analyst & investor presentation - interserve · bruce melizan managing director support...

ANALYST & INVESTOR PRESENTATION

15 NOVEMBER 2010

HSBC, Canary Wharf

2 The Trusted Partner

Agenda

•

Interim Management Statement

•

Support Services Presentations―

Business overview―

Internal initiatives delivering value▪

Public sector contracts margin enhancement plan▪

Procurement & supply chain management

―

Growth opportunities▪

UK public sector outsourcing market▪

Middle East outsourcing market

―

HSBC & Interserve―

Summary

•

Site tour


Interim Management Statement

•

Trading in line with expectations

•

Stronger second-half performance anticipated

•

Group retains a strong financial position

Business Overview

Bruce Melizan Managing Director

SUPPORT SERVICES


Business Development Director

Phil Clark

Procurement & Supply Chain Director

Guy Bruce

Finance Director

Commercial Director

MD Commercial

Tony Sanders

MD Defence MD Engineering MD HALA

Keith Dorling

MD Health MD Industrial MD Security

HR QSHE National Service Centre

Managing Director

Bruce Melizan

Support Services Organisation Chart

6 The Trusted Partner6 The Trusted Partner

Key messages

Leading Support Services Business

Margin enhancement plan on track

Attractive end markets, both in UK and overseas


65%2%

33%Public

Privatised

Private

0

200

400

600

800

1,000

H2 2010 2011 2012 2013 2014 2015+

£m

£2.2bn

Health

10%

Infrastructure

6%

Government

16%

Industry

4%

Defence

32%

Custodial &

police

5%

Commerce

26%

Historical profit Public / Private split H1 2010

2010 future workload @ 30.6.10Revenue by sector H1 2010

£1 billion support services division 23,500 employees


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Interserve Support Services2009 margin

Interserve Support Servicesaverage margin 2004 - 2008

Initial target margin


Margin improvement in Support Services


Productivity

Procurement &

In-sourcing

Customer Relationships

Contract Management

Market Growth The

Interserve Way

Margin improvement – key building blocks


Proposal Development

NegotiationMobilisation Period

Live Service

Transformation Continuous Improvement

Contract Award

Contract Signature

TRANSITION START

Contract Go-Live

Operational TeamBid Team

TRANSITION END

Management Responsibility

Proposal Submission

Pre-mobilisation

OPERATIONS INPUT

Transition Input

Contract transformation process


Risk Management

Pricing

• Experienced Estimators

• Internal Benchmarks

• External Benchmarks

• Performance Data

• Operational Service solutions

Operational Feedback

• Monthly CVR

• Monthly Cost Reports

• Performance Reports

• Client Feedback

• Operational Benchmarks

Internal and External Audit

• Support Services Review and Audit

• In-house risk experts (insurance, QSHE, legal)

• PLC Audit and Review

• 3rd

Party Audit and Review


Central Government

Local Authorities

Defence

Health

Retail

Commercial

Industrial

Examples of Interserve’s Clients


2010 -

Winner in Partners in FM –

manufacturing2009 -

Winner –

Partner in Healthcare FM 2008 -

Overall Winner2007 –

Overall Winner

2010 –

Winner –

Special Recognition Award -

Landmarc2008 -

Sustainability Winner2007 -

Winner in Best Practice

Winner in Innovation Human Capital Awards

2009

Winner in Best Facilities

Management provider 2010

2009 Winner in Sustainability in real estate

Industry recognition and accreditation

ISO 14001: 2004 OHSAS 18001


Revenue by service lines

-

100

200

300

400

500

600

700

800

Single Service Bundled Services

£m •

Solid track record of developing single service relationships into bundled ones (e.g. BP & HSBC)

•

Bundled services helps to create a deeper and wider client relationship


UK market size and segmentation

Source: KPMG –

Facilities Management –2010

7.7%

59.7%

32.6%

Contracted-out

In-house TFM

118.0

92.4

97.8

101.7

105.5

110.6114.0

116.0

80

85

90

95

100

105

110

115

120

2002 2003 2004 2005 2006 2007 2008 2009

£bn

2009

• Growth market

• Total Facilities Management (TFM) penetration opportunity


Spending Review implications

• Much as we expected -

Continue to engage in constructive discussions with government on how we can support public sector cost savings programme

-

As previously anticipated, may result in some near-term volume pressures

• Encouragingly, it is also leading to a streamlining of procurement processes

• We expect substantial opportunities in the coming years asthe government seeks to effect structural changes in public service delivery and social infrastructure investment


Interserve Positioning

Mar

ket

pote

ntia

l

Commercial

Local Government

Retail

Central Government

Defence

Aviation

Industrial

Low

Hig

h

Low High

Health

Market sector positioningBy relative value

Internal Initiatives Delivering Value

UK Public Sector Contracts Margin Enhancement Plan

Keith Dorling

Managing Director,

Home Affairs & Local Authorities




Live Service


Contract Award

Contract Signature

TRANSITION START

Contract Go-Live


TRANSITION END


Proposal Submission

Pre-mobilisation

OPERATIONS INPUT

Transition Input

Contract transformation


Public sector contracts margin enhancement plan

Headcount/man-hour reductions

c. 350 heads

61%

Agency staff reductions c. 200 heads

23%

Operational efficiencies 12%

Sub-contractors re-tender 4%

Targeted savings 100%

Components of turnaround plan:

Profile of cumulative targeted savings & progress to date:

-1

0

1

2

3

4

5

6

7

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

£m

Target savings Actual/projected savings

Annualised impact in 2011 c. £10m


National Service Centre

•

24/7/365 centralised helpdesk capability

•

Manages c. 80,000 calls a month servicing 5 key clients

•

Space for 130 customer service professionals, providing scope to add extra contracts in time & further improve productivity

•

Improves service performance & flexibility

•

Increases our competitive advantage through cost savings


Returning contracts to planned levels of profitability – Contract A

Contract A - Target vs Actual Efficiency Savings

0

1,000

2,000

3,000

4,000

Apr May Jun Jul Aug Sep Oct Nov Dec

£k

Target Actual Target savings Actual/projected savings

• Headcount reduction

• Procurement

• Contract application (additional revenue)


Contract B - Target vs Actual Efficiency Savings

0

200400

600800

1,000

1,2001,400

1,600

Apr May Jun Jul Aug Sep Oct Nov Dec

£k

Target Actual Target savings Actual/projected savings

Returning contracts to planned levels of profitability – Contract B

• Headcount reductions

• Temporary roles cost reduction

• Procurement

• Asset verification

Procurement & Supply Chain Management

Guy Bruce

Procurement & Supply Chain Director


Introduction

•

Following the integration of the Specialist and FM businesses in

January 2010 we launched a new wave of procurement initiatives to take advantage of our enhanced scale;

―

Leverage Support Services buying power

―

Improve organisational effectiveness

―

Improve service delivery

•

The team has mobilised delivering structural and sustainable cost reduction.


Newly targeted spend

• £190m of new opportunity spend identified

• 19 primary spend categories targeted representing 83% of opportunity spend

• Builds on historic activity and approach

Gross spend £437m


94% of the savings identified

Spend Total Category

£40m+ BUILDING MAINTENANCE EQUIPMENT / SERVICE

£10m+

RECRUITMENT & EMPLOYMENT SERVICES

CLEANING & HYGIENE

ELECTRICAL EQUIPMENT

CATERING EQUIPMENT & SUPPLIES

CONTROLS & CONTROL EQUIPMENT

£5m+

TELECOMS, COMMUNICATION, I.T & COMPUTING

BUILDING, MECHANICAL & PLUMBING MATERIALS

CONSULTANT & DESIGN SERVICES

AIR MOVEMENT, ACOUSTICS & ATTENUATION

WASTE DISPOSAL

PLANT, EQUIPMENT, ACCOMODATION & STORAGE - HIRE / PURCHASE

Identified savings: supplier known & savings calculated in detailAgreed savings: savings approved and being taken to BU’s for sign off


Project Benefits Realisation Plan

A strong start

RealisationEnabling

Identified savings: supplier known & savings calculated in detailAgreed savings: savings approved by PMO and being taken to BU’s for sign offRealised Savings: savings can be tracked through the P&L

Target


Benefit realisation is beginning

Category: Catering Equipment & Supplies

Supplier

Target Save %

Levers Deployed

Businesses Impacted

Category: Laundry Services & Equipment

Supplier

Target Save %

Levers Deployed

Businesses Impacted

Category: Cleaning & Hygiene

Supplier

Target Save %

Levers Deployed

Businesses Impacted

Category: Alarms, Fire Detection & Systems

Supplier

Target Save %

Levers Deployed

Businesses Impacted

9 down to 2

Identified

99

Agreed

29

Supplier consolidation, volume discounts

3

1

Identified

146

Agreed

86

Contract renegotiation & competitive tender

3

13 down to 4

Identified

129

Agreed

129

Arbitrage, supplier consolidation

2

1

Identified

132

Agreed

132

Contract renegotiation & competitive tender

1


A structured approach

ORGANISATIONAL DESIGN

ANALYSIS & DESIGN

CATEGORY DEPLOYMENT

CATEGORY STRATEGY & PLANNING

PROCESS DEVELOPMENT

PROGRAMME MANAGEMENT



A sustainable model


YEA

R 1

BEN

EFIT

SSU

STA

INA

BLE

DEL

IVER

Y

TACTICAL NEGOTIATION

Supplier Negotiation

Data Analysis

Implementation Planning

MANAGEMENT CONTROL & REPORTING

Design

NEW ORG IMPLEMENTATION

Design Recruit

Rollout

Embed

BENEFITS REALISATION

Audit Audit Audit Audit

SKILLS DEVELOPMENT

Skills Gap Training & Capability Development

Questions

Growth Opportunities

UK Public Sector Outsourcing Market

Phil Clark

Business Development Director


Future Workload

£4bn

Short list

£1.4bn

Significant opportunity pipeline feeding the division’s future workload

Long list

£2.2bnTargeted £2.5bn

• >£6bn opportunity pipeline, in addition to division’s future workload of £4bn


Major Opportunities - UK Pipeline

0

1

2

3

4

2007 2008 2009 2010

Total Life Value £bn

PrivateHealthLocal AuthorityCentral GovtDefence


UK Opportunity Characteristics

• Shortened procurement & mobilisations

• More medium-sized opportunities

• Increased service bundling

• Growth in Local Authority market opportunities

• Office of Government Commerce (OGC) Framework -

(FM)


OGC Framework - FM

THE

OPPO

RTUN

ITY

• 5,000 approved and cleared employees• National Service Centre• Integrated bidding and operations• Approved management and systems• Culture and understanding

•

£1bn of current bids•

200+ government bodies•

Cabinet Office

mandated•

8 companies in the framework, 4 national players

OU

RO

FFER

ING

Middle East Outsourcing Market


Our support services presence in the Middle East

•

Madina acquisition in 2007―

Engineering & fabrication services and HSE training for the Qatari petrochemical industry

•

OTI acquisition in 2010―

Training and consultancy services to the petrochemical industry in Oman

•

Organic development of regional FM activities from late 2009―

First major support services contract in UAE awarded early 2010


Middle East FM market

• Less mature market

• Relationship development

• Limited competition

• Attractive margins


Middle East FM Opportunity Pipeline £300m total life

8%

14%

20%

16%

42% Secured

Bidding

Pre‐qualify

Pipeline

Long‐term


Middle East FM – Our USP

Local Partner Associate Companies•

Infrastructure•

20,000 employees• Reputation•

Local Relationships/Understanding


Outsourcing Opportunities - Summary

•

UK public sector opportunity growth, particularly Local Authorities

•

OGC framework delivering many good medium-sized opportunities

• Private sector outsourcing: solid pipeline

• Middle East positioned for growth

HSBC & Interserve

Tony Sanders

Managing Director, Commercial


HSBC integrated FM contract overview

•

TFM & small works (additional manned guarding)

•

Global HQ, c. 1,600 retail, 120 office sites & 900 remote ATMs, commercial & data centres

•

UK, Isle of Man & Channel Islands

•

Initial term 3 yrs, 2 yr extension, 1 yr continuation period

•

Annual value c. £80m including £30m small works

•

Day 1 c. 2,500 TUPE transferred from Carillion, Sodexo, HSBC, LCC & OCS

•

120,000 reactive work orders & 250,000 planned maintenance jobs per annum

•

120 sub-contractors delivering materials & specialist services

•

Assumed significant proportion of traditional client role

•

Capital Investment Planning with team of surveyors & project managers




Live Service


Contract Award

Contract Signature

TRANSITION START

Contract Go-Live


TRANSITION END


Proposal Submission

Pre-mobilisation

OPERATIONS INPUT

Transition Input

HSBC integrated FM contract development


Progress to date

Actions

Full RestructureCleaning cost reductionProcurement savingsReduce outsourced spendFocus on internal controlsStrong small capital/reactive worksComprehensive asset surveys

Outcomes

Transformation to bid model KPI focused improvementsProfitable & performing in line with budgeted margin

Contract Compliance

KPI performance and reporting100+ reciprocal supplier contractsStatutory compliance >98% 5 year rolling capital plan developed

Customer Perception

Continual customer satisfaction focusStructure realigned to client structurePortfolio data knowledge & managementStakeholder toolkits & brand ‘Facilit8’

roll out


ConsultingEnergy Bureau

Lift maintenanceWindow cleaning

Project worksSmall works

NationwideSecurity

QatarFM

RetailRefresh

HSBC relationship developmentBroadening our services and adding value with a key client

SelfDelivery

Integrated FM contract

commencedDec 2009


Focus going forward

•

Employee performance/productivity

•

Further added value

•

Stakeholder relationship enhancements

•

Strategic planning/Innovation demonstration

•

5 year estate capital planning

•

KPI performance/reporting

•

Employee development


Performance measurement & management

•

Extensive use of management information

•

Client accessible web based portal

•

Daily/weekly operational reporting and analysis

•

Detailed monthly reporting pack


Daily regional performance dashboard


Weekly regional performance snapshot

90.00% 100.00% 95.00%

100%

Average100%100%100%100%100%

Average100%100%100%100%

Responsiveness

QuestionHelpfulness & professionalism

ResponsivenessStandard of w ork Standard of w ork Standard of w ork

Helpfulness & professionalism

Overall Service

Number of audits completed: Number of audits completed: Number of audits completed:

100%100%100%100%

95.00%

HARD SERVICES CLEANING FRONT OF HOUSE

100.00% 100.00%

12 11 8

Question

OVERALL AUDIT SCORE

100.00%

100.00%

HARD SERVICES CLEANING FRONT OF HOUSE

Communication CommunicationResponsiveness

Overall Service Overall Service 100%

Helpfulness & professionalismCommunication

Question Average

OVERALL PERFORMANCE SUMMARY - CUSTOMER SATISFACTION & AUDITSCANADA SQUARE, UPDATED ON 16/8/2010

OVERALL CUSTOMER SATISFACTION SCORE


Monthly client report

Summary

Bruce Melizan

Managing Director


Summary

Leading Support Services Business

Margin enhancement plan on track

Attractive end markets, both in UK and overseas

Questions

Matt Jones, Head of Investor Relations

0118 960 2280

[email protected]

Investor relations contact:

analyst & investor presentation - interserve · bruce melizan managing director support...

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