3 September 2003
Please see below
SERCO GROUP PLC
Interim results for the six months ended 30 June 2003
6 months 6 months
to 30.06.03 to 30.06.02
Turnover �722.6m �625.9m Up 15.4%
Profit before tax - pre �31.3m �28.4m Up 10.2%
goodwill*
Earnings per share - pre 5.15p 4.84p Up 6.4%
goodwill
Dividend per share 0.72p 0.64p Up 12.5%
*Profit after goodwill and before tax for the six months to 30.6.03 was �27.0m
(2002: �24.5m).
More detail is provided in the financial review.
HIGHLIGHTS
- Double-digit increases in sales and profits for the 16th consecutive year
- Over 70% of increase in turnover came from extensions to the scope and scale
of existing contracts
- Profit before goodwill, tax and an incremental pension cost of �4.5m
resulting from an increase in long term contribution is up 26%
- Succession of sales records broken
- Largest new contract - 25-year Merseyrail Electrics contract worth �1.8bn
- Largest rebid - 11-year contract at Goose Bay, Canada worth C$400m
- Largest contract extension - 15-year extension to the Atomic Weapons
Establishment contract worth over �1bn
- Largest North American contract - 10-year Ontario driver examination services
contract worth C$600m
- Strong cash performance
- First half year free cash inflow �14.2m (2002: outflow of �11.5m)
- Great Southern Railway sale and leaseback generated �5.8m of cash
- Acquisition of remaining 50% share in Premier Custodial Group successfully
completed in July
- Restructuring and review of underperforming businesses
- Business reorganisation resulted in exceptional charge of �4.5m while
generating ongoing savings of �1.5m a year
- Agreement reached with Network Rail to terminate East Midlands track
maintenance contract in January 2004
- Continued high visibility of earnings
- Forward order book up from �7.1bn to �9.9bn
- 99% of 2003 turnover already secured
- 86% of 2004 turnover already secured
- Substantial range of future opportunities
- Bids worth �6bn submitted and under evaluation
- �8bn of further opportunities identified
Kevin Beeston, Executive Chairman, said:
"We have had an outstanding six months, continuing the Group's double-digit
growth record. After breaking a succession of sales records we've increased our
forward order book by �2.8bn to �9.9bn while delivering a strong profit and
cash performance.
We are confident that our standing among customers and potential customers
remains high, and our credibility is underpinned by a track record of delivery.
We look forward to sustained, profitable growth - in the second half and for
the foreseeable future."
- Ends -
INTERIM REPORT
A copy of the 2003 Interim Report will be available on www.serco.com from 0730
(BST). Hard copies of the report can be obtained on request from the registered
office:
Serco Group plc
Serco house
16 Bartley Wood Business Park
Bartley Way
Hook
Hampshire
RG27 9UY
United Kingdom
T: +44 (0)1256 745900
F: +44 (0)1256 744111
CONFERENCE CALL
Following a briefing to analysts there will be a teleconference for analysts
and investors on the day of announcement. This will begin promptly at 1500hrs
(BST).
Dial-in telephone numbers
UK only 020 7162 0192
International +44 20 7162 0192
US only +1 334 323 6203
Password Serco
WEBCAST
A webcast of the results presentation will also be available on www.serco.com
from 1700 hrs (BST) on the day of announcement. To pre-register for viewing
please visit http://clients.tornadonetworks.net/serco-001/
For further information please contact Serco Group plc: T: +44 (0)1256 745900
Kevin Beeston - Executive Chairman
Andrew Jenner - Finance Director
Ben Woodford - Corporate Communications Director
Chairman's statement
Serco has had an excellent six months. While maintaining double-digit growth in
sales and profits, we have won major new contracts that will contribute to the
business for years to come. Trading, margins and cash generation remain strong.
Our forward order book grew from �7.1bn in December 2002 to �9.9bn as we broke
a succession of sales records: our largest new contract, largest rebid and
largest contract extension. A high rate of organic growth is our principal
objective, and over 70% of the first half's incremental sales came from
extensions to the scope and scale of existing contracts. Our success rate in
rebids and contract extensions remained above 90%, and we continued to win over
half of our new bids.
The keys to our record of dependable organic growth are the diversity of our
markets, extending across many sectors and geographies, and the quality of the
relationships we build with customers. There is no shortage of new
opportunities: we currently have bids with a value of �6bn under evaluation and
are addressing a further �8bn of opportunities.
Financial performance
Results
In the six months to 30 June 2003, turnover was �722.6m - 15.4% higher than the
first half of 2002. Pre-tax profit (before goodwill) grew 10.2% to �31.3m.
Earnings per share (before goodwill) grew 6.4% to 5.15p.
These results include an additional �4.5m of pension costs in the first half as
a result of the increased pension funding requirement identified with our 2002
preliminary results. Excluding these costs, pre-tax profits (before goodwill)
grew by 26%.
We continue to focus on cash generation. During the first half cash performance
was strong, with positive free cash inflow of �14.2m compared with an outflow
of �11.5m in the six months to 30 June 2002. This is a significant achievement
in a business with consistently high growth, which brings incremental demand
for working capital.
As part of the focus on cash generation, we arranged the sale and leaseback of
the remaining rolling stock belonging to our Great Southern Railway business in
Australia. This generated �5.8m of cash and �4m of profit and followed a
similar arrangement completed in June 2001.
Further details of our financial performance are given in the financial review.
Dividend
We have increased the interim dividend by 12.5% to 0.72p per ordinary share. It
will be paid on 10 October 2003 to shareholders on the register at close of
business on 12 September 2003.
Balance sheet
Because of the rapid growth of the business and the scale of opportunities
ahead of us, maintaining a strong balance sheet is a priority. In August we
took advantage of historically low interest rates by issuing �117m of 8-12 year
loan notes. This provides assured funding for the future and allows a mixed
profile of debt facilities and maturity. It has also enabled us to repay the
short term bank facilities we used to acquire the remaining 50% of Premier
Custodial Group.
Operational performance
Notwithstanding excellent organic growth, the period was particularly notable
for four business wins: our largest-ever new contract, rebid and extension plus
a strategically important win in North America.
In May we signed our largest-ever contract, worth �3.6bn, to run the Merseyrail
Electrics contract for 25 years from July in partnership with the Dutch rail
operator NedRailways. Serco's share of the contract is worth �1.8bn.
In February the Canadian Department of National Defence appointed us to provide
site support services at its Goose Bay Canadian Forces Base for a second term
in our largest-ever rebid: an 11-year contract worth some C$400m.
In January the UK government announced a 15-year extension to the 10-year
contract under which we and our partners are managing the Atomic Weapons
Establishment - adding �1bn to our order book and extending the contract to
2025.
In addition to these wins, we broke new ground in North America with a 10-year
public private partnership under which we will provide driver examination
services throughout the state of Ontario in Canada. This is the first contract
of its kind in the North American market and is a model which could be
replicated in future.
UK
The UK continues to be an exceptionally fruitful market for us. Two further
important UK wins were a �60m multi-activity contract to provide flight
training and support services at RAF Cranwell, and a Private Finance Initiative
(PFI) contract to procure a 326-bed immigration detention centre in Colnbrook,
Middlesex and operate it for eight years.
The contract at RAF Cranwell further strengthens our position in the buoyant
defence market, where we currently have several very large bids under
consideration including the �13bn Future Strategic Tanker Aircraft contract and
the RAF's Airfield Support Services Project, which covers over 100 UK military
bases and airfields.
Our rail business continues to bid for carefully selected contracts. We were
disappointed not to win the Wales & Borders franchise after reaching the final
shortlist, but our Merseyrail success has encouraged us in our bids for the
Northern Rail franchise and the third phase of the Manchester Metrolink.
In the road transport sector we continue to secure new business and are on
schedule to open the Highways Agency's Traffic Control Centre in early 2004.
We are also making good progress in civil government. Our leisure, healthcare,
education and local authority direct service businesses are all addressing
opportunities with innovative solutions and a high rate of success.
We remain enthusiastic but selective participants in PFI contracts, which
account for some 12% of our turnover. Our interest in PFIs is focused on the
long term operating contracts that follow the construction or asset procurement
phase. Over the past few years we have built a PFI forward order book worth
some �3.4bn, and we are already generating net positive cash flows after our �
13.2m equity and subordinated debt investment in these contracts.
International
We continue to attach great importance to our international growth strategy,
and several of our primary target markets are beginning to show real promise.
In Canada we have achieved a degree of critical mass by securing the Goose Bay
rebid and winning the Ontario driver examination services franchise.
In Australia our Great Southern Railway business will gain a further boost in
February 2004, when the Alice Springs-Darwin link opens. Ticket sales for the
extended journey to Darwin topped A$5m in the first five weeks after bookings
opened - six months before the first train is due to run.
In Europe we continue to gain ground in Italy and Germany. In Germany we are
making steady progress in the defence and government sectors; in Italy we have
won our first facilities management contract as we build on our early successes
in government IT outsourcing to gain entry into new and evolving market
sectors.
In the Middle East we are continuing to grow our core air traffic services
business while developing newer markets in facilities management, technology
and training services. We are on a shortlist of two bidders for the first Omani
PFI, to build and operate a joint services technical training college.
Strategic developments
Acquisitions
During the first half we bought-out our partners in three businesses, two of
which are PFI projects. At the National Physical Laboratory we took full
control of Laser, formerly a joint venture with Laing Investments Limited. In
Manchester we acquired the Altram consortium which had built Phase 2 of the
Metrolink system and operates and maintains Phases 1 and 2. In Denmark we made
a similar move by buying out the joint venture we formed with Arriva to
commission and run the Copenhagen Metro, which opened last October.
In July we also acquired our partner's share of Premier Custodial Group, our
custodial support services business. This �48.6m deal followed our partner's
acquisition by a competitor and gives us the opportunity to develop the
business in the UK and overseas. The custodial market is expanding rapidly and
opportunities arising over the next few years in the UK alone will include new
prisons, secure training facilities for juvenile offenders, and immigration
accommodation centres. Premier has a number of PFI contracts, and its assets
and non-recourse debt will be consolidated in the second half.
All our PFI acquisitions bring non-recourse debt onto the Group balance sheet.
During the first half, the amount of non-recourse debt on the balance sheet
increased from �29.7m to �117.8m. The Premier acquisition will add around �
180m. All these debts are long term bank loans secured on the assets held in
the companies which operate the PFI concessions and not on the assets of Serco
Group. Although
we consolidate these non-recourse loans on the balance sheet, they are
ringfenced and do not affect our debt facility covenants or our ability to fund
the Group going forward.
Restructuring
In our 2002 preliminary results announcement and at our AGM in May, we referred
to the review that we are undertaking to focus the business on areas with
greatest potential and to reduce underperforming activities.
As our businesses grow, we need to back them with efficient and consistent
support processes. So we have restructured our UK support operations, bringing
them together on a single business campus in Hampshire to create Serco Business
Services. We have also rationalised our Australian support offices to a single
centre in Sydney. The redundancy and relocation costs result in an exceptional
charge of
�4.5m in the accounts for the first half, but will generate ongoing savings of
some �1.5m a year.
A further result of the strategic review was an agreement with Network Rail in
the UK to withdraw from our track maintenance contract for the East Midlands
zone in January 2004.
New capability
We have continually encouraged customers to let larger and more sophisticated
contracts, and have developed the resources to handle them. Helping customers
to develop and manage this type of contract has now become a growth opportunity
in its own right. Having already built the financial capability to structure
finance for complex, large-scale contracts and to manage our own investment
portfolio, we have now supplemented and extended that capability to create a
new business, Serco Government Consulting. The team currently includes some 20
management consultants who provide strategic consulting advice and help
customers shape, define and implement business solutions. It will also provide
strategic advice and management support to our operating businesses.
People
In June we appointed David Richardson to the board as a non-executive director.
David is finance director of Whitbread, the FTSE 100 leisure group. His
previous roles there have included eight years as strategy director. He will
take over as chairman of the audit committee when Rhidian Jones retires in
April 2004.
A further change to the board is planned in March next year, when Iestyn
Williams retires as a director. Iestyn has been with the company for 25 years
and a board member since 1986. He will continue his association with the
company as non-executive chairman of our education business, Serco Learning.
One of our major objectives, as a business employed predominantly by the public
sector, is to demonstrate that a private sector business can have a public
service ethos. There can be few more convincing examples of this than the
conduct of our 500 support staff working in Hong Kong hospitals during the SARS
outbreak. Almost 1,750 people caught the disease in Hong Kong - and more than a
fifth of them were hospital workers. Many of our people admitted they were
scared. But that didn't stop them from delivering much-needed services on the
front line throughout the crisis. We respect all of them for their courage and
thank them for their dedication.
As always, we also thank all our people for their part in Serco's continuing
growth and success.
Corporate social responsibility
Social responsibility has been an integral part of our culture for over 40
years. We have a structured approach which delegates accountability for
corporate social responsibility performance to every contract manager. This
ensures that initiatives are managed at a local level, where they have most
impact. The first Business in the Community Corporate Responsibility Index,
announced in March, indicates that this approach is delivering encouraging
results: Serco was ranked in the second quintile, and our overall score of 79%
only just fell short of the top quintile.
Outlook
Our total order book has increased from �7.1bn to �9.9bn - equivalent to about
seven times last year's turnover. We are currently addressing a further �14bn
of opportunities. Assuming a continuing 90% renewal rate on rebids, we already
have contracts in place to provide 99% of planned revenue this year, 86% in
2004 and 71% in 2005.
The unremitting pressure on governments to deliver value for taxpayers' money
plays to our strengths. We are confident that our standing among customers and
potential customers remains high, and our credibility is underpinned by a track
record of delivery. We look forward to sustained, profitable growth - in the
second half and for the foreseeable future.
3 September 2003
Financial review
1 Financial performance
The first half of 2003 has been another period of strong performance. Further
analysis is provided below:
2003 2002
Six months to 30 June �m �m Change
Total turnover 722.6 625.9 15.4%
Group turnover 608.6 522.0
Joint venture turnover 114.0 103.9
Gross profit 83.2 71.1 16.9%
Administrative expenses (61.8) (50.4)
Exceptional items (net) (0.5) -
Joint venture profit 11.8 10.1
Net Group interest (1.4) (2.4)
PROFIT BEFORE GOODWILL AND TAX 31.3 28.4 10.2%
Goodwill (4.3) (3.9)
Profit before tax 27.0 24.5 10.0%
Tax (9.2) (8.3)
Profit after tax 17.8 16.2
Effective tax rate 34% 34%
Average number of shares 429.6m 414.1m
Earnings per share before goodwill 5.15p 4.84p 6.4%
Earnings per share after goodwill 4.14p 3.91p 5.9%
1.1 Turnover
Total turnover in the six months to 30 June 2003 increased by 15.4% to �722.6m.
This includes �114.0m of turnover relating to joint ventures, an increase of
9.7%. Group turnover increased by 16.6% to �608.6m.
1.2 Gross profit
Gross profit of �83.2m increased by 16.9% and represents a return on group
turnover of 13.7% (2002: 13.6%).
1.3 Pre-tax profit
Pre-tax profit before goodwill amortisation increased 10.2% to �31.3m.
1.4 Exceptional items
Two exceptional items during the period result in a net charge of �0.5m.
The sale and leaseback of the remaining rolling stock belonging to our Great
Southern Railway (GSR) business in Australia generated cash of �5.8m and profit
of �4.0m.
We have also undertaken a fundamental review of our support office and
underperforming operations, resulting in a number of redundancies, office
closures and relocations. The �4.5m cost of this restructuring has been charged
to the profit and loss account in the first half of the year.
1.5 Pensions costs
As disclosed in our 2002 Accounts, to address the net deficit on our UK defined
benefit scheme we have increased our long term contribution rates. For 2003 we
have increased our pension contribution by �9m, which is accounted for evenly
over the year. Excluding this additional cost, our first half profit before
goodwill and tax increased by 26%.
1.6 Tax
The tax charge of �9.2m (2002: �8.3m) represents an effective rate of 34%
(2002: 34%).
1.7 Earnings per share
Earnings per share before goodwill amortisation grew by 6.4% to 5.15p. The
average number of shares increase reflects the impact of a share placement in
March 2002.
2 Dividends
The proposed interim dividend of 0.72p per share is a 12.5% increase on 2002.
3 Cash flow
During the six months to 30 June 2003 we generated free cash inflow of �14.2m
against an outflow of �11.5m in the first six months of 2002.
This is further analysed below:
2003 2002
Six months to 30 June �m �m
Operating Profit before exceptional item 17.1 16.8
Exceptional item: Reorganisation costs (4.5) -
Operating profit 12.6 16.8
Non cash items: Depreciation and goodwill 13.7 11.5
Group EBITDA 26.3 28.3
One-off pension fund contribution - (15.5)
Working capital movement (10.9) (16.6)
Operating cash flow 15.4 (3.8)
Dividends from joint ventures 4.6 6.2
Interest and taxation (5.1) (5.4)
Capital expenditure/disposals of assets (7.6) (7.9)
Exceptional item: GSR sale and leaseback 5.8 -
Other items 1.1 (0.6)
FREE CASH FLOW 14.2 (11.5)
Acquisitions/disposals (5.3) (3.2)
Share issues/other financing (1.5) 116.0
Dividends paid (6.2) (5.5)
Net cash flow 1.2 95.8
Closing cash 70.6 60.0
Long term loans (48.2) (45.3)
Other loans and finance leases (22.2) (17.5)
Net cash/(recourse debt) 0.2 (2.8)
Non-recourse debt to fund PFI assets (117.8) (19.7)
Total net debt (117.6) (22.5)
3.1 Operating cash flow
There was an operating cash inflow for the period of �15.4m (2002: outflow of �
3.8m). This converts 122% (2002: n/a) of our operating profit and 59% (2002: n/
a) of Group EBITDA into cash.
The working capital increase of �10.9m (2002: �16.6m) reflects the continuing
strong level of organic growth shown by the Group in 2003 and equates to
approximately one month's incremental period on period turnover, reflecting the
typical invoicing cycle of our contracts.
3.2 Joint ventures
Dividends received from joint ventures in the first six months of 2003 of �4.6m
(2002: �6.2m) represent a 56% (2002: 88%) conversion of profit after tax of
joint ventures into cash. Dividends received in 2002 included a dividend of �
3.3m from a refinancing of the Joint Services Command and Staff College PFI.
3.3 Capital expenditure
Capital expenditure, excluding investment in PFI Special Purpose Companies
(SPCs), for the six months to 30 June 2003 was �12.5m (2002: �8.2m). As a
proportion of Group turnover this expenditure represents 2% and has remained at
a similar level to previous years.
3.4 Pensions
A �15.5m pension payment in 2002 was made to assist the merger of Serco's two
defined benefit schemes by achieving a similar funding level across both
schemes.
Operating cash flow for the six months to 30 June 2003 includes an additional �
4.5m of pension costs as a result of the increased pension funding requirement
referred to in 1.5.
3.5 Non-recourse debt
At 30 June 2003 non-recourse loans totalled �117.8m (2002: �19.7m). These loans
fund the construction and development of the Traffic Control Centre and the
National Physical Laboratory.
The completion of the acquisition of our partner's share in Premier Custodial
Group in July, together with the funding of the Ontario driver examination
services franchise payment, will lead to additional non-recourse loans being
included in our balance sheet, along with the related assets at the end of
2003.
Non-recourse debt is excluded from the Group's banking facility covenants but
is consolidated on the Group's balance sheet. The corresponding asset is
included within `Debtors: amounts due after more than one year' in the balance
sheet. The loans are secured on those assets held within the SPC to operate the
PFI concessions and not on the assets of Serco Group.
4 Pensions
We continue to apply the transitional rules and disclosures of FRS 17
Retirement Benefits. This required the market value of assets and liabilities
for defined benefit schemes to be calculated and disclosed in a note to the
2002 Group accounts. At 31 December 2002 we identified a net deficit of �74m in
relation to the main UK defined benefit schemes and an asset base of
approximately �295m, while the Minimum Funding Rate (MFR) funding level was
100%. While we are not required to undertake a full actuarial valuation of the
scheme at 30 June 2003, it is estimated that the net deficit is approximately
the same.
As noted above, the two principal defined benefit schemes in the UK were merged
in February 2003. The investment profile of the merged scheme will be changed
such that equities will become a smaller proportion of total assets to help
achieve a closer matching of the asset and liability profiles.
5 Treasury
5.1 Treasury management
The Group's tax and treasury function is responsible for managing the Group's
exposure to financial risk. It operates within policies approved and reviewed
by the board, which include controls on the use of financial instruments. The
Group reviews the credit quality of counterparties and limits individual
aggregate credit exposures accordingly.
5.2 Liquidity management
The Group funds its operations through bilateral bank credit facilities and a
long term US private placement of loan notes (`the US notes'). Borrowings under
the bank facilities are floating rate, unsecured obligations with covenants and
obligations typical of these types of arrangements. The US notes mature in
December 2007.
At the end of June 2003 bank facilities totalled �160m, of which �50m was
committed funding. The committed bank facilities mature in November 2005.
On 20 August 2003, the Group completed a private placement for �117m sourced
from a number of institutions. This private placement is designed to lengthen
the maturity profile of the Group's debt, with a final maturity of 12 years and
an average term of 10 years. The placement will be used to refinance the debt
used to acquire Premier Custodial Group and to help position the Group for
future growth. The debt was issued in Sterling and US Dollars at a fixed
average coupon of 5.7%. The debt issued in US Dollars has been swapped into
Sterling.
6 Auditors
While there is no statutory requirement to do so, the financial statements and
notes in the Interim Report have been reviewed by our auditors, Deloitte &
Touche LLP. Their review conclusion is included on page 23 of our Interim
Report.
7 Events after 30 June 2003
On 2 July we completed the acquisition of Wackenhut Corrections UK Limited's
50% share in Premier Custodial Group (`Premier'). Serco paid �48.6m for the
shares, which represents 90% of their fair market value, as determined by
independent valuation.
In the year ended 31 December 2002 Premier's turnover was �127.4m and profit
before tax was �10.0m. The net assets employed in Premier at 31 December 2002
were �25.0m, which included non-recourse debt of �179.2m. Serco's share of
Premier's gross assets and liabilities is included within the share of joint
venture assets and liabilities shown on Serco's balance sheet. The acquisition
of Premier will result in 100% of these assets and liabilities being
consolidated for the second half of 2003.
Consolidated Profit & Loss Account
For the six months ended 30 June 2003
6 months 6 months Year to
31.12.02
to 30.6.03 to 30.6.02
�'000
�'000 �'000
(unaudited) (unaudited) (audited)
TURNOVER: GROUP AND SHARE OF JOINT VENTURES 722,551 625,936 1,325,948
Less: Share of joint ventures (113,997) (103,895) (228,670)
Group turnover 608,554 522,041 1,097,278
Cost of sales (525,376) (450,903) (947,313)
Gross profit 83,178 71,138 149,965
Administrative expenses (70,556) (54,296) (120,862)
Amortisation of goodwill (4,330) (3,870) (8,098)
Exceptional item: Reorganisation costs (4,489) - -
Other administrative expenses (61,737) (50,426) (112,764)
Operating profit 12,622 16,842 29,103
Exceptional Item: GSR sale and leaseback 3,977 - -
Share of operating profit in joint ventures 10,384 9,589 21,883
Net interest
Group (1,421) (2,416) (4,064)
Share of joint ventures 1,394 510 2,019
PROFIT ON ORDINARY ACTIVITIES BEFORE 26,956 24,525 48,941
TAXATION
Taxation on profit on ordinary activities (9,165) (8,339) (16,639)
PROFIT ON ORDINARY ACTIVITIES AFTER 17,791 16,186 32,302
TAXATION
Dividends (3,092) (3,257) (9,441)
RETAINED PROFIT 14,699 12,929 22,861
Earnings per ordinary share (EPS) of 2p
each:
Basic EPS, after amortisation of goodwill 4.14p 3.91p 7.66p
Basic EPS, before amortisation of goodwill 5.15p 4.84p 9.58p
Diluted EPS, after amortisation of goodwill 4.14p 3.90p 7.63p
Diluted EPS, before amortisation of 5.15p 4.84p 9.54p
goodwill
Dividend per share 0.72p 0.64p 2.08p
Consolidated Balance Sheet
As at 30 June 2003
As at As at As at
30.6.03 30.6.02 31.12.02
�'000 �'000 �'000
(unaudited) (unaudited) (audited)
FIXED ASSETS
Intangible assets 141,130 141,570 147,473
Tangible assets 71,002 51,379 62,479
Investments in joint ventures 41,074 30,650 35,883
Share of gross assets 267,846 320,355 317,831
Share of gross liabilities (226,772) (289,705) (281,948)
Investment in own shares 17,766 18,487 18,207
270,972 242,086 264,042
CURRENT ASSETS
Stocks 37,264 29,771 38,744
Debtors: Amounts due within one year 256,597 210,303 220,042
Debtors: Amounts due after more than one 190,358 84,751 108,932
year
Cash at bank and in hand 72,815 168,685 71,774
557,034 493,510 439,492
CURRENT LIABILITIES
Bank loans and overdrafts 2,190 108,646 2,386
Trade creditors 77,755 68,793 74,377
Other creditors including taxation and 94,707 74,244 93,843
social security
Accruals and deferred income 141,976 119,004 136,766
Proposed dividend 3,093 2,831 6,184
319,721 373,518 313,556
NET CURRENT ASSETS 237,313 119,992 125,936
TOTAL ASSETS LESS CURRENT LIABILITIES 508,285 362,078 389,978
Creditors: Amounts falling due after more 182,915 72,847 87,588
than one year
Provisions for liabilities and charges 36,987 27,276 34,533
NET ASSETS 288,383 261,955 267,857
CAPITAL AND RESERVES
Called up share capital 8,697 8,695 8,697
Share premium account 190,791 191,203 190,791
Capital redemption reserve 143 143 143
Profit and loss account 88,752 61,914 68,226
EQUITY SHAREHOLDERS' FUNDS 288,383 261,955 267,857
Consolidated Cash Flow Statement
For the six months ended 30 June 2003
6 Months 6 months Year to
to 30.6.03 to 30.6.02 31.12.02
�'000 �'000 �'000
(unaudited) (unaudited) (audited)
Operating profit pre exceptional item 17,111 16,842 29,103
Exceptional item: Reorganisation costs (4,489) - -
Operating profit 12,622 16,842 29,103
Depreciation and amortisation of goodwill 13,671 11,494 23,632
Movement in working capital (10,911) (16,652) (13,124)
One-off pension fund contribution - (15,500) (15,500)
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES BEFORE PFI ASSET EXPENDITURE 15,382 (3,816) 24,111
Expenditure on PFI assets in the course of (13,327) (5,063) (14,950)
construction
Net cash inflow/(outflow) from operating 2,055 (8,879) 9,161
activities after PFI asset expenditure
Dividends received from joint ventures 4,602 6,172 11,095
RETURNS ON INVESTMENT AND SERVICING OF
FINANCE
Interest received 448 299 1,223
Interest paid (1,869) (3,251) (7,362)
Net cash outflow from returns on (1,421) (2,952) (6,139)
investments and servicing of finance
TAXATION
Tax paid (3,658) (2,468) (5,738)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible and intangible fixed (12,499) (8,211) (23,596)
assets
Sale of tangible fixed assets 4,895 343 8,125
Exceptional item: GSR sale and leaseback 5,761 - -
Net cashflows with joint ventures 780 (1,039) 1,235
Net cash outflow from capital expenditure (1,063) (8,907) (14,236)
and financial investment
ACQUISITIONS AND DISPOSALS
Acquisitions (829) (4,213) (11,353)
Net cash acquired with acquisitions 66 26 397
Subscription for shares in joint ventures (4,552) - (370)
Proceeds on disposal of joint ventures - 1,000 1,030
Net cash outflow from acquisitions and (5,315) (3,187) (10,296)
disposals
EQUITY DIVIDENDS PAID
Dividends paid (6,183) (5,536) (8,283)
Net cash outflow from equity dividends paid (6,183) (5,536) (8,283)
Net cash outflow before financing (10,983) (25,757) (24,436)
FINANCING
Issue of Ordinary Share Capital - 117,945 117,929
Debt due within one year:
(Decrease)/increase in other loans (32) 115 (300)
Debt due beyond one year: 14,384 5,270 15,624
Increase/(decrease) in other loans 734 (330) 24
Increase in non-recourse debt financing PFI 13,650 5,600 15,600
asset
Capital element of finance lease repayments (2,132) (1,699) (3,594)
Net cash inflow from financing 12,220 121,631 129,659
Increase in cash 1,237 95,874 105,223
Opening balance 69,388 (35,835) (35,835)
Closing balance 70,625 60,039 69,388
Notes
For the six months ended 30 June 2003
1 Basis of preparation
The interim financial statements for the six months ended 30 June 2003 have
been prepared in accordance with the accounting policies detailed in the
financial statements for the year ended 31 December 2002 and were approved by
the directors on 3 September 2003. The accounting information contained in the
Interim Report for 2003 does not comprise a full set of accounts within the
meaning of Section 240 of the Companies Act 1985 and no full accounts have been
filed with the Registrar of Companies. The interim results for both 2002 and
2003 are unaudited, but have been reviewed by the auditors and their report to
the company is set out on page 23 of our Interim Report. The financial
information for the full year 2002 is an abridged version of the financial
statements for that year, on which the auditors gave an unqualified report and
which did not contain statements under section 237(2) or (3) of the Companies
Act 1985. The 2002 full year accounts have been delivered to the Registrar of
Companies.
2 Earnings per share
The calculation of basic earnings per Ordinary Share after goodwill is based on
profits of �17,791,000 for the six months ended 30 June 2003 (2002: �
16,186,000) and the weighted average number of 429,640,399 (2002: 414,132,355 )
Ordinary Shares of 2p each in issue during the period.
The calculation of basic earnings per Ordinary Share before goodwill is based
on profits of �22,121,000 for the six months ended 30 June 2003 (2002: �
20,056,000) and the weighted average number of 429,640,399 (2002: 414,132,355 )
Ordinary Shares of 2p each in issue during the period.
The calculation of diluted earnings per Ordinary Share after goodwill is based
on profits of �17,791,000 for the six months ended 30 June 2003 (2002: �
16,186,000) and the weighted average number of 429,640,399 (2002: 414,798,700 )
Ordinary Shares of 2p each in issue during the period.
The calculation of diluted earnings per Ordinary Share before goodwill is based
on profits of �22,121,000 for the six months ended 30 June 2003 (2002: �
20,056,000) and the weighted average number of 429,640,399 (2002: 414,798,700 )
Ordinary Shares of 2p each in issue during the period.
Notes
For the six months ended 30 June 2003
3 Reconciliation of operating profit to net cash inflow/(outflow) from
operating activities
6 Months 6 months Year to
31.12.02
to 30.6.03 to 30.6.02
�'000
�'000 �'000
(unaudited) (unaudited) (audited)
Operating profit pre exceptional item 17,111 16,842 29,103
Exceptional item: Reorganisation costs (4,489) - -
Operating profit 12,622 16,842 29,103
Depreciation 9,341 7,624 15,534
Amortisation of goodwill and intangible 4,330 3,870 8,098
fixed assets
Profit on sale of tangible fixed assets (1,249) (136) (1,948)
Decrease/(increase) in stocks 1,480 6,067 (2,906)
(Increase) in debtors (9,211) (20,701) (41,870)
(Decrease)/increase in creditors (2,900) (3,515) 30,795
Increase in provisions 979 1,633 2,805
One-off pension fund contribution - (15,500) (15,500)
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES BEFORE PFI ASSET EXPENDITURE 15,382 (3,816) 24,111
Expenditure on PFI asset in the course of (13,327) (5,063) (14,950)
construction
Net cash inflow/(outflow) from operating 2,055 (8,879) 9,161
activities after PFI asset expenditure
* Analysis of total net debt
As at As at As at
30.6.03 30.6.02 31.12.02
�'000 �'000 �'000
(unaudited) (unaudited) (audited)
Cash at bank and in hand 72,815 168,685 71,774
Overdrafts (2,190) (108,646) (2,386)
Cash net of overdrafts 70,625 60,039 69,388
Other loans due after more than one year (48,167) (45,312) (47,433)
Other loans due within one year (340) (6,562) (372)
Finance leases (21,888) (10,976) (15,291)
Net cash/(recourse debt) 230 (2,811) 6,292
Non-recourse debt to fund PFI assets (117,828) (19,700) (29,700)
Total net debt (117,598) (22,511) (23,408)
END