REG - Serco Group PLC - 2017 Full Year Results <Origin Href="QuoteRef">SRP.L</Origin> - Part 7

SercoAnnouncement

22/02/2018 07:05

- Part 7: For the preceding part double click  ID:nRSV5870Ff 

discontinued operations                  -                                 -                          -              (3.3)                            (14.2)                     (17.5)        
 Operating profit for the year                                          49.6                              (19.6)                     30.0           95.2                             (70.5)                     24.7          
 Adjustments for:                                                                                                                                                                                                             
 Share of profits in joint ventures and associates                      (27.3)                            -                          (27.3)         (33.4)                           -                          (33.4)        
 Share based payment expense                                            11.4                              -                          11.4           9.7                              -                          9.7           
 Exceptional impairment of goodwill                                     -                                 -                          -              -                                17.8                       17.8          
 Exceptional impairment of property, plant and equipment                -                                 -                          -              -                                (0.8)                      (0.8)         
 Exceptional impairment of intangible assets                            -                                 8.9                        8.9            -                                0.3                        0.3           
 Impairment and write down of intangible assets                         (0.1)                             -                          (0.1)          0.7                              -                          0.7           
 Impairment of property, plant and equipment                            -                                 -                          -              0.7                              -                          0.7           
 Depreciation of property, plant and equipment                          24.3                              -                          24.3           24.8                             -                          24.8          
 Amortisation of intangible assets                                      25.8                              -                          25.8           26.2                             -                          26.2          
 Exceptional profit on disposal of subsidiaries and operations          -                                 (0.3)                      (0.3)          -                                (0.1)                      (0.1)         
 Loss on disposal of property, plant and equipment                      0.3                               -                          0.3            0.4                              -                          0.4           
 Loss on disposal of intangible assets                                  0.3                               -                          0.3            0.8                              -                          0.8           
 Non cash R&D expenditure offset against intangible assets              (0.7)                             -                          (0.7)          0.2                              -                          0.2           
 Decrease in provisions                                                 (46.4)                            (9.6)                      (56.0)         (118.4)                          (1.1)                      (119.5)       
 Other non cash movements                                               0.1                               -                          0.1            0.4                              -                          0.4           
 Total non cash items                                                   (12.3)                            (1.0)                      (13.3)         (87.9)                           16.1                       (71.8)        
 Operating cash inflow / (outflow) before movements in working capital  37.3                              (20.6)                     16.7           7.3                              (54.4)                     (47.1)        
 Decrease in inventories                                                3.7                               -                          3.7            1.3                              -                          1.3           
 Decrease in receivables                                                8.1                               4.5                        12.6           59.0                             13.9                       72.9          
 Decrease in payables                                                   (20.8)                            (16.4)                     (37.2)         (84.0)                           0.6                        (83.4)        
 Movements in working capital                                           (9.0)                             (11.9)                     (20.9)         (23.7)                           14.5                       (9.2)         
 Cash generated by operations                                           28.3                              (32.5)                     (4.2)          (16.4)                           (39.9)                     (56.3)        
 Tax paid                                                               (11.4)                            -                          (11.4)         (5.6)                            -                          (5.6)         
 Non cash R&D expenditure                                               (0.2)                             -                          (0.2)          (0.4)                            -                          (0.4)         
 Net cash (outflow) / inflow from operating activities                  16.7                              (32.5)                     (15.8)         (22.4)                           (39.9)                     (62.3)        
 
 
Additions to property, plant and equipment during the year amounting to £4.7m (2016: £0.5m) were financed by new finance
leases. 
 
21. Post balance sheet events 
 
On 26 January 2018, the Group acquired 100% of the issued share capital of BTP Systems, LLC (BTP), for consideration of US
Dollar $20.5m / £14.5m in cash.  BTP provides satellite communications (SATCOM), radar modernization, operations and
maintenance and sustainment services that enable customers to extend the lives of existing systems and achieve phased
upgrades with new technology to enhance operational capability. BTP specializes in areas including obsolescence
engineering, systems engineering services, test equipment and design, and field engineering services, and maintains a
near-field and compact antenna test range at their Ludlow, MA headquarters. BTP's expertise spans shipboard and submarine
SATCOM antenna systems, MILSTAR command post antennas and radar antennas. No acquisition related costs were incurred. The
acquisition is expected to increase the Group's market share. The financial results and impact of this transaction have not
been recognised in these Condensed Consolidated Financial Statements, the operating results, assets and liabilities will be
recognised with effect from 26 January 2018. 
 
                                                             Provisional fair value US Dollar $m  Provisional fair value £m  
 Goodwill                                                    13.6                                 9.6                        
 Acquisition related intangible assets                       4.4                                  3.1                        
 Property, plant and equipment                               0.4                                  0.3                        
 Inventories                                                 0.5                                  0.4                        
 Trade and other receivables                                 2.3                                  1.6                        
 Cash and cash equivalents                                   1.7                                  1.2                        
 Trade and other payables                                    (2.4)                                (1.7)                      
 Acquisition date fair value of consideration transferred    20.5                                 14.5                       
 
 
The Group signed a revised Business Purchase Agreement (BPA) on 13 February 2018 with the Special Managers and Provisional
Liquidators acting on behalf of the relevant Carillion plc subsidiaries to acquire a portfolio of selected UK health
facilities management contracts. The portfolio has annual revenues of approximately £90m and a weighted average remaining
term of 14 years. Upon the receipt by the Special Managers and Provisional Liquidators of the requisite third party
consents, each individual contract will be transferred to Serco on a cash-free, debt-free basis, with the consideration to
be paid in instalments and to be satisfied using Serco's existing financing facilities. If all the contracts are
transferred to Serco under the revised BPA process, the total consideration payable would be £29.7m. The consideration
payable is lower than the amount of £47.7m announced on 13 December 2017 in respect of substantially the same contracts
that were subject to the initial BPA signed with Carillion plc at that date. The change in consideration reflects the
Group's re-evaluation of potential liabilities, indemnities, warranties and the additional working capital investment
required as a result of Carillion's liquidation. The financial effects of this transaction have not been recognised at 31
December 2017. As consents are required for each individual contract to be transferred and therefore acquired, at the time
the financial statements were authorised for issue, no legal transfer or control of assets had taken place and so no
disclosures have been made in respect of the assets and liabilities being acquired. The fair values of the assets and
liabilities will be determined at the date when contracts are acquired. It is also not yet possible to provide detailed
information about each class of acquired receivables and any contingent liabilities in respect of the acquired contracts. 
 
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