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Shareholder Returns

What shareholder returns means to us

Shareholder returnsWe focus on creating long-term, sustainable value – protecting the interests of our owners alongside those of our employees, customers and communities in which we operate.





Our policy and commitment

We focus as much on the preservation and growth of the business as on the maximisation of shareholder value.

We believe that in a free market system, and in the long-term, the two will automatically coincide, even if there is some short-term divergence. Delivering sustainable, profitable growth is therefore central to appropriate delivery of shareholder returns, and our performance framework is structured accordingly.

In summary, we strive to:

  • ensure a balanced performance framework that recognises value must be delivered to our shareholders as well as our customers and the people who work in the business;

  • align remuneration and incentive arrangements to long-term, sustainable value creation; and

  • implement the new strategy presented to shareholders in March 2015 and deliver our five-year plan to achieve our purpose of becoming a trusted partner of governments, delivering superb public services that transform outcomes and make a positive difference for our fellow citizens.

Key components in our governance

  • Our performance framework does not explicitly include ‘maximising shareholder value’. Instead, shareholder value is expected to coincide automatically with the appropriate achievement of ‘our deliverables’. Just as each component in the performance framework is expected to support achieving our deliverables, they are also expected to deliver shareholder returns in the long term.

  • Short-term incentives include a mix of financial measures as well as key strategic goals aligned to generating long-term shareholder value, whilst long-term incentives directly include relative total shareholder return (TSR) as an explicit performance measure, alongside earnings per share (EPS) growth and return on invested capital (ROIC) – the two other most appropriate measures for sustainable shareholder value generation.

  • Our Remuneration Committee has set personal shareholdings guidelines and requirements for our senior management team to support long-term commitment to Serco and the alignment of employee interests with those of our shareholders.

Our performance framework

Performance framework

Our progress and performance in 2017

  • As shareholders have not received dividend income in recent years, TSR is reflected in share price performance (SPP) only. Point-to-point SPP has been -27%, +52% and -31% from start to end of the financial years 2015, 2016 and 2017, respectively.

  • SPP is influenced by many factors: financial and non-financial, historic and prospective, and related specifically to Serco and to the wider stock market. However, the earnings and returns on invested capital delivered are considered important to SPP. Underlying EPS performance was -27%, +20% and -17% for 2015, 2016 and 2017, respectively, whilst underlying ROIC has been at 11.1%, 10.7% and 8.7% for these three years.

  • Our initiatives and financial performance are comprehensively assessed in our Annual Report for each respective year, including Key Performance Indicators and broader discussion and analysis in the Strategic Report, Directors’ Report and Financial Statements.

Our next steps

As set out in our guidance and outlook, we expect profits to grow strongly over the next two years.

Beyond 2019, our long term ambitions for margins and revenue growth (as originally expressed with our Strategy Review announced in March 2015 and shown within the deliverables of our performance framework above) remain intact, but the timing of achieving these continues to be subject to seeing improvements in trading conditions across our markets. In the meantime we continue to deliver against our plans and make good progress against our strategy.