Final Results - Part 2
Serco Group PLC
4 March 2002
PART 2
2. Segmental Report
In 2000, the results of the Group were analysed under three classes of business: Facilities Management; Systems
Engineering; and Investments. These accounts include new segmental analysis which provides a more detailed
representation of the results and financial position of the Group. The 2000 results have been restated accordingly.
It should be noted however that the Company pursues all projects on their individual merits regardless of sector.
Classes of Business Joint
Group Ventures Total
2001 £'000 £'000 £'000
Turnover
Civil Government 202,605 107,917 310,522
Defence 218,001 115,349 333,350
Transport 275,888 4,244 280,132
Science 87,404 - 87,404
Private sector 129,795 - 129,795
Total 913,693 227,510 1,141,203
Profit before taxation and other costs
Civil Government 13,271 5,169 18,440
Defence 11,312 11,996 23,308
Transport 14,179 209 14,388
Science 4,907 - 4,907
Private sector 6,778 - 6,778
Total 50,447 17,374 67,821
Other costs
Common costs (22,877)
Exceptional item: Cost of unsuccessful NATS acquisition (10,187)
Exceptional item: GSR refinancing 15,356
Amortisation of goodwill (5,123)
Net interest - Group (5,092)
Net interest - Joint ventures 1,334
Total 41,232
Net assets
Civil Government 33,517
Defence 36,282
Transport 27,044
Science 903
Private sector 14,246
111,992
Unallocated assets 17,885
Total 129,877
Classes of Business
Joint
Restated Group Ventures Total
2000 £'000 £'000 £'000
Turnover
Civil Government 159,772 57,787 217,559
Defence 212,968 120,041 333,009
Transport 215,509 3,024 218,533
Science 77,131 - 77,131
Private sector 106,663 5,022 111,685
Total 772,043 185,874 957,917
Profit before taxation and other costs
Civil Government 9,917 2,419 12,336
Defence 10,780 16,104 26,884
Transport 10,260 1,069 11,329
Science 2,630 - 2,630
Private sector 5,437 210 5,647
Total 39,024 19,802 58,826
Other costs
Common costs (18,597)
Amortisation of goodwill (3,681)
Net interest - Group (3,543)
Net interest - Joint ventures 1,024
Total 34,029
Net assets
Civil Government 26,836
Defence 34,697
Transport 19,003
Science 1,081
Private sector 10,004
91,621
Unallocated assets 17,304
Total 108,925
Geographical segments Joint
Group Ventures Total
2001 £'000 £'000 £'000
Turnover
United Kingdom 618,559 175,641 794,200
Rest of Europe and Middle East 130,608 8,876 139,484
Asia Pacific 103,414 38,588 142,002
North America 61,112 4,405 65,517
Total 913,693 227,510 1,141,203
Profit before taxation and other costs
United Kingdom 26,988 14,068 41,056
Rest of Europe and Middle East 10,041 720 10,761
Asia Pacific 8,597 1,871 10,468
North America 4,821 715 5,536
Total 50,447 17,374 67,821
Other costs
Common costs (22,877)
Exceptional item: Cost of unsuccessful NATS acquisition (10,187)
Exceptional item: GSR refinancing 15,356
Amortisation of goodwill (5,123)
Net interest - Group (5,092)
Net interest - Joint ventures 1,334
Total 41,232
Net assets
United Kingdom 64,563
Rest of Europe and Middle East 9,278
Asia Pacific 30,919
North America 7,232
111,992
Unallocated assets 17,885
Total 129,877
Note: Turnover is shown by geographical origin. Turnover analysed by
geographical destination is not materially different.
Geographical segments
Joint
Restated Group Ventures Total
2000 £'000 £'000 £'000
Turnover
United Kingdom 490,786 121,305 612,091
Rest of Europe and Middle East 124,140 13,327 137,467
Asia Pacific 96,872 42,095 138,967
North America 60,245 9,147 69,392
Total 772,043 185,874 957,917
Profit before taxation and other costs
United Kingdom 16,476 16,449 32,925
Rest of Europe and Middle East 10,017 552 10,569
Asia Pacific 8,482 1,316 9,798
North America 4,049 1,485 5,534
Total 39,024 19,802 58,826
Other costs
Common costs (18,597)
Amortisation of goodwill (3,681)
Net interest - Group (3,543)
Net interest - Joint ventures 1,024
Total 34,029
Net assets
United Kingdom 49,901
Rest of Europe and Middle East 8,972
Asia Pacific 24,573
North America 8,175
91,621
Unallocated assets 17,304
Total 108,925
Note: Turnover is shown by geographical origin. Turnover analysed by
geographical destination is not materially different.
3. Information regarding Directors and employees
2001 2000
£'000 £'000
a) Directors' remuneration:
Fees as Directors 83 70
Other emoluments 1,319 1,268
Total remuneration excluding pensions 1,402 1,338
The prior year comparative includes Directors who did not serve in 2001.
2001 2000
£'000 £'000
b) Employee costs including Directors:
Wages and salaries 399,447 358,707
Social security costs 36,376 33,612
Other pension costs (Note 31) 19,544 17,851
Long Term Incentive Scheme costs 661 320
456,028 410,490
Restated
2001 2000
c) Number of persons employed by Serco Group plc and its subsidiaries
Average number of persons employed in the provision of services:
Civil Government 6,738 5,878
Defence 6,491 6,342
Transport 4,653 4,021
Science 1,460 1,425
Private sector 2,445 2,223
Non-specific 116 167
21,903 20,056
4. Interest receivable
Restated
2001 2000
£'000 £'000
Short term deposits 1,484 606
Loans to joint ventures 723 606
Total Group 2,207 1,212
Share of joint ventures' interest 17,102 9,213
19,309 10,425
5. Interest payable and similar charges
2001 2000
£'000 £'000
On liabilities repayable within five years:
Group bank loans and overdrafts 4,246 1,665
Share of joint ventures' interest - 10
4,246 1,675
On liabilities repayable after five years:
Group bank loans and overdrafts 3,053 3,090
Share of joint ventures' interest 15,768 8,179
18,821 11,269
23,067 12,944
6. Profit on ordinary activities before taxation
2001 2000
£'000 £'000
Profit on ordinary activities before taxation is after charging:
Rentals under operating leases:
Land and buildings 11,790 10,028
Plant and machinery 17,586 16,640
Depreciation on tangible assets:
Owned 10,861 9,788
Held under finance leases 2,299 1,950
Finance lease interest on operational assets 454 357
Amortisation of goodwill 5,123 3,681
Auditors' remuneration:
Deloitte & Touche 444 397
Other auditors 125 82
Other fees paid to Deloitte & Touche:
Transaction support 659 -
Tax 544 485
Other 432 424
7. Taxation on profit on ordinary activities
2001 2000
£'000 £'000
The taxation charge on the results of the year is made up as follows:
United Kingdom corporation taxation 3,010 1,646
Double tax relief (349) -
Overseas taxation:
Operating income 2,777 2,038
Exceptional item: GSR refinancing 1,219 -
Deferred taxation (117) (336)
Adjustment in respect of prior years:
United Kingdom corporation taxation 292 (576)
Overseas taxation - (274)
Deferred taxation 501 157
Share of joint ventures' taxation charge 6,066 8,404
13,399 11,059
The effective tax charge for the year is higher than the United Kingdom corporation tax rate principally as a result
of disallowed expenditure and the high effective tax rates of PFI businesses.
8. Dividends
2001 2000
£'000 £'000
Interim dividend of 0.57p per share on 392,551,903
Ordinary Shares (2000 - 0.50p on 391,169,280 Ordinary Shares)
of 2p each fully paid - paid 12 October 2001 2,238 1,956
Proposed final dividend of 1.29p per share on 389,613,782
Ordinary Shares (2000 - 1.13p on 391,591,141 Ordinary Shares)
of 2p each fully paid - proposed payment on 10 May 2002 5,026 4,425
7,264 6,381
2000 final dividend of 1.13p on 50,212 shares issued between
31 December 2000 and 6 April 2001 (record date) 1 -
1999 final dividend of 0.98p on 658,230 shares relating
to shares issued between 31 December 1999 and
17 March 2000 (record date) - 6
7,265 6,387
A dividend waiver is effective for those shares held on behalf of the Company by its Employee Share Ownership Trust.
9. Earnings per Ordinary Share
Basic and diluted earnings per Ordinary Share after goodwill have been
calculated in accordance with Financial Reporting Standard 14 - Earnings Per
Share. Earnings per share is shown both before and after goodwill to assist in
the understanding of the impact of FRS 10 on the Group Accounts.
The calculation of basic earnings per Ordinary Share after goodwill is based on
profits of £27,833,000 for the year ended 31 December 2001 (2000 - £22,970,000)
and the weighted average number of 389,552,980 (2000 - 392,825,780) Ordinary
Shares of 2p each in issue during the year.
The calculation of basic earnings per Ordinary Share before goodwill is based on
profits of £32,956,000 (adjusted for the effect of goodwill amortisation of
£5,123,000) for the year ended 31 December 2001 (2000 - £26,651,000 as adjusted
for goodwill amortisation of £3,681,000) and the weighted average number of
389,552,980 (2000 - 392,825,780) Ordinary Shares of 2p each in issue during the
year.
The calculation of diluted earnings per Ordinary Share after goodwill is based
on profits of £27,833,000 for the year ended 31 December 2001 (2000 -
£22,970,000) and the weighted average number of 391,115,673 (2000 - 396,763,939)
Ordinary Shares of 2p each assuming that the options are all exercised.
The calculation of diluted earnings per Ordinary Share before goodwill is based
on profits of £32,956,000 (adjusted for the effect of goodwill amortisation of
£5,123,000) for the year ended 31 December 2001 (2000 - £26,651,000 as adjusted
for goodwill amortisation of £3,681,000) and the weighted average number of
391,115,673 (2000 - 396,763,939) Ordinary Shares of 2p each assuming that the
options are all exercised.
10. Intangible asset: Goodwill
Group
£'000
Cost:
At 1 January 2001 75,258
Additions during the year 77,631
At 31 December 2001 152,889
Accumulated amortisation:
At 1 January 2001 6,596
Charge for the year 5,123
At 31 December 2001 11,719
Net book value:
At 31 December 2001 141,170
At 31 December 2000 68,662
11. Tangible assets
Group Short Machinery,
Freehold leasehold motor vehicles,
land and building furniture and
buildings improvements equipment Total
£'000 £'000 £'000 £'000
Cost:
At 1 January 2001 8,519 7,949 87,533 104,001
Reclassifications - 533 (533) -
Subsidiaries acquired - 126 4,272 4,398
Capital expenditure 1,225 1,933 24,557 27,715
Disposals (1,970) (338) (16,549) (18,857)
Foreign exchange differences (207) (75) (1,434) (1,716)
At 31 December 2001 7,567 10,128 97,846 115,541
Accumulated depreciation:
At 1 January 2001 2,296 3,297 58,139 63,732
Reclassifications - 20 (20) -
Subsidiaries acquired - 53 3,038 3,091
Provided during the year 266 1,046 11,848 13,160
Disposals (282) (304) (11,650) (12,236)
Foreign exchange differences (46) (38) (846) (930)
At 31 December 2001 2,234 4,074 60,509 66,817
Net book value:
At 31 December 2001 5,333 6,054 37,337 48,724
At 31 December 2000 6,223 4,652 29,394 40,269
The cost of assets held by the Group under finance leases at 31 December 2001
was £18,905,000 (2000 - £11,517,000). The accumulated depreciation provided for
those assets at 31 December 2001 was £6,903,000 (2000 - £6,900,000).
Company Short Machinery,
leasehold motor vehicles,
building furniture and
improvements equipment Total
£'000 £'000 £'000
Cost:
At 1 January 2001 643 2,082 2,725
Transfers from subsidiary undertakings 103 200 303
Capital expenditure 372 427 799
Disposals (1) (85) (86)
At 31 December 2001 1,117 2,624 3,741
Accumulated depreciation:
At 1 January 2001 200 1,304 1,504
Transfers from subsidiary undertakings 40 52 92
Provided during the year 116 417 533
Disposals (1) (69) (70)
At 31 December 2001 355 1,704 2,059
Net book value:
At 31 December 2001 762 920 1,682
At 31 December 2000 443 778 1,221
12. Investments held as fixed assets
Company
£'000
a) Shares in subsidiary companies at cost:
At 1 January 2001 30,314
Equity subscription for shares in Serco Limited 1,238
Acquisition of remaining 50% of Serco Group (Hong Kong) Limited 2,760
Acquisition of Total IT Limited 1,286
At 31 December 2001 35,598
Group
£'000
b) Group investments in joint ventures:
At 1 January 2001 27,688
Dividends receivable (9,645)
Acquisitions 38
Foreign exchange translation difference (213)
Retained profits 12,642
At 31 December 2001 30,510
Group
£'000
c) Investment in own shares:
At 1 January 2001 9,680
Additions 10,000
Amortisation (661)
Exercise of options (36)
At 31 December 2001 18,983
Investment in own shares represents 5,557,033 shares in Serco Group plc held by
the Employee Share Ownership Trust ('ESOP') (1.4% of current allotted share
capital). The market value of shares held by the ESOP Trust at 31 December 2001
was £20,283,170. 52,308 were allotted during the year of which 9,864 were
allotted at £4.26 and 42,444 at nil value.
d) A list of the principal undertakings of Serco Group plc is shown in Note 32.
All the subsidiaries of the Group have been consolidated.
e) At 31 December 2001, Group companies had branches in Abu Dhabi, Antarctica,
Ascension Island, Bahrain, Chile, Dubai, France, Korea, Ras Al Khaimah, Saudi
Arabia, Sharjah and Switzerland.
f) All the subsidiaries of Serco Group plc and the joint venture undertakings
are engaged in the provision of services with the exception of Serco Investments
Limited and certain other holding companies, which manage equity investments.
2001 2000
£'000 £'000
g) The aggregate of the Group's share in the assets and
liabilities of joint ventures is:
Share of fixed assets 54,147 41,144
Share of current assets 268,191 264,444
322,338 305,588
Share of liabilities due within one year 62,817 60,107
Share of liabilities due after more than one year 229,011 217,793
291,828 277,900
Share of net assets 30,510 27,688
Premier Custodial Group made a significant contribution during 2001 contributing
turnover of £76,655,000 and profit before tax of £6,388,000. The tax charge was
£2,058,000.
Within the share of net assets at 31 December 2001 the following amounts are
included for Premier Custodial Group.
2001
£'000
Fixed assets 4,737
Current assets 122,059
126,796
Liabilities due within one year 19,467
Liabilities due after more than one year 96,807
116,274
Share of net assets 10,522
h) Acquisitions:
All acquisitions made during the year have been accounted for using the
acquisition method of accounting. The goodwill arising on all acquisitions made
in the year is being amortised over a period of 20 years.
i) Serco Assurance
The Nuclear Consulting division of AEA Technology plc was acquired by Serco
Limited on 10 September 2001 for cash consideration of £69,400,000. The business
now trades under under the name 'Serco Assurance'. Acquisition costs of £797,000
were incurred.
The fair value of net liabilities was £2,574,000 after taking account of
revaluation adjustments of £298,000 which have been made in order to reflect the
estimated realisable value of acquired work in progress. Other adjustments
amounting to £1,811,000 principally relate to onerous contracts acquired with
the business.
The goodwill arising on consolidation is £72,771,000.
ii) Hiser Group Pty Limited
All the issued share capital of Hiser Group Pty Limited was acquired by Serco
Group Pty Limited on 2 January 2001, for a cash consideration of £2,007,000.
Acquisition costs of £256,000 were incurred.
The fair value of assets and liabilities are considered to be the same as the
book value. The goodwill arising on consolidation is £2,377,000.
iii) Total IT Limited
All the issued share capital of Total IT Limited was acquired by Serco Group plc
on 26 June 2001, for a cash consideration of £275,000, the issue of 74,535 Serco
Group plc shares (equivalent £300,000) and deferred consideration comprising
loan notes to the value of £600,000. Acquisition costs of £111,000 were
incurred.
The fair value of assets and liabilities are considered to be the same as the
book value. The goodwill arising on consolidation is £1,282,000.
iv) Serco Group (Hong Kong) Limited (formerly Serco Guardian (FM) Limited)
The remaining 50% of shares of Serco Group (Hong Kong) Limited were acquired by
Serco Group plc on 28 September 2001 for a cash consideration of £2,530,000.
Acquisition costs of £230,000 were incurred.
The fair value of assets and liabilities are considered to be the same as the
book value. The goodwill arising on consolidation is £1,201,000.
v) Subscriptions for shares in joint ventures
During the year the Group made subscriptions and further equity injections in
joint ventures all of which have been accounted for by the gross equity method
of accounting. The details of each transaction are as follows:
Further equity injections were made in Laser (Teddington Holding) Limited by
Serco Investments Limited during 2001 for a total cash amount of £38,000.
As part of the acquisition of the remaining 50% of shares of Serco Group (Hong
Kong) Limited on 28 September 2001, 50% of the Ordinary Share Capital of Hong
Kong Parking Limited was acquired. The net asset value on acquisition was
£1,252,000.
vi) Partnerships UK
£1,500,000 was invested in Partnerships UK on 11 April 2001. Serco has a 3.3%
stake in the company.
13. Stocks
Group
2001 2000
£'000 £'000
Service spares 10,093 11,529
Long term contract balances 25,745 14,413
35,838 25,942
14. Debtors
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £'000
a) Amounts due within one year:
Amounts recoverable on contracts 151,535 121,526 - -
Other debtors 21,224 16,317 14,747 7,795
Prepayments and accrued income 19,148 11,843 73 75
Amounts owed by joint ventures 4,257 3,940 - -
Building held for re-sale 4,734 4,906 - -
200,898 158,532 14,820 7,870
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £'000
b) Amounts due after more than one year:
Amounts recoverable on contracts 11,847 9,451 - -
Other debtors 14,131 3,246 - -
Pensions prepayment (Note 31) 26,460 9,212 - -
Amounts owed by joint ventures 9,567 10,288 - -
PFI asset in the course of construction* 14,100 - - -
76,105 32,197 - -
Total debtors 277,003 190,729 14,820 7,870
Included in amounts recoverable on contracts is £14,710,000 (2000 - £15,913,000)
in respect of items procured on behalf of customers. This is offset by an amount
of £12,038,000 (2000 - £13,499,000) in trade creditors and an amount of
£1,611,000 (2000 - £2,886,000) in accruals.
* PFI asset in the course of construction is in relation to the Traffic Control
Centre contract. The balance includes £367,000 of capitalised interest. The
corresponding non recourse loan is included within bank loans greater than one
year (note 16).
15. Other creditors including taxation and social security
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £'000
Obligations under finance leases 2,557 1,852 - -
Corporation tax 4,418 3,501 - -
Other taxes and social security costs 30,464 24,697 631 616
Other creditors 47,689 28,838 446 79
Amounts owed to joint ventures 14,864 17,213 - 5,000
Other loans 629 529 - -
100,621 76,630 1,077 5,695
16. Creditors: Amounts falling due after more than one year
Group Company
Restated Restated
2001 2000 2001 2000
£'000 £'000 £'000 £'000
a) Bank loans and overdrafts 70,647 34,601 30,245 32,005
Obligations under finance leases 11,385 4,081 - -
Other loans 60,371 45,421 41,420 41,420
Total loans 142,403 84,103 71,665 73,425
Less: amounts included in creditors
falling due within one year 73,833 36,982 30,245 32,005
Amounts falling due after more
than one year 68,570 47,121 41,420 41,420
Group Company
Restated Restated
2001 2000 2001 2000
£'000 £'000 £'000 £'000
b) Analysis of loan repayments due:
Bank loans and overdrafts:
Within one year or on demand 70,647 34,601 30,245 32,005
Obligations under finance leases:
Within one year or on demand 2,557 1,852 - -
Between one and two years 2,543 1,456 - -
Between two and five years 3,826 713 - -
After five years 2,459 60 - -
Other loans:
Within one year or on demand 629 529 - -
Between one and two years 1,618 257 - -
Between two and five years 14,681 3,169 - -
Non recourse debt to fund PFI asset* 14,100 - - -
Other 581 3,169 - -
After five years 43,443 41,466 41,420 41,420
142,403 84,103 71,665 73,425
* The non recourse debt to fund a PFI asset is in relation to the Traffic
Control Centre contract. The PFI asset under construction is shown in current
assets (note 14).
c) All loans are unsecured, with the exception of the non recourse debt to fund
the Traffic Control Centre PFI asset, which is secured against the Group's
equity commitment and contract cash flows.
d) Finance lease obligations are secured by retention of title to the relevant
assets.
17. Treasury policies and risk management
The principal risks arising from the Group's financing activities are interest
rate risk and foreign currency risk. Treasury operations are conducted within a
framework of policies and guidelines reviewed and authorised by the Board. There
has been no change during the year or since the year end to the major financial
risks faced by the Group or the Group's approach to the management of these
risks.
As permitted by Financial Reporting Standard 13 - 'Derivatives and other
Financial Instruments: Disclosures' short term debtors and non interest bearing
short term creditors and loans from joint ventures have been excluded from the
following disclosure other than the disclosure of the currency profile of
financial assets and liabilities.
The fundamental purpose of interest rate and foreign currency financial
instruments entered into is to hedge long term and short term financial
borrowings, the details of which are set out below.
Interest rate risk
The Group borrows at both fixed and floating rates of interest. The Group's
exposure to interest rate fluctuations on its borrowing is managed by using
interest rate swaps and forward rate agreements. At 31 December 2001 after
taking account of interest rate swaps, the proportion of the Group's fixed rate
borrowings was 23.4%.
Foreign currency risk
The Group has a significant investment in overseas subsidiaries. The Group's
policy is not to hedge net assets of overseas subsidiaries as they represent a
small proportioyn of the market value of the Group.
Business units are required to hedge their material trading transactions (sales
and purchases in currencies other than their functional currency) by using
forward contracts. There were no material debtors or creditors as at 31 December
2001 with unmatched transactional exposure.
Financial assets and liabilities
i) Assets
Australian US Other
Sterling Dollar Dollar Euro currencies Total
31 December 2001 £'000 £'000 £'000 £'000 £'000 £'000
Cash and short term
deposits 12,782 2,450 5,670 11,282 2,628 34,812
Long term interest-
bearing loans to
joint ventures 8,817 750 - - - 9,567
Other long term debtors** 64,564 1,363 611 - - 66,538
Total long term assets 73,381 2,113 611 - - 76,105
Australian US Other
Sterling Dollar Dollar Euro currencies Total
31 December 2000 £'000 £'000 £'000 £'000 £'000 £'000
Cash and short term
deposits 59,813 1,891 4,952 8,179 5,263 80,098
Long term interest-
bearing loans to
joint ventures 6,576 3,606 106 - - 10,288
Other long term debtors 16,720 2,306 1,888 - 995 21,909
Total long term assets 23,296 5,912 1,994 - 995 32,197
** Includes £14.1 million PFI asset under construction.
ii) Liabilities
Fixed Rate Liabilities
Weighted
Weighted average
Total Floating rate Fixed rate average time for which
liabilities liabilities liabilities interest rate rate is fixed
31 December 2001 £'000 £'000 £'000 % Years
Sterling* 98,077 98,077 - - -
Australian Dollar 2,451 2,451 - - -
US Dollar 41,420 8,038 33,382 7.34 6
Euro 455 455 - - -
Total (Note 16) 142,403 109,021 33,382
Fixed Rate Liabilities
Weighted
Weighted average
Total Floating rate Fixed rate average time for which
liabilities liabilities liabilities interest rate rate is fixed
31 December 2000 £'000 £'000 £'000 % Years
Sterling 5,469 5,469 - - -
Australian Dollar 2,047 2,047 - - -
US Dollar 44,582 14,997 29,585 7.64 7
Euro 32,005 32,005 - - -
Total (Note 16) 84,103 54,518 29,585
The Maturity of the Group's financial liabilities at 31 December 2001 and 31 December 2000:
Maturing Maturing Maturing
Maturing between one between two after more
within one year and two years and five years than five years Total
31 December 2001 £'000 £'000 £'000 £'000 £'000
Sterling* 72,677 3,216 17,778 4,406 98,077
Australian Dollar 701 945 730 75 2,451
US Dollar - - - 41,420 41,420
Euro 455 - - - 455
Total 73,833 4,161 18,508 45,901 142,403
Maturing Maturing Maturing
Maturing between one between two after more
within one year and two years and five years than five years Total
31 December 2000 £'000 £'000 £'000 £'000 £'000
Sterling 2,535 558 2,369 7 5,469
Australian Dollar 894 986 167 - 2,047
US Dollar 1,548 169 1,346 41,519 44,582
Euro 32,005 - - - 32,005
Total 36,982 1,713 3,882 41,526 84,103
* Includes £14.1 million non recourse debt to fund PFI asset.
iii) Fair Values
The book value and fair value of the Group's financial assets and liabilities at
31 December 2001 and 31 December 2000 were:
2001 2000
------------------------------------- -------------------------
Unrecognised Unrecognised
Book value Fair value gain/(loss) Book Fair gain/(loss)
value value
£'000 £'000 £'000 £'000 £'000 £'000
Assets
Cash and
short
term
deposits 34,812 34,812 - 80,098 80,098 -
Amounts
owed by
joint
ventures 9,567 9,567 - 10,288 10,288 -
Other
long
term
debtors** 66,538 66,538 - 21,909 21,909 -
Total 76,105 76,105 - 32,197 32,197 -
Liabilities
Long
term
borrowing:
Sterling* 25,400 25,400 - 2,934 2,934 -
Australian 1,750 1,750 - 1,153 1,153 -
Dollar
US 41,420 48,991 (7,571) 43,034 46,439 (3,405)
Dollar
Total 68,570 76,141 (7,571) 47,121 50,526 (3,405)
Short
term
borrowing:
Sterling 72,677 72,677 - 2,535 2,535 -
Australian 701 701 - 894 894 -
Dollar
US - - - 1,548 1,548 -
Dollar
Euro 455 455 - 32,005 32,005 -
Derivatives
held
to
manage
the
currency
and
interest
rate
profile - (4,492) 4,492 - (3,231) 3,231
Total 73,833 69,341 4,492 36,982 33,751 3,231
* Includes £14.1 million non recourse debt to fund PFI asset.
** Includes £14.1 million PFI asset under construction.
The fair value of the interest rate swaps, foreign currency contracts and US
Dollar denominated long term fixed rate debt, with a carrying amount of
USD70,000,000, have been determined by reference to prices available from the
markets on which the instruments involved are traded.
Gains and losses on hedges
The Group uses interest rate swaps to manage its interest rate profile. Changes
in the fair value of instruments used as hedges are not recognised in the
financial statements until the hedged position matures. There were no
unrecognised gains or losses brought forward that were charged to the Profit and
Loss account during the period. There was an unrecognised gain of £4,492,000
(2000 - £3,231,000) on the interest rate swaps as at 31 December 2001, as set
out in the previous table. The unrecognised gain is not expected to be
recognised in the Profit and Loss account in the next period.
Borrowing facilities
Serco Group plc had facilities of £50,100,000 committed and £73,556,000
uncommitted that were unused as at 31 December 2001. Committed facilities are
renewable every five years with the exception of a 3 year £90,000,000 facility
which expires 9 September 2004. Uncommitted facilities are renewable annually.
18. Provisions for liabilities and charges
Balance Charged to Foreign Balance
1 January the profit and exchange 31 December
2001 Usage loss account differences 2001
Group £'000 £'000 £'000 £'000 £'000
Pensions provision 23,829 (326) 130 (630) 23,003
Deferred taxation 2,249 - 384 - 2,633
26,078 (326) 514 (630) 25,636
19. Deferred taxation
Group
2001 2000
£'000 £'000
The amounts of deferred taxation provided in the accounts are:
Capital allowances in excess of depreciation 332 178
Overseas timing differences 692 38
Other timing differences 1,609 2,033
2,633 2,249
Potential amounts of deferred taxation for which no credit
has been taken:
Depreciation in advance of capital allowances 317 (546)
Overseas timing differences (2,916) (3,341)
Other timing differences (625) (295)
(3,224) (4,182)
20. Reconciliation of movements in shareholders' funds
2001 2000
£'000 £'000
Profit on ordinary activities after taxation 27,833 22,970
Dividends (7,265) (6,387)
20,568 16,583
Currency translation differences on foreign currency net investments (1,917) (1,155)
New capital subscribed 3,561 7,174
Exercise of share scheme options (1,260) (5,305)
Net increase in shareholders' funds 20,952 17,297
Opening shareholders' funds 108,925 91,628
Closing shareholders' funds 129,877 108,925
21. Called up share capital
2001 2000
£'000 £'000
a) Authorised 550,000,000 (2000 - 550,000,000)
Ordinary Shares of 2p each 11,000 11,000
2001 2000
£'000 £'000
b) Called up, allotted and fully paid:
395,170,815 (2000 - 393,864,463) Ordinary Shares of 2p each 7,903 7,877
c) Ordinary Shares of 2p each allotted in the year:
During the year 1,189,973 Ordinary Shares of 2p each were allotted to the
holders of options or their personal representatives, 4,944 were allotted at
£2.02, 737,178 at £2.175, 32,106 at £2.45, 29,159 at £3.81 and 383,586 at nil
value.
In addition to the above, 74,535 Ordinary Shares of 2p each were allotted as
consideration for the acquisition of Total IT Limited on 26 June 2001. 44,844
Ordinary Shares of 2p each were also allotted on 19 December 2001 as deferred
consideration relating to the acquisition of Serco QAA (formerly Quality
Assurance Associates Limited) made in December 2000.
d) Options in respect of Ordinary Shares of 2p each:
i) In January 1996, 1,210,392 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group plc 1996 Long Term
Incentive Scheme'. At 31 December 2001 no options remain.
ii) In January 1997, 1,439,622 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group plc 1996 Long Term
Incentive Scheme'. At 31 December 2001 there remained 54,000 options which are
exercisable at nil value in accordance with the rules of the Scheme.
iii) 3,341,346 options in respect of Ordinary Shares of 2p each were granted in
May and September 1998 in accordance with the rules of the 'Serco Group plc 1998
Executive Option Plan'. At 31 December 2001 there remained 1,951,391 options
which are exercisable at a price of £2.175 each and 13,458 at £2.02 each in
accordance with the rules of the Scheme.
iv) On 1 April 1999, 3,461,664 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group plc 1998 Executive
Option Plan'. At 31 December 2001 there remained 3,016,368 options which are
exercisable at a price of £2.45 each in accordance with the rules of the scheme.
v) On 31 March 2000, 4,511,988 options in respect of Ordinary Shares of 2p each
were granted as part of the 1996 Sharesave Scheme, 3,595,595 options were held
by employees on 31 December 2001. The options are exercisable at any time
between 1 May 2003 and 31 October 2003 at a price of £3.81 each in accordance
with the rules of the scheme.
vi) On 5 April 2000, 2,524,836 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group plc 1998 Executive
Option Plan'. At 31 December 2001 there remained 2,420,958 options which are
exercisable at a price of £4.26 each in accordance with the rules of the Scheme.
vii) On 5 April 2000, 219,900 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the '1996 Serco Group plc Long Term
Incentive Scheme as amended by the company on 5 April 2000'. At 31 December 2001
there remained 196,752 options which are exercisable at a nil value in
accordance with the rules of the scheme.
viii) 37,677 options in respect of Ordinary Shares of 2p each were granted in
August and November 2000, in accordance with the rules of the 'Serco Group plc
1998 Executive Option Plan'. As at 31 December 2001 there remained 26,268
options which are exercisable at a price of £5.825 and 8,878 options which are
exercisable at a price of £4.90 each in accordance with the rules of the scheme.
ix) On 24 November 2000, 259,351 options in respect of Ordinary Shares of 2p
each were granted in accordance with the rules of the '1996 Serco Group plc Long
Term Incentive Scheme as amended by the Company on 5 April 2000'. At 31 December
2001 there remained 240,055 options which are exercisable at nil value in
accordance with the rules of the Scheme.
x) On 20 March 2001, 2,851,962 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group 1998 Executive
Option Plan'. As at 31 December 2001 there remained 2,803,343 options which are
exercisable at a price of £4.07 each in accordance with the rules of the Scheme.
xi) On 27 March 2001, 603,144 options in respect of Ordinary Shares of 2p each
were granted in accordance with the rules of the 'Serco Group 1998 Executive
Option Plan'. As at 31 December 2001 there remained 600,838 options which are
exercisable at a price of £4.35 each in accordance with the rules of the Scheme.
xii) On 16 November 2001, 248,374 options in respect of Ordinary Shares of 2p
each were granted in accordance with the rules of the '1996 Serco Group plc Long
Term Incentive Scheme as amended by the Company on 5 April 2000'. At 31 December
2001 no options had been exercised or lapsed. These options have been granted in
respect of a three year performance period starting 1 January 2002 and are
exercisable at nil value in accordance with the rules of the Scheme.
e) The market price of Serco Group plc Ordinary Shares of 2p each as at 31
December 2001 was £3.65. The market price of these shares ranged from £2.40 to
£5.825 during the year.
22. Share premium account
£'000
Balance at 1 January 2001 70,121
Share Premium on issue of shares for the acquisition of Total IT Limited 299
Deferred consideration relating to the acquisition of Serco QAA Limited 171
Share premium on issue of shares upon exercise of options 3,065
Balance at 31 December 2001 73,656
23. Profit and loss account
£'000
Group
Balance at 1 January 2001 30,784
Retained profit transferred to reserves 20,568
Currency translation differences on foreign currency net investments (1,917)
Exercise of share scheme options (1,260)
Balance at 31 December 2001 48,175
The profit and loss account includes a goodwill charge of £41,578,000 under the
accounting policy applicable prior to the implementation of FRS 10.
Company
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the Parent Company is not presented as part of these accounts. The
consolidated profit for the financial year includes the Parent Company profit of
£17,406,000 which includes dividends of £18,560,000 received from subsidiary
companies.
A final ordinary dividend of £5,026,000 is proposed which together with the
interim dividend of £2,238,000 and the payment in relation to the 2000 final
dividend caused by the movement in the number of shares in issue of £1,000
leaves a profit of £10,141,000 which has been added to reserves brought forward
of £25,391,000. This, along with a foreign exchange charge of £574,000, results
in reserves carried forward of £34,958,000.
24. Reconciliation of operating profit to net cash inflow from operating activities
2001 2000
£'000 £'000
Operating profit pre NATS costs 22,447 16,746
Exceptional item: Cost of unsuccessful NATS (10,187) -
acquistion
Operating profit 12,260 16,746
Depreciation 13,160 11,738
Goodwill amortisation 5,123 3,681
(Profit)/loss on sale of tangible assets (1,236) 313
(Increase)/decrease in stocks (8,932) 1,094
Increase in debtors (57,416) (25,657)
Increase in creditors 53,578 37,099
(Decrease)/increase in provisions (1,053) 520
Net cash inflow from operating activities
before
PFI asset expenditure 15,484 45,534
Expenditure on PFI asset in the (13,733) -
course of construction
Net cash inflow from operating activities 1,751 45,534
after PFI asset expenditure
25. Analysis of net debt
Restated
Balance Other Balance 31
1 January Cash non-cash December
2001 flow changes 2001
£'000 £'000 £'000 £'000
Cash at bank and in hand 80,098 (45,286) - 34,812
Overdrafts (34,601) (36,046) - (70,647)
Cash net of overdrafts 45,497 (81,332) - (35,835)
Non recourse debt to fund PFI asset - (14,100) - (14,100)
Other loans due after more than one year (44,892) (750) - (45,642)
Other loans due within one year (529) (100) - (629)
Finance leases (4,081) 2,785 (10,089) (11,385)
Net debt (4,005) (93,497) (10,089) (107,591)
26. Reconciliation of (decrease)/increase in cash to movement in net debt
2001 2000
£'000 £'000
(Decrease)/increase in cash (81,332) 10,310
Cash (outflow)/inflow from debt and lease financing (12,165) 2,106
Change in net debt resulting from cash flows (93,497) 12,416
New finance leases (10,089) (2,055)
Movement in net debt in the period (103,586) 10,361
Net debt at 1 January (4,005) (14,366)
Net debt at 31 December (107,591) (4,005)
27. Major non-cash transactions
During the year the Group entered into finance lease arrangements in respect of
assets with a total capital value at the inception of the leases of £10,089,000
(2000 - £2,055,000).
During the year £1,260,000 (2000 - £5,305,000) has been charged to the profit
and loss reserve in respect of shares issued under employee share incentive
schemes.
28. Contingent liabilities
The Group has given indemnities to banks totalling £43,626,000 of which
£14,356,000 is in respect of performance bonds issued in the ordinary course of
business. The remainder is primarily in respect of financial guarantees.
29. Capital and other commitments
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £'000
Capital expenditure contracted
but not provided 1,244 1,172 - -
There is a commitment of £45 million in relation to the Traffic Control Centre
PFI asset under construction (included in current assets), which will be funded
by non recourse bank debt.
During the year ending 31 December 2002 the Group is to make the following
payments in respect of operating leases:
Land and buildings Other
£'000 £'000
Leases which expire:
Within one year 2,777 4,504
Between one and five years 3,115 15,655
After five years 4,372 3,318
10,264 23,477
30. Related parties
Directors
The Directors of Serco Group plc had no material transactions with the Group
during the year other than service contracts and Directors' liability insurance.
Joint ventures
The following material transactions took place between the Group and its joint
ventures during 2001:
2001 2000
£'000 £'000
Net loans during the year 2,131 8,431
Net trading 2,671 2,848
Royalties and management fees receivable 2,448 2,429
Dividends receivable 9,645 6,768
16,895 20,476
The following receivable balances relating to joint ventures were included in
the Group Balance Sheet:
2001 2000
£'000 £'000
Amounts due within one year:
Loans - 196
Trading balance 342 760
Royalties and management fees 3,915 2,984
4,257 3,940
Amounts due after more than one year:
Loans 9,567 10,288
The following payable balances relating to joint ventures were included in the
Group Balance Sheet:
2001 2000
£'000 £'000
Amounts payable within one year:
Loans 14,165 17,213
Trading balance 699 -
14,864 17,213
Details of Group investments in joint ventures and other principal undertakings
are given in Note 32.
31. Pension schemes
The Group has continued to account for pensions in accordance with SSAP 24. Full
adoption of the requirements of FRS 17 'Retirement Benefits' will not be
mandatory for the Group until the year ended 31 December 2003. The transitional
disclosures required by FRS 17 are set out in Part (B) of this note which shows
the net pension deficit in accordance with FRS 17 at 31 December 2001 was £3.6
million on an asset base of £298 million.
(A) SSAP 24 Disclosure
The net pension charge in accordance with SSAP 24 for the year ended 31 December
2001 was £19,544,000 (2000 - £17,851,000). The Group operates or is a member of
a number of pension schemes as follows:
a) Serco Pension and Life Assurance Scheme ('SPLAS')
This is a pre-funded defined benefit scheme.
The funding policy is to contribute such variable amounts, on the advice of the
actuary, as will achieve 100% funding on a projected salary basis.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries, with the last such review being carried out as
at 6 April 1999. The average contribution rate is currently 18% for the scheme.
The projected unit method was adopted for the actuarial valuation of the Scheme
for accounting purposes. The main actuarial assumptions used to value
liabilities are:
Investment yield 8.0% p.a.
Salary growth 6.0% p.a. (including 0.5% in respect of promotion)
Increase in LEL offset 3.5% p.a. (SPLAS section only)
Price inflation 3.5% p.a.
Equity dividend growth 3.5% p.a.
Pension increases (in excess of GMP) 3.5% p.a. (for Serco Alternative Pension Scheme and Services section)
3.0% p.a. (for SPLAS section accrual after 6/4/97)
0.5% p.a. (for SPLAS section accrual prior to 6/4/97)
The Scheme is assessed to be fully funded on a current funding level basis based
on a market value of assets of £145,881,000 at 6 April 1999. Liabilities for
this purpose are calculated using the basis for determining individual cash
equivalents for active members and deferred pensioners and by estimating the
cost of purchasing annuity policies for pensioners.
The actuarial value of the assets represented 81% of the ongoing liabilities of
the Scheme. Variations from the normal costs are amortised for accounting
purposes over a fifteen year period as a constant monetary amount.
Employer pension contributions paid into the Scheme during the year were
£9,760,000 (2000 - £8,861,000), of which £652,000 related to special
contributions in respect of a discretionary increase to pensions in payment
awarded during the year (2000 - £640,000) and £810,000 of contributions in
respect of augmentations (2000 - £nil). A £15,000,000 contribution which is
included in accruals and prepayments at 31 December 2001 was paid in February
2002.
At 31 December 2001 a prepayment of £17,360,000 (2000 - £1,550,000) in respect
of the Scheme was included in the Balance Sheet. £8,950,000 was charged to the
Profit and Loss Account in respect of the Scheme (2000 - £7,995,000).
b) The Serco-IAL Pension Scheme
This is a pre-funded defined benefit scheme.
The funding policy is to contribute such variable amounts, on the advice of the
actuary, as will achieve 100% funding on a projected salary basis.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries, with the last such review being carried out as
at 31 March 2001. On the assumptions adopted for accounting purposes and based
on a market value of assets of £104,037,000 at 31 March 2001, the actuarial
value of the assets represented 110% of the ongoing past service liabilities of
the Scheme as at that date. The current contribution rate is 17.8% for the
scheme.
For accounting purposes, the projected unit method has been adopted and the main
actuarial assumptions used to value liabilities are:
Investment return 6.0% p.a.
Salary growth (excluding salary scale) 4.5% p.a.
Pension increases 2.5% p.a.
The past service surplus in excess of the prepayment as at 31 March 2001 is
being amortised for accounting purposes over a nine year period as a constant
monetary amount.
Employer pension contributions paid into the Scheme during the year were
£1,738,000 (2000 - nil).
An amount of £300,000 (2000 - £87,000) has been charged to the 2001 Profit and
Loss Account in respect of the Scheme and a prepayment of £9,100,000 (2000 -
£7,662,000) has been included in the Balance Sheet as at 31 December 2001.
c) Serco GmbH & Co. KG Pension arrangement
The German pension arrangement comprises two elements; an unfunded defined
benefit arrangement and an unfunded hybrid scheme.
Actuarial assessments covering liabilities are carried out by independent
qualified accountants, with the last such review being carried out as at 23
December 1999 and updated as at 31 December 2001 by a qualified independent
actuary.
The projected unit method was adopted for the actuarial valuation of the
arrangement. The main actuarial assumptions used in the valuation for accounting
purposes were:
Discount rate 6.0% p.a.
Salary growth 3.0% p.a
Price inflation 1.0% p.a.
The Profit and Loss charge for the year was £130,000 (2000 - £520,000) and a
provision of £23,003,000 (2000 - £23,829,000) has been included in the Balance
Sheet as at 31 December 2001 of which £17,466,000 relates to the hybrid element
of the scheme and £5,537,000 to the defined benefit element of the scheme.
d) Serco Superannuation Fund
The defined benefit element of the scheme was established in Australia on 1
April 1993 to provide equivalent benefits for members transferring from the AWA
Defence Industries Superannuation Fund, a defined benefit scheme.
Actuarial assessments covering expenses and contributions relating to the
defined benefit element of the Scheme are carried out by independent qualified
actuaries with the last such valuation being carried out as at 31 December 2000.
The attained age method was used for the actuarial valuation of the Scheme as at
31 December 2000. This method was chosen to produce a level employer
contribution rate as a proportion of members' salaries over the expected future
working lives of the existing members, as the defined benefit element of the
Scheme was closed to new members with effect from 1 April 1993.
The main actuarial assumptions used in the actuarial valuation for accounting
purposes this year were:
Average long-term interest rate (net of investments
and administration expenses and investment tax) 8.0% p.a.
Average long term allowance for salaries increases 5.5% p.a.
The defined benefit element of the Scheme was assessed to be fully funded on a
current funding level based on a market value of assets of £1,385,000
(A$3,938,000) at 31 December 2000 with a ratio of market value of assets to
current funding level liabilities of 107%.
The actuarial value of assets of the defined benefit element of the Scheme
represented 115% of its ongoing liabilities at 31 December 2000. The pension
cost calculated under the attained age method will amortise the above surplus
over the expected future working lives of the existing members which have an
average value of 11 years.
Employer pension contributions paid into the Scheme and charged to the 2001
Profit and Loss Account relating to the defined benefit element of the scheme
was £104,000 (2000 - £117,000).
e) The NPL Management Limited Pension Scheme
This is a pre-funded defined benefit scheme. The Company accounts for this
scheme as a defined contribution scheme since at re-bid any surplus or deficit
would transfer to the next contractor. Cash contributions are recognised as
pension costs and no asset or liability is shown on the balance sheet.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries. The funding policy is to contribute such
variable amounts as will achieve 100% funding on a projected unit basis. The
last review was carried out as at 6 April 1998.
A review has been carried out as at 6 April 2001. Although this review has not
yet been finalised the Company has increased its contribution rate to 20.8% of
Pensionable Pay in line with the provisional results.
The main actuarial assumptions proposed in the valuation were:
Investment return 6.50% p.a. (5.0% for current pensioners)
Salary growth 4.25% p.a. (plus promotional scale)
Price inflation 2.25% p.a.
Pension increases 2.25% p.a.
The market value of assets represented 93% of the ongoing liabilities of the
Scheme.
Employer pension contributions charged to the 2001 Profit and Loss Account were
£1,634,000 (2000 - £1,730,000).
f) The Serco Shared Cost Section of the Railways Pension Scheme ('RPS')
This is a pre-funded defined benefit scheme. The Company accounts for this
scheme as a defined contribution scheme since at re-bid any surplus or deficit
would transfer to the next contractor. Cash contributions are recognised as
pension costs and no asset or liability is shown on the balance sheet.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries. The funding policy is to contribute such
variable amounts as will achieve 100% funding on a projected unit basis. The
last review was carried out at 31 December 1998.
The main actuarial assumptions used in the valuation were:
Investment return 6.75% p.a.
Salary growth 4.50% p.a. (plus promotional scale)
Dividend growth 3.75% p.a.
Pension increases 3.00% p.a.
The actuarial value of assets represented 133% of the ongoing liabilities of the
scheme. The current contribution rate is 7.5% of Section Pay.
Employer pension contributions charged to the 2001 Profit and Loss Account
during the year were £634,000 (2000 - £527,000).
g) Serco Metrolink Pension Scheme
This is a pre-funded defined benefit scheme. The Company accounts for this
scheme as a defined contribution scheme as at re-bid any surplus or deficit
would transfer to the next contractor. Cash contributions are recognised as
pension costs and no asset or liability is shown on the balance sheet.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries. The funding policy is to contribute such
variable amounts as will achieve 100% funding on a projected unit basis. The
last review was carried out as at 1 September 1998.
The main actuarial assumptions used in the valuation were:
Investment return 9.0% p.a.
Salary growth 7.0% p.a.
Equity dividend growth 5.0% p.a.
Pension increases 4.0% p.a.
The actuarial value of assets represented 101% of the ongoing liabilities of the
scheme. The current contribution rate is 8.2%.
Employer pension contributions charged to the 2001 Profit and Loss Account were
£225,000 (2000 - £241,000).
h) Docklands Light Railway Pension Scheme
This is a pre-funded defined benefit scheme with Docklands Light Railway Limited
being the principal employer. Serco accounts for this scheme as a defined
contribution scheme, since at re-bid any surplus or deficit would transfer to
the next contractor. Cash contributions are recognised as pension costs and no
asset or liability is shown on the Balance Sheet.
Actuarial assessments covering expenses and contributions are carried out by
independent qualified actuaries. The funding policy is to contribute such
variable amounts as will achieve 100% funding on a projected unit basis. The
last review was carried out as at 1 April 1998. The main actuarial assumptions
used in the valuation this year were:
Investment return 8.5% p.a.
Salary growth 6.5% p.a. (including promotional scale)
Pension increases 4.0% p.a.
Dividend yield 3.0% p.a.
The actuarial value of assets represented 100% of the ongoing liabilities of the
scheme. The current contribution rate is 11.0%.
Employer pension contributions paid into the Scheme and charged to the 2001
Profit and Loss Account were £1,181,000 (2000 - £921,000).
i) Other defined contribution schemes
The Group paid employer contributions of £6,386,000 (2000 - £5,713,000) into UK
and Australian defined contribution schemes and foreign state pension schemes.
(B) FRS 17 Disclosure
The net pension deficit for the funded UK pension schemes at 31 December 2001
under FRS17 is £3,614,000. The profit and loss reserves under FRS17 would have
been as follows:
2001
£'000
Profit and loss reserve 48,175
Deficit in relation to SPLAS scheme, net of deferred taxation (5,740)
Surplus in relation to Serco IAL scheme, net of deferred taxation 2,126
Net pension deficit (3,614)
Profit and loss reserve adjusted 44,561
a) Serco Pension and Life Assurance Scheme ('SPLAS')
The disclosures required under the transitional arrangements within FRS 17 have
been based on the most recent full actuarial valuation as at 6 April 1999
updated to 31 December 2001 by independent qualified actuaries. The financial
assumptions used at 31 December 2001 were:
Rate of increase in salaries 4.00% p.a.
Rate of increase in deferred pensions 2.25% p.a.
Rate of increase in pensions in payment 2.25% p.a.
Discount rate 5.83% p.a.
Inflation assumption 2.50% p.a.
The Scheme's assets and the expected rates of return as at 31 December 2001 were:
% p.a £'000
Equities 7.25 119,600
AA corporate bonds 5.83 15,500
Gilts 5.00 21,000
Cash and Other 4.00 15,800
Total market value of assets 171,900
Present value of scheme liabilities (180,100)
Deficit in the Scheme (8,200)
Related deferred tax asset 2,460
Net pension liability (5,740)
b) The Serco IAL Scheme
The disclosures required under the transitional arrangements within FRS 17 have
been based on the most recent full actuarial valuation as at 31 March 2001
updated to 31 December 2001 by independent qualified actuaries. The financial
assumptions used at 31 December 2001 were:
Rate of increase in salaries 4.00% p.a.
Rate of increase in pensions
- RPI 2.50% p.a.
- LPI 2.25% p.a.
- discretionary 2.25% p.a.
Discount rate 5.83% p.a.
Inflation assumption 2.50% p.a.
The Scheme's assets and the expected rates of return as at 31 December 2001 were:
% p.a £'000
Equities 7.25 59,694
UK bonds 5.18 31,336
Property 6.54 7,329
Cash and other assets 4.00 78
Annuity policies 5.83 28,100
Total market value of assets 126,537
Present value of scheme liabilities (123,500)
Surplus in the Scheme 3,037
Related deferred tax liability (911)
Net pension asset 2,126
c) The balance sheet position for all of the other Group Pension Schemes is the
same in accordance with FRS17 as for SSAP 24.
32. List of principal undertakings
The companies listed below are, in the opinion of the Directors, the principal
undertakings of Serco Group plc. The percentage of equity capital directly or
indirectly held by Serco Group plc is shown. The voting rights are the same as
the percentage holding. The companies are incorporated and principally operate
in the countries stated below.
Principal subsidiaries
United Kingdom Serco Limited 100%
Serco-Denholm Limited 90%
Serco Europe Limited 100%
Serco-IAL Limited 100%
Serco Railtest Limited 100%
Serco Systems Limited 100%
Serco Research & Development Limited 100%
NPL Management Limited 100%
Serco Docklands Limited 100%
Rakmulti Technology Limited 100%
Serco QAA Limited 100%
Traffic Information Services (TIS) Limited 100%
Rest of Europe
Belgium Serco Belgium S.A. 100%
Denmark Metro Service A/S 67%
France Serco France Sarl 100%
Germany Serco International GmbH 100%
Serco Services GmbH 100%
Ireland Serco Services Ireland Limited 100%
Italy Serco s.r.l. 100%
Guernsey Serco Insurance Co. Limited 100%
Luxembourg Serco Facilities Management S.A. 100%
The Netherlands Serco Facilities Management BV 100%
Spain Serco Gestion de Negocias SL 100%
Sweden Serco Sverige AB 100%
Switzerland Serco Facilities Management S.A. 100%
Asia Pacific
Australia Serco Group Pty Limited 100%
Serco Australia Pty Limited 100%
Great Southern Railway Limited 100%
New Zealand Serco Group NZ Limited 100%
Hong Kong Serco Group (Hong Kong) Limited
(formerly Serco Guardian (FM) Limited) 100%
Other
Canada Serco Facilities Management, Inc. 100%
USA Serco Group, Inc. 100%
Serco, Inc. 100%
Serco Management Services, Inc. (Delaware) 100%
Barton ATC, Inc. 100%
Serco Management Services, Inc. (Tennessee) 100%
JL Associates, Inc. 100%
Joint venture undertakings
United Kingdom Premier Custodial Group Limited 50%
Kilmarnock Prison Services Limited 50%
Lowdham Grange Prison Services Limited 50%
Medomsley Holdings Limited 50%
Pucklechurch Custodial Services Limited 50%
Moreton Prison Services Limited 50%
Serco Gulf Engineering Limited 50%
Defence Management Watchfield Limited 50%
Laser (Teddington) II Limited 50%
Altram (Manchester) Limited 26%
Serco-Denholm Shipping Company Limited 50%
AWE Management Limited 33%
Serco Fleet Services Limited 50%
Asia Pacific
Australia Defence Maritime Services Pty Limited 50%
Serco Sodexho Defence Services Pty Limited 50%
New Zealand Serco Sodexho Defence Services Limited 50%
Other
Bahrain Aeradio Technical Services WLL 49%
Bermuda BAS-Serco Limited 40%
Cyprus Serco Kalisperas 50%
Dubai International Aeradio (Emirates) LLC 49%
Saudi Arabia Key Communications Development Co Limited N/A
Singapore Serco Guthrie Pte Ltd 50%
Turkey Elektronik Sistemler Destek Sanavi ve Ticaret AS 51%
Full details of related undertakings will be attached to the Company's Annual
Return to be filed with the Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
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