REG - Serco Group PLC - 2016 Half Year Results <Origin Href="QuoteRef">SRP.L</Origin> - Part 3
04/08/2016 07:09
- Part 3: For the preceding part double click ID:nRSD2055Gb
292.7
Covenant CTNB/EBITDA (not to exceed 3.5x) 0.5x 0.4x 1.7x
Covenant EBITDA / Net finance costs (at least 3.0x) 9.8x 6.7x 4.8x
Balance Sheet Summary
The balance sheet at 30 June 2016 is summarised below, showing the impact of the assets and liabilities held for sale for
each line item. At 30 June 2016 the balance sheet had net assets of £400.4m, a movement of £118.3m from the closing net
asset position of £282.1m as at 31 December 2015. The increase in net assets is mainly due to a reduction in provision
balances due to utilisation and an increase in goodwill resulting predominantly from movements in exchange rates.
2016 2016 2016 2015 2015 2015
As at 30 June Including assets held for sale As at 30 June Adjustment for assets held for sale As at 30 June As reported As at 31 December Including assets held for sale As at 31 December Adjustment for assets held for sale As at 31 December As reported
£m £m £m £m £m £m
Non current assets
Goodwill 547.6 (2.4) 545.2 517.7 (7.8) 509.9
Other intangible assets 88.5 - 88.5 90.2 (0.4) 89.8
Property, plant and equipment 70.7 - 70.7 74.1 (0.9) 73.2
Other non current assets 70.2 - 70.2 72.0 (0.2) 71.8
Deferred tax assets 42.5 - 42.5 42.2 - 42.2
Retirement benefit assets 153.9 - 153.9 127.1 - 127.1
973.4 (2.4) 971.0 923.3 (9.3) 914.0
Current assets
Inventories 27.6 - 27.6 26.4 - 26.4
Trade and other current assets 585.9 (9.9) 576.0 549.7 (20.6) 529.1
Current tax 12.9 (4.7) 8.2 11.3 (4.7) 6.6
Cash and cash equivalents 168.9 (2.7) 166.2 328.8 (5.2) 323.6
795.3 (17.3) 778.0 916.2 (30.5) 885.7
Assets classified as held for sale - 19.7 19.7 - 39.8 39.8
Total current assets 795.3 2.4 797.7 916.2 9.3 925.5
Total assets 1,768.7 - 1,768.7 1,839.5 - 1,839.5
Current liabilities
Trade and other current liabilities (557.9) 3.2 (554.7) (558.6) 7.4 (551.2)
Current tax liabilities (11.5) 0.1 (11.4) (14.3) 0.1 (14.2)
Provisions (153.9) 1.1 (152.8) (191.2) 22.6 (168.6)
Obligations under finance leases (15.6) 0.3 (15.3) (16.3) 0.5 (15.8)
Loans (9.7) - (9.7) (132.2) - (132.2)
(748.6) 4.7 (743.9) (912.6) 30.6 (882.0)
Amounts classified as held for sale - (5.6) (5.6) - (32.5) (32.5)
Total current liabilities (748.6) (0.9) (749.5) (912.6) (1.9) (914.5)
Non current liabilities
Other non current liabilities (18.7) - (18.7) (18.3) - (18.3)
Deferred tax liabilities (28.6) - (28.6) (22.3) - (22.3)
Provisions (274.6) 0.9 (273.7) (315.0) 1.9 (313.1)
Obligations under finance leases (20.4) - (20.4) (28.0) - (28.0)
Loans (263.8) - (263.8) (249.7) - (249.7)
Retirement benefit obligations (13.6) - (13.6) (11.5) - (11.5)
(619.7) 0.9 (618.8) (644.8) 1.9 (642.9)
Total liabilities (1,368.3) - (1,368.3) (1,557.4) - (1,557.4)
Net assets 400.4 - 400.4 282.1 - 282.1
Provisions
The total of current and non current provisions, excluding provisions related to businesses held for sale, has decreased by
£55.2m in the six months ended 30 June 2016, the majority of which relates to a reduction in contract provisions as a
result of the utilisation and net release of in the period. Movements in contract provisions, including those related to
businesses held for sale since the 31 December 2015 balance sheet date, are as follows:
Onerous Contract Provisions Other Contract Provisions Total contract provisions including assets held for sale Held for sale adjustment Total contract provisions as reported
£m £m £m £m £m
At 31 December 2015 (audited) (299.9) (13.1) (313.0) 10.9 (302.1)
Charged to income statement (4.4) - (4.4) - (4.4)
Released to income statement - exceptional - 4.3 4.3 (4.3) -
Released to income statement - other 17.8 0.6 18.4 (0.7) 17.7
Utilised during the year 47.3 0.5 47.8 (3.0) 44.8
Unwinding of discount (0.8) - (0.8) - (0.8)
FX (7.0) - (7.0) 0.1 (6.9)
Transfer to trade payables 11.5 1.6 13.1 - 13.1
Reclassifications (3.2) 5.5 2.3 (3.0) (0.7)
At 30 June 2016 (unaudited) (238.7) (0.6) (239.3) - (239.3)
In the six months ended 30 June 2016 there were releases from OCPs of £17.8m and additional OCP charges of £4.4m, which
included no new OCPs. Included within the release from OCPs were amounts in relation to HMP Ashfield where the ongoing
discussions with the customer in respect of repricing progressed sufficiently in the period to trigger a reassessment of
the required provision. An OCP release was also made on the Future Provision of Marine Services contract, primarily due to
the progress being made in lowering the ongoing costs base of the contract.
During the six months ended 30 June 2016 a settlement was reached with the customer in respect of HMAS Bundaberg, the
vessel operating under the Armidale Class Patrol Boat contract which was destroyed by fire in 2014. The provision relating
to this claim has been transferred to other creditors and other debtors, given that the amounts owed to the customer and
the associated insurance receivable are no longer uncertain and therefore do not meet the criteria to be included within
the provisions balance.
Utilisation of OCPs in the six months ended 30 June 2016 was £47.3m (six months ended 30 June 2015 £68.8m).
Other Contract and Balance Sheet Review items
There were adjustments arising in the six months ended 30 June 2016 on items identified during the Contract and Balance
Sheet Review. These adjustments relate to a number of items including:
· The releases of other provisions and accruals of £5.0m where liabilities have either been settled for less than
the amount provided or accrued, or have lapsed due to the passage of time.
· The release of allowances for bad debts of £1.6m following the receipt of payments in respect of old outstanding
balances.
nce with the terms of our engagement to assist the company in meeting
the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European
Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Service Authority.
Stephen Wardell
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London, E14 5GL
4 August 2016
Financial StatementsCondensed Consolidated Income StatementFor the six months ended 30 June 2016
Six months ended 30 June 2016(unaudited) Six months ended 30 June 2015 (unaudited) Year ended 31 December 2015(audited)
Continuing operations Note £m (restated*)£m £m
Revenue 1,493.2 1,612.7 3,177.0
Cost of sales (1,326.7) (1,427.6) (2,849.1)
Gross profit 166.5 185.1 327.9
Administrative expenses
General and administrative expenses (109.4) (142.7) (253.9)
Exceptional loss on disposal of subsidiaries and operations 5 (0.9) (4.9) (2.6)
Other exceptional operating items 5 (6.8) (11.7) (107.3)
Other expenses - amortisation and impairment of intangibles arising on acquisition (1.9) (2.9) (4.8)
Share of profits in joint ventures, net of interest and tax 4 17.7 13.9 37.0
Operating profit/(loss) 65.2 36.8 (3.7)
Operating profit before exceptional items 72.9 53.4 106.2
Investment income 6 4.7 2.8 6.1
Finance costs 7 (11.8) (22.8) (39.0)
Exceptional finance costs 5 - (32.8) (32.8)
Total net finance costs (7.1) (52.8) (65.7)
Profit/(loss) before tax 58.1 (16.0) (69.4)
Tax on profit/(loss) before exceptional items (3.7) (9.6) (17.9)
Tax on exceptional items (0.1) 0.3 0.4
Tax charge 8 (3.8) (9.3) (17.5)
Profit/(loss) for the period from continuing operations 54.3 (25.3) (86.9)
Loss for the period from discontinued operations 2 (7.9) (66.4) (66.2)
Profit/(loss) for the period 46.4 (91.7) (153.1)
Attributable to:
Equity owners of the Company 46.5 (91.5) (152.6)
Non controlling interests (0.1) (0.2) (0.5)
Earnings per share (EPS)
Basic EPS from continuing operations 9 5.00p (2.83p) (8.78p)
Diluted EPS from continuing operations 9 4.82p (2.83p) (8.78p)
Basic EPS from discontinued operations 9 (0.73p) (7.49p) (6.69p)
Diluted EPS from discontinued operations 9 (0.70p) (7.49p) (6.69p)
Basic EPS from continuing and discontinued operations 9 4.27p (10.32p) (15.47p)
Diluted EPS from continuing and discontinued operations 9 4.12p (10.32p) (15.47p)
*restated to reflect discontinued operations.
Condensed Consolidated Statement of Comprehensive IncomeFor the six months ended 30 June 2016
Six months ended 30 June 2016(unaudited)£m Six months ended 30 June 2015 (unaudited)£m Year ended 31 December 2015(audited)£m
Profit/(loss) for the period 46.4 (91.7) (153.1)
Other comprehensive income for the period:
Items that will not be reclassified subsequently to profit or loss:
Net actuarial gain/(loss) on defined benefit pension schemes1 21.7 (9.5) (15.8)
Actuarial gain/(loss) on reimbursable rights1 0.8 - (0.4)
Tax relating to items not reclassified1 (4.4) 1.2 4.1
Share of other comprehensive income in joint ventures 0.2 0.1 5.0
Items that may be reclassified subsequently to profit or loss:
Net exchange gain/(loss) on translation of foreign operations2 44.0 (14.6) (40.9)
Fair value gain on cash flow hedges during the period2 4.2 6.3 2.2
Tax relating to items that may be reclassified2 (0.1) (1.5) -
Share of other comprehensive income in joint ventures 0.6 1.5 2.6
Total other comprehensive income/(expense) for the period 67.0 (16.5) (43.2)
Total comprehensive income/(expense) for the period 113.4 (108.2) (196.3)
Attributable to:
Equity owners of the Company 113.4 (108.0) (195.9)
Non controlling interests - (0.2) (0.4)
Notes:
1 Recorded in retirement benefit obligations reserve in the consolidated statement of changes in equity.
2 Recorded in hedging and translation reserve in the consolidated statement of changes in equity.
Condensed Consolidated Statement of Changes in Equity
Share capital Share premium account Capital redemption reserve Retained earnings Retirement benefit obligations reserve Share-based payment reserve Own shares reserve Hedging and translation reserve Total share Non controlling interests
holders' equity
£m £m £m £m £m £m £m £m £m £m
At 1 January 2015 11.0 327.9 0.1 (306.0) (89.0) 71.4 (64.5) (18.9) (68.0) 1.8
Total comprehensive expense for the period - - - (89.9) (8.3) - - (9.8) (108.0) (0.2)
Issue of share capital 11.0 - - 519.1 - - - - 530.1 -
Shares transferred to option holders on exercise of share options - - - - - (0.1) 4.4 - 4.3 -
Expense in relation to share based payments - - - - - 4.1 - - 4.1 -
Transfer on disposal - - - (3.4) 3.4 - - - - -
At 30 June 2015 (unaudited) 22.0 327.9 0.1 119.8 (93.9) 75.4 (60.1) (28.7) 362.5 1.6
Total comprehensive expense for the period - - - (55.1) (3.8) - - (29.0) (87.9) (0.2)
Issue of share capital - - - 0.2 - - - - 0.2 -
Shares transferred to option holders on exercise of share options - - - - - (0.2) 0.3 - 0.1 -
Expense in relation to share based payments - - - - - 5.7 - - 5.7 -
Transfer on disposal - - - 3.6 (3.6) - - - - -
Change in non controlling interests - - - - - - - - - 0.1
At 31 December 2015 (audited) 22.0 327.9 0.1 68.5 (101.3) 80.9 (59.8) (57.7) 280.6 1.5
Total comprehensive income for the period - - - 47.3 18.1 - - 48.0 113.4 -
Shares transferred to option holders on exercise of share options - - - - - (0.3) 0.3 - - -
Expense in relation to share based payments - - - - - 4.9 - - 4.9 -
At 30 June 2016 (unaudited) 22.0 327.9 0.1 115.8 (83.2) 85.5 (59.5) (9.7) 398.9 1.5
Condensed Consolidated Balance Sheet
At 30 June 2016 At 30 June 2015 At 31 December 2015
Note (unaudited)£m (unaudited)£m (audited)£m
Non current assets
Goodwill 10 545.2 530.6 509.9
Other intangible assets 88.5 95.5 89.8
Property, plant and equipment 70.7 37.2 73.2
Interests in joint ventures 4 12.6 1.4 13.8
Trade and other receivables 46.9 46.1 50.2
Derivative financial instruments 14 10.7 3.3 7.8
Deferred tax assets 42.5 32.9 42.2
Retirement benefit assets 15 153.9 133.8 127.1
971.0 880.8 914.0
Current assets
Inventories 27.6 34.4 26.4
Trade and other receivables 561.2 557.2 519.7
Current tax assets 8.2 20.1 6.6
Cash and cash equivalents
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