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2014 Full Year Results

Published: 12 Mar 2015

Year ended 31 December 2014 2013
Revenue (note 1) £3,955m £4,284m
Trading (Loss)/Profit (note 2) (£632m) £257m
Operating (Loss)/Profit Before Exceptional Items (£656m) £236m
Operating (Loss)/Profit (£1,317m) £146m
EPS Before Exceptional Items (basic) (135.0p) 32.7p
EPS (basic) (258.4p) 20.1p
Dividend Per Share 3.10p 10.55p
Free Cash Flow £62m £63m
Net Debt (including that for assets and liabilities held for sale) £682m £745m

Note 1: Revenue is as defined under IFRS.  Adjustments are no longer made to include Serco's share of revenue from its joint ventures. 
Note 2: Trading Profit is defined as IFRS Operating Profit adjusted for (i) amortisation and impairment of intangibles arising on acquisition and (ii) exceptional items.  Adjustments are no longer made to exclude Serco's share of joint venture tax and interest, management estimation of charges related to UK Government reviews or transaction-related costs.  A reconciliation to former non-GAAP measures is included in the Finance Review.

  • Revenue and profitability in line with revised expectations as set out on 10 November 2014; guidance for 2015 maintained
  • Overall financial result reflects £1.3bn  of onerous contract provisions, asset impairments and other charges, broadly in line with the November estimate; Trading Loss of £632m includes £745m of such charges; Operating loss of £1,317m includes £661m of exceptional items, driven by impairment of goodwill and other balance sheet charges together totalling £541m
  • As outlined in November, a proposed equity rights issue of approximately £555m, fully underwritten, is being launched today, with details provided in a separate announcement and the accompanying Prospectus
  • Agreements reached with lending banks and US private placement noteholders, subject to successful completion of the rights issue announced today, to refinance existing facilities including the reduction of gross indebtedness by up to £450m
  • Strategy Review complete: Serco's future to be as an international Business-to-Government (B2G) business, specialising in public service provision
  • Corporate Renewal Programme established and a substantially new management team put in place

Rupert Soames, Serco Group Chief Executive Officer, said: "2014 has been an extremely difficult year for Serco, and the magnitude of the provisions, impairments and other charges reflects the scale of the challenges we have had to face.  However, there is a real sense that, having confessed our sins and in taking the punishment, we are now ready to start on the path to recovery.  We have all we need: a good plan, strong management to execute it, and, following the successful completion of our proposed rights issue and refinancing, a balance sheet that is an appropriate foundation on which to implement our new strategy.

"We are convinced that our strategy will deliver over time value to our shareholders, customers and colleagues alike.  We will focus on providing public services to government and other bodies across five core sectors - Justice & Immigration, Defence, Transport, Citizen Services and Healthcare - and do so across some of the largest public services markets in the world.  By concentrating on these markets, we are playing to our strengths.

"Asking shareholders for financial support, and lenders to adjust terms on their facilities, is not a position any management would want to be in.  But we are determined to repay the confidence and support shown to us, to the benefit of all."