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2012 Full Year Results

Published: 5 Mar 2013

Well placed for future growth following excellent achievements in 2012 

12 months to 31 December





Change at constant currency 




Revenue - ongoing activities*




Adjusted operating profit




Adjusted operating profit - ongoing activities*




Operating profit




Adjusted profit before tax




Profit before tax**




Adjusted earnings per share




Earnings per share** 49.94p



Dividend per share 10.10p 8.40p +20% n/a
Group free cash flow





 * Excludes the financial results of subsidiaries and operations disposed of during the year

** Includes the impact of exceptional items, principally the £51.1m non-cash gain arising from the step acquisition accounting for the DMS joint venture in Australia; full definitions of adjusted measures are provided on page 2 and the income statement is presented on page 29

Record level of contract wins and excellent operational performance

  • £5.8bn of awards (2011: £5.1bn); increase in order book to £19.1bn (2011: £17.9bn)
  • High revenue visibility (92% for 2013, 79% for 2014 and 70% for 2015)
  • Excellent service delivery across existing operations and major new contracts progressing well

Strong financial result for the year

  • Total revenue growth of 5.7% to £4.9bn; growth of 6.2% at constant currency
  • Organic growth of 3.3%, with excellent performances in AMEAA (up 22%) and Global Services (up 12%)
  • Adjusted operating profit growth of 9.9% at constant currency; margin increase from 6.2% to 6.4%
  • Adjusted earnings per share growth of 7.5% to 42.55p; growth of 8.7% at constant currency
  • Group free cash flow of £181.2m, with an exceptionally strong conversion rate of profits in the second half
  • Proposed 2012 total dividend of 10.10p up 20%; increase reflects new policy to accelerate dividend growth on the path to a higher payout ratio

Greater exposure to international growth markets and sectors

  • Growth prospects further underpinned by entry into new countries, services and private sector industries
  • 31% total revenue growth in AMEAA increases region's exposure to 18% of the Group's portfolio
  • 40% total revenue growth in our global Business Process Outsourcing (BPO) business increases nonfrontline services to 15% of the Group's portfolio
  • These achievements, together with a return to organic growth in the UK, more than offset US challenges

Strategic position further improved through ongoing proactive portfolio management

  • Additional capabilities and market access from infill acquisitions such as Vertex and DMS Maritime
  • Exits from non-core operations reflect our ongoing focus on strategic fit, performance and returns
  • Leading BPO position after full integration of operations and successful launch of Global Services division

Extensive pipeline demonstrates attractive growth opportunities

  • Estimated £31bn pipeline reflects growing demand for efficient, high quality and innovative services
  • Positive developments opening up more frontline services markets; exciting new opportunities in AMEAA
  • Good longer term opportunities in Americas beyond the current tough US federal contracting environment
  • Excellent growth prospects in the global BPO market with both private and public sector customers

Confident of further growth and continued resilience of the Group

  • Strength of portfolio provides resilience and enhances growth potential
  • Group well positioned following excellent strategic and organisational progress in 2012
  • For 2013, expect a modest improvement in organic growth and operating margin to be broadly maintained
  • Beyond 2013, planning for continued delivery of strong financial performance
  • Confidence in outlook and strength of financial position underpin plans for higher dividend payout ratio


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Christopher Hyman, Chief Executive of Serco Group plc, said: "Serco improves the quality and efficiency of services that matter to millions of people around the world, helping our customers to focus their precious resources on what they do best. To continue developing our business we are providing more support to our existing customers, offering more to emerging markets and improving our ability to provide more complex services. This has resulted in a strong year for us in 2012 despite some very real challenges; we won more work than ever, we entered new markets, we built more capabilities and we established a global BPO business. Our unique breadth and depth leaves us strongly positioned to meet the growing demand from around the world for our skills and services. This confidence in our business prospects underpins our new dividend policy and commitment to a higher payout ratio over the coming years.

"I am also enormously proud of the achievements of our 120,000 people around the world and with their support, in celebration of our 25th anniversary, we have launched the Serco Foundation to help charities and other organisations make an even bigger impact on some of the world's most critical issues."


Ongoing activities excludes the financial results of subsidiaries and operations disposed of during the year, being nuclear consulting services, defence-related German operations, education software and UK data hosting operations.

Adjusted operating profit is before amortisation of intangibles arising on acquisitions, acquisition-related costs and exceptional items (being profits or losses on disposals of subsidiaries and operations, and the one-off payment to establish the charitable foundation), as shown on the face of the Group's consolidated income statement and the accompanying notes. Adjusted profit before tax is also before the exceptional gain arising from the step acquisition accounting for the DMS joint venture in Australia.

Adjusted earnings per share is calculated on the basis of earnings before amortisation of intangibles arising on acquisitions, acquisitionrelated costs and exceptional items as noted above, together with the tax effect of these adjusting items.

Group free cash flow is free cash flow from subsidiaries and dividends received from joint ventures, and is reconciled to movements in cash and cash equivalents in Section 3 of the Finance Review.

Performance at constant currency has been calculated by translating non-Sterling revenue and earnings for the year to 31 December 2012 into Sterling at the average exchange rates for 2011.

The order book reflects the value of future revenues based on all existing signed contracts. It excludes contracts at the preferred bidder stage and excludes the award of new Indefinite Delivery, Indefinite Quantity (IDIQ) contract vehicles and Multiple Award Contracts (MACs) where Serco are one of a number of companies able to bid for specific task orders issued under the IDIQ or MAC. The value of any task order is recognised within the order book when subsequently won.

The pipeline is the estimated value of all future potential opportunities that are clearly defined and identifiable.


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