Serco Group Plc · LSE:SRP
Serco — FY2007 Earnings Presentation
37 slides from Serco's earnings presentation, Feb 27, 2008
Slide 1: 2007 Preliminary Results
2007 Preliminary Results Presented by Serco Group plc 27 February Advise | Design | Integrate | Deliver Preliminary Results
Slide 2: Agenda
Agenda Overview Chris Hyman Financial results Andrew Jenner Business review and Outlook Chris Hyman Q&A 27 February Preliminary Results
Slide 3: International success builds on UK strengths
International success builds on UK strengths 2007 Increase Revenue £2,811m +10.3% Adjusted profit before tax £123.2m +17.3% Adjusted earnings per share 18.57p +16.6% Dividend per share 4.25p +18.1% Group free cash flow £97.6m +14.3% 27 February Preliminary Results
Slide 4: International success builds on UK strengths
International success builds on UK strengths Growth driven by buoyant UK and international markets Effective bidding performance – Won >90% of rebids and 1 in 2 new bids – £3.6bn of business signed in the period – Appointed preferred bidder for £1.0bn of contracts Record level of international
Slide 5: Broad pipeline supports excellent visibility
Broad pipeline supports excellent visibility At 31 December 2007 2008 76% 13% 2% 91% 2009 61% 13% 2% 76% 2010 48% 13% 2% 63% Order book Extensions and rebids Preferred bidder 27 February Preliminary Results
Slide 6: Higher margins and growing markets underpin outlook
Higher margins and growing markets underpin outlook Margin improvement to date through portfolio management and efficiency Existing contract base driving strong organic growth Expanding markets underpin confidence in future Moving up value chain as customers seek advanced solutions Capabil
Slide 7: Andrew Jenner Financial review
Andrew Jenner Financial review 2007 Preliminary Results Advise | Design | Integrate | Deliver
Slide 8: Financial results
Financial results Disclosure Financial performance Pension funding 27 February Preliminary Results
Slide 9: Pro forma disclosure
Pro forma disclosure Intangible assets accounted for and amortised in line with IFRS as disclosed in note 14 to the 2006 accounts Post IFRS best practice – companies moving pro forma profit measures closer to statutory measures Amortisation 2006 2007 £m £m Customer relationships 3 3 Licences and
Slide 10: Pro forma disclosure
Pro forma disclosure From 2007 full year results onwards, for pro forma purposes amortisation of intangibles has been split into two: £m Intangibles arising on acquisition 9 Other intangibles 14 23 Pro forma profit measure is profit before tax and amortisation of intangibles arising on acquisiti
Slide 11: Income statement
Income statement Revenue Adjusted profit before tax 2,811 123 2,548 105 2,260 87 1,637 1,556 £m 69 £m 63 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Note: adjusted profit before tax is profit before tax and amortisation of acquired intangibles. For 2006, this also 27 February excludes Prelimin
Slide 12: Income statement
Income statement 2007 2006 Year ended 31 December £m £m increase Revenue 2,810.7 2,548.2 10.3% Adjusted operating profit 142.0 122.8 15.6% Margin 5.1% 4.8% Investment revenue and finance costs (18.8) (17.8) Adjusted profit before tax 123.2 105.0 17.3% Margin 4.4% 4.1% Amortisation of acquired intang
Slide 13: Income statement
Income statement Year ended 31 December 2007 2006 increase Effective tax rate 28.1% 26.0% Average shares in issue 482.4m 471.2m Adjusted earnings per share 18.57p 15.92p 16.6% Earnings per share 16.98p 16.62p 2.2% 27 February Preliminary Results
Slide 14: Group free cash flow
Group free cash flow 98 85 74 £m 56 47 2003 2004 2005 2006 2007 27 February Preliminary Results
Slide 15: Group free cash flow
Group free cash flow 2007 2006 Year ended 31 December £m £m Group EBITDA 144.3 122.9 Working capital movement (4.7) (2.1) Group operating cash flow 139.6 120.8 Interest (25.6) (10.6) Tax (5.4) (6.7) Expenditure on tangible and intangible assets (47.9) (47.7) Dividends from joint ventures 36.9 29.6 G
Slide 16: Net cash flow
Net cash flow 2007 2006 Year ended 31 December £m £m Group free cash flow 97.6 85.4 Cash received on sale of PFI investments - 76.5 Cash disposed of on sale and transaction costs - (58.3) Disposals 3.3 - Acquisitions (7.4) - Other financing (71.0) (98.6) Special pension contribution (51.0) (19.0) Di
Slide 17: Net debt
Net debt 2007 2006 As at 31 December £m £m Group cash and cash equivalents 138.1 177.8 Group loans (263.3) (334.4) Group obligations under finance leases (12.7) (15.3) Group recourse net debt (137.9) (171.9) JV recourse net cash 34.9 28.2 Total recourse net debt (103.0) (143.7) Group non recourse de
Slide 18: Defined benefit pension schemes
Defined benefit pension schemes Net balance sheet liabilities reduced to £52.2m (2006: £120.0m) – asset base of £1.3bn Deficit on main Group scheme of £28.7m (2006: £117m) Reduction in deficit on Group scheme principally due to – special cash contribution of £51m in January 2007 – movement in
Slide 19: Summary
Summary Continued strong organic growth Further progress with margin improvement Good group free cash flow Strong balance sheet 27 February Preliminary Results
Slide 20: Chris Hyman Business review and Outlook
Chris Hyman Business review and Outlook 2007 Preliminary Results Advise | Design | Integrate | Deliver
Slide 21: Agenda
Agenda Business review Platform for growth Outlook 27 February Preliminary Results
Slide 22: Market sector and geographical analysis
Market sector and geographical analysis Revenue by market Revenue by geography 2007 £2,811m 8% 26% 11% 34% 6% 23% 75% 17% 25% 8% 34% 12% 6% 2006 £2,548m 74% 25% 16% Civil Government Science UK Asia Pacific Defence Transport Europe and Middle East North America Advise | Design | Integrate | Deliver
Slide 23: Civil Government
Civil Government Greater use of technology to deliver sophisticated services 8.8% revenue increase to £952m Home Affairs – UK Yarl’s Wood IRC, £85m over up to eight years – UK e-Borders, £200m over ten years – Solutions and Home Affairs combining technology and service capabilities – Australia B
Slide 24: Civil Government
Civil Government Greater use of technology to deliver sophisticated services Integrated FM – NHS Forth Valley, £450m over 30 years – State Street Bank, £50m over five years – UAE University, £70m over ten years Consulting – Framework contracts with UK central government, MoD and DEFRA; Metropoli
Slide 25: Civil Government
Civil Government Growth areas Home Affairs – Growth in UK prison market – International prospects – e-Borders platform for expanding opportunities IT & BPO – Local council partnerships – Glasgow platform for local service and technology transformations – Economic regeneration – Technology-based
Slide 26: Defence
Defence Strong organic growth enhanced by added value skills 11.8% revenue increase to £721m UK – Marine Services, £750m over 15 years – Two helicopter support contracts, £18m over three years – Apache and Sea King technical support – Multi activity contracts: Gilbraltar and South Atlantic, £70m
Slide 27: Defence
Defence Growth areas UK Defence Industrial Strategy – Support services designed into equipment procurement – Trend to partnering arrangements and transformational programmes US defence spending – Services to military personnel and their families – Security and anti-terrorism applications 27 Febr
Slide 28: Transport
Transport UK skills enabling international opportunities 4.7% revenue increase to £655m Light rail – Dubai Metro (preferred bidder), more than £400m over 12.5 years – DLR increased capacity Traffic management – UK National Traffic Control Centre final completion in May 2007 – Georgia traffic m
Slide 29: Transport
Transport Growth areas Light rail – Dubai Metro – Significant pipeline of opportunities in the UAE region NTCC technology migration – NTCC provides template for US and Australian markets – New UK traffic management pilots 27 February Preliminary Results
Slide 30: Science
Science Technology and innovation at the heart of growth 19.9% revenue increase to £483m Atomic Weapons Establishment – Growth from £350m extension Nuclear decommissioning – Magnox reactor support, £15m over five years – Contaminated land at Sellafield, £10m over two years 27 February Prelimin
Slide 31: Science
Science Growth areas Nuclear decommissioning – Sellafield bid progressing Nuclear capabilities – National Nuclear Laboratory – Increasing requirements for environmental assurance services 27 February Preliminary Results
Slide 32: Summary
Summary Revenue growth of 10.3% £3.6bn of new contracts signed Record level of international awards Adjusted PBT growth of 17.3% with margin up to 4.4% Free cash flow increased by 14.3% Order book of £14.7bn and pipeline of £27bn Markets developing well Strong internal capabilities,
Slide 33: Key growth drivers
Key growth drivers Growing UK and international markets with governments facing: – Increasing demand for better and more efficient public services – Limited powers to keep raising taxes – Common challenges: climate change, migration, economic development, security, congestion Research demonstrat
Slide 34: Outlook
Outlook Optimistic about 2008 and beyond: Confident in delivering double digit revenue growth for foreseeable future Further margin increases from portfolio management, efficiency and selective bidding 27 February Preliminary Results
Slide 35: 2007 Preliminary Results Question & Answers
2007 Preliminary Results Question & Answers 27 February Advise | Design | Integrate | Deliver Preliminary Results
Slide 36: Income statement – previous basis of disclosure
Income statement – previous basis of disclosure 2007 2006 Year ended 31 December £m £m increase Revenue 2,810.7 2,548.2 10.3% Operating profit before amortisation and gain on sale 156.6 130.0 20.5% Margin 5.6% 5.1% Investment revenue and finance costs (18.8) (17.8) Profit before tax, amortisation an
Slide 37: Income statement – previous basis of disclosure
Income statement – previous basis of disclosure Year ended 31 December 2007 2006 increase Effective tax rate 28.1% 26.0% Average shares in issue 482.4m 471.2m Earnings per share 16.98p 16.62p 2.2% Earnings per share before amortisation and 20.92p 17.13p 22.1% gain on sale of PFI investments 27 Febru