Serco Group Plc · LSE:SRP
Serco — H1 2025 Earnings Presentation
48 slides from Serco's earnings presentation, Aug 7, 2025
Slide 1: Serco 2025 half year results
serco Serco 2025 half year results For the six months ended 30 June 2025
Slide 2: Agenda
Agenda Overview Anthony Kirby Group Chief Executive Financial review Nigel Crossley Group Chief Financial Officer Sector update: defence Anthony Kirby Group Chief Executive Q&A
Slide 3: Overview
Overview Anthony Kirby, Group Chief Executive serco
Slide 4: Strong first half performance
Strong first half performance Revenue £2.4bn 5% ↑ at constant currency Underlying operating profit £146m Delivering 6% margin Order intake £3.2bn >130% book-to-bill
Slide 5: The fundamentals of our business are strong
The fundamentals of our business are strong We continue to have a With a portfolio of in-demand capabilities across attractive sectors diversified, global footprint Defence Justice & Citizen Transport Healthcare Immigration Services & FM >£870bn total Presence in the largest US Gov. spending up 5-10
Slide 6: Continued progress across key priority areas
Continued progress across key priority areas £3.2bn 6% 134% 95% x2 Margin in ASPAC vs. HY24 £11.9bn 19%
Slide 7: Initial reflections: a strong base, giving us the opportunity to accelerate
Initial reflections: a strong base, giving us the opportunity to accelerate
Slide 8: Key Takeaways
Key Takeaways Strong first half financial performance Enabling further shareholder returns, including £50m share buyback and increased interim dividend Confidence in delivering full-year guidance Focus on growth, competitiveness and operational excellence, bolstered by strong pipeline Organic wins p
Slide 9: Financial review
Financial review Nigel Crossley, Group Chief Financial Officer serco
Slide 10: Financial overview
Financial overview HY25 HY24 Growth Revenue Revenue £2,419m £2,359m 3% Organic growth Acquisitions 3% 2% (5%) 2% 3% Organic growth led by defence in FX (2%) (2%) North America Underlying Underlying operating profit £146m £142m 2% operating profit 6% Organic growth 1% (7%) Acquisitions 3% 5% Margin F
Slide 11: North America
North America Excellent organic growth, pipeline more than doubled Six months ended 30 June 2025 (£m) HY25 HY24 Total growth CFX growth • Revenue +10% reported, +9% organic – Defence: 10% organic growth, MT&S acquisition Citizen Services 169 159 6% 9% completed and integration progressing well Defen
Slide 12: UK & Europe
UK & Europe Strong order intake, high retention rates and significant new business wins Six months ended 30 June 2025 (£m) HY25 HY24 Total growth CFX growth • Revenue +4% reported, +2% organic – Up: HAAS full H1 contribution to Citizen Services, Citizen Services 193 156 24% 25% Defence growth from A
Slide 13: Asia Pacific
Asia Pacific Operational excellence and competitiveness delivered improved margins Six months ended 30 June 2025 (£m) HY25 HY24 Total growth CFX growth • Revenue (8)% reported, (3)% organic – Down: transition out of onshore Immigration services to Citizen Services 54 57 (5%) 1% the Australian Govern
Slide 14: Middle East
Middle East Focus on strengthening portfolio and securing new work Six months ended 30 June 2025 (£m) HY25 HY24 Total growth CFX growth • Revenue (15)% reported, (13)% organic – Up: MELABS (Defence), KSA Fire & Rescue (Transport) Citizen Services 12 12 (4%) (6%) – Down: Contract exits including DANS
Slide 15: Strong cash flow performance
Strong cash flow performance Healthy first-half cash conversion of 84% Six months ended 30 June 2025 (£m) HY25 HY24 Underlying operating profit 145.8 142.4 Continued focus on Capex and repayment of lease liabilities (92.1) (83.3) working capital and cash discipline Depreciation and amortisation 92.1
Slide 16: Capital allocation
Capital allocation Continued progress against our framework supported by strong balance sheet Highly Capital-light Target leverage range of Context: cash generative business model 1-2x net debt to EBITDA Capital priorities Progress in 2025 1 Invest to support organic growth New bid investment, incre
Slide 17: Guidance for 2025
Guidance for 2025 2024 2025 Previous New Actual guidance guidance Revenue £4.8bn ~£4.9bn ~£4.9bn Organic sales growth (3%) ~1% ~1% Underlying operating profit £274m ~£260m ~£260m Net finance costs £33m ~£48m ~£48m Underlying effective tax rate 25% ~25% ~23% Free cash flow £228m ~£130m ~£130m Adjuste
Slide 18: Sector update: defence
Sector update: defence Anthony Kirby, Group Chief Executive serco
Slide 19: Long-term drivers of demand persist, whilst new trends create opportunities - particularly in defence
Long-term drivers of demand persist, whilst new trends create opportunities - particularly in defence
Slide 20: We have deep expertise in areas of growing demand
We have deep expertise in areas of growing demand Acquisition support Vessel operations Naval design MRO Assisting in the procurement of Crewing & operations of support Naval architecture & design of vessels, Maintenance, repair & overhaul of key defence & security platforms ships & ports including
Slide 21: Converting opportunity with robust defence order intake & strong pipeline
And we are converting this opportunity with robust defence order intake & a strong pipeline of new opportunities
Slide 22: Twin track: targeted platform of defence capability
Twin track: An attractive, targeted platform of defence capability, built organically & through bolt-on acquisitions
Slide 23: Organic: UK Armed Forces Recruitment begins to mobilise next-gen solution
Organic: UK Armed Forces Recruitment begins to mobilise next-gen solution • • • • • • Protecting the nation begins here
Slide 24: Inorganic: successful start to MT&S integration
Inorganic: successful start to MT&S integration creates new growth opportunities • • • • • • • •
Slide 25: Maintain momentum across our focus areas
And we can maintain momentum across our focus areas to deliver on these drivers of demand in defence and beyond
Slide 26: Key Takeaways
Key Takeaways Strong first half financial performance Enabling further shareholder returns, including £50m share buyback and increased interim dividend Confidence in delivering full-year guidance Focus on growth, competitiveness and operational excellence, bolstered by strong pipeline Organic wins p
Slide 27: se rCO er: futiire
se rCO er: futiire
Slide 28: Appendix
Appendix serco
Slide 29: Forward-looking statements
Forward-looking statements This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. Generally, words such as "expect", "anticipate", "
Slide 30: Notes and definitions
Appendix 1 Notes and definitions Revenue is as defined under IFRS, which excludes Serco’s share of revenue of its joint ventures and associates. In prior periods where relevant, revenue including that from any discontinued operations has been shown for consistency with previous guidance and disclosu
Slide 31: Revenue divisional analysis
Appendix 2 Revenue divisional analysis Revenue - growth composition HY25 vs HY24 HY24 HY25 Reported Acquisition/ Reported Constant £m Organic FX TOTAL Currency (Disposal) Currency Currency UK&E 1,210.6 2% 2% —% 4% 1,253.5 1,258.4 North America 656.4 9% 4% (3%) 10% 720.8 739.1 Asia Pacific 387.4 (3%)
Slide 32: Underlying operating profit (UOP) divisional analysis
Appendix 3 Underlying operating profit (UOP) divisional analysis Underlying operating profit and margin HY25 UOP HY24 UOP Change FY24 UOP Reported Constant Reported Reported Reported Constant Constant Reported Reported £m Currency Currency Margin Currency Margin Currency Currency Currency Margin UK&
Slide 33: Income statement – EPS and DPS
Appendix 4 Income statement – EPS and DPS £m HY25 HY24 FY24 Underlying operating profit (UOP) 145.8 142.4 273.5 Net finance costs (NFC) (19.4) (15.5) (33.1) Underlying PBT 126.4 126.9 240.4 Tax on UOP and NFC (27.5) (33.0) (60.4) Underlying PAT 98.9 93.9 180 Amortisation and impairment of intangible
Slide 34: Exceptional items
Appendix 5 Exceptional items £m HY25 HY24 FY24 Exceptional items: Goodwill impairment (Asia Pacific) - (114.5) Exceptional items - - (114.5) Tax on exceptional items - - - Total exceptional items, net of tax - - (114.5) Memo: Cash flow on exceptional items - - - 34
Slide 35: Free Cash Flow and Trading Cash Flow
Appendix 6 Free Cash Flow and Trading Cash Flow £m HY25 HY24 FY24 Underlying operating profit (UOP) 145.8 142.4 273.5 Share of profit of joint ventures and associates (11.7) (11.2) (22.8) Depreciation, amortisation and impairment of owned assets 12.9 11.7 25.1 Depreciation, amortisation and impairme
Slide 36: Net debt and leverage
Appendix 7 Net debt and leverage £m HY25 HY24 FY24 Free cash flow 90.5 75.3 227.5 Net (acquisition) / disposal of subsidiaries and operations (245.7) (19.3) (20.8) Dividends paid to shareholders (28.6) (24.5) (38.4) Purchase of own shares - (57.6) (141.3) Capitalisation and amortisation of loan cost
Slide 37: Focus on five sectors across four regions
Appendix 8 Focus on five sectors across four regions HY25 revenue mix, including share of JV&As* UK & North Asia Middle Serco £m Sector Europe America Pacific East Total Defence 377 515 90 15 £997m 38% Justice & 692 - 121 - £813m 31% Immigration Transport 115 37 13 34 £199m 7% Health 113 - 77 28 £21
Slide 38: Cash flow breakdown 1 and breakdown 2
Appendix 9 Cash flow breakdown 1 and breakdown 2 £m HY25 HY24 FY24 Breakdown 1 – depreciation, amortisation and impairment Depreciation (excluding lease assets) 8.8 8.0 17.2 Amortisation (non-acquisition) 4.1 4.0 8.3 Depreciation and amortisation 12.9 12.0 25.5 Impairment of PPE (excluding lease ass
Slide 39: Leverage covenant calculation
Appendix 10 Leverage covenant calculation £m HY25 HY24 FY24 Underlying operating profit (UOP) 276.9 243.2 273.5 Exclude: share of joint venture and associate post-tax profits (23.4) (22.2) (22.8) Exclude: foreign exchange credit on investing and financing arrangements (0.5) (1.9) (2.1) Include: divi
Slide 40: Interest cover covenant calculation
Appendix 11 Interest cover covenant calculation £m HY25 HY24 FY24 Net finance costs (37.0) (29.1) (33.1) Other covenant adjustments to net finance costs 22.1 16.3 19.6 Exclude: foreign exchange credit on investing and financing arrangements 0.5) 1.9) 2.1) Exclude: net interest receivable on retireme
Slide 41: Balance sheet summary
Appendix 12 Balance sheet summary £m HY25 HY24 FY24 Goodwill 915.5 938.5 826.2 Other intangible assets (excluding leased assets) 173.6 117.2 101.4 Property, plant and equipment (excluding leased assets) 59.5 55.7 56.8 Contract assets, trade and other receivables 708.2 678.8 657.8 Inventories 21.9 24
Slide 42: Return on Invested Capital (ROIC)
Appendix 13 Return on Invested Capital (ROIC) £m HY25 HY24 FY24 Invested capital assets 1,903.4 1,853.2 1,691.4 Invested capital liabilities (746.2) (702.9) (714.7) Invested Capital (IC) 1,157.2 1,150.3 976.7 Average IC (two-point) 1,153.8 1,152.9 1,043.8 Underlying Operating Profit for rolling 12 m
Slide 43: Pension assets mix and IAS 19 valuation
Appendix 14 Pension assets mix and IAS 19 valuation £m HY25 HY24 FY24 Fair value of scheme assets - SPLAS Buy and maintain credit - 47.7 17.8 Short-dated credit 35.4 30.4 31.9 Asset backed securities 64.5 12.5 38.0 LDIs 187.7 203.7 181.7 Private debt 134.6 147.9 143.5 Amounts held by insurance compa
Slide 44: Currency rates
Appendix 15 Currency rates Spot rate for FY25e Average rates Closing rates 08 Jul 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec HY25 FY24 HY24 FY23 HY23 2025 2025 2024 2024 2023 2023 2022 £:US$ 1.33 1.29 1.28 1.27 1.24 1.23 1.37 1.25 1.28 1.27 1.26 1.20 £:Aus$ 2.08 2.05 1.93 1.92 1.87 1.83 2.10 2.02 1.9
Slide 45: Tax
Appendix 16 Tax • HY25 underlying tax of £27.5m, on underlying profit before tax of £126.4m - effective tax rate (ETR) of 21.8% • Expect ETR to increase closer to ~23% for the year, the ETR effect of one-off items at half year will be diluted by full year profits, overall ETR continues to be sensiti
Slide 46: Net debt trend analysis
Appendix 17 Net debt trend analysis The trend of net debt in H1 2025 was significantly impacted by the acquisition of MT&S in May. The completion of the acquisition occurred at the same time as other discrete cash outflows such as the final ordinary dividend and balancing payments of VAT, which ampl
Slide 47: American Depositary Receipt (ADR) program
Appendix 18 American Depositary Receipt (ADR) program Serco Group has a sponsored Level 1 ADR program, for which Deutsche Bank act as the depositary bank and custodian Ticker: SCGPY Exchange: OTC For assistance with converting Ordinary Shares into ADRs (or vice CUSIP: 81748L209 versa), please contac
Slide 48: serco.com
Serco Business serco.com