Serco Group Plc Sp/Adr

Good morning, everybody. Rupert here. I'm starting on slide five, which is the opening slide. I'm joined by Nigel Crossley and also by Angus Coben. By way of introduction, 2020 has obviously been a very strong performance, and pleasingly, we see continued growth in 21. Revenue up 20% of constant currency, 16% organic, and of that 16% organic, obviously quite a lot was related to COVID. So ex-COVID, the organic was about 4%, and it was about 5% from the impact of the NSBU acquisition in the U.S. Online trading profit up 37% in constant currency, and the margin increase from 3.7% to 4.2. Very strong free cash flow. Doubles to $135 million, and that's brought the adjusted net debt down by $157 million to $58 million, and leaves us with 0.5 times leverage. A couple of points to point out would be that this now means that about 75% of our trading profit now comes from outside the UK, and that's a point that we'll be returning to in terms of the geographic balance of our flow of profits. I'd also like to point out that ROIC now, post-tax ROIC, has now hit 15% on an underlying after-tax basis. COVID itself, whilst it had a significant impact on revenues, had an only marginal net impact on profits, less than £2 million. And that was because we've repaid all the furlough. It was because we have had businesses in our portfolios, such as leisure, doing leisure centres for councils, and transport and air traffic control have had, basically, they've had almost to shut. And then we've had other businesses like health that have had significant costs. We've paid out £5 million to 50,000 employees as an ex-gratia payment. And the net impact of that is from about £400 million of revenue, we've actually generated net about £2 million of profits, less than 1% of our total profits. And of the £43 million increase in underlying trading profit year on year, £41 million of it came from sources other than COVID. It's been a very strong operational performance. I'll talk more about it. But the business has responded really, really fast to new opportunities and to the sort of disruption that we've all faced whilst maintaining discipline and control. Solid order intake, 3.1 billion, a lot slower in the second half. It seems to be that the second lockdown has slowed up, had a much bigger impact on slowing up tender adjudications. In the US alone, there's 2.8 billion of outstanding tender adjudications. And we got large ones in the UK as well. And that's had the impact of increasing our pipeline. But our book-to-bill was 80% for the year, which compares to 160% the previous year. So we're still ahead across the two years. The reasons why we might not have proposed a dividend have now all fallen away. And we are proposing a dividend of 1.4p, which is about a 25%. And we are continuing with our 40 million share buyback program, but we are confirming that about 20 million of those shares will actually be canceled. In terms of 2021, we've increased our guidance from up to 175 million, which will give us on a constant currency basis about 10% growth. And the reason for that really is that we've had a very strong start to the year. Moving on to the next slide, that is slide six, just to put this sort of profit growth into context. between FY17 and FY20, we delivered compound annual growth of 33% in UTP, and the margins gone from 2.3 to 4.2. If we extend that to a four-year CAGR to 21, it's still a 26% CAGR. And this is, of course, all without the impact of WBB, an acquisition that we announced just over a week ago. And we will update guidance to reflect that when we have completed. But the fact is, is that the revenue growth and the profit growth indicates that we are outperforming, we think, the market by a meaningful degree. And we are delivering on our promise of taking our margins up towards 5%. I will now hand over to Angus, who will go through the first part of the financial report. Angus.

Thank you, Rupert. Morning, everybody. I'll now take you through a brief review of the 2020 financials before handing over to Nigel, who will talk about debt, capital allocation, dividends, and the outlook. Let's start with the income statement on slide eight. Revenue of 3.9 billion is up 20% in both a reported and constant currency basis, with organic revenue growth of 16% being boosted by the full-year impact of the NSBU acquisition. The net unfavorable currency impacts of 24 million in revenue and 1.4 million in underlying trading profit arose primarily from the weakening of sterling against the US dollar. All the rates are in the appendix. UTP was up 36% to 163 million. Like last year, UTP is lower than the trading profit of 176 million as it excludes non-recurring and contract and balance sheet review items, namely the benefit of commercial settlements and the Caledonian sleeper contract and a couple of OCP provision releases on our legacy PEX and Compass contracts, which together amounted to 12.6 million. Underlying trading margin improved by 50 basis points to 4.2%. This ongoing improvement, assisted to some extent in 2020 by reduced travel costs, has been generated by keeping a tight lid on SG&E costs as the revenue line has grown. The overhead leverage that our business model now delivers is illustrated by the fact that in a year when revenue grew by 20%, our administration expenses grew by less than 3%. The 20% constant currency revenue growth on slide 9 consists of organic growth of 16%, with the NSBU acquisition contributing 5%. Forex reduced revenue growth by 1%. Approximately 12% of that organic growth was COVID-related. UKE and ASPAC were the key drivers, with organic growth growing by 31% and 18% respectively. In UKE, the net estimated impact in revenue from COVID was around 400 million and supplemented by the full year impact of the AASC contract, as well as the PEX and Gatwick Immigration Removal Centre mobilisations. These increases were offset partially by sharp COVID-related falls in demand on Northern Isles ferries and directly managed leisure trusts. Growth in ASPAC was largely due to recent contract wins, including our AHSC Garrison Healthcare contract, which commenced in 2019, and the Adelaide Remand and Clarence Correctional Centres, which came online during the year. Revenue in ASPAC was also boosted by additional demand in immigration services, as well as COVID-related work for Services Australia. Organic revenue growth in the Americas was muted at 1%, with strong first-half growth in our FEMA and U.S. pension benefit guaranteed cooperation contracts being offset later in the year by the loss of the Georgia Department of Transport contract, as well as a significant reduction in the ship and shore modernization business during the second half, where activity levels had previously been very high. Organic revenue in the Middle East fell by 7%, mainly reflecting the impact of COVID on our airport services work in Dubai and air traffic control contracts in UAE and Iraq. These transport losses were compounded by a COVID-related reduction in revenue on our Saudi rail contract, as well as the loss of a hospital FM contract in UAE. As slide 10 shows, UTP, for example, of 163 million represents headline growth of 37% in constant currency. Underlying trading margin improved by 50 basis points to 4.2%. This means that over the last three years, Serco has grown its underlying trading profit at a compound rate of 33% and added 90 basis points of underlying trading margin. The net positive impact from COVID-19 was around 2 million pounds or 1% with some large operating impacts. All four divisions increased their underlying trading profits in 2020. The outstanding performers were UKE and the Americas, where constant currency UTP grew by 48% and 24% respectively. Despite the strong growth in UKE, this division still contributes only around a quarter of Serco's profits, reflecting the higher margins earned overseas and illustrating the growing importance of Serco's international business. The early January acquisition of Facilities First in Australia, and once regulatory approval has been obtained, the recently announced acquisition of WBB Inc in the US, further underline the growing importance to the group of Serco's international footprint. UKE had some big profit swings. Most notably, the contrasting impact of COVID on different businesses. Our immigration contract AASC benefited from no longer having the transition costs of 2019. Citizen services delivered a very strong performance, in large part due to additional COVID call centre and testing and tracing work. In transport, low ridership took a previously profitable Mersey Rail contract into loss, whilst our health business was impacted by COVID-related absence and additional costs. In addition, our leisure business sustained a significant loss due to the closure of leisure facilities. Overall, however, UKE performed very well, growing its UTP by 48% to 57 million and its margin by 40 basis points to 3.2%. UTP in North America grew by 24% in constant currency to 101 million pounds, with margin improvement by 50 basis points to 9.5%. Around half of this growth came from the MSBU acquisition. The rest of this growth came from across the contract base, with notable contributions from the pension guarantee corporation, FEMA, and our garrison support contract in Goose Bay, Canada. This growth was offset by the reduced volume of ship modernization work, the loss of the transport contract in Georgia, and the anticipated second half impact of the completion of the additional CMS volume in early summer. Going forward, the completion of the higher margin WBB acquisition will help offset the full year margin impact from the end of the temporary uplift in CMS margins and the lower margin in the recently secured ATFP bid. Also impacting margin are higher insurance costs, which have been felt across the group but most notably in our US air traffic control business. UTP and ASPAC increased by 5% in constant currency terms to 33 million. This increase reflects continuing strong performance in the citizen services business, in part due to COVID-related work for Services Australia, as well as the full year impact of the AHSC garrison healthcare contract. Our justice and immigration business also performed well, with higher volumes in immigration caused in part by COVID and the end of the mobilization of the Adelaide romance center contract. Reported UTP margin reduced by 50 basis points to 4.5% due to the startup of Clarence Correctional Center and delays on the icebreaker given schedule slippage in part caused by COVID. Despite the fall in revenue, UTP currency in the Middle East increased by 2% to 14 million, reflecting strong growth in our citizen services business, notably our MASH contract in Saudi, offset by profit falls in health, compounded by the COVID impact and transport profits in Iraq and UAE. Turning to the bottom of the income statement on slide 11, The increase in finance costs of $4 million to $26 million was largely due to a $3 million increase in IFRS 16 lease interest caused by the growth in properties rented for the AASC contract, together with increased utilization of the RCS in the early part of the year and a reduction in pension interest. The blended average cost of our debt in 2020 was 50 basis points lower at 4.01% as compared to 4.51% in 2019. The underlying tax rate in 2013 was two percentage points lower than in 2019. Underlying profit before tax generated from our overseas operations accounted for more than 80% of the total underlying profits in 2020. thereby pushing up the effective rate relative to the UK statutory rate. Offsetting this, we have been able to use some of our historic UK losses and deductions against UK profits in 2020, which reduces our underlying tax rate. Over the medium term, we expect the underlying effective rate to be around 25%, with the cash tax rate a little lower due to the benefit of goodwill amortization in the US. Cash tax will also benefit in the longer term, from the 560 million of UK unrecognised deferred tax assets with a current tax value of 105 million that we expect to bring onto our balance sheet as UK profitability continues to improve. Underlying diluted earnings per share grew by 37%, from 6.16 pence to 8.43 pence. The weighted average number of shares increased from 1.199 billion in 2019 to 1.254 billion in 2020, largely as a result of the full-year effect of the May 2019 share placing relating to the NSBU acquisition. Statutory reported earnings per share on a diluted basis, which reflects non-underlying items and exceptionals, was 10.67 pence, as compared to 4.21 pence in the prior year, which mainly reflects the strong growth in underlying profitability, together with the credit arising from non-underlying items and the exceptional profit in respect to the disposal of our Viapass joint venture. Nigel will talk about the dividend later. Turning to slide 12, exceptional items were a net 12 billion pound profit in 2020, as compared to a £26 million loss in the prior year. The biggest example of cost in the prior year related to the third project agreement with the Serious Fraud Office. We said this time last year there would be no exceptional restructuring costs in 2020, and we were true to our word with the costs relating to improving our HR processes running through UTP in 2020. The exceptional cash inflow was £12 million. as compared to the exceptional cash outflow of 49 million in 2019, which reflects in both the SFO settlement and the significant restructuring cash costs. With both OCPs and restructuring behind us, the naturally strong free cash flow generation of Serco's business model will be fully reflected in net debt as the historic leakage from loss-making contracts and restructuring is now well behind us. Slide 13. has the usual detailed cash flow and net debt and cash flow. Now, you can pick up more detail in the appendices on both net debt and cash flow. Here, I'll just pick out a few headlines. 2020 has delivered excellent free cash flow performance, which was significantly better than expected. Free cash flow generation improved from 62 million in 2019 to 135 million this year, which represents 127% conversion of underlying profit after tax compared to 84% last year with around 21 percentage points or £12 million of benefit coming from COVID related tax deferrals in the US for which there is no early repayment mechanism in place and which will consequently be repaid in 2021 and 22. All other COVID related tax deferrals were fully repaid during 2020. The increase in free cash flow was largely driven by higher UTP and strong cash collections in North America, notably the catch-up with FEMA. In addition, the end of the cash costs associated with our loss-making contract portfolio had a big positive impact on cash generation. We continue to have zero receivables or payables financing in place. Our billed receivable days were 23 six-day improvement compared to the 29 days of 2019, reflecting strong cash collection efforts, particularly in North America and the Middle East, and the continuing support provided by our government customers during COVID in terms of paying their bills in a timely fashion, despite all the disruption. Our trade payable days decreased by five to 20 days, reflecting our focus on paying suppliers promptly and passing on the benefit of the prompt payment of our customers during COVID. Just before I hand over to Nigel, let me say a huge personal thanks to both the analysts, some of whom have had to suffer my chat for more than 20 years, and our shareholders for your support over the last six and a half years. I will miss Circle and my colleagues enormously when the time comes. particularly Rupert, who it has been one of life's great privileges to work with. But I'm delighted to hand you over to my successor, Nigel Crossley, whose appointment ensures that Circle finally has a proper CFO in place. Having worked closely with Nigel during my time at Circle, I know that the company is in a very capable and safe pair of hands. Nigel. Thank you, Anderson.

Thank you for those kind words. And good morning to everybody. First, I want to turn to net debt and leverage, which is slide 14. In 2020, adjusted net debt closed at £58 million, which represents a reduction of more than £150 from the start of the year. This is largely driven by strong cash flow performance that Angus has already explained, and to a lesser extent, the proceeds from the sale of our Viapath joint venture, along with some positive foreign exchange movements on our US dollar debt. The average adjusted net debt during the year was £209 million, which, compared to the closing net debt, is higher than we would normally expect. This is due to stronger cash collection performance across all divisions, which helped reduce our average net debt in the second half to only £137 million. Our adjusted net debt excludes all IFRS 16 liabilities, which were £403 million at the end of December. And as we've explained previously, a significant proportion of these lease liabilities directly relate to delivery of our contracts, the costs of which are covered by our contract revenue, and the leases have been structured to anchor terminally with our contracts. Net debt at the end of the year, including all the lease liabilities, was £460 million. As a result of the strong cash performance during the year, the December covenant leverage ratio was just under 0.5 times net debt to EBITDAR. So now turning to funding and capital allocation, slide 15. We ended 2020 with a very strong balance sheet and available liquidity of £582 million, which has enabled the two acquisitions we have recently announced to be funded from existing facilities. In October, we successfully raised $200 million from the US placement market to refinance upcoming debt maturities. The new loan notes are spread over 5, 7, 10 and 12-year terms, with the cost of the new debt lower than our existing debt. This will be the first time that Serco has been able to access investment-grade financing since 2013 and reflects the progress made in terms of financial performance and the strength of our balance sheet. In addition, we have recently secured £75 million three-year loan term with our relationship banks. We will draw this at the time of the WBB acquisition closure, and we expect to be in course two, and this will ensure that we maintain strong liquidity. The Group Revolving Credit Facility, which is currently undrawn, is also forecast to be materially undrawn. Overall, our debt facilities have a broad maturity profile, and we have come to a level of liquidity and financial flexibility that they provide to the business. As we consider the reinstatement of the dividend, we thought it would be helpful to remind everybody about Serco's priorities for capital allocation. Serco's performance over the last two years has proven that it is now a cash-generative business. The cash drag of onerous contracts is behind us, and low levels of capital investment are required by the business, with the most significant internal investment likely to be working capital support revenue growth. Therefore, I expect the group's trading cash conversion to be in the region of 80% to 90% over time. As we have previously set out, the group's target leverage is to be between 1 to 2 times debt to EBITDA. While in December 2020, leverage is less than 0.5 times, We expect this to increase to around 1.6 times by June after the acquisition of Facilities First Australia and WBB in North America, which will still be well within our range and also as we have completed the share buyback programme. However, we expect profits generated by these acquisitions and the business as a whole will result in leverage being towards the bottom end of the target range by the close of 2022. The group's capital allocation priorities are laid out on the slide, and the first priority is to ensure that the liquidity exists to fund all costs associated with operating the business and the investment required for organic, profitable growth. We also plan to be able to fund full-time acquisitions to strengthen Borden's Circo's position in the markets it competes, at the same time as paying an annual dividend to shareholders. If surplus cash builds up and leverage stays below one times for an extended period of time, with no immediate investments or acquisitions opportunities available, we will consider returning surplus cash to shareholders. So turning to dividends, slide 16. In April 2020, when the scale of the COVID pandemic was becoming apparent, Serco, like many other companies, withdrew their recommended dividends. And this was for two reasons. First, we thought it was inappropriate to pay dividends whilst in receipt of government support. And second, we were understanding the cultures at the start of COVID-19 about the potential impact it might have on the financial performance and the liquidity of the group. During 2020, as we've heard, Circus performed well, and our balance sheet and liquidity remained strong. In addition, all government support has been repaid, including £38 million of UK VAT, which was repaid early. The one exception is the US payroll taxes of £12 million, for which there is no facility to repay early. SERP was also paid a £100 excretion bonus payment to each of its 50,000 frontline workers in recognition of their commitment to performance while working in challenging environments. On this basis, the Serco Board has recommended a final dividend should be paid for 2020 of 1.4p per share. This represents a 25% payout ratio, assuming a one-third, two-thirds split between the interim and final dividend. We're also planning to cancel around £20 million worth of Treasury shares purchased through the share buyback programme announced in December, which is a similar value to a final dividend for 2019, and an interim dividend for 2020. The Board will keep the dividend policy, including the payout ratio, under review as we continue to implement the growth phase of our strategy. It would be mindful of the requirement to maintain a prudent level of dividend cover and the need to maintain a strong balance sheet, which is critical for Serco's long term. So finally, I'll turn to the guidance for 2021 on slide 17. And you'll see that we've increased guidance compared to the initial view we gave in December with UTP anticipated to be 175 million pounds and revenue around 4.2 billion pounds. This reflects a strong start to the year with performance on or above expectation in all divisions and particularly in the UK, which has benefited from higher levels of activity on COVID-19 related services. The new guidance accounts for recent foreign exchange movements, which has an approximate negative £40 million impact on revenue and a £3 to £4 million impact on underlying trading profits compared to 2020. On a constant currency basis, organic revenue growth is expected to be 4% and underlying trading profit is expected to increase by 10%. The guidance includes the acquisition of Facilities First Australia, which is expected to add around £6 million of underlying trading profit, but does not include the acquisition of WBB, which is still subject to regulator clearance. We'll update guidance in quarter two to include WBB once we have clarity on the completion date. We expect performance in the first half of 2021 to be stronger than the second half. with volumes on COVID-19-related contracts forecast to drop off as the year progresses. The second half will also see the end of the AWE contract, but we do anticipate seeing improved demand returning on our leisure and transport businesses. The guidance for finance costs, tax rates, free cash flow and net debt remain unchanged from the guidance we provided in December. But on that point, I'm going to hand back to Rupert.

Thank you, Nigel. And moving to slide 19, highlights and lowlights. Well, perhaps the most important highlight and lowlight for the year for me was the lowlight when Angus came and said that he'd like to retire, which was obviously a lowlight. But the highlight is how well he's managed that process and that he took the precaution of hiring an incredibly talented successor in the form of Nigel Crossley way back in 2014. And Nigel and I have been working together for a very long time. I have worked with Angus almost continuously since 2003 with a brief six-month gap when I jumped ship from Agreco and came to Serco. Whilst at Agreco, the share price while we were there together went from £1.30 to £17 when we um uh left we was in the footsie 100 and during that time as at uh psycho we have seen both triumph and disaster uh coming back um uh time and again it's been a a wonderful fantastic uh And, Angus, as I say, there are not many stock exchange announcements that have a reference to the CEO. Being firmly what I believe, that you are a prince amongst men and a giant amongst CEOs. And we will miss you. It's also, I think, your 42nd results presentation. So that must be getting on for a record. Moving on to our own, the highlights and lowlights of the year, well, clearly a strong operational performance. And we'll talk a little bit more about that. On the people front, 21,500 people recruited, 10,000 net new jobs increased. And perhaps best of all is that during COVID, engagement increased. And we'll talk about that in a moment. In terms of we talked about the financial performance, the angus will be stepping down in the year in which we go and pay our first dividend since 2014. And also when the underlying post-tax rate, which was something that we all followed incredibly closely at Agreco, is over 15%. I mentioned earlier on the importance of this idea that the growth in 2020 was broadly based. It wasn't just COVID. The COVID impact was relatively small. But the ongoing underlying business did really, really well as well. And the year has started out, yes, strongly because COVID test and trace is running very hot. But also the whole business across the world is actually doing pretty well in January. The fact that we're managing after 33% compound growth for the last three years to still continue to grow in 2021, we were uncertain whether that would be the case last year. But the fact is that we're going to be growing about 10% in constant currency in 2021. We've had some key wins, mainly in the first half. But I would like to point to Keisha Prism. in Australia, which was a foundational contract for the Australian business, and it's a long-term contract. I think one of the reasons for the book and bill being a site though is that most of our revenues are made up of long-term contracts, so when you renew them, you get five years' worth of revenue into the order book, but particularly with Test and Trace, this is stuff that's coming in and out of the, into the order book, through revenue and out the other side without building the order book. But the order book still remains very healthy. But the consequence of a lot of decisions slowing up in the second half has been that we have got a very strong pipeline coming into 2021. And it's one of the reasons why we think that we're going to be able to maintain and resist headwinds through the years that we've got a strong pipeline of opportunities. We have during this process we've also managed to successfully integrate NSBU and due to acquisitions which have been recently announced. And I think also another highlight would be the successful refinancing of our long-term debt. There are precious few companies in our sector who find this as an easy process. We went back to the USDP market, and we've been offered 10 years out to 12 years out. That's all done. We've just gone and raised another $75 million yesterday to give us added financial flexibility. So we have masses of liquidities. In terms of lowlights, you have to start with the dreadful impact that COVID has had on the lives and welfare of many tens of thousands of colleagues. We think of, I think particularly the people listening to this call, the main experience would have been the perils of working from home. But 90% of our staff, their office is a prison. It's a hospital. It's a train. It's an air traffic control site. They have to turn up. And the bravery, the courage, the resilience of people turning up to work. And it has been my challenge to be able to come to terms with the fact that, I mean, I have got out in the bank on the contracts, but I'm basically sitting at home doing my work and knowing that people are having to go into very, very infectious COVID environments and they do it and have done it really well through the year. In terms of bid losses, Viapath, which was our joint venture to do services for, not forensics, what's it called? Pathology. Pathology services. air traffic control training in the U.S. Wellingborough Prison we lost. We are pretty certain that we lost Dubai Metro and we lost a bid for a new air force base in Canada. AWE being taken back in house in November I think took everybody by surprise. It was a um uh it was not a surprise that they were considering taking it back in house because we know they've looked at this every two or three years they look at it what took us by surprise was that the speed which they're doing it and they will take over control at the uh end of uh june so that will be um uh about an eight million pound hit in the second half and then a full year effect in uh 2021 Not only have a lot of tender adjudications slipped, particularly there's a huge one in the UK, which is DIO, which we would hope to hear in the next few weeks, but also in the US have been a lot of bid protests. And you will know that we were kind of public enemy number one on test and trace in the middle part of last year. And the fact is that test and trace has been a huge success. I've been talking about it on Radio 4 today and explaining that, you know, you've got these two major programs. One's vaccination and the other is test and trace. And actually now they are both running really, really well. The difference being is that vaccination is something that the NHS does every year for about 14 million flu jabs and they've had nine months to plan before they had to put a single injection into anybody's arms. Test and trace, the government had to stand up on four weeks' notice. Nothing of this scale has ever been put together by any country on the scale of this sort of test and trace. About two and a half million people being tested every week. There were a million people traced in the first week of July. And it is interesting that the level of... angst and volume about Tesla has almost dropped away, but it is now an incredibly good service, but it's taken some time to get established. Now, I think some investors were a bit unnerved by the scale of the vituperation, but that's part of our job, and the important thing is that the government has continued to give us business and extend our contracts, and we think that they're very pleased with us. Prisons and hospitals, it's all been challenging to run, but particularly prisons, they've basically been under lockdown 23 hours a day for much of last year that's made that very difficult. And in recent weeks, we had a cyber attack. I think nearly every company in this sector has had a serious cyber attack. attack. It was on the weakest part of our network that is actually completely separated from what you might call our secure central network in Europe. I'm glad to say that all systems are recovered. We've got all our data. Quite a lot of data was stolen, but it wasn't destroyed. We still have it on our systems and our backups, and it's had immaterial impact on service delivery and our cybersecurity teams have done an absolutely remarkable job of recovering that situation. Moving on to the next slide, slide 20. I think that operationally one of the things that we did was I do think that the organization has risen to the level of events, and that's partly because right from the get-go, we set our priorities. We did not say, as most companies did, that our priority is the safety of our staff. We said from the get-go that our priority in this crisis is to support the delivery of essential public services. and within that context to protect everybody. And this actually has resonated really well within the business because it gave people a sense of purpose. They knew it wasn't that we didn't care about our people, but it made the work that we were doing was of national importance. And I think that both culturally and organizationally, three things have enabled us to navigate our way through this crisis. The first is What we call our loose tight management, where we give operational responsibility for delivering contracts, but that is close to the customer as possible. But people have very strict guardrails. There's very strict control around bidding and risk management and the like. And we actually looked it up between the 1st of April and the end of December, the investment committee, which is basically Angus and Nigel and I and the group general counsel and other group people we meet to review bids. And it met 85 times between April and December. So all the controls and the process that we put in worked really well in terms of maintaining control through the process. Culture was really important at the moment in the engagement scores, but we'd also built a highly scalable operating platform as a result of investment in IT systems and process. And this has, broadly speaking, enabled us to significantly scale up the business, add 50 basis points to our margins. And 20% to our revenues. And so we say in the text for a very large business, it's proved to be a surprisingly agile business for business that looks like a collection of lots of different contracts. We've been able to operate with common purpose and systems. And for a business of any size, it's proved to be remarkably resilient. Onto the next slide. Talking a little, two slides about people. Managing businesses. This is the absence rates from the UK. In March 20, they peaked at nearly 28% absence rate with the first lockdown. And in January, they were back up to 20%. managing, as you imagine, a hospital where from day to day you don't know how many people are going to turn up is extremely testing. But with the expansion of things like the COVID, the test and trace work, we've actually had to recruit 21,500 people in the last year and have created 10,000 net new jobs. Tragically, we've had 25 deaths amongst our staff and 3,000 COVID cases. Those statistics are terrible, but they are not unsurprising in a business that employs 55,000 people. On to the next slide, please. That'll be slide 22. I think perhaps everybody knows I am much attached to our engagement scores and our viewpoint And this is a thing that personally I am proudest about of the year. In a year that has been absolutely a horrific experience for so many of our colleagues. The engagement score actually, I thought it was going to go down. I couldn't imagine it wouldn't go down. And it actually went up. It went up from 71 to 73 amongst all employees and from 73 to 75 amongst managers. And the things that I cleave to here is that the experience of the managers in the business is very similar to the experience of the employees, colleagues. And I think that's so important. And these are not trivial surveys. They're done every year in September. There were 30,000 respondents who made 65,000 comments. And if any of you want to go and see just how rude, people can be about the company that they work for. There are a thousand randomly selected comments available on Serco.com for people to go and have a look at. But we're not embarrassed that we have a very feisty and a lot of colleagues who care deeply about the company. We've also had to deal with some very complex succession planning during this process. So Kevin Craven, retiring from the UK. So Mark Irwin, who was running ASPAC, has come to the UK. We've promoted Peter Wedding to the managing director of ASPAC. Anthony Kirby has been promoted to chief operating officer. And with Angus Coben retiring, Nigel's becoming the CFO. This is a non-trivial amount of senior management movement. And I think it's been incredibly stable, the senior management team. But it has worked to do that in the middle of COVID. It has all worked quite smoothly. On to the next slide, please. I'm not going to read out everyone. This is just examples of the sort of remarkable things that the business has done. In Clarence Prison, between July and December, mobilizing that, we went from nought to a thousand prisoners between July and December. We mobilized Christmas Island, which is a detention center, about seven hours flight from Perth in the middle of the Pacific Ocean. And the customer asked us to re-mobilize, and we got it mobilized on six days' notice. NHS Test and Trace mobilized 10,500 tracing staff in four weeks. 8,800 testing staff we recruited delivering 5.5 million tests. And in Asylum Seeker, contract, we've taken on three and a half thousand extra units and now looking after 25,000 people. And as you can imagine, the protocols for dealing with that in a COVID environment are really complex. So the business has performed out of its socks in an operational sense. Moving on to the next slide. I've just mentioned that not only has it done that, but we were able to do two important acquisitions, both of a very different size. But I think the point that it showed, that even with all the disruption of COVID, we were able to do this. WBB announced on the 16th of February. We hope it to close sometime in the second quarter. And Facilities First Australia announced in December that's already closed. One is a low-margin but large-scale FM business in Australia, and it's just what the Australian business needs. It's not an acquisition that we would have necessarily done elsewhere, but it was right for their business. And WBB gives us now a $1.1 billion defense business in the U.S. and gives us real heft in that market. Moving on to the divisional slides, I'm just going to trot through these quickly. We can spend more time if any of you want more detail. But in terms of America's now 49% of our UTPs, divisional UTPs in North America. It's got the highest margins in the group. The NSBU acquisition has settled in really well. There's been not a single senior management departure from NSBU since we bought in. It's performing in line with our expectations, so we're pleased with that. In terms of the organic revenue, the revenue rate was 16%. It was only 1% organic, but you'll be careful with that because there's quite a lot of revenue in the U.S. that is related to this Canes contract, where we are making large amounts of, basically, it's racks of communications equipment. We go and assemble it for ships. uh and it's very low margin business but a larger amount of kit going through it and actually we've just gone and won a new canes contract in terms of bringing a lot of revenue through with it so that dropped off but you'll see there that's why the organic revenue growth was only one percent but the utp growth was 13 was in part because but Kane's contracts don't contribute a lot to our profit. FEMA, which is a new contract we've stood up, 2,000 people to provide services to the Federal Emergency Management Agency, and I would just say in passing that Texas is one of the areas that we look after for where we subcontractors of FEMA. CMS has run well. The margins are stable. Volumes are going to be a bit lower this year. And in terms of contract wins, a ground-based electrical optical deep space surveillance system. It's called a telescope to you and me. But we've got the contract to go and And there's $3 billion of bids awaiting award. And the other thing is that lots of these bids now are being protested. But the business is in root shape, doing well, and started the year well. Go on to the UK. The UK has seen this tremendous growth, 31% organic growth. Substantially, all of that was COVID-19. About 350 million of test and trace bids. revenues, but then offset by, in profit terms, by leisure and transport. But leisure and transport, most of the revenue doesn't come through our own revenue line, as it's in associates or JVs. The growth has been, in UTP, largely delivered by AASC, the commerce contract, as we mobilise the new contract, and last now after 10 years of losing money, it's now making money, and also our PECS escorting contract has mobilized successfully. Big contract wins with the Northern Isles ferry, and then the NHS test and trace, which we've heard the story, I mean, amazing achievement standing up that. The biggest element in the pipeline is the DIO Defence and Infrastructure bid, but we're also bidding for the Skynet Athena Consortium, along with Inmarsat and Lockheed Martin and CGI. We have the FPMS, which is the tug and shipping services to the Navy coming along. There's a big pipeline there, nearly $8 billion on the wider definition, including rebits. Next slide, please. ASPAC, 16% revenue growth. Actually, 18% on an organic basis. There was a 2% of FX headwinds. They're doing very well. The AHSE Defence Garrison healthcare contract, which is... providing medical staff to the Australian military bases, doing very well and profitable. And the business has done very well through COVID. They've got big contracts providing call centres for the Australian Tax Office and for the Department of Human Services and Services Australia. And they've had a... a good year, with some good orders with the Fiona Stanley extension worth $370 million and Acacia worth $250 million for its first phase. Finally, the Middle East. The Middle East, its management conference today, and I went on to say, you know, it is, next slide, please. It is the smallest of our regions, but nonetheless, It's been very difficult running that business, but they've risen to the occasion. It represents about 7% of our UTP, but it's an important part of the map and an important platform for future growth. We're pretty certain that they've lost the Dubai Metro, which is, on the one hand, it was an iconic contract. On the other hand, it was a barely profitable contract. and very, very complex to do so. We are not shedding a disproportionate number of tears about that, and it will help the revenues, the margin, percentage margin of behavioural growth. Moving on then to the summary and the outlook that is on slide 30. Well, I mean, strong operational financial performance, and we expect to continue great in 2021. The pandemic has tested our mettle, and it's proved us, I think, to be an agile, resilient, and a highly capable business, capable of standing up huge resources very quickly in response to government need. Our investment in culture, the time that we spend talking about trust care, innovation, and pride has paid dividends. as have the instinct for transparency and rigorous reporting. The acquisitions of FFA and WBB show that we can continue to advance our strategy even in the midst of the sort of disruption that you get in a pandemic. And I think that our decision to be an international business, but a highly focused business, a supplier of government services, has worked really well. We've got an international footprint with 50% of our divisional UTP now coming from North America and 30% from the UK. Longer term, the outlook is that the four forces that we talked about in our strategy in 2015, growing costs of healthcare demographics, the need now for more resilient public services, rising expectations of choice and service quality, the quality of public services coming more to the front of people's minds. But equally now, the whole financial situation that governments find themselves in is really going to be, that pressure is going to be all the greater. And basically, people's memories will be shortened. They won't want to pay a lot more tax. So it's going to remain the fierce pressure that is the driver of demand in our business to provide, to deliver more services of higher quality for better value, what we call more and better for less. So we think that will be intact. We're going to do a capital markets day in H2 when we see when the fog begins to clear on COVID. But in the meantime, we're still holding to our medium term aspiration of 5% revenue growth and 5% margins over the medium term. With that, I'm going to say thank you and open this up to questions.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star and one if you'd like to ask a question. Your first question today comes from Sylvia Barker from JP Morgan. Please go ahead. Your line is open.

Thank you. Hi, morning, everyone. A couple of questions on NSBU. It seems like you have had, again, a strong year. Could you maybe just talk about what growth you've seen in that business? And if we can extrapolate to WBB at all, Obviously, you've got some reasonable assumptions for its first year, but how did NSBU develop after you bought it in terms of the revenue trends? And then secondly, just on central costs, could you maybe just remind us what the temporary savings are within that line and what maybe the more structural savings are and where that might be going forward? Thank you.

So I will take NSBU, and Nigel, will you take central costs? So NSBU, remember, it's got two parts of it. One is the U.S. business, and the other is the Canadian business. The Canadian business did particularly well, had a very, very strong year. I would say revenues on that year unit overall have been slightly lower than we thought because we had a particular class of landing craft that had to go and get reworked. But in terms of its contribution overall with the synergies that we got were ahead of our cost of capital and is performing pretty much where we would hope, albeit that the profit's a bit higher and the revenue is a bit lower. They've got a lot of protests out on bids that that they have won but have subsequently been protested. So in terms of the growth that we can get out of that business, it is going to be very largely dependent on the outcome of those, in the short term, on the outcomes of those protests. But we're happy that they've got a decent, a strong pipeline with a lot of work that they've won that happens to be under protest at the moment, but basically speaking, we are delighted with that acquisition. It's given us a very strong position in Navy, and then it's given us this platform from which we've now expanded with WBB. Nigel, central costs.

Yeah, so the central costs, they came in at £41 million this year, a little bit lower than they were last year. We've had travel savings, as everybody's been grounded, and there's just been less project works, but we can always expect corporate costs to move up and down a little bit. And I think our guidance would be a number of somewhere around the mid 40s is what we'd expect our corporate costs to be going forward.

Thank you very much. Thank you. And your next question comes from the line of Alan Wells, Ex-Am. Please go ahead. Your line is open.

Good morning, guys. Just a few from me, please. Can I just ask, I guess as we think about 2021 and the phasing into 22 as well, Could you talk a little bit about the assumptions behind or how you guys are thinking about the pathway to recovery in the likes of Mersey, Rao and Leisure? I guess maybe more broadly, do you expect them to get back towards sort of 2019 levels or do you think that that just isn't possible now, given, I guess, kind of changing attitudes in over 21 and 22? Following on from that, I guess one of the other key areas, obviously, which you alluded to, is the phasing down of test and trace and testing activities. Could you just remind us where we are in terms of visibility on this contract? I think I read that you now almost certainly will have those contracts through to the half year. But how are you thinking about the rebids and how that carries on beyond as vaccines are rolled out? Sorry. And then finally, as I guess I think about sort of the pipeline and rebids, and you kind of alluded to this, DIO ends up being quite a big opportunity that comes up this year. Could you maybe remind us how you guys are looking at the sort of the bull and bear case here on DIO, what that could mean for numbers as we look forward if you're successful? Thank you.

So, Alan, I'll take, in terms of the 21 phasing, I think we are assuming revenues on test and trace. to be pretty much the same this year in 21 as they were in 20, but just phased differently. So we had a much stronger second half and a weaker first half in 2020, and we expect that to reverse this year. So we are assuming some ongoing business beyond the inter-Q2, but at a much lower rate. In terms of the phase in the contract, there is an RFP in the market for the testing side of the um uh of the uh a business which probably would mean that the success if there's other successful bidders will start picking up somewhere in june and july so as you rightly say we'd be uh reasonably hopeful that we keep the testing business that we have got in some form of makes through to the um uh half year and then if we win part of the extension that may continue Nobody knows. Who knows what it's going to be like when life returns to normal, whether there will still be the need for test sites for people to turn up and get tested, or will they all be absorbed into other local authority facilities? They will probably need to maintain some form of central tracing capability because they'll want to be ready to jump on any outbreaks that occur or new variants. But one of the things that we've proven to government is that we can flex this incredibly fast. So we started at 10,000. We went down to 5,000 in September traces. They then increased it to 9,500 again for December and January. And I think we'll be down to 5,000 again in March. And this ability to flex the scale of the tracing, I think, gives the government a lot of confidence that they don't need to keep such a large standing army. So I think you're right. We've got pretty good visibility on test and trace through the first half, very little for the second half, but we're assuming that there will still be revenues of that in the second half. As to the pickup of Mersey Rail and Leisure, I kind of take the same view as you, which is I think it's unlikely to get back to where it was in 2019. Mersey Rail may, but I think Mersey Rail is basically a commuter train And if more people are working from home, presumably there will be less pressure on the rail. So I think it will come back. I mean, it was between health, extra costs in health, leisure and emergency rail, the hit was about 35 million. And I don't know how much of that's going to come back or how long it's going to take, but that gives you some sort of, it's a lot of, there's quite a lot of headroom to come back, but I don't know how much it's going to come back from, but I guess, you know, and it will take some time into 22 to come back. I'm not, on DIO, I'm not going to go into all the different configurations. There are endless different regions we could either win nothing we could win very big or we could win a bit but it is what you know what everybody knows is it is a huge contract to provide services to the MOD and is one of a number of very large opportunities that we have in the pipeline thank you

And your next question comes from the line of Paul Sullivan from Barclays. Please go ahead. Your line is open.

Yeah. Good morning, everyone. Firstly, I mean, the win rate appeared to be higher than usual. I mean, other than you being very good, what do we read into that? Or are you being more selective in terms of what you bid for? And then just sort of following on from that, is the pipeline now at a stage where And is it fluid enough to sustain your 5% long-term growth target in its current form? And then I don't know whether you can provide a bit more color on the 4% organic guidance by division. And then just finally, free cash flow guidance is unchanged versus the higher profits. What's driving that? Thank you.

So... Nigel, will you take the win rate and the free cash flow, why that's changed? I'll talk about the scale of the pipeline.

So the win rate for the year was 35% on new business and it was 90% of our rebid business if we exclude the BiPAP joint venture that we bid for, which was previously a loss-making business for us. So our win rates are strong. 35% is a little bit higher on our new bid win rate than we've seen in recent years. But we're consistently getting a rebid win rate in those 85, 90% on an annual basis. And that's important because it keeps our base strong. So then the new business that we win is largely incremental to that base. So I would say we are pretty happy with those kind of win rates, rebid win rates that we have at the moment. Well, there's a lot of movement in and out of the pipeline. we would say that we feel confident enough that the size of the pipeline would support the growth that we're looking forward to.

And you might like to think and come back to how the 4% organic growth splits by division. I'm not sure that we've got that. But, Paul, this issue about the – you will be aware that I've made a complete idiot of myself over the years when talking about pipeline. My learned colleague, Ed Casey, when he was COO, used to say, you know, we need a pipeline of 10 billion or else we'll be in the sixth circle of hell. It turns out that we don't. The other thing is it's a definition of what is in that pipeline. It is only new business. And as a definition, it's becoming increasingly, it's one that we're likely to go away from because we've always done it, but it's increasingly questionable how valuable it is because so much of our work now is rebids. So I think that we have last year, I think we had 160% book to bill, but we went into the year at something like sort of four and a half or five billion of books. pipeline. I'll have to get the exact number. Jamie will send it to you. But it produced an enormous amount of orderable increase because there were some very big rebids that never appeared in the pipeline. So I note that the pipeline has got bigger, but that's actually a function of decisions that would have happened in the second half going into the first half. If you know of a way of measuring a pipeline that is particularly useful, we'd like to hear from you, but we don't think it's particularly predictive, and that you're better off on the whole just looking at the rebits we've got coming up, applying roughly somewhere around 85% to that, then we'll tell you what the new business is, and you're going to buy roughly 25%. And sometimes it hits well, and sometimes it doesn't. But at the state, I don't look at 6.9 billion of pipeline and say, well, 6.4 billion of pipeline, and say that is always not enough to sustain 5% growth in the long term. We believe that we can sustain that 5%. growth in the long term. But it is dependent on us being able to win a lot of our rebids. It's really the rebid rate that is as significant as the new business.

A couple of numbers for Paul. We came into the year, Paul, with $4.9 billion in what we call our investor pipeline. We come out of it at $6.4 billion. And on top of that, we also have smaller bids, less than 10 million pounds in annual value, which at the end of 19, it was 4.9 of the big bids. And then add on 1.6, you get to 6.5 billion. And then the 20, it's 6.4 plus 1.7 billion, which is 8.1 billion. So improvement in pipeline growth. in part reflecting the movement to the right towards the end of the year in terms of the COVID impact. And also worth noting that 28% of the US pipeline is NSBU. Sorry, Rupert, back to you.

Well, in terms of the 4% growth rate, I can take that. We've got a 4% growth rate organic. If we look across our four regions, we're slightly above that rate in the UK and in North America, slightly below in ASPAC, but pretty clustered around the 4%. Probably one outlier we're going to have is the Middle East, obviously, as we've listed by Metro, which was a much bigger revenue contributor than it was a profit contributor.

Right. That's all we've done.

It's just that was free cash flow.

So just remind me the free cash flow. Why is it low in 2021 versus 2020? There's a couple of things I think the question is. Yeah. So the reason why 2020, unless 2020 was strong because there's some one-offs in there. We did not, we issued shares rather than bought shares for LTIT schemes. We've got about 12 million pounds of U.S. tax benefit that we can't pay back early. And we had some big catch-up on receivables in the U.S. around the FEMA contract and also in the Middle East. They did a great job of catching up on some of their receivables. So we think that 120% cash conversion rate that we saw in 2020 is not repeatable. 2021 has got a cash conversion rate of about 80%, which is more in our range. We've got to pay for that tax back early in the US. And then why didn't we change our guidance? I think there's just more inaccuracy around cash because there's big dollops of cash can come in on the 31st of December or the 2nd of Feb. So we've given some guidance there of 75 million, and we just didn't feel that there was enough evidence to say we should move that number.

That's smashing. Oh, and just to follow up, I mean, Angus, what can I say? Thank you for everything. It's been an absolute pleasure working with you. I'm sure everybody in Serco will miss you, and I know we will too. Thank you very much.

Thank you, Paul.

Thank you. And your next question comes from the line of Keane Marden from Jefferies. Please go ahead. Your line is open.

Morning, all. I've got three very quick ones, if I can. If the unsuccessful bidders for the NSBU awards don't block, so are basically unable to block the awards, what sort of revenue growth would that support for NSBU in the fiscal 21 year? Secondly, your one-liner report about FEMA and Texas caught my eye because that contract can be very lumpy. Are you generating reasonable revenues currently from that area? And have you included that in your 4% organic revenue growth guidance for the full year? And then finally, Just going back to the Dubai Metro contract, and I guess just sort of casting the eye back a bit further in time, are there systemic headwinds to margins in Middle East transport contracts, and therefore the achievable margin in that area might not be as attractive now as you might have thought five years ago?

So, as far as NSBU is concerned, we're not going to give organic-grade forecasts by individual business units. I can tell you that there is about $250 million worth of awards that are, I think, subject to protest at the moment in that business. As far as FEMA is concerned, yes, we've had a great year. We've mobilized the contract. We've been successful in doing work for FEMA. And no, nothing yet has come through from Texas. And no, it's not in our mix of business. They had a budget for FEMA, but they didn't have a line that said Texas. They had a that said that we've got to go and fill up a pipeline, and we're doing pretty well on filling up that pipeline of FEMA work. And as I said, I just note that with Texas being declared a federal emergency area, we tend to be net positive for that contract. The margins on that are not huge, but it's quite a lot of direct labor. On the metro, yes, I would say that these margins are, for the amount of work and complexity on the margins, it's a lot of work for not a lot of money. But, you know, we've had it for 12, 14 years. It's been a hugely successful contract for us. We'll be sad to see it go. But I don't think that it goes and reflects. I mean, we've got some, the margins that we make on other contracts in the Middle East, in other areas like, I don't know what, air traffic control and And some of the other military contracts that we've got make very attractive margins. So I don't think there's anything that would dissuade us that it's good to have a business in the Middle East. And we want to try and, you know, we think we're having a diversified, geographically diversified business because part of the thing is that we want to be able to be nimble and agile and follow the opportunities and follow the money. And there's a lot of money out there in that region going into public services, and we want to be ready to take advantage if some of it falls our way. So we're in no way down about the Middle East at the moment.

Thank you very much.

Thank you. And your next question comes from the line of David Brockton from Numis. Please go ahead. Your line is open.

Good morning. Can I ask a few things? Firstly, on the guidance, going back to an earlier question about extrapolating the guidance to future years, are you able to say how much COVID has played a part in the 6% increase in guidance? I guess there's a danger that consensus extrapolates it into after years. So any thoughts around that would be welcome. Secondly, just in terms of the UK tendering environment, I'm just wondering if you're picking up anything in respect of the post-Brexit tendering environment. I appreciate there's a green paper out there that looks to perhaps accelerate and simplify procurement. Any thoughts there again? Welcome.

So I'll take the green paper. Actually, I think what the Green Paper shows is how little room there is for manoeuvre that a government that wishes to cleave to WTO procurement rules has between EU purchasing and the rules and WTO. Essentially, the principles are there's got to be free, open and non-discriminatory tendering on all tenders over of a size of about a quarter of a million pounds a year. So I think that government will find itself disappointed in its ability to go and change the whole dynamic of purchasing in the way public services are bought in the UK. And they are not wanting to go and do a wholesale re-engineering There are some, it's one of the few documents I have actually read from front to back, and where you get to on that is saying, well, they're very keen on the social value, and social value is now kicking in quite hard as part of adjudication. of something. Typically, it's about 10% of the thing, and that will have an impact. But in terms of making life easier or more difficult for people to bid, I don't think it's going to have a huge amount of impact. And I certainly don't think it will be very difficult for the government to go, and even if it wanted to, to go and to discriminate against people. Is that on guidance?

Yeah, David. The £10 million increase that we've had is largely off a strong start in the year. COVID has provided some of that strong start, but it's only some of it. We've seen a strong start across other parts of our business as well. And then you think, how does that play into future years? We've guided a little bit. We've referenced in the statement that we look at our UK businesses. They've been hit the main business has been hit by about £35 million of profit in the year. That means we broadly have £35 million, £40 million going in the opposite direction. So it's just really a case of how do those, as far as future years is concerned, is how does that business that's been hit really start to recover as the COVID-specific work starts to unwind? And that's the kind of, the timing of that is less clear. And we've already talked on a question earlier about how quickly does Mersey or Leisure come back up.

Thanks. Can I ask, sorry, one more question, just being greedy. I absolutely second your comments about Angus being a prince amongst men and a giant amongst CFOs. So best wishes, Angus. Nobody expects sort of management teams to be around forever. But Rupert, I'm just wondering if you can give any reassurance to investors with respect to your ongoing commitment to the business in the near term. Thanks.

Well, I'm ongoingly committed to the business in the story of the chicken and the egg being the egg and the bacon. The chicken's involved, but the pig is committed. I'm fully picked up. And, you know, it is one of the most fascinating businesses to be involved in. But as you say, nobody goes on forever. But as far as I'm concerned, I'm, as I say, fully pinged.

Thank you.

Thank you. And your last question for today comes from the line of Joe Brent from Liberum. Please go ahead. Your line is open.

Good morning. Morning, Joe. Three questions, if I may. Firstly, could you give some indication of the order book by geography, just to help us understand that organic growth that we're expecting by division? Secondly, you talk about margin target up towards 5%. Is my memory playing tricks that historically you might have said 5% to 6%? And in any event, does not WBB, which is a double-digit margin, and NSBU, which I think is a 7% margin business, start to drag that margin up And then finally, a few people have sort of danced around the subject of COVID in 21, but am I right in thinking that the test and trace will be similar to 2020, but there should be some improvement on some of the areas hit? I think, Rupert, you mentioned a figure of 35 million. Could you just elaborate what that 35 million relates to and how that might come back?

Right. Nigel, will you do order book by geography And I will do the margin question and then you take it.

We'll do two of those first, I'll come back to you on the... Okay.

So, Joe, on the 5%, you are absolutely right that back in 2015, we said margins of 5% to 6%, and we'd still like to head towards that. What we're doing now, if you see the bottom right at the last page, we've got a squiggle in front of the 5%. So as far as we're concerned, We're saying margins around 5%, which may well be nearer 6%. But I think that we're not changing our medium-term aspirations. um because we think that we can get to five percent but it will take some time to get there you are correct wbb will add i think about a basis point to the u.s margin but then we've also got to um uh bear in mind when we uh think about that is that we've got very high margins being delivered on cms and that may not last forever and So, I think sort of progressing on towards, you know, we've come from 2.3, we've got to, what is it, 4.2. And, you know, we want to get to 5 and hopefully above it. But we're not, I'm not, I guess I'm not trying to, I'm just using a different squiggle in front of the 5. And likewise about growth. I mean, clearly we have grown far faster than five. I think that the organic growth rate for next year is about four. And that's before we've got WBB obviously coming in as inorganic growth. So I think We're not trying to stealthily reduce expectations. I think what we might be doing is saying it's taking quite a long time to get there, but directionally, we're still headed to the same place. In terms of COVID in 21, if you look in the report, we say, I think from memory, that there's about 35 million of hit that has come from a combination of leisure, Mersey Rail, and extra costs in specifically health. And we then got a £5 million bonus to all staff, which people know about. And there have also been some write-offs in leisure. And so somewhere you would say at least £40 million has been sort of kind of offset by and the net effect of the track and trace contracts has landed us with a £2 million net out of that, all of that mess of pottage. So I think that gives you a fairly good indication of the sort of materiality of the contribution of those test and trace contracts. But But so as they go away, we would expect some of that 35 to mitigate, to start coming back. But it is very much a question of the speed at which those two things happen. And there is risk in our forecast, but also some opportunity as to the speed of those relative movements in the second half. And we are going to have one of the lines that we want to put in the sand here is we hope people are not going to get overexcited by a very strong first half, because it's going to be, but then the second half is going to be quite a lot weaker because there are some headwinds. But there are also going to be some tailwinds in the form, we hope, of WBB, but that's not in the forecast, but that will be an overlay. on top of that, and also some of the pipeline that we've got, April, converting some of that into new business. And we've had a strong January. Does that kind of help you on that question?

That's extremely helpful. Thank you.

Order book by Geography, Nigel. Order book, Joe. We're looking at about 60% of the order book is in the UK and 25% in ASPAC. And that tends to be the regions where we have by far the longest contracts, so they have the biggest impact on order book. The Middle East, obviously, is a smaller business, so it has a lesser share. And similarly, the US has a relatively short, small part of the order book. And that's because a lot of those contracts have option years, and our definition of order book is we don't include option years. So there's about a billion pounds of option years that aren't included in our order book. And also there's a lot of task order work that they need to go out and win in year. So you always expect to see a smaller order book in the North America business.

I suppose if you look year on year, are there any sort of major changes in those order books, which obviously compares apples with apples for each geography? Nothing material. Fantastic. Thank you.

Thank you. I will now hand the call back for closing remarks.

Well, closing remarks, I would say, other than blubbing and tears because of Angus and Harari, because of Nigel, thank you all very much indeed. And, of course, Paul Cheggitts is available for your further and better particulars, if you wish. But thank you for your time and good morning to you.