Serco Group Plc · LSE:SRP
Serco — H1 2004 Earnings Presentation
26 slides from Serco's earnings presentation, 2004
Slide 1: Serco Group plc Interim Results Presentation 2004
01:04 to 06:04 Serco Group plc Interim Results Presentation 2004 01:04 to 06:04 Agenda Introduction Financial results Business performance Looking forward Agenda 1
Slide 2: 2004 Interim results - highlights
01:04 to 06:04 Introduction Kevin Beeston Executive Chairman Introduction 2004 Interim results - highlights Turnover £804.5m up 11.3% Profit before tax - pre goodwill £36.5m up 16.5% Earnings per share - pre goodwill 6.09p up 18.2% Dividend per share 0.81p up 12.5% Free cash flow £23.5m up 65.5% 2
Slide 3: Company highlights
Company highlights • Strong increases in sales and profits • Strong organic growth • Further improved cash performance • High visibility of future earnings • Substantial range of future opportunities • Order book of £10.3bn 01:04 to 06:04 Financial results Profit and loss Cash flow Net debt Pension
Slide 4: Profit and loss
Profit and loss 67 1,555 57 1,326 1,141 45 958 38 36 804 31 723 28 626 24 24 526 526 451 19 00 01 02 03 04 00 01 02 03 04 Turnover £’m Profit before tax £’m Including joint ventures Before amortisation of goodwill Half year Full year 2004 Half year Profit and loss 2004 2003 Six months to 30 June £m
Slide 5: Cash flow highlights
Cash flow highlights • Free cash inflow of £23.5m (2003: £14.2m) • 70% of group EBITDA converted into operating cash (2003: 58%) • Continued working capital efficiency: 2004 increase £11m (2003 increase £11m) Free cash flow 2004 2003 Six months to 30 June £m £m Group EBITDA 37.1 26.7 Working capital
Slide 6: Cash flow and net debt
Cash flow 2004 2003 Six months to 30 June £m £m Free cash flow 23.5 14.2 Disposals/(acquisitions) 3.6 (5.3) Other financing (10.0) (1.5) Dividends paid (7.0) (6.2) Non-recourse debt financed assets (12.7) - Net cash flow (2.6) 1.2 Net debt 30 06 04 31 12 03 As at £m £m Closing cash 168.3 170.9 Long
Slide 7: Pensions and International Financial Reporting Standards (IFRS)
Pensions • Continue to adopt transitional rules of FRS 17 Retirement Benefits • At 30 June 2004 market value (FRS 17) net deficit estimated to have marginally reduced from 31 December 2003 (£70m) • Long term employer contributions increased in 2003 by approximately £9m per annum and maintained in 20
Slide 8: Business Performance Highlights
01:04 to 06:04 Business Strong operational performance Performance Premier Custodial Group Disposals Contract examples Building to last Christopher Hyman Chief Executive Business Performance Highlights • UK major contributor to growth • Significant success with key rebids • Meaningful progress in lo
Slide 9: Strong operational performance and Premier Custodial Group
Strong operational performance • 66% of turnover growth from existing contracts • Rebid win rate maintained at over 90% • Continuing to win 1 out of 2 new bids • £5.3bn bids submitted and under evaluation • Order book at 30 June 04 stands at £10.3bn • Over £16bn of potential future opportunities ide
Slide 10: Disposals and organic growth examples
Disposals • Portfolio kept under constant review to ensure focus on areas with greatest growth potential and profitability • Disposed of a number of contracts in Australia and New Zealand • Rail maintenance contract exited • Swedish business sold in 2003 • Annualised impact on turnover is £140m Orga
Slide 11: RAF Fylingdales and RAF Northolt and Uxbridge
RAF Fylingdales SSPAR Contract Value: £31.3m Contract Duration: 8 Years • Solid State Phased Array Radar (SSPAR) • Partner of choice since 1963 – over 40 years • Only contractor to have been successful in 10 rebids • Covers the operation, maintenance and repair of the SSPAR RAF Northolt and Uxbridge
Slide 12: Abu Dhabi Aeronautical Services and Nuclear Propulsion
Abu Dhabi & Al Ain Aeronautical Services Contract Value: DHS 220m Contract Duration: 5 Years • Provision of air traffic, electronic engineering and aviation meteorological services • Abu Dhabi is to undergo extensive development during the next co ntract period with a significant increase in traffic
Slide 13: New contract examples and PECO
New contract examples Contract name Years Contract value Country Exelon (PECO) 3 $15m USA Electronic Management of Abnormal Loads (ESDAL) 4 £8m UK Microsoft 4 £4m EIRE EUMETSAT Polar Systems Operations 6 €4.2m DE Schools Monheim 5 €3.8m DE Mycroft - IND 5 £20.6m UK Hong Kong Shenzhen Western Corrido
Slide 14: EUMETSAT and Prisoner Escort and Custody Services
EUMETSAT (Polar System) Operations Contract Value: €4.2m Contract Duration: 6 Years Copyright 2004 © EUMETSAT • Control centre located in Darmstadt, Germany • Provision of satellite controllers and analysts • Satellites provide meteorological information, including tempera ture and moisture profiles
Slide 15: Mycroft and Northern Rail
Mycroft Contract Value: £40m Contract Duration: 5 Years • Builds on our National Crime Squad contract • Secure networked IT system for the Immigration and Nationality Directorate (IND) • Infrastructure provision, including highly secure workstations • First Mycroft users are scheduled to go live in
Slide 16: 2004 Turnover growth and market sector analysis
2004 Turnover growth £37.2m £804.5m £54.4m New Awards £722.6m £(45.0)m £35.3m Changes in Scale and Scope Disposals Acquisitions 2003 half-year turnover 2004 half-year turnover Market sector analysis 2004 half-year turnover £804.5m including joint ventures Civil government 35% Defence 30% 2003 half-y
Slide 17: Geographical analysis and order book by sector
Geographical analysis 2004 half-year turnover £804.5m including joint ventures North America 6% UK 73% Asia Pacific 10% Europe and Middle East 11% 2003 half-year turnover £722.6m including joint ventures North America 5% Asia Pacific 11% UK 71% Europe and Middle East 13% Continued high visibility of
Slide 18: Continued high visibility of earnings; Building to last
Continued high visibility of earnings Near term confirmed order book as at 30 June 2004 percentage of planned revenue 2004 99% 93.1% 4.1% 2.2% 2005 87% 58.0% 14.0% 15.3% 2006 75% 41.9% 19.4% 13.4% Order book Extension and rebids Preferred bidder Building to last • Serco Management System underpins t
Slide 19: Looking forward: world market context
01:04 to 06:04 Looking forward Market context Serco’s positioning Strategy Outlook Kevin Beeston Executive Chairman Looking forward Looking forward World market context • Increasing opportunities worldwide, driven by need to improve efficiency and quality of public services • UK - Gershon Efficiency
Slide 20: UK market context
Looking forward United Kingdom Looking forward UK market context • Gershon Efficiency Review • Savings of £20bn per annum by 2007/08 • Creates outsourcing and consulting opportunities • Improvement in procurement processes • Savings embedded in Comprehensive Spending Review • Increasing performance
Slide 21: Serco's positioning - UK
Looking forward Serco’s positioning - UK Defence • Defence spending up 1.4% p.a. in real terms • Spending remains tight but efficiency drive expected to lead to more outsourcing • Opportunities in equipment support, training and communication technology Transport • Public transport spending up 4.5%
Slide 22: Serco's positioning - UK (Health, Science)
Looking forward Serco’s positioning - UK Health • NHS spending up 7% p.a. in real terms • Additional hospital PFIs create new opportunities Science • Ten year framework for science and innovation, looking to increase R&D spending to 2.5% of GDP • Increased funding for science in DfES and DTI spendin
Slide 23: Serco's positioning - North America
Looking forward Serco’s positioning - North America • US budget deficits are key driver • Potential US outsourcing market estimated at $675bn • Increasing opportunities with US federal and some state governments • Major US FAA supplier • First A76 contract for US Forest Service • Expanding presence
Slide 24: Serco's positioning - Mainland Europe and Middle East
Looking forward Serco’s positioning - Mainland Europe and Middle East • Nation by nation approach • Presence across a range of sectors • Transferring expertise from other markets e.g. PFI • German Army’s Combat Training Centre - first total service outsource contract • Developing German bus, rail an
Slide 25: Serco's positioning - Asia Pacific and Strategy
Looking forward Serco’s positioning - Asia Pacific • Focus on defence and transport in Australia • Bid submitted for Royal Australian Navy Patrol Boats • Favourable markets emerging for outsourced public services in Singapore and Hong Kong Looking forward Strategy • Focus on UK public sector • Selec
Slide 26: Outlook and Questions and Answers
01:04 to 06:04 Looking forward Outlook • Strong track record and reputation on which to build • Market conditions remain encouraging • Continued focus on delivering value for money and service quality • Further strong and profitable growth in the second half and the longer term Questions and Answers