HSBC Global Research - 20 Mar 2012

UK Public Sector Outsourcing
Language: English
Page: 112

Investment summary 2
Report structure 3
Valuation 4
Serco (OW, TP 635p): preferred pick 4
Capita (UW, TP 650p): risky 5
G4S (OW, TP 315p) 7
MITIE (UW, TP 270p) 8
Government spending 11
Government expenditure 12
The Big Five 13
Local authority vs central depts 15
Current versus capital 16
Demographics 17
Spending review 19
Budget deficits: nature of the problem 19
An audacious spending review 19
For government suppliers: opportunity or knocks? 20
Potential for BPO & ICT: GBP4-5bn 24
But risk of service cuts is high 24
Margin pressure a perennial theme 26
Five key departments 27
Pay versus Procurement data 27
The monthly spending data 28
The Cabinet Office 29
Strategic plan 31
Department for Transport 32
1 Strategic plan 32
2 Departmental accounts 33
3 The monthly spending data 37
Austerity in action at the DfT 38
DfT: Pressure in construction and infrastructure companies39
DfT: relative stability in transport grants and ICT & BPO 40
Dept for Work and Pensions 42
1 Strategic plan 42
2 Departmental accounts 45
DWP: Austerity in action 47
3 Monthly spending data 48
DWP: ICT & BPO stable; employment & education
pressurised 50
Home Office 52
1 Strategic plan 52
2 Departmental accounts 54
3 Monthly spending data 57
Ministry of Justice 60
1. Strategic plan 60
2. Departmental accounts 61
3 Monthly spending data 63
MoJ monthly spending with private sector suppliers 65
The Ministry of Defence 66
1 Strategic plan 66
2 Departmental accounts 68
3 Monthly spending data 71
MoD: spending among major general service companies 73
The companies 74
Serco is our top pick 74
Capita is risky at this price 74
Opportunities in the OJEU 76
2011 prelim results 78
Valuation 79
Serco: some key and notable spending trends 80
Summary financials 81
Financials & valuation: 82
Capita (UW, TP 650p) 83
2011 prelim results 84
Valuation 85
Capita: some key and notable spending trends 87
Summary financials 88
Financials & valuation: 89
G4S (OW, TP 315p) 90
2011 prelims 90
Valuation 91
Summary financials 93
Financials & valuation: 94
MITIE (UW, TP 270p) 95
Valuation 95
Summary financials 96
Financials & valuation: 97
Appendix: The 2010 CSR 98
Disclosure appendix 107
Disclaimer 111