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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Serco Group Plc | LSE:SRP | London | Ordinary Share | GB0007973794 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 0.28% | 181.90 | 182.30 | 182.50 | 182.60 | 181.00 | 182.30 | 2,262,753 | 16:35:07 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| General Government, Nec | 4.87B | 202.4M | 0.1834 | 9.94 | 2.01B |
From Apr 2019 to Apr 2024
TIDMSRP
RNS Number : 0657A
Serco Group PLC
21 March 2017
Serco Group plc - Annual Financial Report
21 March 2017
The following documents have today been published and are available on the Company's website at www.serco.com:
2016 Annual Report and Accounts
Notice of Annual General Meeting 2017
In accordance with Listing Rule 9.6.1 copies of the above documents, along with the Form of Proxy for the Company's 2017 Annual General Meeting have been uploaded to the National Storage Mechanism and will be available for viewing shortly at www.morningstar.co.uk/uk/NSM
Compliance with Disclosure and Transparency Rule 6.3.5 (DTR 6.3.5) - Extracts from the 2016 Annual Report and Accounts
The information below, which is extracted from the 2016 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5. It should be read in conjunction with the Company's Full Year results announcement published on 22 February 2016, which included a condensed set of financial statements and an indication of important events that occurred during the financial year and their impact on the financial statements. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2016 Annual Report and Accounts. All page numbers and cross-references in the extracted information below refer to page numbers in the 2016 Annual Report and Accounts.
Principal Risks and Uncertainties
STRATEGIC RISKS
Hot Features
Premium
Failure to grow profitably
Failure to win material bids or renew material
contracts profitably, or a lack of opportunities
in our chosen markets, will restrict growth
and may have an adverse impact on Serco's long-term
financial viability.
Our business is linked to changes in the economy,
fiscal and monetary policy, political stability
and leadership, budget priorities, and the perception
and attitude of governments and the wider public
to outsourcing, which could result in decisions
not to outsource services or lead to delays
in placing work.
Strategic objectives impacted: Winning good
business, Profitable and sustainable
-----------------------------------------------------------------
Key risk drivers: Mitigation:
Lack of opportunities Material controls:
in chosen markets - market -- Serco Group Strategy
sectors do not have a -- Serco Management System
favourable policy of (SMS)
private sector provision -- Business Lifecycle
of public services, reducing Review Team (BLRT) Process
pipeline opportunities. -- Sector-specific Centres
of Excellence (CoEs)
External factors reducing and Value Propositions
the pipeline of opportunities -- Serco Operating Model
- changes such as the -- Annual Talent Review
Brexit decision may make and Succession Planning
it more difficult for process
us to win EU government -- Standardised Divisional
contracts. Performance Reporting
(DPR) process
Not accessing opportunities
due to inability to qualify Current mitigation actions:
- lack of critical skills -- Ongoing Group Strategy
and references, and a reviews by Executive
value proposition for Committee and Board
the markets in which -- Ongoing delivery of
we compete, may put Serco Group and Divisional
at a disadvantage with transformation programmes
our competitors. -- Embedding of DPR process
with Divisional monthly
Inability to meet customer reviews of KPIs
and solution requirements
during design, implementation Future actions:
and delivery - executing -- Additional changes
our bids in an unsatisfactory to Group and Divisional
manner by not understanding overhead and shared service
the strategic needs of structures implemented
the customer, mispricing as part of transformation
bids, developing unworkable programmes
solutions, and misunderstanding -- Review of BLRT process
risks, may prevent us to ensure lessons learned
from achieving our growth and price-to-win competitive
ambitions. analysis are formally
embedded
-- Review of CoE business
model to assess requirement
for cross-divisional
bid teams
--------------------------------- ------------------------------
Failure to build our reputation or act with
integrity
Failure to build our reputation or act with
integrity will mean that customers will be less
likely to give us new business or renew existing
business. It will also impact our ability to
attract and retain high-quality people.
Operating effectively but without integrity
will generate mistrust and scrutiny; conversely,
acting with integrity but operating ineffectively
will raise uncertainty in our ability to sustain
and grow our business. Both are key to building
our reputation.
Strategic objectives impacted: Winning good
business, Executing brilliantly, A place people
are proud to work, Profitable and sustainable
----------------------------------------------------------------------
Key risk drivers: Mitigation:
Stakeholders' perception
of Serco - a poor perception Material controls:
of Serco may result in -- Our Values and Code
an inability to build of Conduct
relationships. -- External stakeholder
engagement
Stakeholders' expectations -- Serco Management System
are not understood - (SMS)
an inability to identify -- Business conduct and
changes in stakeholder ethics tools
expectations may result -- Serco Essentials training
in the failure of key -- Third party ethical
relationships. due diligence procedure
-- Speak Up process
Our ways of working do -- Performance/incentive
not align with our Values schemes
- staff or third parties
being unaware of and/or Current mitigation actions:
not reflecting our Values -- Refresh of Our Values
may result in unacceptable -- Refresh of Incident
business conduct, and Management Procedure
unethical or illegal -- Review of Crisis Communication
behaviour. Manual
-- Media training for
Deliberate breach of key spokespeople
law and / or regulations -- Development of Human
- staff and third parties Rights policy, standard
inappropriately incentivised and procedures
to behave in a certain -- Development of Gifts
manner may result in and Hospitality tool
a breach of laws and and Conflict of Interest
regulations. tool
-- Values Gate in Personal
Direct or indirect contribution Development Review (PDR)
to human rights abuse -- Update of 3rd party
- staff either directly ethical due diligence
or indirectly contributing procedure
to human rights abuses -- Due diligence checks
may result in a breach on customers and suppliers
of laws/regulations. -- Development of Anti-Bribery
and Corruption (ABC)
Inappropriate response Framework and ABC risk
to an incident - if we checklist tool
do not respond in an
honest and collaborative Future actions:
way with key stakeholders, -- Embedding of Serco
then we may fail to protect Values
our reputation. -- Embedding of ABC Framework
and checklist tool
-- Development of stakeholder
relationships in key
markets
--------------------------------- -----------------------------------
Failure to transform and deliver the Group strategy
We aim to transform the business so as to become
the best-managed business in each of our chosen
sectors. If due to a number of internal and
external factors, we fail to successfully implement
the Group-wide transformation programmes, we
may fail to deliver our strategy to become a
sufficiently profitable and growing business.
We have put in place transformation programmes
to achieve lasting change in the way Serco operates
across Finance, IT, and the Corporate Shared
Services (CSS).
Strategic objectives impacted: Winning good
business, Executing brilliantly, Profitable
and sustainable
----------------------------------------------------------------
Key risk drivers: Mitigation:
Failure to implement Material controls:
on time - either as a -- Group Transformation
result of financial pressures Programme Management
or poor programme management, Office (PMO) and Programme
we do not implement the Governance Boards
Group transformation -- Standardised Divisional
programmes on time. Performance Reporting
(DPR) process
Non-delivery of required -- Business Planning
benefits - we fail to Cycle Reviews
achieve the expected -- Group and Programme
benefits due to poor Workstream Communication
programme management Plans
and/or solution design.
Current mitigation actions:
Severe disruption to -- Group Programme Management
the business - we fail Office (PMO) and Programme
to coordinate and prioritise Governance Boards in
the various programme place
activities due to poor -- Business cases developed
integration across activities and signed off, and benefits
and inadequate programme tracking monitored by
management, and we negatively Group Finance and Group
impact on Business As Transformation PMO, and
Usual activities. reported through the
DPR process
Lack of staff engagement -- Group and Programme
- due to ineffective Workstream and Communication
communication or the Plans developed
setting of unrealistic
or unclear expectations, Future actions:
we fail to gain staff -- Ongoing review and
buy-in. updates to Group Strategy
-- Review/benchmark cost
Failure to effect merger of CSS services
and acquisition activities
and disposals - we do
not identify and effect
M&A activities or effect
the intended disposals,
and fail to achieve the
anticipated portfolio
and capital position.
------------------------------- -------------------------------
FINANCIAL RISKS
Financial control failure and Finance IT system
failure
Financial control failure or prolonged loss
of financial IT systems may result in the failure
to create a suitable capital structure, an inability
to make critical financial transactions, accurately
report timely financial results and meet contractual
financial reporting obligations and a heightened
risk of error and fraud.
In addition, poor quality data will lead to
an inability to forecast accurately and may
lead to poor business decisions; therefore,
leading to financial instability, potential
business losses and negative reputational impact.
Strategic objectives impacted: Executing brilliantly,
A place people are proud to work, Profitable
and sustainable
------------------------------------------------------------------------
Key risk drivers: Mitigation:
Not setting the right Material controls:
tone from the top - if -- Group Finance Strategy
we do not set the right -- Serco Management System
tone from the top, we (SMS) - finance processes
may fail to embed the and controls
finance policy, processes -- Shared Service Centre
and controls. (SSC) Customer Boards
-- Process Improvement
Poor financial processes Forums
- if processes are poorly -- Financial Assurance
designed, then inaccuracies Programme
and fraud may occur. -- Finance Academy
-- Standardised financial
Inadequate financial platform (i.e. SAP)
controls within the business -- Testing of Business
- if controls are inadequate Continuity Plans (BCPs)
we may fail to provide and back-up systems
adequate protection from -- Global Finance Transformation
sabotage of systems, Programme Management
fraud and error. Office (PMO) and Programme
Governance Boards
Inadequate financial
controls within Treasury Current mitigation actions:
- a lack of a control -- Embedding of Group
framework for treasury-related Finance strategy, policy
activities may result and standards
in insufficient liquidity. -- Global Finance Transformation
Programme workstreams
Loss of finance IT systems -- Cyber Defence and
and critical financial Cyber Hardening Programme
roles - if finance IT delivering enhanced core
systems and roles become IT security infrastructure,
unavailable, we will processes and controls
not make financial transactions -- Group IT Transformation
and meet contractual Programme
and reporting obligations. -- Business impact assessments
for finance function
Impact of Transformation and systems and updates
Programme activities to BCPs and Disaster
- programme activities Recovery (DR) plans
may lead to an unstable -- Creation of Corporate
financial control environment Shared Service (CSS)
due to an increased workload Crisis Management Team
on the finance community.
Future actions:
Failure of Finance Transformation -- Review of BCP contractual
Programme - we do not compliance, and customer
transform the finance approval of updated BCPs
processes and controls, and testing schedules
and fail to deliver expected -- Global Finance Transformation
benefits. Programme continues to
improve effectiveness
of CSS
-- Backfill/resourcing
pool to be established
to cover finance transformational
activity
----------------------------------- -----------------------------------
OPERATIONAL RISKS
Major information security breach
A major information security breach resulting
in the loss or compromise of sensitive information
(including personal or customer) or wilful damage
resulting in the loss of service, causing significant
reputational damage, financial penalties and
loss of customer confidence.
Due to the nature of the services we provide,
our technology and operational systems will
be subject to threats from both internal and
external breaches. We implement effective controls
proportionate to the level of sensitivity of
the information we are protecting, and where
'things go wrong', we act swiftly to minimise
the impact of any breach and carry out remedial
actions to prevent further breaches immediately.
Strategic objectives impacted: Winning good
business, Executing brilliantly, Profitable
and sustainable
--------------------------------------------------------------------
Key risk drivers: Mitigation:
Non-compliant systems Material controls:
- if our systems are -- Serco Management System
noncompliant with regulatory (SMS)
requirements for sensitive -- Global Information
information, we are susceptible Assurance Board and Enterprise
to breaches and penalties. Architecture Boards
-- Enhanced IT security
Non-compliance with policies infrastructure, process
and standards - if staff and controls
do not comply with Serco -- Global Security Operations
policies and standards, Centre and Computer Security
then they may accidentally Incident Response Teams
release sensitive information -- Serco Essentials training
to third parties. -- Cyber security awareness
training
Inadequate protection -- My HR - standardised
of sensitive information HR processes and corporate
- if we do not identify HR system
sensitive information -- Third party due diligence
and protect and test checks
the vulnerability of -- Privilege User Management
the systems, then we (PUM) process
are potentially exposed -- Cyber Essentials Plus
to a breach. (CES+) certificate successfully
renewed January 2017
Inadequate incident monitoring
and response - if we Current mitigation actions:
do not monitor our systems -- Embedding of Information
and remediate and repel Security policies and
attacks, then we may standards
fail to minimise the -- Cyber Defence and
impact of any breach. Hardening Programme delivering
enhanced core IT security
Unauthorised use of systems infrastructure processes
- if we do not implement and controls and Global
effective personnel vetting Security Operations Centre
and access restriction -- Roll out of PUM process
processes and controls, in Americas
then unauthorised use -- Enhancement of the
of our systems may occur. information security
on-boarding process for
Poor perception of Serco's new IT suppliers as part
capabilities - if we of refreshed supplier
are perceived to be vulnerable risk management
to cyber attack, we may
lose customer confidence. Future actions:
-- Improvements to IT
asset registers
-- Feedback and monitoring
of activities to drive
user awareness and behaviour
--------------------------------- ---------------------------------
Misreporting of performance
Misreporting operational, regulatory and financial
performance, both internally and externally
- particularly deliberate misreporting - will
result in loss of confidence from our stakeholders
and put at risk our long-term viability.
If the misreporting is deliberate, it may constitute
fraud, and the Group may be subject to litigation,
inquiries or investigations that could divert
management time and resources, and result in
penalties, sanctions, variation or revocation
of permissions and authorisations, suspension
or debarment from doing business with government
customers.
Strategic objectives impacted: Winning good
business, Executing brilliantly, A place people
are proud to work
------------------------------------------------------------------
Key risk drivers: Mitigation:
Poor culture - if staff Material controls:
do not align with our -- Our Values and Code
Values, and are inappropriately of Conduct
incentivised due to operational -- Serco Management System
targets and/or performance (SMS)
incentives, then deliberate -- Serco Essentials training
misreporting may occur. -- Leadership Development
Programme
Lack of compliance with -- Contract Manager training
processes and controls -- Business Lifecycle
- if staff do not comply Review Team (BLRT) process
with finance processes -- Contract Management
and financial controls, Application (CMA)
then deliberate or unintentional -- Speak Up process
misreporting may occur. -- Governance of JVs
and minority consortiums
Lack of clarity on contract
performance obligations Current mitigation actions:
- if there is lack of -- Refresh of Serco Values
clarity between Serco and communication to
and the customer on contract business
performance obligations, -- Roll out of Contract
then accidental misreporting Management Application
may occur. (CMA) across material
contracts
Misunderstanding of performance -- Reinforce messaging
reporting requirements around use of the Speak
- if staff are not aware Up process
of reporting requirements -- Widespread adoption
and are not trained to and training of financial
use systems, then accidental processes and controls
misreporting may occur. as part of the Global
Finance Transformation
Poor oversight of Joint Programme
Venture (JV) systems -- Values Gate included
- if we have insufficient In Personal Development
oversight of JV partner Review (PDR)
systems, and insufficient
assurance provided to Future actions:
the JV Board, then we -- Embedding of Serco
may be unaware of deliberate Values
or accidental misreporting -- Further roll out of
of performance. CMA globally
-- Analyse, review and
benchmarking of Speak
Up results
---------------------------------- ------------------------------
PEOPLE RISKS
Failure to attract and retain key resources
and skills fit for the future
If our current leaders are not able to meet
the needs of the business either due to lack
of capability or skills, or there are not enough
qualified leaders, this may result in the business
not being able to deliver the strategy and impacts
on the long-term viability of the business.
A robust framework of people, processes, systems
and controls to enable attraction, selection,
recruitment and retention of leaders is required
in order to meet our business objectives.
Strategic objectives impacted: Winning good
business, Executing brilliantly, A place people
are proud to work, Profitable and sustainable
-----------------------------------------------------------------
Key risk drivers: Mitigation:
Ineffective planning Material controls:
- inadequate planning -- Serco Management System
for management succession (SMS)
may result in a failure -- Centres of Excellence
to provide sufficient (CoEs) and Functional
leaders. Talent Boards
-- Annual Talent Review
Inability to attract and Succession Planning
people - uncompetitive process
reward packages may result -- My HR system - standardised
in failure to attract HR processes and corporate
suitable leaders. HR system
-- Serco Leadership Model
Inability to select people -- Personal Development
- inadequate selection Review (PDR) process
processes may result -- Performance/incentive
in failure to select schemes
the right candidate. -- Viewpoint - Serco's
employee engagement survey
Ineffective on-boarding
- inadequate on-boarding, Current mitigation actions:
in a timely fashion may -- Embedding of Serco
result in failure to Leadership Model including
recruit the right candidate. library of Success Profiles
and Leadership Development
Inability to retain leaders Programme
- inadequate reward reviews -- Piloting of Employee
and incentives structure Profile tool to support
may result in failure delivery of CoE and Functional
to motivate our leaders. Talent Boards
-- Implementation of
Insufficient talent pipeline resourcing/talent partnerships
- if we do not identify in Sector CoEs to support
skillsets and potential annual Talent Reviews
successors, then we may and Succession Planning
fail to build a talent -- Delivery of UK HR
pipeline. Shared Service Centre
on-boarding transformation
Lack of leadership capability workstream
- if we do not develop -- Implementation of
leadership capability, Global On-boarding Virtual
then our leaders may Team
not be fit for the future.
Future actions:
Lack of leadership engagement -- Leadership Levelling
- if we do not effectively Review to determine the
engage with our leaders, right size and shape
then we may not retain of the leadership population
them. -- Market competitiveness
review of reward packages
-- Embedding of refreshed
Serco Values
-- Continuous improvement
and quality control for
Divisional and functional
Executive Management
Team succession plans
------------------------------- --------------------------------
HAZARD RISKS
Catastrophic event
An event as a result of Serco's actions or Serco's
failure to effectively respond to an event that
results in loss of life and/or significant serious
injuries and/or material property or asset damage
and/or Serco not being able to bid or operate
in a strategic market and/or geography. This
may also result in reputation damage, financial
impact (fines by regulators, suspension of operating
licences, compensation etc.), and criminal and
civil action against the Company or individuals.
Strategic objectives impacted: Winning good
business, Executing brilliantly, A place people
are proud to work, Profitable and sustainable
--------------------------------------------------------------------
Key risk drivers: Mitigation:
Lack of capability and Material controls:
experience - if our chosen -- Serco Group Strategy
market sectors are not -- Serco HSE Strategy
aligned to our capability -- Serco Management System
and experience, then (SMS)
a failure to operate -- Business Lifecycle
optimally may result Review Team (BLRT) process
in an event. -- Third party ethical
due diligence procedure
Lack of safety cultural -- Serco Essentials training
alignment - a safety -- Assure - Serco's incident
culture which does not and compliance reporting
reflect our Values and system
fails to engage our staff -- Standardised Divisional
may result in an event. Performance Reporting
(DPR) process
Inadequate policies, -- Adequate insurance
standards and procedures policies
- if procedures/systems
are not aligned with Current mitigation actions:
industry standard or -- Review definition
customer expectations, and scope of catastrophic
an unacceptable level event and implement continuous
of safety management improvement of
may occur. mitigating controls within
Insufficient safety management the SMS
oversight - devolved -- Ethical due diligence
compliance of regulations checks on our existing
to sector-specific SMEs customers and suppliers
without appropriate safety -- Improvements to compliance
management oversight checks for third parties
may result in safety -- Update to the Serco
management systems which Incident Reporting Scale
are not fit for purpose. (SIRS)
-- Review of business
External factors resulting continuity and crisis
in changes in the contract management plans to establish
operational environment consistent approach
- a lack of identification
and assessment of external Future actions:
risks may result in poor -- Validation and alignment
mitigation of and/or of understanding of catastrophic
response to an event. event risks across the
business
Inadequate response to -- Assess current adequacy
a catastrophic event of insurance cover for
- if our contingency identified catastrophic
plans do not provide event risks
an adequate response
to an event then escalation
of an event or prolonged
disruption may occur.
-------------------------------- ----------------------------------
LEGAL AND COMPLIANCE RISKS
Contract non-compliance and contract non-performance
Not meeting our contractual obligations through
either non-compliance with contractual requirements
and/or failure to meet agreed service levels
due to non-performance may result in significant
performance penalties, onerous contract provisions,
loss of potential new bids/re-bids and early
termination of contracts.
If we fail to negotiate contracts that can be
delivered at the right price, or we do not put
in place solutions that deliver our contractual
obligations, we are more likely to suffer from
poor performance and compliance challenges and
potential loss-making contracts.
Strategic objectives impacted: Winning good
business, Executing brilliantly, Profitable
and sustainable
------------------------------------------------------------------------------------
Key risk drivers: Mitigation:
Ineffective and inconsistent Material controls:
bid and contract governance -- Serco Management System
- may result in a lack (SMS)
of understanding of accountabilities -- Investment Committee
and responsibilities. -- Business Lifecycle
Review Team (BLRT) process
Non-compliance with Policies -- Contract Manager training
and Standards - staff -- Sector-specific Centres
failing to follow required of Excellence (CoEs)
processes, controls and -- Contract Management
governance may result Application (CMA)
in contract noncompliance -- Contract Performance
and non-performance. Measurement Tool
-- Standardised Divisional
Lack of visibility of Performance Reporting
contract compliance and (DPR) process
performance - may result -- Targeted contract
in an inability to predict reviews and management
contract non-performance interventions
and make timely interventions.
Current mitigation actions:
Poor understanding of -- Embedding of new SMS
contract obligations standards and procedures
- may result in staff within contracts
failing to acknowledge -- Setting up of process
and act on obligations. for CoEs to collate lessons
learned and establish
Lack of service definition knowledge bank
and capability to deliver -- Transfer of Contract
- may result in an inability Performance Measurement
to deliver contractual Tool into CMA
obligations. -- Roll-out of CMA across
all material contracts
Contract requirements
and pricing too onerous Future actions:
/ severe to perform - -- Review and update
may result in an inability of BLRT process to address
to meet our contractual gaps identified in lessons
obligations. learned
-- Continued roll-out
Set up for failure as of CMA and online documentation
contract assets not as storage across contracts
expected - lack of due globally
diligence of assets may -- Review of processes
result in higher than in place for targeted
anticipated ongoing costs. contract reviews and
management interventions
Not learning from prior -- Review and update
contract issues - may of Contract Manager Training
result in an inability
to learn from our failures
and successes.
Unforeseen changes in
contract assumptions
- may result in a misunderstanding/misalignment
of our contractual obligations
with the customer.
Changes in law/regulations
- see Material Legal
and Regulatory Failure
risk on following page.
------------------------------------------------- ---------------------------------
Material legal and regulatory compliance failure
The complexity and constantly changing legal
and regulatory environment we operate in across
our sectors and geographies creates challenges
to ensuring that we are compliant at all times
to all laws and regulations. Failure to comply
materially with these laws and regulations may
cause significant loss and damage to the Group
including reputational damage, potential loss
of licences and authorisations, as well as prejudicing
future bids.
Legal proceedings may be costly and if they
are not determined in the Group's favour may
divert management attention away from the running
of the business for a prolonged period. Uninsured
losses or financial penalties resulting from
any current or threatened legal actions may
have a material adverse effect on the Group.
Strategic objectives impacted: Winning good
business, Executing brilliantly, A place people
are proud to work, Profitable and sustainable
-----------------------------------------------------------------
Key risk drivers: Mitigation:
Lack of policy and guidance Material controls:
- may result in a failure -- Serco Management System
to manage Group-wide (SMS)
material legal and regulatory -- Serco Essentials training
requirements. -- Third party ethical
due diligence procedure
Staff non-compliance -- External monitoring
with policies and standards - automatic alerts on
- may result in compliance material enterprise-wide
failures for Group-wide legal and regulatory
material legal and regulatory requirements
requirements. -- Legal case tracker
-- Compliance Assurance
Failure to identify and Programme (CAP) reviews
keep up to date with -- Business Lifecycle
all material legal and Review Team (BLRT) process
regulatory requirements
- may result in key subject Current mitigation actions:
matter experts within -- Updates to SMS including:
the business not remaining Human Rights Policy,
up to date and we then Modern Slavery Act 2015,
fail to comply with material Use of Force and Firearms,
legal and regulatory Market Abuse Regulations
obligations. (MAR), and third party
ethical due diligence,
Inadequate assurance and BLRT process
processes - may result -- Development of Global
in an inability to confirm Data Protection Regulations
compliance with legal Programme
and regulatory requirements. -- Identification of
SMS policy owners and
Lack of legal and regulatory subject matter experts
expertise within the -- Due diligence checks
business - may result on our existing customers
in lack of identification and suppliers
and support of legal -- Development of new
and regulatory risks. Anti-Bribery and Corruption
(ABC) Frameworks
Inadequate provision -- Development of Dawn
for material legal and Raid procedure Future
regulatory risks in contracts actions:
- may result in the failure -- Development of master
to provide adequate legal list of material legal
support for material and regulatory requirements
legal and regulatory by SMS policy owners
risks. -- Gap analysis of subject
matter expert capability
Contract exit legal/regulatory within the Divisions
requirements not being for contract-specific
met - may result in possible legal and regulatory
legal action and diversion requirements
of management attention. -- Process to ensure
dissemination of automated
SFO investigation - we alerts to the business
remain under investigation
by the UK Serious Fraud
Office (SFO). In November
2013, the SFO opened
an investigation into
our Group's Electronic
Monitoring Contract.
We are cooperating fully
with the SFO's investigation
but it is not possible
to predict the outcome.
However, in the event
that the SFO decides
to prosecute, the range
of possible adverse outcomes
is any one or a combination
of the following:
(i) that the SFO prosecutes
the individuals and /
or the Serco Group companies
involved, who may defend
the action successfully
or be convicted. This
may result in significant
financial penalties,
an impact on existing
contracts and Serco being
subject to a period of
discretionary debarment
from future contracts
with UK Government entities;
or
(ii) that the SFO and
the relevant Serco entities
enter into a deferred
prosecution agreement
(DPA) - which may result
in significant financial
penalties and a period
of discretionary debarment
from future contracts
with UK Government entities.
Such debarment would
be discretionary in the
sense that a contracting
authority may consider
it not to be relevant
to a given bid or re-bid,
or that Serco has provided
sufficient evidence that
it has addressed any
issues identified in
a DPA, or be limited
in
time under the terms
of the Public Contract
Regulations 2015.
Upon any such conviction
or DPA, the amount of
additional work given
to the Group may be reduced,
and the Group may be
subject to enhanced scrutiny
with respect to its other
contracts and further
actions beyond those
being implemented under
the Corporate Renewal
Programme may need to
be taken.
If the Group faces any
criminal convictions,
debarment consequences
or enters into a DPA,
any such outcome could
result in significant
fines and have a material
adverse impact on the
Group's ability to contract
with the UK Government
and on its reputation,
which would, in turn,
materially adversely
affect its business,
financial condition,
operations and prospects.
In addition, a criminal
conviction of a Serco
entity or of one or more
of the Group's current
or former employees would
in certain circumstances
allow the Ministry of
Justice to re-open the
GBP64.3m settlement agreed
and paid in 2013 in respect
of certain issues arising
under the Electronic
Monitoring Contract.
In those limited circumstances,
the UK Government may
seek additional payments
from Serco.
We will continue to cooperate
with the SFO's investigation.
--------------------------------- ------------------------------
Related Party Transactions (note 38 to the consolidated financial statements)
Transactions between the Company and its wholly owned subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint venture undertakings and associates are disclosed below.
Transactions
During the year, Group companies entered into the following transactions with joint ventures and associates:
Current Non current
outstanding outstanding
at 31 at 31
Transactions December December
2016 2016 2016
GBPm GBPm GBPm
--------------------------- ------------ ------------ ------------
Sale of goods and services
Joint ventures 0.5 0.1 -
Associates 6.2 0.5 -
Other
Dividends received -
joint ventures 20.4 - -
Dividends received -
associates 19.6 - -
Receivable from consortium
for tax - joint ventures 3.2 7.7 -
Total 49.9 8.3 -
--------------------------- ------------ ------------ ------------
AWE Management Limited (AWEML) was formerly a joint venture but in August 2016 there was a change in the AWE Management Limited shareholding structure, with the Group's shareholding reducing from 33.3% to 24.5% by way of a return of shares and Lockheed Martin taking a majority holding. Subsequent to the change in share ownership AWEML has been accounted for as an associate as we continue to have significant influence. In the prior year, the AWE transactions and outstanding balances were disclosed within joint ventures below.
Joint venture receivable and loan amounts outstanding have arisen from transactions undertaken during the general course of trading, are unsecured, and will be settled in cash. Interest arising on loans is based on LIBOR, or its equivalent, with an appropriate margin. No guarantee has been given or received. The only loan amounts owed by joint ventures or associates related to a single entity which have been provided for in full (see note 11).
Non current
Current outstanding outstanding
Transactions at 31 December at 31 December
2015 2015 2015
GBPm GBPm GBPm
---------------------------- -------------- --------------------- ---------------
Sale of goods and services
Joint ventures 6.1 0.6 -
Other
Dividends received - joint
ventures 32.5 - -
Loans and other receivables
- joint ventures - 0.8 7.2
Receivable from consortium
for tax - joint ventures 4.2 9.3 -
Total 42.8 10.7 7.2
---------------------------- -------------- --------------------- ---------------
Remuneration of key management personnel
The Directors of Serco Group plc had no material transactions with the Group during the year other than service contracts and Directors' liability insurance.
The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures:
2016 2015
GBPm GBPm
-------------------- ----- -----
Short-term employee
benefits 11.9 8.4
Share based payment
expense 4.7 1.1
-------------------- ----- -----
16.6 9.5
-------------------- ----- -----
The key management personnel comprise the Executive Directors, Non-Executive Directors and members of the Executive Committee (2016: 20 individuals, 2015: 19 individuals).
Aggregate directors' remuneration
The total amounts for directors' remuneration in accordance with Schedule 5 to the Accounting Regulations were as follows:
2016 2015
GBPm GBPm
============================== ===== =====
Salaries, fees, bonuses 5.6 3.7
and benefits in kind
Amounts receivable under 5.6 4.7
long-term incentive schemes
============================== ===== =====
11.2 8.4
============================== ===== =====
None of the Directors are members of the company's defined benefit pension scheme.
One director is a member of the money purchase scheme.
Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report on pages 96 to 125.
Directors' Responsibility Statement (page 132)
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Parent Company financial statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether Financial Reporting Standard 101 Reduced Disclosure Framework has been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
-- provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
1. The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.
2. The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they face.
3. The Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Rupert Soames, Group Chief Executive
Angus Cockburn, Group Chief Financial Officer
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSPGUCPWUPMGUG
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March 21, 2017 06:30 ET (10:30 GMT)
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