Serco Group Plc · LSE:SRP
Serco — H1 2009 Earnings Presentation
52 slides from Serco's earnings presentation, Aug 26, 2009
Slide 1: Record awards and strong performance
Record awards and strong performance 2009 Half Year Results Serco Group plc 26 August 2009 Advise | Design | Integrate | Deliver
Slide 2: Chris Hyman Overview
Chris Hyman Overview 2009 Half Year Results Advise | Design | Integrate | Deliver
Slide 3: Strong financial performance
Strong financial performance 2009 H1 2008 H1 Change Revenue £1,950m £1,491m 30.8% Adjusted operating profit £110.0m £76.8m 43.2% Profit before tax £83.4m £62.8m 32.8% Adjusted earnings per share 14.02p 10.18p 37.7% Dividend per share 1.85p 1.48p 25.0% Group free cash flow £50.7m £33.0m 53.6% 2
Slide 4: Strong operational performance
Strong operational performance Strong growth across markets Successful entry into new markets and sectors Winning business at higher margins Rollout of integrated systems continues Investing in preparing our people for the future Excellent progress on integration of SI 3
Slide 5: Strong operational performance
Strong operational performance Maintain our rebid win rates at 90% Win one in two of new bids Grow our order book to £16.7bn Opportunity pipeline valued at £27bn £3.5bn awards in first half Further £0.5bn awards in second half to date 4
Slide 6: Excellent revenue visibility
Excellent revenue visibility At 30 June 2009 Order book of £16.7bn 2009 94% 4% 1% 99% 2010 70% 66% 12% 12% 4% 86% 2011 56% 13% 3% 72% Order book Extensions and rebids Preferred bidder 5
Slide 7: New pressures on governments drive opportunities
New pressures on governments drive opportunities Growing citizen demand for essential service improvements Increasing socio-economic challenges - terrorism, congestion, migration, climate change Pressure on public finances driving need for transformational change - governments seeking signific
Slide 8: Andrew Jenner Financial Review
Andrew Jenner Financial Review 2009 Half Year Results
Slide 9: Financial review
Financial review Income statement Cash flow Net debt Pensions Guidance 8
Slide 10: Strong revenue and profit growth
Strong revenue and profit growth Revenue Adjusted operating profit 165 3,124 2,811 142 2,548 2,260 123 1,807* 100* 106 1,491 £m £m 1,349 77 1,236 66 1,075 59 50 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 half year full year * Excludes currency effects. Note: Adjusted operating profit is profi
Slide 11: Income statement
Income statement 2009 2008 6 months ended 30 June £m £m Increase Revenue 1,949.8 1,490.5 30.8% Adjusted operating profit 110.0 76.8 43.2% Investment revenue and finance costs (17.7) (9.5) Adjusted profit before tax 92.3 67.3 37.1% Amortisation of acquired intangibles (8.9) (4.5) Profit before tax 83
Slide 12: Revenue
Revenue +9.6% £1,950m +10.4% £142m £156m +10.8% £161m £1,491m 2008 Excluding SI SI Currency 2009 and currency Note: In calculating the growth rates excluding currency shown above, non-Sterling revenue, including that of SI, has been translated into Sterling at the average foreign exchange rates for
Slide 13: Income statement
Income statement 2009 2008 6 months ended 30 June £m £m Increase Revenue 1,949.8 1,490.5 30.8% Adjusted operating profit 110.0 76.8 43.2% Investment revenue and finance costs (17.7) (9.5) Adjusted profit before tax 92.3 67.3 37.1% Amortisation of acquired intangibles (8.9) (4.5) Profit before tax 83
Slide 14: Adjusted operating profit
Adjusted operating profit +11bps £110.0m +18bps +20bps £76.8m 5.64% 5.15% 2008 Excluding SI SI Currency 2009 and currency Note: In calculating the growth rates excluding currency shown above, non-Sterling revenue and earnings, including those of SI, have been translated into Sterling at the average
Slide 15: Currency
Currency Average rates Closing rates 1H 2009 1H 2008 30 Jun 31 Dec 2009 2008 £:US$ 1.49 1.99 £:US$ 1.65 1.44 £:Aus$ 2.11 2.15 £:Aus$ 2.04 2.06 £:Eur 1.11 1.29 £:Eur 1.17 1.03 FY 2009 FY 2008 assumption * £:US$ 1.57 1.86 £:Aus$ 2.06 2.19 £:Eur 1.14 1.26 * Assuming no further changes to exchange rates
Slide 16: SI revenue and Adjusted operating profit
SI revenue and Adjusted operating profit 6 months ended 30 June 2009 2008 US$m US$m Increase Revenue 308.9 277.2 11.4% Adjusted operating profit 23.1 17.8 29.8% Adjusted operating profit margin 7.5% 6.4% Guidance remains Continuation of organic revenue growth rate of c7% for full year 2009 Mediu
Slide 17: Income statement
Income statement 2009 2008 6 months ended 30 June £m £m Increase Revenue 1,949.8 1,490.5 30.8% Adjusted operating profit 110.0 76.8 43.2% Investment revenue and finance costs (17.7) (9.5) Adjusted profit before tax 92.3 67.3 37.1% Amortisation of acquired intangibles (8.9) (4.5) Profit before tax 83
Slide 18: Group free cash flow
Group free cash flow 98 94 85 74 £m 51 33 29 26 19 2005 2006 2007 2008 2009 half year full year 17
Slide 19: Group free cash flow
Group free cash flow 2009 2008 6 months ended 30 June £m £m Group EBITDA 111.5 72.0 Working capital movement (31.3) (24.2) Group operating cash flow 80.2 47.8 Interest (18.0) (12.4) Tax (8.4) (3.1) Expenditure on tangible and intangible assets (22.5) (19.1) Dividends from joint ventures 19.4 19.8 Gr
Slide 20: Net debt
Net debt 30 June 31 Dec 2009 2008 As at £m £m Group cash and cash equivalents 172.3 199.8 Group loans (611.7) (708.8) Group obligations under finance leases (20.4) (15.5) Group recourse net debt (459.8) (524.5) JV recourse net cash 55.7 44.5 Total recourse net debt (404.1) (480.0) Group non recourse
Slide 21: Defined benefit pension schemes
Defined benefit pension schemes Total net balance sheet liabilities of £73.8m (December 2008: £20.5m) – Asset base of £1.2bn Contract specific schemes – Limited commercial risk Non contract specific schemes – Deficit on main Group scheme of £12.4m (December 2008: surplus of £62.4m) – Movement
Slide 22: Guidance
Guidance In 2009, expect double digit revenue growth and 30 basis points of Adjusted PBT margin improvement, excluding SI Expect SI to enhance 2009 revenue growth by approximately 10% Including SI, expect Adjusted operating profit margin to increase by around 40 basis points in 2009 By the e
Slide 23: Summary
Summary Continued strong revenue growth Further margin improvement Good SI contribution Good group free cash flow performance Continued strong financing position Re-iterated guidance for 2009 and medium-term 22
Slide 24: Chris Hyman Business Review
Chris Hyman Business Review 2009 Half Year Results
Slide 25: Market sector and geographical analysis
Market sector and geographical analysis Revenue by market Revenue by geography 8% 26% 41% 1H 2009 £1,950m 23% 64% 18% 5% 15% 25% 7% 12% 36% 6% 1H 2008 £1,491m 21% 75% 18% Civil Government Science UK Asia Pacific & India Defence Transport Europe & Middle East North America 24
Slide 26: Civil Government
Civil Government New markets entered; growth in existing markets Civil Government segment includes home affairs, IT and BPO, healthcare, environmental services and consulting; now includes Welfare to Work Operates in UK, US, Canada, Australia, India and Europe 49.1% revenue increase to £809m r
Slide 27: Civil Government: Home Affairs, Australia
Civil Government Home Affairs, Australia Immigration management Signed contract to transform Australia’s immigration removal centres (DIAC) Valued at AUS$370m over five years; four year extension potential Seven adult immigration detention centres across the continent National and internatio
Slide 28: Civil Government: Offender management, Australia
Civil Government Home Affairs, Australia Offender management World first - competition extended to state run prisons Sydney 27
Slide 29: Civil Government: Offender management, UK
Civil Government Home Affairs, UK Offender management Competition in UK and prison market extending to existing, state-run prisons England and Wales electronic monitoring contract extended for two years, £70m 28
Slide 30: Civil Government: PFI prisons, UK
Civil Government Home Affairs, UK Offender management Preferred bidder for two PFI prisons in UK Valued at £600m over 26½ years Belmarsh West, London – 900 offenders, category B Maghull, Liverpool – 600 offenders, category B Innovative services developed with charity partners to discourage
Slide 31: Civil Government: Welfare to Work, UK
Civil Government Welfare to Work, UK Successful entry into new UK Welfare to Work market Selected as prime contractor for five year contracts in three UK regions - Valued at up to £500m - Network of specialist providers, funded by service fee and performance payments Number of similar sized oppo
Slide 32: Civil Government: Healthcare, UK
Civil Government Healthcare, UK Successful entry into new UK pathology market Joint venture with leading NHS Trust Guy’s and St Thomas’ - Valued at £250m over ten years - Improving and delivering Trust’s pathology services London 31
Slide 33: Civil Government: Environmental services, UK
Civil Government Environmental services, UK Significant expansion in UK environmental services market Providing services to 13 local authorities including 3 London boroughs Charnwood Borough Council, Leicestershire - £35m over seven years H2 appointed preferred bidder for London Borough of Bex
Slide 34: Civil Government: IT & BPO, US
Civil Government IT & BPO, US US Records processing support to National Benefits Center for the US Department of Homeland Security - US$190m over the full five years Training and technical support contracts renewed with Pension Benefit Guaranty Corporation and the Department of Transportation -
Slide 35: Civil Government: IT & BPO, UK & India
Civil Government IT & BPO, UK & India UK & India H2 appointed preferred bidder for Business Link services with UK’s South East England Development Agency - £80m, three years with potential for two year extension - Builds on expertise developed with services provided to South West Regional Developm
Slide 36: Defence
Defence Good performance and expanded capabilities Support to armed forces in the UK, US, Canada, Germany and Australia 33.2% revenue increase to £499m, representing 26% of the group (2008: 25%) 35
Slide 37: Defence: UK
Defence UK Good growth from broad contract base Over £60m of new business won in first half - Organic growth to helicopter maintenance support and pilot training contracts - Renewed MoD Air Surveillance and Control Systems contract for a further five years Shortlisted for the Armed Forces Recrui
Slide 38: Defence: US
Defence US Enhanced opportunities from expanded capabilities Capabilities expanded through SI acquisition Significant IDIQ awards - Alliant – integrated IT solutions - STOC II – simulation and training for the US Army 37
Slide 39: Transport
Transport Continued growth and expansion of services Transport segment includes light and heavy rail, traffic management, civil aviation, civil marine and cycle schemes Principal services in UK, US, Canada, Australia and Middle East 13.2% revenue increase to £346m, representing 18% of the grou
Slide 40: Transport: Air Traffic Control
Transport Air Traffic Control Continued growth and expansion of services Renewed and expanded contract with Dubai Airports - £245m over 10 years Renewal of contracts at Abu Dhabi and Al Ain airports - £24m over two years Dubai Abu Dhabi 39
Slide 41: Transport: Heavy Rail
Transport Heavy Rail Strong operational performance Good revenue growth Punctuality levels of 90% and 97% in the last year respectively for Northern Rail and Merseyrail Northern Rail Merseyrail 40
Slide 42: Transport: Urban Transport
Transport Urban Transport New services and increased capacity Dubai Metro - inauguration in September DLR - work on extensions to network, stations and three carriage trains Further light rail opportunities H2 London Cycle Hire contract signed – £140m over six years – Operate and maintain 6,
Slide 43: Science
Science Nuclear skills driving growth Science segment manages science based organisations and applies science to economic development Principal services in UK 10.5% revenue increase to £295m, representing 15% of the group (2008: 18%) 42
Slide 44: Science: Nuclear skills driving growth
Science Nuclear skills driving growth Strong nuclear credentials H2 signed AWE five year pricing review Serco-led consortium appointed to transform UK nuclear research - Three year contract to manage and develop the UK National Nuclear Laboratory Examining nuclear decommissioning opportunities
Slide 45: SI International
SI International Excellent progress on integration Good contribution in first half Integration well advanced and good progress on cost synergies - re-brand complete - management and business re-organisation complete - bid pipeline processes reviewed and integrated Patent & Trademark Office (PT
Slide 46: Chris Hyman Outlook and Summary
Chris Hyman Outlook and Summary 2009 Half Year Results
Slide 47: Governments' structural deficits
Governments’ structural deficits United Kingdom - July 2009 UK public sector borrowing of £8bn vs £5.2bn surplus in July 2008 - Total predicted deficit of up to c£175bn this year United States - US deficit largest since World War 2 (predicted to be over US$1.5 trillion) - Improvement projected t
Slide 48: Radical steps to achieve fundamental changes
Radical steps to achieve fundamental changes United Kingdom - Reforming welfare - Transforming healthcare services - Market testing in home affairs - Moving to a low carbon economy United States - Reforming healthcare - Strengthening IT infrastructure and cyber security - Improving educational o
Slide 49: Adopting innovative contracting models
Adopting innovative contracting models Further development of fixed price, outcome based contracting Public-private joint ventures and flexible partnership models Joined-up government through shared support services Performance based contracting Increasing use of third sector 48
Slide 50: Serco is well placed to contribute
Serco is well placed to contribute Experience across all public service contracting models Strong public service ethos and commercial acumen Reputation for transforming and delivering essential services Broad capabilities Flexibility and agility 49
Slide 51: Summary
Summary Record £3.5bn of contract awards Continuing to win 90% of rebids and one in two of new bids Strong order book of £16.7bn Increasing demand for our skills and capabilities Confident in future growth and in achieving guidance 50
Slide 52: Questions & Answers
Questions & Answers Advise | Design | Integrate | Deliver