REG - Serco Group PLC - Final Results <Origin Href="QuoteRef">SRP.L</Origin> - Part 4
12/03/2015 07:02
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Railways
Pension Scheme and a deficit of £0.3m (2013: deficit £0.3m) in a small German pension scheme.
The last formal actuarial valuation of SPLAS was undertaken as at 5 April 2012 and showed a deficit of £24m. The estimated
actuarial deficit at 31 December 2014 was approximately £5m (2013: deficit £13m). The principal difference between the
actuarial valuation and the IAS19 valuation relates to the use of a lower discount rate applied to measure the scheme
liabilities for the actuarial basis. The main investments of this scheme are LDI that seek to reduce volatility by
matching the liabilities of the scheme for changes in interest and inflation rates through a combination of gilts and
corporate bonds with inflation and interest swap overlays.
The Group also had two contract-specific schemes. The £4.0m contract specific deficit related to the Serco Public Services
Ltd Essex Pension Fund (2013: deficit £2.5m). In addition to this, the NPL contract and its associated defined benefit
pension scheme ceased to be part of the Serco Group on 1 January 2015. As at 31 December 2014, there was a nil deficit on
the NPL contract after the franchise adjustment (2013: deficit £0.9m) with the Group consolidated balance sheet including
the scheme's fair value of scheme assets of £104.6m, present value of scheme liabilities of £127.5m and a balancing
franchise adjustment of £22.9m.
On 7 December 2014, the DLR contract and its associated defined benefit pension scheme ceased to be part of the Serco
Group. As a result, Serco's responsibilities as the participating employer in the DLR pension scheme ended. This has
removed from the Group's balance sheet the DLR pension scheme, which resulted in a reduction in the fair value of scheme
assets of £130.5m, present value of scheme liabilities of £161.7m and the franchise adjustment of £31.2m.
Assets Held for Sale
As part of the Strategic Review certain assets and liabilities have been designated as non-core and are held for sale. As
at 31 December 2014 the following businesses have been disclosed as held for sale: National Physical Laboratory, Great
Southern Rail, the UK environmental and leisure businesses, the offshore BPO business and the majority of the UK private
BPO business.
Order Book
The order book reflects the estimated value of future revenue based on all existing signed contracts, excluding Serco's
proportional share of joint ventures. It excludes contracts at the preferred bidder stage and excludes the award of new
Indefinite Delivery, Indefinite Quantity (IDIQ) contract vehicles and Multiple Award Contracts (MACs) where Serco are one
of a number of companies able to bid for specific task orders issued under the IDIQ or MAC. The value of any task order is
recognised within the order book when subsequently won.
The order book at 31 December 2014 was £12.6bn, a decrease of £1.0bn from the 31 December 2013 level of £13.6bn. This
followed £3.1bn of signed contracts in 2014 (2013: £3.5bn) which did not fully replenish the £4.0bn revenue recognised in
the year, with an additional £0.1bn adverse impact from foreign exchange. Signed contracts in the year included Caledonian
Sleepers and Yarl's Wood rebid in Central Government, Centers for Medicare and Medicaid Services CMS expansion and
Department of Defense providing program management and related support rebid in Americas, Department of Immigration and
Border Protection rebid in AsPac and Lincolnshire County Council in Local & Regional Government.
ROIC
Invested Capital is calculated as explained earlier using the closing balance sheet related to the period; for 2015 it will
be calculated as a two-point average of the opening and closing balance sheets for the period. For 2014 a single point has
been used as there has been a significant reduction in net assets reflecting the losses in the year. For 2014, the return
from Trading Profit before the impact of the Contract and Balance Sheet Review items was 11.3% (2013: 13.9%). The
composition of Invested Capital and calculation of ROIC is summarised in the table below.
Invested Capital and ROIC %
At 31 December 2014 £m At
31 December 2013£m
Non-current assets
Goodwill 541.5 1,270.8
Other intangible assets 118.8 185.7
Property, plant and equipment 38.4 176.8
Interest in joint ventures 1.6 8.1
Trade and other receivables 38.1 78.3
738.4 1,719.7
Current assets
Inventory 31.2 49.4
Trade and other receivables 498.8 764.4
Assets classified as held for sale 564.7 -
1,094.7 813.8
Total invested capital assets 1,833.1 2,533.5
Current liabilities
Trade and other payables (581.9) (644.1)
Assets classified as held for sale (219.9) -
Non-current liabilities
Trade and other payables (29.7) (34.1)
Total invested capital liabilities (831.5) (678.2)
Invested capital 1,001.6 1,855.3
Trading (Loss)/Profit (632.1) 257.4
ROIC % n/a 13.9%
Financial StatementsConsolidated Income StatementFor the year ended 31 December
Continuing operations 2014 2013
Note £m (restated)*£m
Revenue 3,955.0 4,284.2
Cost of sales (4,019.7) (3,788.9)
Gross (loss)/profit (64.7) 495.3
Administrative expenses
General and administrative expenses (597.4) (285.0)
Exceptional (loss)/profit on disposal of subsidiaries and operations 6 (5.4) 19.2
Other exceptional operating items 6 (656.1) (109.7)
Other expenses - amortisation and impairment of intangibles arising on acquisition (23.7) (21.4)
Share of profits in joint ventures, net of interest and tax 30.0 47.1
Operating (loss)/profit (1,317.3) 145.5
Operating (loss)/profit before exceptional items (655.8) 236.0
Investment revenue 7 6.2 5.2
Finance costs 8 (42.9) (42.4)
(Loss)/profit before tax (1,354.0) 108.3
Tax on (loss)/profit before exceptional items (11.1) (38.7)
Tax on exceptional items 18.0 28.8
Tax credit/(charge) 6.9 (9.9)
(Loss)/profit for the year (1,347.1) 98.4
Attributable to:
Equity owners of the Company (1,347.3) 98.4
Non-controlling interests 0.2 -
Earnings per share (EPS)
Basic EPS 11 (258.35p) 20.12p
Diluted EPS 11 (258.35p) 19.66p
19.66p
*Prior year adjustments have been made to reflect the restatement of certain financial instruments. Further details are
given in note 2.
Consolidated Statement of Comprehensive IncomeFor the year ended 31 December
Note 2014 £m 2013(restated)£m
(Loss)/profit for the year (1,347.1) 98.4
Other comprehensive income for the year:
Items that will not be reclassified subsequently to profit or loss:
Net actuarial gain on defined benefit pension schemes1 52.8 30.3
Actuarial gain/(loss) on reimbursable rights1 13.5 (37.1)
Tax relating to items not reclassified1 (12.9) 3.0
Share of other comprehensive income in joint ventures 1.9 3.9
Items that may be reclassified subsequently to profit or loss:
Net exchange gain/(loss) on translation of foreign operations2 24.9 (58.7)
Fair value loss on cash flow hedges during the year2 (2.7) (0.9)
Tax relating to items that may be reclassified2 - (0.1)
Share of other comprehensive expense in joint ventures (3.8) (1.8)
Total comprehensive (expense)/income for the year (1,273.4) 37.0
Attributable to:
Equity owners of the Company (1,273.7) 37.0
Non-controlling interest 0.3 -
0.3
-
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.
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 interest
holders' equity
£m £m £m £m £m £m £m £m £m £m
At 1 January 2013 10.0 326.5 0.1 900.7 (138.6) 77.7 (58.8) 10.0 1,127.6 1.3
Prior year adjustment (note 4) - - - (8.7) - - - 8.7 - -
At 1 January 2013 (restated) 10.0 326.5 0.1 892.0 (138.6) 77.7 (58.8) 18.7 1,127.6 1.3
Total comprehensive income for the year - - - 100.5 (3.8) - - (59.7) 37.0 -
Shares transferred to option holders on exercise of share options - 1.3 - - - (4.5) 4.3 - 1.1 -
Dividends paid - - - (51.5) - - - - (51.5) (0.6)
Expense in relation to share-based payments - - - - - 2.9 - - 2.9 -
Tax charge in relation to share-based payments - - - - - (5.9) - - (5.9) -
Purchase of own shares for Employee Share Ownership Trust (ESOT) - - - - - - (16.0) - (16.0) -Recent news on Serco
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