Serco Group Plc · LSE:SRP
Serco — H1 2010 Earnings Presentation
51 slides from Serco's earnings presentation, Aug 25, 2010
Slide 1: Strong financial performance
Strong financial performance Well placed to support customers around the world Serco Group plc 2010 Half Year Results 25 August 2010 Advise | Design | Integrate | Deliver
Slide 2: Chris Hyman Overview
Chris Hyman Overview 2010 Half Year Results Advise | Design | Integrate | Deliver
Slide 3: Strong financial performance
Strong financial performance 2010 H1 2009 H1 Change Revenue £2,140m £1,950m 9.8% Adjusted operating profit £124.4m £110.0m 13.1% Profit before tax £101.4m £83.4m 21.6% Adjusted earnings per share 16.53p 14.02p 17.9% Dividend per share 2.20p 1.85p 18.9% Group free cash flow £93.0m £50.7m 83.4% 2
Slide 4: Strong operational performance and well placed
Strong operational performance and well placed Strong operational and financial performance Expanding our portfolio, building new home markets Skills and capabilities increasingly in demand Established markets growing and new markets opening Business organised and enabled to grow 3
Slide 5: Continued high level of bidding and substantial order book
Continued high level of bidding and substantial order book Won business valued at £2.2bn in H1 Good growth from small and medium-sized wins and extensions Won 90% of rebids and 1 in 2 new bids Order book stands at £16.7bn (30 June 2010) Substantial opportunity pipeline stands at £28bn 4
Slide 6: Excellent revenue visibility supported by order book
Excellent revenue visibility supported by order book At 30 June 2010 Order Extensions Preferred of total book and rebids bidder 49% 21% 1% 2012: 71% 62% 20% 2% 2011: 84% 93% 4% 1% 2010: 98% 5
Slide 7: Andrew Jenner Financial Review
Andrew Jenner Financial Review 2010 Half Year Results
Slide 8: Financial review
Financial review Income statement Cash flow Net debt Pensions Guidance 7
Slide 9: Strong revenue and profit growth
Strong revenue and profit growth Revenue Adjusted operating profit 3,970 230 165 3,124 2,811 142 2,548 2,116 124 1,950 123 110 £m £m 1,491 77 1,349 1,236 66 2006 2007 2008 2009 2010 59 2006 2007 2008 2009 2010 half year full year * Excludes currency effects. Note: Adjusted operating profit is profit
Slide 10: Income statement
Income statement 2010 2009 6 months ended 30 June £m £m Increase Revenue 2,140.3 1,949.8 9.8% Adjusted operating profit 124.4 110.0 13.1% Investment revenue and finance costs (14.2) (17.7) Adjusted profit before tax 110.2 92.3 19.4% Amortisation of acquired intangibles (8.8) (8.9) Profit before tax
Slide 11: Income statement
Income statement 2010 2009 6 months ended 30 June £m £m Increase Effective tax rate 26.6% 26.4% Average shares in issue 491.1m 486.6m Adjusted earnings per share 16.53p 14.02p 17.9% Earnings per share 15.13p 12.62p 19.9% 10
Slide 12: Group free cash flow
Group free cash flow 137 98 94 93 £m 85 51 33 29 26 2006 2007 2008 2009 2010 half year full year 11
Slide 13: Group free cash flow
Group free cash flow 2010 2009 6 months ended 30 June £m £m Group EBITDA 128.2 111.5 Working capital movement (21.8) (31.3) Group operating cash flow 106.4 80.2 Interest (12.5) (18.0) Tax (14.7) (8.4) Net expenditure on tangible and intangible assets (12.2) (22.5) Dividends from joint ventures 26.0
Slide 14: Net debt
Net debt 30 June 31 Dec 2010 2009 As at £m £m Group cash and cash equivalents 215.1 253.7 Group loans (571.1) (619.1) Group obligations under finance leases (24.9) (22.3) Group recourse net debt (380.9) (387.7) JV recourse net cash 91.4 58.2 Total recourse net debt (289.5) (329.5) Group non recourse
Slide 15: Defined benefit pension schemes
Defined benefit pension schemes Total net balance sheet liabilities of £117.3m (December 2009: £113.6m) – Asset base of £1.4bn Contract specific schemes – Limited commercial risk Non contract specific schemes – Balance sheet deficit on main Group scheme of £57.5m (December 2009: £54.7m) – Move
Slide 16: Outcome of main Group scheme funding review
Outcome of main Group scheme funding review Regular triennial review of main Group pension scheme, based on actuarial deficit of £141m at April 2009, now complete Agreed one-off cash contribution of £60m to be made to main Group scheme Payment schedule of £20m in December 2010 and £40m in Janu
Slide 17: Guidance
Guidance In 2010, we expect – Continued strong organic revenue growth – Further progress towards our 2012 margin guidance By the end of 2012, we expect an increase in – Revenue to approximately £5bn – Adjusted operating profit margin to approximately 6.3% Note: 2012 guidance excludes material ac
Slide 18: Summary
Summary Strong revenue and profit growth Further margin improvement Very strong free cash flow generation Robust funding and pension position Expect further progress in 2010 towards our expectations for 2012 17
Slide 19: Chris Hyman Business Review
Chris Hyman Business Review 2010 Half Year Results
Slide 20: Agenda
Agenda Business performance and opportunities How markets are evolving around the world Summary and outlook 19
Slide 21: Market sector and geographical analysis
Market sector and geographical analysis Revenue by market Revenue by geography 10% 18% 27% 21% 1H 2010 £2,140m 62% 20% 20% 22% 8% 15% 26% 23% 1H 2009 £1,950m 21% 64% 20% 23% Civil Government Defence, Science & Nuclear United Kingdom United States Local Government & Americas Other countries Commercia
Slide 22: Civil Government
Civil Government Highlights Comprises home affairs, transport, welfare to work and health, in UK and Europe 13.6% revenue increase to £574m representing 27% of Group (2009 H1: 26%) 21
Slide 23: Civil Government
Civil Government Home Affairs Signed £415m, 26½ year, contract for new Belmarsh West prison – Partnership approach with voluntary organisations – Emphasis on rehabilitation £32m extension to Yarl’s Wood immigration removal centre £10m extension to Scotland electronic monitoring contract 22
Slide 24: Civil Government
Civil Government Transport Signed £530m, two-year, extension for Northern Rail Excellent operating performance at Northern Rail, Merseyrail and DLR £30m of additional transportation and technology contracts 23
Slide 25: Civil Government
Civil Government Welfare to Work Excellent start to Flexible New Deal contracts – Jobs found for 7,500 long-term unemployed Existing Flexible New Deal contracts end in June 2011 Bidding into new and substantially larger Work Programme – Expansion into additional welfare payments including 2.5
Slide 26: Civil Government
Civil Government Health £11m renewed and expanded healthcare and occupational health contracts Won £22m combined healthcare contracts at three Norfolk prisons 25
Slide 27: Civil Government
Civil Government H2 developments Continuing to deliver e-Borders operations after Home Office terminated Raytheon as prime contractor Launched highly popular Barclays Cycle Hire Scheme – 250,000 journeys – Nearly 60,000 registered members 26
Slide 28: Civil Government
Civil Government Opportunities Home affairs: new market to manage failing public sector prisons Welfare to Work: market expected to double Health: management of failing NHS hospitals 27
Slide 29: Defence, Science and Nuclear
Defence, Science and Nuclear Highlights Comprises defence and science- based businesses in UK and Europe 3.5% revenue increase to £461m representing 22% of Group (2009 H1:23%) 28
Slide 30: Defence
Defence UK RAF – £100m, ten-year, multi-activity contract at RAF Halton and RAF High Wycombe – £36m, six-year, operational support contract at RAF Brize Norton £20m MoD radar contract to enable off-shore wind farm developments 29
Slide 31: Science and Nuclear
Science and Nuclear UK AWE continues to deliver on transformation and cost reduction milestones £13m of new commercial business signed by NPL, offsetting lower government funding 30
Slide 32: Defence, Science and Nuclear
Defence, Science and Nuclear Opportunities UK Strategic Defence and Security Review Nuclear new build programme Science spending review 31
Slide 33: Local Government and Commercial
Local Government and Commercial Highlights Comprises IT and BPO, consulting, integrated services, education and commercial businesses in UK and Europe 9.8% revenue growth to £433m representing 20% of Group (2009 H1: 20%) 32
Slide 34: Local Government and Commercial
Local Government and Commercial IT and BPO £24m, five-year, contract with London Borough of Enfield – 20% savings and improved services Two contracts worth €35m over three years with European Space Agency to provide programme and management support Reductions to business support contracts with
Slide 35: Local Government and Commercial
Local Government and Commercial Integrated Services Health FM – £75m, five-year, extension to Norfolk and Norwich University Hospital contract Aviation – £5m, two-year, British Airways support services contract at Gatwick 34
Slide 36: Local Government and Commercial
Local Government and Commercial Opportunities Drivers include service quality and efficiency – IT-enabled transformation – Environmental services – Preferred bidder for £650m, 25-year, Sandwell Borough Council contract 35
Slide 37: Americas
Americas Highlights Comprises civil government, defense and transport businesses in the US and Canada 1.7% revenue increase (2.6% excluding currency) to £455m representing 21% of Group (2009 H1: 23%) 36
Slide 38: Americas
Americas Defense Navy: Renewed US$84m, 3½-year, Indefinite Delivery, Indefinite Quantity (IDIQ) for hazardous materials management Army: One of 12 suppliers appointed to US$1.3bn, five- year, HR Solutions IDIQ, now competing for business planning and re-engineering work 37
Slide 39: Americas
Americas Defense Air Force contracts signed – Renewed US$14m, two-year, Materiel Command depot management order – US$15m logistics contract with Special Operations Forces US$15m Marine Corps renewed and expanded operations and exercise contract 38
Slide 40: Americas
Americas Transport Renewed US$22m, five-year, fleet management contract with Dayton Power and Light Renewed and expanded US$170m Federal Aviation Administration contract to operate air traffic control towers at 65 sites Signed US$50m, five-year, contract to manage Georgia’s traffic management
Slide 41: Americas
Americas Opportunities Government IT upgrade programmes Cyber-security Intelligence capabilities support Trend towards larger contract vehicles Submitted bids valued at more than US$3bn 40
Slide 42: AMEAA
AMEAA Highlights Comprises our operations in Australasia, Middle East, Asia and Africa 37% revenue increase (22% excluding currency) to £218m representing 10% of the Group (2009 H1: 8%) 41
Slide 43: AMEAA
AMEAA Australasia and Middle East Australia – Growth in immigration management contract – Consumer demand at Great Southern Railway shows good signs of recovery Middle East – Dubai Metro availability at 98% and punctuality at 96% – 10 more stations opened 42
Slide 44: Global Transport proposition
Global Transport proposition Entering new geographies Transport is Serco’s first global proposition – Rail, aviation, traffic management Effective transportation drives economic progress New bridgeheads developed that will enable expansion into wider service markets 43
Slide 45: Global Transport
Global Transport Strong interest in Middle East and Asia Saudi Arabia – £10m, one-year contract for new, driverless, Makkah Metro United Arab Emirates – Dubai: £15m, five-year, contract to operate Palm Jumeirah monorail – Abu Dhabi: US$2.7m bus operations management support contract India – Pr
Slide 46: Consistent drivers across markets but different approaches
Consistent drivers across markets but different approaches Underlying drivers remain constant – Macro issues: security, health, education, environment, growth – Efficiency, productivity and quality Different approaches across markets – Middle East and India economies growing – No recession in Au
Slide 47: Global market developments
Global market developments Global outsourcing market circa £1.5 trillion and growing at 6% per annum 10% of US Federal government spending has been opened to competition - addressable market valued at just over US$1 trillion – Federal services market valued at over US$300bn per annum Only 15%
Slide 48: UK market evolutions
UK market evolutions Discussions ongoing with UK Cabinet Office on cost savings UK government spending reviews across defence and security, rail and welfare UK government intending to increase competitive market – Potential new markets include hospital management, prisoner rehabilitation and e
Slide 49: Summary
Summary Strong operational and financial performance and well placed Strong operational and financial performance Expanding our portfolio, building new home markets Skills and capabilities increasingly in demand Portfolio of essential services, global markets, capabilities and significant op
Slide 50: Appendix
Appendix Advise | Design | Integrate | Deliver
Slide 51: Currency
Currency Average rates Closing rates 1H 2010 1H 2009 30 Jun 31 Dec 2010 2009 £:US$ 1.52 1.49 £:US$ 1.50 1.61 £:Aus$ 1.70 2.11 £:Aus$ 1.77 1.80 £:Eur 1.15 1.11 £:Eur 1.22 1.13 FY 2010 FY 2009 assumption * £:US$ 1.55 1.56 £:Aus$ 1.72 1.99 £:Eur 1.17 1.12 * Assuming no further changes to exchange rates