SRP2 Jul 2012 08:09
Disposal of the majority of Serco's operations in Germany
2 July 2012
Serco Group plc (Serco), the international services company, has signed an
agreement to dispose of the majority of its operations in Germany in a
transaction with its local management team. With effect from 29 June 2012, the
operations were transferred in return for net nil cash consideration. The
transaction is in line with Serco's stated strategy to proactively manage its
portfolio of contracts, assessing operations for strategic fit together with
their expected future levels of performance and returns.
Serco Germany was originally established in 1961 to provide installation and
support services for the German air defence radar systems. The business
subsequently diversified into additional engineering and administrative support
services for the defence sector as well as training services, facilities
management, field installation and maintenance services, and IT consulting and
related services.
Serco sees limited revenue growth potential or opportunity to achieve the
necessary improvement in returns from these contracts. There are few synergies
with the rest of the Group. Where appropriate, certain contracts have been
retained, such as IT services to the European Space Agency and facilities
management for State Street in Europe.
The contracts being transferred have delivered combined annual revenue of
approximately £90m. Whilst revenues have been growing in recent years, Adjusted
operating profit has maintained a broadly breakeven position. The disposal will
have a broadly neutral impact on Adjusted earnings. The provisional value of
net assets being disposed of is approximately £25m, which includes goodwill of
around £22m. The provisional accounting loss on disposal, after
disposal-related costs of around £2m, is therefore expected to be approximately
£27m. An existing loan of approximately £12m will be settled by Serco over the
next 18 months.
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