conclusion - Serco has a bright future We have a strong core business providing public services − £4 bn of revenues; present in the largest public sector services markets − Trusted supplier of critical services across a broad range of activities − We are well-placed to provide what the public sector
Slide 82: Questions and Answers
Questions and Answers Rupert Soames Group Chief Executive
Slide 83: Appendix
Bringing service to life se rco
Slide 84: Appendix 1 – Notes and definitions
Appendix 1 – Notes and definitions Trading Profit is defined as statutory Operating Profit before i) amortisation and impairment costs of intangibles arising on acquisitions, and ii) exceptional items. Trading Cash Flow is the net cash flow from operating activities before exceptional items as s
Slide 85: Appendix 2 – Reportable segment reconciliations
Appendix 2 – Reportable segment reconciliations UK UK&E Asia Middle Global Corp £m CG LRG Americas Pacific East Services Costs Group Reconciliation 1 – 2014 revenue Adjusted Revenue, old segments Old UK&E 2,402.8 708.7 Old AMEAA 938.9 702.9 - 4,753.3 Separate UK&E and AMEAA 1,545.0 857.8 708.7 670.7
Slide 86: Appendix 2 – Reportable segment reconciliations
Appendix 2 – Reportable segment reconciliations UK UK&E Asia Middle Global Corp £m CG LRG Americas Pacific East Services Costs Group Reconciliation 2 – 2014 profit Adjusted Op Profit, old segments Old UK&E 84.3 43.2 Old AMEAA 51.1 8.3 (49.3) 137.6 Separate UK&E and AMEAA 61.9 22.4 43.2 28.1 23.0 4.3
Slide 87: Appendix 2 – Reportable segment reconciliations
Appendix 2 – Reportable segment reconciliations UK UK&E Asia Middle Global Corp £m CG LRG Americas Pacific East Services Costs Group Reconciliation 3 – 2013 revenue Adjusted Revenue, old segments Old UK&E 2,624.8 765.3 Old AMEAA 1,049.5 700.4 - 5,140.0 Separate UK&E and AMEAA 1,713.8 911.0 765.3 763
Slide 88: Appendix 2 – Reportable segment reconciliations
Appendix 2 – Reportable segment reconciliations UK UK&E Asia Middle Global Corp £m CG LRG Americas Pacific East Services Costs Group Reconciliation 2 – 2013 profit Adjusted Op Profit, old segments Old UK&E 163.8 65.1 Old AMEAA 83.4 27.4 (46.0) 293.7 Separate UK&E and AMEAA 136.0 27.8 65.1 51.9 31.5
Slide 89: Appendix 3 – cash flow breakdown 1 & breakdown 2
Appendix 3 – cash flow breakdown 1 & breakdown 2 £m FY14 FY13 Breakdown 1 – depreciation, amortisation and impairment Depreciation 42 48 Amortisation 27 25 Depreciation and amortisation 69 73 Impairment of PPE 22 - Impairment of intangibles 27 - Amortisation of intangibles arising on acquisition 11
Slide 90: Appendix 3 – cash flow reconciliation 3 & breakdown 4
Appendix 3 – cash flow reconciliation 3 & breakdown 4 £m FY14 FY13 Reconciliation 3 – free cash flow reconciliation ‘Adjusted’ free cash flow as previously defined 79 85 Include: cash transaction-related costs - (3) Include: cash costs of management estimation of charges re UK Govt reviews (17) (9)
Slide 91: Appendix 4 – leverage covenant calculation
Appendix 4 – leverage covenant calculation £m FY14 FY13 Trading Profit Before Impact of Contract and Balance Sheet Review 113 257 Exclude: share of joint venture post-tax profits (30) (47) Include: dividends from joint ventures 35 52 Add-back: depreciation and amortisation (excluding acquisition int
Slide 92: Appendix 5 – interest cover covenant calculation
Appendix 5 – interest cover covenant calculation £m FY14 FY13 Statutory net finance costs (37) (37) Exclude: net interest receivable on retirement benefit obligations (3) (2) Exclude: movement in discount on other debtors - (1) Add-back: interest payable on non-recourse loans 1 1 Add-back: movement
Slide 93: Appendix 6 – FY14 balance sheet movements
Appendix 6 – FY14 balance sheet movements £m Opening Reviews Held/Sale Other Closing Goodwill 1,271 (466) (279) 16 542 Other intangible assets 186 (45) (5) (17) 119 Property, plant and equipment 177 (23) (94) (21) 38 Trade and other receivables 842 (164) (146) 4 537 Inventories 49 (17) (3) 1 31 Inte
Slide 94: Appendix 6 – FY13 restatement (background)
Appendix 6 – FY13 restatement (background) Two prior year adjustments have been made to reflect the restatement of certain financial instruments. These resulted in a cumulative net charge of £5.6m to prior years’ reported profits, which included a net credit to the 2013 profit for the year of £3.0
Slide 95: Appendix 7 – FY13 restatement (impact)
Appendix 7 – FY13 restatement (impact) £m Previous Derivatives Hedges Restated Revenue 4,288.1 (3.9) - 4,284.2 Operating profit 143.8 (3.9) 5.6 145.5 Net finance costs (37.2) - - (37.2) Profit before tax 106.6 (3.9) 5.6 108.3 Tax (11.2) 1.3 - (9.9) Profit for the year 95.4 (2.6) 5.6 98.4 Earnings pe
Slide 96: Appendix 8 – Pensions
Appendix 8 – Pensions Serco sponsor a number of defined benefit pension schemes – Non contract specific – not related to specific contracts or franchises, largest of which is main Group scheme (SPLAS) – Contract specific – related to specific contract or franchise where the deficit expected to pas
Slide 97: Appendix 9 – Currency rates
Appendix 9 – Currency rates Average rates Closing rates FY14 HY14 FY13 31 Dec 2014 30 Jun 2014 31 Dec 2013 £:US$ 1.65 1.67 1.56 1.56 1.71 1.66 £:Aus$ 1.82 1.82 1.61 1.91 1.81 1.85 £:Eur 1.24 1.21 1.17 1.29 1.25 1.20 £:INR 100.44 101.24 91.24 98.42 102.84 102.45 97