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Serco Group plc half year results 2019

Published: 31 Jul 2019

Six months ended 30 June



Change at reported currency

Change at constant currency






Underlying Trading Profit (UTP)(2)





Reported Operating Profit (ie after exceptional items)(2)





Underlying Earnings Per Share (EPS), diluted(3)





Reported EPS (ie after exceptional items), diluted



Free Cash Flow(4)



Adjusted Net Debt, pro forma(5)



Reported Net Debt(6)



Rupert Soames, Serco Group Chief Executive, said: “Following a strong 2018, which marked an inflection point for Serco after several years of decline, we are reporting another good performance in the first half of 2019 with Underlying Trading Profit and margin well up on the first half of last year. Order intake so far this year has been very strong at over £3bn, already exceeding our revenue forecast for the whole of 2019. The strategic advantage of having a strong international footprint shows clearly in these results, with strong revenue growth in North America and AsPac; I am also delighted to see the UK & Europe division reaping the benefit of the Carillion health facilities management acquisition completed in 2018.

“The acquisition of the Naval Systems Business Unit of Alion for $225m, announced in May, will add materially to the scale and capability of our US defence business; having now received all necessary regulatory approvals, we look forward to completing the transaction imminently and to seeing the earnings accretion it will deliver.  We continue to expect our organic growth to accelerate from this year’s 4% to around 5% in 2020, as a number of large new contracts become fully operational.  As we noted at the beginning of the year, absent unforeseen headwinds or major rebid losses, our recent strong order intake gives us confidence that we will grow faster than our market for at least the next two years.”


  • Underlying Trading Profit(2) increased by 35%; excluding the £2.1m favourable impact of currency, the growth at constant currency was 29%; if the £1.6m increase from the adoption of IFRS16 were also excluded, growth would have been 25%.Growth was particularly strong in the Americas division. The Group margin increased by 60 basis points to 3.4%.
  • Despite a £13.0m increase in UTP, Reported Operating Profit reduced by £14.7m as a result of a £19.5m increase in the charge for exceptional items which included £22.9m related to the conclusion of the SFO investigation, as well as a net £nil movement in Contract & Balance Sheet Review items which in 2018 benefited from a £7.8m net credit.Onerous Contract Provisions (OCPs) are running off as we expected and the residual liability now stands at £27m, which compares to £447m as at December 2014; the residual cash liability is likely to be £50-£55m.
  • Underlying EPS increased by 42%, reflecting the growth in Underlying Trading Profit, together with the benefit of the tax rate reducing from 34% to 24%. Reported EPS was a loss as a result of the exceptional items.
  • Free Cash Flow(4) improved to a modest inflow, which includes the effect of the increase in underlying profitability, a significantly smaller working capital outflow and lower cash outflows on the residual OCP portfolio.
  • Adjusted Net Debt(5) excludes £145m of lease liabilities now accounted for in accordance with IFRS16; it is also shown on a pro forma basis to exclude the £139m net proceeds of the Equity Placing completed in May that will be used to fund the NSBU acquisition.Reported Net Debt on a statutory basis includes both these items. Underlying pro forma leverage stands at 1.37x EBITDA.
  • Acquisitions: the NSBU acquisition, announced in May 2019, will add materially to the scale and capability of our US defence business, and to the Group’s earnings from 2020.This follows the two much smaller acquisitions completed in 2018 of BTP Systems (deepening our satellite and radar capabilities) and of six Carillion health facilities management contracts (adding significant scale to our UK health business).
  • Order intake was very strong at £3.3bn; the two largest awards were for asylum accommodation and support services in the UK valued at £1.9bn, and for defence healthcare provision in Australia valued at £0.6bn; approximately 60% of the order intake comprised new business, and 40% was existing work being rebid or extended.2019 will be the third year in a row in which order intake exceeds revenues.
  • Order book increased by £2.0bn to £14.0bn reflecting the strong order intake.
  • The Pipeline of larger new bid opportunities reduced to £3.2bn at 30 June 2019, reflecting in large part the very strong result of contract awards in the period; we expect the Pipeline to increase in the second half.
  • As stated in our Closed Period trading update issued on 27 June, we expect 2019 full year revenue of around £3.0bn and Underlying Trading Profit of approximately £105m; this excludes any potential part-year financial contribution from the acquisition of NSBU.Assuming completion of the acquisition, Adjusted Net Debt at the end of 2019 is expected to be around £250m, with leverage for covenant purposes on an underlying pro-forma basis of approximately 1.5x, comfortably around the mid-point of our normal target range of 1-2x.

For further information please contact Serco:

Stuart Ford, Head of Investor Relations T +44 (0) 7738 894 788

Marcus De Ville, Head of Media Relations T +44 (0) 7738 898 550


A presentation for institutional investors and analysts was held on Wednesday 31 July 2019 at JPMorgan, 60 Victoria Embankment, London EC4Y 0JP.