Serco Group Plc · LSE:SRP
Serco — H1 2002 Earnings Presentation
52 slides from Serco's earnings presentation, 2002
Slide 1: Serco Group plc interim results 2002
Serco Group plc interim results 2002
Slide 2: The team
Introduction The team Kevin Beeston Executive Chairman Christopher Hyman Chief Executive Andrew Jenner Finance Director David McGhie Chief Executive, Serco Defence Iestyn Williams Executive Director
Slide 3: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Financial results • Business performance • UK Defence • Market development • Conclusion • Financial highlights • Company highlights
Slide 4: Financial highlights to 30.06.02
Introduction Turnover £625.9m Up 19.0% Profit before tax - pre goodwill £28.4m Up 16.4% Underlying profit before tax - pre goodwill £27.3m Up 20.5% Earnings per share - pre goodwill 4.84p Up 11.0% Dividend per share 0.64p Up 12.3% Financial highlights to 30.06.02
Slide 5: Company highlights to 30.06.02
Introduction • Strong organic growth • Record level of bids submitted valued at £4.7bn • 62 new contracts signed • 56 contracts rebid or extended, over 90% retention rate • Contracts signed totalling £400m • Forward order book of £6bn • Appointed preferred bidder for contracts totalling a further £2
Slide 6: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Financial results • Introduction • Business performance • Accounting policies • UK Defence • Consolidated profit and loss account • Market development • Analysis of profit • Conclusion before tax • Consolidated cash flow state
Slide 7: Introduction
Financial results Introduction • Financial review included in the Interim Report • Interim Results reviewed by Auditors • ‘Our Approach to PFIs’ reissued September 2002
Slide 8: Accounting policies
Financial results Accounting policies • UITF Abstract 34 Pre contract costs • FRS 19 Deferred tax • FRS 17 Retirement benefits
Slide 9: Consolidated profit and loss account
Financial results Consolidated profit and loss account 6 months Restated 6 months Restated 12 months to 30.6.02 to 30.6.01 to 31.12.01 £’m £’m £’m Turnover: Group and share of joint ventures 625.9 525.9 1,141.2 Less: Share of joint ventures (103.9) (91.7) (227.5) Group turnover 522.0 434.2 913.7 Cos
Slide 10: Analysis of profit before tax
Financial results Analysis of profit before tax 6 months 6 months to 30.6.02 to 30.6.01 £’m £’m Profit on ordinary activities before taxation - pre goodwill 28.4 24.4 16.4% Serco Assurance (after financing and phase in costs) (1.1) - Net one-off items - (1.7) Investment: People and Technology projec
Slide 11: Consolidated profit and loss account
Financial results Consolidated profit and loss account 6 months Restated 6 months Restated 12 months to 30.6.02 to 30.6.01 to 31.12.01 £’m £’m £’m Turnover: Group and share of joint ventures 625.9 525.9 1,141.2 Less: Share of joint ventures (103.9) (91.7) (227.5) Group turnover 522.0 434.2 913.7 Cos
Slide 12: Consolidated cash flow statement
Financial results Consolidated Restated Restated 6 months 6 months 12 months cash flow statement to 30.6.02 to 30.6.01 £’m £’m to 31.12.01 £’m Operating profit 16.8 2.0 11.1 Depreciation and goodwill amortisation 11.5 8.1 18.3 Movement in working capital (16.6) (13.5) (13.9) One-off pension fund con
Slide 13: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Introduction • Financial results • Growth to • Business performance 30 June 2002 • UK Defence • Contributors to growth • Market development • Business sectors • Conclusion • Geographic analysis • Bids submitted
Slide 14: Introduction
Business performance Introduction • Solid performance in the first six months • Sustained growth in uncertain global economies • Key features • High phase in activity • Intense bidding activity
Slide 15: Introduction
Business performance Introduction • 42% of turnover growth from add-ons and extensions to existing contracts • Bids submitted totalling £4.7bn during the first half • Total bids submitted and awaiting outcome as at 30 June 2002 £6.8bn
Slide 16: Turnover growth to June 2002
Business performance Turnover growth to 30 June 2002 Acquisitions £625.9m New Awards £25.5m Increases in scope of existing contracts £32.4m 2001 half year turnover £42.1m £525.9m “As in the past almost half our turnover growth came from add-ons and extensions to existing contracts.”
Slide 17: Contributors to growth
Business performance Contributors to growth Contract Country New/Rebid Duration Annual Turnover Jebel Ali UAE New 10 yrs £4.0m Skynet 5* UK New 15 yrs £14.7m Merseyside Police UK New 9 mnths £1.8m BNFL Magnox UK New 5 yrs £2.5m Regional Lombardia IT IT New 6 yrs £1.9m European Parliament IT New 5 yr
Slide 18: Typical wins in the period
Business performance Typical wins in the period Canterbury City Council Jebel Ali Free Zone BNFL Magnox Reactor Services
Slide 19: Canterbury City Council
Business performance Rebid • Contract held since April 1996 • A total management contract which includes Environmental services, clinical waste collection, emergency response, coastal maintenance, grounds maintenance, recycling service and call centre. Canterbury City Council UK 10 yrs £5.3m pa £53m
Slide 20: Jebel Ali Free Zone
Business performance New Award • The first significant ‘multi-activity’ outsourcing contract awarded in the Middle East • Jebel Ali Free Zone (JAFZA) is home to over 2,200 international and local companies from 97 countries, and covers an area of over 30 sq km • Providing engineering and related sup
Slide 21: BNFL Magnox Reactor Services
Business performance New Award • Technical support to six nuclear power stations • Partnered with Mitsui Babcock • First such alliance with UK civil nuclear industry BNFL Magnox Reactor Services UK 5 yrs £2.5m pa £12.5m total
Slide 22: BBC travel information
Business performance Preferred Bidder BBC travel information UK 3 yrs £1m pa £3m total • Providing national and local traffic and travel information to the BBC • 12 Broadcast Professionals to TUPE Transfer • 24/7 Information service to BBC radio, television, web portal and Ceefax • This puts us in a
Slide 23: Business sectors
Business performance Business sectors 12% 12% 7% 24% 24% 10% 25% 32% 26% 28% Half year 2001 Turnover Half year 2002 Turnover Total £525.9m Total £625.9m Civil government Defence Transport Science Private sector “Serco’s broad portfolio of business sectors and activities gives us a large choice of op
Slide 24: Geographic analysis
Business performance Geographic analysis 12% 12% 12% 13% 5% 71% 6% 69% Half year 2001 Turnover Half year 2002 Turnover Total £525.9m Total £625.9m Asia Pacific North America Continental Europe & Middle East UK “A distinctive feature of Serco’s business is its international portfolio.”
Slide 25: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Financial results • Business performance • UK Defence • Market development • Conclusion
Slide 26: Serco Defence
Defence • The origins of Serco • Largest group business sector (28% of turnover) • One of the largest providers of defence outsourcing in the UK with over 8,500 staff on 120 locations • Full year forecast revenue of £260m UK only • A range of opportunities in the UK, Europe, Middle East, North Ameri
Slide 27: Serco Defence
Defence • Providing task management, operational and logistic support services to UK MOD, NATO defence forces, civil aviation and related industries within UK and Europe. Contract examples: • Atomic Weapons Establishment • Naval Air Command Multi Activity Contract • Marine Services • Joint Service C
Slide 28: Defence outsourcing market
Defence Asia Middle East Pacific £2.3bn £2.8bn Western Europe £9.7bn UK* £3.2bn USA £65bn * The UK total is expected to double by 2010 to over £6.4bn a year Source - Roland Berger Consultants 2001 Defence outsourcing market
Slide 29: A selection of bids under evaluation
Defence A selection of bids under evaluation Contract Estimated Value Duration Preferred Current to Serco Bidder Start Date Army Training Estate £750m+ 7-10 yrs Nov 02 April 03 Airfield Support Services Project £2,000m+ 15-25 yrs April 03 Dec 04 PJHQ Northwood £300m+ 25 yrs Nov 02 April 03 Future St
Slide 30: Faslane property maintenance
Defence • Strategic partnership with Babcock Naval Services Ltd (BNSL) • Significant property maintenance activities at the HM Naval Base Clyde and Royal Navy Armaments Depot Coulport • Increase in current turnover from £2.1m to £6m pa • Five year contract with options Faslane property maintenance
Slide 31: Total bids awarded
Defence • £300m of contracts awarded and at preferred bidder so far in 2002 (UK) Total bids awarded
Slide 32: International bids
Defence Joint Technical College, Oman • PFI to design,construct,finance and operate a residential technical training college for the Oman Ministry of Defence • Based on the JSCSC model • Single site rationalisation to accommodate 2,000 students • Bid submitted August 2002 • Preferred bidder October
Slide 33: International bids
Defence Defence Integrated Distribution System, Australia • Integrated national warehousing and Joint Technical College, Oman distribution for the Australian Defence Force and repair and maintenance of • PFI to design,construct,finance and equipment for the Australian Army operate a residential tech
Slide 34: Future bid pipeline
Defence Combined Ariel Target Services • Provision of ariel targets to the Army, Navy and Air Force • ITN date Sep 2002 • Preferred Bidder Date Summer 2003 • Potential value to Serco £200m+ Military Flying Training System • Total support for all Joint Service flying training • ITN Summer 2003 • Pref
Slide 35: Future bid pipeline
Defence Defence Education and Training Review • Outcome of the government review Combined Ariel Target Services of training for the armed forces • Consolidation of training facilities • Provision of ariel targets to the Army, Navy • Construction of new Colleges - School of and Air Force logistics cu
Slide 36: Conclusion
Defence • £300m of contracts awarded and at preferred bidder so far in 2002 (UK) • £3.3bn bids submitted in the global market in the first half • Future opportunities are abundant and match our core capabilities Conclusion
Slide 37: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Financial results • Business performance • UK Defence • Market development • Conclusion
Slide 38: Our goal
Market development “…a leading global outsourcing company, focusing primarily on the public sector…” Our goal
Slide 39: Our strategy
Market development “Our growth strategy is to focus primarily on organic expansion, while using acquisitions, joint ventures and strategic alliances to build platforms in new or emerging markets with good long-term organic growth potential.” Our strategy
Slide 40: United Kingdom market and positioning
Market development Market United Kingdom • Government intent on achieving significant improvement in public services with private sector support • Comprehensive Spending Review (MM 2002) will provide an additional Positioning £125bn public spend over the next three years • A leading independent prov
Slide 41: Continental Europe market and positioning
Market development Market Continental Europe • Total economy - 5 times larger than the UK • Rapidly developing Italian market • Evidence of public private partnerships Positioning and management contracts emerging in Germany. • Serco presence through local companies in Germany, Italy, Belgium, Franc
Slide 42: Asia Pacific market and positioning
Market development Asia Pacific Market • Australian defence PFI policy published - PFI now emerging as a procurement process for Australian Department of Defence • Established contracts becoming larger. Positioning • Leading service contractor to Australian and New Zealand defence forces • Key targe
Slide 43: North America market and positioning
Market development North America Market • Bush championing competition as part of the President’s Management Agenda Positioning (Oct 2001) • Small business at US $100m • US$48bn increase in defence budget turnover in 2001 • Brand new £37bn homeland security • Well known to Defence OEM’s budget Lockh
Slide 44: Agenda
Serco Group plc Interim results presentation 2002 Agenda • Introduction • Financial results • Business performance • UK Defence • Market development • Conclusion
Slide 45: Conclusion
Conclusion Conclusion • Strong results for half year to 30 June 2002 • Outstanding and increasing visibility of earnings
Slide 46: Conclusion: order book cover by year
Conclusion Conclusion Total 98% Total 84% Total 71% Total 57% 4% 94% 18% 22% 66% 24% 49% 33% Extensions and Rebids Firm order book 2002 2003 2004 2005
Slide 47: Conclusion
Conclusion Conclusion • Strong results for half year to 30 June 2002 • Outstanding and increasing visibility of earnings • Forward order book stands at £6.0bn at 30.6.02
Slide 48: Total forward order book
Conclusion Conclusion Total forward order book £6.0bn £2.4bn £1.9bn £1.7bn 40% 32% 28% 2002-2004 2005-2009 2010 and beyond
Slide 49: Conclusion
Conclusion Conclusion • Strong results for half year to 30 June 2002 • Outstanding and increasing visibility of earnings • Forward order book stands at £6.0bn at 30.6.02 • Additional £250m of contracts at preferred bidder • Bids submitted in the first half £4.7bn • An additional £12bn of opportuniti
Slide 50: Outlook
Serco Group plc Interim results presentation 2002 “We are confident of achieving strong growth for the remainder of 2002, and for the longer term we anticipate sustained double-digit organic growth.” Outlook
Slide 51: Our goal
Serco Group plc Interim results presentation 2002 “Our goal is to continue strengthening our position as a leading global outsourcing company, focusing primarily on the public sector: we aim to capitalise on the worldwide trend for governments to seek private-sector support in improving the quality
Slide 52: Our strategy
Serco Group plc Interim results presentation 2002 “Our growth strategy is to focus primarily on organic expansion, while using acquisitions, joint ventures and strategic alliances to build platforms in new or emerging markets with good long-term organic growth potential.” Our strategy