Serco : 2015 Half Year Results

Note 1: Revenue is as defined under IFRS. Adjustments are no longer made to include Serco's share of revenue from its joint ventures.

Note 2: Trading Profit is defined as IFRS Operating Profit adjusted for (i) amortisation and impairment of intangibles arising on acquisition and (ii) exceptional items. Adjustments are no longer made to exclude Serco's share of joint venture tax and interest, management estimation of charges related to UK Government reviews or transaction-related costs.

Note 3: Prior period adjustments have been made to reflect the restatement of certain financial instruments; the impact of fair value movements now taken to the income statement rather than reserves increased pre-tax profit measures by £18.2m; fair value movements are still taken to reserves in the latest period.

 As stated in our First Half Trading Update, the first half has been a little better than was anticipated at the time of our rights issue.

 Trading Profit is in line with our guidance at the First Half Trading Update, with the addition of £5.5m net benefit of Contract and Balance Sheet Review adjustments and £10.3m from exclusion of depreciation and

amortisation of assets held for sale; without the benefit of these items, Trading Profit was £46.9m.

 Trading Profit for the comparable period in 2014, excluding an £18.2m financial instruments restatement, was £45.1m.

 We maintain our guidance given at the time of our rights issue of Trading Profit for 2015 of around £90m, with risks now weighted on the upside. This guidance excludes any Contract and Balance Sheet Review adjustments and the treatment of assets held for sale.

 Net exceptional charge of £117.4m in the period, which includes a £70.1m impairment to assets held for sale and £32.8m refinancing costs.

 Rights issue and debt refinancing completed successfully in the period, with closing net debt of £290m, a reduction of £392m since the start of the year.

 £1bn total value of contracts signed in the period, representing 400 individual customer orders of which 15 are contracts greater than £10m; pipeline of larger new bid opportunities remains approximately £5bn.

 Operating costs reduced by over £200m, in proportion with revenue reduction; on track with overhead and other specific cost saving initiatives.

 Good progress being made in other areas of Strategy Review implementation, including reshaping the portfolio on core markets, exiting some of the Group's loss making contracts and improving management information and decision-making processes.

Rupert Soames, Serco Group Chief Executive, said: "This is a respectable start to what will be a long, and no doubt occasionally bumpy, road to recovery. In the period we completed some essential first steps, most notably raising the equity and refinancing our debt which has given us much a stronger balance sheet.
"Trading in the period was a little better than we anticipated at the time of the rights issue, and we are maintaining our previous guidance for 2015, albeit that we now believe that the risks associated with this guidance are weighted to the upside. As previously stated, we expect that revenues and profits will continue to be under pressure in 2016.
"We are making progress executing our strategy; total costs in the period were some £200m lower; we are reshaping the portfolio to become a focused provider of public services, and making good headway exiting loss- making contracts. Good progress is being made on developing and rolling out better reporting and control procedures.
"Many challenges remain, but we are now heading in the right direction. With the rights issue and refinancing behind us, we can now focus on the service we provide our customers and delivering our strategy".

1

Stuart Ford, Head of Investor Relations T +44 (0) 1256 386 227
Marcus De Ville, Head of Media Relations T +44 (0) 1256 386 226

A presentation for institutional investors and analysts will be held today at JPMorgan, 60 Victoria Embankment, London EC4Y 0JP, starting 9.00am. The presentation will be webcast live on www.serco.comand subsequently available on demand. A dial-in facility is also available on +44(0)20 3427 1912 (USA: +1646 254 3361) with participant pin code 2518869.

This announcement contains forward looking statements. The terms "expect", "anticipate", "may", "should", "will" and similar expressions identify forward looking statements. By their nature, these forward looking statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those currently being anticipated as reflected in such statements. Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws and governmental regulations; regulatory or legal actions, including the types of enforcement action pursued and the nature of remedies sought or imposed; exchange rate fluctuations; the development and use of new technology; changes in public expectations and other changes to business conditions; wars and acts of terrorism; and cyber-attacks. These forward looking statements speak only as of the date of this announcement. Except as required by any
applicable law or regulation, Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based.

2

distributed by