Update on purchase of remaining stake in Australian defence and marine services joint venture
Date: 20 Feb 2013
Serco Group plc (Serco), the international services company, provides today an update on its recent purchase of DMS Maritime Pty Ltd. The required valuations have now been completed. These are expected to result in a non-cash exceptional gain of £51m.
Serco announced on 7 November 2012 that it had signed an agreement to purchase the remaining 50% equity stake in DMS Maritime from its joint venture partner P&O Maritime Services. It was subsequently announced on 20 December 2012 that the transaction had completed at an acquisition cost of £82m, comprising cash consideration paid of £69m and incremental net debt acquired of £13m.
As Serco obtained control of DMS Maritime on the purchase of the remaining equity stake, step acquisition accounting, in accordance with IFRS 3 (Revised 2008) - Business Combinations, is applied. The previously held 50% equity interest is treated as if it was disposed of and re-acquired at fair value on the acquisition date. Accordingly, it is re-measured to its acquisition date fair value, with the resulting gain compared to its book value recognised in the consolidated income statement. This is expected to result in a £51m non-cash exceptional gain in Serco's 2012 results. The overall balance sheet effect of the acquisition is therefore expected to result in recognition of £120m of net assets. The valuation is subject to final confirmation as part of the audited results for the 2012 financial year, which will be announced on Tuesday 5 March 2013.
DMS Maritime is one of Australia's largest marine service operators, with facilities in every major port and a technical support network that extends a wide range of engineering and technical services across Asia Pacific. The DMS Maritime purchase strengthens Serco's position as a leading defence services provider and in the growing marine services market.
For the year to 31 December 2012, DMS Maritime had revenues of approximately £80m and underlying operating profit of approximately £12m; Serco will consolidate the remaining 50% stake it has purchased. Expectations are for continued good revenue growth and for margins to be maintained. DMS Maritime has an order book of over £500m; Serco will include within its order book the additional 50% that it now owns.
Christopher Hyman, Chief Executive of Serco Group plc, said: "Our original shareholding in DMS Maritime was made 15 years ago when we first established the joint venture to provide a complex range of harbour and offshore services for the Royal Australian Navy. DMS Maritime is a high quality business that shares Serco's commitment to customer focus, has grown well and will be further enhanced under our full ownership. We believe that it will benefit from the continuing development of our defence business in the region from a base support services provider to a complex services integrator, and from the significant opportunities that we see in the marine systems integration and services market - both for government and private sector customers."
For further information please contact Serco:
Stuart Ford, Head of Investor Relations T +44 (0) 1256 386 227
Marcus De Ville, Head of Media Relations T +44 (0) 1256 386 226
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