Serco Group PLC Update on health facilities management acquisition (1888Z)
December 13 2017 - 2:00AM
UK Regulatory
TIDMSRP
RNS Number : 1888Z
Serco Group PLC
13 December 2017
Update on health facilities management acquisition
13 December 2017
Serco Group plc
LEI: 549300PT2CIHYN5GWJ21
Further to the announcement on 24 October, Serco Group plc
('Serco' or 'the Group'), the international service company, is
pleased to confirm that it has now signed the definitive Business
Purchase Agreement to acquire a portfolio of selected UK health
facilities management contracts from Carillion plc. Assuming
Carillion receives shareholders' approval and the requisite third
party consents over the course of 2018, each individual contract
will be acquired on a cash-free, debt-free basis, with the
consideration to be paid in instalments and to be satisfied using
Serco's existing debt facilities. Assuming that the contracts are
all transferred to Serco, the total consideration payable would be
GBP47.7m (subject to a limited working capital adjustment and a
limited adjustment in the event that the contracts are transferred
ahead of or behind an assumed schedule). Full transition of
operations is targeted to be achieved by the end of 2018.
The 15 contracts to be acquired by Serco provide facilities
management services to NHS sites across the UK, covering five acute
hospital trusts and around 20 other public sector organisations.
The portfolio has current annual revenues of approximately GBP90m
and a weighted average remaining term of 14 years; approaching
GBP1bn of core contracted revenue would be added to Serco's order
book if all contracts are transferred. The contracts will be
integrated within Serco's existing UK Health business unit, which,
following recent wins at Barts Health NHS Trust and University
Hospital Southampton NHS Foundation Trust, has annual revenues of
around GBP240m. The transaction will therefore significantly
increase the scale of Serco's Health business, and, over time, will
create opportunities for operational synergies.
Serco will only include within its financial forecasts the
effect of the transaction once there is certainty regarding the
necessary approvals and consents. Assuming all 15 contracts
transfer, and including an appropriate allocation of charges for
shared support services and other incremental overheads, the
operations are expected to generate around GBP8m Underlying Trading
Profit and therefore be significantly accretive to earnings
following their integration into Serco. Exceptional acquisition
costs of approximately GBP1m are expected to be incurred and the
transition and integration phase is expected to cost around GBP4-5m
which will be expensed across 2018 and 2019. The gross assets of
the contracts being acquired are estimated to be approximately
GBP16m. Reflected in today's separately announced update on 2017
financial performance, we now expect leverage for covenant purposes
to be at the lower end of our previous guidance range 1.4 to 1.8x
EBITDA; on an underlying pro forma basis this transaction would
increase leverage by approximately 0.3x.
Rupert Soames, Serco Group Chief Executive, said: "The Health
sector is one of the fastest-growing areas of government spending
worldwide, and our customers face immense challenges catering for
the ever-increasing demands of ageing populations. Serco's existing
Health operations already generate revenue of over GBP350m, employ
over 8,000 people, and provide services to such world-famous
institutions as St Barts in the UK, the Cleveland Clinic in Abu
Dhabi, the Prince of Wales Hospital in Hong Kong and Fiona Stanley
Hospital in Australia. We look forward to taking on these
high-quality, long-term contracts which will add significant scale
to our Health business, and will enable us to further improve the
quality and efficiency of services we provide to the NHS and our
other customers."
Ends
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
About Serco
Serco is a leading provider of public services. Our customers
are governments or others operating in the public sector. We gain
scale, expertise and diversification by operating internationally
across five sectors and four geographies: Defence, Justice &
Immigration, Transport, Health and Citizen Services, delivered in
UK & Europe, North America, Asia Pacific and the Middle
East.
More information can be found at www.serco.com
Forward looking statements
This announcement contains statements which are, or may be
deemed to be, "forward looking statements" which are prospective in
nature. All statements other than statements of historical fact are
forward looking statements. Generally, words such as "expect",
"anticipate", "may", "should", "will", "aspire", "aim", "plan",
"target", "goal", "ambition" and similar expressions identify
forward looking statements. By their nature, these forward looking
statements are subject to a number of known and unknown risks,
uncertainties and contingencies, and actual results and events
could differ materially from those currently being anticipated as
reflected in such statements. Factors which may cause future
outcomes to differ from those foreseen or implied in forward
looking statements include, but are not limited to: general
economic conditions and business conditions in Serco's markets;
contracts awarded to Serco; customers' acceptance of Serco's
products and services; operational problems; the actions of
competitors, trading partners, creditors, rating agencies and
others; the success or otherwise of partnering; changes in laws and
governmental regulations; regulatory or legal actions, including
the types of enforcement action pursued and the nature of remedies
sought or imposed; the receipt of relevant third party and/or
regulatory approvals; exchange rate fluctuations; the development
and use of new technology; changes in public expectations and other
changes to business conditions; wars and acts of terrorism; and
cyber-attacks. Many of these factors are beyond Serco's control or
influence. These forward looking statements speak only as of the
date of this announcement and have not been audited or otherwise
independently verified. Past performance should not be taken as an
indication or guarantee of future results and no representation or
warranty, express or implied, is made regarding future performance.
Except as required by any applicable law or regulation, Serco
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking statements
contained in this announcement to reflect any change in Serco's
expectations or any change in events, conditions or circumstances
on which any such statement is based after the date of this
announcement, or to keep current any other information contained in
this announcement. Accordingly, undue reliance should not be placed
on the forward looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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