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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
3 The Trusted Partner
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
5 The Trusted Partner
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
7 The Trusted Partner
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
8 The Trusted Partner
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
8 The Trusted Partner
Margin improvement in Support Services
9 The Trusted Partner9 The Trusted Partner
Productivity
Procurement &
In-sourcing
Customer Relationships
Contract Management
Market Growth The
Interserve Way
Margin improvement – key building blocks
10 The Trusted Partner10 The Trusted Partner
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
11 The Trusted Partner11 The Trusted Partner
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
12 The Trusted Partner12 The Trusted Partner
Central Government
Local Authorities
Defence
Health
Retail
Commercial
Industrial
Examples of Interserve’s Clients
13 The Trusted Partner13 The Trusted Partner
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
14 The Trusted Partner
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
15 The Trusted Partner15 The Trusted Partner
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
16 The Trusted Partner16 The Trusted Partner
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
17 The Trusted Partner17 The Trusted Partner
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
20 The Trusted Partner
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
21 The Trusted Partner
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
22 The Trusted Partner
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
23 The Trusted Partner
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)
24 The Trusted Partner
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
26 The Trusted Partner26 The Trusted Partner
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.
27 The Trusted Partner27 The Trusted Partner
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
28 The Trusted Partner28 The Trusted Partner
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
29 The Trusted Partner29 The Trusted Partner
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
30 The Trusted Partner30 The Trusted Partner
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
31 The Trusted Partner
A structured approach
ORGANISATIONAL DESIGN
ANALYSIS & DESIGN
CATEGORY DEPLOYMENT
CATEGORY STRATEGY & PLANNING
PROCESS DEVELOPMENT
PROGRAMME MANAGEMENT
31 The Trusted Partner
32 The Trusted Partner
A sustainable model
32 The Trusted Partner
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
36 The Trusted Partner
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
37 The Trusted Partner
Major Opportunities - UK Pipeline
0
1
2
3
4
2007 2008 2009 2010
Total Life Value £bn
PrivateHealthLocal AuthorityCentral GovtDefence
38 The Trusted Partner
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)
39 The Trusted Partner
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
41 The Trusted Partner
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
42 The Trusted Partner
Middle East FM market
• Less mature market
• Relationship development
• Limited competition
• Attractive margins
43 The Trusted Partner
Middle East FM Opportunity Pipeline £300m total life
8%
14%
20%
16%
42% Secured
Bidding
Pre‐qualify
Pipeline
Long‐term
44 The Trusted Partner
Middle East FM – Our USP
Local Partner Associate Companies•
Infrastructure•
20,000 employees• Reputation•
Local Relationships/Understanding
45 The Trusted Partner
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
47 The Trusted Partner
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
48 The Trusted Partner
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
HSBC integrated FM contract development
49 The Trusted Partner
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
50 The Trusted Partner
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
51 The Trusted Partner
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
52 The Trusted Partner
Performance measurement & management
•
Extensive use of management information
•
Client accessible web based portal
•
Daily/weekly operational reporting and analysis
•
Detailed monthly reporting pack
53 The Trusted Partner53 The Trusted Partner
Daily regional performance dashboard
54 The Trusted Partner54 The Trusted Partner
Daily regional performance dashboard
55 The Trusted Partner55 The Trusted Partner
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
56 The Trusted Partner56 The Trusted Partner
Monthly client report
Summary
Bruce Melizan
Managing Director
58 The Trusted Partner58 The Trusted Partner
Summary
Leading Support Services Business
Margin enhancement plan on track
Attractive end markets, both in UK and overseas
Questions