Restart contract win; WBB acquisition completed
Serco wins DWP Restart contract with an estimated value of £350m; WBB acquisition completed; 2021 guidance updated.
27 April 2021
Contract win
Serco is pleased to announce that it has been awarded two contracts by the UK Department for Work and Pensions (DWP) to help people find jobs in the West Central region and Wales as part of the Restart programme. We estimate that the combined value over the initial four and a half-year contract period will be around £350m, with the amount dependent on the number of people who find employment. The contracts have options to extend for a further two years.
The Restart programme will help people who have been unemployed for between 12 and 18 months get back into work, including those whose prospects for securing employment have been impacted by the Covid-19 pandemic. Jobseekers' needs will be assessed, and individually tailored programmes will be devised to support them; this will include identifying and leveraging skills which will help people find sustainable employment. Serco will be leading a team of employability providers including 13 SME's (Small and Medium sized Enterprises), 6 Local Authorities and 4 charities, all of whom, like Serco, have deep experience and expertise in this sector.
The contracts were awarded after a competitive process, and we expect delivery to start in June this year. The majority of the revenue from the contract will be outcome-related, i.e. only earned when jobseekers have been employed for six months working an average of 16 hours a week and earning at least the National Living Wage. Consequently, the contract will be loss-making in 2021 as it mobilises and helps the initial cohorts find work; we expect losses in 2021 to be in the range of £5m-10m, and that the contract will be profitable thereafter. Cash flow will be phased more evenly over the contract and is expected to be positive in 2021.
Commenting on the award, Rupert Soames, Group Chief Executive of Serco said: "We are delighted to have been selected after a rigorous procurement process by the DWP to deliver a significant part of the Restart programme, which is an important component of the Government's strategy to "Build Back Better". Serco has extensive experience and a proven track record in employment services, and in managing teams of expert partners, including small companies and charities, who will work with us to achieve positive outcomes both for individual job-seekers and the UK economy more generally."
Completion of WBB acquisition
On 16 February 2021 Serco announced the acquisition, subject to regulatory approvals, of Whitney, Bradley & Brown Inc (WBB) from an affiliate of H.I.G. Capital for $295m (£215m). Following receipt of all necessary approvals, Serco has today completed the acquisition, which will increase the scale, breadth and capability of Serco's North American defence business and will give Serco a strong platform from which to address all major segments of the US defence services market. As stated when we announced the acquisition, in calendar year 2021 WBB is expected to generate revenue of around $230m (£165m), EBITDA of $29m (£21m) and UTP of $28m (£20m), before exceptional transaction and integration costs; with the transaction now completed, Serco will benefit from eight months of WBB's financial performance in 2021.
Updated guidance for 2021
We update our guidance for 2021 to take account of eight months of financial contribution anticipated from WBB, the initial losses expected in 2021 on the Restart contract as well as recent exchange rates.
|
|
2020 |
2021 |
|
|
|
Actual |
Guidance as at 25 Feb |
Latest guidance |
|
Revenue |
£3.9bn |
~£4.2bn |
~£4.3bn |
|
Organic sales growth |
16% |
~4% |
~4% |
|
Underlying Trading Profit |
£163m |
~£175m |
~£185m |
|
Net finance costs |
£26m |
~£27m |
~£28m |
|
Underlying effective tax rate |
23% |
~25% |
~25% |
|
Free Cash Flow |
£135m |
~£75m |
~£85m |
|
Adjusted Net Debt |
£58m |
~£100m |
~£300m |
Notes to guidance: The guidance uses an average GBP:USD exchange rate of 1.38 in 2021 and GBP:AUD of 1.81.
Ends
For further information please contact:
Paul Checketts, Head of Investor Relations, tel: +44 (0) 7718 195 074 or email: paul.checketts@serco.com
Marcus De Ville, Head of Media Relations, tel: +44 (0) 7738 898 550 or email: marcus.deville@serco.com
About Serco
Serco is a leading international provider of public services. Our customers are governments or others operating in the public sector. We gain scale, expertise and diversification by operating around the world 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", "could", "should", "will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" 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; cyber-attacks; and pandemics, epidemics or natural disasters. 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.
LEI code: 549300PT2CIHYN5GWJ21
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