2024 half year
results
Serco Group
1 August 2024
On
track for full year following good progress in first
half
Highlights
-
|
Revenue: £2.4bn, in line with
expectations.
|
-
|
Margin: Focus on enhancing
performance across our portfolio delivered margin of
6.0%.
|
-
|
Underlying operating profit: Ahead of plan at £142m. Approximately 60% of Group underlying
operating profit derived from outside the
UK1.
|
-
|
Cash flow: Free cash flow £75m, on track for full
year trading cash conversion of at least 80%.
|
-
|
Strong financial position: Adjusted net debt
of £131m, Leverage 0.6x net debt to
EBITDA.
|
-
|
Order intake: £1.9bn of wins,
order book remains strong at £13.5bn.
|
-
|
Pipeline: Pipeline of potential
new work remains high at £10.2bn.
|
-
|
Dividend per share: Interim
dividend per share of 1.34p, +18% year on year.
|
-
|
Share buyback: £57m of £140m
share buyback completed, remainder in second half.
|
-
|
Guidance for 2024: Unchanged
following upgrade to profit and cash in trading statement on 27
June.
|
Period ended 30 June
|
2024
|
2023
|
Change at reported
currency
|
Change at constant
currency
|
Reported revenue
|
£2,359m
|
£2,472m
|
(5)%
|
(3)%
|
Underlying operating
profit
|
£142m
|
£148m
|
(4)%
|
(2)%
|
Reported operating profit
|
£130m
|
£188m
|
(31)%
|
|
Underlying earnings per share (EPS),
diluted
|
8.54p
|
9.40p
|
(9)%
|
|
Reported EPS (i.e. after exceptional
items), diluted
|
7.68p
|
12.96p
|
(41)%
|
|
Dividend per share
(recommended)
|
1.34p
|
1.14p
|
18%
|
|
Free cash flow
|
£75m
|
£98m
|
(23)%
|
|
Net cash inflow from operating
activities
|
£189m
|
£209m
|
(10)%
|
|
Adjusted net debt
|
£131m
|
£216m
|
(39)%
|
|
Reported net debt
|
£631m
|
£654m
|
(4)%
|
|
Mark Irwin, Serco Group Chief
Executive, said:
"Our focus on productivity and
driving improvement across our portfolio has seen good progress at
this early stage. As a result, we were able to increase our
guidance for profit, cash and net debt with our trading update in
June. In a year where revenue is expected to be slightly
down, we will grow underlying operating profit by approximately 9%
to £270m, with margins increasing by around 50 basis
points.
As we enter the second six months of
the year, we continue to work on enhancing the performance of the
business. While mindful of a potential impact internationally from
elections in 2024, we are confident about the quality of our
pipeline of potential new work to achieve our medium-term growth
targets."
Guidance for 2024
Guidance for 2024 is unchanged since
our trading statement on 27 June. At that point we increased
underlying operating profit guidance by £10m, or 4%, to
approximately £270m, and free cash flow by the same amount.
We expect revenue in 2024 to be slightly below 2023 but underlying
operating profit to grow by around 9%. Conversion of profit
to cash is expected to be consistent with our medium-term target of
at least 80%.
|
2023 Actual
|
2024
Guidance
(unchanged from 27
June)
|
Revenue
|
£4.9bn
|
~£4.8bn
|
Organic sales growth
|
4%
|
~(3)%
|
Underlying operating profit
|
£249m
|
~£270m
|
Net
finance costs
|
£25m
|
~£35m
|
Underlying effective tax rate
|
23%
|
~25%
|
Free cash flow
|
£209m
|
~£150m
|
Adjusted net debt
|
£109m
|
~£165m
|
NB: The guidance uses an average
GBP:USD exchange rate of 1.28 in 2024, GBP:EUR of 1.17 and GBP:AUD
of 1.91. We expect a weighted average number of shares in
2024 of 1,060m for basic EPS and 1,080m for diluted EPS.
For
further information please contact Serco:
Paul Checketts, Head of Investor
Relations | +44 (0) 7718 195 074 |
paul.checketts@serco.com
Scot Marchbank, Group Communications
and Marketing Director | +44 (0) 7958 675 706 |
scot.marchbank@serco.com
Presentation:
A presentation for institutional
investors and analysts will be held at H/Advisors Maitland, 3
Pancras Square, London, N1C 4AG today at 10.00 UKT. The
presentation will be webcast live at
https://www.sparklive.lseg.com/SercoGroup/events/ec96ccaa-2fed-4d77-8f48-b0d830164eb3/serco-2024-half-year-results
and subsequently available on demand. To be able
to ask questions please use our dial-in facility accessed on
https://registrations.events/direct/LON941200
Notes to financial results summary table and
highlights:
The trading performance and outlook
for each Division are described on pages 10 to 14. Reconciliations and further
detail of financial performance are included in the additional
information on pages 36 to 40.
This includes full definitions and explanations of the purpose of
each non-IFRS Alternative Performance Measure (APM) used by the
Group.
(1) Refers to non-UK underlying
operating profit as a proportion of Group underlying operating
profit before corporate costs. Our underlying operating
profit before corporate costs for the period ended June 2024 was
£165.2m
LEI: 549300PT2CIHYN5GWJ21
Chief Executive's update
Our focus is on building a resilient
international government services business that can sustainably
deliver growth in revenue, profit and cash. We continue to
work on effective execution of initiatives prioritising service
excellence to our customers, the safety and productivity of
colleagues, actively managing our portfolio for performance and
strategic alignment, and generating and converting a pipeline of
opportunities to deliver profitable growth over the medium
term.
Good early progress has contributed
to the margin being ahead of plan in the first half, and, together
with the successful ramp up of new work, supports our planned
delivery of more than 25% profit improvement in the second six
months when compared to the same period in the prior
year.
We anticipated revenue in the period
to reduce due to previously announced exits from low margin
contracts and the changes from successfully rebidding one of our
largest contracts in North America. On this basis, revenue of
£2.4bn was in line with expectation and 5% lower than the same
period last year. Underlying operating profit was £142m, with
margins at the upper end of our 5-6% target range at 6.0% in the
period.
In our North America business, the
first half saw further progress in defence and good order
intake. The pipeline of new opportunities remains
positive. As anticipated this half saw the most significant
step down in our Centers for Medicaid & Medicare Services (CMS)
contract when compared to the prior year as we completed the first
year of the new five-year contract under different scope and
terms. CMS remains a benchmark contract in the Group
portfolio for innovation and profitability. Mobilising the
new employment services contracts and better performance of
existing contracts has seen an improved outcome from operations in
Canada.
Our UK & Europe business,
despite revenue being slightly lower, delivered strong growth in
profit and a significant uplift in margin. The division
managed previously announced contract exits effectively, while also
responding to ongoing demand for immigration services, successfully
ramping up new work and making progress on productivity.
New management settled in well in
Asia Pacific and is working through a plan to stabilise the
business ahead of positioning for the growth opportunities we
expect in the coming years. The first half saw us take action
to reduce the cost base and improve profitability on some larger
contracts. We expect the benefit of this to come through in
the second half of the year.
Our Middle East business saw organic
revenue growth with profit impacted due to the successful rebid of
an historically significant contract which has a materially reduced
scope in the current term. The division has a healthy
pipeline of opportunities in both the United Arab Emirates and the
Kingdom of Saudi Arabia. The recently acquired Climatize
engineering consulting business has been fully integrated into our
advisory business and is providing additional capability for
sustainability projects.
Looking more broadly across the
business, a central part of our strategy is to protect and deepen
the relationship between Serco and the people whose dedication and
commitment enables our success. Colleague engagement levels
have remained high, and the first half saw improvement in safety
outcomes with an 18% reduction in lost time incidents.
Compared to their peak in the last two years, vacancy numbers are
down by 60% and the data-driven approach we have taken to
understanding and addressing the reasons for elevated attrition has
led to a 30% reduction in the attrition rate.
We have progressed the AI pilots we
commenced in 2023 with Group-wide implementation of two of the
initial six platforms so far. AutoGenAI to support bid and
proposal development, and Synthesia for text to video knowledge
management are now being used in the business, and we are moving
others, for example VisionAI, into operational testing phase.
We are also exploring several new opportunities aimed at enhancing
colleague safety and productivity or differentiating our value
proposition to our customers. We are pleased that Tom Read
has joined us in July as Chief Digital and Technology Officer and a
member of the Executive Committee. Tom brings deep experience
in public and private sector digital transformation to accelerate
our approach to simplify, automate and digitise.
We remain mindful of potential
timing impacts on contract awards due to the unusually large number
of elections across the globe in 2024. Notwithstanding a
range of potential outcomes with changes in government, we see
significant demands on our customers arising from fiscal
constraints, demographic and social impacts, migration patterns and
geopolitical tension, among others. The geographic and sector
diversity of our portfolio sees us well placed to respond to these
market drivers by bringing together the right people, the right
technology and the right partners.
In summary, we are pleased with
progress so far in 2024 and the steps we are taking to deliver
profitable, sustainable growth aligned to our medium-term
goals. The business has a very healthy pipeline of potential
new work, a business plan to deliver margin improvement from a
rigorous approach to operational efficiency, a network of
partnerships to support technology enablement and a robust balance
sheet providing good optionality for capital
allocation.
Mark Irwin
Group Chief Executive
Serco - Impact a better
future
Group Review
Summary of financial performance
Revenue, underlying operating profit and underlying earnings
per share
Revenue was in line with our
expectations at £2,359m, which was 5%, or £113m, lower than the
£2,472m reported in 2023. Organically, revenue declined by 5%
(£116m), while acquisitions added 2% (£49m) and currency was a drag
of 2% (£46m). We saw constant
currency growth in the immigration, defence and justice sectors in
the half. This partially offset declines in other areas, in
particular lower revenue from the new CMS contract and our
previously announced exit from some low margin contracts in the
UK.
Underlying operating profit reduced
by 4% to £142m (2023: £148m). Currency had an adverse impact of 2%, leaving a constant
currency decline of 2%. The lower profit was due to the new
CMS contract, immigration volumes in Australia and mobilisation
costs on new work. Although profit was lower than in 2023,
the outcome was better than we had expected. A contributing
factor to this was our focus on productivity and improving the
underlying performance of our portfolio. We first discussed
this in our 2023 full year results, and we have seen good progress
at this early stage. Efforts to improve the underlying
portfolio meant our profit margin was also better than
anticipated. It was 6.0% in the first half, the same as the
first six months of 2023, despite the headwinds on
profit.
Reported operating profit reduced by 31% to £130m. The decline was
primarily because the prior year included £51m of positive one-off exceptional operating items. These resulted from the release of £41m of provisions held
for indemnities provided on businesses disposed of in 2015,
predominantly due to the claims period ending, and £10m
compensation we received on the early termination of a
contract.
Diluted underlying earnings per
share reduced by 9% to 8.54p (2023: 9.40p). Higher net finance costs and tax rate were partially offset by
a 4% reduction in our weighted average number of
shares, due to our share buybacks in 2023 and
2024.
The revenue and underlying operating profit performances are
discussed in more detail in the Divisional
Reviews.
Cash flow and net debt
Free cash flow was £75m (2023:
£98m). We have made excellent progress in structurally
improving our working capital over recent years, which has
delivered average cash conversion of more than 100%. This was
achieved with focus on efficient and prompt processes to issue
sales invoices and collect cash from our customers. This
rigour is now built into our culture and processes, and we expect
the business to convert at least 80% of profit into cash on an
ongoing basis, including in 2024. Average working capital
days were at attractive levels with debtor days of 21 (2023: 21
days) and creditor days of 19 (2023: 22 days). Including
accrued income and other unbilled receivables, day sales
outstanding were 43 days (2023: 43 days). Of all UK supplier
invoices, 94% were paid in under 30 days (2023: 93%) and 97% were
paid in under 60 days (2023: 97%). No working capital
financing facilities were utilised in this or the prior
year.
Adjusted net debt was £131m at the
end of June. This was an increase of only £22m since the year end
(December 2023: £109m) despite £25m of dividend payments, a £19m
net cash outflow for acquisitions and £58m being spent on our share
buyback programme, including fees.
The period end adjusted net debt
compares to a daily average of £157m (first half of 2023: £261m)
and a peak of £212m (first half of 2023: £357m).
The difference between average and peak figures
reflected working capital fluctuations. These can be caused
when certain discrete outflows - for example payroll, supplier
payments, VAT payments on account - occur in a short
timeframe. Variances like this are normal for the
Group.
Our measure of adjusted net debt
excludes lease liabilities, which aligns closely with the covenants
on our financing facilities. Lease liabilities totalled £500m
at the end of June (2023: £438m), the majority being leases on housing
for asylum seekers under our Asylum Accommodation and Support
Services Contract (AASC). These leases are cash backed with
contracted revenue from the customer and their terms do not extend
beyond the expected life of the contract we have.
At the closing balance sheet date,
our leverage for debt covenant purposes was 0.6x EBITDA (2023:
0.9x). This compares with the covenant requirement for net
debt to be less than 3.5x EBITDA and our target range of
1-2x.
On 27 February 2024, we issued $150m
(£118m) of US Private Placement loan notes. The notes are
equally split into two series of $75m each with maturities of five
and ten years, giving an average maturity of seven and a half
years. The average interest rate on the new loan notes is
fixed at 6.58%, which compares to a blended rate of 3.97% for the
existing notes.
Capital allocation and
returns to shareholders
We aim to have a strong balance
sheet with our target financial leverage of 1x to 2x net debt to
EBITDA, and, consistent with this, the Board's capital allocation
priorities are to:
-
|
Invest in the business to support
organic growth.
|
-
|
Increase ordinary dividends to
reward shareholders with a growing and sustainable income
stream.
|
-
|
Selectively invest in strategic
acquisitions that add capability, scale or access to new markets,
enhance the Group's future potential organic growth and have
attractive returns.
|
-
|
Return any surplus cash to
shareholders through share buybacks or other means.
|
Our capital
allocation framework was actively applied in the first half of
2024:
-
|
Invest to support organic growth:
investment has been put into business development, which has
supported our healthy pipeline of new opportunities. We
continued to invest in pilot programmes to partner with both
start-up and established technology businesses to create a broader
capability ecosystem from which to deliver future growth.
Investment was made to improve productivity and
competitiveness.
|
-
|
Increase ordinary dividends: we will
be paying an interim dividend of 1.34p per
share, 18% higher than the prior year, as we continue on our path
to reduce dividend cover progressively towards 3x over the coming
years.
|
-
|
Invest in acquisitions: in March we
acquired European Homecare (EHC), a leading provider of immigration
services in Germany. In January we acquired Climatize, a
small but fast-growing business that operates in the United Arab
Emirates and the Kingdom of Saudi Arabia offering 'zero-carbon'
advisory and related engineering services. We continue to
assess other opportunities that are aligned to our strategy and
provide potential to enhance future organic growth.
|
-
|
Return surplus cash to shareholders:
we completed £57m of our £140m share buyback in the first
half.
|
Contract awards, order book, rebids and
pipeline
Contract
awards
Order intake in the half was £1.9bn,
a book-to-bill rate of 82%. Book-to-bill of below 100%
reflects some larger bids in the UK either being unsuccessful or
the existing contract being extended and therefore delaying the
procurement.
There were around 30 contract awards
worth £10m or more each. North America had the strongest
book-to-bill at 127%, with wins across the defence, citizen
services and transport sectors. After strong order intake in
2023, our Middle East business had another good half with
book-to-bill of 125%. Unsuccessful bids and some existing
work being extended rather than proceeding with the tender left the
UK & Europe book-to-bill at 70%. Book-to-bill in Asia
Pacific was unsurprisingly low, at 35%, as we look to stabilise the
business, rebuild the pipeline and work to make sure we are well
positioned to convert future opportunities. Both North
America and the UK & Europe had order intake of £0.8bn, or
approximately 45% each, and the Middle East and Asia Pacific both
contributed £0.1bn, or approximately 5%.
Approximately 40% of the order
intake value was new business and 60% was rebids or extensions of
existing work. The win rate by value for new work was
approximately 25%, at the lower end of the range we have delivered
over recent years, while the win rate by value for retaining
existing work was consistent with our typical levels at
approximately 90%.
New wins included additional
immigration accommodation work in the UK, a £90m six and a half
year contract to deliver emergency response services in the NEOM
economic zone in the Kingdom of Saudi Arabia, a £70m six-year
agreement to operate and maintain the Shing Mun Tunnels and Tseung
Kwan O Tunnel in Hong Kong, and a further £50m five-year contract
with the Government of Ontario to help job seekers develop their
skills and match them to employment opportunities. We
successfully rebid our contract to manage HMP Ashfield in the
UK. The new contract has an estimated value to Serco of £200m
over its initial ten-year period. In the US, we won the rebid
of our contract to provide customer support services to the US
Pension Benefit Guaranty Corporation. The contract has a
one-year base period and four option years with a value of
approximately £180m if all options years are exercised. Our
contracts with the UK Department for Work and Pensions to help
people find jobs in the West Central region and Wales as part of
the Restart programme, were extended for a further two years, with
an estimated value of £130m. Since the period end, we have been
awarded a new $320m four-year contract by the US Army Corps of
Engineers to upgrade defence infrastructure in
Greenland.
Order book
The order book remains strong at
£13.5bn at the end of June (30 June 2023: £14.1bn, 31 December
2023: £13.6bn). Our order book definition gives our
assessment of the future revenue expected to be recognised from the
remaining performance obligations on existing contractual
arrangements. This excludes unsigned extension periods, and
the order book would be £2.5bn (2023: £2.4bn) higher if option
periods in our US business, which typically tend to be exercised,
were included. If joint venture work was included this would
add a further £1.7bn (2023: £1.8bn) to our order book.
Rebids
In our portfolio of existing work,
we have around 70 contracts with annual revenue of £5m or more
where an extension or rebid will be required before the end of
2026, with an aggregate annual revenue of £1.5bn. At around 30% of
the Group's 2024 revenue guidance, this proportion of work that
will be up for rebid is at the low end of the range we have seen
over recent years. Contracts that will either need to be rebid or
extended in 2024 have an annual contract value of around £0.4bn,
including our immigration services work in Australia, which is
currently contracted until December 2024. The annual value of
rebids in 2025 is approximately £0.7bn and this reduces to
£0.5bn in 2026.
New business
pipeline
Our measure of pipeline includes
only opportunities for new business that have an estimated annual
contract value (ACV) of at least £10m and which we expect to bid
and to be adjudicated within a rolling 24-month timeframe. We
cap the total contract value (TCV) of individual opportunities at
£1bn, to lessen the impact of single large opportunities. The
definition does not include rebids and extension opportunities, and
in the case of framework, or call-off, contracts such as 'ID/IQ'
(Indefinite Delivery / Indefinite Quantity contracts), which are
common in the US, we only take the value of individual task orders
into our pipeline as the customer confirms them. Our
published pipeline is thus a small proportion of the total universe
of opportunities, as many opportunities have annual revenues less
than £10m, are likely to be decided beyond the next 24 months or
are rebids and extensions.
Our pipeline was £10.2bn at the end
of June, slightly higher than the £10.1bn level at the end of
December 2023, and an increase of nearly 30% since the end of June
2023. This remains the largest pipeline of potential new work we
have had in a decade. The pipeline consists of around 45 bids
with an ACV averaging slightly less than £40m and an average
contract length of around six years. The pipeline of
opportunities for new business with an estimated ACV of less than
£10m totalled £2.2bn at the end of June, a 13% decrease from the
£2.6bn value at the end of December 2023.
Acquisitions
We view acquisitions as an important
part of our strategic toolkit, which, if deployed correctly, can
add significant value to the business. They should therefore
supplement and be capable of delivering new opportunities for
organic growth. Generally speaking, we regard acquisitions as
higher risk than organic growth, so any potential opportunities
have to meet our stringent criteria of being both financially and
strategically compelling. We judge potential acquisitions
against three criteria: do they add new, or strengthen existing,
capability? Do they add scale which we can use to increase
efficiency? Do they bring us access to new and desirable
customers and markets? We also recognise that acquisition
opportunities come in different shapes, sizes and sectors, and a
small one can be strategically important to a region, but not
necessarily significant at Group level. But large or small,
the execution of all acquisitions is centrally managed and follows
the same rigorous process. Equal focus and discipline is
applied to post-acquisition value drivers such as effective
integration and value realisation from synergy and
growth.
We completed two acquisitions in the
first half of 2024:
-
|
In March we acquired European
Homecare (EHC), for an enterprise value of €40m (£34m). EHC
is a leading private provider of immigration services in
Germany. In conjunction with ORS, the Swiss-based business we
acquired in 2022, this strategic acquisition creates a strong
partner for European governments in immigration services and
complements the support we already provide to government customers
in the UK and Australia.
|
-
|
In January we acquired Climatize,
for an initial consideration of AED 9m (£2m) and a contingent
consideration of up to AED 51m (£11m), payable on achieving certain
financial targets. Climatize is a small but fast-growing business
that operates in the United Arab Emirates and Saudi Arabia offering
'zero-carbon' advisory and related engineering services. The
business will significantly boost Serco's sustainability advisory
capability in the Middle East with possible scalability to other
markets.
|
|
|
We continue to seek out and evaluate
new opportunities for acquisitions that fit our criteria and focus
on delivering value from those acquisitions already
executed.
Guidance for 2024
Our guidance for 2024 is unchanged
from our pre-close trading statement on 27 June 2024. At that
point we increased underlying operating profit guidance by £10m, or
4%, to £270m, and free cash flow by the same amount.
Revenue: We expect revenue to
be around £4.8bn, slightly below the £4.9bn outturn for 2023, with
a 3% organic contraction, a 2% contribution from acquisitions and a
1% adverse impact of currency. Revenue is expected to be lower
organically due to our CMS contract now being in its new five-year
agreement, the annualisation of our previously announced exit from
certain low-margin contracts, and contract mix change in
immigration, as we support the UK Government's efforts to reduce
the number of asylum seekers being accommodated in hotels.
These factors will be partially offset by growth in the defence and
justice sectors.
Underlying operating profit: Underlying operating profit is expected to grow by around 9%
to £270m, including an expected currency drag of £5m, with margins
increasing by around 50 basis points (bps). The year will benefit
from new contracts ramping up, operational efficiency improvements
across the existing portfolio and a contribution from acquisitions.
We expect these to more than offset the mobilisation costs on new
work, lower immigration volumes in the UK and Australia, and CMS
operating in its new contract term. Following our success in
winning the Health Assessment Advisory Services and electronic
monitoring contracts in the UK in the fourth quarter of 2023, we
expect there to be around a £13m drag on profits due to
mobilisation activities.
Net
finance costs and tax: Net finance
costs are expected to be around £35m. This is more than 2023 due to
higher interest rates, increased volume of lease-related interest
and acquisition spend. The underlying effective tax rate is
expected to be around 25%, although this is sensitive to the
geographic mix of our profit and any changes to current corporate
tax rates.
Financial position: Free cash
flow is again expected to be strong at around £150m in the year,
consistent with our ongoing expectation of converting at least 80%
of profit into cash. This is below 2023, as this included the
benefit of actions taken to structurally improve our working
capital. We expect adjusted net debt to end the year at around
£165m, including the acquisitions of EHC and Climatize, and the
£140m share buyback. We expect net debt to EBITDA to be
approximately 0.6x at the year end.
Summary of guidance for 2024
|
2023 Actual
|
2024
Guidance
(unchanged from 27
June)
|
Revenue
|
£4.9bn
|
~£4.8bn
|
Organic sales growth
|
4%
|
~(3)%
|
Underlying operating profit
|
£249m
|
~£270m
|
Net
finance costs
|
£25m
|
~£35m
|
Underlying effective tax rate
|
23%
|
~25%
|
Free cash flow
|
£209m
|
~£150m
|
Adjusted net debt
|
£109m
|
~£165m
|
NB: The guidance uses an average
GBP:USD exchange rate of 1.28 in 2024, GBP:EUR of 1.17 and GBP:AUD
of 1.91. We expect a weighted average number of shares in 2024 of
1,060m for basic EPS and 1,080m for diluted EPS.
Outlook for growth in the
medium-term
Our medium-term targets remain unchanged. We expect to grow
revenue at an average of 4-6% a year. Our focus on productivity and
efficiency will help us achieve our margin target of 5-6%. At least
80% of our operating profit will be converted into cash.
Divisional Reviews
Serco's operations are reported as
four regional divisions: North America; UK & Europe (UK&E);
the Asia Pacific region; and the Middle East. Reflecting statutory
reporting requirements, Serco's share of revenue from its joint
ventures and associates is not included in revenue, while Serco's
share of joint ventures and associates' profit after interest and
tax is included in underlying operating profit.
Period ended 30 June 2024
|
North
America
|
UK&E
|
Asia
Pacific
|
Middle
East
|
Corporate
costs
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
656.4
|
1,210.6
|
387.4
|
104.9
|
-
|
2,359.3
|
Change
|
(6)%
|
(1)%
|
(14)%
|
2%
|
|
(5)%
|
Change at constant currency
|
(3)%
|
(1)%
|
(10)%
|
5%
|
|
(3)%
|
Organic change at constant currency
|
(3)%
|
(5)%
|
(10)%
|
5%
|
|
(5)%
|
|
|
|
.
|
|
|
|
Underlying operating profit / (loss)
|
68.8
|
82.9
|
7.8
|
5.7
|
(22.8)
|
142.4
|
Margin
|
10.5%
|
6.8%
|
2.0%
|
5.4%
|
(1.0)%
|
6.0%
|
Change
|
(13)%
|
19%
|
(44)%
|
(19)%
|
2%
|
(4)%
|
|
|
|
|
|
|
|
Amortisation and impairment of
intangibles arising on acquisition
|
(7.8)
|
(5.1)
|
-
|
-
|
-
|
(12.9)
|
Exceptional operating
items
|
-
|
-
|
-
|
-
|
-
|
-
|
Reported operating profit / (loss)
|
61.0
|
77.8
|
7.8
|
5.7
|
(22.8)
|
129.5
|
Period ended 30 June 2023
|
North
America
|
UK&E
|
Asia
Pacific
|
Middle
East
|
Corporate
costs
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
701.0
|
1,218.5
|
449.5
|
103.1
|
-
|
2,472.1
|
|
|
|
|
|
|
|
Underlying operating profit / (loss)
|
79.4
|
69.9
|
13.9
|
7.0
|
(22.3)
|
147.9
|
Margin
|
11.3%
|
5.7%
|
3.1%
|
6.8%
|
(0.9)%
|
6.0%
|
|
|
|
|
|
|
|
Amortisation and impairment of
intangibles arising on acquisition
|
(8.1)
|
(1.5)
|
(1.8)
|
-
|
-
|
(11.4)
|
Exceptional operating
items
|
-
|
9.9
|
-
|
-
|
41.3
|
51.2
|
Reported operating profit / (loss)
|
71.3
|
78.3
|
12.1
|
7.0
|
19.0
|
187.7
|
The trading performance and outlook
for each Division are described on the following pages.
Reconciliations and further detail of financial performance are
included in the additional information on pages 36 to 40. This includes full definitions and
explanations of the purpose of each non-IFRS Alternative
Performance Measure (APM) used by the Group. The Condensed
Consolidated Financial Statements and accompanying notes are on
pages 18 to
35.
Included in note 2 to the Group's
2023 Consolidated Financial Statements are the Group's policies on
recognising revenue across the various revenue streams associated
with the diverse range of goods and services discussed within the
Divisional Reviews. The various revenue recognition policies are
applied to each individual circumstance as relevant, taking into
account the nature of the Group's obligations under the contract
with the customer and the method of delivering value to the
customer in line with the terms of the contract.
North America (28% of revenue, 42% of underlying operating
profit)
Period ended 30 June
|
2024
|
2023
|
Growth
|
£m
|
|
|
|
Revenue
|
656.4
|
701.0
|
(6)
%
|
Organic change
|
(3)%
|
6%
|
|
Acquisitions
|
-%
|
-%
|
|
Currency
|
(3)%
|
6%
|
|
Underlying operating profit
|
68.8
|
79.4
|
(13)%
|
Organic change
|
(10)%
|
(2)%
|
|
Acquisitions
|
-%
|
-%
|
|
Currency
|
(3)%
|
7%
|
|
Margin
|
10.5%
|
11.3%
|
(85)bps
|
Revenue declined by 6% to £656m
(2023: £701m), with an organic decline of 3% and a 3% adverse
translational effect of currency. The organic reduction in revenue
was mainly due to our CMS contract being in its new five-year
agreement, with this half being both the final period with the
effect and the one where it had the largest impact. Our
defence business delivered modest organic revenue growth. There
were positive contributions from new work ramping up, maritime
services and anti-terrorist force protection for the navy.
Offsetting these were lower volumes on some other existing
operations, including communication systems integration.
Underlying operating profit reduced
by 13% to £69m (2023: £79m). Currency had a 3% adverse impact, with
underlying operating profit down 10% on a constant currency
basis. As with revenue, lower profit was
due to the new CMS contract, which was partially offset by growth
in our defence business. Margins reduced
from 11.3% to 10.5% as a result.
Order intake was solid at £0.8bn,
around 45% of the total for the Group and a book-to-bill ratio of
1.3x. Of this, new business wins were around 40% of the order
intake. Following on from our success in 2022 and 2023, we
secured a further £50m five-year contract with the Government of
Ontario to help job seekers develop their skills and match them to
employment opportunities. We won the rebid of our contract
with the US Pension Benefit Guaranty Corporation. We provide
benefits administration and customer support for over one million
individuals whose defined benefits plans have been disrupted. The
contract has a one-year base period and four option years with a
value of approximately £180m if all options years are
exercised. We also successfully rebid our IT support contract
with the US Air Force. The new agreement has a one-year base
period and four one-year option periods, and a value of
approximately £70m if all options are exercised. As the NexGen
Information Technology (IT) Service Provider, Serco will manage,
configure, deploy, operate, sustain, and enhance the NexGen IT
program solutions for Air Force Civil Engineering activities.
This includes delivering the largest implementation of the IBM
TRIRIGA software application in the world, to enable data-driven
decisions for the Air Force. Since the period end, we have been
awarded a new $320m four-year contract by the US Army Corps of
Engineers to upgrade defence infrastructure in
Greenland.
The pipeline of major new bid
opportunities due for decision within the next 24 months in North
America has increased from £3.2bn at the end of 2023 to £3.4bn at
the end of June, with it having increased by more than 15% in the
last 12 months. It is pleasing to see the pipeline at such a
healthy level given good order intake in 2022, 2023 and the first
half of 2024. North America represents approximately one-third of
the total Group pipeline. Defence makes up the vast majority
of the North American pipeline, with a broad spread of types of
work.
UK
& Europe (52% of revenue, 50% of underlying operating
profit)
Period ended 30 June
|
2024
|
2023
|
Growth
|
£m
|
|
|
|
Revenue
|
1,210.6
|
1,218.5
|
(1)%
|
Organic change
|
(5)%
|
11%
|
|
Acquisitions
|
4%
|
11%
|
|
Currency
|
-%
|
1%
|
|
Underlying operating profit
|
82.9
|
69.9
|
19%
|
Organic change
|
8%
|
64%
|
|
Acquisitions
|
12%
|
20%
|
|
Currency
|
(1)%
|
2%
|
|
Margin
|
6.8%
|
5.7%
|
111bps
|
Revenue reduced by 1% to £1,211m
(2023: £1,219m), with an organic decline of 5% partially offset by
a 4% contribution from acquisitions. EHC, the German immigration
services business we acquired in March 2024, traded strongly with
robust demand due to global migration patterns. The organic decline
resulted from us exiting a variety of contracts in 2023, several of
which had margins below the level we see as appropriate for the
services we deliver. These contracts were in different sectors, so
revenue declined in citizen services, transport and health &
facilities management as we exited this work. Elsewhere we
saw good growth in justice & immigration. Revenue in our
defence business was stable in the period.
Underlying operating profit
increased by 19% to £83m (2023: £70m). The good profit outcome was supported by
immigration, where the EHC acquisition contributed and UK
performance was better than originally anticipated, justice, where
we successfully mobilised the newly built HMP Fosse Way, and from
our focus on productivity and improving the underlying performance
of our portfolio. Our health & facilities management business,
in particular, saw much improved profitability compared to the
prior year. Margin performance in the period was strong, with it
increasing by 111bps to 6.8% (2023: 5.7%).
Underlying operating profit includes
the profit contribution of joint ventures and associates, from
which interest and tax have already been deducted. If the
proportional share of revenue from joint ventures and associates
was included and the share of interest and tax cost was excluded,
the overall divisional margin would have been 5.9% (2023: 5.2%).
The joint venture and associate profit contribution reduced to £11m
(2023: £18m) due to a one-off settlement being included in the
prior year.
Order intake was around £0.8bn, a
book-to-bill ratio of 0.7x and around 45% of the total intake for
the Group. The low book-to-bill reflected some larger bids on
new work not landing in our favour. This included two bids
with a total contract value of more than £300m being awarded to
competitors, which of course can happen in a healthily functioning
market, and another being extended with the current provider rather
than proceeding with the tender process. Our win rate by
value on new work was slightly below 20% as a result. Offsetting
this, our win rate on rebids and extensions was very good at more
than 95%. New business represented approximately 30% of the
order intake, with rebids and extensions around 70%. Agreements
signed included the rebid of our contract to manage HMP Ashfield in
the UK. The new contract has an estimated value of £200m and by the
end of the ten-year period, Serco will have been managing the
prison for 29 years. Additional immigration accommodation work was
awarded. Our contracts with the UK Department for Work and
Pensions to help people find jobs in the West Central region and
Wales as part of the Restart programme, were extended for a further
two years, with an estimated value of £130m. We extended our
EFC2 contract with the European Space Agency. On this
contract, Serco provides services in various areas including space,
telecommunications, software engineering and data science. The new
agreement is worth approximately £50m over two
years.
The pipeline of new opportunities in
the UK & Europe remains healthy at £4.5bn (December 2023:
£4.8bn), with significant new opportunities across the defence,
justice & immigration, and citizen services sectors.
Asia Pacific (16% of revenue, 5% of underlying operating
profit)
Period ended 30 June
|
2024
|
2023
|
Growth
|
£m
|
|
|
|
Revenue
|
387.4
|
449.5
|
(14)%
|
Organic change
|
(10)%
|
(4)%
|
|
Acquisitions
|
-%
|
-%
|
|
Currency
|
(4)%
|
(1)%
|
|
Underlying operating profit
|
7.8
|
13.9
|
(44)%
|
Organic change
|
(41)%
|
(56)%
|
|
Acquisitions
|
-%
|
-%
|
|
Currency
|
(3)%
|
-%
|
|
Margin
|
2.0%
|
3.1%
|
(108)bps
|
We are working through a plan to
turn around our Asia Pacific segment following a difficult year in
2023. New management has bedded in well as we look to
stabilise the business and position it for the opportunities we
expect in the coming years. The first half saw us take action to
reduce the cost base and improve profitability on some larger
contracts. We expect the benefit of this to begin to come through
in the second half of the year. Rebuilding the pipeline
of potential new work is a key focus for us through the remainder
of the year and into 2025.
Revenue reduced by 14% to £387m
(2023: £450m). The business contracted by 10% organically and
adverse currency moves had a 4% impact. Revenue fell because of
lower volume-variable work in parts of the immigration network,
reduced work in facilities management and some lost work in the
citizen services sector.
Underlying operating profit reduced
by 44% to £8m (2023: £14m), representing a margin of 2.0% (2023:
3.1%). Profit fell more than revenue due to a negative mix impact
from the lower immigration volumes and investment in the cost
transformation programme. We expect to see the focus on
contract profitability improvements and cost transformation to show
positive results in the second half of the year.
Order intake was £0.1bn. This was
unsurprisingly low at this stage of our turnaround plan. New work
included a £70m six-year agreement to operate and maintain the
Shing Mun Tunnels and Tseung Kwan O Tunnel in Hong Kong.
The pipeline of potential new
business stands at £1.4bn (December 2023: £1.3bn). Defence makes up
around 80% of the pipeline with smaller opportunities in the
transport, citizen services, justice & immigration and health
sectors.
Our immigration services work in
Australia, which is contracted until December 2024, and one of the
largest contracts in the Group, is currently in a competitive rebid
process. Serco has been providing immigration services as a
partner to the Australian Government since October 2009, with our
work having been successfully rebid and extended over this period.
Our performance levels have been high on the current contract, and
we believe we have submitted a compelling bid. The outcome of
the tender process is expected before the end of the third quarter
of 2024.
Middle East (4% of revenue, 3% of underlying operating
profit)
Period ended 30 June
|
2024
|
2023
|
Growth
|
|
£m
|
|
|
|
|
Revenue
|
104.9
|
103.1
|
2%
|
|
Organic change
|
5%
|
5%
|
|
|
Acquisitions
|
-%
|
-%
|
|
|
Currency
|
(3)%
|
6%
|
|
|
Underlying operating profit
|
5.7
|
7.0
|
(19) %
|
|
Organic change
|
(17)%
|
(22)%
|
|
|
Acquisitions
|
1%
|
-%
|
|
|
Currency
|
(3)%
|
2%
|
|
|
Margin
|
5.4%
|
6.8%
|
(136)bps
|
|
Revenue grew by 2% to £105m (2023:
£103m). The business grew by 5% organically and currency moves had
a 3% adverse impact. Organic growth was driven by new work in the
transport and citizen services sectors. This more than offset lower
revenue in health and in defence, where a large contract, which we
successfully retained, moved to a materially reduced scope in its
new term.
Underlying operating profit reduced
by 19% to £6m (2023: £7m). Profit was negatively impacted by
the defence rebid. Margins decreased from 6.8% to 5.4% as a
result.
Order intake was around £0.1bn, a
book-to-bill ratio of 1.3x. Around 80% of the order intake
was new business. The largest win was a new contract to
provide Fire Rescue, Emergency and Ambulance Services in the NEOM
economic zone in Saudi Arabia. This followed on from other
similar work in the zone and is estimated to be worth around £90m
over its six-and-a-half-year term.
Our pipeline of major new bid
opportunities in the Middle East totals around £0.9bn (December
2023: £0.8bn) and includes opportunities in justice &
immigration, defence, citizen services and transport.
_____________________________________________________________________________________________________
Corporate costs
Corporate costs relate to typical
central function costs of running the Group, including executive,
governance and support functions such as HR, finance and IT. Where
appropriate, these costs are stated after allocation of recharges
to operating divisions. The costs of Group-wide programmes and
initiatives are also incurred centrally.
Underlying corporate costs were
relatively stable in the period, increasing by £0.5m to £22.8m (2023: £22.3m).
Dividend
The Board has declared an interim
dividend of 1.34p per share. The
interim dividend will be paid on 4 October
2024, with an ex-dividend date of 29 August 2024 and a record date of 30 August 2024.
Other Financial Information
Joint ventures and associates - share of
results
During the period, the most
significant joint ventures and associates in terms of scale of
operations were Merseyrail Services Holding Company Limited
(Merseyrail) and VIVO Defence Services Limited (VIVO).
Merseyrail generated revenue of
£108.8m (2023: £116.1m), with the Group's share of profits net of
interest and tax for the period being £5.9m (2023: £12.2m). The
reduction in Merseyrail revenue and profits is primarily due to a
one-off commercial settlement received in 2023. The Group received
dividends of £5.5m (2023: £4.7m).
VIVO revenues for the period was
£514.8m (2023: £387.9m) with the Group's share of profits net of
interest and tax for the year for the period being £5.3m (2023:
£5.8m). The increase in VIVO's revenue is largely due
to volumes in the Accommodation contract, of which the
Group's share of profit is 25%. VIVO issued dividends of £nil
(2023: £nil) in the period.
Whilst the revenues and individual
line items are not consolidated in the Group Consolidated Income
Statement, summary financial performance measures for the Group's
proportion of the aggregate of all joint ventures and associates
are set out below for information purposes.
For the period ended 30
June
|
2024
£m
|
2023
£m
|
Revenue
|
267.6
|
228.4
|
Operating profit
|
15.9
|
23.4
|
Net finance cost
|
(0.5)
|
-
|
Income tax charge
|
(4.2)
|
(5.4)
|
Profit after tax
|
11.2
|
18.0
|
Dividends received from joint
ventures and associates
|
5.6
|
4.7
|
Finance costs and investment revenue
Net finance costs recognised in the
income statement were £15.5m (2023: £11.0m), consisting of
investment revenue of £3.8m (2023: £3.5m), less finance costs of £19.3m
(2023: £14.5m).
Investment revenue of £3.8m (2023:
£3.5m) consists of interest accruing on net retirement benefit
assets of £0.9m (2023: £1.5m) and interest income of £2.9m (2023:
£2.0m).
Finance costs of £19.3m (2023:
£14.5m) include interest incurred on loans, primarily the US
private placement loan notes and the revolving credit facility of
£7.6m (2023: £8.3m) and lease interest expense of £9.1m (2023:
£5.6m), as well as other financing related costs including the
impact of foreign exchange on financing activities. The increase in
lease interest expense year on year is primarily due to the
continuing increase in the number of leases for dispersed
properties required for our UK asylum contract.
Net interest paid recognised in the
cash flow statement was £12.2m (2023: £12.4m), consisting of
interest received of £2.8m (2023: £1.9m) less interest paid of
£15.0m (2023: £14.3m).
Tax
Underlying tax
An underlying tax charge of
£33.0m (2023:
£29.8m) has been recognised in the period on underlying
profits after finance costs. The effective tax rate (26.0%) is higher than at half year 30 June 2023 (21.8%) and higher than
the rate at year end 31 December 2023
(22.7%). The rate is higher than the December 2023 rate due to a change in geographical mix of where
profits have arisen, proportional reduction in profits within Joint
Ventures, and charges recorded on the finalisation of overseas tax
positions, which is only partially offset by a reduction in
expenses that are treated as disallowable for tax.
The current rate of 26.0% is slightly higher than the UK statutory rate of
25%. This is mainly due to higher rates of tax on profits arising
on international operations (increases the rate by 1.4%), a charge
that arises in relation to prior years where tax positions have now
been finalised (increases the rate by 1.0%) and the impact of
losses made in companies overseas where forecast profits are such
that deferred tax is not recognised (increases rate by 0.9%).
This is only partially offset by the impact of profits made by
joint ventures whose post tax profits are included in the Group's
profit before tax (reduces the rate by 2.2%) together with other
adjustments (reducing the rate by 0.1%).
Non-underlying tax
A tax credit of £3.5m (2023: £0.7m) arises from
the amortisation and impairment of intangibles arising on
acquisition.
Deferred tax assets
As at 30 June 2024 there is a net
deferred tax asset of £175.1m (31 December 2023: £184.8m). This
consists of a deferred tax asset of £230.1m
(31 December 2023: £235.7m) and a deferred
tax liability of £55.0m (31 December 2023:
£50.9m). A £174.2m UK deferred tax asset is included within the
deferred tax asset on the Group's balance sheet as at 30 June 2024
(31 December 2023: £179.9m).
Taxes paid
Net corporate income tax of £15.5m
was paid during the period, relating primarily to operations in
Asia Pacific (£1.7m), North America (£12.1m), Middle East (£1.8m),
and Europe (£0.6m). The UK business made tax payments to the Tax
Authority (£1.3m) and had receipts from joint ventures in relation
to the 2022 year (£2.0m) during the period, with these balances
netting against each other to give a balance received of
£0.7m.
The amount of tax paid (£15.5m)
differs from the tax charge in the period (£29.5m) mainly because taxes paid to or received from
Tax Authorities can arise in later periods to the associated tax
charge/credit. This is particularly the case with regards to
movements in deferred tax and provisions for uncertain tax
positions.
Risk management and treasury operations
The Group's operations expose it to
a variety of financial risks that include access to liquidity, the
effects of changes in foreign currency exchange rates, interest
rates and credit risk. The Group has a centralised treasury
function whose principal role is to seek to ensure that adequate
liquidity is available to meet the Group's funding requirements as
they arise and that the financial risk arising from the Group's
underlying operations is effectively identified and
managed.
Treasury operations are conducted in
accordance with policies and procedures approved by the Board which
are reviewed annually. Financial instruments are only used for
hedging purposes and speculation is not permitted. A monthly report
is provided to senior management outlining performance against the
Treasury Policy.
Liquidity and funding
As at 30 June 2024, the Group had
committed funding of £626.5m (31 December 2023: £558.8m),
comprising £276.5m of US private placement loan notes, and a
£350.0m revolving credit facility which was undrawn. The US private
placement loan notes are repayable in bullet payments between 2025
and 2034. The Group does not engage in any external financing
arrangements associated with either receivables or
payables.
During the period ended 30 June
2024, £118.2m of US private placement notes were issued and total
repayments of £52.8m were made.
The Group's revolving credit
facility provides £350.0m of committed funding for five years from
the arrangement date in November 2022. The facility includes an
accordion option, providing a further £100.0m of funding
(uncommitted and therefore not incurring any fees) if required
without the need for additional documentation. This option has not
been included in the Group's assessment of available liquidity as
approvals are required to access the funding.
Interest rate risk
The Group has a preference for fixed
rate debt to reduce the volatility of net finance costs. The
Group's Treasury Policy requires it to maintain a minimum
proportion of fixed rate debt as a proportion of overall adjusted
net debt and for this proportion to increase as the ratio of EBITDA
to interest expense falls. As at 30 June 2024, £276.5m of debt was
held at fixed rates and adjusted net debt was £130.8m.
Foreign exchange risk
The Group is subject to currency
exposure on the translation to Sterling of its net investments in
overseas subsidiaries. The Group seeks to manage this risk, where
appropriate, by borrowing in the same currency as those
investments. Group borrowings are predominantly denominated in
Sterling and US Dollars. The Group seeks to manage its currency
cash flows to minimise foreign exchange risk arising on
transactions denominated in foreign currencies and uses forward
contracts where appropriate to hedge net currency cash
flows.
Credit risk
Cash deposits and in-the-money
financial instruments give rise to credit risk on the amounts due
from counterparties. The Group manages this risk by adhering to
counterparty exposure limits based on external credit ratings of
the relevant counterparty.
Net
assets
At 30 June 2024, the consolidated balance
sheet shown on page 21
had net assets of £994.7m, a reduction of £39.0m
from the closing net asset position of £1,033.7m as at
31 December 2023.
Key movements since
31 December 2023 on the
consolidated balance sheet shown on page 21 include:
-
|
Obligations under leases increased
by £46.7m primarily driven by new leases
for dispersed properties in our UK asylum contract resulting in an
equivalent increase in right of use assets.
|
-
|
Goodwill increased by £31.8m and includes £20.5m
relating to European Homecare and £9.7m
relating to Climatize. Other intangibles increased by £1.6m, driven by £15.5m recognition of customer
relationships for European Homecare offset by
amortisation.
|
-
|
A decrease in the net retirement
benefit asset of £10.0m primarily in
respect of Serco Pension and Life Assurance Scheme
(SPLAS); further details are provided in the pensions
section below.
|
-
|
Cash and cash equivalents have
increased by £48.0m. In the period the
Group generated cash of £189.0m from
underlying operations. The net advance of loans was £65.4m and the capital element of lease repayments in
the period was £66.9m. Including associated
costs, the spend on shares repurchased during the year totalled
£80.4m (£57.6m
share buyback and £22.8m to fund employee
share options) and dividends totalling £24.5m have been paid to shareholders. The acquisition
of European Homecare and Climatize cost £19.3m net of cash acquired.
|
-
|
Net loan balances have increased by
£67.1m, driven by the issuance of US
Private Placement loan notes of £118.2m, offset by repayments of
£52.8m. An FX impact of £2.2m was offset by capitalised finance
costs.
|
-
|
The movements in contract assets,
trade receivables and other assets, and, contract liabilities,
trade payables and other liabilities are a result of normal working
capital movements.
|
Pensions
Serco's pension schemes remain in a
strong funding position and have a net accounting surplus, before
tax, of £14.5m (31 December 2023: £24.5m), on scheme gross assets
of £1.0bn (31 December 2023: £1.1bn) and gross liabilities of
£1.0bn (31 December 2023 £1.0bn). The £10.0m decrease in the net
retirement benefit surplus is primarily attributed to the Group's
largest scheme, SPLAS. This reduction is a consequence of declining
bond yields driven by the market's scaled-back expectation of
interest rate cuts in 2024 offset by increased discount
rates.
Based on the 2021 actuarial funding
valuation which was finalised in 2022 for SPLAS, the Group has
committed to make deficit recovery payments of £6.6m per year to
2030.
The opening net asset position led
to a net interest income within net finance costs of £0.9m (2023:
£1.5m).
Condensed Consolidated Financial Statements
Consolidated Income Statement
For
the period ended 30 June 2024
(unaudited)
|
Underlying
|
Non Underlying
items
|
Reported
|
Underlying
|
Non
Underlying items
|
Reported
|
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
|
unaudited
|
unaudited
|
unaudited
|
unaudited
|
unaudited
|
unaudited
|
Period ended 30 June
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
2,359.3
|
-
|
2,359.3
|
2,472.1
|
-
|
2,472.1
|
Cost of sales
|
(2,098.9)
|
-
|
(2,098.9)
|
(2,210.5)
|
-
|
(2,210.5)
|
Gross profit
|
260.4
|
-
|
260.4
|
261.6
|
-
|
261.6
|
Administrative expenses
|
(129.2)
|
-
|
(129.2)
|
(131.7)
|
-
|
(131.7)
|
Exceptional operating
items
|
-
|
-
|
-
|
-
|
51.2
|
51.2
|
Amortisation and impairment of
intangibles arising on acquisition
|
-
|
(12.9)
|
(12.9)
|
-
|
(11.4)
|
(11.4)
|
Share of results of joint ventures
and associates, net of interest and tax
|
11.2
|
-
|
11.2
|
18.0
|
-
|
18.0
|
Operating profit / (loss)
|
142.4
|
(12.9)
|
129.5
|
147.9
|
39.8
|
187.7
|
Margin
|
6.0%
|
|
5.5%
|
6.0%
|
|
7.6%
|
Investment revenue
|
3.8
|
-
|
3.8
|
3.5
|
-
|
3.5
|
Finance costs
|
(19.3)
|
-
|
(19.3)
|
(14.5)
|
-
|
(14.5)
|
Net finance costs
|
(15.5)
|
-
|
(15.5)
|
(11.0)
|
-
|
(11.0)
|
Profit/(loss) before tax
|
126.9
|
(12.9)
|
114.0
|
136.9
|
39.8
|
176.7
|
Tax (charge)/credit
|
(33.0)
|
3.5
|
(29.5)
|
(29.8)
|
0.7
|
(29.1)
|
Effective tax rate
|
26.0%
|
|
25.9%
|
21.8%
|
|
16.5%
|
Profit/(loss) for the period
|
93.9
|
(9.4)
|
84.5
|
107.1
|
40.5
|
147.6
|
Attributable to:
|
|
|
|
|
|
|
Equity attributable to owners of the
Company
|
93.6
|
(9.4)
|
84.2
|
107.1
|
40.5
|
147.6
|
Non-controlling interest
|
0.3
|
-
|
0.3
|
-
|
-
|
-
|
Earnings per share (EPS)
|
|
|
|
|
|
|
Basic EPS
|
8.65p
|
|
7.78p
|
9.52p
|
|
13.11p
|
Diluted EPS
|
8.54p
|
|
7.68p
|
9.40p
|
|
12.96p
|
Consolidated Statement of Comprehensive
Income
For
the period ended 30 June 2024
(unaudited)
|
|
2024
|
2023
|
|
|
unaudited
|
unaudited
|
|
|
£m
|
£m
|
Profit for the period
|
|
84.5
|
147.6
|
|
|
|
|
Other comprehensive income/(loss) for the
period:
|
|
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or
loss:
|
|
|
|
Share of other comprehensive income
in joint ventures and associates
|
|
0.4
|
0.8
|
Remeasurements of post-employment
benefit obligations1
|
|
(19.9)
|
(25.8)
|
Actuarial loss on reimbursable
rights1
|
|
-
|
(3.2)
|
Income tax relating to components of
other comprehensive income that will not be reclassified
subsequently to profit or loss
|
|
6.3
|
6.9
|
|
|
|
|
Items that may be reclassified subsequently to profit or
loss:
|
|
|
|
Net exchange loss on translation of
foreign operations2
|
|
(2.3)
|
(43.3)
|
Fair value gain/(loss) on cash flow
hedges during the year2
|
|
0.2
|
(0.7)
|
Tax relating to items that may be
reclassified2
|
|
-
|
0.2
|
Total other comprehensive loss for the
period
|
|
(15.3)
|
(65.1)
|
|
|
|
|
Total comprehensive income for the period
|
|
69.2
|
82.5
|
Attributable to:
|
|
|
|
Equity owners of the
Company
|
|
68.9
|
82.5
|
Non-controlling interest
|
|
0.3
|
-
|
1
|
Recorded in retirement benefit
obligations reserve in the Consolidated Statement of Changes in
Equity.
|
2
|
Recorded in hedging and translation
reserve in the Consolidated Statement of Changes in
Equity.
|
Consolidated Statement of Changes in Equity
For
the period ended 30 June 2024
(unaudited)
|
Share
capital
|
Share premium
account
|
Retained
earnings
|
Other
Reserves
|
Total shareholders'
equity
|
Non-controlling
interest
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Audited balance as at 1 January 2023
|
24.4
|
463.1
|
670.6
|
(129.9)
|
1,028.2
|
1.5
|
Total comprehensive income/(loss)
for the year
|
-
|
-
|
148.4
|
(65.9)
|
82.5
|
-
|
Dividends paid
|
-
|
-
|
(21.2)
|
-
|
(21.2)
|
(1.7)
|
Shares purchased and held in own
share reserve
|
-
|
-
|
-
|
(22.8)
|
(22.8)
|
-
|
Shares purchased and held in
Treasury
|
-
|
-
|
-
|
(88.8)
|
(88.8)
|
-
|
Change in non-controlling
interests
|
-
|
-
|
(1.2)
|
-
|
(1.2)
|
(0.1)
|
Expense in relation to share-based
payments
|
-
|
-
|
-
|
7.1
|
7.1
|
-
|
Unaudited balance as at 30 June 2023
|
24.4
|
463.1
|
796.6
|
(300.3)
|
983.8
|
(0.3)
|
|
|
|
|
|
|
|
Audited balance as at 1 January 2024
|
22.1
|
463.1
|
659.1
|
(110.3)
|
1,034.0
|
(0.3)
|
Total comprehensive income/(loss)
for the year
|
-
|
-
|
84.6
|
(15.7)
|
68.9
|
0.3
|
Dividends paid
|
-
|
-
|
(24.5)
|
-
|
(24.5)
|
-
|
Shares purchased and held in own
share reserve
|
-
|
-
|
-
|
(22.8)
|
(22.8)
|
-
|
Shares committed to be purchased and
held in Treasury until cancelled
|
-
|
-
|
-
|
(12.6)
|
(12.6)
|
-
|
Shares purchased and held in
Treasury until cancelled
|
-
|
-
|
-
|
(57.6)
|
(57.6)
|
-
|
Cancellation of shares held in
Treasury
|
(0.5)
|
-
|
(42.2)
|
42.7
|
-
|
-
|
Tax credit on items taken directly
to equity
|
-
|
-
|
-
|
1.5
|
1.5
|
-
|
Expense in relation to share-based
payments
|
-
|
-
|
-
|
7.8
|
7.8
|
-
|
Unaudited balance as at 30 June 2024
|
21.6
|
463.1
|
677.0
|
(167.0)
|
994.7
|
-
|
Consolidated Balance Sheet
For
the period ended 30 June 2024
(unaudited)
|
|
As at
30 June
2024
|
As at
31 December
2023
|
|
|
unaudited
|
audited
|
|
|
£m
|
£m
|
Non-current assets
|
|
|
|
Goodwill
|
|
938.5
|
906.7
|
Other intangible assets
|
|
117.2
|
115.6
|
Property, plant and
equipment
|
|
55.7
|
44.3
|
Right of use assets
|
|
488.8
|
440.9
|
Interests in joint ventures and
associates
|
|
38.1
|
32.1
|
Trade and other
receivables
|
|
23.1
|
14.8
|
Deferred tax assets
|
|
230.1
|
235.7
|
Retirement benefit assets
|
|
21.3
|
37.4
|
|
|
1,912.8
|
1,827.5
|
Current assets
|
|
|
|
Inventories
|
|
24.9
|
24.1
|
Contract assets
|
|
309.9
|
296.6
|
Trade and other
receivables
|
|
345.8
|
329.0
|
Loan to joint ventures
|
|
-
|
10.0
|
Current tax assets
|
|
18.6
|
23.8
|
Cash and cash equivalents
|
|
142.4
|
94.4
|
Derivative financial
instruments
|
|
1.1
|
4.9
|
|
|
842.7
|
782.8
|
Total assets
|
|
2,755.5
|
2,610.3
|
Current liabilities
|
|
|
|
Contract liabilities
|
|
(38.0)
|
(35.8)
|
Trade and other payables
|
|
(584.5)
|
(558.0)
|
Derivative financial
instruments
|
|
(0.9)
|
(1.7)
|
Current tax liabilities
|
|
(28.8)
|
(18.4)
|
Provisions
|
|
(119.3)
|
(92.9)
|
Obligations under leases
|
|
(153.0)
|
(140.0)
|
Loans
|
|
-
|
(51.0)
|
|
|
(924.5)
|
(897.8)
|
Non-current liabilities
|
|
|
|
Contract liabilities
|
|
(63.8)
|
(59.3)
|
Trade and other payables
|
|
(16.6)
|
(9.2)
|
Derivative financial
instruments
|
|
(0.1)
|
(0.2)
|
Deferred tax liabilities
|
|
(55.0)
|
(50.9)
|
Provisions
|
|
(73.3)
|
(77.4)
|
Obligations under leases
|
|
(347.4)
|
(313.7)
|
Loans
|
|
(273.3)
|
(155.2)
|
Retirement benefit
obligations
|
|
(6.8)
|
(12.9)
|
|
|
(836.3)
|
(678.8)
|
Total liabilities
|
|
(1,760.8)
|
(1,576.6)
|
Net
assets
|
|
994.7
|
1,033.7
|
Equity
|
|
|
|
Share capital
|
|
21.6
|
22.1
|
Share premium account
|
|
463.1
|
463.1
|
Retained earnings
|
|
677.0
|
659.1
|
Other reserves
|
|
(167.0)
|
(110.3)
|
Equity attributable to owners of the Company
|
|
994.7
|
1,034.0
|
Non-controlling interest
|
|
-
|
(0.3)
|
Total equity
|
|
994.7
|
1,033.7
|
Condensed Cash Flow Statement
For
the period ended 30 June 2024
(unaudited)
|
|
2024
|
2023
|
|
|
unaudited
|
unaudited
|
|
|
£m
|
£m
|
Net
cash inflow from underlying operating activities
|
|
189.0
|
199.1
|
Non-underlying items
|
|
-
|
9.7
|
Net
cash inflow from operating activities
|
|
189.0
|
208.8
|
Investing activities
|
|
|
|
Interest received
|
|
2.8
|
1.9
|
Dividends received from joint
ventures and associates
|
|
5.6
|
4.7
|
Loan to joint venture
|
|
-
|
(5.0)
|
Loan repaid by joint
ventures
|
|
10.0
|
5.0
|
Purchase of other intangible
assets
|
|
(3.8)
|
(4.0)
|
Purchase of property, plant and
equipment
|
|
(12.9)
|
(5.4)
|
Proceeds from disposal of property,
plant and equipment
|
|
0.4
|
0.9
|
Proceeds from disposal of intangible
assets
|
|
-
|
1.3
|
Proceeds from disposal of
subsidiary
|
|
-
|
0.2
|
Acquisition of subsidiaries, net of
cash acquired
|
|
(19.3)
|
(6.9)
|
Other investing
activities
|
|
0.1
|
(3.1)
|
Net
cash outflow from investing activities
|
|
(17.1)
|
(10.4)
|
Financing activities
|
|
|
|
Interest paid
|
|
(15.0)
|
(14.3)
|
Capitalised finance costs
paid
|
|
(1.0)
|
-
|
Advances of loans
|
|
118.2
|
65.0
|
Repayments of loans
|
|
(52.8)
|
-
|
Capital element of lease
repayments
|
|
(66.9)
|
(63.0)
|
Cash movements on hedging
instruments
|
|
(0.3)
|
(7.7)
|
Dividends paid to
shareholders
|
|
(24.5)
|
(21.2)
|
Dividends paid to non-controlling
interests
|
|
-
|
(1.7)
|
Purchase of Own Shares for Employee
Share Ownership Trust
|
|
(22.8)
|
(22.8)
|
Own shares repurchased
|
|
(57.6)
|
(88.8)
|
Net
cash outflow from financing activities
|
|
(122.7)
|
(154.5)
|
Net
increase in cash and cash equivalents
|
|
49.2
|
43.9
|
Cash and cash equivalents at beginning of
year
|
|
94.4
|
57.2
|
Net exchange loss
|
|
(1.2)
|
(2.4)
|
Cash and cash equivalents at end of period
|
|
142.4
|
98.7
|
Notes to the Condensed Consolidated Financial
Statements
1. Basis of preparation and accounting
policies
Basis of preparation
These Condensed Financial Statements
have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK.
The annual financial statements of
Serco Group plc are prepared in accordance with UK-adopted
international accounting standards and in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, this condensed set of Financial Statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Group's 2023 audited
financial statements.
The financial information herein for
the period ended 31 December 2023 does not constitute the Company's
statutory accounts as defined in section 434 of the Companies Act
2006 but is derived from those accounts. The auditor's report on
the 2023 accounts was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
No new or amended accounting
standards had a material impact on the Group for the 30 June 2024
reporting period.
Going concern
In assessing the basis of
preparation of the condensed set of financial statements for the
six months ended 30 June 2024, the Directors have considered the
principles of the Financial Reporting Council's 'Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting, 2014'; particularly in assessing the applicability of
the going concern basis, the review period and disclosures. The
period of assessment is considered to be at least 12 months from
the date of approval of these condensed financial
statements.
As at 30 June 2024, the Group's
principal debt facilities comprised a £350m revolving credit
facility maturing in November 2027 (of which £nil was drawn), and
£276.5m of US private placement notes, giving £626.5m of committed
credit facilities and committed headroom of £492.4m, being the
undrawn RCF plus cash of £142.4m. The principal financial covenant
ratios are consistent across the US private placement loan notes
and revolving credit facility. As at 30 June 2024, the Group's
primary restricting covenant, its leverage ratio, is below the
covenant of 3.5x and is below the Group's target range of 1x-2x at
0.56x.
The Directors have undertaken a
rigorous assessment of going concern and liquidity, taking into
account financial forecasts, as well as the potential impact of key
uncertainties and sensitivities on the Group's future performance.
In making this assessment the Directors have considered the Group's
existing debt levels, the committed funding and liquidity positions
under its debt covenants, its ability to generate cash from trading
activities and its working capital requirements. The Directors have
also identified a series of mitigating actions that could be used
to preserve cash in the business should the need arise.
The basis of the assessment
continues to be the Board-approved budget updated to take account
of known changes since, including the impact of the Group's results
for the six months to 30 June 2024. The budget is prepared annually
for the next two-year period and is based on a bottom-up approach
to all of the Group's existing contracts, potential new contracts
and administrative functions.
The Directors believe that
appropriate sensitivities in assessing the Group's ability to
continue as a going concern are to model reductions in the Group's
win rates for bids and extensions, and reductions in profit
margins. Due to the diversity in the Group's operations, the
Directors believe that a reverse stress test of these sensitivities
to assess the headroom available under the Group's debt covenants
and available liquidity provides meaningful analysis of the Group's
ability to continue as a going concern. Based on the headroom
available, the Directors are then able to assess whether the
reductions required to breach the Group's financial covenants, or
exhaust available liquidity, are plausible.
This reverse stress test shows that,
even after assuming that the US private placement loan of £39.5m
due to mature during the assessment period is repaid, and that no
additional refinancing occurs, the Group can afford to be
unsuccessful on 80% of its bids and extensions, combined with a
profit margin 80 basis points below the Group's forecast, and still
retain sufficient liquidity to meet all liabilities as they fall
due and remain compliant with the Group's financial
covenants.
In respect of win rates, rebids and
extensions have a more significant impact on the Group's revenue
than new business wins during the assessment period. The Group has
won more than 85% of its rebids and extensions and available
contract extensions by volume over the last two years. Including
new business, win rates by volume remain high at more than 70%.
Therefore a reduction of 80% or more to the budgeted bid and
extensions rates is not considered plausible.
In respect to margin reduction, due
to the diversified nature of the Group's portfolio of long-term
contracts and the fact that the Group has met or exceeded its full
year guidance for the last five years, a reduction in margin of
80bps versus the Group's budget is not considered plausible within
the assessment period combined with an 80% reduction in bid and
extensions rates.
Consequently, the Directors are
confident that the Group and Company will have sufficient funds to
continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements and
therefore have prepared the condensed financial statements on a
going concern basis.
2.
Segmental information
The Group's operating segments
reflecting the information reported to the Board in 2023 under IFRS
8 Operating Segments are consistent with those reported in the
Group's 2023 audited financial statements.
An analysis of the Group's revenue
from its key market sectors is as follows:
Period ended 30 June 2024
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Key
sectors
|
|
|
|
|
|
Defence
|
174.5
|
452.9
|
86.7
|
12.4
|
726.5
|
Justice & Immigration
|
710.9
|
-
|
156.1
|
-
|
867.0
|
Transport
|
62.8
|
43.9
|
4.5
|
41.3
|
152.5
|
Health & Other Facilities
Management
|
106.6
|
-
|
82.9
|
38.9
|
228.4
|
Citizen Services
|
155.8
|
159.6
|
57.2
|
12.3
|
384.9
|
|
1,210.6
|
656.4
|
387.4
|
104.9
|
2,359.3
|
Period ended 30 June 2023
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Key
sectors
|
|
|
|
|
|
Defence
|
180.7
|
462.4
|
77.8
|
15.6
|
736.5
|
Justice & Immigration
|
620.7
|
-
|
183.1
|
-
|
803.8
|
Transport
|
86.0
|
51.9
|
8.0
|
34.6
|
180.5
|
Health & Other Facilities
Management
|
122.8
|
-
|
108.4
|
42.6
|
273.8
|
Citizen Services
|
208.3
|
186.7
|
72.2
|
10.3
|
477.5
|
|
1,218.5
|
701.0
|
449.5
|
103.1
|
2,472.1
|
The following is an analysis of the
Group's revenue, results, assets and liabilities by reportable
operating segment:
Period ended 30 June 2024
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Corporate
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
1,210.6
|
656.4
|
387.4
|
104.9
|
-
|
2,359.3
|
Result
|
|
|
|
|
|
|
Underlying operating
profit/(loss)1
|
82.9
|
68.8
|
7.8
|
5.7
|
(22.8)
|
142.4
|
Amortisation and impairment of
intangibles arising on acquisition
|
(5.1)
|
(7.8)
|
-
|
-
|
-
|
(12.9)
|
Operating profit/(loss)
|
77.8
|
61.0
|
7.8
|
5.7
|
(22.8)
|
129.5
|
Net finance cost
|
|
|
|
|
|
(15.5)
|
Profit before tax
|
|
|
|
|
|
114.0
|
Tax (charge)/credit
|
|
|
|
|
|
(29.5)
|
Tax on exceptional items
|
|
|
|
|
|
-
|
Profit for the year
|
|
|
|
|
|
84.5
|
Supplementary Information
|
|
|
|
|
|
|
Share of profits in joint ventures
and associates, net of interest and tax
|
11.2
|
-
|
-
|
-
|
-
|
11.2
|
Total depreciation and impairment of
plant, property and equipment and right of use assets
|
(59.7)
|
(9.9)
|
(4.2)
|
(0.9)
|
-
|
(74.7)
|
Amortisation and impairment of
intangible assets
|
(2.8)
|
(0.6)
|
(0.5)
|
(0.1)
|
-
|
(4.0)
|
1
|
Underlying operating profit/(loss)
is defined as operating profit/(loss) before exceptional items and
amortisation and impairment of intangible assets arising on
acquisition.
|
|
|
Period ended 30 June 2023
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Corporate
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
1,218.5
|
701.0
|
449.5
|
103.1
|
-
|
2,472.1
|
Result
|
|
|
|
|
|
|
Underlying operating
profit/(loss)1
|
69.9
|
79.4
|
13.9
|
7.0
|
(22.3)
|
147.9
|
Amortisation and impairment of
intangibles arising on acquisition
|
(1.5)
|
(8.1)
|
(1.8)
|
-
|
-
|
(11.4)
|
Exceptional operating
items2
|
9.9
|
-
|
-
|
-
|
41.3
|
51.2
|
Operating profit/(loss)
|
78.3
|
71.3
|
12.1
|
7.0
|
19.0
|
187.7
|
Net finance cost
|
|
|
|
|
|
(11.0)
|
Profit before tax
|
|
|
|
|
|
176.7
|
Tax (charge)/credit
|
|
|
|
|
|
(26.8)
|
Tax on exceptional items
|
|
|
|
|
|
(2.3)
|
Profit for the year
|
|
|
|
|
|
147.6
|
Supplementary Information
|
|
|
|
|
|
|
Share of profits in joint ventures
and associates, net of interest and tax
|
18.0
|
-
|
-
|
-
|
-
|
18.0
|
Total depreciation and impairment of
plant, property and equipment and right of use assets
|
(50.5)
|
(10.5)
|
(5.3)
|
(1.1)
|
(5.6)
|
(73.0)
|
Amortisation and impairment of
intangible assets
|
(1.0)
|
(0.5)
|
(0.5)
|
-
|
(2.0)
|
(4.0)
|
1
|
Underlying operating profit/(loss)
is defined as operating profit/(loss) before exceptional items and
amortisation and impairment of intangible assets arising on
acquisition.
|
2
|
Included within exceptional
operating items are releases of provisions previously held for
indemnities given on disposed businesses of £41.3m and compensation
received on the early termination of a contract of £9.9m.
Exceptional items incurred by the Corporate segment are not
allocated to other segments. Such items may represent costs that
will benefit the wider business.
|
Period ended 30 June 2024
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Corporate
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Segment assets
|
|
|
|
|
|
|
Interests in joint ventures and
associates
|
37.7
|
-
|
-
|
0.4
|
-
|
38.1
|
Other segment
assets1
|
1,038.8
|
907.8
|
253.9
|
72.1
|
52.6
|
2,325.2
|
Total segment assets
|
1,076.5
|
907.8
|
253.9
|
72.5
|
52.6
|
2,363.3
|
Unallocated
assets2
|
|
|
|
|
|
392.2
|
Consolidated total assets
|
|
|
|
|
|
2,755.5
|
Segment liabilities
|
|
|
|
|
|
|
Segment liabilities
|
(841.4)
|
(168.5)
|
(226.5)
|
(67.4)
|
(98.9)
|
(1,402.7)
|
Unallocated
liabilities2
|
|
|
|
|
|
(358.1)
|
Consolidated total
liabilities
|
|
|
|
|
|
(1,760.8)
|
Supplementary Information
|
|
|
|
|
|
|
Additions to non current
assets3
|
158.9
|
16.3
|
3.2
|
11.0
|
0.1
|
189.5
|
Segment non-current
assets
|
802.7
|
691.7
|
148.0
|
23.5
|
16.8
|
1,682.7
|
Unallocated non-current
assets
|
|
|
|
|
|
230.2
|
1
|
The Corporate segment assets and
liabilities include balance sheet items which provide benefit to
the wider Group, including defined benefit pension schemes and
corporate intangible assets.
|
2
|
Unallocated assets and liabilities
include deferred tax, cash and cash equivalents, derivative
financial instruments and loans.
|
3
|
Additions to non-current assets
reflects additions and amounts arising on acquisition for goodwill,
other intangible assets, property plant and equipment and right of
use assets.
|
Year ended 31 December 2023
|
UK&E
|
North
America
|
Asia
Pacific
|
Middle East
|
Corporate
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Segment assets
|
|
|
|
|
|
|
Interests in joint ventures and
associates
|
31.8
|
-
|
-
|
0.3
|
-
|
32.1
|
Other segment
assets1
|
891.6
|
897.7
|
254.5
|
62.4
|
113.2
|
2,219.4
|
Total segment assets
|
923.4
|
897.7
|
254.5
|
62.7
|
113.2
|
2,251.5
|
Unallocated
assets2
|
|
|
|
|
|
358.8
|
Consolidated total assets
|
|
|
|
|
|
2,610.3
|
Segment liabilities
|
|
|
|
|
|
|
Segment liabilities
|
(725.1)
|
(172.0)
|
(223.5)
|
(54.1)
|
(124.7)
|
(1,299.4)
|
Unallocated
liabilities2
|
|
|
|
|
|
(277.2)
|
Consolidated total
liabilities
|
|
|
|
|
|
(1,576.6)
|
Supplementary Information
|
|
|
|
|
|
|
Additions to non current
assets3
|
125.3
|
16.7
|
8.0
|
2.6
|
15.7
|
168.3
|
Segment non-current
assets
|
677.1
|
688.6
|
151.9
|
13.5
|
60.8
|
1,591.9
|
Unallocated non-current
assets
|
|
|
|
|
|
235.8
|
1
|
The Corporate segment assets and
liabilities include balance sheet items which provide benefit to
the wider Group, including defined benefit pension schemes and
corporate intangible assets.
|
2
|
Unallocated assets and liabilities
include deferred tax, cash and cash equivalents, derivative
financial instruments and loans.
|
3
|
Additions to non-current assets
reflects additions and amounts arising on acquisition for goodwill,
other intangible assets, property plant and equipment and right of
use assets.
|
3.
Acquisitions
On 1 March 2024, the Group acquired
100% of the issued share capital of European Homecare (EHC), a
leading private provider of immigration services in Germany for
cash consideration of €49.5m (£42.2m). The
acquired net assets included €29.3m
(£24.9m) of cash resulting in a net cash
outflow on acquisition of €20.2m
(£17.3m). The operating results, assets and
liabilities have been recognised effective 1 March 2024.
EHC contributed £46.9m of revenue and £8.1m of
operating profit before exceptional items, including an appropriate
allocation of charges for shared support services and fully
allocated overheads, to the Group's results during the period to 30
June 2024.
On 31 January 2024, the Group
acquired 100% of the issued share capital of Climatize, a small but
fast-growing business that operates in the United Arab Emirates and
the Kingdom of Saudi Arabia offering 'zero-carbon' advisory and
related engineering services for total consideration of AED51.3m
(£11.0m). AED11.3m (£2.5m) was paid in cash
and the remaining AED40.0m (£8.5m) is the fair value of the contingent consideration
payable on achieving certain financial targets. The acquired net
assets included AED2.4m (£0.5m) of cash resulting in a net cash outflow on
acquisition of AED8.9m (£2.0m). The operating results, assets and liabilities
have been recognised effective 31 January 2024.
Climatize contributed £0.5m of revenue and £0.1m of
operating profit before exceptional items, including an appropriate
allocation of charges for shared support services and fully
allocated overheads, to the Group's results during the period to 30
June 2024.
The provisional fair values of the
two acquisitions undertaken during the period are summarised
below:
|
Provisional fair values
EHC
|
Provisional fair values
Climatize
|
Total
|
|
£m
|
£m
|
£m
|
Goodwill
|
20.5
|
9.7
|
30.2
|
Other intangible assets
|
15.5
|
-
|
15.5
|
Property, plant and
equipment
|
6.7
|
-
|
6.7
|
Right of use assets
|
1.6
|
-
|
1.6
|
Trade and other
receivables
|
28.0
|
0.8
|
28.8
|
Cash and cash equivalents
|
24.9
|
0.5
|
25.4
|
Trade and other payables
|
(8.7)
|
-
|
(8.7)
|
Provisions
|
(26.4)
|
-
|
(26.4)
|
Corporation tax
liabilities
|
(13.7)
|
-
|
(13.7)
|
Deferred tax liabilities
|
(4.7)
|
-
|
(4.7)
|
Lease obligations
|
(1.5)
|
-
|
(1.5)
|
Acquisition date fair value of consideration
transferred
|
42.2
|
11.0
|
53.2
|
Satisfied by:
|
|
|
|
Cash consideration
|
42.2
|
2.5
|
44.7
|
Contingent consideration on
acquisition
|
-
|
8.5
|
8.5
|
Total consideration
|
42.2
|
11.0
|
53.2
|
The total impact of acquisitions to
the Group's cash flow position in the period was as
follows:
|
£m
|
Cash consideration
|
44.7
|
Cash acquired on acquisition of
businesses
|
(25.4)
|
Net
cash outflow in respect of acquisitions
|
19.3
|
Acquisition related costs
|
0.8
|
Net
cash impact in the year on acquisitions
|
20.1
|
4.
Exceptional operating items
Exceptional items are items of
financial performance that are outside normal operations and are
material to the results of the Group either by virtue of size or
nature. As such, the items set out below require separate
disclosure on the face of the income statement to assist in the
understanding of the performance of the Group.
|
2024
|
2023
|
Period ended 30 June
|
£m
|
£m
|
Compensation received on the early
termination of contractual services
|
-
|
9.9
|
Release of provisions held for
indemnities given on disposed businesses
|
-
|
41.3
|
Exceptional operating items
|
-
|
51.2
|
Exceptional tax (charge)
|
-
|
(2.3)
|
Total exceptional operating items net of tax
|
-
|
48.9
|
5.
Tax
The tax charge for the six months
ended 30 June 2024 is calculated using the full year forecasted
effective tax rate by taxable entity which is then applied to the
actual profit for the period in each taxable entity. The tax
impacts of items specific to the period are then included to
provide the half year actual tax charge.
A total tax charge of £29.5m includes an underlying tax charge of
£33.0m and a tax credit on amortisation of
intangibles arising on acquisition of £3.5m.
The current rate of 25.9% is slightly higher than the UK statutory rate of
25%. This is mainly due to higher rates of tax on profits arising
on international operations, a charge that arises in relation to
prior years where tax positions have now been finalised and the
impact of losses made in companies overseas where forecast profits
are such that deferred tax is not recognised. This is only
partially offset by the impact of profits made by joint ventures
whose post tax profits are included in the Group's profit before
tax.
A £175.1m deferred tax asset is
recognised on the balance sheet as at 30 June 2024 (31 December
2023: £184.8m) of which £174.2m relates to the UK (31 December
2023: £179.9m).
6.
Earnings per share
Basic earnings per share is
calculated by dividing the profit after tax attributable to owners
of the Company by the weighted average number of shares in issue,
after deducting the own shares held by employee share ownership
trusts and treasury shares, and adding back vested share options
not exercised.
In calculating the diluted earnings
per share, unvested share options outstanding have been taken into
account where the impact of these is dilutive.
The calculation of the basic and
diluted EPS is based on the following data:
Period ended 30 June
|
2024
|
2023
|
Number of shares
|
millions
|
millions
|
Weighted average number of ordinary
shares for the purpose of basic EPS
|
1,082.0
|
1,125.5
|
Effect of dilutive potential
ordinary shares: Shares under award
|
14.1
|
13.7
|
Weighted average number of ordinary
shares for the purpose of diluted EPS
|
1,096.1
|
1,139.2
|
Earnings per share
|
Earnings
|
Per share
amount
|
Earnings
|
Per share
amount
|
Period ended 30 June
|
2024
|
2024
|
2023
|
2023
|
Basic EPS
|
£m
|
pence
|
£m
|
pence
|
Earnings for the purpose of basic
EPS
|
84.2
|
7.78
|
147.6
|
13.11
|
Effect of dilutive potential
ordinary shares
|
-
|
(0.10)
|
-
|
(0.15)
|
Diluted EPS
|
84.2
|
7.68
|
147.6
|
12.96
|
7.
Goodwill
At 30 June 2024 the carrying value
of goodwill was £938.5m (31 December 2023: £906.7m). The net
increase is primarily due to £30.2m arising
on acquisition, refer to Note 3.
Goodwill is stated at cost less any
provision for impairment and is compared against the associated
recoverable amount at least annually. The value of each cash
generating unit (CGU) is based on value in use calculations derived
from forecast cash flows based on past experience, adjusted to
reflect market trends, economic conditions and key risks. These
forecasts include an estimate of new business wins and an
assumption that the final year forecast continues on into
perpetuity at a CGU specific growth rate.
Goodwill is required to be tested
for impairment at least once every financial year, irrespective of
whether there is any indication of impairment. The annual
impairment review typically takes place in the final quarter of the
year. However, if there are indicators of impairment, an earlier
review is also required.
In assessing for indicators of
impairment, the Group has gathered information internally and
externally, at both macro and micro levels, globally and on the
basis of the individual geographies in which the Group operates.
Factors that were considered included, but were not limited
to:
-
|
Any obsolescence indicators within
the Group's physical assets;
|
-
|
Any plans to dispose of CGUs or
significant portions of CGUs;
|
-
|
Indicators of worse than expected
financial and bidding performance to an extent that would have
caused an impairment had they been known at the time of the latest
full impairment review;
|
-
|
Unfavourable market conditions and
valuations; or
|
-
|
Carrying amounts of net assets in
excess of market capitalisation.
|
There have been no indicators of
impairment identified since the full impairment test undertaken as
at 31 December 2023. However, the risks associated with the Asia
Pacific CGU outlined in the 2023 Annual Report and Accounts remain
and therefore a review of these has been performed for the period
ending 30 June 2024.
Asia Pacific CGU
Consistent with the impairment test
performed as at 31 December 2023 and outlined in the 2023 Annual
Report and Accounts, the 2023 risk adjusted Board-approved
five-year plan for the Asia Pacific Division supports the headroom
held against the CGU. The key judgements taken in respect of the
divisional plan are as follows:
-
|
Win rates by value are in line with
the five-year average being 15% for new business and 63% for
rebids.
|
-
|
The immigration rebid delivers cash
flows beyond 2024; and
|
-
|
There is no significant
deterioration within the outsourcing market in the
region.
|
In the period to 30 June 2024,
following local management changes, a full review of the pipeline
has been performed and actions identified to ensure opportunities
are prioritised based on capability and sector focus. Whilst
positive progress has been made, it is expected that it will take
time for these actions to result in observable improvements in the
pipeline and win rates. In addition, Management has made good
progress in the delivery of its cost rationalisation programme with
structural savings having been realised. Costs incurred in the
period in relation to restructuring have been expensed within
underlying operating profit.
The Group is awaiting the outcome of
the Immigration rebid which is now expected in the second half of
2024 and as such the Directors continue to believe on balance that
the contract is likely to be retained given the Group's experience
in delivering the existing contract, and the general rebid rates it
achieves. However, as noted in the 2023 Annual Report and Accounts,
a loss would impact the Division's ability to deliver the five-year
plan if no opportunities are secured to replace the cash flows
delivered by the contract.
The Directors continue to highlight
the risk of impairment of the entire goodwill balance of the CGU if
win rates on new business do not improve, and sufficient credible
opportunities are not identified. Win rates not improving, or the
loss of the Immigration rebid, would require further review of the
efficiency of the Asia Pacific Division and may result in a further
review of the overhead and support structures in place to ensure
that they are appropriate for the scale of business and
opportunities available.
8.
Analysis of net debt
The analysis below provides a
reconciliation between the opening and closing positions in the
balance sheet for liabilities arising from financing activities
together with movements in derivatives relating to the items
included in net debt. There were no changes in fair value noted in
either the current or prior year.
|
As at 1 January
2024
|
Cash flow
|
Acquisitions1
|
Exchange
differences
|
Non-cash
movements2
|
As at 30
June
2024
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Loans payable
|
(206.2)
|
(65.4)
|
-
|
(2.2)
|
0.5
|
(273.3)
|
Lease obligations
|
(453.7)
|
66.9
|
(1.5)
|
0.8
|
(112.9)
|
(500.4)
|
Liabilities arising from financing
activities
|
(659.9)
|
1.5
|
(1.5)
|
(1.4)
|
(112.4)
|
(773.7)
|
Cash and cash equivalents
|
94.4
|
23.8
|
25.4
|
(1.2)
|
-
|
142.4
|
Derivatives relating to net
debt
|
3.1
|
-
|
-
|
(3.0)
|
-
|
0.1
|
Net
debt
|
(562.4)
|
25.3
|
23.9
|
(5.6)
|
(112.4)
|
(631.2)
|
1
|
Acquisitions represent the net
cash/(debt) acquired on acquisition.
|
2
|
Non-cash movements on loans payable
relate to movement in capitalised finance costs in the year. For
lease obligations non-cash movements relate to the net impact of
entering into new leases and exiting certain leases before the end
of the lease term without payment of a cash termination
cost.
|
9.
Provisions
|
Employee
related
|
Property
|
Contract
|
Claims
|
Other
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
As at 1 January 2024
|
83.9
|
23.2
|
16.7
|
25.6
|
20.9
|
170.3
|
Arising on acquisition
|
-
|
-
|
0.3
|
-
|
26.1
|
26.4
|
Charge capitalised in right of use
assets
|
-
|
1.0
|
-
|
-
|
-
|
1.0
|
Charged to income
statement
|
7.3
|
1.0
|
1.6
|
3.9
|
1.6
|
15.4
|
Released to income
statement
|
(1.7)
|
(3.0)
|
-
|
(1.3)
|
(2.5)
|
(8.5)
|
Utilised during the year
|
(4.6)
|
(0.9)
|
(1.8)
|
(2.4)
|
(1.1)
|
(10.8)
|
Exchange differences
|
(0.9)
|
-
|
(0.1)
|
-
|
(0.2)
|
(1.2)
|
As
at 30 June 2024
|
84.0
|
21.3
|
16.7
|
25.8
|
44.8
|
192.6
|
Analysed as:
|
|
|
|
|
|
|
Current
|
57.0
|
6.4
|
10.6
|
4.6
|
40.7
|
119.3
|
Non-current
|
27.0
|
14.9
|
6.1
|
21.2
|
4.1
|
73.3
|
|
84.0
|
21.3
|
16.7
|
25.8
|
44.8
|
192.6
|
Employee-related provisions include
amounts for long-term service awards and terminal gratuity
liabilities which have been accrued and are based on contractual
entitlement, together with an estimate of the probabilities that
employees will stay until rewards fall due and receive all relevant
amounts. The provisions will be utilised over various periods
driven by attrition and demobilisation of contracts, the timing of
which is uncertain. There are also amounts included in relation to
restructuring.
The majority of property provisions
relate to leased properties and are associated with the requirement
to return properties to either their original condition, or to
enact specific improvement activities in advance of exiting the
lease. Dilapidations associated with leased properties are held as
a provision until such time as they fall due, with the longest
running lease ending in March 2037.
A contract provision is recorded
when a contract is deemed to be unprofitable and therefore is
considered onerous. The present value of the estimated future cash
outflow required to settle the contract obligations as they fall
due over the respective contracts has been used in determining the
provision.
Claims provisions relate to claims
made against the Group. These claims are varied in nature, although
they typically come from either the Group's service users,
claimants for vehicle-related incidents or the Group's employees.
While there is some level of judgement on the amount to be
recorded, in almost all instances the variance to the actual claim
paid out will not individually be material; however, the timing of
when the claims are reported and settled is less certain as a
process needs to be followed prior to the amounts being
paid.
Included within other
provisions:
-
|
£20.4m relates to legal and other
costs that the Group expects to incur over an extended period, in
respect of past events for which a provision has been recorded,
none of which are individually material.
|
-
|
£24.4m relates to a provision in
respect of a contingent liability recognised on the acquisition of
EHC. The Directors have assessed that a present obligation exists
in respect of the treatment of certain historic transactions and
have measured the fair value of these as required by IFRS 3
Business Combinations
notwithstanding that the outflow of economic benefits is not
probable. This provision will be reassessed at each reporting date
as the risk associated with the contingent liability progressively
reduces and in due course expires.
|
Individual provisions are only
discounted where the impact is assessed to be significant.
Currently, the effect of discounting is not material.
10.
Contingent liabilities
The Group and its subsidiaries have
provided certain guarantees and indemnities in respect of
performance and other bonds, issued by its banks on its behalf in
the ordinary course of business. The total commitment outstanding
as at 30 June 2024 was £215.1m (31 December 2023:
£214.4m).
The Group has guaranteed overdrafts,
finance leases and bonding facilities of its joint ventures and
associates up to a maximum value of £5.7m (31 December 2023:
£5.7m). The actual commitment outstanding at 30 June 2024 was
£5.7m (31 December 2023: £5.7m).
The Group has previously disclosed a
contingent liability in respect of damages for alleged losses as a
result of the reduction in Serco's share price in 2013. The claim
has now been resolved with no material impact to the Group's
financial statements.
The Group is also aware of other
claims and potential claims which involve or may involve legal
proceedings against the Group although the timing of settlement of
these claims remains uncertain. The Directors are of the opinion,
having regard to legal advice received and the Group's insurance
arrangements, that it is unlikely that these matters will, in
aggregate, have a material effect on the Group's financial
position.
11.
Financial risk management
The vast majority of financial
instruments are held at amortised cost. The classification of the
fair value measurement falls into three levels, based on the degree
to which the fair value is observable. The levels are as
follows:
Level
1:
|
Inputs derived from unadjusted
quoted prices in active markets for identical assets or
liabilities.
|
Level
2:
|
Inputs that are observable for the
asset or liability, either directly or indirectly, other than
quoted prices included within Level 1.
|
Level
3:
|
Inputs are unobservable inputs for
the asset or liability.
|
Based on the above, derivative
financial instruments held by the Group at 30 June 2024 fall
into Level 2, and contingent consideration, as outlined in Note 3,
is considered to fall into Level 3. Market prices are sourced from
Bloomberg and third party valuations. The valuation models
incorporate various inputs including foreign exchange spot and
forward rates and interest rate curves.
There have been no transfers between
levels in the year.
12.
Retirement benefit schemes
Period ended 30 June
|
2024
|
2023
|
Recognised in the income statement
|
£m
|
£m
|
Current service cost -
employer
|
3.5
|
2.8
|
Administrative expenses and
taxes
|
0.4
|
0.8
|
Recognised in arriving at operating profit
|
3.9
|
3.6
|
Interest income on scheme assets -
employer
|
(23.7)
|
(25.3)
|
Interest cost on scheme liabilities
- employer
|
22.8
|
23.8
|
Finance income
|
(0.9)
|
(1.5)
|
Total recognised in the income statement
|
3.0
|
2.1
|
|
2024
|
2023
|
Included within the Statement of Comprehensive
Income
|
£m
|
£m
|
Actual return on scheme
assets
|
(24.6)
|
(18.2)
|
Less: interest income on scheme
assets
|
(23.7)
|
(25.3)
|
Net return on scheme
assets
|
(48.3)
|
(43.5)
|
Effect of changes in demographic
assumptions
|
2.3
|
-
|
Effect of changes in financial
assumptions
|
27.5
|
37.1
|
Effect of experience
adjustments
|
(1.4)
|
(19.4)
|
Remeasurements
|
(19.9)
|
(25.8)
|
Change in franchise
adjustment
|
-
|
(1.9)
|
Change in members' share
|
-
|
(1.3)
|
Actuarial loss on reimbursable rights
|
-
|
(3.2)
|
Total recognised in the Statement of Comprehensive
Income
|
(19.9)
|
(29.0)
|
The assets and liabilities of the
schemes are:
|
Fair value
of
scheme
assets
|
Present value of scheme
liabilities
|
Surplus/(deficit)
|
Fair value
of
scheme
assets
|
Present value of scheme
liabilities
|
Surplus/(deficit)
|
|
As at 30
June
|
As at 30
June
|
As at 30
June
|
As at 31
December
|
As at 31
December
|
As at 31
December
|
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
SPLAS1
|
873.1
|
(855.8)
|
17.3
|
917.0
|
(886.5)
|
30.5
|
ORS
|
77.7
|
(83.6)
|
(5.9)
|
68.5
|
(80.5)
|
(12.0)
|
RPS
|
63.9
|
(60.8)
|
3.1
|
66.7
|
(60.8)
|
5.9
|
Other Schemes in surplus
|
3.8
|
(2.9)
|
0.9
|
3.8
|
(2.8)
|
1.0
|
Other schemes in deficit
|
1.0
|
(1.9)
|
(0.9)
|
1.1
|
(2.0)
|
(0.9)
|
Net
retirement benefit asset2
|
1,019.5
|
(1,005.0)
|
14.5
|
1,057.1
|
(1,032.6)
|
24.5
|
1
|
The SPLAS Trust Deed gives the Group
an unconditional right to a refund of surplus assets assuming the
gradual settlement of plan liabilities over time until all members
have left the plan. Pension assets are deemed to be recoverable and
there are no adjustments in respect of minimum funding requirements
as economic benefits are available to the Group either in the form
of future refunds or in the form of possible reductions in future
contributions.
|
2
|
Net retirement benefit asset (before
tax) is split between schemes with a pension asset £21.3m (31
December 2023: £37.4m) and a pension liability £6.8m (31 December
2023: £12.9m).
|
Actuarial assumptions:
The assumptions set out below are
for SPLAS, which reflects 86% of total
assets and 85% of total liabilities of the defined benefit pension
schemes in which the Group participates. The significant actuarial
assumptions with regards to the determination of the defined
benefit obligation are set out below.
|
As at 30
June
|
As at 31
December
|
|
2024
|
2023
|
Significant actuarial assumptions
|
%
|
%
|
Discount rate1
|
5.15
|
4.80
|
Rate of salary increases
|
3.05
|
2.85
|
RPI Inflation
|
3.15
|
3.05
|
CPI Inflation
|
2.55
|
2.35
|
1
|
In 2024, the yield curve used to
derive discount rates was updated to incorporate expanded corporate
bond data. This adjustment resulted in a 0.15% decrease in the
discount rate. If this change had occurred in isolation, there
would have been an approximate £16m increase in the present value
of scheme liabilities. The impact of this adjustment is reported
within the 'effects of changes in financial assumptions' reported
in the Statement of Comprehensive Income.
|
|
As at 30
June
|
As at 31
December
|
|
2024
|
2023
|
Post-retirement mortality1
|
years
|
years
|
Current pensioners at 65 -
male
|
20.8
|
20.9
|
Current pensioners at 65 -
female
|
23.6
|
23.6
|
Future pensioners at 65 -
male
|
22.8
|
22.8
|
Future pensioners at 65 -
female
|
25.7
|
25.6
|
1
|
The mortality assumptions for 30
June 2024 reflects the latest available mortality tables CMI_2023
compared to 31 December 2023 reflecting CMI_2022.
|
13.
Related party transactions
Transactions between the Company and
its wholly-owned subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Transactions between the Group and its joint venture undertakings
and associates are disclosed below. During the year, Group
companies entered into the following transactions with joint
ventures and associates:
|
Transactions
|
Current
outstanding
|
Non-current
outstanding
|
Transactions
|
Current
outstanding
|
Non-current
outstanding
|
|
As at 30
June
|
As at 30
June
|
As at 30
June
|
As at 30
June
|
As at 30
June
|
As at 30
June
|
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Sale of goods and services
|
|
|
|
|
|
|
Joint
ventures1
|
10.3
|
0.9
|
-
|
6.9
|
2.2
|
-
|
Other transactions
|
|
|
|
|
|
|
Loan receivable from joint
ventures2
|
10.0
|
-
|
-
|
-
|
-
|
10.0
|
Dividends received - joint
ventures
|
5.6
|
-
|
-
|
4.7
|
-
|
-
|
Receivable from consortium for tax -
joint ventures2
|
7.3
|
11.0
|
7.3
|
3.8
|
0.8
|
7.0
|
Total
|
33.2
|
11.9
|
7.3
|
15.4
|
3.0
|
17.0
|
1
|
Sales of goods and services to joint
ventures relates to services provided including administrative and
back office activities to VIVO.
|
2
|
Joint venture receivable and loan
amounts outstanding have arisen from transactions undertaken during
the general course of trading, are unsecured and will be settled in
cash.
|
|
|
14.
Notes to the Consolidated Cash Flow statement
Period ended 30 June
|
2024
Underlying
£m
|
2024
Non
underlying
items
£m
|
2024
Reported
£m
|
2023
Underlying
£m
|
2023
Non
underlying
items
£m
|
2023
Reported
£m
|
Profit/(loss) before tax
|
126.9
|
(12.9)
|
114.0
|
136.9
|
39.8
|
176.7
|
Net finance costs
|
15.5
|
-
|
15.5
|
11.0
|
|
11.0
|
Operating profit/(loss) for the year
|
142.4
|
(12.9)
|
129.5
|
147.9
|
39.8
|
187.7
|
Adjustments for:
|
|
|
|
|
|
|
Share of profits in joint ventures
and associates
|
(11.2)
|
-
|
(11.2)
|
(18.0)
|
-
|
(18.0)
|
Share-based payment
expense
|
7.8
|
-
|
7.8
|
7.1
|
-
|
7.1
|
Impairment of intangible
assets
|
-
|
2.0
|
2.0
|
-
|
-
|
-
|
Amortisation of intangible
assets
|
4.0
|
10.9
|
14.9
|
4.0
|
11.4
|
15.4
|
Impairment of property, plant and
equipment
|
(0.3)
|
-
|
(0.3)
|
0.9
|
-
|
0.9
|
Depreciation of property, plant and
equipment
|
8.0
|
-
|
8.0
|
9.0
|
-
|
9.0
|
Depreciation of right of use
assets
|
66.9
|
-
|
66.9
|
63.1
|
-
|
63.1
|
(Profit) on disposal of intangible
assets
|
-
|
-
|
-
|
(1.2)
|
-
|
(1.2)
|
(Profit) on disposal of property,
plant and equipment
|
(0.1)
|
-
|
(0.1)
|
(0.2)
|
-
|
(0.2)
|
Other non-cash movements
|
-
|
-
|
-
|
(1.3)
|
-
|
(1.3)
|
(Decrease) in provisions
|
(3.9)
|
-
|
(3.9)
|
(0.3)
|
(41.5)
|
(41.8)
|
Total non-cash items
|
71.2
|
12.9
|
84.1
|
63.1
|
(30.1)
|
33.0
|
Operating cash inflow before movements in working
capital
|
213.6
|
-
|
213.6
|
211.0
|
9.7
|
220.7
|
(Increase) in inventories
|
(0.8)
|
-
|
(0.8)
|
(1.5)
|
-
|
(1.5)
|
(Increase)/decrease in
receivables
|
(17.6)
|
-
|
(17.6)
|
43.0
|
-
|
43.0
|
Decrease/(increase) in
payables
|
9.3
|
-
|
9.3
|
(28.7)
|
-
|
(28.7)
|
Movements in working capital
|
(9.1)
|
-
|
(9.1)
|
12.8
|
-
|
12.8
|
Cash generated by operations
|
204.5
|
-
|
204.5
|
223.8
|
9.7
|
233.5
|
Tax paid
|
(15.5)
|
-
|
(15.5)
|
(24.7)
|
-
|
(24.7)
|
Net
cash inflow from operating activities
|
189.0
|
-
|
189.0
|
199.1
|
9.7
|
208.8
|
15.
Post balance sheet events
Share
Buyback
Subsequent to the period end, the
Group purchased a further 5,667,779 of its own shares at a cost (before fees) of £10.6m,
resulting in £67.9m of the £140m share buyback programme being
completed.
Dividends
Subsequent to the period end, the
Board has declared an interim dividend of 1.34p per share in
respect of the six months ended 30 June 2024.
Additional information
Notes to financial results summary table and
highlights:
Alternative performance measure
|
Relevance to strategy
|
Underlying operating profit
(UOP)
|
The level of absolute UOP and the
relationship of UOP with revenue - i.e. the margin we earn on what
our customers pay us - is at the heart of our aspiration to be
profitable and sustainable. We believe the delivery of strategic
success has potential to support annual revenue growth of 4-6%, in
the medium term, and trading margins of 5-6%.
|
Underlying earnings per share (EPS),
diluted
|
EPS builds on the relevance of UOP,
and further reflects the achievement of being profitable and
sustainable by taking into account not just our ability to grow
revenue and margin but also the strength and costs of our financial
funding and tax arrangements. EPS is therefore a measure of
financial return for our shareholders.
|
Free cash flow (FCF)
|
FCF is a reflection of the
sustainability of the business, by showing how much of our effort
turns into cash to reinvest back into the business or to deploy in
other ways. Our philosophy is we should only win business that
generates appropriate cash returns, and 'executing well' includes
appropriate management of our working capital cash flow
cycles.
|
Underlying return on invested
capital (ROIC)
|
ROIC measures how efficiently the
Group uses its capital to generate returns from its assets. To be a
sufficiently profitable and sustainable business, a return must be
achieved that is appropriately above a cost of capital hurdle
reflective of the typical returns required by our weighting of
equity and debt capital.
|
Pipeline of larger new bid
opportunities
|
The pipeline provides a key area of
potential for winning good business and therefore is a major input
to being profitable and sustainable. The size of the pipeline and
our win-rate on the bids within it are at the heart of our strategy
to grow the business.
|
Order book
|
The order book reflects progress
with winning good business, including retaining existing work and
as a store of future value, it is a key measure to ensure the Group
is profitable and sustainable. The value of how much is added to
the order book compared to how much revenue we are billing our
customers - the book-to-bill ratio - is key to achieving long-term
growth.
|
Alternative revenue measures
Revenue is as defined under IFRS,
which excludes Serco's share of revenue of its joint ventures and
associates. Organic revenue growth is the change at constant
currency after adjusting to exclude the impact of relevant
acquisitions or disposals. Constant currency is calculated by
translating non-sterling values for the Period ended 30 June into
sterling at the average exchange rates for the prior period. A
reconciliation of reported revenue to the alternative revenue
measures is as follows:
|
Statutory
Revenue
|
Statutory
Revenue
|
Organic
Revenue
|
Organic
Revenue
|
Revenue plus share of joint
ventures and associates
|
Revenue plus share of joint
ventures and associates
|
Period ended 30 June
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Alternative revenue measure at
constant currency
|
2,404.8
|
2,472.1
|
2,356.2
|
2,472.1
|
2,672.4
|
2,700.5
|
Foreign exchange
differences
|
(45.5)
|
-
|
(44.3)
|
-
|
(45.5)
|
-
|
Alternative revenue measure at reported
currency
|
2,359.3
|
2,472.1
|
2,311.9
|
2,472.1
|
2,626.9
|
2,700.5
|
Impact of relevant acquisitions or
disposals
|
-
|
-
|
47.4
|
-
|
-
|
-
|
Share of joint venture and
associates
|
-
|
-
|
-
|
-
|
(267.6)
|
(228.4)
|
Reported revenue at reported currency
|
2,359.3
|
2,472.1
|
2,359.3
|
2,472.1
|
2,359.3
|
2,472.1
|
Alternative profit measures
Underlying operating profit is
defined as IFRS Operating Profit excluding amortisation of
intangibles arising on acquisition and exceptional items.
Consistent with IFRS, it includes Serco's share of profit after
interest and tax of its joint ventures and associates. Constant
currency is calculated by translating non-sterling values for the
Period ended 30 June into sterling at the average exchange rates
for the prior period. A reconciliation of underlying operating
profit to reported operating profit is as follows:
Period ended 30 June
|
2024
|
2023
|
|
£m
|
£m
|
Underlying operating profit at
constant currency
|
145.6
|
147.9
|
Foreign exchange
differences
|
(3.2)
|
-
|
Underlying operating profit at reported
currency
|
142.4
|
147.9
|
Amortisation and impairment of
intangibles arising on acquisition
|
(12.9)
|
(11.4)
|
Exceptional operating
items
|
-
|
51.2
|
Reported operating profit at reported
currency
|
129.5
|
187.7
|
Underlying EPS
Underlying EPS is derived from the
underlying operating profit measure after deducting pre-exceptional
net finance costs and related tax effects. A reconciliation of
underlying EPS to reported EPS is as follows:
|
2024
|
2023
|
2024
|
2023
|
Period ended 30 June
|
basic
pence
|
basic
pence
|
diluted
pence
|
diluted
pence
|
Underlying EPS
|
8.65
|
9.52
|
8.54
|
9.40
|
Non-underlying items:
|
|
|
|
|
Net impact of non-underlying
operating items, non underlying tax and amortisation and impairment
of intangibles arising on acquisition
|
(0.87)
|
(0.75)
|
(0.86)
|
(0.74)
|
Exceptional operating items, net of
tax
|
-
|
4.34
|
-
|
4.30
|
Reported EPS
|
7.78
|
13.11
|
7.68
|
12.96
|
Alternative cash flow measures
Free cash flow is the net cash flow
from operating activities adjusted to remove the impact of
non-underlying cash flows from operating activities, adding
dividends we receive from joint ventures and associates and
deducting net interest, net capital expenditure on tangible and
intangible asset purchases and the purchase of own shares to
satisfy share awards.
In order to calculate an appropriate
cash conversion metric equivalent to UOP, trading cash flow is
derived from FCF by excluding capitalised finance costs, interest,
non-cash R&D expenditure and tax items. Trading cash conversion
therefore provides a measure of the efficiency of the business in
terms of converting profit into cash before taking account of the
impact of capitalised finance costs, interest, non-cash R&D
expenditure, tax and non-underlying items.
A reconciliation of underlying
operating profit to trading cash flow is as follows:
Period ended 30 June
|
2024
|
2023
|
|
£m
|
£m
|
Underlying operating profit
|
142.4
|
147.9
|
Less: Share of profit from joint
ventures and associates
|
(11.2)
|
(18.0)
|
Movement in provisions
|
(3.9)
|
(0.3)
|
Depreciation, amortisation and
impairment of property, plant and equipment and intangible
assets
|
11.7
|
13.9
|
Depreciation and impairment of right
of use assets
|
66.9
|
63.1
|
Other non-cash movements
|
7.7
|
4.4
|
Working capital movements
|
(9.1)
|
12.8
|
Tax paid
|
(15.5)
|
(24.7)
|
Net
cash inflow from underlying operating activities
|
189.0
|
199.1
|
Dividends from joint ventures and
associates
|
5.6
|
4.7
|
Net interest paid
|
(12.2)
|
(12.4)
|
Capitalised finance costs
paid
|
(1.0)
|
-
|
Capital element of lease
repayments
|
(66.9)
|
(63.0)
|
Purchase of own shares to satisfy
share awards
|
(22.8)
|
(22.8)
|
Purchase of intangible and tangible
assets net of proceeds from disposal
|
(16.4)
|
(7.2)
|
Free cash flow
|
75.3
|
98.4
|
Add back:
|
|
|
Tax paid
|
15.5
|
24.7
|
Net interest paid
|
12.2
|
12.4
|
Capitalised finance costs
paid
|
1.0
|
-
|
Trading cash flow
|
104.0
|
135.5
|
Underlying Operating Profit
|
142.4
|
147.9
|
Trading cash conversion
|
73%
|
92%
|
Adjusted net debt
Adjusted net debt is used by Serco
as an additional non-IFRS Alternative Performance Measure (APM).
This measure more closely aligns with the covenant measure for the
Group's financing facilities than reported net debt because it
excludes all lease liabilities including those recognised under
IFRS 16 Leases.
Period ended 30 June
|
2024
|
2023
|
|
£m
|
£m
|
Free cash flow
|
75.3
|
98.4
|
Net cash outflow on acquisition and
disposal of subsidiaries, joint ventures and associates
|
(19.3)
|
(6.7)
|
Dividends paid to non-controlling
interests
|
-
|
(1.7)
|
Dividends paid to
shareholders
|
(24.5)
|
(21.2)
|
Purchase of own shares
|
(57.6)
|
(88.8)
|
Movements on other investment
balances
|
-
|
(3.1)
|
Loans repaid from joint
venture
|
10.0
|
-
|
Capitalisation and amortisation of
loan costs
|
0.5
|
(0.4)
|
Exceptional items
|
-
|
9.7
|
Cash movements on hedging
instruments
|
(0.3)
|
(7.7)
|
Foreign exchange (loss)/gain on
adjusted net debt
|
(6.2)
|
9.7
|
Movement in adjusted net debt
|
(22.1)
|
(11.8)
|
Opening adjusted net debt - 1
January
|
(108.7)
|
(203.9)
|
Closing adjusted net debt - 30 June
|
(130.8)
|
(215.7)
|
Reported net debt includes all lease
liabilities, including those recognised under IFRS 16 Leases. A
reconciliation of adjusted net debt to reported net debt is as
follows:
|
As at 30
June
|
As at 31
December
|
|
2024
|
2023
|
|
£m
|
£m
|
Cash and cash equivalents
|
142.4
|
94.4
|
Loans payable
|
(273.3)
|
(206.2)
|
Lease liabilities
|
(500.4)
|
(453.7)
|
Derivatives relating to net
debt
|
0.1
|
3.1
|
Reported net debt
|
(631.2)
|
(562.4)
|
Add back: Lease
liabilities
|
500.4
|
453.7
|
Adjusted net debt
|
(130.8)
|
(108.7)
|
Return on invested capital (ROIC)
ROIC is a measure to assess the
efficiency of the resources used by the Group and is a metric used
to determine the performance and remuneration of the Executive
Directors. ROIC is calculated based on UOP, using the income
statement for the period and a two-point average of the invested
capital. The composition of Invested capital and calculation of
ROIC are summarised in the table below.
|
As at 30
June
|
As at 31
December
|
As at 30
June
|
|
2024
|
2023
|
2023
|
|
£m
|
£m
|
£m
|
ROIC excluding right of use assets
|
|
|
|
Non
current assets
|
|
|
|
Goodwill
|
938.5
|
906.7
|
908.5
|
Other intangible assets -
owned
|
117.2
|
115.6
|
134.0
|
Property, plant and equipment -
owned
|
55.7
|
44.3
|
41.7
|
Interest in joint
ventures
|
38.1
|
32.1
|
37.3
|
Loans to joint ventures
|
-
|
-
|
10.0
|
Contract assets, trade and other
receivables
|
23.1
|
14.8
|
14.3
|
Current assets
|
|
|
|
Inventory
|
24.9
|
24.1
|
23.1
|
Loans to joint ventures
|
-
|
10.0
|
-
|
Contract assets, trade and other
receivables
|
655.7
|
625.6
|
646.0
|
Total invested capital assets
|
1,853.2
|
1,773.2
|
1,814.9
|
Current liabilities
|
|
|
|
Contract liabilities, trade and
other payables
|
(622.5)
|
(593.8)
|
(618.9)
|
Non
current liabilities
|
|
|
|
Contract liabilities, trade and
other payables
|
(80.4)
|
(68.5)
|
(40.6)
|
Total invested capital liabilities
|
(702.9)
|
(662.3)
|
(659.5)
|
Invested capital
|
1,150.3
|
1,110.9
|
1,155.4
|
Two
point average of opening and closing invested
capital
|
1,152.9
|
1,163.7
|
1,154.7
|
Underlying operating profit 12 months
|
243.2
|
248.7
|
255.4
|
Underlying ROIC %
|
21.1%
|
21.4%
|
22.1%
|
Debt Covenant
The principal financial covenant
ratios are consistent across the US private placement loan notes
and revolving credit facility, with a maximum Consolidated Total
Net Borrowings (CTNB) to covenant EBITDA of 3.5 times and minimum
covenant EBITDA to covenant net finance costs of 3.0 times, tested
semi-annually. A reconciliation of the basis of calculation is set
out in the table below.
|
30 June
|
31 December
|
30 June
|
For
the twelve months ended
|
2024
|
2023
|
2023
|
|
£m
|
£m
|
£m
|
|
|
|
|
Operating Profit
|
213.4
|
271.6
|
281.7
|
Remove: Exceptional
items
|
(2.6)
|
(53.8)
|
(49.7)
|
Remove: Amortisation and
impairment of intangibles arising on acquisition
|
32.4
|
30.9
|
23.4
|
Exclude: Share of joint
venture post-tax profits
|
(22.2)
|
(29.0)
|
(26.6)
|
Include: Dividends from joint
ventures
|
22.0
|
21.1
|
10.2
|
Add back: Net non-exceptional
charges/(releases) to OCPs
|
9.1
|
8.2
|
(0.9)
|
Add back: Net covenant OCP
utilisation
|
(2.8)
|
(3.2)
|
(3.2)
|
Add back: Depreciation,
amortisation and impairment of owned property, plant and equipment
and non acquisition intangible assets
|
19.5
|
25.7
|
31.6
|
Add back: Depreciation,
amortisation and impairment of property, plant and equipment and
non acquisition intangible assets held under finance leases - in
accordance with IAS17 Leases
|
4.2
|
4.3
|
4.7
|
Add back: Foreign exchange on
investing and financing arrangements
|
(1.9)
|
(0.9)
|
0.5
|
Add back: Share-based payment
expense
|
14.2
|
13.5
|
14.9
|
Net other covenant adjustments to
EBITDA
|
(16.4)
|
(11.5)
|
(1.0)
|
Covenant EBITDA
|
268.9
|
276.9
|
285.6
|
Net finance costs
|
29.1
|
24.6
|
22.2
|
Exclude: Net interest
receivable on retirement benefit obligations
|
2.5
|
3.1
|
2.8
|
Exclude: Movement in discount
on other debtors
|
-
|
-
|
0.1
|
Exclude: Foreign exchange on
investing and financing arrangements
|
(1.9)
|
(0.9)
|
0.6
|
Other covenant adjustments to net
finance costs
|
(16.3)
|
(12.7)
|
(9.5)
|
Covenant net finance costs
|
13.4
|
14.1
|
16.2
|
Adjusted net debt
|
130.8
|
108.7
|
215.7
|
Obligations under finance leases -
in accordance with IAS17 Leases
|
15.2
|
17.4
|
19.6
|
Recourse net debt
|
146.0
|
126.1
|
235.3
|
Add back: Disposal vendor loan
note, encumbered cash and other adjustments
|
3.4
|
5.9
|
4.6
|
Covenant adjustment for average FX
rates
|
1.2
|
5.6
|
13.3
|
CTNB
|
150.6
|
137.6
|
253.2
|
CTNB / Covenant EBITDA (not to exceed 3.5x)
|
0.56x
|
0.50x
|
0.89x
|
Covenant EBITDA / Covenant net finance costs (at least
3.0x)
|
20.1x
|
19.6x
|
17.6x
|
|
|
|
|
Currency impact on Guidance
The currency rates used for our 2024
outlook, along with their estimated impact on revenue and
underlying operating profit are:
|
2024
outlook
|
2023
actual
|
2022
actual
|
Average FX rates:
|
|
|
|
US Dollar
|
1.28
|
1.24
|
1.24
|
Australian
Dollar
|
1.91
|
1.87
|
1.78
|
Euro
|
1.17
|
1.15
|
1.18
|
Year-on-year impact:
|
|
|
|
Revenue
|
£(66)m
|
£(33)m
|
£175m
|
Underlying operating
profit
|
£(5)m
|
£(0)m
|
£14m
|
Principal risks and uncertainties
Risk Management
Since the date of the approval of
the Annual Report and Financial statements our risk management
process has continued to operate as described on page 32 of our
2023 Annual Report.
The Executive Committee and the Risk
Committee reviewed the principal risks and uncertainties of the
Group and have determined that those reported in the 2023 Annual
Report and Accounts remain valid for the remaining half of the
financial year. These and any emerging risks will be reviewed again
by the Executive Committee before year end and remain under review
on a quarterly basis by the Risk Committee.
The following summarises the risks
and uncertainties detailed further in the Annual Report:
-
|
Major Information Security Breach
(including Cyber-attack and Data Privacy), resulting in the loss or
compromise of sensitive information or wilful damage;
|
-
|
Failure to Grow Profitably as a
result of failing to win material bids or renew material contracts
profitably, or a lack of opportunities in our chosen
markets;
|
-
|
Material Legal and Regulatory
Compliance that may cause significant loss and damage to the Group
including exposure to regulatory prosecution, reputational damage
and the potential loss of licences and authorisations;
|
-
|
Significant Failure of the Supply
Chain that may result in Serco being unable to meet customer
obligations, perform business critical operations or win new
business;
|
-
|
Failure to Act with Integrity
including engagement in significant corrupt, illegal or dishonest
acts;
|
-
|
Contract Non-Compliance including
failure to deliver contractual requirements and to meet agreed
service performance levels and report against them
accurately;
|
-
|
Financial Control Failure impacting
our ability to accurately report, forecast, create suitable capital
structures and make critical financial transactions;
|
-
|
Catastrophic Risk focusing on the
risk of an event as a result of our actions or failure to respond
to an event that results in multiple fatalities, severe
property/asset damage or loss or very serious long term
environmental damage;
|
-
|
Health, Safety and Wellbeing as a
result of the diversity of our operations and the inherent risks in
our operations in both work and public environments; and
|
-
|
Failure to Attract and Retain Good
People restricting our ability to deliver customer obligations,
execute our strategy and achieve business objectives whilst driving
employee pride in the organisation.
|
Further detail on our principal
risks and uncertainties and the associated controls and mitigations
can be found on page 34 in our 2023 Annual Report.
Statement of Directors' Responsibilities
We confirm that to the best of our
knowledge:
-
|
The condensed set of financial
statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted for use in the UK;
|
-
|
The interim management report
includes a fair review of the information required by DTR 4.2.7R of
the Disclosure Guidance and Transparency Rules, being an indication
of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of
financial statements;
|
-
|
The interim management report
includes a fair review of the information required by DTR 4.2.8R of
the Disclosure Guidance and Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the entity during that period;
and any changes in the related party transactions described in the
last annual report that could do so.
|
By order of the Board:
Mark
Irwin
|
Nigel Crossley
|
Group Chief Executive
Officer
|
Group Chief Financial
Officer
|
31 July 2024
|
31 July 2024
|
INDEPENDENT REVIEW REPORT TO SERCO GROUP PLC
Conclusion
We have been engaged by Serco Group
Plc ("the Company") to review the condensed set of financial
statements in the half-yearly financial report for the six months
ended 30 June 2024 which comprises the Condensed Consolidated
Income Statement, the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Statement of
Changes in Equity, the Condensed Consolidated Balance Sheet, the
Condensed Cash Flow Statement and the related explanatory
notes.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for
the six months ended 30 June 2024 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK and the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct
Authority ("the UK FCA").
Basis for conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
2410 Review of Interim Financial
Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review
procedures.
We read the other information
contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
A review is substantially less in
scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that
the directors have inappropriately adopted the going concern basis
of accounting, or that the directors have identified material
uncertainties relating to going concern that have not been
appropriately disclosed.
This conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the Group to cease
to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is
the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-yearly financial
report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual
financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted for use in
the UK. In preparing the condensed
set of financial statements, the directors are responsible for
assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Our
responsibility
Our responsibility is to express to
the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion section of
this report.
The
purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the
Company in accordance with the terms of our engagement to assist
the Company in meeting the requirements of the DTR of the UK FCA.
Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company for our review work, for this report, or for the
conclusions we have reached.
Juliette Lowes
for and on behalf of KPMG
LLP
Chartered Accountants
15 Canada Square, London, E14
5GL
31 July 2024
Forward looking statements
This announcement contains
statements which are, or may be deemed to be, "forward looking
statements" which are prospective in nature. All statements
other than statements of historical fact are forward looking
statements. Generally, words such as "expect", "anticipate",
"may", "could", "should", "will", "aspire", "aim", "plan",
"target", "goal", "ambition", "intend" or, in each case, their
negative or other variations or comparable terminology identify
forward looking statements. By their nature, these forward
looking statements are subject to a number of known and unknown
risks, uncertainties and contingencies, and actual results and
events could differ materially from those currently being
anticipated as reflected in such statements. Factors which
may cause future outcomes to differ from those foreseen or implied
in forward looking statements include, but are not limited to:
general economic conditions and business conditions in Serco's
markets; contracts awarded to Serco; customers' acceptance of
Serco's products and services; operational problems; the actions of
competitors, trading partners, creditors, rating agencies and
others; the success or otherwise of partnering; changes in laws and
governmental regulations; regulatory or legal actions, including
the types of enforcement action pursued and the nature of remedies
sought or imposed; the receipt of relevant third party and/or
regulatory approvals; exchange rate fluctuations; the development
and use of new technology; changes in public expectations and other
changes to business conditions; wars and acts of terrorism;
cyber-attacks; and pandemics, epidemics or natural disasters.
Many of these factors are beyond Serco's control or
influence. These forward looking statements speak only as of
the date of this announcement and have not been audited or
otherwise independently verified. Past performance should not
be taken as an indication or guarantee of future results and no
representation or warranty, express or implied, is made regarding
future performance. Except as required by any applicable law
or regulation (including under the UK Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), Serco expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward looking
statements contained in this announcement to reflect any change in
Serco's expectations or any change in events, conditions or
circumstances on which any such statement is based after the date
of this announcement, or to keep current any other information
contained in this announcement. Accordingly, undue reliance
should not be placed on the forward looking statements.