Interim Management Statement

SERCO GROUP PLC - Interim Management Statement

PR Newswire

London, May 14

Interim Management Statement

On track to meet 2013 expectations with strong first half organic revenuegrowth and investment in future market development

15 May 2013

Ahead of its Annual General Meeting today, Serco Group plc (Serco), theinternational service company, is issuing the following Interim ManagementStatement covering performance from 1 January 2013 to date.

The Group is on track to meet previously stated expectations for the 2013financial year as set out in the outlook and guidance section below.

Christopher Hyman, Chief Executive of Serco Group plc, said: "We have begun2013 with many important new contracts underway and have achieved a goodoperational performance across our activities around the world. Our global BPObusiness and AMEAA division are delivering further excellent organic revenuegrowth. We are developing new opportunities in the Americas division, thoughchallenging conditions remain in the US federal contracting market. Meanwhilein the UK, markets continue to show more encouraging signs. We are thereforeconfident of Serco's portfolio achieving another year of good progress."

Contract awardsand operational update

Serco's order book was £19.1bn at 31 December 2012 and our pipeline ofidentified opportunities around the world had a total estimated value of £31bn.Since the beginning of the financial year, our contract awards total anestimated £0.9bn. Winning or expanding smaller contracts also plays animportant role in our growth and a selection of these is included in today'sContract News Update on www.serco.com. Notable contract developments so far inthe year are highlighted below.

In UK & Europe frontline services, good progress has been made in the major newcontracts still in their initial year of Serco operation. We also secured an18-month extension to our Docklands Light Railway contract, and are pleased tobe working with the Department for Transport to agree a future award tocontinue operating Northern Rail through to February 2016. Other awards in theperiod include a new contract for parking services for the West LondonAlliance.

In the Americas division, conditions in the US federal contracting marketremain challenging due to the implementation of sequestration and the ongoinggovernment budget and funding issues. However, we have continued to be awardedtask orders and contracts, including the rebid of driver examination servicesin Ontario. Business development activity to further diversify the Americasportfolio is progressing well, particularly in the areas of health andtransportation.

In the AMEAA region, Serco has secured its first direct contract to providetraining services in the Middle East defence market and we have also extendedour support of the Australian Defence Force in the region. New health supportservices have been awarded in the Middle East and extended in Hong Kong, andour pre-operational activity continues to build at the Fiona Stanley Hospitalin Australia. Strong revenue growth in the period was also driven by furtherincreases in the number of people in our care for the Australian Department ofImmigration and Citizenship.

Global Services, Serco's BPO business, is making good progress in the deliveryof major new operations including those for AEGON UK, Shop Direct Group and theshared service support to NHS organisations through the Anglia SupportPartnership. New contract awards in the period include BPO services for afurther leading UK high street retailer and the provision of shared services toover 50 government departments within the United Arab Emirates. Extensions havealso been awarded to UK Central Government contracts such as our complex casemanagement services for the Child Maintenance Group at the Department for Workand Pensions.

Serco has made two small infill acquisitions in the Kingdom of Saudi Arabia inthe period, building on the Group's strength and capabilities in the MiddleEast. The first brings integrated facilities management capabilities in thehealthcare market and the second adds IT and BPO services in the region. Whileremaining primarily focused on organic growth, Serco will continue to look atpotential acquisitions that bring new skills, capabilities or market access.Our proactive portfolio management also involves an ongoing assessment of ourexisting operations for strategic fit, together with expected future levels ofperformance and returns.

Financial position

Serco has continued to achieve both greater diversification and a lengthenedmaturity profile of its borrowing facilities. New US private placementstotalling $240m, which will be repaid between 2020 and 2024, have recently beencompleted. No other material events, transactions or impacts on the Group'sstrong financial position have taken place since the 31 December 2012 balancesheet date.

Outlook and guidance

The outlook and our detailed financial assumptions for 2013 remain unchangedfrom those set out within the results announced on 5 March 2013. For the fullyear, we expect a modest improvement in the 3.3% rate of organic revenue growththat was achieved in 2012, and the Adjusted operating margin to be broadlymaintained around the 6.4% level reported in 2012.

The first half of 2013 is expected to deliver strong organic revenue growthdriven by last year's record level of contract awards, many of which onlystarted part way through last year. Supporting the strong pipeline and marketopportunities in the Global Services division, there is also a greater level ofinvestment in contract bidding and new market development activity occurring inthe first half. Including the effect of this, the Adjusted operating margin forthe Group as a whole is anticipated to be broadly flat on the comparableperiod.

We remain confident in the ongoing resilience, overall outlook and futuregrowth prospects for the Group.

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 FTSE 100 international service company, which combines commercialknow-how with a deep public service ethos.

Around the world, we improve essential services by managing people, processes,technology and assets more effectively. We advise policy makers, designinnovative solutions, integrate systems and - most of all - deliver to thepublic.

Serco supports governments, agencies and companies who seek a trusted partnerwith a solid track record of providing assured service excellence. Our peopleoffer operational, management and consulting expertise in the aviation, BPO,defence, education, environmental services, facilities management, health, homeaffairs, information and communications technology, knowledge services, localgovernment, science and nuclear, transport, welfare to work and the commercialsectors.

More information can be found at www.serco.com