On course for another successful year

A strong first half

• Won £2.0bn of contracts including Forth Valley (£450m), Yarl's Wood (£85m), US Postal Service ($260m), Sea Enterprise ($200m) and LOGCAP ($225m)
• Appointed preferred bidder for £0.6bn of contracts, including Dubai Metro (£400m) and Naval Air Command (£70m)
• Continued to win one in two new bids and maintained rebid win rate at more than 90%
• PBTA margin of 4.6%, up from 4.2% in 2006, and PBT margin of 3.9%, up from 3.6% in 2006
• Group EBITDA to cash conversion of 73%, resulting in 12% increase in Group free cash flow          

High visibility of future revenue

• Record order book of £14.6bn at 30 June 2006
• Contracts valued at an additional £1.8bn at preferred bidder
• Visibility of 99% of planned revenue for 2007, 84% for 2008 and 73% for 2009
• £24bn of further opportunities identified          

Strong market dynamics - continuing positive outlook

• UK market remains strong with broad spread of growth opportunities
• International markets show increasing potential
• Confident of double-digit revenue growth for 2007 and the foreseeable future 
• Increased PBTA margin guidance to 4.8% for 2007, representing a 40 basis point uplift for the year and following a similar uplift in 2006, with further margin expansion in 2008 and beyond          

Christopher Hyman, Chief Executive of Serco Group plc, said:
“2007 has started well and we are confident of a strong full year, with profit ahead of previous expectations.  We have built a firm platform for growth by developing our people, investing in new capabilities and systems and expanding our international footprint.  This positions us to bid for large and complex opportunities, and to embrace new business models.  By continuing to deliver outstanding customer service, we will ensure an exciting future for Serco.”

Note: PBTA is profit before tax and intangible amortisation. Group EBITDA is earnings from subsidiaries (excluding joint ventures) before interest, tax, depreciation, intangible amortisation and other non-cash items. Cash conversion is the ratio of Group operating cash flow to Group EBITDA. Group free cash flow is from subsidiaries and joint venture dividends and is reconciled in Section 3 of the Finance Review.