serco people 
the heart of our business
bringing service to life
serco group plc
annual review and accounts 2008
serco group plc  annual review and accounts 2008
serco group plc
registered office
serco house
16 bartley wood business park
bartley way
hook
hampshire rg27 9uy
t 44 01256 745 900
e generalenquiriessercocom
wwwsercocom
serco ar08ver8 coverserco ar08  design  23032009  1453  page 1 financial calendar
2009
preliminary results announcement 27 february
exdividend date 4 march
record date 6 march
last date for receiptrevocation 28 april
of drip dividend mandates 
interim management statement 12 may
annual general meeting 12 may 
final dividend pay date 20 may
halfyear results announcement 26 august
financial yearend 31 december
 subject to shareholder approval
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1 introduction
2 highlights
4 our business
6 sercos vision and strategy
8 market opportunities
10 chairmans statement
business review
12 chief executives statement
16 operating performance
34 business relationships
35 our people and reputation
36 corporate responsibility
39 finance review
44 principal risks and uncertainties
49 directors secretary and advisors
50 corporate governance report
58 directors report
60 directors profiles
62 directors responsibilities
63 remuneration report
79 independent auditors report
financial statements
81 consolidated income statement
81 consolidated statement of recognised income and expense
82 consolidated balance sheet
83 consolidated cash flow statement
84 notes to the consolidated financial statements
137 serco group plc company financial statements
143 shareholder information
ibc financial calendar
serco ar08ver8 coverserco ar08  design  23032009  1453  page 2 serco group plc 1
serco is an international service company that
combines commercial knowhow with a deep
public service ethos we improve services by
managing people processes technology and
assets more effectively
national and local governments which represent
90 of serco’s business face profound challenges
despite intense budget pressures they must
continue to improve vital services and address
rising public concerns over sustainability security
and service quality in today’s economic climate
major private companies also face issues of cost
efficiency and quality
the result is a growing demand for serco’s skills
in redesigning organisations improving processes
and enabling people to deliver their best
this expertise is rooted in a valuesled culture
and over 40 years’ experience in delivering public
services which has enabled us to build strong
capabilities across different sectors our governing
principles underpin consistent delivery and
customer satisfaction and our management
system allows us to react to changing times
with innovation and agility
serco ar08ver7qxdserco ar08  design  20309  1909  page 1 2 serco group plc
2008 highlights
revenue
2007 £2811m
£3124m
111
adjusted earnings per share
pence
1857
1592
1341
1128
adjusted profit before tax
£m
123
105
87
69
revenue
£m
2811
2548
2260
1637
dividend per share
pence
2008 2007 2006 2005 2004 2008 2007 2006 2005 2004 2008 2007 2006 2005 2004 2008 2007 2006 2005 2004
425
360
297
263
2220 145 3124 500
serco ar08ver7qxdserco ar08  design  20309  1909  page 2 serco group plc 3
strong operational performance and increasing
capabilities in growing markets
• signed contracts valued at £32bn
• win rates of one in two for new bids and 90 of rebids
• organic growth broadly spread across markets and
sectors
• significant progress in developing new markets
• si international integration on track
robust financial performance and secure funding
• strong revenue growth of 111
• adjusted profit before tax margin increase of 30bps
• good cash generation group free cash flow of £942m
• £900m of committed debt funding £64m repayable
in 2010 with over 60 maturing from 2013
substantial order book and continued high revenue
visibility
• order book of £163bn at 31 december 2008
• continued high visibility of 90 of planned revenue for
2009 76 for 2010 and 65 for 2011
growth prospects increasing expect continued strong
performance
• challenging global economic environment fuelling
opportunities for efficient delivery of essential services
in existing and new markets
• flexible and agile business model £26bn pipeline
of opportunities and new markets support expectation
of continued strong performance
• consistent with previous guidance expect revenue
of approximately £5bn and an improvement in
adjusted operating profit margin of around one
per cent to approximately 63 by the end of 2012
adjusted profit before tax
2007 £1232m
£1453m
179
profit before tax
2007 £1146m
£1361m
188
adjusted earnings per share
2007 1857p
2220p
195
earnings per share
2007 1698p
2049p
207
group free cash flow
2007 £976m
£942m
35
dividend per share
2007 425p
500p
176
 excluding material acquisitions disposals and currency effects
note adjusted operating profit adjusted profit before tax and adjusted earnings per share shown above are before amortisation of acquired intangibles as shown on the face
of the group’s income statement and the accompanying notes group free cash flow is free cash flow from subsidiaries and dividends received from joint ventures and is
reconciled in section 3 of the finance review
strong operational performance underpins growth
serco ar08ver7qxdserco ar08  design  20309  1909  page 3 4 serco group plc
our business
our work in civil government includes home
affairs information and communications
technology ict business process outsourcing
bpo education and children’s services health
integrated facilities management and consulting
we manage prisons in the uk australia and germany
electronically monitor offenders develop systems for
law enforcement agencies controlling immigration and
improving civil resilience
we run all education services in two local authority areas
and all children’s services in one area providing services
for over 500 schools and around 20000 children
our expanding health business provides clinical
services to over two million people in a range of
primary and community settings and occupational
health services for private companies local authorities
and notforprofit organisations
we use our ict skills and bpo knowledge to deliver
better faster and cheaper solutions to local
government schools and blue chip private sector
customers in north america the acquisition of
si international has added new records management
and it capabilities which we provide to a number of civil
government agencies during the year we also
acquired infovision now serco bpo the largest
independent bpo business in the indian market
our integrated facilities management business provides
environmental streetscene and other direct services
to councils and also works with hospitals and
private sector customers our consulting capability
raises awareness of serco and enhances our reputation
with potential and existing customers by providing
highvalue advisory services
defence 25 transport 22
civil government 36
science 17
£3124m
26
23
34
17
£2811m
revenue by market 2008
2007
revenue by geography 2008
2007
united kingdom 75
£3124m
6
75
8
11
£2811m
europe  middle east 7
asia pacific 6
north america 12
we organise our business around
market expertise in a variety of sectors
civil government defence transport
and science
civil government
revenue
£1127m
2007 £952m
serco ar08ver7qxdserco ar08  design  20309  1909  page 4 serco group plc 5
serco is a leader in the provision of
support services to the armed forces of
the uk us germany and australia
in the uk we provide training engineering
and operational support to the royal air
force and the flight arms of the british
army and royal navy we put the royal
navy to sea at its three main uk bases
operate and maintain strategic defence
assets such as secure satellite
communications and the defence
academy of the united kingdom and
provide systems engineering safety
assurance and risk management services
in north america following the acquisition
of si international during the year our skills
now encompass information technology
professional services human capital
management engineering and logistics
national security and intelligence and
we serve every branch of the military
we provide training logistics and
operational support services to the
australian department of defence with
a presence on every defence base in
australia and to the german bundeswehr
including our work at one of europe’s
most advanced combat training centres
serco is a major provider of transport
services with our partner nedrailways
we run merseyrail – one of the uk’s best
performing franchises – and northern
rail which is the uk’s largest network
in australia serco owns and operates
great southern rail including the ghan
and indian pacific transcontinental
services
we have substantial experience
of operating light rail systems including the
awardwinning docklands light railway in
london during 2008 we signed the
contract to operate and maintain the
dubai metro system which will commence
operation in september 2009
serco is also a uk market leader in traffic
management systems including the
national traffic control centre for england
which helps motorists to plan their journeys
and make best use of the road network
in air we are one of the world’s largest
private sector providers of air traffic control
services with operations in the uk middle
east and the us
serco is a leader in managing both
sciencebased organisations and the
process of developing transferring and
applying knowledge
we manage the national physical
laboratory npl which is one of the
world’s major scientific establishments
it is our responsibility to maximise the
positive impact of npl’s mission in
measurement standards and science
for business and government
we have an integral role in the uk defence
and civil nuclear industries since 2000
serco as a joint venture partner in awe
management limited has been entrusted
with the management of the uk atomic
weapons establishment which is
responsible for providing the warheads for
the uk’s nuclear deterrent in addition we
have provided independent specialist
nuclear safety advice to the royal navy in
support of its nuclear submarine fleet for
nearly half a century
we also offer specialist technical support
to the uk’s civil nuclear industry providing
safety environmental risk and asset
management advice and operational
solutions across the uk’s civil nuclear sites
transport
revenue
£671m
2007 £655m
defence
revenue
£786m
2007 £721m
science
revenue
£540m
2007 £483m
serco ar08ver7qxdserco ar08  design  20309  1909  page 5 6 serco group plc
serco’s vision and strategy
education in walsall light rail in the middle east
most admired support services
company for the fifth year running
serco continued to strengthen and broaden its portfolio we
won £32bn of contracts increasing our presence in existing
markets both through new contract wins and expanding the
scope and scale of existing contracts and developing new
markets such as local authority strategic partnerships and
light rail in the middle east
reducing our exposure to market fluctuations
our balanced portfolio and our high rebid and new contract win
rates give high visibility of future revenue and protect against
fluctuations in any one of our markets innovation enhances our
competitiveness and allows us to enter new markets and find new
ways of delivering services to customers
our vision is to be the leading
service company in our chosen
markets
the outcomes of our strategy
each of the four elements of our strategy contributes to
one or more of the following outcomes
our strategy for achieving this vision has four elements
our win rate on rebids for existing contracts in 2008 was 90
and we won one in two new bids reflecting our ability to select
only those opportunities where we can differentiate ourselves
we received numerous awards for the quality of our service in our
businesses which are mentioned throughout this report we won
management today’s award for the most admired support
services company for the fifth year running
build a balanced portfolio
we aim to reduce risk and increase opportunity by building a
balanced contract portfolio spread across markets this reduces
our exposure to market fluctuations enables us to select the best
opportunities whichever market they are in and allows us to
transfer expertise from one market to another
maintain high rebid and new win rates
we maintain high win rates through building longterm customer
relationships and by meeting – and often exceeding – customer
expectations this along with our reputation with existing
customers helps us to expand the scope and scale of contracts
during their life retain contracts at rebid and win new contracts
our key achievements in 2008
serco ar08ver7qxdserco ar08  design  20309  1909  page 6 serco group plc 7
serco bpo si international glasgow city council guy’s and st thomas’ pathology
strengthening our position in our chosen markets
we focus our resources on those markets where we see
the best prospects and innovate to satisfy our customers’
needs we supplement our organic growth with carefully
selected acquisitions to expand our footprint
developing new skills and capabilities for the future
we constantly invest in our skills and capabilities to strengthen our
market position we acquire to enhance our capabilities and to
allow us to enter new markets which helps us secure opportunities
for growth in the future
‘leading’ means that we want to be
the best partner to work with the
company people aspire to work for
and the company which delivers
superior returns to shareholders
our ‘chosen markets’ are those
which promise strong revenue growth
attractive margins and the ability to
offer good working conditions for
our people
we took a significant step in our international development by
acquiring si international a provider of information services
technology and network solutions in the substantial us federal
government services market
the acquisition of infovision now serco bpo established serco
in the fastgrowing indian market we also acquired the uk’s
leading independent occupational health service company the
grosvenor group
we signed a pioneering joint venture with glasgow city council for
a range of innovative ict and property services
we developed a new partnership structure with the guy’s and st
thomas’ nhs foundation trust to improve its pathology services
and target the significant pathology market
serco signed two environmental services contracts with an
innovative approach to waste and recycling collection
our marine services and transport businesses partnered to win a
contract to operate the woolwich ferry service
make strategic acquisitions
while we are primarily focused on organic growth
we make acquisitions to acquire new skills which will be important
for future growth and to enter new markets where we see strong
opportunities
develop new models
we respond to emerging opportunities by finding new ways to
deliver services this may mean collaboration between our
divisions bringing together skills and experience which few other
companies can replicate or it may mean partnering with our
customer or the voluntary sector our ability to lead change keeps
us at the forefront of our markets
serco ar08ver7qxdserco ar08  design  21309  1030  page 7 8 serco group plc
market opportunities
at the same time they continue to face
rising demand from their citizens to
improve the delivery of existing public
services and growing challenges in
areas such as climate change
migration security economic
development ageing populations
and congestion
these pressures are increasing demand
from our customers to reduce the costs of
public services and address these broader
challenges we are well positioned to help
them given our strong capabilities across
a broad range of markets our proven track
record in delivering peopleled change and
excellent service and our ability to create
innovative solutions
the strong opportunities for the private
sector in delivering better value for money
services both in the uk and overseas
were confirmed in the independent review
of the public services industry conducted
for the uk government by dr deanne
julius the review which was published in
july 2008 concluded that the uk has the
most developed public services industry in
the world valued at £79bn and saw strong
potential for this to grow further in the uk
and for these skills to be exported into
new markets
the role of the private sector in delivering
efficiencies was further confirmed in the
uk government’s operational efficiency
review announced in july 2008 and due
to report this year the review identifies five
work streams including collaborative
procurement back office and it functions
asset management property and local
initiatives and empowerment and is
seeking to draw on the best of public and
private sector experience to deliver billions
of pounds of savings across these areas
the further development of competitive
neutrality as set out in the uk’s budget in
2008 should also increasingly mean that
there will be equality between the public
sector and private sector or voluntary
agencies when bidding for contracts
looking at prospects across the business
we continue to see strong opportunities in
home affairs rising prison populations are
increasing the demand for prison places
and innovative approaches to offender
management providing serco with
opportunities to expand its work in the
sector in the uk and australia at the same
time border security issues have increased
the pressure on places at immigration
control centres and the demand for
proven consistent approaches to
managing these facilities and associated
services such as escorting
our customers principally national and local
governments are increasingly under pressure to
reduce budgets and to maximise the effectiveness
of their available resources given the current
challenging economic environment
above caring for prisoners at acacia prison
serco ar08ver7qxdserco ar08  design  20309  1909  page 8 serco group plc 9
in the us the incoming administration’s
focus on countering cybersecurity threats
improving information sharing among
agencies modernising healthcare
management and increasing the need
for logistics services with the anticipated
drawdown of combat troops and the
lengthening life expectancies of existing
military platforms provide growing areas of
opportunity for the expanded capabilities
of our north american business
ageing populations are adding significantly
to the pressures on health services and
increasing the need to use existing
resources efficiently the groundbreaking
partnership between serco and guy’s
and st thomas’ nhs foundation trust
establishes a new replicable model to
target the significant national pathology
market which is valued at £25bn and
is growing at 8 to 10 annually with
international opportunities similarly the
acquisition of grosvenor has given us new
opportunities in the fastgrowing market
for occupational health services for public
private and notforprofit organisations
the economic downturn is increasing
the focus on developing new solutions
to increase employment by encouraging
entrepreneurialism and supporting people
in returning to work we see further
opportunities to support small and medium
sized enterprises through initiatives such as
business link and our work with the uk’s
regional development agencies and expect
new opportunities under the government’s
flexible new deal initiative following the
publication of the green paper on welfare
reform in july 2008
local authorities in the uk face a range
of challenges in balancing the requirement
to achieve a 3 annual efficiency gain
as required by the 2007 comprehensive
spending review with the demand for
more responsive public services and their
key role in enabling the delivery of national
policy such as the every child matters
agenda serco has pioneered an innovative
approach to service transformation in our
partnership with glasgow city council
and we see good opportunities to provide
similar services to other local authorities
we also see a strong pipeline in providing
our environmental services to local
authorities
traffic congestion is a growing threat to
economic growth public health and the
wider environment in most regions of the
world responsive dependable traffic
management and reliable costeffective
public transport systems both play vital
roles in the solution we see further
opportunities to grow our presence in
light rail both in dubai as the new metro
network expands and in other countries
including the uk and continental europe
serco’s expertise in traffic management
is also in growing demand as the uk
highways agency increases its investment
in this area and as other countries look to
import the expertise in integrating systems
and data to maximise efficiency of the road
network developed in the uk
we recognise the financial and operational
pressures affecting our defence customers
and are using our expertise to help them
achieve more within existing resource
levels in the uk we remain in constant
dialogue at senior levels as to how we
can contribute to throughlife capability
management and continue to innovate to
help our customers at a local level in the
us we now serve every branch of the
military and see strong opportunities to
grow in key areas such as personnel
support services procurement engineering
and logistics and program management
we also see opportunities to deploy our
skills in other selected markets overseas
we have also identified good growth
opportunities in the indian market where
we launched serco bpo following the
acquisition in december of infovision’s bpo
capabilities rising incomes are creating an
increasing demand from consumers for
services and consequently a growing use of
third parties to deliver them the
outsourced domestic bpo services market
is expected to grow in value to around
us18bn over the next five years and
there is early evidence that there will be
demand for process outsourcing within the
indian public services market
above the joint venture between serco and guy’s and
st thomas’ nhs foundation trust will enhance the
trust’s pathology capabilities
above serco delivers and operates the national traffic
control centre ntcc delivering real time traffic
information to motorists
above providing surface finishing services at
raf cranwell
serco ar08ver7qxdserco ar08  design  20309  1909  page 9 10 serco group plc
chairman’s statement
our substantial order book and pipeline
of opportunities together with our
proven ability to deliver innovation and
efficiency savings to our customers
support our expectation of continued
strong performance going forward
financial results
i am pleased to report on another year of
strong financial performance revenue grew
by 111 to £3124m adjusted profit
before tax adjusted pbt rose by 179
to £1453m and adjusted earnings per
share grew 195 to 2220p the adjusted
pbt margin increased from 44 to 47
as we continue to benefit from efficiency
improvements and management of our
contract portfolio profit before tax rose by
188 to £1361m and earnings per share
was 207 higher at 2049p we delivered
another good cash performance with free
cash flow of £942m and have a strong
funding position with £900m of committed
debt facilities the majority of which are not
repayable until 2013
in december we were included for the
first time in the ftse 100 index which
comprises the uk’s 100 largest
listed companies
2008 was another year of strong performance
for serco with good growth across our markets
and sectors we also made significant progress
in developing new markets and enhancing
our capabilities
kevin beeston
chairman
serco ar08ver7qxdserco ar08  design  20309  1909  page 10 serco group plc 11
dividend
serco’s policy is to increase the total
dividend each year broadly in line with the
increase in underlying earnings the board
has proposed a final dividend of 352p per
share representing an increase on the
2007 final dividend of 166 and bringing
the total dividend for the year to 500p
representing growth of 176 the final
dividend will be paid on 20 may 2009
to shareholders on the register on
6 march 2009
delivering sustainable growth
economic conditions in 2008 were
challenging for governments companies
and citizens alike and whilst no one can
expect to be immune to these conditions
serco has once again demonstrated the
resilience of its business model
budget constraints are fuelling demand for
efficient and costeffective public services
as governments balance their investment in
stimulating economies with the requirement
to control national debt meanwhile citizens
increasingly demand better solutions to
global challenges such as security
congestion and environmental issues
the role of the private sector in supporting
governments in tackling these issues has
become an established part of the solution
the julius review commissioned for the
uk government revealed that the public
services industry employs more than
12 million people in the uk generates
£45bn of value per year and has significant
export potential our growing capabilities
mean that we are now able to address
a broader range of these opportunities
across a larger number of geographies
and sectors
we continue to grow our capabilities both
organically by investing within our existing
business and by acquisition in addition to
a substantial number of new contract wins
and extensions in 2008 we took a significant
step in our international development by
acquiring si international inc a provider of
information services technology and
network solutions in the very large us
federal government services market we
also established a presence in the indian
market where we see strong growth
opportunities through the acquisition of
infovision a bpo company serving the
domestic market
effective management of risk
as well as maximising opportunities for
growth within our business a key element
in delivering sustainable performance
is to manage risks in bids and existing
operations we do this through the serco
management system our robust system
of governance and internal control which
covers all aspects of our business and is
overseen by the board
we carefully select new bidding
opportunities and assess each bid’s
financial profile risks visibility place within
our portfolio and our ability to deliver
excellent service we take a similar
approach to our existing contracts with
regular assessment of performance
and risks which is reviewed on
a continuous basis
we also constantly look to improve our
processes given challenging global
economic conditions in 2008 it was
appropriate that we incorporated our risk
management processes into a broader
framework that encompasses the resilience
of the group as a whole providing us with
further confidence in the visibility and
control environment within our business
our people
finally i would like to thank all serco
employees for their tremendous efforts over
the year and to welcome to the business
those who joined us in 2008 it is the spirit
of innovation of our people and their
commitment to the delivery of excellent
service that distinguishes us and supports
our confidence in the future
“it is the spirit of innovation of our people
and their commitment to the delivery of
excellent service that distinguishes us and
supports our confidence in the future”
dividend per share
2007 425p
500p
176
adjusted earnings per share
2007 1857p
2220p
195
revenue
2007 £2811m
£3124m
111
adjusted profit before tax
2007 £1232m
£1453m
179
serco ar08ver7qxdserco ar08  design  20309  1909  page 11 12 serco group plc
we delivered another year of double
digit revenue growth enhanced our
margins generated good free cash flow
and strengthened our funding position
at the same time we invested in
improving our capabilities systems and
structures across the business
in an economic environment that seems
likely to remain challenging our expectation
of continued strong performance is
underpinned by our continued high revenue
visibility our agility and flexibility in
addressing our customers’ needs and our
ability to direct our resources at the best
opportunities
the strength of our business model and
the commitment of our people mean that
we continue to deliver quality service to
our customers which was again reflected
in our contract win rates during 2008
we maintained our win rates at over 90
on rebids and one in two new bids and in
total we won over 200 contracts valued at
£32bn across a wide range of our markets
expanding presence in
existing markets
we expanded our presence in existing
markets both through new contracts and
expanding the scope and scale of existing
contracts among larger wins in the uk
we won two contracts to deliver a range
of innovative environmental services for
the london borough of hammersmith 
fulham and milton keynes council valued
respectively at £140m and £160m over a
maximum of 14 years and we renewed our
education and children’s services contract
with walsall council which is now valued
at £345m over a longer term of 12 years
we were also awarded a facilities
management contract to manage 29 of
deloittes office facilities and buildings
valued at £50m over five years
in defence we continued to expand
our services to the military in the uk and
overseas in the uk we expanded our
contract valued at £76m over its maximum
tenyear term to provide the naval air
command with engineering and aircraft
support services at yeovilton and culdrose
air stations in australia serco sodexho
defence services a serco joint venture
renewed its contract to provide garrison
support services at six defence bases in
the northern territory and was awarded
a similar contract for the north queensland
region the total value of both contracts to
serco is aus362m in the us we won a
rebid to deliver aviation technical
maintenance and support services to the
us navy which has a total potential value
of us167m over five years and
significantly increases the support we
provide to the space and naval warfare
systems center atlantic
developing new markets
in 2008 we also invested in the
development of a number of new markets
in the local authority market we signed our
first local authority strategic partnership
valued at £265m over ten years with
glasgow city council we continue to
pursue similar opportunities with other local
authorities in april we signed our first light
rail contract in the middle east with an
agreement valued at £500m to operate
and maintain the dubai metro leveraging
the transport capabilities we have
developed in the uk and positioning us
well for further opportunities in the region
our implementation plan for the metro is
on schedule ahead of the start of the
service in september 2009
chief executive’s statement
in 2008 we delivered strong operational and financial
performance while continuing to increase our presence
in existing markets and enter new markets we were
successful in expanding the scope and scale of
existing contracts both on rebids and during the
contract term and won a number of significant
contracts in new markets with strong growth
opportunities
serco ar08ver7qxdserco ar08  design  21309  1030  page 12 13
investing to support our growth
during the year we continued to invest to
support our strong growth this means
ensuring that we have the best people
capabilities systems and business
structures to meet our customers’ needs
and pursue the highervalue opportunities
available to us for example during the
year we began the rollout of our business
academy providing our people with online
access to the latest tools thinking
approaches and techniques at the end of
july we reorganised the central it services
team within our technology business in
order to better align our capabilities with
developing market needs such as in
security and resilience and to improve
efficiency and simplify structures in the
future we will also leverage our new
capabilities in india to support these
and related areas we also completed the
rollout of our sap system in the uk and
the asia pacific business and are now
implementing it in the middle east and
anticipate starting this process in north
america later this year
a strong foundation for growth in the
us government services market
at the end of the year we completed our
acquisition of si international a provider of
information services technology and
network solutions to the us government
for us524m including assumption of
debt in 2008 si international had revenue
of us5755m and underlying adjusted
operating profit of us367m
si international creates a strong foundation
for growth and the delivery of higher value
services in the us government services
market by giving us scale and increased
resources to bid on larger us government
contracts broader customer relationships
access to higher growth areas and
increased capabilities since the year end
“we have a substantial
order book that gives us
high visibility on our
future revenues
together with increasing
growth prospects”
visiting the glasgow partnership team presenting the pulse awards
christopher hyman
chief executive
serco ar08ver7qxdserco ar08  design  20309  1909  page 13 14 serco group plc
chief executive’s statement
continued
we have made good progress in integrating
si international with our existing north
american business and there are early
positive signs that our integrated teams will
be able to apply our enhanced capabilities
across our enlarged customer base
we also entered the indian market through
the acquisition in december of a majority
shareholding in infovision a bpo business
serving the domestic indian market for
£148m and have invested in enhancing
our presence and launching the serco
brand in that market
in january 2009 we announced that we
had formed a partnership with the guy’s
and st thomas’ nhs foundation trust to
improve the trust’s pathology services and
target the pathology market in the uk and
overseas in the uk pathology is a
significant market valued at around £25bn
the 5050 joint venture – the first of its kind –
is branded as gsts pathology and will
operate and enhance the trust’s existing
pathology capabilities under a tenyear
contract valued at around £250m to serco
which started on 1 february 2009
in the nuclear market while we were
disappointed that our consortium did not
win the sellafield nuclear decommissioning
contract we have seen growth in our
nuclear assurance business which is
well placed to take advantage of
increasing nuclear opportunities
in the uk and overseas
a valuesled company
we continue to be focused on our values
our governing principles as we call them
to ensure that we operate in the best
interests of all our stakeholders in the short
medium and longterm by combining a
strong public service ethos with commercial
acumen we seek to create a working
environment that is attractive and rewarding
for employees and gives customers the
confidence they need to entrust their
requirement to deliver excellent service to
us that environment helps serco people all
around the world give their best whether
improving the education a child receives
helping pilots and commuters arrive safely
at their destinations supporting front line
military personnel or assisting businesses
in their plans to grow and prosper
the quality and dedication of our people is
reflected in the many awards we receive
around the world some examples in 2008
include the many employees who received
military service medals for their work in
operational theatres supporting the no 32
the royal squadron and the skynet 5
secure military satellite communications
systems both in iraq and afghanistan
at merseyrail and northern rail employees’
dedication to service has been recognised
at an industry level merseyrail has achieved
a high rating of 90 customer satisfaction
and northern rail was recognised as the
rail operator of the year having continued
to improve reliability and service quality
among many other awards we were
again recognised by our peers as the uk’s
most admired support services company
for the fifth year in a row
“during the year
we continued to
invest to support
our strong growth
this means ensuring
that we have the
best people
capabilities systems
and business
structures to meet
our customers’
needs”
serco ar08ver7qxdserco ar08  design  20309  1909  page 14 serco group plc 15
we were also delighted to celebrate the
achievement of those teams and individuals
nominated by their colleagues to receive
a ‘pulse’ award which is serco’s way of
recognising their efforts in ensuring that
we live our governing principles and
support those around us and in our
wider community our people’s strong
commitment which we find all over
serco is the real bedrock of our growth
as 2008 came to a close approximately
13000 people joined the serco family
through the acquisitions of si international
in the us and infovision in india we chose
these companies very carefully based on
the growing markets they operate in the
skills and capabilities they have and
critically the values that their people
demonstrate we are delighted to welcome
them to the group
outlook and guidance
while the global economic environment
seems likely to remain challenging we have
a substantial order book that gives us high
visibility on our future revenues together
with increasing growth prospects
our longterm contracts and substantial
order book continue to provide excellent
visibility over our revenues over 90 of
which come from government including
a £1bn benefit from si international we had
a substantial order book of £163bn as at
31 december 2008 and we had identified
90 of planned revenue for 2009 76
for 2010 and 65 for 2011
constrained government budgets
drive demand for efficiency and
costeffectiveness in the delivery of public
services especially as governments
balance their investment in providing
economic stimulus with the requirement
to control national debt our strong
capabilities mean that we are well
positioned to provide relevant support
in existing markets and to leverage our
expertise through exporting proven models
to new areas with growing markets and
capabilities our pipeline now stands
at a substantial £26bn including
si international’s pipeline of over £2bn
with our substantial order book excellent
revenue visibility and our ability to direct
our resources flexibly to pursue the best
opportunities we remain confident that our
business will continue to perform strongly
we expect increasing demand for our skills
to support robust revenue growth and see
good opportunities to improve our margins
through our focus on managing our
contract portfolio enhancing our efficiency
and bidding selectively for highervalue work
given the confidence this gives us over the
mediumterm we are guiding to revenue
and margin by the end of 2012 in future
reflecting the operational drivers of our
margin improvement and in line with market
practice we will give our margin guidance
at the operating profit margin level
accordingly and consistent with our
previous guidance our projections are that
our revenue will increase to approximately
£5bn and our adjusted operating profit
margin to approximately 63 by the end
of 2012 excluding material acquisitions
disposals and currency effects
in 2009 we expect to deliver doubledigit
revenue growth and a 30bps increase
in our adjusted pbt margin excluding
si international the addition of
si international is anticipated to increase
our 2009 revenue growth by approximately
10 including the benefit of si international
we expect our adjusted operating profit
margin of 53 in 2008 to increase by
approximately 40bps in 2009 this
2009 guidance excludes material
currency effects
2009
visibility of planned revenue
at 31 december 2008
2010
2011 15 1
12 1
13 1 90
76
65
order book extensions  rebids preferred bidder
76
63
49
76 13
63 12
49 15
“our projections are
that our revenue will
increase to
approximately
£5bn and our
adjusted operating
profit margin to
approximately 63
by the end of
2012”
serco ar08ver7qxdserco ar08  design  20309  1909  page 15 16 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1909  page 16 serco group plc 17
working alongside ceop
the child exploitation and online protection ceop centre is the uk police
agency dedicated to protecting children from sexual abuse
serco works in partnership with the ceop centre to support child protection in
the uk as part of its partnership serco funded the building of a state of the art
behavioural analysis unit bau within the ceop centre in london providing
expert project management support which enabled the bau to be built in just
six weeks
the bau focuses on understanding how offenders with a sexual interest in
children operate and think it is a resource to law enforcement nationally and
internationally who are investigating these types of crimes
the qualitative information the bau obtains is disseminated to law enforcement
via a comprehensive training programme that incorporates a unique national
qualification programme for child protection professionals working in this area
the results from the analysis undertaken directly influences ceop strategy and
operational policy and helps to inform the development of ceop’s thinkuknow
education programme which teaches parents and children about online safety
this programme has to date reached over 375 million children
serco ar08ver7qxdserco ar08  design  20309  1911  page 17 18 serco group plc
in the us the acquisition of
si international has added new
records management and it capabilities
which we provide to a number of civil
government agencies
civil government revenue grew by
184 to £1127m representing 36 of
group revenue 2007 34
home affairs
the uk government is responding
to increasing prisoner numbers with
investment in building new prison facilities
and increasing the capacity of existing
prisons serco is playing an important role
in maximising the impact of this investment
construction has begun on new
houseblock accommodation at hmp
dovegate and hmp lowdham grange
adding 260 new places to each prison and
increasing the combined operating income
of both contracts by over £100m over their
lives the pressures on the prison system
are also increasing demand for associated
services including growth in our court
escorting and electronic monitoring
services as authorities look to alternative
approaches to prison sentences for the
management of offenders
we received positive inspection reports
issued on yarl’s wood immigration removal
centre by hm chief inspector of prisons
and hassockfield secure training centre by
ofsted which commended our people on
the high quality of the care they provide and
further reinforced our reputation for the
provision of specialist care for children and
young people in secure accommodation
ict and bpo
the demand for innovative flexible
approaches to working and people
management combined with the
requirement to achieve value for money
and the requirement for local authorities to
achieve year on year efficiencies is leading
to new opportunities for our it and bpo
management services
in december we acquired a 60
shareholding in infovision the third largest
bpo company serving the indian domestic
market enabling further development of
infovisions bpo business and broadening
our existing customer offering we have
agreed to acquire the remaining 40 of
infovision in two tranches over the next
two years we see strong opportunities
for growth both in bpo and as a provider
of services to the public as the indian
market develops
in civil government our work encompasses sectors
including home affairs healthcare local government
education and children’s services and the corporate
sector providing a broad range of integrated facilities
management it and business process
outsourcing bpo support and consulting services
civil government
2008 revenue
£1127m
36 of group revenue
our work includes
• border protection
• prisons management
• it and itenabled services
• government web portal management
• education and children’s services
• environmental services
• health management and
hospital support
• management consultancy
above skills workshops at acacia
prison
serco ar08ver7qxdserco ar08  design  20309  1911  page 18 serco group plc 19
we have made a successful start to our
landmark £265m partnership with glasgow
city council to transform land property
and information and communications
technology ict services during the first
nine months of the contract we have
surveyed close to 500 properties opened
a new datacentre merged five service
desks into one and delivered some £9m of
transition projects to time cost and quality
the transfer of some 280 seconded staff
into the joint venture has taken place and
we have already reorganised the ict
function to improve service delivery
following our success in glasgow
we signed a new contract with derby city
council and derby homes to provide
it management and support the new
partnership is designed to support
innovative approaches to office and home
working alongside reducing the council’s
carbon footprint and securing cash
efficiencies for both derby city council
and derby homes the contract is
valued at £19m over seven years
our contract with the businesslinkgov
services supporting smes has been
extended to cover the development of
online business support this extra work
with an additional value of £14m per
annum follows positive reviews of our
performance on the contract by the
national audit office we have continued to
develop our business support work across
a number of the uk’s regions with a £2m
fouryear contract to support the south
east’s businesses through a customer
relationship management system additional
funding of £9m to support rural enterprise
in devon cornwall and somerset and
a contract for the london development
agency for its competefor procurement
portal to match buyers and potential
suppliers in the 2012 olympic games
supply chain which has recently secured
additional funding of £18m
in 2008 serco was selected by glasgow city council for a pioneering joint
venture known as access the joint venture provides high quality property
and ict services improving outcomes for glasgow’s citizens while saving the
council more than £70m over ten years
steven purcell leader  glasgow city council says
“ i am both impressed and delighted with what the access team has
achieved in such a short space of time having only signed the contract in
february going live in april was always going to be a difficult goal the
challenges of creating a new business unit and bringing together so rapidly
groups of people from different backgrounds were not insignificant however
the teamwork and sense of purpose exhibited by access working in real
partnership with the council ensured that not only was the april target met
initial service performance results have been excellent and access has
already gone on to become an established wellrespected and effective
member of the wider council team the energy and leadership evident in
access is already beginning to create a real momentum of change and
improvement across the council and i look forward to a successful and
valued partnership”
above access team members on a site visit to glasgow city council chambers
serco ar08ver7qxdserco ar08  design  20309  1911  page 19 20 serco group plc
civil government
continued
integrated services
we saw good growth in 2008 in our
integrated services business which provides
facilities management services to both
public and private sector customers and
environmental services for local authorities
all of whom are looking to reduce overall
expenditure and improve service levels we
were pleased that our work with the norfolk
and norwich health trust was commended
in the department of health’s ‘deep clean
to keep clean’ report which quotes serco
as an example of best practice in
collaborative working
our innovative approach to environmental
services includes introducing electric
vehicles and more efficient route planning
to reduce councils’ carbon footprints
synchronising street cleansing recycling
and refuse collections and actively
promoting recycling during the year
we won contracts with the london
borough of hammersmith  fulham
at a value of £140m over a maximum of
14 years and milton keynes council with
a value of £160m over the same term
we have also won a contract to maintain
parks and sports grounds for the london
borough of newham with a value of £30m
over ten years
we secured a new £50m fiveyear facilities
management contract with deloitte which
covers cleaning security maintenance
helpdesk facilities and the disposal of
confidential waste and won further
corporate facilities management contracts
for cocacola volkswagen and wyeth
medica with a combined value of around
£20m per annum
the signing of a £20m tenyear contract
covering fire and rescue services at cardiff
international airport further secures our
strong position in the uk’s airport facilities
management market adding to existing
contracts with birmingham and filton
airports the new contract covers primary
fire and rescue response adverse weather
response training and maintenance
education and children’s services
during the year we renewed and extended
our contract with walsall council to provide
education and children’s services the
award of the new contract which is valued
at around £345m is for a longer term of
12 years reflecting the success we had
achieved under the previous contract
under the new contract we are working
with the council to ensure that children and
young people achieve the best possible
educational outcomes and also to provide
support to the most vulnerable children
and their families
our contract to provide support for the
national rollout of children’s centres under
sure start’s together for children
programme has been extended following
strong performance under our innovative
‘field force’ model our approach delivered
the target of 2500 rolled out centres ahead
of schedule and we delivered a further
400 centres under the term of the initial
contract under the contract extension
worth £15m over two years the total
number of centres will be increased to
3500 by 2010
our success under together for children
contributed to us winning a separate new
contract under the aiming high for disabled
children programme known as together for
disabled children with a value of £55m
over two years in both these national
programmes we are proud to lead
contracts fully involving voluntary
sector organisations in delivery
above environmental services in
hammersmith and fulham
serco ar08ver7qxdserco ar08  design  20309  1911  page 20 serco group plc 21
this year has seen two major landmarks
in our success in education our primary
school results across walsall and bradford
were ranked the first and seventh
respectively most improved councils for
primary school achievement nationally
between 2001 and 2008 and our
transformation of children’s services at
stoke was recognised by ofsted in the
2008 annual performance assessment
referring to “significant and rapid progress
made” since our appointment
healthcare
excellent service delivery and an innovative
approach to improving performance are
the foundations of our growth across the
healthcare sector
serco occupational health has increased
our presence in this fastgrowing sector
and added new capabilities in managed
healthcare services the business has
won new contracts and extended current
business across both public and private
sector employers serco is now the third
largest provider of occupational health
in the uk
the extension for a further two years of our
outofhours doctors’ service contract for
cornwall and the isles of scilly follows
consistent outperformance of national
targets as recognised by the healthcare
commission and positive feedback from
users of the service the contract extension
is worth £145m
we have signed a new threeyear contract
with doncaster primary care trust to
provide nursing and related services to
hmp lindholme hmp moorlands and
lindholme immigration removal centre
with a value of £4m the contract brings
the number of prisons and immigration
centres to 16 for which we provide
health services
consulting
serco’s consulting business continued to
increase its scale and scope during the
year expanding its highvalue strategic and
advisory level work examples include nhs
connecting for health the rural payments
agency and our work for department for
environment food and rural affairs
defra animal health where we are
working on a major business reform
programme serco’s consultancy team
continues to perform strongly and our
presence on the programme has been
expanded to developing defra’s
capability and managing external
relationships with suppliers
home affairs continues to represent a
growing market with new wins including
the metropolitan police greater
manchester police and the home office
other strong markets for consulting include
the scottish government and education
as the uk government looks to find
efficiencies in the procurement of external
consultancy services our position as an
approved supplier on the office of
government commerce’s buyingsolutions
catalist framework is also leading to an
increased number of new project
opportunities
above measuring noise humidity pollution vibration
and other factors that may lead to ill health
above helping with the care of patients at norfolk and
norwich hospital
serco ar08ver7qxdserco ar08  design  20309  1911  page 21 22 serco group plc
helping to make western australia safer
in 2006 the government of western australia appointed serco to manage
the state’s only privately run prison eighteen months later acacia prison
was ranked by the state inspector as a high performing facility
among the prison’s strengths are its high standard of offender treatment
programmes resettlement services and the prison’s constructive and equitable
regime our staff remain committed to understanding the different cultural challenges
faced by indigenous australians who account for more than 30 of the prison
population the positive and responsive attitude of the serco team reflects the focus
on staff engagement and communication at the prison
rehabilitation and the reentry of prisoners into society is at the heart of what we do
at acacia giving prisoners the opportunity to address their offending behaviour and
develop their potential so they leave better able to find work and contribute
to the community
serco ar08ver7qxdserco ar08  design  20309  1911  page 22 serco group plc 23
serco ar08ver7qxdserco ar08  design  20309  1911  page 23 24 serco group plc
defence
we are well placed to help our customers
by improving efficiency and reducing
costs through providing advice and
consultancy to achieve greater
efficiencies while improving operational
availability and implementing the
delivery of services to improve
operational capability
defence revenue grew by 91 to
£786m representing 25 of group
revenue 2007 26
united kingdom
we are actively engaged with the ministry
of defence at the highest levels to help
them meet their operational challenges
with a focus on improving the availability of
people and equipment to the front line and
ensuring that military staff are able to focus
on core operational tasks
we provide training engineering and
operational support to the royal air force
and the aviation arms of the british army
and royal navy we also support the royal
navy’s three main uk bases operate and
maintain key strategic defence assets such
as secure satellite communications and
the uk’s defence academy and provide
systems engineering safety assurance
and risk management services
we continued to broaden our contribution
to improving the capability of the uk’s
military air operations in 2008 both
through engineering support in the uk and
deployed operations in theatres of conflict
during the year over 50 serco employees
supporting the no 32 the royal
squadron and the skynet 5 secure military
satellite systems were awarded military
service medals for their work in operational
theatres
the potential for growth stemming from
our successful track record in support to
operations is shown in a number of new air
support contracts won during 2008 these
include the tenyear £68m ‘surface finish’
contract covering 16 raf sites including
the falkland islands taking serco’s military
aviation support to over 16 different aircraft
types and a maintenance contract for the
raf glider fleet valued at £6m over a
maximum of seven years
following successful rebids we were also
awarded the £9m fiveyear contract to
provide air traffic control engineering and
flight planning at the british army air corps’
wattisham base and an £85m contract
with the us air force europe to provide
support services at three of its uk
operating bases
2008 revenue
£786m
25 of group revenue
our work includes
• commandcontrol systems
• defence establishments’ management
• economic cost analysis
• logistics consulting
• marine services
• port security
• risk and safety management
• secure it support
• throughlife capability management
• training and personnel services
top providing support services to the
uk mod at its base in gibraltar
above maintaining military aircraft and
helicopters at the royal navy air station
in yeovilton
we are a major provider of operational support
services to the armed forces of the uk the us
canada germany and australia we provide training
engineering and operational support maintain strategic
defence assets and deliver cost analysis human
resources systems engineering safety assurance
and risk management services
serco ar08ver7qxdserco ar08  design  21309  1030  page 24 serco group plc 25
in addition to contracts directly awarded by
the ministry of defence we are benefiting
from an increasing range of opportunities
with other private sector providers bae
systems appointed serco to the £8m
fiveyear maintenance and supply contract
for improving efficiency and aircraft
availability amongst the vc10 aircraft fleet
that bae systems operates at brize
norton we already support the raf tristar
fleet at the base
north america
we provide information services
technology and network solutions and
enterprise management engineering
logistics economic cost analysis and
human resources services to the us
military the acquisition of si international
at the end of the year has significantly
expanded our capabilities and broadened
our customer base we now serve all
branches of the us armed forces
increasing demand for highquality
personnel support services is reflected
in the award of a number of contracts
these included a contract to provide
psychological health services at five
us navy regional commands valued at
approximately us6m over two years
we also renewed our contract valued at
up to us32m over two years with the us
army career and alumni program to provide
career counselling and won a
new contract to support the provision of
advocacy services to soldiers and family
members who are victims of domestic
violence and sexual assault through
a oneyear us10m contract with a
secondyear option we will provide support
services for families of active army national
guard and reserve soldiers under a
us56m extension to our us army’s
integrated family support network contract
we were also awarded a contract worth
us11m annually over a base year
plus one option year to develop the
myarmylifetoo web portal which
provides timely and relevant information
to army families
we successfully rebid for the casualty
support services contract awarded by
the us army casualty and mortuary affairs
operations center which includes manning
the operations center for army casualty
support receiving casualty reports and
providing information and assistance to
nextofkin the initial value of the contract
is us9m for the first year with the
potential to increase to us445m
if all options are exercised
we also won with our partner summit
marketing a contract for the freedom
team salute recognition and commendation
program which has an estimated value of
us21m to serco over two years
the award of the aviation technical
maintenance and support services
contract by us navy spawar systems
center charleston with a potential value
of us167m over five years reaffirms our
track record in delivering high quality air
traffic control and integrated technical
and maintenance aviation services and
strengthens our 11year partnership
with spawar
with greater budget constraints and
increased demand for operational
resources being deployed in the field
emphasis is being placed on cost analysis
and procurement during the year we rebid
successfully for the price fighters cost
analysis contract supporting the us navy’s
weapons procurement program the
contract is valued at approximately
us41m for a base year plus four option
years we were also awarded
a oneyear us23m contract to provide
cost analysis support to the
multinational coalition forces in iraq
we were awarded a us185m contract by
the us space and naval warfare systems
command for the production and delivery
of navigation sensor system interface
navssi components and ongoing
production engineering support services
the navssi system collects and processes
data for weapons combat support and
other onboard information systems the
fiveyear contract combines purchases for
the us navy and the governments of
australia and spain we were also part of a
team awarded contracts under the project
management support services
programme with an overall value to serco
estimated at us25m over five years
middle east and asia pacific
in the middle east as previously reported
we were disappointed to be informed in
february 2008 that the oman ministry
of defence no longer wished to proceed
with its project to develop a military
training college
we provide training logistics and operational
support services to the australian
department of defence and we have
successfully built a presence on every
defence base in australia providing
a firm foundation for organic growth
our joint venture in australia serco sodexho
defence services was awarded the
integrated base services contract for the
north queensland region adding to its
earlier success in winning the base
services contract for the northern territory
the combined value of the two contracts
is aus362m over nine years
above providing engineering support to the apache
helicopters of 7 air assault battalion wattisham station
serco ar08ver7qxdserco ar08  design  20309  1911  page 25 supporting the us navy
serco’s price fighters contracts help the us navy maximise its buying power
under our initial contract which began in 1996 we assessed the fair price of
spare parts since then we have transformed our capabilities in response to the
navy’s evolving needs enabling us to perform increasingly complex analyses of
aircraft weapons and programs we also adapted our methodology to understand
the cost of services such as logistics
serco’s cost analysts engineers and technicians have years of manufacturing
experience and have helped the defense department save over us12bn our
expertise has been a key factor in winning other significant defence service
contracts with the us army
26 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1912  page 26 serco group plc 27
serco ar08ver7qxdserco ar08  design  20309  1912  page 27 28 serco group plc
transport
transport revenue grew by 24 to
£671m representing 22 of group
revenue 2007 23 excluding the
effect of the ending of our contracts to
operate the manchester metrolink and
copenhagen metro in 2007 revenue
growth was 8 reflecting strong
performance across this segment
during the last year our transport
operations continued to leverage skills
developed in the uk to win significant new
business in the middle east and further
develop our presence in us markets
heavy rail
northern rail and merseyrail serco’s two
joint ventures with nedrailways continued
to deliver good growth in 2008 supported
by innovation and excellent service delivery
and have made a good start to 2009
these joint ventures have revenue or profit
sharing agreements and stable subsidies
which account for over 60 of revenue
northern rail was named as ‘train operator
of the year’ and ‘rail business of the year’
at the hsbc rail business awards during
2008 the new hourly service northern rail
has introduced between leeds and
nottingham links these two important
centres directly for the first time in 25 years
and along with the expansion to a half
hourly service on its leedssheffield route
will further improve performance and
enhance the passenger experience
merseyrail has received the highest score
for passenger satisfaction in the latest
national passenger survey for any train
operating company outside london as well
as achieving the uk’s first fully secure rail
network by the department of transport
as all of its 66 stations have been awarded
secure station status serco docklands
was awarded secure station status for its
stations in 2007
our australian rail operation great
southern rail has made appropriate
adjustments to service schedules and
operations after a weaker tourist market
began to impact on passenger numbers
during the second half of the year sales
of the ghan service’s premium platinum
cabins launched in september have
performed well in august we learned
we had not been selected to run the
trains in melbourne australia
we continue to pursue opportunities for
monitoring and maintaining infrastructure
serco was awarded two contracts this year
one by network rail extending our existing
track monitoring and rail grinding contract
valued at £20m over one year with a
possible oneyear extension and one
by virgin trains to upgrade property and
stations on the west coast route valued
at £55m over a maximum fouryear term
our work includes
• air traffic services
• heavy rail operations and maintenance
• light rail operations and maintenance
• traffic control and transport systems
• transport consultancy
2008 revenue
£671m
22 of group revenue
top air traffic control in dubai
above assisting passengers on
merseyrail
we are a major provider of transport services to the uk
and markets in australia the middle east and the us
we operate heavy and light rail systems are a leader in
the development of integrated traffic management
systems and are one of the world’s largest private
sector suppliers of air traffic control services
serco ar08ver7qxdserco ar08  design  20309  1912  page 28 serco group plc 29
light rail
docklands light railway dlr continued to
perform strongly in 2008 the construction
work to extend the railway’s capacity from
twocarriage to threecarriage trains is
proceeding on schedule and the £180m
extension to the line serving woolwich
arsenal was opened in january 2009
our expertise in light rail systems puts us
in an excellent position to meet growing
demand for these services particularly
in the middle east
signed in april 2008 our contract with the
dubai government roads and transport
authority rta to operate and maintain
the first two lines of the new dubai metro
has a value of £500m over 12½ years
the launch of the driverless metro system is
creating considerable local interest and
is expected to lead to further opportunities
in the region through the extension of the
dubai metro network further transport
systems in dubai and the adoption of
similar rail systems in other emirates
our implementation plan which includes
the recruitment of over 3000 employees
is proceeding to schedule ahead of the
formal start of the operating contract in
september 2009
our broad transport capabilities meant that
we were also able to win further business
with the rta during the year these included
a £35m contract to implement ten key
projects under the bus master plan for
dubai and a £2m contract to deliver
a realtime journey planner system which
is accessible online over mobile phones
and through a customer service centre
traffic management
reducing congestion is a priority issue
in the uk with the highways agency
increasing its investment in the area and
emphasis growing on the skills required to
manage motorways and road infrastructure
effectively we are taking a leading role in
developing innovative solutions through
traffic management systems with several
new contract wins during 2008 we signed
a firstyear trial contract with the uk’s
department for transport to undertake a
feasibility and strategy study on time
distanceplace tdp road charging tdp
systems track vehicle movements and offer
road authorities the option of varying costs
to motorists depending on where and when
they use their vehicles we also won a
groundbreaking contract with baa to
maintain the traffic system at heathrow
airport which has the potential to be
replicated around the world
in the us serco secured a us23m
contract to install and manage a new smart
parking system for san francisco as well
as a separate us8m twoyear extension
to our parking meter counting and
collection contract
in hong kong we have renewed our
contracts to operate the aberdeen tunnel
and maintain the shenzhen road corridor
between hong kong and mainland china
under a further contract serco will supply
the latest technology in traffic light
enforcement to the hong kong transport
department in total these contracts are
valued at approximately £23m
civil marine
serco’s expertise in the provision of marine
services to the royal navy led to transport
for london awarding us a new £11m
18month contract to operate the
woolwich ferry opening up further
opportunities in the civil marine market
the free ferry service carries over a million
vehicles and two million passengers a year
and provides an important link to the dlr
air traffic control
in middle east air traffic control services
we rebid successfully on our contract to
provide air traffic control and electronic
engineering services for the united arab
emirates’ area control centre in
abu dhabi the contract with the
general civil aviation authority is worth
£28m over three years
left northern rail serco’s joint venture
with nedrailways was named as uk
train operator of the year in 2008
above operating the woolwich ferry in london
serco ar08ver7qxdserco ar08  design  20309  1912  page 29 30 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1912  page 30 serco group plc 31
servicing an infrastructure for the 21st century
developing longterm relationships with our customers by delivering
excellent service is at the heart of what we do we have supported dubai air
navigation services since 1967 alongside their staff we provide air traffic
control electronic engineering and meteorology services the primary
purpose of the contract is to provide dubai airports company with all the
specialist aviation services it needs to help maximise the capacity and
throughput of aircraft and passengers at dubai
our team has grown from 35 to 160 since the early 1990s we have improved
and expanded our service through innovation helping to enhance safety with an
aviation management system that serco developed and with our customer
introducing sophisticated air traffic control simulators to improve training a two
year project to maximise capacity of the twin parallel runways has resulted in an
increase of aircraft movement capacity of 30 and a decrease in departure
delays as a result of implemented improvements
in 2010 dubai will open the first stage of what is planned to be the largest airport
in the world serco air traffic services staff have been at the heart of the planning
process and been commended for being the most advanced in their preparations
for the opening
serco ar08ver7qxdserco ar08  design  20309  1912  page 31 32 serco group plc
science
science revenue grew by 117 to
£540m representing 17 of group
revenue 2007 17
we continued to see strong
performance from our joint venture to
manage and operate the uk’s atomic
weapons establishment awe the
construction phase of the new orion
building finished as scheduled in march
2008 with the project due for
completion in 2010 awe has also
commenced the planning phase for
project mensa the construction of a
replacement warhead assembly and
disassembly facility at the burghfield
site
in december 2008 bnfl sold its onethird
shareholding in awe management limited
aweml to the californiabased company
jacobs engineering we retain our onethird
stake in aweml in an equal partnership
alongside lockheed martin and jacobs
engineering
the annual rospa awards once again
recognised awe’s excellent health safety
and environmental performance with the
award of the astor trophy for excellence in
occupational health the international
dilmun environmental award and the
sectoral award for outstanding performance
in health and safety
we have been responsible for managing
the work of the national physical
laboratory npl since 1995 supporting its
mission to apply scientific knowledge for
economic and quality of life benefits npl
has won business in the environment
sector including air monitoring projects with
defra and in the security and defence
sector in addition the nobel peace prize
committee recognised the important work
of npl in supporting its peace prize
winners and our diversity and educational
outreach were rewarded with the ‘investor
in wise’ award from women into science
engineering and construction wise
our nuclear assurance business which is
focused on enhancing the performance of
nuclear reactors that generate electricity or
power nuclear submarines has continued
to perform well during the year
our work includes
• materials science
• measurement science
• nuclear assurance
• research establishments’ management
• technical training
2008 revenue
£540m
17 of group revenue
top the analytical science team at npl
is a multidisciplinary team focused on
government priority areas such as
environmental protection energy and
sustainability healthcare and
nanotechnologies
above npl is a recognised source of
expertise on the evaluation of biometrics
technologies
serco manages sciencebased organisations and
develops and applies scientific knowledge for wealth
creation technology innovation and people
management are at the heart of our offering in this
market
serco ar08ver7qxdserco ar08  design  20309  1912  page 32 serco group plc 33
we were appointed as one of a team of
partners to provide engineering and
technical support to british energy’s nuclear
power stations worth up to £30m to the
partners over the next five years and are
well placed to grow the business as nuclear
new build programmes get underway in the
uk and overseas
the business has also completed the main
stage of its extensive refurbishment of the
nuclear laboratory and support complex in
cheshire these facilities which include
nuclear corrosion and high temperature
laboratories strengthen serco’s world class
capabilities in nuclear safety assurance and
regulatory support
“the annual rospa
awards once again
recognised awe’s
excellent health
safety and
environmental
performance”
serco ar08ver7qxdserco ar08  design  20309  1914  page 33 suppliers
alongside the hundreds of services serco
manages through contracts on behalf of
customers the group also has its own
extensive supplier relationships
we take the same approach to suppliers as
we do to customers we look for longterm
relationships in which there is opportunity
for continuous improvement and value
creation based on innovation
in order to continually improve quality and
manage costs the group has standardised
the centralisation of buying goods and
services the number of preferred suppliers
for such goods and services ranging from
commodity computer peripherals to agency
employees has reduced and the
terms and conditions enhanced
procurement policies and processes
are clearly communicated internally and
facilitated through online purchasing systems
which reduce administration costs reduce
wastage improve cash flow and give
contract managers more time to focus
on client needs
joint ventures and strategic
partnerships
serco has a number of joint ventures and
strategic partnerships around the world that
manage service contracts particularly in the
transport defence and science sectors
strong relationships mutual trust and
respect and clarity of role are all essential
ingredients if a service is to be successfully
delivered through a joint venture
in transport for example our partnership
with nedrailways began work at merseyrail
in 2003 and northern rail in 2004
together we have become one of the
uk’s major train operating companies
our partnership at the atomic weapons
establishment has been highly successful
and together we have consistently
exceeded service targets
we continue to create new partnerships
and joint ventures which include innovative
new business models with customers
in 2008 we formed a strategic joint venture
with glasgow city council to improve
services for citizens through cohesive
efficient and higher quality property and
information and communications
technology services in 2009 we
announced that we had formed a
partnership with guys and st thomas
nhs foundation trust to improve the
trusts pathology services and target
the significant national and international
pathology market
relationships with joint venture partners are
the responsibility of the relevant divisional
management teams supported by
members of the group executive team and
board as appropriate regular strategy and
review meetings ensure the joint venture
partners remain firmly committed to working
together to deliver services to clients
our track record for successful partnerships
speaks volumes
34 serco group plc
business relationships
“our reputation for
delivering excellent
service and our
ability to build
longterm
relationships is
behind the
consistent success
serco has enjoyed
to date”
serco ar08ver7qxdserco ar08  design  20309  1914  page 34 serco group plc 35
our people
having skilled qualified engaged and
inspired employees who bring service to
life is essential to our continued success
that is why we are committed to
communicating with supporting and
developing our people we have a strong
culture based on our governing principles –
and we monitor how well we’re putting
them into practice
having great people is the single biggest
factor in the growth and success of our
business and in 2008 we have further
embedded our leadership development
strategy initially focused on our senior
leadership over the course of 2008 we
broadened the programme to develop the
right type and number of leaders across our
entire leadership population this strategy
enables effective performance management
and development plans that are tailored to
the needs of the individual
across the company we are committed to
investing in the professional and technical
skills our staff need to do their jobs we are
always looking to equip and encourage
staff to take on wider roles
to enable our leaders to manage their
people we have developed a
comprehensive suite of employment policies
which support our employees wherever
they are in the world the key employment
policies are made available through line
managers human resources teams and our
intranet they include policies covering
diversity and equality for employees having
children resolving issues health and safety
confidentiality security and ethics and
time off work
as an international company we
experience differing employment legislation
customs and practices in different parts of
the world our approach is always to
respect local differences but not to fall
short of minimum standards
our performance against our policies and
the implications of changing legislation and
best practice is monitored by our human
resources function where we need to
change an approach then appropriate
communications and training are
implemented
our skills for you programme was developed
in partnership with uk government
departments trade unions and training
providers it offers serco staff the chance
to improve their literacy numeracy and
language skills while continuing with their
workplace learning since its introduction
at serco 3221 of our people have been
assessed with 640 achieving a qualification
we know that having highly engaged
employees who live our governing
principles and bring service to life will lead
to even higher performing contracts that is
why we research how engaged our
employees are with serco to us this
research is more than a measurement tool
it is a continuous improvement process for
people issues and a key driver to improved
business performance throughout 2008
across every level of our business we
have put changes in place to improve
engagement and will be measuring the
impact in 2009
we’re passionate about communication
it is natural for us to share information and
bring people together across the world
we have set out how we want employees
across the business to connect to serco
this is delivered through a communications
network programme of channels and
campaigns
in 2008 we launched scoop a magazine
for all serco employees through this
publication we deliver consistent brand and
message and present a 360 degree view
of the serco family we also introduced a
new intranet channel for employees to
connect with their senior leadership
our pulse awards are designed to celebrate
the very best qualities and achievements of
serco people our customers and partners
the awards are closely linked to our
governing principles they recognise
people who excel at innovation inspire
through their leadership demonstrate
outstanding commitment and make an
exceptional impact on communities the
environment or issues such as safety and
ethics
in 2008 48 employees received an award
in the first global pulse awards
our reputation
our reputation for delivering excellent
service and our ability to build longterm
relationships is behind the consistent
success serco has enjoyed to date
customers and potential customers tell us
that corporate reputation is one of the key
criteria in the selection and retention of
private sector partners as a result we
are taking steps to measure customer
advocacy and corporate reputation
consistently on a groupwide basis
we continue to build our reputation
amongst business stakeholders through a
communication programme which includes
the publication of thoughtleading research
and attendance at seminars and conferences
however we recognise that delivering value
to customers and citizens by improving
services’ efficacy and efficiency is the most
significant shaper of our reputation
our people and reputation
above we are committed to investing in the
professional and technical skills our staff need to
do their jobs
serco ar08ver7qxdserco ar08  design  20309  1914  page 35 36 serco group plc
corporate responsibility
serco strives to operate in a way that
has a positive impact on society
our people embody the values that we
have worked so hard to embed throughout
the organisation these values are built on
our governing principles we foster an
entrepreneurial culture we enable our
people to excel we deliver our promises
and we build trust and respect these
values have supported us in becoming one
of the world’s leading service companies
we work in partnership with governments
and commercial organisations around the
world to improve services across many
areas of public life
beyond profits
while financial performance is important
the search for profit is not what defines us
we want not only to achieve the social
outcomes we are often contracted to
deliver but to do it in a way that has
a positive impact on society
setting a strategic framework
as an organisation we are never
complacent we work continually to
improve our systems and processes
like all responsible companies we are
striving to become more sustainable as a
result we have developed our corporate
responsibility framework which recognises
local cultures and conditions across our
diverse operations to put sustainable
development at the heart of our business
the framework consists of five key areas
• to make a positive difference to the
communities we serve
• to reduce our environmental impact
• to reduce our consumption and assure
our supply chain
• to increase our value to our customers
and shareholders
• to realise the potential of our people
key to this whole process is understanding
how we perform so that we can improve
the management decisions we make
we have a core set of performance
indicators that we use to assure ourselves
that we are performing responsibly details
of these are provided in our corporate
responsibility review and are available
on our website
reviewing corporate governance
we undertook a review of our management
system to ensure that our policy framework
is the right one for the size and scale of the
organisation we now are
as we continue to grow we have focused
on how to keep it as simple as possible
and make sure we are using language that
everybody can clearly understand
we need to ensure we have strong links
between our management system risk
management and our internal audit
process so that we have confidence in
both our governance structure and our
management of risk
it is important that our people have
clarity about their roles and accountability
empowering and enabling them to excel
even further leading to better value
all around
measuring performance
an overall assessment is provided by the
business in the community bitc corporate
responsibility index we achieved for the
second year running a gold overall rating
90 this year a new workplace index
was introduced under which we received
platinum banding with a score of 95
along with a community index in which we
achieved platinum status 96 serco’s
leisure business national physical
laboratory and our contract at airbus filton
were again recognised by the bitc awards
for excellence with each receiving a big
tick award for the second year in
succession
our bitc environmental index rating also
improved with a gold banding and overall
score of 89 this was an improvement on
the previous index where we scored 795
these are some of the highlights
taken from our 2008 corporate
responsibility review t o find out
more please visit wwwsercocom
serco ar08ver7qxdserco ar08  design  20309  1914  page 36 serco group plc 37
measuring our environmental performance
has been a particular area of attention
2008 saw a significant step forward with a
comprehensive review of the company’s
environmental performance indicators and
the capture of accurate environmental data
this has provided a baseline of company
performance that we will use to benchmark
future environmental performance against
we recognise we not only have a
responsibility to improve our performance
but also to influence thinking in 2008 serco
cosponsored with the new local
government network an independent local
government think tank a piece of research
looking at potential solutions to the pressing
and immediate challenges and issues
facing the uk waste industry
our lost time incident rate has continued
to improve although the proportion relating
to reportable threeday absence has
increased leading to a pilot to better
manage firstday absence management
by occupational health reflecting external
benchmarks mental and behavioural
diseases and musculoskeletal system
and connective tissue diseases remain the
main reason for referrals we have therefore
established a process to fast track these
referrals to specialists to reduce the time
in resolving them we are also looking at
ways of reducing the number of incidents
the pilot of the ‘backtrack’ system in
the uk has seen a significant reduction in
manual handling manoeuvres where it has
been trialled
in our rail operations both verbal and
physical assault rates have been below
target and reflect the success of a focused
campaign over the last few years
in 2007 we launched the pulse awards
aligned to our governing principles the
awards recognise examples of excellence
in business operations or improvement
environmental and safety initiatives and
leadership they also recognise our wider
responsibilities to society the environment
and the communities we serve this might
be through significant contributions made
to charitable or community organisations
in 2008 the first pulse awards were given
to 118 divisional award winners of which
48 received a global pulse award
embedding ethical guidelines
our company values and ethics are integral
to one another historically our value set
has been clear about where we draw the
lines however as we move into different
countries and cultures and as we diversify
our range of services we need to review
regularly the company’s position on these
that is why we have set up a formal ethics
committee made up of senior
management with very clear guidelines
about its remit it is there to determine the
‘big ticket’ items that define our position
beyond regulatory and statutory
requirements
doing business the right way demands
constant vigilance by its very nature it has
to be a journey without an ending thanks
to the people we employ we are making
real progress in reaching our ambitious
goals
“as an organisation
we are never
complacent we
work continually to
improve our
systems and
processes”
above teaming up with the scouts association to
sponsor their environment badge
above safety is a priority at dubai airport above education classes at kilmarnock prison
above corporate responsibility
review 2008
serco ar08ver7qxdserco ar08  design  20309  1914  page 37 38 serco group plc
39 finance review
44 principal risks and uncertainties
49 directors secretary and advisors
50 corporate governance report
58 directors report
60 directors profiles
62 directors responsibilities
63 remuneration report
79 independent auditors report
financial statements
81 consolidated income statement
81 consolidated statement of recognised income and expense
82 consolidated balance sheet
83 consolidated cash flow statement
84 notes to the consolidated financial statements
137 serco group plc company financial statements
143 shareholder information
ibc financial calendar
finance contents p38serco ar08  design  23032009  1327  page 38 serco group plc    39
finance review
1 financial performance
serco’s strong performance in 2008 is reflected in our financial results with doubledigit revenue growth and a further increase in margins
we generated good cash flow and have a strong funding position
serco’s income statement for the year is summarised in figure 1 below this includes the results of joint ventures which are proportionately
consolidated 
figure 1 income statement
year ended 31 december 2008 2007 increase
£m £m
revenue 31235 28107 111
gross profit 4568 4062 125
administrative expenses 2916 2642
adjusted operating profit 1652 1420 163
investment revenue and finance costs 199 188
adjusted profit before tax 1453 1232 179
amortisation of acquired intangibles 92 86
profit before tax 1361 1146 188
tax 365 322
profit for the year 996 824 209
effective tax rate 268 281
adjusted earnings per share 2220p 1857p 195
earnings per share 2049p 1698p 207
dividend per share 500p 425p 176
11 revenue
revenue grew by 111 to £31235m benefiting from the growth of existing contracts and the contribution of new wins underlying
revenue growth which excludes the effects of changes to currency exchange rates acquisitions disposals and significant contract
divestments was 103 
12 gross margin
gross margin – the average contract margin across our portfolio – was 146 a small increase of 01 on 2007
13 investment revenue and finance costs
investment revenue and finance costs totalled a net cost of £199m 2007 £188m a reduction in the group’s underlying borrowing
costs was offset by an increase in the net pension funding cost charged to the income statement
14 profit before tax
adjusted profit before tax was £1453m an increase of 179 this represented a margin of 47 up from 44 on 2007 profit before
tax increased by 188 to £1361m 
15 tax
the tax charge of £365m 2007 £322m represents an effective tax rate of 268 compared with 281 in 2007 the decrease in the
effective tax rate principally reflects the fall in the uk corporation tax rate from 30 to 28 in april 2008
16 earnings per share eps
adjusted eps rose by 195 to 2220p eps grew by 207 to 2049p 
eps and adjusted eps are calculated on an average number of shares in issue of 4857m during the year 2007 4824m the increase in
the average number of shares in issue resulted from the exercise of employees’ share options
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 39 2 dividend
serco’s policy is to increase the total dividend each year broadly in line with the increase in underlying earnings the board has proposed
a final dividend of 352p per share representing an increase on the 2007 final dividend of 166 and bringing the total dividend for the
year to 500p a growth of 176 the final dividend will be paid on 20 may 2009 to shareholders on the register on 6 march 2009
3 cash flow
the group generated a free cash inflow of £942m £34m lower than in 2007 the free cash flow in 2007 benefited from a low working
capital movement and a lower level of cash tax 
figure 2 analyses the cash flow as in previous years we have designed the analysis to show the actual cash performance of the group –
being the cash flows generated by subsidiaries plus the dividends received from joint ventures it therefore differs from the consolidated
cash flow on page 83 which proportionately consolidates the cash flows of joint ventures the adjustment line in figure 2 reconciles the
movement in group cash to the consolidated cash flow
figure 2 cash flow 
year ended 31 december 2008 2007
£m £m
operating profit excluding joint ventures 1078 922
non cash items 394 476
group ebitda 1472 1398
working capital movement 216 02
group operating cash flow 1256 1396
interest 250 256
tax 118 54
net expenditure on tangible and intangible assets 318 479
dividends from joint ventures 372 369
group free cash flow 942 976
disposal of business undertakings 19 33
acquisition of subsidiaries 3222 74
financing 2890 710
special pension contribution – 510
dividends paid 216 179
group net increasedecrease in cash and cash equivalents 413 464
adjustment to include joint venture cash impacts 28 67
net increasedecrease in cash and cash equivalents 441 397
note group ebitda is earnings from subsidiaries excluding joint ventures before interest tax depreciation intangible amortisation and other non cash items
31 group operating cash flow
group operating cash flow of £1256m 2007 £1396m represents a conversion of group ebitda into cash of 85 2007 100 the
strong levels of organic growth in the business require working capital investment and this is reflected in the 2008 movement of £216m 
32 interest
net interest paid was £250m compared to £256m in 2007
33 tax
tax paid was £118m 2007 £54m tax paid in 2007 and the first half of 2008 was lower than expected as a result of the tax relief on the
special pension contributions made in 2006 and 2007 the increase in 2008 reflected that there was no further tax relief available in the
second half of the year on these contributions
cash tax is below the equivalent charge in the income statement as a result of accelerated capital allowances and other timing differences 
40 serco group plc
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 40 serco group plc    41
34 net expenditure on tangible and intangible assets
net expenditure on tangible and intangible assets in the year was £318m 2007 £479m this comprised gross expenditure of £487m
representing 20 of revenue excluding joint ventures 2007 22 and disposals of £169m the principal component of disposals was
the sale and leaseback of a number of carriages on the great southern railway in australia this follows similar transactions in previous
years to realise a further part of the substantial investment we have made in acquiring and successfully growing the business since 1999 
35 dividends from joint ventures
dividends received from joint ventures totalled £372m 2007 £369m a conversion rate of 84 2007 100 of joint ventures’ profit
after tax and minority interest excluding costs allocated by group this is in line with our expectation of a conversion rate in the range 
of 8090 
36 disposal of business undertakings
on 23 june 2008 the group disposed of its equity stake in kilmarnock prison services limited in line with our strategy to realise cash
from our equity and subordinated debt in private finance initiatives pfi projects this disposal follows the sale of equity and subordinated
debt in six pfi projects in 2006  profit on disposal of the kilmarnock stake was £27m and the net cash inflow of £19m comprised gross
sale proceeds of £62m offset principally by cash held within the entity to cover future debt repayments of £30m we retain the operating
contract for kilmarnock prison
37 acquisition of subsidiaries 
acquisition of subsidiaries principally comprises the acquisition of si international inc on 29 december 2008 a provider of information
services technology and network solutions to the us government for £2898m the acquisition gave rise to goodwill of £3052m
intangible assets arising on the acquisition have been recognised at £518m and will be amortised on a straightline basis over their
expected lives given the proximity of the acquisition to the group’s year end si international inc made no contribution to the group’s
revenue profit and operating cash flow in 2008
other acquisitions were infovision an indian business process outsourcing company for which we paid £148m for an initial 60
shareholding in december 2008 and the grosvenor health group an occupational health service provider acquired for £190m in 
may 2008
fair values have been determined provisionally in respect of si international inc and infovision and may be subject to adjustment in 
the year
38 financing
the movement in financing resulted primarily from a drawdown on our committed facilities to finance acquisitions made during the year
4 net debt
figure 3 analyses serco’s net debt 
figure 3 net debt
at 31 december 2008 2007
£m £m
group  cash and cash equivalents 1998 1381
group  loans 7088 2633
group  obligations under finance leases 155 127
group recourse net debt 5245 1379
joint venture recourse net cash 445 349
total recourse net debt 4800 1030
group non recourse debt 341 593
total net debt 5141 1623
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 41 41 group recourse net debt
group recourse net debt increased by £3866m to £5245m the net impact of acquisitions in the year added £3222m to net debt
changes in currency exchange rates increased net debt by £323m group cash and cash equivalents rose to £1998m an increase of
£617m primarily reflecting periodic changes in working capital cash and cash equivalents includes encumbered cash of £104m 
31 december 2007 £119m which is cash securing credit obligations and customer advance payments 
42 group non recourse debt
the groups debt is non recourse if no group company other than the relevant borrower has an obligation to repay the debt under a
guarantee or other arrangement the debt is excluded from all of our credit agreements and other covenant calculations and therefore
has no impact on the group’s ability to borrow 
group non recourse debt reduced by £252m to £341m due to the disposal of our equity stake in kilmarnock prison services limited
the remaining non recourse debt relates to our driver examination services contract in canada
5 pensions
at 31 december 2008 the net liability included in the balance sheet arising from our defined benefit pension scheme obligations was
£205m 31 december 2007 £522m on an asset base of £12bn the net liability has fallen principally as a result of changes in the rpi
and discount rate assumptions used to value the schemes partially offset by lower than expected equity returns in the year figure 4
provides further analysis
figure 4 defined benefit pension schemes
at 31 december 2008 2007
£m £m
group schemes – non contract specific 07 679
contract specific schemes
– reimbursable 896 607
– not certain to be reimbursable 244 140
net retirement benefit liabilities 1147 1426
intangible assets arising from rights to operate franchises and contracts 144 174
reimbursable rights debtor 896 607
deferred tax liabilitiesassets 98 123
net balance sheet liabilities 205 522
serco has three main types of scheme which are accounted for as defined benefit pension schemes each type has its own accounting
treatment under international financial reporting standards these are
• non contract specific – schemes which do not relate to specific contracts or franchises for these schemes we charge the actuarial
gain or loss for the period to the consolidated statement of recognised income and expense sorie
• reimbursable – schemes where we have a right of full cost reimbursement and therefore include both the pension scheme deficit and
offsetting reimbursable rights debtor in the balance sheet and
• not certain to be reimbursable – schemes relating to specific contracts or franchises where the deficit will pass back to the customer or
on to the next contractor at the end of the contract for these schemes we charge the actuarial gain or loss on our share of the deficit
for the period to the sorie recognise a recoverable intangible asset on the balance sheet at the start of the contract or franchise and
amortise the intangible asset to the income statement over the contract or franchise life
serco has limited commercial risk in relation to the contract specific schemes due to either the right of cost reimbursement or because
the deficit will in general pass back to the customer or on to the next contractor at the end of the contract among our non contract
specific schemes the largest is the serco pension and life assurance scheme splas at 31 december 2008 splas had a surplus of
£624m 31 december 2007 a deficit of £287m this movement in the scheme position reflects the reduction in volatility afforded by the
liability driven investment ldi strategy introduced in 2007 and a change in inflation and discount rate assumptions 
figure 5 shows the sensitivity of the liabilities of our pension schemes to changes in discount rates and to adjustments in the principal
actuarial assumptions for the rate of inflation members’ salary increases and life expectancies
42 serco group plc
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 42 serco group plc    43
figure 5 pension assumptions and sensitivities 
assumption change in assumption change in liability
discount rate 60 05 9
05 10
price inflation 26 05 7
05 7
salary inflation 31 05 3
05 3
longevity 203 – 244 increase by one year 3
post retirement mortality range for male and female current and future pensioners
6 treasury 
in the year the group replaced its existing £400m bank credit facility with a new fiveyear £400m bank revolving credit facility which
matures in september 2013 the group also arranged a term loan and bilateral facility totalling us dollar 550m to fund the acquisition of
si international inc the term loan and bilateral facility are repayable between september 2010 and september 2013 the facilities which
are syndicated with a group of 13 banks are unsecured as at 31 december 2008 £560m had been drawn down on these facilities
serco has also issued us private placement loan notes totalling £117m which will be repaid evenly from 2011 to 2015
in total the group has £900m of committed debt facilities available giving significant headroom to fund working capital and other 
known requirements
7 going concern
the directors have acknowledged the guidance on going concern and financial reporting published by the financial reporting council in
november 2008 whilst the current economic environment is uncertain the broad base of our contract portfolio and with 90 of our
customers being government bodies the group is well placed to manage its business risks successfully including those risks arising from
the failure of customers to meet contractual obligations and has adequate resources to continue in operational existence for the
foreseeable future 
as disclosed in the business review of the annual review and accounts the group’s revenues are largely derived from longterm
contracts with governments which historically have been largely unaffected by changes in the general economy the contract portfolio is
spread across a number of markets sectors and geographies such that a downturn in any one segment is highly unlikely to affect the
group as a whole in addition with an order book of £163bn and high visibility of future revenue streams 90 in 2009 76 in 2010 and
65 in 2011 the group is well placed to manage its business risks despite the current uncertain economic climate
the group’s management of exposure to financial risk including liquidity foreign exchange credit interest rate and price risks is disclosed
in note 26 to the annual review and accounts
in september 2008 the group secured mediumterm financing by entering into a fiveyear revolving credit facility and bilateral facilities
eliminating the nearterm risk of refinancing the £400m bank facility maturing at the end of 2009 including the term loan and us private
placements the group has committed funding of approximately £900m as at 31 december 2008 the headroom on the facilities was in
excess of £300m the first repayment on these new facilities falls due in september 2010 for an amount of us dollar 92m the group
fully expects to meet this repayment through internally generated cash flows in addition we have diversified both the number and
geographical locations of the banks within the syndicate which has risen from nine to thirteen 
based on the information set out above the directors believe that it is appropriate to prepare the financial statements on a going 
concern basis
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 43 44 serco group plc
principal risks and uncertainties
the group has a wellestablished and
embedded system of internal control
including financial operational and
compliance controls and risk management
designed to safeguard shareholders’
investments and the group’s assets and
reputation whilst the board has overall
responsibility for the group’s system of
internal control and for reviewing its
effectiveness it is the role of 
management to implement the 
policies on risk and control
the group’s risk management process
identifies the key risks facing each
business and the group as a whole and
reports to the board on how those risks
are being managed these processes are
reviewed regularly by the board and
conform to the requirements of the
combined code such a system however
can only be designed to mitigate rather
than eliminate the risk of failure to achieve
business objectives and can only provide
reasonable and not absolute assurance
against misstatement or loss the board
confirms that this process has been in
place for the year under review and up to
the date of approval of the annual review
and accounts
the serco management system sms is
the framework within which business
divisions operating companies and
contracts implement processes and
procedures that are appropriate to the
business being undertaken divisional chief
executives and business unit managers
have the responsibility and authority to
implement and monitor the system within
their businesses the sms incorporates
the group’s vision and strategy the core
values and business principles that define
the corporate behaviour of the
organisation the operating structure and
roles and responsibilities of the principal
elements of the organisation and its 
core processes
policy statements and
standards
as part of the sms the board has
authorised a set of policy statements
which are supported by standards
guidance and training material an ethical
standard defines the following principles
that apply to all our business activities
• we will comply with the laws of the
country in which business is being
transacted
• we will respect the rights of the
individual
• we will respect the traditions and culture
of communities and protect the
environment within which we operate
• we will undertake our business activities
in accordance with the highest
standards of professionalism integrity
and honesty
these broad principles are further
interpreted in respect of individual and
corporate behaviours a separate
corporate responsibility standard defines
the corporate responsibility programme
that is implemented throughout the group
the group’s risk management standard
defines the processes required in the
organisation to manage and mitigate
threats to our business objectives
the risk management process is
described in a risk management manual
and a set of guidance notes covering
specific aspects appropriate to particular
business activities an internally developed
and supported risk database tool supports
the risk management process at all levels
of the business and is used to create the
risk opportunity assumption and issue
registers that support the decisionmaking
processes risk registers are maintained at
a contract business unit divisional and
group level and are reviewed at least
quarterly and more frequently as required  
during 2008 the risk management
process has been incorporated into an
overarching resilience management
framework that incorporates risk security
business continuity and crisis
management  the resilience management
framework is supported by a set of 
toplevel requirements more detailed
process descriptions and guidance and
tools to support the implementation of the
framework across the group
the risk registers identify the key risks the
probability of those risks occurring their
potential impact on the business and the
actions being taken to reduce and mitigate
the risks guidance on the risk appetite of
the group has been issued which defines
the appetitetolerance levels both for
individual risks and for projects or business
units where multiple risks are present
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 44 serco group plc    45
principal risks
the group risk register identifies the
principal risks facing the business
including those that are managed directly
at a group level the process specifically
identifies the business objectives and the
interests not only of shareholders but also
of other stakeholders that are likely directly
or indirectly to influence the performance
of the business and its value
these include but are not limited to
shareholders customers suppliers staff
trade unions government regulators
banks and insurers the interests of the
wider community in areas such as social
environmental and ethical impact are
recognised in the group’s corporate
responsibility programme
the group risk register is updated at least
quarterly reviewed sixmonthly by the risk
oversight group and discussed at
quarterly board meetings active risks are
ranked by importance and grouped under
the following six headings
• strategic – covering threats to the 
longterm deliverability of the group’s
strategy principal risks include loss of
competitive position and risks
associated with acquisitions
• financialcommercial – covering threats
to the short to mediumterm
performance principal risks include
financial market instability the loss of key
contracts failure to meet financial
business plans pension fund liabilities
and delays or cost overruns in major
transition programmes
• compliance – covering compliance with
all relevant legislation and regulations
principal risks include legal action
resulting from compliance failures loss
or compromise of personal data and
unethical behaviour by directors or
members of staff
• safety and security – covering threats to
the safety of staff subcontractors
members of the public and the
environment and the security of the
group’s assets and staff risks include
the responsibility for a major accident or
incident where public safety is
concerned environmental pollution
assaults on staff in the course of their
duties loss of sensitive information and
crime fraud and terrorism 
• operational – covering threats to the
continuity of business operations
principal risks include the failure of
information systems loss of key
infrastructure and the recruitment and
retention of key staff
• management – covering possible
internal failures of managers or
management systems principal risks
include failures of internal controls and
management systems
for the group the most significant risks
relate to the strategy and safety areas
social environmental and ethical issues
while recognised within a number of the
group’s risks do not represent significant
threats to the group’s strategy at present
reputational and emerging risks are kept
under active review and the board
informed of changes emerging risks cover
longerterm risks that could represent a
threat to the group’s activities but which
are not yet sufficiently defined to be
included as active risks examples of these
risks include influenza pandemic climate
change and changes in key markets
in quantifying and ranking risks serco
uses a risk scoring system based on
assessments of probability and impact
the guidance provided in internal
documents requires the assessment to
address the impact on business objectives
as well as wider stakeholder interests 
as serco operates in a number of
business sectors such as aviation rail and
nuclear where public safety is involved
societal concerns such as public safety
and environmental damage are specifically
identified in the assessment criteria the
criteria are generally subjective rather than
financially based since it is difficult to
quantify the financial impact of a major
incident involving loss of life
serco’s approach to the reporting of risks
that have social environmental or ethical
implications is summarised below it is
based on the assessment of three factors
• significance of the risk to the
achievement of serco’s business
objectives
• significance of the risk to wider society
• ability of serco to influence or control
the risk
risks that could have a significant impact
on serco’s business objectives are
strategically important and are reported
externally  where this impact is combined
with a high significance to society and
serco has a direct responsibility for the
management of the risk additional
performance indicators are also included in
external reporting examples of such risks
include public safety environmental
protection and data protection 
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 45 46 serco group plc
risk mitigation
each risk in the group register is assigned
an owner at board or senior management
level and specific risk reduction and risk
mitigation actions are identified
the board may ask for additional
information in respect of risk reduction or
mitigation actions or request that an audit
is undertaken to provide additional
assurance risk management techniques
used include appropriate systems staff
internal controls public and media
relations and business continuity planning
these techniques are designed with clarity
of accountability and responsibility and
with certain formal policies covering areas
such as compliance safety and
environmental protection
serco’s business units build and maintain
an understanding of their operational risk
profiles and are expected to fully
understand the likelihood and potential
impact of any operational incidents at the
same time making appropriate and
informed decisions that balance the risks
against the potential returns and
opportunities while operational risk can
never be eliminated the group
endeavours to minimise the impact by
ensuring that appropriate infrastructure
controls systems staff and processes are
in place
some of the key management and control
techniques are set out below
• the principles of clear delegation of
authority and segregation of duties are
fully reflected in the group’s operating
processes
• comprehensive business review
processes ensure that our services and
products meet customer expectations
performance criteria operational
effectiveness regulatory requirements
investment returns cash flow
requirements and profitability
• an investment committee meets on a
monthly basis to consider new or
developing projects against a defined
set of criteria
• there is a formal review and approval
process for all proposals and business
acquisitions including delegated
authority for signoff based on the
financial value and capital requirement of
the transaction and the assessed risk of
the project
• sound project management and change
implementation disciplines are applied to
all major development projects including
new contract transitions acquisitions
new technology applications change
programmes and other major initiatives
• the commitment and capability of staff
is critical for the effective management of
operational risk ongoing training and
career development constantly improves
the skills of our employees selective
recruitment succession planning and
other human resource policies and
practices are in place to ensure that staff
skills are aligned with the current and
future needs of the organisation
• safety management systems in the
group’s aviation rail defence nuclear
and marine businesses have been
addressed by the appointment of safety
specialists for each area who report
directly to the board and maintain and
further develop the very high standards
expected in these industries
• the group’s approach to health safety
and environmental protection is
described in the directors’ report
qualified and experienced staff in each
business unit provide advice and
support on health safety and
environmental issues and undertake
regular audits
• the chief information officer is
responsible for ensuring that systems
and processes are in place to ensure
the confidentiality integrity and
availability of sensitive information and
the associated information systems that
support the group’s business activities 
• an ethics committee comprising the
executive team has been established
with responsibility for the review of
ethical issues that may arise from the
group’s current and possible future
activities
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 46 serco group plc    47
• the company secretary manages the
confidential reporting service to which
staff can report illegal dangerous
dishonest or unethical activities
• a programme of internal audits confirms
the extent to which key controls are
applied across the group audit priorities
are established on the basis of risk
assessments regulatory requirements
and business imperatives
• the operational risk framework tracks
key indicators these include analysis of
business performance and variances
from plan customer satisfaction and
retention data staff turnover and
satisfaction levels occupational health
and safety incidents and error and
exception reporting
the group maintains insurance policies to
provide for losses arising from
circumstances such as damage or
destruction of physical assets theft legal
liability for third party loss and professional
advice the adequacy of the insurance
cover is reviewed at regular intervals
corporate assurance group
the corporate assurance group cag
oversees and reviews internal controls and
risk policies procedures and management
frameworks and develops guidance
training material and management training
to ensure the business needs are met 
the board recognises its responsibilities 
to shareholders and the wider community
where social environmental and ethical
issues are very important cag is
responsible for developing and overseeing
the corporate responsibility activities within
the group
every quarter cag reports formally to the
board providing analyses of the health
safety and environmental performance of
the group against targets and advises the
board on policy and future activities to
enhance best practice a separate
resilience report covering risk security
business continuity and crisis management
is also submitted to the board on a
quarterly basis cag works closely with
the internal audit function to provide an
appropriate level of business assurance to
the board
cag sponsors five specialist groups
• a health safety and environment
oversight group chaired by the
director health safety and
environment and comprising senior
assurance representatives from across
the group  during the year this group
met four times to review health safety
and environmental policy and
procedures and to review the
performance of the operating divisions
against safety and environmental targets
• a risk oversight group chaired by the
risk director comprising operational
and assurance representatives from
across the group which met twice
during the year to review the group risk
register and key risk controls this group
provides additional assurance in relation
to the system of internal control and risk
management and enhances the board’s
ability to discharge its responsibilities in
relation to internal control
• an aviation safety oversight group
chaired by an independent aviation
safety professional and comprising the
aviation safety representatives from
across the group which met once
during the year this group has been
responsible for the implementation of the
aviation safety management system
across the group and for transferring
best practice between serco’s aviation
operating companies
• a transportation safety oversight
group chaired by the integrated
transport nonexecutive director with
special interest in safety and comprising
the rail and road safety representatives
from across the group oversees the
safety management systems within
serco’s rail and road businesses in the
united kingdom middle east and
australia
• a corporate responsibility steering
group chaired by the assurance
director provides direction on projects
that address the social and
environmental issues affecting our staff
and the communities within which we
work
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 47 48 serco group plc
internal audit
during the first half of 2008 grant
thornton continued to provide an
outsourced internal audit function within
the group in addition to that provided by
internal peer review and cag on 1 july
2008 kpmg llp took over responsibility
for the outsourced internal audit
programme with a revised scope of work
at the same time a head of internal audit
was appointed with responsibility for
coordinating the work carried out by
kpmg and the audit programme carried
out within the operating divisions the 
riskbased audit programme has been
designed to address the internal control
and risk management processes and the
recommendations of the combined code
the outsourced internal auditors reported
to the audit committee twice during the
year there were no material weaknesses
identified as a result of the audits
undertaken and corrective action has been
taken where deficiencies were found as a
result of recommendations made by
kpmg the internal audit processes and
reporting activities have been strengthened
and more closely integrated with the risk
management process
joint ventures
in addition to contracts held in serco’s
name the group has material investments
in a number of joint ventures where
investments are not wholly owned by
serco the group can influence but not
control management practices serco
representatives within these companies
ensure that the processes and procedures
for identifying and managing risk are
appropriate for the business and that
internal controls exist and are regularly
monitored employees from the group’s
joint ventures participate in the health
safety and environment oversight group
the risk oversight group and the
transportation safety oversight group
review of internal controls
the board confirms that the actions it
considers necessary have been taken to
remedy such failings and weaknesses
which it has determined to be significant
from its review of the internal controls the
board also confirms that it has not been
advised of material weaknesses in that
part of the internal control system that
relates to financial reporting
corporate responsibility
corporate responsibility is about living the
values and principles that govern the way
we operate and behave our approach
reflects the importance corporate
responsibility has to those with whom we
come into contact it is also good business
practice which we believe will ultimately
help us deliver better returns to
shareholders
the responsibilities of cag which reports
directly to the board include developing
and overseeing our corporate responsibility
activities our corporate responsibility
model encompasses four elements
• safety – recognising our legal
responsibility for the safety of our staff
subcontractors and the general public
for whom we have a duty of care
• people – addressing our legal and moral
responsibility for our employees
• community – addressing our social
responsibility for the communities within
which we operate
• environment – recognising our legal and
moral responsibility to protect the
environment from damage as a direct
result of our operations and to promote
activities to protect and sustain the
wider environment
a summary of our performance in 2008
and targets and objectives for 2009 can
be found in the 2008 corporate
responsibility review and at
wwwsercocom
serco ar2008 p39 qxdserco ar08  design  20032009  1732  page 48 serco group plc    49
directors secretary and advisors
chairman
kevin beeston
directors
leonard v  broese van groenou
tom corcoran
baroness ford of cunninghame
christopher hyman
andrew jenner
david richardson
secretary
joanne roberts
registered office
serco house
16 bartley wood business park
bartley way
hook
hampshire
rg27 9uy
auditors
deloitte llp
2 new street square
london 
ec4a 3bz
investment bankers
ubs limited
1 finsbury avenue
london 
ec2m 2pp
stockbrokers
jpmorgan cazenove limited
20 moorgate
london
ec2r 6da
merrill lynch international
merrill lynch financial centre
2 king edward street
london
ec1a 1hq
principal bankers
hsbc bank plc
8 canada square
london
e14 5hq
solicitors
linklaters llp
one silk street
london
ec2y 8hq
registrars
up to 20 march 2009
computershare investor services plc
the pavilions
po box 82
bridgwater road
bristol
bs99 7nh
after 20 march 2009
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
nonexecutive director
senior independent director
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 49 50 serco group plc
corporate governance report
introduction
in managing the affairs of the group the
board of serco group plc is committed to
achieving high standards of corporate
governance integrity and business ethics
for all its activities around the world a
fundamental part of the group’s corporate
governance processes is the ethics and
business conduct policy standard that the
company and group have adopted to
support the highest standards of corporate
governance 
throughout 2008 serco group plc
complied fully with the provisions of
section 1 of the 2006 combined code on
corporate governance issued by the
financial reporting council the code 
the paragraphs below together with the
business review on pages 12 to 48 and
the remuneration report on pages 63 to
78 provide details of how the company
has applied the principles and complies
with the provisions of the code
the board of directors
board composition
currently the board has seven members
the chairman two executive directors and
four nonexecutive directors no individual
or group of individuals dominates the
board’s decisionmaking with the
exception of the chairman who is
presumed under the code not to be
independent the board considers all of
the nonexecutive directors to be
independent in coming to this conclusion
the board has determined that each
director is independent in character and
judgement and there are no relationships
or circumstances which are likely to affect
or could appear to affect the directors’
judgements 
each director brings a valuable range of
experience and expertise to the board
the profiles of all directors can be found
on pages 60 and 61
the role of the board
the board has responsibility for the overall
management and performance of the
group the approval of its longterm
objectives and commercial strategy and for
ensuring that any necessary corrective
action is taken promptly 
reporting to the board the corporate
assurance group cag is tasked by the
group to develop and oversee corporate
processes for the identification and
management of business risks and the
appropriate application of the serco
management system sms and corporate
responsibility activities throughout the
group the business review on pages 12
to 48 details the internal control and risk
policies procedures and management
framework adopted by the group
the corporate responsibility review
which covers the whole spectrum of
corporate assurance processes and
outcomes for 2008 is available online at
wwwsercocom and illustrates how
serco’s approach to corporate assurance
and responsibility translates from the
board into everyday working practices
conflicts of interest
at the company’s last annual general
meeting shareholders approved
amendments to the articles of association
which in accordance with the companies
act 2006 included provisions concerning
conflicts of interest in deciding whether to
authorise a conflict or potential conflict of
interest only noninterested directors ie
those that have no interest in the matter
under consideration will be able to take
the relevant decision in taking the decision
the directors must act in a way they
consider in good faith will be most likely
to promote the company’s success in
addition the directors may impose
conditions or limitations when giving
authorisation if they think this is
appropriate
reserved and delegated authorities
there is a formal schedule of matters
reserved to the board this schedule
which is reviewed annually includes
approval of
• group strategy
• annual financial and operating plans
• major capital expenditure acquisitions or
divestments
• annual and interim financial results
• satisfying itself as to the integrity of
financial information
• dividend policy
• ensuring adequate succession planning
for the board and senior management
and appointing and removing directors
the company secretary and committee
members
• treasury policy
• review of the effectiveness of the
group’s system of internal control and
risk management process
• training and development of the board
and the company secretary
other specific responsibilities are
delegated to board committees which
operate within clearly defined terms of
reference details of the responsibilities
delegated to the committees are given on
pages 54 and 55
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 50 serco group plc    51
information flow
senior executives below board level attend
certain board meetings at which they
make presentations on the results and
strategies of their divisional units and
functional areas of the group board
members are given appropriate
documents in advance of each board
meeting and each committee meeting 
as appropriate
board meetings are routinely held four
times a year over two days at a time and
are structured to allow open discussion of
the strategy trading and financial
performance and risk management of the
group
board and committee meetings are held
at varying locations and the opportunity is
used to combine the formal business of
the board with site visits and divisional
presentations and discussions additional
board meetings are scheduled if required
usually to discuss major transactions if
any
the attendance of individual directors at
board meetings held during the year which
they were eligible to attend is shown in the
table on page 52
company secretary and independent
advice
the company secretary is responsible for
advising the board on all corporate
governance matters ensuring that all
board procedures are followed ensuring
good information flow and facilitating
induction programmes for directors
all directors have access to the advice
and services of the company secretary
the board has approved a procedure for
directors to take independent professional
advice if necessary at the company’s
expense
chairman and chief executive
as chairman kevin beeston is 
responsible for
• ensuring the effective running of the
board its agenda and processes
• promoting the highest standards of
corporate governance and ensuring
appropriate communication with
shareholders on these standards and
the group’s overall performance
• ensuring appropriate director
development and succession planning
for the board
the chief executive christopher hyman
is responsible for
• the formation and implementation of the
group’s global strategy
• delivery of the group’s business plan
• providing motivation and leadership to
the operating divisions chairing the
global management board and setting
its style and tone
• setting the overall policy and direction of
serco’s business operations
investments and other activities within a
framework of prudent and effective risk
management and ensuring that divisions
and functions control those risks
satisfactorily
• providing leadership and representation
of the group with major customers and
industry organisations
senior independent director
margaret ford was appointed senior
independent director in october 2007 as
part of her role margaret is available to
shareholders if they have any issues or
wish to discuss any aspects of the
company’s business without the executive
directors or chairman present 
external directorships for executive
directors
the board considers that executive
directors can gain valuable experience and
knowledge through appropriate and limited
nonexecutive appointments in other listed
companies or independent sector
organisations the board is careful to
ensure that any such appointments do not
compromise the effective management of
the group and that these are approved in
advance of any appointments being taken
up details of the fees received by
executive directors for external
appointments can be found in the
remuneration report on page 69
significant other commitments of the
chairman
kevin beeston is nonexecutive chairman
of partnerships in care infinitas learning
bv and domestic and general ltd and is
a nonexecutive director of imi plc kevin is
also a member of the cbi president’s
committee and chairman of the cbi’s
public services strategy board the board
continues to believe that kevin holds a
wellbalanced portfolio of positions which
allow him to appropriately perform his
duties as chairman
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 51 reelection of directors
in accordance with the company’s articles of association a director must retire at the
annual general meeting but is eligible for reappointment if he or she has held office for
more than 30 months as at the date of the notice convening the annual general meeting
since he or she was appointed or last reappointed any directors appointed by the board
since the last annual general meeting must stand for reelection at the next annual general
meeting any nonexecutive directors who have served for more than nine years will be
subject to annual reelection 
the names of the directors retiring and standing for reelection at the 2009 annual
general meeting are set out in the notice of annual general meeting
the nonexecutive directors
independence
all the nonexecutive directors are independent of management and have no cross
directorships or significant links which could materially interfere with the exercise of
independent judgement
term of appointment
all nonexecutive directors are appointed for an initial term of three years thereafter
subject to satisfactory performance they may serve one or two additional threeyear
terms with a thorough review of their continued independence and suitability to continue
as nonexecutive directors being undertaken if they are to remain on the board for more
than nine years the terms and conditions of the appointment of the directors are
summarised in the remuneration report on pages 69 and 70 and are available on request
from the company secretary
meetings of nonexecutive directors
nonexecutive directors meet separately without the chairman or executive directors
being present at least once a year principally to appraise the chairman’s performance
this meeting is chaired by the senior independent director 
board meetings and attendance
the board holds its meetings on a quarterly basis with ad hoc meetings in between if
required board meetings are scheduled over two days and are held at varying group
operating locations usually including one overseas meeting per annum this allows a
thorough exposure to the group’s activities customers and management the frequency
and content of board meetings are reviewed by the board annually
the attendance of the individual directors at board and committee meetings during 2008
was as follows
board audit remuneration nomination
6 meetings
2
3 meetings 7 meetings 2 meetings
kevin beeston 6 na na 2
leonard v  broese van groenou 53 72
tom corcoran 63 72
margaret ford 53 72
christopher hyman 6 na na na
andrew jenner 6 na na na
david richardson 63 72
grant rumbles
3
1 na na na
notes
1 na means that the specified director is not a member of that committee although he or she may attend
meetings at the invitation of the chairman of the committee
2 in addition to the six full board meetings there was one board meeting attended by the executive directors only
for the approval of the yearend results which had been considered previously by the full board 
3 grant rumbles ceased being a director with effect from 25 march 2008
52 serco group plc
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 52 serco group plc    53
board effectiveness 
induction
on joining the board directors are given
background information describing the
company and its activities they receive
an induction pack which includes
information on all the governance
processes of the group the roles and
responsibilities of the board committees
and other management teams and a
range of other appropriate information
about the group its activities and its
advisors meetings are also arranged with
a range of key people from across the
group on a structured basis to assist with
a director’s induction visits are also
arranged where possible to a number of
contracts around the country 
continued professional development
during 2008 the board members were all
engaged in a range of training and
professional development activities these
activities are considered by the board
which also considers the training needs of
the company secretary all board
members are encouraged to attend
relevant training courses at the company’s
expense the training and development
needs of the directors and the company
secretary have previously been the remit of
a separate committee of the board
however the board considers itself to be
best placed to most effectively perform this
role without the need for a separate 
subcommittee and the use of the latter
has therefore been discontinued 
performance evaluation
the group recognises the importance of a
comprehensive evaluation process for the
board and ensures that comments and
recommendations are considered carefully
and implemented where appropriate to
ensure its continued development a
rigorous evaluation of the board and its
committees was undertaken in november
2008 this included the completion of an
evaluation questionnaire onetoone
meetings for all directors held with the
chairman plus an evaluation of the
chairman’s performance led by the senior
independent director taking into account
the views of both the nonexecutive and
executive directors the outcomes from
the board’s appraisal were discussed fully
at the following board meeting and
recommendations from the evaluation will
be implemented as soon as reasonably
practicable 
all directors feel that the board and
company are open professional and
enjoyable to be a part of and that
appropriate information is provided to the
board in the furtherance of its
responsibilities its diversity strong sense
of value and good governance are also
considered to be key strengths while the
areas for further development were few it
was noted that the balance and structure
of the board should be kept under review
particularly in light of the growing
geographic and technical diversity of the
group  
in carrying out the performance evaluation
process the use of an independent
evaluator was considered but the board
once again concluded that its own
process was sufficiently rigorous
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 53 54 serco group plc
board committees 
the board has delegated authority to a
number of permanent committees to deal
with matters in accordance with written
terms of reference the terms of reference
for all committees are reviewed on a
regular basis by the board to ensure they
are still appropriate and reflect any changes
in good practice and governance these
are available online at wwwsercocom
committees are authorised to obtain
outside legal or other independent
professional advice if they consider it
necessary
the audit committee and audit
committee report
membership the audit committee
consists solely of independent non
executive directors it is chaired by david
richardson and comprises margaret ford
leonard v  broese van groenou and tom
corcoran
the chairman of the committee has recent
and relevant experience for this role the
audit committee met three times during
the year 
at the invitation of the committee the
finance director the head of internal audit
kpmg llp the group’s internal audit
providers since july 2008 and deloitte
llp the external auditors attend
meetings the committee meets with each
of the internal auditors external auditors
and the head of internal audit separately at
least once a year all directors have access
to the minutes of the audit committee
meetings 
responsibilities the main responsibilities
of the audit committee are
• to monitor the integrity of the financial
statements of the company including
interim management statements and
any formal announcements relating to
the company’s financial performance
reviewing significant financial reporting
judgements contained in them
• to review the internal audit programme
and ensure that the internal audit
function is adequately resourced and has
appropriate standing with the company
• to review management’s and the internal
auditors’ reports on the effectiveness of
systems for internal financial control
financial reporting and risk management
• to consider the appointment 
reappointment and removal of 
the external auditors and assess
independence of the external auditors
ensuring that key partners are rotated at
appropriate intervals
• to recommend the audit fee to the
board and preapprove any fees in
respect of nonaudit services provided
by the external auditors and to ensure
that the provision of nonaudit services
does not impair the external auditors’
independence or objectivity
• to discuss with the external auditors
before the audit commences the nature
and scope of the audit and to review the
auditors’ quality control procedures and
steps taken by the auditors to respond
to changes in regulatory and other
requirements
• to oversee the process for selecting the
external auditors and make appropriate
recommendations through the board to
the shareholders to consider at the
annual general meeting
additionally in accordance with the
combined code the committee is
responsible for a formal whistleblowing
policy and procedure which applies
throughout the group responsibility for
the operation of this policy has been
delegated to the company secretary
members of the audit committee have
received updates on accounting standards
and generally accepted accounting
practice on a quarterly basis as part of the
finance director’s report to the board and
also on a halfyearly basis from the external
auditors
during 2008 the audit committee
discharged fully its responsibilities listed
above and in doing so considered the
following
• corporate governance report and
statement of directors’ responsibilities
for inclusion in the 2007 annual review
and accounts
• 2008 interim statement and auditors’
report thereon
• 2008 external audit fees
• review of the whistleblowing policy
• assessment of the audit committee and
the external and internal auditors
• 2008 internal audit programme and the
proposed 2009 programme
• the continuing independence of the
external auditors 
as part of a review of the company’s
internal audit function and a move to a 
riskbased approach in may 2008 the
company appointed a head of internal
audit and with effect from july 2008
appointed a new external provider of
internal audit services kpmg 
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 54 serco group plc    55
nonaudit services the committee has
reconfirmed its policy on the provision of
audit and nonaudit services by deloitte 
it determined three categories of services
approved eg audit and related assurance
services permitted eg tax compliance
and due diligence and not permitted eg
it services and quasi management
services the committee the company
and deloitte all monitor compliance with
the policy and review at each meeting the
fees earned and the estimates for the year
the group has complied with the policy
throughout the year  where appropriate
nonaudit services have been provided by
companies other than deloitte llp to
safeguard auditor objectivity and
independence
auditors’ independence the
independence objectivity and effectiveness
of the external auditors have been
examined by the committee and
discussions were held regarding their terms
of engagement remuneration and proposal
for partner rotation the committee
considered specifically the contract to
provide office services to deloitte llp and
was satisfied that no conflict existed
the committee recommended to the
board that deloitte llp be proposed for
reappointment at the forthcoming 2009
annual general meeting this
recommendation has been accepted and
will be proposed to shareholders
the nomination committee
membership the nomination committee
is chaired by kevin beeston and comprises
margaret ford david richardson leonard
v  broese van groenou and tom corcoran
the committee met twice during 2008
responsibilities matters considered
during the year included succession and
contingency planning board structure and
composition and the departure of grant
rumbles
no appointments were made to the board
during the year the committee has
responsibility for the identification and
nomination for the approval of the board
of candidates to fill board vacancies as and
when they arise engaging external search
consultants as and when necessary 
the remuneration committee
details of the remuneration committee
and its policies together with the directors’
remuneration emoluments and interests in
the company’s share capital are set out in
the remuneration report on pages 63 to
78
executive committees
the board has delegated responsibility for
the daytoday management of the
business to the global management board
gmb
the gmb is chaired by the chief executive
christopher hyman and its membership
currently comprises 17 senior managers
representing each of the group’s operating
divisions and a number of functional heads
and includes both executive directors the
gmb meets formally four times a year over
two days at a time to review the group’s
activities and discuss management and
operational issues 
representatives from across the serco
business are invited to the meetings to
discuss aspects of their business or give
presentations on specific topics the gmb
is able to take a broad view of the business
due to its membership from across the
group 
a senior group of the gmb the executive
team which is chaired by the chief
executive and comprises four members
including the executive directors is
responsible for the oversight of all aspects
of the daytoday operations and trading of
the group the executive team met 12
times during the year 
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 55 56 serco group plc
relationship with
shareholders
the company’s relationship with
shareholders is given a high priority the
annual review and accounts is available to
all shareholders and a shorter annual
review and summary financial statement
is also available currently by election or on
request 
regular trading updates are published
ahead of closed periods and before the
annual general meeting by press release
in addition press releases and stock
exchange announcements are made
regarding significant contracts or
transactions all trading announcements
are also posted on the group’s website
wwwsercocom
the company is currently reviewing its
shareholder communications including a
greater use of electronic means in
accordance with the amendment to the
articles of association approved by
shareholders at the annual general meeting
in 2007 any proposed changes will be
communicated fully prior to
implementation 
annual general meeting
individual shareholders have the
opportunity at the annual general meeting
to question the chairman and through him
the chairs of the various board committees
and other directors 
details of the meeting are set out in the
notice of annual general meeting which is
sent to shareholders and which contains
the text of the resolutions to be proposed
and explanatory notes 
shareholders attending will be advised of
the number of proxy votes lodged for each
resolution in the categories “for” and
“against” together with the number of
“votes withheld” this information is also
posted on the group’s website
wwwsercocom
institutional investors
the chief executive and finance director
have regular dialogue with institutional
investors the chairman also meets with
institutional investors from time to time and
as required the company’s investor
relations programme and daytoday
activities are managed by the head of
investor relations as part of the role of
senior independent director margaret
ford is also available to meet shareholders
should it be required
in addition during 2008 the chairman of
the remuneration committee contacted
the company’s largest shareholders and
representative bodies in connection with
the company’s triennial review of executive
remuneration further details can be found
in the remuneration report
the board receives an investor relations
report on a quarterly basis this reviews
share price movements and valuation
changes in the share register the
company’s recent and planned investor
relations activities communication with
shareholders analyst recommendations
and significant news from the market and
support services sector the report ensures
that the board has a clear understanding of
the company’s investor relations
performance
group website
the group website wwwsercocom is a
primary source of information on the
group the site includes an area tailored
for investors including information such as
an archive of all reports announcements
presentations and webcasts share price
tools the terms of reference for all board
committees and information on voting at
the 2009 annual general meeting it also
has a link directly to the company’s
registrars allowing shareholders to view
their shareholding online and to vote on the
resolutions set out in the notice of annual
general meeting
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 56 serco group plc    57
business conduct 
serco group operates within a
management system that defines the
policies standards and processes to be
applied where we operate  integral to this
are our policies on ethics and business
conduct and human rights that apply to
all business divisions operating companies
and business units throughout the world 
these two policies outline the group’s
position on a wide range of ethical and
legal issues including conflicts of interest
financial inducements human rights and
legal and regulatory compliance they
apply to directors and to all employees
regardless of their position or location
recognising that ethical dilemmas may
arise in a growing company the group has
introduced an ethics consultation process
that is to be followed to determine the
group’s position on particular issues to
support this process an ethics committee
has been established comprising the
executive team with a quorum of three
and chaired by the chief executive  as the
leadership of the company the executive
team will make any fine judgements about
what it considers acceptable or otherwise
serco has established a dedicated
whistleblowing hotline so that employees
can seek guidance or express any
concerns on grouprelated issues
the company secretary investigates any
issues raised independently and reports
back to the board reports can be made
anonymously and without fear of retaliation 
the group maintains a position of
impartiality with respect to party politics
accordingly it does not contribute funds to
any political party it does however
contribute to the public debate of policy
issues that may affect it in the countries in
which it operates
internal control and risk
management 
further to the comments above regarding
corporate assurance details of the
group’s internal control and risk
management processes are contained in
pages 44 to 49 of the business review
the board confirms that the actions it
considers necessary have been taken to
remedy any failings and weaknesses which
it has determined to be significant from its
review of the group’s internal controls and
risk management processes 
going concern
as discussed further on page 43 of the
finance review the directors have
acknowledged the guidance on going
concern and financial reporting published
by the financial reporting council in
november 2008 whilst the current
economic environment is uncertain the
group is well placed to manage its
business risks successfully and has
adequate resources to continue in
operational existence for the foreseeable
future given that it has a balanced portfolio
of principally longterm contracts an 
order book of £163bn over 90 of its
revenues derived from governments and
substantial debt financing committed for
the mediumterm as at 31 december
2008 the group as a whole had a revenue
visibility of 90 for the next 12 month
period based upon the order book visibility
of planned 2010 and 2011 revenues are
already 76 and 65 respectively
accordingly the group has adopted the
going concern basis in preparing the
annual review and accounts
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
26 february 2009
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 57 58 serco group plc
directors’ report
annual review and accounts
the directors have pleasure in presenting
the annual review and accounts of the
group for the year ended 31 december
2008 comparative figures used in this
report are for the year ended 31
december 2007
activities
serco group plc is a holding company
which operates via its subsidiaries and its
joint ventures to improve services by
managing people processes technology
and assets more effectively serco
supports governments agencies and
companies by offering operational
management and consulting expertise in
the aviation defence education health
home affairs local government nuclear
science technology transport and
commercial sectors 
the chairman’s statement on pages 10
and 11 and the business review on pages
12 to 48 report on the activities during the
year post balance sheet events and likely
future developments the information in
these reports which is required to fulfil the
requirements of the business review is
incorporated in this directors’ report by
reference 
share capital
the authorised and issued share capital of
the company together with the details of
shares issued during the year is shown in
note 30 to the financial statements
the powers of the directors to issue or
buy back shares is restricted to that
approved at the company’s annual 
general meeting
dividends 
an interim dividend of 148p 2007 –
1213p per ordinary share was paid on 17
october 2008 the directors recommend
a final dividend of 352p 2007 – 302p
per ordinary share which if approved by
shareholders at the annual general
meeting will be paid on 20 may 2009 to
those shareholders on the register at the
close of business on 6 march 2009 
substantial shareholdings
as at 26 february 2009 the company had been notified under rule 5 of the disclosure
rules and transparency rules of the financial services authority of the following holdings
of voting rights in its shares 
no of shares
millions  held
baillie gifford  co 290 596
newton investment management limited 289 593
fidelity international limited 239 493
hbos plc 205 422
legal  general group plc 195 400
aegon uk plc group of companies 183 378
the directors are unaware of any restrictions on transfer of securities in the company or
on voting rights there are also no known agreements between holders of the company’s
securities which may result in such restrictions 
directors
the current members of the board together with biographical details of each director are
set out on pages 60 and 61 grant rumbles ceased being a director with effect from 25
march 2008 and subsequently left serco employment on 16 may 2008
directors’ interests
with the exception of the executive directors’ service contracts and the nonexecutive
directors’ letters of appointment there are no contracts in which any director has an
interest
certain change in control conditions are included in the service contracts of directors
which provide compensation or reduction of notice periods in the event of a change in
control of the company
details of the directors’ interests in the ordinary shares and options over the ordinary
shares of the company are set out in the remuneration report on pages 71 to 75
annual general meeting
the annual general meeting of the company will be held at the queen elizabeth ii
conference centre london on 12 may 2009 at 1100am
the notice of annual general meeting together with explanatory notes is sent to
shareholders with this review
financial risk policies
a summary of the group’s treasury policies and objectives relating to financial risk
management including exposure to associated risks is on pages 112 to 115
employment policies
the board is committed to maintaining a working environment where staff are individually
valued and recognised group companies and divisions operate within a framework of
human resources policies practices and regulations appropriate to their own market
sector and country of operation
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 58 serco group plc    59
the group is committed to ensuring equal
opportunity honouring the rights of the
individual and fostering partnership and
trust in every working relationship policies
and procedures for recruitment training
and career development promote equality
of opportunity regardless of gender sexual
orientation age marital status disability
race religion or other beliefs and ethnic or
national origin 
the group gives full consideration to
applications for employment career
development and promotion received
from the disabled and offers employment
when suitable opportunities arise if
employees become disabled during their
service with the group wherever
practicable arrangements are made to
continue their employment and training
the group remains proud of its record of
managing employee relations and
continues to believe that the structure of
individual and collective consultation and
negotiation are best developed at a local
level 
over the years the group has
demonstrated that working with trade
unions and creating effective partnerships
allows improvements to be delivered in
business performance as well as terms
and conditions of employment where
employees choose not to belong to a
trade union employee communication
forums such as works councils exist to
ensure involvement of staff within the
business
participation by staff in the success of the
group is encouraged by the availability of
sharesave schemes and a share option
scheme and long term incentive plan for
senior management which effectively align
their interests with those of shareholders
by requiring that performance criteria are
achieved prior to exercise
corporate responsibility 
the group maintains a focus on corporate
responsibility through a structure model
that is applied across the business our
corporate responsibility model focuses on
our people safety the environment and
the communities we serve  this model
forms an integral part of our management
system and is supported by defined
policies in all of the areas it covers these
are applied within the context of our
policies on ethics and business conduct
and human rights activities are reported
quarterly as part of our internal assurance
reporting process
further information on our approach to
corporate responsibility and how we have
delivered our commitments is contained in
the corporate responsibility review which
is available online at wwwsercocom this
site also provides an overview of our
approach to corporate responsibility our
management system and our policies
creditor payment policies
the group requires each of its business
units to negotiate and agree terms and
conditions for payment for the supply of
capital and revenue items just as keenly as
they negotiate prices and other
commercial matters 
suppliers are made aware of the terms
and the way in which disputes are to be
settled payment is then made in
accordance with those terms
the group’s average creditor payment
terms in 2008 were 28 days 2007 24
days 
donations 
the group continues to encourage all staff
to participate in their local communities
and has a process to capture investment
on a worldwide basis this measure is
based upon the business in the
community bitc reporting format
the value of this investment in 2008 at
£1767168 2007 £1066527 represents
13 of the group’s pretax profit 
during the year neither the company nor
the group made political donations and
they intend to continue with this policy the
us businesses which joined the group in
2008 as part of the acquisition of si
international have a political action
committee pac which is funded entirely
by employees and their spouses no funds
are provided to the pac by serco nor will
they be and any administrative services
provided to the pac by the us business
are fully charged to and paid for by the
pac and the company does not therefore
consider these to be political donations
employee contributions are entirely
voluntary and no pressure is placed on
employees to participate under us law
an employeefunded pac must bear the
name of the employing company
financial statements
at the date of this report as far as each
director is aware there is no relevant audit
information of which the group’s auditors
are unaware each director has taken all
the steps that heshe ought to have taken
as a director in order to make himself 
herself aware of any relevant audit
information and to establish that the
group’s auditors are aware of that
information
auditors
deloitte llp have expressed their
willingness to continue in office as auditors
and a resolution to reappoint them will be
proposed at the forthcoming annual
general meeting
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
26 february 2009
as at 9 march 2009 the company had
been informed that the notifiable interests
of legal  general group plc were 396
there were no other changes or additions
to these notifiable interests
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 59 60 serco group plc
directors’ profiles
kevin beeston fcma 46
chairman
3
kevin beeston became nonexecutive
chairman of serco group plc in
september 2007 having previously served
as the groups executive chairman chief
executive and finance director since
joining the group in 1985
he is a member of the cbi presidents
committee and chairman of the cbis
public services strategy board which
promotes the role business has in
transforming the uks public services
in addition he is the nonexecutive
chairman of partnerships in care infinitas
learning bv and domestic and general
ltd and is a nonexecutive director of 
imi plc
christopher hyman ca sa
45
chief executive
christopher hyman was appointed chief
executive of serco group plc in 2002 he
is also chairman of the prince of wales
charity in kind direct and a nonexecutive
director for habitat for humanity and africa
foundation earlier this year christopher
was appointed national ambassador by
the prince of wales for business in the
community he is also a member of the
uk governments honours advisory
committee for economy and uk
commission for employment and skills
christopher graduated from natal
university in durban south africa and
qualified as a chartered accountant
serving with arthur andersen and ernst 
young before joining serco in 1994 as the
european finance director he was
appointed group company secretary in
1996 corporate finance director in 1997
and group finance director in april 1999
he is responsible for setting the vision and
strategy of the group 
from left to right
david richardson nonexecutive director
tom corcoran nonexecutive director
christopher hyman chief executive
margaret baroness ford of cunninghame nonexecutive
director
kevin beeston chairman
leonard v broese van groenou nonexecutive director
andrew jenner finance director
joanne roberts company secretary
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 60 serco group plc    61
andrew jenner aca 40
finance director
andrew joined serco in 1996 as group
financial controller having previously
worked for unilever and deloitte  touche
llp   he became corporate finance
director with additional responsibility for
treasury activities in 1999 and group
finance director in may 2002  andrew
shares responsibility for our relationship
with shareholders and the city with the
chief executive  he is also responsible for
the groups pfi investment business
andrew is a nonexecutive director of
gallifordtry plc
tom corcoran ba phd 64
nonexecutive director
123
tom joined serco in december 2007 as a
nonexecutive director  he brings 40
years of global business experience
particularly in the us aerospace and
defence contracting industry  he is
currently senior advisor to private equity
firm the carlyle group and president of
corcoran enterprises llc a management
consulting firm
tom has held senior positions in the
aerospace defence and electronics
industries including chairman and chief
executive officer of allegheny teledyne
and president and chief operating officer
of lockheed martin’s electronic and space
sectors  during his 26 years with general
electric tom held senior management
positions including vice president and
general manager of ges aerospace
operations
he is also a nonexecutive director of 
aer lingus ltd l3 communications
holdings inc labarge inc arinc inc 
and gencorp inc
leonard v  broese van
groenou msc 62
nonexecutive director
123
leonard joined serco as a nonexecutive
director in april 2006
leonard was previously vicepresident
human resources and a member of the
corporate executive committee of
pennsylvaniabased air products a new
york listed company serving customers in
technology energy healthcare and
industrial markets worldwide where he
served for nearly 30 years  his career at
air products spans numerous international
roles including financial control business
planning operational management and
human resources  he is the chairman of
the netherlands benevolent society
baroness ford of
cunninghame ma mphil 51
senior independent director
123
margaret joined serco in october 2003 as
a nonexecutive director  she spent her
early career in a variety of roles either in the
public sector or as an advisor to
government and is a specialist in
leadership development culture change
and public sector reform  from 1997 to
2000 she was chairman of lothian health
board and from 2000 to 2003 was a non
executive director of ofgem  in december
2007 margaret retired from english
partnerships the national regeneration
agency after six highly successful years
from 2000 to 2005 margaret was a
director of good practice limited the
publishing company that she founded
margaret is managing director social
infrastructure and development royal
bank of canada capital markets and
chairman of irvine bay urban
regeneration company  she is also a
nonexecutive director of grainger plc
david richardson bsc fca
57
nonexecutive director
123
david joined serco as a nonexecutive
director in june 2003  
he has previously held the position of
finance director of whitbread where his
roles in a 20year career have included
eight years as strategy director  david
was instrumental in transforming
whitbread from a brewing and pubs
company into a market leader in hotels
restaurants and leisure clubs 
david is currently a nonexecutive director
of dairy crest group plc forth ports plc
and tomkins plc
1 member of the audit committee
2 member of the remuneration committee
3 member of the nomination committee
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 61 62 serco group plc
directors’ responsibilities
the directors are responsible for preparing
the annual review directors’ report
remuneration report and the financial
statements in accordance with applicable
law and regulations
company law requires the directors to
prepare financial statements for each
financial year the directors are required by
the ias regulation to prepare the group
financial statements under international
financial reporting standards ifrs as
adopted by the european union  the
group financial statements are also
required by law to be properly prepared in
accordance with the companies act 1985
and article 4 of the ias regulation  
international accounting standard 1
requires that ifrs financial statements
present fairly for each financial year the
group’s financial position financial
performance and cash flows  this
requires the faithful representation of the
effects of transactions other events and
conditions in accordance with the
definitions and recognition criteria for
assets liabilities income and expenses set
out in the international accounting
standards boards framework for the
preparation and presentation of financial
statements  in virtually all circumstances
a fair presentation will be achieved by
compliance with all applicable ifrss  
directors are also required to
• properly select and apply accounting
policies
• present information including
accounting policies in a manner that
provides relevant reliable comparable
and understandable information and 
• provide additional disclosures when
compliance with the specific
requirements in ifrss are insufficient to
enable users to understand the impact
of particular transactions other events
and conditions on the groups financial
position and financial performance
the directors have elected to prepare the
parent company financial statements in
accordance with united kingdom
generally accepted accounting practice
the parent company financial statements
are required by law to give a true and fair
view of the state of affairs of the company
and of the profit or loss of the company
for that period in preparing these financial
statements the directors are required to
• select suitable accounting policies and
then apply them consistently
• make judgments and estimates that are
reasonable and prudent
• state whether applicable accounting
standards have been followed and
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the
company will continue in business
the directors are responsible for keeping
proper accounting records that disclose
with reasonable accuracy at any time the
financial position of the company and
enable them to ensure that the parent
company financial statements comply
with the companies act 1985 they are
also responsible for safeguarding the
assets of the company and hence for
taking reasonable steps for the prevention
and detection of fraud and other
irregularities
the directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
companys website legislation in the
united kingdom governing the preparation
and dissemination of financial statements
may differ from legislation in other
jurisdictions
we confirm to the best of our knowledge
1the financial statements prepared in
accordance with the applicable set of
accounting standards give a true and
fair view of the assets liabilities financial
position and profit or loss of the
company and the undertakings included
in the consolidation taken as a whole
and
2the management report which is
incorporated into the directors report
includes a fair review of the development
and performance of the business and
the position of the company and the
undertakings included in the
consolidation taken as a whole together
with a description of the principal risks
and uncertainties they face 
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
26 february 2009
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 62 serco group plc    63
remuneration report
dear shareholder
i am very happy to present the directors’
remuneration report  as reported in the
business review in 2008 serco has
delivered strong operational and financial
performance while continuing to increase
its presence in existing and new markets
the company delivered another year of
double digit revenue growth enhanced its
margins generated strong free cash flow
and strengthened its funding position  in
addition it won a number of significant
contracts in new markets such as the
formation of a partnership with guy’s  st
thomas’ nhs foundation trust through
which it will target the significant national
pathology market valued at around 
£25bn  it has additionally broadened
further its service offerings into children’s
services uk homeland security and
occupational health  serco’s international
footprint in the us australia and the
middle east has also been extended
over the last three years revenue has
increased from £226bn to £31bn 
profit before tax increased by 75 and
market capitalisation has exceeded £2bn
in december 2008 serco firmly entered
the ftse 100
following the departure of serco’s chief
operating officer in the first half of the
year the structure of the senior
management team has been changed
further the remuneration committee has
spent a great deal of time on a major
review of executive remuneration and
embarked on a lengthy and helpful
consultation exercise with our largest
shareholders  the discussions and the
views that have been exchanged have
been of great value to us and changes
have been made to the new policy in light
of shareholders’ opinions
several shareholders have expressed
concerns about the timing of the changes
indeed the remuneration committee has
debated whether revised remuneration
arrangements should be implemented for
2009 against the backdrop of turmoil in
the global financial markets and the
resulting impact on the economies of
many of the countries in which we
operate  we hope that we have
demonstrated why we believe that
shareholders’ interests are best served by
making changes now and doing so
decisively  serco’s strong performance
over the last three years owes much to the
leadership of the senior team  we believe
that the changes to remuneration are
necessary to ensure serco’s continued
success over the next three years
especially in a difficult economic climate
and to ensure that we focus serco’s
leaders on serco’s future growth and
reward them appropriately for their
contribution 
the changes are designed to ensure that
the structure and the level of remuneration
further align the interests of management
with those of shareholders by
• increasing the emphasis on
performance both in the short and long
term
• improving alignment by increasing the
proportion of longterm remuneration
• encouraging executive directors to defer
part of their annual bonus into shares
and
• increasing the share ownership
requirement for the chief executive to
two times salary
the changes are described in this report
and in respect of the proposed new share
plans in more detail in the notice of
annual general meeting
one key modification is the change to the
comparator group for pay benchmarking
purposes  we have always sought to
benchmark total remuneration against
companies of broadly similar size and
business fit  the comparator group we
had been using comprised fourteen
companies and as serco has grown the
group ceased to reflect the breadth of
serco’s services  furthermore serco had
become large relative to the companies in
the group  an industry peer group was
ruled out both for pay comparisons and
for benchmarking our performance again
on the basis that too few companies have
serco’s breadth of coverage  hence the
committee has chosen a robust group of
around 30 companies in the ftse 51130
which are much more similar to serco in
terms of turnover growth profile and
market capitalisation  after rigorous
analysis the companies in the comparator
group are viewed by the committee as an
effective proxy for this ftse group  it is
also important to the committee that the
same comparator group is used to
benchmark the arrangements of
employees more broadly  if serco’s size
and scope changes for better or for
worse this comparator group will of
course be reviewed 
the remuneration committee believes
that this investment in remuneration that
we are recommending to shareholders
together with the increased emphasis on
performance will make an important
contribution to serco’s continuing success
yours sincerely
leonard v  broese van groenou
chairman of remuneration committee
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 63 64 serco group plc
introduction
the following report details the
remuneration policy and the actual
remuneration of the directors of the group
for the year ended 31 december 2008  in
preparing this report consideration has
been given to the disclosure requirements
of the 2006 combined code and
schedule 7a of the companies act 1985
a resolution to approve this report will be
proposed at the annual general meeting
on 12 may 2009
the remuneration committee
the remuneration committee the
committee consists solely of independent
nonexecutive directors  it is chaired by
leonard v  broese van groenou and
comprises margaret ford david
richardson and tom corcoran
the chairman of the company and the
executive directors may attend meetings
of the committee at its discretion and as
appropriate  they are not in attendance
when their own remuneration
arrangements are discussed
the committee met seven times during
the year  the terms of reference of the
committee a copy of which can be found
on the group’s website are reviewed
annually to ensure that they meet best
practice  details of the directors’
attendance at the committee meetings
can be found in the corporate
governance report on page 52
the committee determines the overall
remuneration policy for senior
management and the individual
remuneration of the chairman and the
executive directors  this includes base
salary bonus longterm incentives
pensions benefits and terms of
employment including those terms on
which service may be terminated 
advisors to the remuneration
committee 
the committee has been advised by
towers perrin who were appointed by the
committee in may 2008 following a
competitive tendering process  towers
perrin has provided advice to the
committee throughout the triennial review
process on the overall remuneration policy
and philosophy and has carried out
benchmarking exercises on the executive
directors’ remuneration packages
geoff lloyd group human resources
director also provides advice and
guidance to the committee
remuneration policy
as indicated in last year’s remuneration
report during 2008 the committee
carried out its comprehensive triennial
review of executive remuneration and of
the principles which form the basis of the
company’s remuneration policy  the
objective has been to ensure that the
group’s arrangements are aligned with the
threeyear business plan and best
practice 
as a result of the review several changes
are proposed both to the structure and the
levels of remuneration of executive
directors  these are described in this
report and where appropriate in the
notice of annual general meeting
serco’s remuneration policy adopts the
following principles which are that
executive remuneration should
• support serco’s longterm future
growth strategy and values
• align the financial interests of executives
and shareholders
• provide market competitive reward
opportunities for performance in line with
expectations and deliver significant
financial rewards for sustained 
outperformance
• enable serco to recruit and retain the
best in all our chosen markets 
• be based on a clear rationale which
participants shareholders and other
stakeholders are able to understand and
support
in setting the remuneration of the
executive directors in particular the non
financial objectives relating to the annual
bonus scheme the remuneration
committee is able to consider corporate
performance on safety environmental
social and corporate governance  the
committee retains discretion to reduce
bonuses or the vesting of awards under
the share plans if performance in these
areas is unsatisfactory
serco ar2008 p39 qxdserco ar08  design  19032009  1632  page 64 serco group plc    65
the elements of remuneration
composition
the current remuneration package for
executive directors consists of base salary
annual bonus longer term sharebased
incentives pensions and other benefits
the group’s policy is to ensure that a
significant proportion of the package is
related to performance
the relative proportions of the
performancerelated and fixed elements of
remuneration excluding pension and other
benefits for executive directors  showing
the current and future position and
assuming ‘ontarget’ remuneration  are
shown in the following charts 
base salary
performancerelated annual bonus 
performancerelated longterm
incentives expected value
proposed remuneration for chief executive
proposed remuneration for finance director
base salary
as a consequence of the triennial review
the committee’s policy is to set the base
salaries of the executive directors so as to
ensure that total target remuneration is
competitive
a new comparator group has been
adopted which comprises the companies
within the ftse 51 to 130 that are in the
proprietary database of the committee’s
advisors and covers a range of roles at
and below board level  this is a group of
approximately 30 companies of broadly
similar size and scope to serco in terms of
turnover growth profile and market
capitalisation  the new comparator group
gives access to a more robust and stable
data set and will be used by serco to
benchmark other roles below executive
level across the group 
base salaries are normally reviewed
annually  the committee takes note of
relative pay and employment conditions
within the comparator group and the
company when determining salaries
with effect from 1 september 2008 the
base salaries for christopher hyman and
andrew jenner were increased to
£645000 and £380000 increases of
15 and 10 respectively  these
increases were determined with
consideration to the following
• serco’s strong performance in 2008
• serco’s steady growth and performance
over the past three years
• the market position of these new
salaries which is below median against
the new comparator group and
• the overall impact on total target
remuneration which subject to
shareholders’ approval of the new 
longterm plans will be above median
only if executive directors defer half 
their earned bonus
39
37
24
41
34
25
33
45
22
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 65 66 serco group plc
annual bonus
bonus is earned only on the basis of
achievement of a mix of financial and 
nonfinancial objectives which are
weighted 80 and 20 respectively
financial measures are based on the
serco group results and the nonfinancial
measures are teambased  the three
financial measures for 2008 were based
on turnover adjusted profit before tax and
amortisation and cash conversion  these
measures reflect the growth and margin
improvement strategies of the business
the standards of performance set are
designed to be stretching  the 
nonfinancial goals set for 2008 
assessed performance against a 
number of strategically important areas
for 2008 the maximum annual bonus
award was 100 of salary  on the basis
of serco’s performance in 2008 annual
awards of 82 of salary have been
determined the executive directors
delivered an excellent financial
performance that exceeded target
serco’s financial performance for the year
is described in more detail in the business
review starting on page 12 the executive
directors also delivered in full against a
number of strategic objectives in the areas
of leadership development new business
wins and investor relations  
annual bonuses are not pensionable
changes to annual bonus for 2009
following the triennial review annual bonus
potential will be increased from 100 to
150 of base salary for the chief
executive and to 130 of base salary for
the finance director  payments for target
performance will also increase to 75 and
65 of base salary respectively  the level
of difficulty and the standard of
performance required to achieve target
performance will also increase  the mix of
measures will remain as described above
the measure of profit will be profit before
tax adjusted for exceptional items where
appropriate  beyond this the bonus plan
will not change  
the change to annual bonus is designed
to increase the emphasis on performance
and to balance reward for short term and
longer term performance in combination
with the proposed new deferred bonus
plan see below  the increase to annual
bonus linked to challenging annual
performance measures places greater
emphasis and focus on shortterm
operational performance which is key to
delivering serco’s longer term
performance
sharebased remuneration
longterm share incentives are awarded to
executive directors under the serco group
plc 2006 long term incentive plan ltip
and the serco group plc 2005 executive
option plan eop  all grants and awards
are made pursuant to the rules of the
applicable plans and in accordance with
the model code and policies in relation to
the treatment of the leavers have been
adopted  the measurement of the
performance targets is undertaken by
mercer for the 2006 long term incentive
plan and audited by deloitte llp in
relation the 2005 executive option plan
the conditions relating to the plans are
detailed below 
long term incentive plan
the ltip awards granted to executive
directors are calculated at 100 of salary
at the time of grant  the vesting of awards
depends on the group’s total shareholder
return tsr measured relative to the top
250 companies in the ftse as ranked by
market capitalisation excluding those in
certain sectors such as oil and gas and
financial services
the committee has discretion to vary the
proportion of awards that vest if it
considers that the tsr performance
measure does not appropriately reflect the
underlying financial performance of the
group
for awards that completed their
performance period on 31 december
2008 the group’s tsr performance
relative to its comparator group was in the
top decile and therefore 200 of the
awards will vest
no awards were made under this plan in
2008
there is no retesting under the ltip 
executive option plan 
options granted under the eop may be
exercised after the third anniversary of
grant depending upon the achievement of
a financial performance target over three
years  the options are granted at market
value and awards made to executive
directors are based on 100 of salary as
at the 31 december prior to grant
for awards granted in 2008 achievement
of the performance is measured by
reference to the group’s earnings per
share eps performance relative to the
retail price index rpi over the threeyear
performance period 
the vesting of the grants is based on the
following schedule
• if the level of eps growth is less than
rpi  5 per annum none of the
options may be exercised
• if the level of eps growth is equal to rpi
 5 per annum 40 of the options
may be exercised
• if the level of eps growth is equal to rpi
 10 per annum all of the options
may be exercised
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 66 serco group plc    67
• for an eps growth of between rpi 
 5 and rpi  10 per annum 
a proportion of the options between 
40 and 100 may be exercised
for option grants which completed their
performance period on 31 december
2008 the group’s eps growth was
1813 per annum over the threeyear
performance period which resulted in all
options vesting  the level at which
maximum vesting would occur was
1313 per annum
the committee considers that tsr and
eps are the key performance indicators for
serco and are most relevant for measuring
relative shareholder value created and the
group’s underlying financial performance
respectively
relative tsr measures share price growth
and dividend performance against a broad
range of ftse companies and provides
alignment between the interests of
shareholders and executive directors
eps is a key operational measure for
serco and focuses executive directors on
sustainable profitable growth
changes to sharebased remuneration
from 2009
no further awards will be made to
executive directors under the serco group
plc 2005 executive option plan or the
serco group plc 2006 long term
incentive plan provided shareholders
approve the proposed new share plans  
two new plans will subject to shareholder
approval replace the current longterm
share plans  under the deferred bonus
plan executive directors will be invited to
defer up to half of any bonus earned  to
encourage investment executive directors
will normally be eligible for an award of
‘matching’ shares at the end of a 
threeyear period only if they are still 
in employment with serco and two
performance measures have been met
the two measures are independent and
each determines the vesting of half of the
matching shares  the measures are tsr
measured against the companies in the
ftse 51 to 130 excluding investment
trusts and eps growth  the structure for
vesting is the same for both measures  
an award of matching shares of one half of
the gross value of the bonus deferred will
vest for median or threshold performance
and matching shares with a value of two
times the gross value of the deferred
bonus vest for upper quartile or superior
performance at the top end of the range
the eps performance range for 2009
2011 is shown in the notice of annual
general meeting and has been set on the
basis of serco’s business plan and the
expectations of brokers and shareholders
the definition of eps is basic eps
excluding acquisitions and before
amortisation of non acquired intangibles
the serco group plc 2006 long term
incentive plan ltip will subject to
shareholder approval be replaced by a
new performance share plan  annual
awards under the plan will normally have a
face value on grant of 200 of base salary
for the chief executive and 175 of base
salary for the finance director  the normal
limit on annual awards for executive
directors will be subject to a cap of 200
of salary  the shares will normally only
vest at the end of a threeyear period if the
executive directors are still in employment
with serco and two performance
measures have been met  the two
measures are independent  the measures
are tsr measured against the companies
in the ftse 51 to 130 excluding
investment trusts and eps growth
relative tsr performance determines the
vesting of 70 of the shares and eps the
remainder  the structure for vesting is the
same for both measures  the shares will
vest in full only if serco’s performance is
upper quartile or in the case of eps
superior and at the top end of the range
median or threshold performance will
trigger the vesting of 25 of the award  
dividends will be reinvested and
distributed only in respect of shares that
vest under both plans at the end of the
performance period
the remuneration committee decided
that the case for relative tsr and eps as
the performance measures for longterm
sharebased plans remains strong 
relative tsr and eps growth carry equal
weight in respect of the matching shares
awarded under the deferred bonus plan
this is to ensure a balance of internal and
external measures and hence sufficient
‘lineofsight’ to encourage investment in
the plan  in the case of the ltip  greater
weight has been placed on relative tsr to
underscore the importance of longer term
alignment with shareholders’ interests
as now the committee will have discretion
to vary the proportion of awards that vest
under both the performance share plan
and the deferred bonus plan to ensure
that the outcomes are fair and
appropriately reflect the underlying financial
performance of the group
the provisions of the rules of both plans in
respect of ‘good’ leavers and in the event
of a change of control are detailed in the
notice of annual general meeting but in
short time pro rating where the
performance period is truncated and
performance will normally apply
the changes will mean that total target
remuneration is between median and
upper quartile if executive directors invest
in the deferred bonus plan and at median
if they do not which the remuneration
committee believes is reasonable 
sharesave scheme
the group operates a sharesave scheme
no performance conditions are attached
to options granted under the scheme as it
is an allemployee scheme  options
granted to scheme participants are
normally set at a discount of 10 to the
market value of shares at grant  none of
the directors participate in the sharesave
scheme  options were granted in july
2008 under the sharesave scheme to
8123 participants
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 67 68 serco group plc
share ownership policy
in light of the proposed changes to the executive directors’ remuneration the share ownership requirement for the chief executive has
been increased from one to two times base salary  the requirement for the finance director remains one times base salary  executive
directors will be required to retain in shares 50 of the net value of any performance shares or options exercised until they have satisfied
the shareholding requirement
at the end of the year by reference to the share price at that date 45050p executive directors’ share ownership levels were as follows
ordinary shareholding at ordinary shareholding
31 december 2008 as a  of salary
chief executive 166440 116
finance director 104874 124
pensions life assurance and other benefits
serco operates both defined benefit and defined contribution pension schemes  the
executive directors participate in the serco pension and life assurance scheme splas
this is a funded defined benefit scheme which provides for a target pension of twothirds
of pensionable salary following a full career  members contribute to the scheme at rates
varying according to the section of the scheme
christopher hyman and andrew jenner contributed to the scheme at a rate of 95 of
pensionable salary in 2008
from 1 january 2007 serco also introduced smart whereby all members were given the
option to have their pension contributions paid by salary sacrifice  under this arrangement
the member makes no normal pension contributions serco makes additional contributions
to splas equal to those that the member would otherwise have made and the member’s
contractual pay is reduced by the amount of these contributions  both christopher
hyman and andrew jenner opted to have their contributions paid by smart 
kevin beeston’s pension benefits accrued prior to 6 april 2006 exceeded the new lifetime
allowance which came into force at that date and he opted to cease paying contributions
and accruing benefits in the pension scheme after 6 april 2006
kevin beeston remains entitled to lump sum and widow’s pension benefits should he die
before retirement and while still employed by or an officer of serco
the chairman and executive directors receive a range of other benefits which include a
car private medical insurance permanent health insurance life cover an annual allowance
for independent financial advice and voluntary health checks every two years  the
executive directors are also entitled to 25 days’ holiday per year
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 68 serco group plc    69
service contracts and compensation
each executive director has a rolling service contract and these contracts will be available for inspection prior to the start of and after the
company’s annual general meeting  the service contracts have a notice period of 12 months
under the service contracts for the executive directors the company reserves the right to make a payment in lieu of notice  in addition
where a director leaves the company following a change of control whether or not he is dismissed or he elects to leave on notice he will
be entitled to receive a payment equivalent of up to one year’s remuneration  the service contracts do not provide for termination
payments to be made in any other circumstances
service contracts have been reviewed and are being amended with the agreement of the executive directors to ensure they appropriately
reflect best practice  there have been no payments made during the year in relation to compensation for loss of office
a summary of details relating to each director who served during the year is provided below
date of unexpired term at
name of date joined appointment date of 31 december
director company to the board contract 2008
christopher hyman 30 august 1994 1 april 1999 21 july 2003 rolling contract 
of 12 months 
notice period
andrew jenner 4 november 1996 3 may 2002 21 july 2003 rolling contract
of 12 months 
notice period
grant rumbles 
1
3 july 1982 3 july 2007 3 july 2007 na
1 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  his termination payment was in
accordance with his contractual entitlement and is reported on page 71
external appointments
the board believes that the group can benefit from its executive directors holding
appropriate nonexecutive directorships of companies or independent bodies  such
appointments are subject to the approval of the board  fees are retained by the executive
director concerned
christopher hyman was a nonexecutive director in united business media plc until his
resignation in may 2008  fees payable in the year were £20308
andrew jenner was appointed nonexecutive director of gallifordtry plc on 1 january
2009  fees due in 2009 are £38800
no other feepaying external positions were held by any of the executive directors
the chairman and nonexecutive directors
the group’s policy is that the fees of the chairman and the nonexecutive directors
which are determined by the board are set at a level which will attract individuals with the
necessary experience and ability to make a substantial contribution to the group’s affairs
nonexecutive directors of the group are initially appointed for a threeyear term and that
appointment may be terminated on three months’ written notice  the renewal of
appointments is not automatic and nonexecutive directors are required to retire and
stand for reelection in accordance with the company’s articles of association and the
combined code on corporate governance
as at 31 december 2008 the nonexecutive directors of the group had no personal
financial interest in the matters determined by the board there are no conflicts of interest
arising from crossdirectorships and no involvement in the daytoday running of the
group  the nonexecutive directors do not participate in the group’s incentive or pension
schemes or receive other benefits except as described 
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 69 a summary of details relating to each nonexecutive director who served during the year is provided below
date of appointment date of letter unexpired term at
to the board of appointment 31 december 2008
chairman
kevin beeston 29 february 1996 1 september 2007 20 months
nonexecutive directors
1

margaret ford 8 october 2003 7 october 2003 9 months
leonard v  broese van groenou 3 april 2006 20 february 2006 3 months
david richardson 2 june 2003 29 may 2003 5 months
tom corcoran 3 december 2007 3 december 2007 23 months
1 nonexecutive directors have a threemonth notice period and no compensation or other benefits are payable on early termination
70 serco group plc
current fee structure
nonexecutive directors’ remuneration consists of cash fees paid monthly with increments
for positions of additional responsibility  in addition reasonable travel and related business
expenses are paid  no bonuses are paid to nonexecutive directors the board believe
that payment of fees on a cashonly basis remains appropriate as opposed to the partial
payment of fees in shares 
nonexecutive directors are encouraged to hold shares in the group but are not subject
to a shareholding requirement  nonexecutive directors’ fees are not performance related
the fees and terms of engagement of nonexecutive directors are reviewed on an annual
basis taking into consideration market practice and approved by the board 
the standard annual fees payable for the chairman and nonexecutive directors during
the financial year under review are shown in the table below the chairman’s fee was
increased with effect from 1 september 2008 in light of his current responsibilities the time
commitment to serco and competitive market practice
1 january 2008 from 1 september 2008
to 31 august 2008 to date
££
chairman
1
200000 230000
1 january 2008 
to date
£
board member 45000
committee chairmanship 10000
senior independent director 10000
1 the chairman receives a range of other benefits which include a car private medical insurance permanent health
insurance life cover an annual allowance for independent financial advice and voluntary health checks every two
years
serco ar2008 p39 qxdserco ar08  design  20032009  1654  page 70 serco group plc    71
directors’ remuneration
this section has been audited by deloitte llp 
the remuneration of the directors for the year was as follows
total total
total remuneration remuneration
estimated value excluding excluding
termination of any non pensions pensions
note remuneration fees bonus arrangements cash benefits 2008 2007
£ £££££ £
kevin beeston 2 210000 nil nil na 62797 272797 905451
christopher hyman 12 588333 nil 528900 na 62872 1180105 1093740
andrew jenner 12 356666 nil 311600 na 63186 731452 697002
grant rumbles 12 117197 nil 80000 706600 26193 929990 348511
leonard v  broese van groenou nil 55000 nil na nil 55000 45000
margaret ford nil 55000 nil na nil 55000 53333
david richardson nil 55000 nil na nil 55000 53333
tom corcoran nil 45000 nil na nil 45000 3750
total 1272196 210000 920500 706600 215048 3324344 3200120
notes
1 the bonuses shown include performance bonuses earned in the period under review but not paid in the financial year
2 the value of the non cash benefits relates to the provision of a car allowance now fully inclusive of all scheme costs including insurance and maintenance and private
healthcare
3 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008 the payment to him detailed under
termination arrangements consisted only of amounts in lieu of notice basic salary and all benefits
4 remuneration is shown gross of salary sacrificed under the smart scheme  see page 68
directors’ shareholdings
the directors’ interests in the shares of the company are detailed in the following table  
ordinary shares of ordinary shares of 
note 2p each fully paid at 2p each fully paid at
1 2 1 january 2008 31 december 2008
kevin beeston 138218 100000
leonard v  broese van groenou 3375 5375
margaret ford 11686 14481
christopher hyman 3 156457 166440
andrew jenner 3 97062 104874
david richardson 10000 15000
tom corcoran nil 4000
notes
1 as at 9 march 2009 the shareholdings of those directors in office have not changed
2 ordinary shares are beneficial holdings which include the directors’ personal holdings and those of their spouses and minor children
3 17749 of christopher hyman’s and 10649 of andrew jenner’s shares are held in trust on their behalf under the terms of their participation in the 2003 deferred bonus
scheme  provided such shares remain in trust for three years and subject to certain performance conditions they are also granted an award over an equivalent number of
shares
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 71 72 serco group plc
sharebased incentives
this section has been audited by deloitte llp   
the total share options granted to each person who has served as a director of the company at any time in the financial year were as
follows
i serco group plc 2003 deferred bonus scheme dbs
conditional rights to receive matching shares over serco group plc’s ordinary shares under the dbs held by directors at 31 december
2008 were as follows
awards market market awards 
held at price vested price held at 
1 january at grant during on vesting 31 december earliest 
2008 pence the period pence 2008 performance period vesting date
christopher hyman 10030 242 10030 443  1 jan 2005 – 31 dec 2007 9 mar 2008
17749 334  17749 1 jan 2006 – 31 dec 2008 22 mar 2009
andrew jenner 6018 242 6018 443  1 jan 2005 – 31 dec 2007 9 mar 2008
10649 334  10649 1 jan 2006 – 31 dec 2008 22 mar 2009
notes
1 the dbs has now been closed and no further awards will be made under its terms
2 the awards shown in the table are the maximum number of shares that can vest under the performance conditions
3 the performance condition for matching shares is tsr relative to the companies comprising the ftse 350 and is measured over the three year deferral period
4 on 31 december 2008 the performance conditions attached to the awards made on 22 march 2006 were satisfied though the awards may not be exercised until 22 march
2009  tsr performance relative to the comparator group was in the upper quartile 93rd percentile  a one for one match of shares deferred will be made in march 2009
ii serco group plc 2006 long term incentive plan ltip
the conditional rights to serco group plc ordinary shares under the ltip held by directors at 31 december 2008 were as follows
awards held at 
awards 31 december 
held at market price 2008 or date latest
1 january on grant of cessation earliest exercise
2008 pence if earlier performance period vesting date date
kevin beeston 147928 349 147928 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
145205 373 145205 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
christopher hyman 147928 349 147928 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
145205 373 145205 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
122874 456 122874 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
andrew jenner 88757 349 88757 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
89589 373 89589 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
75699 456 75699 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
grant rumbles 43550 349 43550 1 jan 2006 – 31 dec 2008 5 may 2009 30 sep 2009
33892 510 33892 1 jan 2007 – 31 dec 2009 8 may 2010 30 sep 2009
70213 456 70213 1 jan 2008 – 31 dec 2010 31 dec 2010 30 sep 2009
notes
1 awards take the form of nominal cost options
2 awards made are calculated at 100 of salary at the time of grant
3 the tsr performance condition is measured relative to the top 250 companies in the ftse as ranked by market capitalisation excluding those in certain sectors which are
not comparable with the group
4 no awards were granted lapsed or exercised during the period
5 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  all awards held by grant rumbles with
the exception of that made on 12 november 2007 were granted prior to him being appointed executive director  an award made on 8 may 2007 relates to the three year
performance period commencing 1 january 2007  awards that expire prior to the completion of the performance period will be prorated
6 on 31 december 2008 the performance conditions attached to the awards made on 5 may 2006 were satisfied though the awards may not be exercised until 5 may 2009
top decile performance was achieved resulting in 200 of the award vesting
7 awards held by kevin beeston relate to his tenure as an executive director prior to september 2007
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 72 serco group plc    73
iii serco group plc long term incentive scheme ltis
the ltis has been superseded by the ltip   the last award to executive directors under the ltis was made in june 2005
awards 
held at 
awards market market 31 december 
held at price price on 2008 or date date
1 january on grant vesting of cessation earliest of expiry
2008 pence pence if earlier performance period vesting date of awards
kevin beeston 38736 426 153  1 jan 2000 – 31 dec 2002 31 dec 2002 4 apr 2010
50797 490 172  1 jan 2001 – 31 dec 2003 31 dec 2003 23 nov 2010
40898 465 240  1 jan 2002 – 31 dec 2004 31 dec 2004 15 nov 2011
103467 153 314 103467 1 jan 2003 – 31 dec 2005 31 dec 2005 5 may 2013
173142 175 382  1 jan 2004 – 31 dec 2006 31 dec 2006 26 nov 2013
119411 231 462 119411 1 jan 2005 – 31 dec 2007 31 dec 2007 21 dec 2014
christopher hyman 32868 426 153 32868 1 jan 2000 – 31 dec 2002 31 dec 2002 4 apr 2010
43540 490 172 43540 1 jan 2001 – 31 dec 2003 31 dec 2003 23 nov 2010
35056 465 240 35056 1 jan 2002 – 31 dec 2004 31 dec 2004 15 nov 2011
103467 153 314 103467 1 jan 2003 – 31 dec 2005 31 dec 2005 5 may 2013
173142 175 382 173142 1 jan 2004 – 31 dec 2006 31 dec 2006 26 nov 2013
119411 231 462 119411 1 jan 2005 – 31 dec 2007 31 dec 2007 21 dec 2014
andrew jenner 62081 153 314 62081 1 jan 2003 – 31 dec 2005 31 dec 2005 5 may 2013
105138 175 382 105138 1 jan 2004 – 31 dec 2006 31 dec 2006 26 nov 2013
76101 231 462 76101 1 jan 2005 – 31 dec 2007 31 dec 2007 21 dec 2014
grant rumbles 45454 231 462 45454 1 jan 2005 – 31 dec 2007 31 dec 2007 30 mar 2010
notes
1 the awards shown in the table have all vested
2 for awards made in relation to performance periods commencing up to and including 1 january 2002 the extent to which an award will vest is measured by reference to the
absolute growth in the group’s eps over the performance period of three financial years  for awards granted on or after 1 january 2003 achievement of the performance is
measured by reference to the group’s tsr performance relative to the companies comprising the ftse 350 at the start of the performance period
3 no awards were granted or lapsed during the year
4 for those awards marked with an  approximately 1467 1350 for prior year grants of the options granted under the ltis represent supplementary awards granted for
the sole purpose of compensating participants for agreeing to bear the company’s liability to employers’ national insurance contributions upon the exercise of the underlying
ltis awards  these awards can only be exercised in conjunction with and to the extent of the underlying award
5 awards take the form of nominal cost options
6 awards made are calculated at 100 of salary at the time of grant
7 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  awards that expire prior to the completion
of the performance period will be prorated
8 awards held by kevin beeston relate to his tenure as an executive director prior to september 2007
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 73 74 serco group plc
iv serco group plc 1998 and 2005 executive option plan eop
options over serco group plc ordinary shares granted under the 1998 executive option plan and the 2005 executive option plan and
held by directors at 1 january 2008 and 31 december 2008 were as follows
awards
held at
awards 31 december market
held at granted exercised 2008 or date price on exercise date from date
1 january during during of cessation exercise date price which of expiry
2008 period period if earlier pence pence exercisable of options
kevin beeston 68922  68922 00 451 218 21 may 2001 20 may 2008
76734  76734 00 424 245 1 apr 2002 31 mar 2009
58764  00 58764  426 5 apr 2003 4 apr 2010
91321  00 91321  435 28 mar 2004 27 mar 2011
135768  00 135768  264 3 may 2005 2 may 2012
289515  00 289515  153 6 may 2006 5 may 2013
219320  00 219320  217 3 mar 2007 2 mar 2014
183404  00 183404  235 29 apr 2008 28 apr 2015
147492  00 147492  339 5 may 2009 4 may 2016
120798  00 120798  439 19 mar 2010 18 mar 2017
christopher hyman 39078  39078 00 450 218 21 may 2001 20 may 2008
40812  00 40812  245 1 apr 2002 31 mar 2009
49830  00 49830  426 5 apr 2003 4 apr 2010
78275  00 78275  435 28 mar 2004 27 mar 2011
116373  00 116373  264 3 may 2005 2 may 2012
289515  00 289515  153 6 may 2006 5 may 2013
219320  00 219320  217 3 mar 2007 2 mar 2014
183404  00 183404  235 29 apr 2008 28 apr 2015
147492  00 147492  339 5 may 2009 4 may 2016
120798  00 120798  439 19 mar 2010 18 mar 2017
00 123076 00 123076  455 27 feb 2011 26 feb 2018
andrew jenner 7422  7422 00 414 245 1 apr 2002 31 mar 2009
12336  00 12336  426 5 apr 2003 4 apr 2010
18524  00 18524  435 28 mar 2004 27 mar 2011
69824  00 69824  264 3 may 2005 2 may 2012
173709  00 173709  153 6 may 2006 5 may 2013
133178  00 133178  217 3 mar 2007 2 mar 2014
116885  00 116885  235 29 apr 2008 28 apr 2015
88495  00 88495  339 5 may 2009 4 may 2016
74530  00 74530  439 19 mar 2010 18 mar 2017
00 75824 00 75824  455 27 feb 2011 26 feb 2018
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 74 serco group plc    75
iv serco group plc 1998 and 2005 executive option plan eop continued
awards
held at
awards 31 december market
held at granted exercised 2008 or date price on exercise date from date
1 january during during of cessation exercise date price which of expiry
2008 period period if earlier pence pence exercisable of options
grant rumbles 4002  00 4002 00 218 21 may 2001 20 may 2008
12336  00 12336 00 245 1 apr 2002 31 mar 2009
9954  00 9954 00 426 5 apr 2003 30 sep 2009
13113  00 13113 00 408 20 mar 2004 30 sep 2009
26099  00 26099 00 264 3 may 2005 30 sep 2009
12453  00 12453 00 165 6 sep 2005 30 sep 2009
52639  00 52639 00 153 6 may 2006 30 sep 2009
58387  00 58387 00 214 30 apr 2007 30 sep 2009
89361  00 89361 00 235 29 apr 2008 30 sep 2009
67846  00 67846  339 5 may 2009 4 nov 2009
61538  00 61538  439 19 mar 2010 18 sep 2010
00 70329 00 70329  455 27 feb 2011 26 aug 2011
notes
1 the awards shown in the table are the maximum number of shares that can vest under the performance conditions
2 the performance conditions attached to the awards are described on pages 66 and 67
3 for those options marked with an  approximately 1467 1350 for prior year grants of the options granted under the plan represent supplementary options granted for
the sole purpose of compensating participants for agreeing to bear the company’s liability to employers’ national insurance contributions upon the exercise of the underlying
plan awards  these options can only be exercised in conjunction with and to the extent of the underlying option
4 no payment was made for the grant of the awards
5 grants of options under the executive option plans are calculated at 100 of salary at the time of grant 
6 the market price of the company’s ordinary shares at the close of business on 31 december 2008 was 45050p and the range during the year to 31 december 2008 was
32600p to 47200p
7 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  all awards held by grant rumbles were
granted prior to him being appointed executive director  awards that expire prior to the completion of the performance period will be prorated
8 awards during the year were made on 28 february 2008
9 awards held by kevin beeston relate to his tenure as an executive director prior to september 2007
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 75 76 serco group plc
comparison of total shareholder returns
serco group plc total shareholder return tsr vs ftse 350 total return index
value of investment of £100 on 31 december 2003
in drawing this graph it has been assumed that all dividends paid have been reinvested  the tsr level shown at 31 december each year
is the average of the closing daily tsr levels for the 30day period up to and including that date the company’s tsr is compared to that
of the ftse 350 index which is a broad equity market index of which it is a constituent
as detailed earlier tsr is defined as the return shareholders would receive if they held a notional number of shares and received
dividends on those shares over a period of time it measures the percentage growth in the company’s share price together with the value
of any dividends paid assuming that the dividends are reinvested into the company’s shares
31 dec 03
75
100
125
150
175
200
225
250
275
300
31 dec 04 31 dec 05 31 dec 06 31 dec 07 31 dec 08
ftse 350 index serco
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 76 serco group plc    77
pensions and life assurance
this section has been audited by deloitte llp 
the directors receive pension and life assurance benefits consistent with those provided
by other leading companies
the details of the defined benefit schemes operated by the group are set out in the note
on page 118  in the event of death in service the serco supplementary death benefit
scheme provides for a lump sum payment
the accrued pension benefits of all directors under the serco pension and life assurance
scheme which is a defined benefit scheme are as follows
increase gross increase in
transfer value transfer value in transfer increase accrued value of
of accrued of accrued director’s value in accrued pension increase in total
benefits at benefits at contributions during pension during the accrual accrued
31 december 31 december for the the year during year net of over the pension at
2008 2007 year 4  the year inflation year year end
1 2 3 123 5 6 7 8
££££££ £ £
kevin beeston 3591340 2921990  669350 6580 00 00 278686
christopher hyman 1275901 776483  499418 21150 19686 307455 81694
andrew jenner 628494 363309  265185 12773 11989 166652 45213
grant rumbles 2720190 2164769  555421 6949 3566 66071 146833
notes
a the total accrued pension shown is that which would be paid annually on retirement based on pensionable
service to the end of this year or for kevin beeston and grant rumbles to 5 april 2006 when they opted out of
the scheme  the increase in accrued pension during the year is shown both as a gross increase and excluding
any increase in respect of inflation 
b the pension which kevin beeston had accrued up to 5 april 2006 is increased in line with his pensionable
remuneration averaged over three years since 5 april 2006  the increase in his accrued pension over the year
to 31 december 2008 is entirely due to inflation
c grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment
on 16 may 2008  the pensions note covers accrual over the period to leaving employment  the pension which
grant rumbles had accrued up to 5 april 2006 was increased in line with his pensionable remuneration
averaged over three years from 5 april 2006 to 16 may 2008 when he left service  
d the increase in the accrued pensions of christopher hyman and andrew jenner allow for both the increase in
their pensionable salaries over the year and for the accrual of a further year’s pensionable service as a result of a
further year’s active membership of the scheme
e transfer values have been calculated in accordance with the amended transfer value regulations which apply after
1 october 2008  the assumptions to be used for calculating transfer values after this date were agreed by the
trustees and the methodology for setting these assumptions has remained the same as for last year’s
calculations  the difference between the transfer values at the beginning and end of the year shown in 4
includes not only the effect of the increase in accrual and salaries but also the effect of fluctuations in the transfer
value due to factors beyond the control of the company and the directors such as stock market movements
f the value of the net increase in accrual represents the incremental value to the director of his service during the
year calculated on the assumption that his service terminated at the year end or 5 april 2006 in the case of
kevin beeston and grant rumbles  it is based on the increase in the accrued pension net of inflation  
g transfer values disclosed do not represent the sum paid or payable to the individual director instead they
represent a potential liability of the pension scheme
h all directors who are currently active members of the scheme have opted to have their contributions paid by the
company under a salary sacrifice arrangement and hence no contributions were paid by the directors during the
year
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 77 78 serco group plc
share dilution
awards granted under the serco group
plc share plans are met either by the issue
of new shares or by shares held in trust
when awards vest  the committee
monitors the number of shares issued
under its various share plans and their
impact on dilution limits  the relevant
dilution limits established by the
association of british insurers in respect of
all share plans 10 in any rolling ten year
period and discretionary share plans 5
in any rolling ten year period were based
on the company’s issued share capital at
31 december 2008 513 and 383
respectively
the group has an employee benefit trust
which is administered by an independent
trustee and which holds ordinary shares in
the company to meet various obligations
under the share plans
in july 2008 a loan of £9 million was made
to the employee benefit trust to ensure
sufficient shares were available to meet its
ongoing liabilities
the trust held 4849759 and 5650253
ordinary shares at 1 january 2008 and 31
december 2008 respectively
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
26 february 2009
serco ar2008 p39 qxdserco ar08  design  19032009  1630  page 78 serco group plc    79
independent auditors’ report
independent auditors’ report
to the members of serco
group plc
we have audited the group financial
statements of serco group plc for the
year ended 31 december 2008 which
comprise the consolidated income
statement the consolidated statement of
recognised income and expense the
consolidated balance sheet the
consolidated cash flow statement and
the related notes 1 to 38 these group
financial statements have been prepared
under the accounting policies set out
therein we have also audited the
information in the remuneration report
that is described as having been audited
we have reported separately on the 
parent company financial statements 
of serco group plc for the year ended 
31 december 2008
this report is made solely to the
company’s members as a body in
accordance with section 235 of the
companies act 1985 our audit work has
been undertaken so that we might state to
the company’s members those matters
we are required to state to them in an
auditors’ report and for no other purpose
to the fullest extent permitted by law we
do not accept or assume responsibility to
anyone other than the company and the
company’s members as a body for our
audit work for this report or for the
opinions we have formed
respective responsibilities of
directors and auditors
the directors’ responsibilities for preparing
the annual review and accounts the
remuneration report and the group
financial statements in accordance with
applicable law and international financial
reporting standards ifrss as adopted
by the european union are set out in the
statement of directors’ responsibilities
our responsibility is to audit the group
financial statements in accordance with
relevant legal and regulatory requirements
and international standards on auditing
uk and ireland
we report to you our opinion as to
whether the group financial statements
give a true and fair view whether the
group financial statements have been
properly prepared in accordance with the
companies act 1985 and article 4 of the
ias regulation and whether the part of
the remuneration report described as
having been audited has been properly
prepared in accordance with the
companies act 1985 we also report to
you whether in our opinion the information
given in the directors’ report is consistent
with the group financial statements the
information given in the directors’ report
includes that specific information
presented in the chairman’s statement
and the business review that is cross
referred from the directors’ report
in addition we report to you if in our
opinion we have not received all the
information and explanations we require for
our audit or if information specified by law
regarding directors’ remuneration and
other transactions is not disclosed
we review whether the corporate
governance report reflects the
companys compliance with the nine
provisions of the 2006 combined code
specified for our review by the listing
rules of the financial services authority
and we report if it does not we are not
required to consider whether the boards
statements on internal control cover all
risks and controls or form an opinion on
the effectiveness of the groups corporate
governance procedures or its risk and
control procedures
serco ar2008 p79 qxdserco ar08  design  19032009  1629  page 79 we read the other information contained in
the annual review and accounts as
described in the contents section and
consider whether it is consistent with the
audited group financial statements the
other information comprises only the
directors’ report the chairmans
statement the unaudited part of the
remuneration report the business
review and the corporate governance
report we consider the implications for
our report if we become aware of any
apparent misstatements or material
inconsistencies with the group financial
statements our responsibilities do not
extend to any further information outside
the annual review and accounts 
basis of audit opinion
we conducted our audit in accordance
with international standards on auditing
uk and ireland issued by the auditing
practices board an audit includes
examination on a test basis of evidence
relevant to the amounts and disclosures in
the group financial statements and the
part of the remuneration report to be
audited it also includes an assessment of
the significant estimates and judgements
made by the directors in the preparation of
the group financial statements and of
whether the accounting policies are
appropriate to the groups circumstances
consistently applied and adequately
disclosed
we planned and performed our audit so
as to obtain all the information and
explanations which we considered
necessary in order to provide us with
sufficient evidence to give reasonable
assurance that the group financial
statements and the part of the
remuneration report to be audited are
free from material misstatement whether
caused by fraud or other irregularity or
error in forming our opinion we also
evaluated the overall adequacy of the
presentation of information in the group
financial statements and the part of the
remuneration report to be audited
opinion
in our opinion
• the group financial statements give a
true and fair view in accordance with
ifrss as adopted by the european
union of the state of the groups affairs
as at 31 december 2008 and of its profit
for the year then ended
• the group financial statements have
been properly prepared in accordance
with the companies act 1985 and
article 4 of the ias regulation 
• the part of the remuneration report
described as having been audited has
been properly prepared in accordance
with the companies act 1985 and
• the information given in the directors’
report is consistent with the group
financial statements
deloitte llp
chartered accountants and registered
auditors 
london united kingdom
26 february 2009
80 serco group plc
independent auditors’ report continued
serco ar2008 p79 qxdserco ar08  design  19032009  1629  page 80 serco group plc    81
2008 2007
note £m £m
continuing operations
revenue 45 31235 28107
cost of sales 26667 24045
gross profit 4568 4062
administrative expenses 2916 2642
other expenses – amortisation of intangibles arising on acquisition 14 92 86
total administrative expenses 3008 2728
operating profit 56 1560 1334
investment revenue 8 82 122
finance costs 9 281 310
profit before tax 1361 1146
tax 10 365 322
profit for the year 996 824
attributable to
equity holders of the parent 995 819
minority interest 01 05
earnings per share eps
basic eps 12 2049p 1698p
diluted eps 12 2018p 1674p
2008 2007
note £m £m
net actuarial gain on defined benefit pension schemes 2832 87 622
actuarial gainloss on reimbursable rights 2832 506 194
net exchange gain on translation of foreign operations 32 541 128
net fair value gain on cash flow hedges during the year 32 142 90
tax charge on items taken directly to equity 32 213 115
recycling of cumulative net hedging reserve on disposal 32 07 
net income recognised directly in equity 1056 531
profit for the year 996 824
total recognised income and expense for the year 2052 1355
attributable to
equity holders of the parent 2051 1349
minority interest 01 06
consolidated income statement
for the year ended 31 december 2008
consolidated statement of recognised income and expense
for the year ended 31 december 2008
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 81 2008 2007
note £m £m
noncurrent assets
goodwill 13 9647 5421
other intangible assets 14 1913 1394
property plant and equipment 17 1154 951
trade and other receivables 20 1211 1046
retirement benefit assets 28 624 
deferred tax assets 23 196 516
derivative financial instruments 27 56 12
14801 9340
current assets
inventories 19 502 463
trade and other receivables 20 7195 5736
cash and cash equivalents 21 2508 1850
derivative financial instruments 27 50 15
10255 8064
total assets 25056 17404
current liabilities
trade and other payables 25 7547 6700
current tax liabilities 195 148
obligations under finance leases 24 45 77
loans 22 368 135
derivative financial instruments 27 42 21
8197 7081
noncurrent liabilities
trade and other payables 25 355 133
obligations under finance leases 24 127 87
loans 22 7109 3174
derivative financial instruments 27 04 112
retirement benefit obligations 28 1771 1426
provisions 29 381 186
deferred tax liabilities 23 259 220
10006 5338
total liabilities 18203 12419
net assets 6853 4985
equity
share capital 30 97 97
share premium account 31 3011 2993
capital redemption reserve 01 01
retained earnings 32 3398 2606
retirement benefit obligations reserve 32 477 902
sharebased payment reserve 32 400 346
own shares reserve 32 197 151
hedging and translation reserve 32 619 18
equity attributable to equity holders of the parent 6852 4972
minority interest 32 01 13
total equity 6853 4985
the financial statements were approved by the board of directors on 26 february 2009 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
82 serco group plc
consolidated balance sheet
at 31 december 2008
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 82 serco group plc    83
2008 2007
note £m £m
net cash inflow from operating activities 33 1626 1341
investing activities
interest received 73 103
disposal of business undertakings 16 19 25
proceeds from disposal of intangible assets  17
proceeds from disposal of property plant and equipment 175 29
acquisition of subsidiaries net of cash acquired 15 3222 91
purchase of other intangible assets 204 306
purchase of property plant and equipment 326 262
net cash outflow from investing activities 3485 485
financing activities
interest paid 303 342
dividends paid 11 216 179
dividend paid to minority interest  12
repayment of loans 786 746
repayment of non recourse loans 75 83
new loan advances 3974 22
other financing 170 
capital element of finance lease repayments 86 84
purchase of own shares for employee benefit trust esop 92 
proceeds from issue of share capital and exercise of share options 54 171
net cash inflowoutflow from financing activities 2300 1253
net increasedecrease in cash and cash equivalents 441 397
cash and cash equivalents at beginning of year 1850 2179
net exchange gain 217 68
cash and cash equivalents at end of year 21 2508 1850
consolidated cash flow statement
for the year ended 31 december 2008
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 83 84 serco group plc
notes to the consolidated financial statements
1 general information
serco group plc the group is a company incorporated in the united kingdom under the companies act 1985 the address of the
registered office is serco house 16 bartley wood business park bartley way hook hampshire rg27 9uy  
these consolidated financial statements the financial statements are presented in pounds sterling because this is the currency of the
primary economic environment in which the group operates foreign operations are included in accordance with the policies set out 
in note 2
2 significant accounting policies
basis of accounting
the financial statements on pages 81 to 135 have been prepared in accordance with international financial reporting standards ifrss
adopted for use in the european union and therefore the group financial statements comply with article 4 of the eu ias regulation
the financial statements have been prepared on the historical cost basis the principal accounting policies adopted are set out below 
and have been applied consistently in the current and preceding financial year
ifric 14 ‘ias 19  the limit on a defined benefit asset minimum funding requirements and their interaction’ is effective from 
1 january 2008 the group has considered ifric 14 when determining the value of all pension assets and liabilities
as discussed in more detail in the finance review the financial statements have been prepared on a going concern basis
presentation of financial information
the primary statements within the financial information contained in this document have been presented in accordance with 
ias 1 ‘presentation of financial statements’ 
basis of consolidation
the consolidated financial statements incorporate the financial statements of the company entities controlled by the company 
its subsidiaries and entities jointly controlled by the company its joint ventures made up to 31 december each year control is 
achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain 
benefits from its activities
the results of subsidiaries and joint ventures acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition or up to the effective date of disposal as appropriate
where necessary adjustments are made to the financial statements of subsidiaries and joint ventures to bring accounting policies used
into line with those used by the group
all intragroup transactions balances income and expenses are eliminated on consolidation
minority interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the group and is presented within
equity in the consolidated balance sheet separately from parent shareholders’ equity
business combinations
the acquisition of subsidiaries is accounted for using the purchase method the cost of the acquisition is measured at the aggregate of
the fair values at the date of exchange of assets given liabilities incurred or assumed and equity instruments issued by the group in
exchange for control of the acquiree plus any costs directly attributable to the business combination the acquiree’s identifiable assets
liabilities and contingent liabilities that meet the conditions for recognition under ifrs 3 ‘business combinations’ are recognised at their fair
value at the acquisition date
goodwill arising on acquisition is recognised as an asset and initially measured at cost being the excess of the cost of the business
combination over the group’s interest in the net fair value of the identifiable assets liabilities and contingent liabilities recognised if after
reassessment the group’s interest in the net fair value of the acquiree’s identifiable assets liabilities and contingent liabilities exceeds the
cost of the business combination the excess is recognised immediately in the income statement
the interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets
liabilities and contingent liabilities recognised unless there is an unconditional obligation to purchase the remaining shares and the minority
has no right to future dividend flows
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 84 serco group plc    85
2 significant accounting policies continued
goodwill
goodwill arising on consolidation represents the excess of the cost of acquisition over the group’s interest in the fair value of the identifiable
net assets and liabilities of a subsidiary associate or jointlycontrolled entity at the date of acquisition goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less any accumulated impairment losses goodwill which is recognised as an asset is
reviewed for impairment at least annually any impairment is recognised immediately in profit or loss and is not subsequently reversed 
for the purpose of impairment testing goodwill is allocated to each of the group’s cashgenerating units expected to benefit from the
synergies of the combination cashgenerating units to which goodwill has been allocated are tested for impairment annually or more
frequently when there is an indication that the unit may be impaired if the recoverable amount of the cashgenerating unit is less than the
carrying amount of the unit the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit prorata on the basis of the carrying amount of each asset in the unit an impairment loss recognised
for goodwill is not reversed in a subsequent period
on disposal of a subsidiary associate or jointlycontrolled entity the attributable amount of goodwill is included in the determination of the
profit or loss on disposal
goodwill arising on acquisitions before the date of transition to ifrs has been retained at the previous uk gaap amounts subject to
being tested for impairment at that date goodwill written off to reserves under uk gaap prior to 1998 has not been reinstated and is not
included in determining any subsequent profit or loss on disposal
investments in joint ventures
the group’s investments in joint ventures are reported in the financial statements using the proportionate consolidation method 
whereby the group’s share of each of the assets liabilities income and expenses of its joint ventures is combined line by line with 
similar items in the group’s financial statements or reported as separate line items within the group’s financial statements
revenue recognition
revenue is measured at the fair value of the consideration received or receivable and represents amounts due for goods and services
provided in the normal course of business net of discounts vat and other salesrelated taxes
sales of goods are recognised when goods are delivered and title has passed
interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable 
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s 
net carrying amount
dividend income from investments is recognised when the shareholders’ rights to receive payment have been established
revenue from longterm projectbased contracts is recognised in accordance with the group’s accounting policy below
longterm projectbased contracts
the group has a number of longterm contracts for the provision of complex projectbased services where the outcome of such 
longterm projectbased contracts can be measured reliably revenue and costs are recognised by reference to the stage of completion 
of the contract activity at the balance sheet date in accordance with ias 18 ‘revenue’ and ias 11 ‘construction contracts’ this is
measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs except
where this would not be representative of the stage of completion variations in contract work claims and incentive payments are included
to the extent that they have been agreed with the customer or are virtually certain of being received
where the outcome of a longterm projectbased contract cannot be estimated reliably contract revenue is recognised to the extent of
contract costs that it is probable will be recovered contract costs are recognised as expenses in the period in which they are incurred
when it is probable that the total contract costs will exceed total contract revenue the expected loss is recognised as an 
expense immediately
all bid costs are expensed through the income statement up to the point where contract award or full recovery of costs is virtually certain
bid costs incurred after this point are then capitalised within trade and other receivables on contract award these bid costs are amortised
through the income statement over the contract period by reference to the stage of completion of the contract activity at the balance
sheet date phasein costs directly related to phasein programmes of contracts are treated as an integral part of contract costs and are
recognised on a straightline basis over the life of the contract
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 85 86 serco group plc
2 significant accounting policies continued
segmental information
segmental information is based on two segment formats the primary format reflects the group’s management structure whereas the
secondary format is geographicallyorientated
items excluded from segments comprise corporate expenses specific corporate expenses are allocated to the corresponding segments
segment assets comprise goodwill other intangible assets property plant and equipment inventories trade and other receivables
excluding corporation tax recoverable and retirement benefit assets liabilities comprise trade and other payables and retirement 
benefit obligations  
inventories
inventories are stated at the lower of cost and net realisable value and comprise service spares parts awaiting installation and longterm
projectbased contract balances cost comprises direct materials and where applicable direct labour costs that have been incurred in
bringing the inventories to their present location and condition 
leases
leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee all other leases are classified as operating leases
assets held under finance leases are recognised as assets of the group at fair value or if lower at the present value of minimum lease
payments determined at the inception of the lease the corresponding liability to the lessor is included in the balance sheet as a finance
lease obligation lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability finance charges are charged directly against income unless they are
directly attributable to a qualifying asset in which case they are capitalised in accordance with the group’s general policy on borrowing
costs see below
total rentals payable under operating leases are charged to income on a straightline basis over the term of the relevant lease
foreign currencies
transactions in currencies other than pounds sterling are recorded at the rates of exchange on the dates of the transactions 
at each balance sheet date monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date nonmonetary assets and liabilities carried at fair value that are denominated in foreign currencies 
are translated at the date when the fair value was determined gains and losses arising on retranslation are included in the net profit or
loss for the period except for exchange differences arising on nonmonetary assets and liabilities where the changes in fair value are
recognised directly in equity in the statement of recognised income and expense sorie
on consolidation the assets and liabilities of the group’s overseas operations are translated at exchange rates prevailing on the balance
sheet date income and expense items are translated at the average exchange rates for the period exchange differences arising if any
are recognised directly within equity in the group’s hedging and translation reserve such translation differences are recognised as income
or expenses in the period in which the operation is disposed of
goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate
borrowing costs
borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale no such borrowing costs have been capitalised in the year
all other borrowing costs are recognised as an income or expense in the period in which they are incurred
retirement benefit costs
payments to defined contribution pension schemes are charged as an expense as they fall due
for defined benefit pension schemes the cost of providing benefits is determined using the projected unit credit method with actuarial
valuations being carried out at each balance sheet date actuarial gains and losses are recognised in full in the period in which they occur
they are recognised outside the income statement and are presented in the sorie
the current service cost represents the increase in the present value of the plan liabilities expected to arise from employee service in the
current period
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 86 serco group plc    87
2 significant accounting policies continued
retirement benefit costs continued
past service cost is recognised immediately to the extent that the benefits are already vested and is amortised on a straightline basis
over the average period until the benefit becomes vested gains and losses on curtailments or settlements are recognised in the period in
which the curtailment or settlement occurs
the retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted
for unrecognised past service costs and as reduced by the fair value of scheme assets any asset resulting from this calculation is limited
to past service cost plus the present value of available refunds and reductions in future contributions to the plan
the economic benefit from refunds is only recognised to the extent that the group has an unconditional right to receive a refund
to the extent that an economic benefit is available as a reduction in contributions and there is a minimum funding requirement the
economic benefit available as a reduction in contributions is calculated at the present value of
a the estimated future service cost in each year less
b the estimated minimum funding contributions required in respect of the future accrual and benefits in that year
defined benefit obligations arising from contractual obligations
where the group takes on a contract and assumes the obligation to contribute variable amounts to the defined benefit pension scheme
throughout the period of the contract and it is not virtually certain that the contributions will be recovered from the customer the group’s
share of the defined benefit obligation less its share of the pension scheme assets that it will fund over the period of the contract is
recognised as a liability at the start of the contract with a corresponding amount being recognised as an intangible asset the intangible
asset which reflects the group’s right to manage and operate the contract is amortised over the contract period the group’s share of
the scheme assets and liabilities is calculated by reducing the scheme assets and liabilities by a franchise adjustment the franchise
adjustment represents the amount of scheme deficits that will be funded outside the contract period subsequent actuarial gains and
losses in relation to the group’s share of pension obligations are recognised outside the income statement and are presented in the sorie
where the group takes on a contract and assumes the obligation to contribute variable amounts to the defined benefit pension scheme
throughout the period of the contract and it is virtually certain that the contributions will be recovered from the customer the group’s share
of the defined benefit obligation less its share of the pension scheme assets are recognised as a liability at the start of the contract with a
corresponding amount being recognised as a financial asset at fair value being the fair value of the reimbursable rights in the
consolidated income statement the expense relating to the defined benefit plan is presented net of the amount recognised for
reimbursement subsequent actuarial gains and losses in relation to the group’s share of pension obligations are recognised outside the
income statement and are presented in the sorie the change in fair value of the reimbursable rights that is not presented in the income
statement is reported in the sorie
multiemployer pension schemes
multiemployer pension schemes are classified as a defined contribution pension scheme or a defined benefit pension scheme under the
terms of the scheme
when sufficient information is not available to use defined benefit accounting for a multiemployer defined benefit pension scheme the
group accounts for the scheme as if it were a defined contribution scheme
taxation
the tax expense represents the sum of current tax expense and deferred tax expense
current tax expense is based on taxable profit for the year taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible the group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by
the balance sheet date
deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for accounting purposes
deferred tax liabilities are generally recognised for all taxable temporary differences deferred tax assets are generally recognised for all
deductible temporary differences carry forward of unused tax credits and unused tax losses to the extent that it is probable that taxable
profit will be available against which these items can be utilised
deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of an
asset and liability in a transaction other than a business combination and at the time of the transaction affects neither the tax profit nor
the accounting profit
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 87 88 serco group plc
2 significant accounting policies continued
taxation continued
deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint ventures except
where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future
the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be utilised
deferred tax is measured at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based
upon tax rates and legislation that have been enacted or substantively enacted at the balance sheet date deferred tax is charged or
credited in the income statement except where it relates to items charged or credited directly to equity in which case the deferred tax is
also recognised in equity
deferred tax assets and liabilities are offset when there is a legal enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same tax authority where the group intends to settle its current tax assets and
liabilities on a net basis
property plant and equipment
assets held for use in the rendering of services or for administrative purposes are stated in the balance sheet at cost net of accumulated
depreciation and any provision for impairment
depreciation is provided on a straightline basis at rates to reduce the assets to their residual value over their estimated useful lives
the principal annual rates used are
freehold buildings 25
shortleasehold building improvements the higher of 10 or the rate produced by the lease term
machinery 15  20
motor vehicles 10  50
furniture 10
office equipment 20  33
leased equipment the higher of the rate produced by the lease term or useful life
the gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the income statement
research and development costs
expenditure on research is recognised as an expense in the period in which it is incurred development costs are expensed in the period
in which the costs are incurred unless the criteria for capitalisation is met see other intangible assets policy
other intangible assets
customer relationships represent the value of contracts acquired on the acquisition of subsidiaries and are amortised over the average
length of contracts
development expenditure is capitalised as an intangible asset only if all of the following conditions are met
• an asset is created that can be identified
• it is probable that the asset created will generate future economic benefits and
• the development cost of the asset can be measured reliably
development expenditure is amortised over the period in which the group is expected to benefit this period is between three to eight
years or the length of the contract if longer provision is also made for any impairment all other development expenditure is written off as
incurred assets under the course of construction are not depreciated
licences comprise premiums paid for the acquisition of licences which are amortised on a straightline basis over the life of the licence
franchises represent costs incurred in obtaining franchise rights and franchise goodwill arising on the acquisition of franchises these are
amortised on a straightline basis over the life of the franchise
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 88 serco group plc    89
2 significant accounting policies continued
other intangible assets continued
pension related intangibles represent assets arising in relation to the group’s right to manage and operate contracts where there is a
defined benefit pension scheme and it is not virtually certain that contributions will be recovered from the customer but where the group’s
obligation to contribute to the scheme ends when the contract ends the intangible assets represent the group’s share of scheme net
liabilities on the date that contracts commence and are amortised on a straightline basis over the contract life
impairment of tangible and intangible assets
annually the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss if any such indication exists the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss if any where the asset does not generate cash flows that are independent from other
assets the group estimates the recoverable amount of the cashgenerating unit cgu to which the asset belongs a cgu is the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash flows of other assets or groups
of assets the goodwill acquired in a business combination for the purpose of impairment testing is allocated to cgus that are expected
to benefit from the synergies of the combination  
the recoverable amount is the higher of fair value less costs to sell and value in use in assessing value in use the estimated future cash
flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted
if the recoverable amount of an asset or cgu is estimated to be less than its carrying amount the carrying amount of the asset or cgu
is reduced to its recoverable amount an impairment loss is recognised as an expense immediately impairment losses recognised in
respect of cgus are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying
amount of the other assets in the unit group of units on a prorata basis
an impairment loss in respect of goodwill is not reversed in respect of other assets impairment losses recognised in prior periods are
assessed at each reporting date for indications that the loss has decreased or no longer exists where an impairment loss subsequently
reverses the carrying amount of the asset or cgu is increased to the revised estimate of its recoverable amount but so that the
increased carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation
had no impairment loss been recognised for the asset or cgu in prior years a reversal of an impairment loss is recognised as income
immediately
impairment losses and reversals are included within other expenses within the consolidated income statement
sharebased payment
the group has applied the requirements of ifrs 2 ‘sharebased payment’ in accordance with the transitional provisions ifrs 2 has
been applied to all grants of equity instruments after 7 november 2002 that were not fully vested as of 1 january 2005
the group issues equitysettled sharebased awards to certain employees and operates an inland revenue approved save as you earn
saye share option scheme open to eligible employees which allows the purchase of shares at a discount these are measured at fair
value at the date of grant the fair value is expensed on a straightline basis over the vesting period based on the group’s estimate of
shares that will eventually vest
fair value is measured by use of the black scholes binomial lattice or monte carlo simulation models depending on the type of scheme
as set out in note 35 the expected life used in the models has been adjusted based on management’s best estimate for the effects of
nontransferability exercise restrictions and behavioural considerations where relevant the value of the option has also been adjusted to
take account of market conditions applicable to the option
trade receivables
trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method
less provision for impairment a provision for impairment of trade receivables is established when there is objective evidence that the
group will not be able to collect all amounts due according to the original terms of the contract significant financial difficulties of the
debtor probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments are considered
indicators that a trade receivable is impaired the amount of the provision is based on management’s best estimate of the likelihood of the
recoverable amount the carrying amount of the asset is reduced through the use of a bad debt provision account and the amount of the
loss is recognised in the income statement within administrative expenses when a trade receivable is uncollectible it is written off against
the bad debt provision account for trade receivables subsequent recoveries of amounts previously written off are credited against
administrative expenses
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 89 90 serco group plc
2 significant accounting policies continued
cash and cash equivalents
cash and cash equivalents comprise cash in hand and balances with banks and similar institutions which are readily convertible to known
amounts of cash and which are subject to insignificant changes in value and have a maturity of three months or less this definition is also
used for the consolidated cash flow statement
dividends
dividends are recorded in the group’s consolidated financial statements in the period in which they are approved by the 
group’s shareholders
loans
loans are initially stated at the amount of the net proceeds after deduction of issue costs the carrying amount of loans hedged by
derivatives is increased by the finance cost in respect of the accounting period and reduced by payments made in the period loans
which are unhedged are stated at amortised cost with accrued interest recorded separately from the associated borrowings within 
current liabilities
loans are described as non recourse loans and classified as such only if no group company other than the relevant borrower has an
obligation under a guarantee or other arrangement to repay the debt
derivative financial instruments and hedging activities
the group enters into a variety of derivative financial instruments to manage the exposure to interest rate and foreign exchange risk
including foreign exchange forward contracts and interest rate swaps further details of derivative financial instruments are given in 
note 27 to the financial statements
derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair
value at each balance sheet date a derivative with a positive fair value is recognised as a financial asset whereas a derivative with a
negative fair value is recognised as a financial liability the resulting gain or loss is recognised in profit or loss immediately unless the
derivative is designated and effective as a hedging instrument in which event the timing of the recognition in profit or loss depends on the
nature of the hedge relationship the group designates certain derivatives as either hedges of the fair value of recognised assets or
liabilities or term commitments fair value hedges hedges of highly probable forecast transactions or hedges of foreign currency risk of
firm commitments cash flow hedges or hedges of net investments in foreign operations
a derivative is presented as a noncurrent asset or a noncurrent liability if the remaining maturity of the instrument is more than 12 months
and it is not expected to be realised or settled within 12 months other derivatives are presented as current assets or current liabilities
embedded derivatives
derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through 
profit or loss 
hedge accounting
the group designates certain hedging instruments which include derivatives embedded derivatives and nonderivatives in respect of
foreign currency risk as either fair value hedges cash flow hedges or hedges of net investments in foreign operations hedges of foreign
exchange risk on firm commitments are accounted for as cash flow hedges
at the inception of the hedge relationship the entity documents the relationship between the hedging instrument and the hedged item
along with its risk management objectives and its strategy for undertaking various hedge transactions furthermore at the inception of the
hedge and on an ongoing basis the group documents whether the hedging instrument that is used in a hedging relationship is highly
effective in offsetting changes in fair values or cash flows of the hedged item 
note 27 sets out details of the fair values of the derivative instruments used for hedging purposes movements in the hedging and
translation reserve in equity are detailed in note 32 
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 90 serco group plc    91
2 significant accounting policies continued
derivative financial instruments and hedging activities continued
fair value hedges
changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately
together with any changes in the fair value of the hedged item that is attributable to the hedged risk the change in the fair value of the
hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in the line of the income statement
relating to the hedged item 
hedge accounting is discontinued when the group revokes the hedging relationship the hedging instrument expires or is sold terminated
or exercised or no longer qualifies for hedge accounting the adjustment to the carrying amount of the hedged item arising from the
hedged risk is amortised to profit or loss from that date 
cash flow hedges
the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity
the gain or loss relating to the ineffective portion is recognised immediately in profit or loss and is included in the ‘other gains and losses’
line of the income statement 
amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same
line of the income statement as the recognised hedged item however when the forecast transaction that is hedged results in the
recognition of a nonfinancial asset or a nonfinancial liability the gains and losses previously deferred in equity are transferred from equity
and included in the initial measurement of the cost of the nonfinancial asset or nonfinancial liability
hedge accounting is discontinued when the group revokes the hedging relationship the hedging instrument expires or is sold terminated
or exercised or no longer qualifies for hedge accounting any cumulative gain or loss deferred in equity at that time remains in equity and
is recognised when the forecast transaction is ultimately recognised in profit or loss when a forecast transaction is no longer expected to
occur the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss 
provisions
provisions are recognised when the group has a present obligation as a result of a past event and it is probable that the group will be
required to settle that obligation provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation
at the balance sheet date
new standards and interpretations not applied
at the date of authorisation of these financial statements the following standards and interpretations which have not been applied in these
financial statements were in issue but not yet effective and in some cases had not yet been adopted by the eu
international financial reporting standards ifrss
ifrs 1 amended  ias 27 amended cost of an investment in a subsidiary jointly controlled entity or associate
ifrs 2 amended sharebased payment – vesting conditions and cancellations
ifrs 3 revised 2008 business combinations
ifrs 8 operating segments
ias 1 revised 2007 presentation of financial statements
ias 23 revised 2007 borrowing costs
ias 27 revised 2008 consolidated and separate financial statements
ias 32 amended  ias 1 amended puttable financial instruments and obligations arising on liquidation
international financial reporting interpretations committee ifric
ifric 12 service concession arrangements
ifric 15 agreements for the construction of real estate
ifric 16 hedges of a net investment in a foreign operation
the directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group’s financial
statements in the period of initial application with the exception of additional segmental disclosures required by ifrs 8 and the treatment
of acquisition of subsidiaries when ifrs 3 comes into effect for business combinations for which the acquisition date is on or after the
beginning of the first annual period beginning on or after 1 july 2009 if ifrs 3 revised 2008 had been adopted in these accounts
directly attributable acquisitions costs of £80m would have been expensed during the year
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 91 3 critical accounting judgements and key sources of estimation uncertainty
critical judgements in applying the group’s accounting policies
in the process of applying the group’s accounting policies which are described in note 2 management has made the following
judgements that have the most significant effect on the amounts recognised in the financial statements apart from those involving
estimations which are dealt with below
revenue and profit recognition of longterm projectbased contracts
revenue and profit is recognised for certain longterm projectbased contracts based on the stage of completion of the contract activity
this is measured by the proportion of costs incurred to estimated wholelife contract costs except where this would not be representative
of the stage of completion  
key sources of estimation uncertainty
the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are 
discussed below
impairment of goodwill
determining whether goodwill is impaired requires an estimation of the value in use of the cashgenerating units to which goodwill has
been allocated the value in use calculation involves an estimation of the future cash flows of cashgenerating units and also the selection
of appropriate discount rates which involves judgement to use to calculate present values see note 13 the carrying value of goodwill is
£9647m 2007 £5421m at the balance sheet date
retirement benefit obligations
the calculation of retirement benefit obligations is dependent on material key assumptions including discount rates future returns on
assets and future contribution rates see note 28 the value of retirement benefit obligations at the balance sheet date is £1771m 
2007 £1426m the value of retirement benefit assets is £624m 2007 £nil details of the impact of changes in assumptions 
relating to retirement benefit obligations are disclosed in the finance review page 43
4 revenue
an analysis of the group’s revenue is as follows
2008 2007
£m £m
rendering of services 29503 26354
revenue from longterm projectbased contracts 1732 1753
revenue as disclosed in the consolidated income statement 31235 28107
investment revenue note 8 82 122
total revenue as defined in ias 18 31317 28229
92 serco group plc
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 92 serco group plc    93
5 segmental information
the group manages its business on a market segment basis and these segments are the basis on which the group reports its primary
segment information
market segments
civil government defence transport science total
year ended 31 december 2008 £m £m £m £m £m
revenue 11273 7858 6708 5396 31235
result
segment result 552 591 297 516 1956
corporate expenses 396
operating profit 1560
investment revenue 82
finance costs 281
profit before tax 1361
tax 365
profit for the year 996
capital expenditure including acquisitions
property plant and equipment 340 64 112 07 523
goodwill 2334 1342   3676
intangible assets – segments 398 253 17 08 676
intangible assets – corporate 70
746
depreciation and amortisation
depreciation 135 41 46 38 260
amortisation – segments 147 07 49 15 218
amortisation – corporate 75
293
segment assets
business segment assets 11382 5856 1685 2602 21525
corporate assets 676
22201
segment liabilities
business segment liabilities 3820 1757 1412 2499 9488
corporate liabilities 185
9673
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 93 94 serco group plc
5 segmental information continued
market segments
civil government defence transport science total
year ended 31 december 2007 £m £m £m £m £m
revenue 9522 7205 6550 4830 28107
result
segment result 468 498 267 457 1690
corporate expenses 356
operating profit 1334
investment revenue 122
finance costs 310
profit before tax 1146
tax 322
profit for the year 824
capital expenditure including acquisitions
property plant and equipment 158 53 102 16 329
goodwill 98  14  112
intangible assets – segments 118 12 13 05 148
intangible assets – corporate 162
310
depreciation and amortisation
depreciation 177 62 46 17 302
amortisation – segments 113 06 38 15 172
amortisation – corporate 60
232
segment assets
business segment assets 7763 2906 1499 2274 14442
corporate assets 561
15003
segment liabilities
business segment liabilities 2814 2338 1080 1794 8026
corporate liabilities 233
8259
geographical segments
united north europe and asia pacific
kingdom america middle east and india total 
year ended 31 december 2008 £m £m £m £m £m
revenue 23346 3699 2372 1818 31235
capital expenditure including acquisitions
property plant and equipment 195 64 38 226 523
goodwill 202 3052  422 3676
intangible assets 166 537  43 746
assets
geographical segment assets 12023 7310 1531 1337 22201
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 94 serco group plc    95
5 segmental information continued
geographical segments
united north europe and asia pacific
kingdom america middle east and india total 
year ended 31 december 2007 £m £m £m £m £m
revenue 21256 3009 2221 1621 28107
capital expenditure including acquisitions
property plant and equipment 192 12 30 95 329
goodwill 98  14  112
intangible assets 293 11 05 01 310
assets
geographical segment assets 11158 2078 1175 592 15003
2008 2007
£m £m
segment assets comprise
goodwill 9647 5421
other intangible assets 1913 1394
property plant and equipment 1154 951
trade and other receivables – noncurrent 1211 1046
retirement benefit assets 624 
inventories 502 463
trade and other receivables – current excluding tax recoverable 7150 5728
22201 15003
2008 2007
£m £m
segment liabilities comprise
trade and other payables – current 7547 6700
trade and other payables – noncurrent 355 133
retirement benefit obligations 1771 1426
9673 8259
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 95 96 serco group plc
6 operating profit
operating profit is stated after chargingcrediting
2008 2007
£m £m
net foreign exchange lossesgains 10 11
research and development costs 432 449
gainloss on disposal of property plant and equipment 46 13
depreciation of property plant and equipment note 17 260 302
amortisation of intangible assets – arising on acquisition note 14 92 86
amortisation of intangible assets – other note 14 201 146
staff costs note 7 13060 11836
bad debt provision charged to income statement note 20 13 05
fair value adjustment on financial instruments
 recycling of amounts on discontinued cash flow hedges 01 03
 forward foreign exchange contracts nondesignated hedges 13 11
operating lease payments 817 1084
operating lease income 01 01
amounts payable to deloitte llp and their associates by the company and its subsidiary undertakings in respect of audit and nonaudit
services are shown below
2008 2007
£m £m
fees payable to the company’s auditors for the audit of the company’s annual accounts 09 08
fees payable to the company’s auditors and their associates for other services to the group
 audit of the company’s subsidiaries pursuant to legislation 07 08
total audit fees 16 16
other services pursuant to legislation 02 02
tax services 02 04
other services 04 02
total nonaudit fees 08 08
7 staff costs
the average monthly number of employees including executive directors was
2008 2007
number number
civil government 19380 17916
defence 11564 11676
transport 7595 8114
science 3882 3525
corporate 263 214
total 42684 41445
average monthly numbers of employees for joint ventures are included on a proportionately consolidated basis in the table above
aggregate remuneration comprised
2008 2007
£m £m
wages and salaries 11140 10116
social security costs 991 920
other pension costs note 28 859 750
12990 11786
sharebased payment expense note 35 70 50
total 13060 11836
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 96 serco group plc    97
8 investment revenue
2008 2007
£m £m
net fair value adjustments on derivative financial instruments 03 03
interest receivable by pfi companies 10 32
interest receivable on other loans and deposits 69 55
net interest receivable on retirement benefit obligations note 28  32
82 122
9 finance costs
2008 2007
£m £m
interest payable on non recourse loans 27 37
interest payable on obligations under finance leases 13 10
interest payable on other loans 235 263
net interest payable on retirement benefit obligations note 28 06 
281 310
10 tax
2008 2007
£m £m
current tax
uk corporation tax 212 122
foreign tax 115 111
adjustment in respect of prior years
 uk corporation tax 39 39
 foreign tax 11 01
299 193
deferred tax 
current year 89 165
adjustment in respect of prior years 23 36
66 129
365 322
the charge for the year can be reconciled to the profit in the consolidated income statement as follows
2008 2007
£m £m
profit before tax 1361 1146
tax calculated at a rate of 285 2007 30 388 344
expenses not deductible for tax purposes 59 65
unrelieved tax losses and different tax rates on overseas earnings 27 32
untaxed income and the effect of the use of unrecognised tax losses 26 13
tax incentives 32 30
adjustments in respect of prior years 51 76
tax charge 365 322
the tax rate of 285 is derived from the blended statutory uk corporation tax rates for the year which reduced from 30 to 28 on 
1 april 2008
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 97 98 serco group plc
11 dividends
2008 2007
£m £m
amounts recognised as distributions to equity holders in the year
final dividend for the year ended 31 december 2007 of 302p per share on 4802 million ordinary shares 
2007 final dividend for the year ended 31 december 2006 of 255p per share on 4711 million ordinary shares 145 120
interim dividend for the year ended 31 december 2008 of 148p per share on 4803 million ordinary shares 
2007 interim dividend for the year ended 31 december 2007 of 123p per share on 4789 million ordinary shares 71 59
216 179
proposed final dividend for the year ended 31 december 2008 of 352p per share on 4811 million ordinary shares 
2007 302p on 4802 million ordinary shares 169 145
the proposed final dividend for 2008 is subject to approval by shareholders at the annual general meeting and has not been included as
a liability in these financial statements a dividend waiver is effective for those shares held on behalf of the company by its employee
share ownership trust note 32
12 earnings per share
basic and diluted earnings per ordinary share eps have been calculated in accordance with ias 33 ‘earnings per share’ eps is shown
both before and after amortisation of intangible assets arising on acquisition see note 14 to assist in the understanding of the underlying
performance of the business
the calculation of the basic and diluted eps is based on the following data
number of shares
2008 2007
millions millions
weighted average number of ordinary shares for the purpose of basic eps 4857 4824
effect of dilutive potential ordinary shares share options 73 68
weighted average number of ordinary shares for the purpose of diluted eps 4930 4892
earnings
2008 2007
per share per share
earnings amount earnings amount 
£m pence £m pence
earnings for the purpose of basic eps being net profit attributable to the equity 
holders of the parent 995 2049 819 1698
add back
amortisation of intangible assets arising on acquisition net of tax of £09m
2007 £09m 83 171 77 159
adjusted earnings before amortisation of intangible assets arising on acquisition 1078 2220 896 1857
earnings for the purpose of basic eps 995 2049 819 1698
effect of dilutive potential ordinary shares  031  024
diluted eps 995 2018 819 1674
at 31 december 2008 options over 1955000 2007 27000 shares were excluded from the weighted average number of shares used
for calculating diluted earnings per share because their exercise price was above the average share price for the year and they were
therefore antidilutive
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 98 serco group plc    99
13 goodwill
cost
£m
at 1 january 2007 5285
additions 112
exchange differences 24
at 1 january 2008 5421
additions 3676
exchange differences 550
at 31 december 2008 9647
the goodwill acquired in business combinations is allocated at acquisition to the cashgenerating units cgus that are expected to
benefit from that business combination goodwill has been allocated to cgus in the following business segments
cost
2008 2007
£m £m
civil government 5484 3255
defence 2806 970
science 1143 1023
transport 214 173
at 31 december 9647 5421
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired the
recoverable amount of each cgu is based on value in use calculations
key assumptions
the value in use calculations use cash flow projections based on financial plans approved by senior management covering a fiveyear
period the key assumptions used are discussed below
shortterm growth rates
shortterm revenue growth rates used in each cgu fiveyear plan are based on internal data regarding the current pipeline of
opportunities and published industry forecasts for the relevant market 
shortterm growth rates are tailored for each cgu taking into account the longterm contractual nature of revenues generated by the
group as at 31 december 2008 the group as a whole had revenue visibility of 90 for the next 12 month period based upon the order
book visibility of planned 2010 and 2011 revenues are already 76 and 65 respectively 
the order book at 31 december 2008 totalled £163bn appropriate new bid and rebid win rates are included within each cgu forecast
group wide these rates are 50 and 90 respectively 
further discussion of the group’s order book and pipeline is provided in the business review
terminal growth rates
the cash flows subsequent to the fiveyear period are based upon management’s estimate of the growth rates of the sectors in which the
cgus operate the terminal growth rates applied vary between 225 to 4 
these rates do not exceed the average longterm growth rates forecast for the individual market sectors
capital expenditure
forecast capital expenditure is based on past practices expectations on revenue growth and future expected capital requirements of
existing opportunities within the pipeline for each cgu
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 99 100 serco group plc
13 goodwill continued
discount rate
the underlying discount rate is based on the uk tenyear gilt rate adjusted for an equity risk premium and the systematic risk of the
group management uses this pretax discount rate and adjusts for the risks specific to each of the cgus including consideration of
• customer type
90 of the group’s revenues are derived from government contracts and the group’s management of credit risk is disclosed in note 26
in preparation of the impairment reviews an additional premium is added for new non government customers if in managements’ view
the credit risk is higher than other contracts within our portfolio
• contract length
the majority of the group’s contracts within the cgus are longterm in nature and the average length remaining on our significant
contracts is nine years for cgus with contracts of a shorter duration management consider whether it is appropriate to add a contract
length premium to the base discount rate
• acquisition
a higher discount rate is applied to acquisitions to reflect any implementation risks within the acquisition business model until these
entities have been fully integrated into the group structure
• geographic
consideration is given to the country in which a cgu operates and an adjustment is applied if management considers that the
economic risk is greater than that implicit in the base discount rate
• technology
if a cgu is reliant upon new technology implementations to secure future revenue streams an appropriate technology premium is
added to the base discount rate
the discount rate ranges applied are disclosed below
2008 2007
 
civil government 106 – 118 118 – 135
defence 106 – 116 113 – 123
science 106 – 118 113
transport 111 – 131 118
the principal movement in discount rates applied from 2007 to 2008 reflects the removal of acquisition premiums relating to acquisitions
in 2005 as the group now fully understands the operating model of these businesses 
sensitivities
sensitivity analysis has been undertaken on each goodwill impairment review by increasing the risk element of the discount rate and
other applicable variables for each cgu the following cgu impairment tests were noted 
• the principal cgu within the civil government segment is our core technology business the goodwill attributable to this cgu as at 
31 december 2008 was £2702m due to the potential impact of the adverse market conditions currently affecting the it sector the
group has undertaken extensive impairment testing including adjustments to growth rates discount rates and a reduction in significant
contract wins none of these impairment sensitivities either individually or combined resulted in the carrying value of goodwill in respect
of this business being reduced to the recoverable amount
• the transport segment contains six cgus including a cgu involved in the provision of aviation ground handling services with
attributable goodwill of £43m at the beginning of the financial period the fair value of goodwill was substantially in excess of its book
value owing to a contraction in the size of the business and the current adverse market conditions affecting the industry the
recoverable amount based on future cash flows has reduced as at 31 december 2008 the group has conducted sensitivity analysis
on the impairment testing of the cgu and has concluded that a reduction in operating margin growth of 50 would result in the cgu
requiring a goodwill impairment charge 
based on the group’s sensitivity analysis no reasonably possible change in assumptions resulted in the carrying value of the goodwill
being reduced to the recoverable amount with the exception of the cgu within the transport sector identified above
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 100 serco group plc    101
14 other intangible assets
acquisition related other
licences software and pension 
customer and development related 
relationships franchises expenditure intangibles total
£m £m £m £m £m
cost
at 1 january 2008 224 620 939 267 2050
arising on acquisition of a company 537  05  542
additions   204  204
exchange differences 14 61 46  121
at 31 december 2008 775 681 1194 267 2917
amortisation
at 1 january 2008 84 277 202 93 656
charge for the year 31 61 171 30 293
exchange differences 06 31 18  55
at 31 december 2008 121 369 391 123 1004
net book value
at 31 december 2008 654 312 803 144 1913
acquisition related other
licences software and pension 
customer and development related 
relationships franchises expenditure intangibles total
£m £m £m £m £m
cost
at 1 january 2007 220 548 617 267 1652
transfers   19  19
arising on acquisition of a company 04    04
additions   306  306
disposals  08 11  19
exchange differences  80 08  88
at 31 december 2007 224 620 939 267 2050
amortisation
at 1 january 2007 55 191 84 61 391
charge for the year 29 57 114 32 232
disposals  02   02
exchange differences  31 04  35
at 31 december 2007 84 277 202 93 656
net book value
at 31 december 2007 140 343 737 174 1394
the following amortisation rates have been determined for the intangible assets acquired during 2008
• software and development expenditure – over their estimated useful lives
• customer relationships – over average length of contracts acquired
amortisation of intangibles arising on acquisition consists of amortisation in relation to customer relationships and licences and franchises
and totals £92m 2007 £86m
the group is carrying £1194m in relation to software and development expenditure which includes assets relating to formula 100 the
group’s global sap rollout of £478m 2007 £453m the amortisation period of this asset has six years 2007 seven years remaining
the group is carrying £775m in relation to customer relationships of which the principal component is £518m acquired in the current
year relating to the si international inc acquisition the average remaining life of these customer relationship intangible assets is
approximately seven years
serco ar2008 p79 qxdserco ar08  design  20032009  1702  page 101 102 serco group plc
15 acquisitions 
si international inc
on 29 december 2008 serco acquired 100 of the issued share capital of si international inc si international for consideration of
£2958m in cash si international is a provider of information services technology and network solutions to the us government
due to the completion of the transaction being almost coterminous with the group’s own year end the fair values of si international’s
assets liabilities and contingent liabilities have been determined provisionally
the transaction was accounted for in accordance with ifrs 3 ‘business combinations’
net liabilities acquired were
provisional
fair value provisional
book value adjustments fair value 
£m £m £m
goodwill 1825 1825 
other intangible assets 153 365 518
property plant and equipment 91 38 53
trade and other receivables 938 23 915
cash and cash equivalents 132  132
trade and other payables 643 23 620
loans 699  699
deferred tax liabilities 112 30 142
provisions  251 251
net liabilities acquired 1685 1779 94
goodwill 3052
total consideration 2958
satisfied by
£m
purchase consideration 2898
directly attributable costs 60
total consideration 2958
net cash outflow arising on acquisition
£m
purchase consideration 2898
directly attributable costs 128
cash and cash equivalents acquired 132
2894
directly attributable costs include £68m of acquisition costs incurred by si international which were paid post acquisition in accordance with ifrs 3 these costs have not been
capitalised
due to the proximity of the acquisition date of 29 december 2008 to the group’s year end si international did not contribute to either the
revenue or the profit before tax of the group if the acquisition had taken place at the start of the year the group’s revenue and profit
before tax on a proforma basis would have been approximately £3083m and £137m higher respectively
si international and serco’s existing north american business will be combined and the combination will enhance serco’s ability to deliver
integrated solutions to the us federal government services market the goodwill arising on the acquisition of £3052m is attributable to the
anticipated profitability arising from new business and the anticipated future operating synergies from the combination
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 102 serco group plc    103
15 acquisitions continued
amtech private limited ‘infovision’
on 1 december 2008 the group acquired 60 of the issued share capital of infovision the group is unconditionally obligated to acquire
the remaining 40 of the issued share capital of infovision and as part of the purchase agreement the acquiree has waived all rights to
dividends as a result the group is accounting for infovision as a 100 subsidiary with no attributable minority interest consideration for
the acquisition of infovision was £442m consisting of £148m in cash of which £97m was paid in 2008 and £51m falls due in 2009
£278m in deferred consideration and £16m in directly attributable costs
due to the proximity of the transaction to the year end the fair values of infovision’s assets liabilities and contingent liabilities have been
determined provisionally
this transaction has been accounted for in accordance with ifrs 3 ‘business combinations’
net assets acquired were
provisional
fair value provisional
book value adjustments fair value 
£m £m £m
intangible assets  21 21
property plant and equipment 62 08 54
trade and other receivables 99  99
trade and other payables 80 24 104
loans 30  30
deferred tax liabilitiesassets 01 03 02
provisions 22  22
net assets acquired 28 08 20
goodwill 422
total consideration 442
satisfied by
£m
purchase consideration 426
directly attributable costs 16
total consideration 442
net cash outflow arising on acquisition
£m
purchase consideration paid in 2008 97
directly attributable costs 16
total consideration paid in 2008 113
purchase consideration due in 2009 51
164
deferred consideration 278
total consideration 442
deferred consideration is payable in two tranches in april 2010 and april 2011 deferred consideration of £278m represents the present value of management’s best estimate
of the expected liability as at 31 december 2008
infovision contributed £23m to revenue and £02m to the group’s profit before tax for the period between the date of acquisition and the
balance sheet date if the acquisition had taken place at the start of the year the group’s revenue and profit before tax on a proforma
basis would have been approximately £243m and £10m higher respectively
the purchase of infovision gives serco an operational foothold in the indian market this rapidly growing predominantly domestic bpo
business will be used to develop the serco brand and grow our market presence in a fast moving emerging market this future growth
potential has resulted in the recognition of goodwill of £422m
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 103 104 serco group plc
15 acquisitions continued
grosvenor health limited
on 30 may 2008 the group acquired 100 of the equity of grosvenor health limited grosvenor health for consideration of £194m 
in cash grosvenor health is a leading independent provider of occupational health in the uk
this transaction has been accounted for in accordance with ifrs 3 ‘business combinations’
net liabilities acquired were
fair value 
book value adjustments fair value 
£m £m £m
intangible assets 58 55 03
property plant and equipment 04 01 03
trade and other receivables 29 01 30
cash and cash equivalents 09  09
trade and other payables 61 08 53
net liabilities acquired 39 47 08
goodwill 202
total consideration 194
satisfied by
£m
purchase consideration 190
directly attributable costs 04
total consideration 194
net cash outflow arising on acquisition
£m
purchase consideration 190
directly attributable costs 04
cash and cash equivalents acquired 09
185
serco acquired grosvenor health to gain access to new markets the combination of serco’s management expertise and grosvenor
health’s specialist knowledge is expected to deliver growth in the coming years and the future potential of the combined entity has lead to
the recognition of goodwill of £202m
grosvenor health contributed £92m to revenue and £06m to the group’s profit before tax for the period between the date of acquisition
and the balance sheet date if the acquisition had taken place at the start of the year the group’s revenue and profit before tax on a
proforma basis would have been approximately £158m and £10m higher respectively
er consultants limited
as disclosed in the annual review and accounts for 2007 the group acquired er consultants limited on 31 december 2007 the
consideration in relation to this acquisition of £29m was paid in january 2008 together with £01m of related directly attributable costs
this has been reflected in the net cash outflow arising on acquisition in the cash flow statement for the year ended 31 december 2008
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 104 serco group plc    105
16 disposals
on 23 june 2008 serco disposed of its equity stake in kilmarnock prison services limited a 100 subsidiary
the financial effect of the disposal on the consolidated accounts for the period is as follows
net assets disposed of were
£m
trade and other receivables 28
pfi debtor 290
cash and cash equivalents 30
trade and other payables 23
derivative financial instruments 09
loans 209
tax liabilities 78
29
the gain on sale is calculated as follows
£m
cash consideration 62
recycling of hedging reserve 07
less
net assets disposed of 29
transaction costs 13
gain on sale 27
the net cash inflow arising on disposal is as follows
£m
cash consideration received 62
less
cash disposed of 30
cash inflow 32
transaction costs 13
net cash inflow 19
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 105 106 serco group plc
17 property plant and equipment
machinery  
short motor 
freehold leasehold vehicles 
land and building furniture and 
buildings improvements equipment total
£m £m £m £m
cost
at 1 january 2008 64 293 2055 2412
additions 01 59 353 413
disposals 01 10 229 240
arising on acquisition of subsidiaries  26 84 110
exchange differences 12 22 201 235
at 31 december 2008 76 390 2464 2930
accumulated depreciation and impairment
at 1 january 2008 25 140 1296 1461
charge for the year 03 35 222 260
disposals 01 08 103 112
exchange differences 06 12 149 167
at 31 december 2008 33 179 1564 1776
net book value
at 31 december 2008 43 211 900 1154
machinery  
short motor 
freehold leasehold vehicles 
land and building furniture and 
buildings improvements equipment total
£m £m £m £m
cost
at 1 january 2007 84 242 1832 2158
additions  48 270 318
disposals 10 12 116 138
reclassifications 12 12  
transfers   13 13
arising on acquisition of subsidiaries   11 11
eliminated on disposals of joint ventures 02 02 18 22
exchange differences 04 05 63 72
at 31 december 2007 64 293 2055 2412
accumulated depreciation and impairment
at 1 january 2007 25 112 1085 1222
charge for the year 02 31 269 302
eliminated on disposals 02 05 89 96
arising on acquisition of subsidiaries   02 02
eliminated on disposals of joint ventures 01 01 13 15
exchange differences 01 03 42 46
at 31 december 2007 25 140 1296 1461
net book value
at 31 december 2007 39 153 759 951
the carrying amount of the group’s machinery motor vehicles furniture and equipment includes an amount of £195m 2007 £174m in
respect of assets held under finance leases
the carrying amount of the group’s shortleasehold building improvements includes an amount of £24m 2007 £10m in respect of
assets held under finance leases
serco ar2008 p79 qxdserco ar08  design  20032009  1659  page 106 serco group plc    107
18 joint ventures
the group’s interests in joint ventures are reported in the consolidated financial statements using the proportionate consolidation method
the effect of the group’s joint ventures on the consolidated income statement and balance sheet is as follows
income statement
2008 2007
£m £m
revenue 7197 6801
expenses 6714 6389
operating profit 483 412
investment revenue 51 49
finance costs 07 09
profit before tax 527 452
tax 132 121
profit for the year 395 331
minority interest  03
share of posttax results of joint ventures 395 328
operating profit is after allocating £47m 2007 £40m of costs incurred by group
balance sheet
2008 2007
£m £m
noncurrent assets 1288 1026
current assets 1177 1242
current liabilities 1158 1233
noncurrent liabilities 1037 755
net assets 270 280
19 inventories
2008 2007
£m £m
service spares 164 149
parts awaiting installation 119 112
longterm projectbased contract balances 219 202
502 463
as at 31 december 2008 £nil 2007 £nil of advances received from customers were included within ‘longterm projectbased contract
balances’ as at 31 december 2008 the group had £nil 2007 £nil of contract retentions held by customers
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 107 108 serco group plc
20 trade and other receivables
2008 2007
£m £m
trade and other receivables noncurrent
pfi debtor  274
amounts owed by joint ventures 19 06
amounts recoverable on retirement benefit obligations note 28 896 607
other debtors 296 159
1211 1046
2008 2007
£m £m
trade and other receivables current
trade receivables 5251 4181
other amounts recoverable on contracts 615 503
pfi debtor  24
prepayments and accrued income 841 513 
other debtors 443 507
7150 5728
corporation tax recoverable 45 08
7195 5736
the pfi debtor in 2007 was funded by a non recourse loan of £225m
the directors estimate that the carrying amount of trade debtors approximates to their fair value
as of 31 december 2008 trade receivables of £27m 2007 £14m were considered to be impaired impairments to trade receivables are
based on specific estimated irrecoverable amounts and general provisions on outstanding balances greater than a year old unless there is
firm evidence that the balance is recoverable the amount of the provision was £27m as of 31 december 2008 2007 £14m primarily
because our customers have a sovereign credit rating being either government organisations or blue chip private sector companies 
the ageing of trade receivables is as follows
2008 2007
£m £m
neither billed impaired nor past due 4633 3346
not impaired but overdue by less than 30 days 373 534
not impaired but overdue by between 30 and 60 days 123 135
not impaired but overdue by more than 60 days 122 166
impaired 27 14
bad debt provision 27 14
5251 4181
movements on the group bad debt provision are as follows
2008 2007
£m £m
at 1 january 14 14
charged to income statement 13 05
utilised 06 05
arising on acquisition 03 
exchange differences 03 
at 31 december 27 14
the maximum exposure to credit risk in relation to trade receivables at the reporting date is the fair value of trade receivables the group
does not hold any collateral as security
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 108 serco group plc    109
21 cash and cash equivalents
other other 
sterling currencies total sterling currencies total
2008 2008 2008 2007 2007 2007
£m £m £m £m £m £m
cash of pfi and other project companies securing 
credit obligations  41 41 17 40 57
customer advance payments  63 63  62 62
other cash and shortterm deposits 1088 1316 2404 976 755 1731
total cash and cash equivalents 1088 1420 2508 993 857 1850
cash of pfi and other project companies and customer advance payments totalling £104m 2007 £119m are encumbered cash balances
cash and cash equivalents which are presented as a single class of assets on the face of the balance sheet comprise cash at bank and
other shortterm highly liquid investments with a maturity of three months or less
22 loans
non non
recourse  recourse
loans  other non loans  other non
relating to recourse other relating to recourse other
pfi assets loans loans total pfi assets loans loans total
2008 2008 2008 2008 2007 2007 2007 2007
£m £m £m £m £m £m £m £m
loans are repayable as follows
on demand or within one year  65 303 368 28 59 48 135
between one and two years  68 646 714 52 59 1443 1554
between two and five years  208 5710 5918 76 188 519 783
after five years   477 477 69 62 706 837
 341 7136 7477 225 368 2716 3309
less amount due for settlement 
within one year shown within 
current liabilities  65 303 368 28 59 48 135
amount due for settlement 
after one year  276 6833 7109 197 309 2668 3174
the carrying amounts and fair values of the loans are as follows
carrying amount fair value
2008 2007 2008 2007
£m £m £m £m
non recourse loans relating to pfi assets  225  210
other non recourse loans 341 368 380 382
other loans 7136 2716 7288 2746
7477 3309 7668 3338
the fair values are based on cash flows discounted using a rate based on the borrowing rate associated with the loan all loans are held
at amortised cost
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 109 23 deferred tax
deferred income taxes are calculated in full on temporary differences under the liability method using local substantively enacted tax rates 
the gross movement on the deferred income tax account is as follows
2008 2007
£m £m
at 1 january 296 538
income statement charge note 10 66 129
acquisitionsdisposals 71 
items taken directly to equity 222 115
exchange differences  02
at 31 december 63 296
the movement in deferred tax assets and liabilities during the year was as follows
temporary sharebased
differences payment and retirement derivative other
on assets employee benefit financial temporary
intangibles benefits schemes instruments differences total
£m £m £m £m £m £m
at 1 january 2008 80 197 154 30 05 296
chargedcredited to income statement 24 27 61  08 66
acquisitionsdisposals 211 39  03 98 71
items taken directly to equity 53 68 168 39  222
at 31 december 2008 262 195 75 06 85 63
the movement in deferred tax assets and liabilities during the previous year was as follows
temporary sharebased
differences payment and retirement derivative other
on assets employee benefit financial temporary
intangibles benefits schemes instruments differences total
£m £m £m £m £m £m 
at 1 january 2007 112 190 411 52 03 538
creditedcharged to income statement 30 36 122 01 02 129
exchange differences 02     02
items taken directly to equity  43 135 23  115
at 31 december 2007 80 197 154 30 05 296
deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred income taxes relate to the same fiscal authority the following is the analysis of the deferred tax balances
after offset for financial reporting purposes
2008 2007
£m £m
deferred tax liabilities 259 220
deferred tax assets 196 516
63 296
at the balance sheet date the group did not recognise deferred tax assets of £97m 2007 £77m in respect of unused tax losses of
£280m included in unrecognised tax losses are losses of £106m that will expire in 2010 £26m that will expire in 2014 £08m that will
expire in 2026 and £13m that will expire in 2027 remaining losses may be carried forward indefinitely
at the balance sheet date the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for 
which deferred tax liabilities have not been recognised was £75m 2007 £62m no liability has been recognised in respect of these
differences because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that 
such differences will not reverse in the foreseeable future 
110 serco group plc
serco ar2008 p79 qxdserco ar08  design  20032009  1700  page 110 serco group plc    111
24 obligations under finance leases
present value present value
minimum of minimum minimum of minimum
lease lease lease lease
payments payments payments payments
2008 2008 2007 2007
£m £m £m £m 
amounts payable under finance leases
within one year 58 45 86 77
between one and five years 126 107 91 75
after five years 23 20 14 12
207 172 191 164
less future finance charges 35  27 
present value of lease obligations 172 172 164 164
less amount due for settlement within one year shown under current liabilities 58 45 86 77
amount due for settlement after one year 114 127 78 87
finance lease obligations are secured by the lessors’ title to the leased assets
the directors estimate that the fair value of the group’s lease obligations approximates their carrying amount
25 trade and other payables
2008 2007
£m £m
trade and other payables current
trade creditors 2250 1737
other creditors 1326 1372
accruals and deferred income 3971 3588
amounts owed to joint ventures  03
7547 6700
the average credit period taken for trade purchases is 28 days 2007 24 days the directors estimate that the fair value of trade creditors
approximates to their carrying amount
2008 2007
£m £m
trade and other payables noncurrent
other creditors 354 133
amounts owed to joint ventures 01 
355 133
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 111 112 serco group plc
26 financial risk management
the group held the following financial instruments at 31 december
carrying amount 
2008 2007
£m £m
financial assets
derivative financial instruments at fair value note 27 106 27
loans and receivables at amortised cost  trade receivables note 20 5251 4181
 other financial assets note 26 14 14
 cash and cash equivalents note 21 2508 1850
7879 6072
financial liabilities
derivative financial instruments at fair value note 27 46 133
at amortised cost  loans note 22 7477 3309
 trade creditors note 25 2250 1737
 obligations under finance leases note 24 172 164
9945 5343
net financial instruments 2066 729
financial risk
the board is ultimately responsible for ensuring that financial and nonfinancial risks arising from financial instruments is monitored and
managed within acceptable and known parameters the board delegates authority to the executive team to manage financial risks the
group’s treasury function acts as a service centre and operates within clearly defined guidelines and policies that are approved by the
board the guidelines and policies define the financial risks to be managed specify the objectives in managing these risks delegate
responsibilities to those managing the risks and establish a control framework to regulate treasury activities to minimise operational risk
credit facilities and liquidity management
the group maintains committed credit facilities to ensure that it has sufficient liquidity to maintain its ongoing operations during the year
financing was arranged for the si international inc acquisition along with the refinancing of the group’s main committed credit facility
acquisition financing consisted of a £35m revolving credit facility and us dollar 488m term loan facility both fully drawn as at 
31 december 2008 the £35m facility expires in december 2011 whilst the us dollar 488m facility amortises from 2010 and expires in
september 2013 the previous bank facility was refinanced with a £400m revolving credit facility expiring in september 2013 and as at 
31 december 2008 drawings were £26m and us dollar 229m as at 31 december 2007 the bank facility comprised of term loans of
£26m and us dollar 229m and an undrawn £255m revolving credit facility  
the banking facilities are unsecured and have financial and nonfinancial covenants and obligations typical of these arrangements
the group has outstanding private placements of £117m which amortise in equal annual instalments from 2011 to 2015 the private
placements comprise a tranche of £83m and a tranche of us dollar 55m which is hedged by two cross currency swaps note 27a
foreign exchange risk
transactional
the group’s business does not involve a significant amount of crossborder trade and therefore the group is not exposed to substantial
foreign currency transaction risk as sales and costs are closely matched within each overseas operation any material transactional
exposures that do arise are hedged by the group’s treasury function using forward foreign exchange contracts
translational
the foreign exchange exposure on the us dollar tranche of the private placements has been fully hedged into sterling the exposure on
us dollar drawings under the new bank facilities is hedged against the net investment in our us business
central funding of individual businesses gives rise to monetary assets and liabilities the currency of funding is selected to ensure that any
foreign exchange risk resides with group this risk is then managed by the group’s treasury function using forward foreign exchange
contracts and any natural hedge positions that may exist
serco ar2008 p79 qxdserco ar08  design  19032009  1628  page 112 serco group plc    113
26 financial risk management continued
credit risk
the group’s principal financial assets are cash and cash equivalents and trade and other receivables
the group’s credit risk is relatively low because a high proportion of our customers have a sovereign or sovereign like credit rating and the
group has a large number of counterparties and customers external credit checks are completed for all new non government customers
before signing a contract above £100000 credit vetting for new government body customers is performed by an internal review of the
client’s ability to pay and timeliness of payment the review includes a consideration of the expected contract budget as well as economic
and industry factors and the budget holders’ position within the government body at quarterly intervals a management credit worthiness
review for all ongoing customers with material outstanding balances is undertaken including an assessment to determine if there has been
any deterioration in the customer’s payment history and a review of the total credit authorised to the customer throughout the group
the group’s treasury function only transacts with counterparties that have a public rating from a credit rating agency of single a or better
it also ensures that no exposure to any one institution at any given time exceeds a preapproved exposure limit
interest rate risk
the group’s policy is to hedge core borrowing requirements to protect against adverse interest rate movements exposure to interest rate
risk arises principally on changes to us dollar and sterling interest rates
price risk
the group is exposed to commodity price risk through its joint venture rail operations these joint ventures have used commodity
derivatives to mitigate some of this risk see note 27b
26 a currency management
the group’s currency exposures that result in net currency gains and losses on financial instruments that are recognised in the income
statement and equity arise principally from us dollar and canadian dollar financial instruments the fluctuations in other exchange rates
do not significantly alter the value of financial instruments at 31 december 2008 if the us dollar had weakened by 10 against sterling
with all other variables held constant posttax profit for the year would have been £01m higher 2007 £07m lower mainly as a result of
offsetting movements on working capital and derivative financial instruments equity would have been £348m higher 2007 £06m lower
mainly due to exchange gains on net investment hedges denominated in us dollars however this would be predominantly offset by
exchange losses on the retranslation of the net assets of the us subsidiaries at 31 december 2008 if the us dollar had weakened by
10 against the canadian dollar with all other variables held constant posttax profit for the year would have been £03m lower 
2007 £09m higher mainly as a result of exchange losses on us dollar denominated noncurrent intercompany borrowings equity 
would have been £05m higher 2007 £04m higher due to canadian dollar denominated noncurrent intercompany borrowings
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 113 114 serco group plc
26 b interest rate management
an analysis of financial assets and liabilities exposed to interest rate risk is set out below
i financial assets
2008 2007
weighted weighted 
average fixed average fixed 
interest rate interest rate 
floating rate fixed rate received floating rate fixed rate received
£m £m  £m £m 
cash and cash equivalents 2508   1850  0
other financial assets 02 12 600 02 12 600
2510 12 1852 12
ii financial liabilities
2008 2007
weighted weighted 
average fixed average fixed 
interest rate interest rate 
floating rate fixed rate received floating rate fixed rate received
£m £m  £m £m 
non recourse sterling loans related to pfi assets   0  225 735
non recourse canadian dollar loans  341 527  368 453
sterling loans 483 1198 580 260 1205 570
us dollar loans 5347  0 1174  0
other loans 75 33 1259 29 48 800
5905 1572 1463 1846
exposure to interest rate fluctuations is mitigated through the use of interest rate derivatives excluded from the above analysis is 
£172m 2007 £164m of amounts payable under finance leases which are subject to fixed rates of interest
iii interest rate sensitivity
the sensitivity analyses have been determined on the exposure to interest rates for both derivatives and financial liabilities at the balance
sheet date and on average balances of financial assets held throughout the past year a 100 basis point movement in interest rates with 
all other variables held constant would have an impact on posttax profit for the year to 31 december 2008 of £11m 2007 £06m the
variance is mainly due to interest exposure on floating rate borrowings the resulting impact on equity due to a 100 basis point movement
is £12m 2007 £17m mainly due to the movement in the fair value of derivative financial instruments held as cash flow hedges
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 114 serco group plc    115
26 c liquidity risk management
the group’s financial liabilities will be settled on a net basis based on the remaining period at the balance sheet date to the contractual
maturity date the amounts disclosed below are the contractual undiscounted cash flows based on the earliest date on which the group
can be required to pay
on demand between between
or within one and two and after five
one year two years five years years total
£m £m £m £m £m
loans 368 714 5918 477 7477
loan interest 281 269 531 36 1117
finance leases 58 62 64 23 207
derivative financial liabilities 13 02 02  17
trade creditors 2250    2250
at 31 december 2008 2970 1047 6515 536 11068
on demand between between
or within one and two and after five
one year two years five years years total
£m £m £m £m £m
loans 135 1554 783 837 3309
loan interest 195 117 220 60 592
finance leases 86 50 41 14 191
derivative financial liabilities 19 18 50 12 99
trade creditors 1737    1737
at 31 december 2007 2172 1739 1094 923 5928
26 d capital risk management
the group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure 
access to capital takes many forms and includes although not exhaustive access to the equity market debt capital market and bank
market during 2008 the group maintained sufficient debt facilities that ensured its objectives were met
26 e price risk management
the group is exposed to commodity price risk arising from the volatility in the price of fuel and manages this exposure by holding
commodity futures contracts a us dollar 02 per litre increase in the price of fuel as at the balance sheet date would result in a 
£65m increase 2007 £50m increase in equity there is no impact in the income statement resulting from a change in fuel prices 
the sensitivity to changes in fuel prices resulting from changes in exchange rates is included within the currency sensitivity analysis 
see note 26a 
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 115 116 serco group plc
27 derivative financial instruments
derivative financial instruments total a net asset of £60m 2007 £106m net liability comprising noncurrent assets of £56m 
2007 £12m current assets of £50m 2007 £15m current liabilities of £42m 2007 £21m and noncurrent liabilities of 
£04m 2007 £112m
movement
movement movement in fair
in fair in fair value of non cash flow
1 january value of cash value of fair designated hedges 31 december
2008 flow hedges value hedges hedges disposed of 2008
£m £m £m £m £m £m
currency swaps 63 105    42
forward foreign exchange contracts 43 52  13  22
interest rate swaps 20 08  03 09 
commodity futures contracts 20 24    04
106 141  16 09 60
the movement in interest rate swaps resulted from the disposal on 23 june 2008 of the group’s equity stake in kilmarnock prison
services limited a 100 subsidiary of serco limited
movement
movement movement in fair
in fair in fair value of non cash flow
1 january value of cash value of fair designated hedges 31 december
2007 flow hedges value hedges hedges disposed of 2007
£m £m £m £m £m £m
currency swaps 114 37 14   63
forward foreign exchange contracts 91 08 29 11  43
interest rate swaps 21 01    20
commodity futures contracts 22 42    20
248 88 43 11  106
the movement in the fair value of cash flow hedges includes an amount of £34m relating to the maturity of a currency swap
the maturity of derivative financial instruments is as follows
forward
foreign commodity
currency exchange interest futures
swaps contracts rate swaps contracts total
at 31 december 2008 £m £m £m £m £m
on demand or within one year 02 15  08 09
between one and two years 02 02   04
between two and five years 23 05  04 32
after five years 15    15
42 22  04 60
forward foreign exchange contracts comprise a current asset of £48m 2007 £08m a noncurrent asset of £10m 2007 £nil 
a current liability of £34m 2007 £14m and a noncurrent liability of £02m 2007 £37m
forward
foreign commodity
currency exchange interest futures
swaps contracts rate swaps contracts total
at 31 december 2007 £m £m £m £m £m
on demand or within one year 04 06 04 08 06
between one and two years 03 10 04 06 11
between two and five years 09 27 09 06 39
after five years 47  03  50
63 43 20 20 106
derivative financial instruments are recognised in the balance sheet at fair value which is calculated using a discounted cash flow
technique consistent for similar types of instruments this technique takes into consideration assumptions based on market data
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 116 serco group plc    117
27 a forward foreign exchange contracts and currency swaps
the group utilises currency derivatives to hedge significant future transactions and cash flows the group is party to a variety of foreign
currency forward contracts and swap contracts in the management of its exchange rate exposures these contracts are primarily
denominated in the currencies of the group’s principal markets
at the balance sheet date the total notional amount of outstanding forward foreign exchange and currency swap contracts to which the
group is committed is £997m 2007 £501m these arrangements are mainly designed to address significant exchange exposures for
the next seven years
cash flow hedges
at 31 december 2008 the group held a number of currency swaps designated as cash flow hedges fixed interest cash flows
denominated in us dollars are exchanged for fixed interest cash flows denominated in sterling the profile of these currency swaps held
by the group is as follows
2008 2007
receivable receivable  
notional usd payable gbp notional usd payable gbp
amount interest rate interest rate amount interest rate interest rate
maturity usdm  usdm 
august 2015 350 57 57 350 57 57
august 2015 200 57 57 200 57 57
the group also held a number of forward foreign exchange contracts designated as cash flow hedges with a notional amount of £522m
2007 £156m
all currency derivatives designated as cash flow hedges are highly effective and the fair value movement of £157m 2007 £45m has
been deferred as a credit in equity no amounts have been recognised in the income statement except for a discontinued cash flow
hedge in prior periods a loss of £14m had been recognised in the hedging reserve as at 31 december 2007 the balance remaining in
the hedging reserve was £06m the hedging reserve is recycled to the income statement as the hedged transaction affects the income
statement a loss of £01m 2007 loss of £03m has been included in the income statement and the remaining loss of £05m 
2007 loss of £06m is expected to be recognised in the income statement in future periods
27 b commodity futures contracts 
the group uses commodity futures contracts in its joint venture train operations in order to protect itself from volatility in the price of 
fuel the group has a contract expiring in 2011 whereby it pays a fixed rate of £02895 per litre and receives a floating rate for a fixed
quantity which varies each month the floating rate is calculated as the daily 02 nwe price in us dollars per tonne converted into 
litres and then into sterling at the daily spot rate in november 2008 a contract was transacted whereby during the period between
december 2008 and september 2009 the group pays a fixed rate of £0341 per litre for a fixed quantity which varies each month and
receives a floating rate in december 2008 a further contract was transacted whereby during the period between october 2009 and
september 2010 the group will pay a fixed rate of £0338 per litre for a fixed quantity which varies each month and receives a floating
rate for both of the new contracts the floating rate is calculated as the daily 01 nwe price in us dollars per tonne converted into 
litres and then into sterling at the daily spot rate the commodity futures contracts are designated as cash flow hedges and are highly
effective and the fair value movement of £24m 2007 £42m has been deferred as a credit in equity no amounts have been 
recognised in the income statement
27 c hedges of net investments in foreign entities
the group has us dollar denominated borrowings some of which have been designated as a hedge of part of the net investment
in its acquired subsidiaries in the us in december 2008 borrowings of euro 172m were designated as a hedge of part of the net
investment in the group’s subsidiaries in europe following the acquisition of si international inc on 29 december 2008 a further
us dollar 5397m of borrowings and us dollar 103m forward foreign exchange contracts were designated as a hedge of the net
investment in si international inc the carrying value of the designated borrowings was £426m 2007 £246m the foreign
exchange loss of £161m 2007 £04m gain on translation into sterling of the borrowings and forward foreign exchange contracts
has been recognised within the group’s hedging and translation reserve the hedge is highly effective no amounts have been
recognised in the income statement
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 117 118 serco group plc
28 retirement benefit schemes
the group has accounted for pensions in accordance with ias 19 ‘employee benefits’ the group operates and is a member of a
number of defined benefit schemes and defined contribution schemes the pension charge for the year ended 31 december 2008
including the proportionate share of joint ventures was £859m 2007 £750m
28 a defined benefit schemes
the group operates defined benefit schemes for qualifying employees of its subsidiaries in the uk and europe in addition the group has
interests in joint ventures which operate defined benefit schemes for qualifying employees
the assets of the funded plans are held independently of the group’s assets in separate trustee administered funds the group’s major
plans are valued by independent actuaries annually using the projected unit credit method this reflects service rendered by employees to
the dates of valuation and incorporates actuarial assumptions primarily regarding discount rates used in determining the present value of
benefits projected rates of salary growth and longterm expected rates of return for plan assets discount rates are based on the market
yields of highquality corporate bonds in the country concerned longterm expected rates of return for plan assets are based on
published brokers’ forecasts for each category of scheme assets pension assets and liabilities in different defined benefit schemes are not
offset unless the group has a legally enforceable right to use the surplus in one plan to settle obligations in the other plan and intends to
exercise this right
the amounts recognised in the consolidated balance sheet are grouped together as follows
contract specific  virtually certain costs reimbursed
the group has an obligation to contribute to the pension scheme over the term of the contract at rebid any deficit or surplus would
transfer to the next contractor throughout the contract it is virtually certain that the group will be reimbursed the expenditure required to
settle the defined benefit obligation the group’s share of the defined benefit obligation less its share of the fair value of scheme assets
that it will fund over the period of the contract has been recognised as a liability the group has recognised the right to reimbursement as
a separate asset
in the consolidated income statement the expense relating to this defined benefit plan has been presented net of the amount recognised
for the reimbursement resulting in a nil charge to the income statement
contract specific  not certain costs reimbursed
these are prefunded defined benefit schemes the group has obligations to contribute variable amounts to the pension schemes over
the terms of the related contracts at rebid any deficit or surplus would transfer to the next contractor the group has recognised as a
liability the defined benefit obligation less the fair value of scheme assets that it will fund over the period of the contracts with a
corresponding amount recognised as intangible assets at the start of the contracts subsequent actuarial gains and losses in relation to
the group’s share of the pension obligations have been recognised in the consolidated statement of recognised income and expense
sorie the intangible assets are amortised over the term of the contracts
non contract specific
these consist of a prefunded defined benefit scheme which does not relate to any specific contract the funding policy is to contribute
such variable amounts on the advice of the actuary as will achieve 100 funding on a projected salary basis and an unfunded defined
benefit scheme both of which do not relate to any specific contract any liabilities arising are recognised in full
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 118 serco group plc    119
28 a defined benefit schemes continued
the assets and liabilities of the schemes at 31 december are
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
year ended 31 december 2008 £m £m £m £m
scheme assets at fair value
equities 1020 1944 1635 4599
bonds except ldi 451 106 134 691
liability driven investments ldi   4807 4807
gilts  485 01 486
property 142 196 92 430
cash and other 163 223 241 627
annuity policies  19 282 301
fair value of scheme assets 1776 2973 7192 11941
present value of scheme liabilities 2672 3564 7198 13434
net amount recognised 896 591 06 1493
members’ share of surplus  170 16 186
franchise adjustment  177  177
effect of ifric 14   17 17
896 244 07 1147
analysed as
net pension liability 896 244 631 1771
net pension asset   624 624
related assets
intangible assets note 14  144  144
trade and other receivables note 20 896   896
896 144  1040
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
year ended 31 december 2007 £m £m £m £m
scheme assets at fair value
equities 1631 2476 2137 6244
bonds except ldi 476 89 184 749
liability driven investments ldi   4380 4380
gilts  373 344 717
property 187 250 119 556
cash and other 65 425 22 512
annuity policies  09 261 270
fair value of scheme assets 2359 3622 7447 13428
present value of scheme liabilities 2966 3917 8126 15009
net amount recognised 607 295 679 1581
members’ share of deficit  21  21
franchise adjustment  176  176
net pension liability 607 140 679 1426
related assets
intangible assets note 14  174  174
trade and other receivables note 20 607   607
607 174  781
liabilities in relation to unfunded schemes included above amount to £512m 2007 £381m
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 119 120 serco group plc
28 a defined benefit schemes continued
during 2007 certain of the group’s non contract specific schemes introduced a liability driven investment ldi strategy which aims to
reduce volatility risk by better matching assets to liabilities the main asset classes that make up the ldi investments are gilts and
corporate bonds with inflation and interest swap overlays and the assumed expected rate of return is taken to be gilts 03 
2007 gilts 02
in some schemes employee contributions vary over time to meet a specified proportion of the overall costs including a proportion of 
any deficit the liabilities recognised in the balance sheet for these schemes are net of the proportion attributed to employees in addition
the amounts charged to the consolidated income statement for these schemes are net of the proportion attributed to employees the
amounts attributed to employees are shown separately in the reconciliation of changes in the fair value of scheme assets and liabilities
the amounts recognised in the financial statements for the year are analysed as follows
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
year ended 31 december 2008 £m £m £m £m
recognised in the consolidated income statement
current service cost – employer 116 159 199 474
past service cost   11 11
reimbursed to employer 116   116
recognised in arriving at operating profit  159 210 369
expected return on scheme assets  employer 174 184 431 789
interest on franchise adjustment  14  14
interest cost on scheme liabilities  employer 171 168 467 806
reimbursed to employer 03   03
finance incomecost  30 36 06
included within the sorie
actual return on scheme assets 676 773 308 1757
less expected return on scheme assets 174 260 446 880
850 1033 754 2637
other actuarial gains 531 700 1493 2724
actuarial gains and losses recognised in the sorie 319 333 739 87
change in ifric 14   17 17
change in franchise adjustment  13  13
change in members’ share  200 17 217
reimbursed to employer 319   319
actuarial gains on reimbursable rights 319 187  506
total pension creditcost recognised in the sorie  146 739 593
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 120 serco group plc    121
28 a defined benefit schemes continued
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
year ended 31 december 2007 £m £m £m £m
recognised in the consolidated income statement
current service cost  employer 99 153 212 464
past service cost  01 18 19
reimbursed to employer 99   99
recognised in arriving at operating profit  154 230 384
expected return on scheme assets  employer 162 168 401 731
interest on franchise adjustment  12  12
interest cost on scheme liabilities  employer 151 145 404 700
reimbursed to employer 11   11
finance incomecost  35 03 32
included within the sorie
actual return on scheme assets 102 285 439 826
less expected return on scheme assets 162 237 413 812
60 48 26 14
other actuarial gains 112 158 338 608
actuarial gains recognised in the sorie 52 206 364 622
change in franchise adjustment  66  66
change in members’ share  64 12 76
reimbursed to employer 52   52
actuarial losses on reimbursable rights 52 130 12 194
total pension cost recognised in the sorie  76 352 428
cumulative actuarial gains recognised since 1 january 2004 are £884m 2007 £291m
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 121 122 serco group plc
28 a defined benefit schemes continued
changes in the fair value of plan liabilities are analysed as follows
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
£m £m £m £m
at 1 january 2007 2879 3750 8022 14651
arising on acquisition   08 08
current service cost – employer 99 153 212 464
current service cost – employee  59 07 66
past service costs  01 18 19
plan participants’ contributions 09 08 15 32
interest cost – employer 151 145 404 700
interest cost – employee  53 11 64
benefits paid 60 94 248 402
actuarial gains and losses 112 158 338 608
foreign currency differences   31 31
at 1 january 2008 2966 3917 8126 15009
adoption of ifric 14   404 404
current service cost – employer 116 159 199 474
current service cost – employee  59 06 65
past service costs   11 11
plan participants’ contributions 16 05 13 34
interest cost – employer 171 168 467 806
interest cost – employee  60 12 72
benefits paid 66 104 671 841
actuarial gains and losses 531 700 1493 2724
foreign currency differences   124 124
at 31 december 2008 2672 3564 7198 13434
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 122 serco group plc    123
28 a defined benefit schemes continued
changes in the fair value of plan assets are analysed as follows
virtually not certain  
certain costs costs non contract 
reimbursed reimbursed specific total
£m £m £m £m
at 1 january 2007 2203 3232 6433 11868
expected return on plan assets  employer 162 168 401 731
expected return on plan assets  employee  69 12 81
employer contributions 105 144 803 1052
contributions by employees 09 55 20 84
benefits paid 60 94 248 402
actuarial gains and losses 60 48 26 14
at 31 december 2007 2359 3622 7447 13428
adoption of ifric 14   404 404
expected return on plan assets  employer 174 184 431 789
expected return on plan assets  employee  76 15 91
employer contributions 143 170 300 613
contributions by employees 16 58 18 92
benefits paid 66 104 671 841
actuarial gains and losses 850 1033 754 2637
foreign currency differences   02 02
at 31 december 2008 1776 2973 7192 11941
employer contributions for non contract specific schemes in 2007 include a £51m special contribution paid in january 2007
no assets are invested in the group’s own financial instruments properties or other assets used by the group
history of experience gains and losses
2008 2007 2006 2005 2004
experience adjustments arising on scheme assets
amount £m 2637 14 458 1036 102
percentage of scheme assets 22 0 4 10 1
experience adjustments arising on scheme liabilities
amount £m 01 51 131 118 64
percentage of the present value of scheme liabilities 0 0 1 1 1
fair value of scheme assets £m 11941 13428 11868 9927 7765
present value of scheme liabilities £m 13434 15009 14651 13471 10555
deficit £m 1493 1581 2783 3544 2790
the normal contributions expected to be paid during the financial year ended 31 december 2009 are £610m
assumptions in respect of the expected return on plan assets are based on market expectations of returns over the life of the related
obligation  due consideration has been given to current market conditions as at 31 december 2008 in respect to inflation interest 
bond yields and equity performance when selecting the expected return on assets assumptions
the expected yield on bond investments with fixed interest rates is derived from their market value  the yield on equity investments
contains an additional premium an ‘equity risk premium’ to compensate investors for the additional anticipated returns of holding 
this type of investment when compared to bond yields management have considered the impact of the adverse changes and 
volatility in the equity market in 2008 and have concluded that an equity risk premium of 41 is appropriate at 31 december 2008 
31 december 2007 345 
the overall expected return on assets is calculated as the weighted average of the expected returns for the principal asset categories 
held by the scheme
serco ar2008 p79 qxdserco ar08  design  20032009  1713  page 123 124 serco group plc
28 a defined benefit schemes continued
2008 2007
 
main assumptions
rate of salary increases 310 470
rate of increase in pensions in payment 260 320
rate of increase in deferred pensions 260 320
inflation assumption 260 320
discount rate 600 570
expected rates of return on scheme assets
equities 795 795
bonds except ldi 600 570
ldi 415 470
gilts 385 450
property 510 575
cash and other 200 550
annuity policies 600 570
2008 2007
years years
postretirement mortality
current pensioners at 65 – male 203 203
current pensioners at 65 – female 232 231
future pensioners at 65 – male 216 216
future pensioners at 65 – female 244 243
in 2007 in respect of a number of the smaller schemes included above allowance for expected future improvements in life expectancy
was made by reducing the discount rate by 025 per annum from the rate shown above
due to the change in the mortality rate assumptions used in the year no such adjustment was required in 2008
28 b defined contribution schemes
the group paid employer contributions of £347m 2007 £261m into uk and other defined contribution schemes foreign state pension
schemes and multiemployer schemes including those of joint ventures
prefunded defined benefit schemes treated as defined contribution
serco accounts for certain prefunded defined benefit schemes relating to contracts as defined contribution schemes because the
contributions are fixed until the end of the current concession and at rebid any surplus or deficit would transfer to the next contractor
cash contributions are recognised as pension costs and no asset or liability is shown on the balance sheet 
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 124 serco group plc    125
29 provisions
2008 2007
employee employee
related property contract other total related property contract other total
£m £m £m £m £m £m £m £m £m £m
at 1 january 90 47 47 02 186 73 84 47 19 223
arising from acquisitions  93 74 106 273    04 04
charged to income statement 06   03 09 19    19
released to income statement 37 43 10  90  37  15 52
utilised during the year 07 01  01 09 04   06 10
exchange differences 07 02 01 02 12 02    02
at 31 december 59 98 112 112 381 90 47 47 02 186
employee related provisions relate to longterm service awards and terminal gratuities liabilities which have been accrued and are 
based on contractual entitlement together with an estimate of the probabilities that employees will stay until retirement and receive 
all relevant amounts
property provisions relate to leased properties which are either under utilised or vacant and where the unavoidable costs associated with
the lease exceed the economic benefits expected to be required management has calculated the provision based on the discounted
cash outflows required to settle the lease obligations 
contract provisions primarily relate to the acquisition of si international inc where as required under ias 37 a provision has been taken
for a loss making onerous contract management has used the present value of the estimated future cash outflows required to settle the
contract obligations in determining the provision
other provisions are provisions held for expected legal and other costs that the group expects to incur over an extended period 
these costs are based on past experience of similar items and other known factors and represent management’s best estimate of 
the likely outcome
30 share capital
2008 2007
number number
£m millions £m millions  
authorised
550000000 2007 550000000 ordinary shares of 2p each 110 5500 110 5500
issued and fully paid
485051557 2007 476295589 ordinary shares of 2p each at 1 january 97 4851 95 4763
issued on the exercise of share options  17 02 88
486764440 2007 485051557 ordinary shares of 2p each at 31 december 97 4868 97 4851
the company has one class of ordinary shares which carry no right to fixed income
during the year 1712883 2007 8755968 ordinary shares of 2p each were allotted to the holders of options or their personal
representatives using newly listed shares
31 share premium account
2008 2007
£m £m
at 1 january 2993 2835
premium on shares issued 18 158
at 31 december 3011 2993
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 125 126 serco group plc
32 reserves
retirement share hedging
benefit based own and 
retained obligations payment shares translation minority 
earnings reserve reserve reserve reserve total interest 
£m £m £m £m £m £m £m
at 1 january 2007 1966 1195 255 164 213 649 19
profit for the year attributable to equity 
holders of the parent 819     819 
profit for the year attributable to 
minority interest       05
dividends paid 179     179 12
net actuarial gain on defined benefit 
pension schemes  622    622 
actuarial loss on reimbursable rights  194    194 
credit in relation to sharebased 
payment expense   50   50 
net exchange gain on translation of 
foreign operations     128 128 01
net fair value gain on cash flow hedges 
during the year     90 90 
exercise of share options   02 13  11 
tax charge on cash flow hedges     23 23 
tax chargecredit on items taken 
directly to equity  135 43   92 
at 1 january 2008 2606 902 346 151 18 1881 13
profit for the year attributable to equity 
holders of the parent 995     995 
profit for the year attributable to 
minority interest       01
dividends paid 216     216 
net actuarial gain on defined benefit 
pension schemes  87    87 
actuarial gain on reimbursable rights  506    506 
credit in relation to sharebased 
payment expense   70   70 
net exchange gain on translation of 
foreign operations     541 541 
net fair value gain on cash flow hedges 
during the year     142 142 
purchase of own shares for employee 
benefit trust esop    92  92 
exercise of share options   10 46  36 
tax charge on cash flow hedges     39 39 
tax charge on items taken directly to equity  168 06   174 
recycling of cumulative net hedging 
reserve on disposal     07 07 
acquisition of minority interest by 
joint venture 13     13 13
at 31 december 2008 3398 477 400 197 619 3743 01
in 2008 these amounts represent £213m of tax charge taken directly to equity in the sorie 2007 £115m tax charge the net movement of £213m consists of £222m of
deferred tax 2007 £115m and a credit of £09m relating to current tax 2007 £nil
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 126 serco group plc    127
32 reserves continued
the retirement benefit obligations reserve represents the actuarial gains and losses recognised in respect of annual actuarial valuations for
defined benefit retirement schemes the fair value adjustments on reimbursable rights and the related movements in deferred tax balances
the sharebased payment reserve represents credits relating to equitysettled sharebased payment transactions granted after 
7 november 2002 but not fully vested as of 1 january 2005 and any gain or loss on the exercise of share options satisfied 
by own shares
the own shares reserve represents the cost of shares in serco group plc purchased in the market and held by the serco group plc
employee share ownership trust esop to satisfy options under the group’s share options schemes at 31 december 2008 the esop
held 5650253 2007 4849759 shares equal to 12 of the current allotted share capital 2007 10 the market value of shares held
by the esop as at 31 december 2008 was £25454390 2007 £22211896
the hedging and translation reserve represents foreign exchange differences arising on translation of the group’s overseas operations and
movements relating to cash flow hedges
33 notes to the consolidated cash flow statement
reconciliation of operating profit to net cash inflow from operating activities
2008 2007
£m £m
operating profit for the year 1560 1334
adjustments for
sharebased payment expense 70 50
depreciation of property plant and equipment 260 302
amortisation of intangible assets 293 232
profitloss on disposal of property plant and equipment 46 13
profit on disposal of business undertakings 27 07
movement in provisions 90 43
gain on derivatives 12 11
operating cash inflow before movements in working capital 2008 1870
decrease in inventories 09 59
decreaseincrease in receivables 122 999
decreaseincrease in payables 264 1086
special contribution to defined benefit pension scheme note 28  510
cash generated by operations 1875 1506
tax paid 249 165
net cash inflow from operating activities 1626 1341
additions to fixtures and equipment during the year amounting to £89m 2007 £42m were financed by new finance leases
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 127 128 serco group plc
33 notes to the consolidated cash flow statement continued
analysis of net debt
at 1 at 31
january acquisitions exchange non cash december
2008 cash flow disposals differences movements 2008
£m £m £m £m £m £m
cash and cash equivalents 1850 330 111 217  2508
non recourse loans related to pfi assets 225 16 209   
other non recourse loans 368 59  32  341
other loans 2716 3188 729 503  7136
obligations under finance leases 164 86  05 89 172
1623 2697 409 323 89 5141
at 1 at 31
january acquisitions exchange non cash december
2007 cash flow disposals differences movements 2007
£m £m £m £m £m £m
cash and cash equivalents 2179 383 14 68  1850
non recourse loans related to pfi assets 248 23    225
other non recourse loans 374 60  54  368
other loans 3418 724 02 17 41 2716
obligations under finance leases 198 84  04 46 164
2059 508 12 27 87 1623
non cash movements in 2008 relate to finance leases
non cash movements in 2007 primarily relate to fixed assets acquired under finance leases and the crystallisation of the fair value
adjustment of £40m to the value of one of the private placement loans the loan was hedged by forward foreign exchange contracts and
cross currency swaps
34 capital and other commitments
2008 2007
£m £m
capital expenditure contracted but not provided
 property plant and equipment 05 19
 intangibles  01
05 20
included within the balances above is joint venture capital expenditure contracted but not provided in relation to property plant and
equipment of £03m 2007 £04m
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable operating
leases which fall due as follows
2008 2007
£m £m
within one year 1049 970
between one and five years 2648 2581
after five years 1500 1387
5197 4938
principal lease commitments are within the transport segment with future minimum lease payments totalling £2394m these leases
relate primarily to administrative and operational buildings track and rolling stock within the train operating companies the length of the
leases is concurrent with the period of the franchises and the terms of the leases are fixed during this period
serco ar2008 p79 qxdserco ar08  design  19032009  1552  page 128 serco group plc    129
34 capital and other commitments continued
future minimum rentals receivable under noncancellable operating leases where the group is the lessor are as follows
2008 2007
£m £m
within one year  01
between one and five years  06
after five years  02
 09
35 sharebased payment expense
the group recognised the following expenses related to equitysettled sharebased payment transactions
2008 2007
£m £m
executive option plan 07 09
long term incentive scheme and plan 53 37
transformational share scheme  
sharesave 2004  04
sharesave 2008 10 
70 50
executive option plan eop
options granted under the eop may be exercised after the third anniversary of grant dependent upon the achievement of a financial
performance target over three years the options are granted at market value and awards made to eligible employees are based on
between 50 and 100 of salary as at 31 december prior to grant if the options remain unexercised after a period of ten years from the
date of grant the options expire furthermore options may be forfeited if the eligible employee leaves the group before the options vest
details of the movement in all eop options are as follows
2008 2007
weighted weighted
average average
number exercise number exercise
of options price of options price
thousands £ thousands £
outstanding at 1 january 13724 253 16530 242
granted during the year 334 455 443 439
exercised during the year 2520 229 2991 220
lapsed during the year 590 236 258 283
outstanding at 31 december 10948 265 13724 253
9606125 2007 11939768 of these options were exercisable at the end of 2008 with a weighted average exercise price of 
£246 2007 £243
the options outstanding at 31 december 2008 had a weighted average contractual life of 422 years 2007 448 years the exercise
prices for options outstanding at 31 december 2008 ranged from £139 to £490 2007 £139 to £490
the weighted average share price at the date of exercise approximates to the weighted average share price during the year which was
£420 2007 £443
the fair value of options granted under the eop is measured by use of the binomial lattice model the binomial lattice model is
considered to be most appropriate for valuing options granted under this scheme as it allows exercise over a longer period of time
between the vesting date and the expiry date 
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 129 130 serco group plc
35 sharebased payment expense continued
the inputs into the binomial lattice model for options granted during the year are
2008 2007
weighted average share price 453p 475p
weighted average exercise price 455p 445p
expected volatility 275 337
expected life 5 years 5 years
risk free rate 44 51
expected dividends 09 08
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous five years the
expected life used in the model has been adjusted based on management’s best estimate for the effects of nontransferability exercise
restrictions and behavioural considerations
long term incentive scheme ltis and long term incentive plan ltip
awards made to eligible employees under the above schemes are structured as options with a zero exercise price and may be exercised
after the third anniversary of grant the extent to which an award vests and therefore becomes exercisable is measured by reference to
the growth in the company’s earnings per share or total shareholder return over the performance period of three financial years 
if the options remain unexercised after a period of ten years from the date of grant the options expire furthermore options may be
forfeited if the eligible employee leaves the group before the options vest details of the movement in all ltis and ltip options are as
follows
2008 2007
weighted weighted
average average
number exercise number exercise
of options price of options price
thousands £ thousands £
outstanding at 1 january 7040 nil 4040 nil
granted during the year 2224 nil 3055 nil
exercised during the year 592 nil 33 nil
lapsed during the year 458 nil 22 nil
outstanding at 31 december 8214 nil 7040 nil
1293356 2007 1529440 of these options were exercisable at the end of 2008
the options outstanding at 31 december 2008 had a weighted average contractual life of 811 years 2007 833 years
the fair value of options granted under the ltis and ltip is measured by use of a monte carlo simulation model this model is
considered to be most appropriate for valuing options granted under these schemes as it takes into account the changes in performance
conditions by which the options are measured
the inputs into the monte carlo simulation model for options granted during the year are
2008 2007
weighted average share price 402p 425p
weighted average exercise price nil nil
expected volatility 232 to 268 214 to 221
expected life 1 to 5 years 3 years
risk free rate 25 to 50 47 to 55
expected dividends 09 to 11 08
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 130 serco group plc    131
35 sharebased payment expense continued
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous three years the
expected life used in the model has been adjusted based on management’s best estimate for the effects of nontransferability exercise
restrictions and behavioural considerations
transformational share scheme
awards made to eligible employees under the transformational share scheme are structured as options with a nominal exercise price and
are exercisable after the third anniversary of the grant 
the employee must exercise the options no later than 30 days after the vesting date furthermore if the eligible employee leaves the
group before the options vest the options may be forfeited
2008
weighted
average 
number exercise 
of options price
thousands £
outstanding at 1 january  nil
granted during the year 46 nil
exercised during the year  nil
lapsed during the year 7 nil
outstanding at 31 december 39 nil
none of these options were exercisable at the end of the year
the options outstanding at 31 december 2008 had a weighted average contractual life of 233 years
the fair value of options granted under the transformational share scheme are measured by use of the binomial lattice model this
model is considered to be most appropriate for valuing options granted under this scheme as the options have a nominal exercise price
the inputs into the binomial lattice model for options granted during the year are
2008
weighted average share price 456p
weighted average exercise price nil
expected volatility 233
expected life 3 years
risk free rate 40
expected dividends 09
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous three years the
expected life used in the model has been adjusted based on management’s best estimate for the effects of nontransferability exercise
restrictions and behavioural considerations 
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 131 132 serco group plc
35 sharebased payment expense continued
sharesave 2004
the sharesave 2004 scheme provides for a purchase price equal to the daily average market price on the date of grant less 20 the
options can be exercised for a period of six months following their vesting details of the movement in sharesave 2004 options are as
follows
2008 2007
weighted weighted
average average
number exercise number exercise
of options price of options price
thousands £ thousands £
outstanding at 1 january 70 172 6274 172
exercised during the year 22 172 6094 172
lapsed during the year 48 172 110 172
outstanding at 31 december  nil 70 172
none 2007 69714 of these options were exercisable at the end of the year and the weighted average exercise price was 
£nil 2007 £172
sharesave 2008
the sharesave 2008 scheme provides for a purchase price equal to the daily average market price on the date of grant less 10 the
options can be exercised for a period of six months following their vesting details of the movement in sharesave 2008 options 
are as follows
2008
weighted
average 
number exercise 
of options price
thousands £
outstanding at 1 january  nil
granted during the year 6976 400
exercised during the year  nil
lapsed during the year 216 400
outstanding at 31 december 6760 400
none of these options were exercisable at the end of the year
the options outstanding at 31 december 2008 had a weighted average contractual life of 312 years given that options granted under
the sharesave plan can be exercised at any time up to six months after vesting management consider the binomial lattice model to be
appropriate to value the options granted under this scheme the binomial lattice model allows exercise over a window in time from
vesting date to expiry date and assumes option holders make economically rational exercise decisions
the model used the following assumptions when the options were granted in 2008
2008
weighted average share price 384p
weighted average exercise price 400p
expected volatility 237 to 309
expected life 2 to 4 years
risk free rate 49
expected dividends 11
expected volatility was determined by calculating the historical volatility of the group’s share price over the previous three years the
expected life used in the model has been adjusted based on management’s best estimate for the effects of nontransferability exercise
restrictions and behavioural considerations
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 132 serco group plc    133
36 related party transactions
transactions between the company and its wholly owned subsidiaries which are related parties have been eliminated on consolidation
and are not disclosed in this note transactions between the group and its joint venture undertakings are disclosed below with the
relevant proportion being eliminated on consolidation transactions between the company and its subsidiaries and joint ventures are
disclosed in the company’s separate financial statements
trading transactions
during the year group companies entered into the following material transactions with joint ventures
2008 2007
£m £m
royalties and management fees receivable 14 12
dividends receivable 372 369
386 381
the following receivable balances relating to joint ventures were included in the consolidated balance sheet
2008 2007
£m £m
current
loans 12 17
2008 2007
£m £m
noncurrent
loans 07 06
joint venture receivable and loan amounts outstanding have arisen from transactions undertaken during the general course of trading are
unsecured and will be settled in cash no guarantee has been given or received no provisions are required for doubtful debts in respect
of the amounts owed by the joint ventures
remuneration of key management personnel
the directors of serco group plc had no material transactions with the group during the year other than service contracts and directors’
liability insurance 
the remuneration of the key management personnel of the group is set out below in aggregate for each of the categories specified in 
ias 24 ‘related party disclosures’
2008 2007
£m £m
shortterm employee benefits 36 38
termination arrangements 07 
postemployment benefits 04 07
sharebased payment expense 19 19
66 64
the key management personnel comprise the executive directors nonexecutive directors and key members of the global 
management board
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 133 134 serco group plc
37 list of principal undertakings
the companies listed below are in the opinion of the directors the principal undertakings of serco group plc as at 31 december 2008
the percentage of equity capital directly or indirectly held by serco group plc is shown the voting rights are the same as the percentage
holding the companies are incorporated and principally operate in the countries stated below 
principal subsidiaries 2008 2007
united kingdom
serco limited 100 100
sercoial limited 100 100
npl management limited 100 100
serco leisure operating limited 100 100
serco health limited 100 100
serco regional services limited 100 100
europe and middle east 
belgium serco belgium sa 100 100
france serco sarl 100 100
serco sas 100 100
germany serco gmbh 100 100
ireland serco services ireland limited 100 100
italy serco spa 100 100
luxembourg serco facilities management sa 100 100
the netherlands serco facilities management bv 100 100
spain serco gestion de negocias sl 100 100
switzerland serco facilities management sa 100 100
asia pacific 
australia serco australia pty limited 100 100
great southern rail travel pty limited 100 100
great southern rail limited 100 100
serco traffic camera services pty limited 100 100
china serco group consultants shanghai limited 100 100
hong kong serco group hk limited 100 100
north america
canada serco facilities management inc 100 100
serco des inc 100 100
usa serco inc 100 100
serco services inc  100 
india serco bpo private limited 60 
serco ar2008 p79 qxdserco ar08  design  20032009  1706  page 134 serco group plc    135
37 list of principal undertakings continued
joint venture undertakings 2008 2007
united kingdom
serco gulf engineering limited 50 50
awe management limited 33 33
merseyrail services holding company limited 50 50
northern rail holdings limited 50 50
asia pacific
australia defence maritime services pty limited 50 50
serco sodexho defence services pty limited 50 50
uae
khadamat facilities management company llc 49 49
dubai international aeradio emirates llc 49 49
abu dhabi international aeradio emirates llc 49 49
other
bahrain aeradio technical services wll 49 49
south africa equity aviation services limited 50 50
all joint ventures are accounted for using the proportionate consolidation method all the subsidiaries of the group have been consolidated
at 31 december 2008 group companies had branches in united arab emirates uae bahrain south africa luxembourg and gibraltar
all the principal subsidiaries of serco group plc and its joint venture undertakings are engaged in the provision of support services
38 contingent liabilities
the company has guaranteed overdrafts finance leases and bonding facilities of its joint ventures up to a maximum value of 
£46m 2007 £42m the actual commitment outstanding at 31 december 2008 was £35m 2007 £19m
in addition to this the company and its subsidiaries have provided performance guarantees and indemnities relating to performance
bonds and letters of credit issued by its banks on its behalf in the ordinary course of business these are not expected to result in any
material financial loss
further details of the contingent liabilities of serco group plc are contained in note 14 to the serco group plc company financial
statements
serco ar2008 p79 qxdserco ar08  design  20032009  1706  page 135 136 serco group plc
uk gaap audit report – parent company
independent auditors’ report
to the members of serco
group plc
we have audited the parent company
financial statements of serco group plc
for the year ended 31 december 2008
which comprise the balance sheet and
the related notes 1 to 15 these parent
company financial statements have been
prepared under the accounting policies set
out therein
we have reported separately on the group
financial statements of serco group plc
for the year ended 31 december 2008 and
on the information in the remuneration
report that is described as having 
been audited 
this report is made solely to the
company’s members as a body in
accordance with section 235 of the
companies act 1985 our audit work has
been undertaken so that we might state to
the company’s members those matters
we are required to state to them in an
auditors’ report and for no other purpose
to the fullest extent permitted by law we
do not accept or assume responsibility to
anyone other than the company and the
company’s members as a body for our
audit work for this report or for the
opinions we have formed
respective responsibilities of
directors and auditors
the directors’ responsibilities for 
preparing the annual review and
accounts and the parent company
financial statements in accordance with
applicable law and united kingdom
accounting standards united kingdom
generally accepted accounting practice
are set out in the statement of directors’
responsibilities
our responsibility is to audit the parent
company financial statements in
accordance with relevant legal and
regulatory requirements and international
standards on auditing uk and ireland
we report to you our opinion as to
whether the parent company financial
statements give a true and fair view and
whether the parent company financial
statements have been properly prepared
in accordance with the companies act
1985 we also report to you whether in
our opinion the directors’ report is
consistent with the parent company
financial statements 
in addition we report to you if in our
opinion the company has not kept proper
accounting records if we have not
received all the information and
explanations we require for our audit or if
information specified by law regarding
directors’ remuneration and other
transactions is not disclosed
we read the other information contained in
the annual review and accounts as
described in the contents section and
consider whether it is consistent with the
audited parent company financial
statements we consider the implications
for our report if we become aware of any
apparent misstatements or material
inconsistencies with the parent company
financial statements our responsibilities
do not extend to any further information
outside the annual review and accounts
basis of audit opinion
we conducted our audit in accordance
with international standards on auditing
uk and ireland issued by the auditing
practices board an audit includes
examination on a test basis of evidence
relevant to the amounts and disclosures in
the parent company financial statements
it also includes an assessment of the
significant estimates and judgements
made by the directors in the preparation of
the parent company financial statements
and of whether the accounting policies are
appropriate to the companys
circumstances consistently applied and
adequately disclosed
we planned and performed our audit so
as to obtain all the information and
explanations which we considered
necessary in order to provide us with
sufficient evidence to give reasonable
assurance that the parent company
financial statements are free from material
misstatement whether caused by fraud or
other irregularity or error in forming our
opinion we also evaluated the overall
adequacy of the presentation of
information in the parent company
financial statements
opinion
in our opinion
• the parent company financial
statements give a true and fair view in
accordance with united kingdom
generally accepted accounting
practice of the state of the companys
affairs as at 31 december 2008
• the parent company financial
statements have been properly
prepared in accordance with the
companies act 1985 and
• the information given in the directors’
report is consistent with the parent
company financial statements
deloitte llp
chartered accountants and registered
auditors 
london united kingdom
26 february 2009
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 136 serco group plc    137
company balance sheet
at 31 december 2008
2008 2007
note £m £m
fixed assets
investments in subsidiary undertakings 3 7996 7926
7996 7926
current assets
amounts owed by subsidiary companies due after more than one year 7254 1328
debtors  amounts due within one year 4 342 429
debtors  amounts due after more than one year 4 143 86
derivative financial instruments due within one year 7 46 07
derivative financial instruments due after more than one year 7 50 
cash at bank and in hand 81 362
7916 2212
creditors amounts falling due within one year
loans 6 100 
amounts owed to subsidiary companies 1681 1330
trade creditors 03 02
other creditors including taxation and social security 5 10 24
derivative financial instruments 7 33 16
accruals and deferred income 79 105
1906 1477
net current assets 6010 735
total assets less current liabilities 14006 8661
creditors  amounts falling due after more than one year 6 6784 2588
amounts owed to subsidiary companies 2375 1465
derivative financial instruments 7 02 97
net assets 4845 4511
capital and reserves
called up share capital 9 97 97
share premium account 10 3011 2993
capital redemption reserve 01 01
sharebased payment reserve 11 287 217
hedging and translation reserve 12 39 62
profit and loss account 13 1410 1265
shareholders funds 4845 4511
the financial statements were approved by the board of directors on 26 february 2009 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 137 138 serco group plc
notes to the company financial statements
1 accounting policies
the principal accounting policies adopted are set out below and have been applied consistently throughout the current and preceding year
basis of accounting
these financial statements have been prepared in accordance with uk gaap and applicable uk law
as discussed in more detail in the finance review these financial statements have been prepared on a going concern basis
accounting convention
these accounts have been prepared under the historical cost convention
fixed asset investments
investments held as fixed assets are stated at cost less provision for any impairment in value
sharebased payment
the company has applied the requirements of frs 20 ‘sharebased payment’ in accordance with the transitional provisions frs 20 has
been applied to all grants of equity instruments after 7 november 2002 that were not fully vested as of 1 january 2005
the company issues equitysettled sharebased awards to certain employees and operates an inland revenue approved save as you
earn saye share option scheme open to eligible employees which allows the purchase of shares at a discount these are measured at
fair value at the date of grant the fair value is expensed on a straightline basis over the vesting period based on the company’s estimate
of shares that will eventually vest
fair value is measured by use of the black scholes binomial lattice or monte carlo simulation models depending on the type of scheme
the expected life used in the models has been adjusted based on management’s best estimate for the effects of nontransferability
exercise restrictions and behavioural considerations where relevant the value of the option has also been adjusted to take account of
market conditions applicable to the option
dividends
dividends are recorded in the company’s financial statements in the period in which they are approved by the board of directors
derivative financial instruments and hedging activities
derivatives are initially accounted for and measured at fair value on the date a derivative contract is entered into and subsequently
measured at fair value the gain or loss on remeasurement is taken to the profit and loss account except where the derivative is a
designated cash flow hedging instrument the accounting treatment of derivatives classified as hedges depends on their designation
which occurs on the date that the derivative contract is committed to the company designates derivatives as
• a hedge of the fair value of an asset or liability fair value hedge
• a hedge of the incomecost of a highly probable forecast transaction or commitment cash flow hedge and
• a hedge of a net investment in a foreign entity
gains and losses on fair value are recorded in the profit and loss account with the gain or loss on the hedged item attributable to the
hedged risk
gains or losses on cash flow hedges that are regarded as highly effective are recognised in equity where the forecast transaction results
in a financial asset or liability only gains or losses previously recognised in equity are reclassified to profit or loss in the same period as the
asset or liability affects profit or loss where the forecast transaction or commitment results in a nonfinancial asset or liability any gains or
losses previously deferred in equity are included in the cost of the related asset or liability if the forecast transaction or commitment results
in future income or expenditure gains and losses deferred in equity are transferred to the profit and loss account in the same period as
the underlying income or expenditure the ineffective portion of the gain or loss on the hedging instrument is recognised in the profit and
loss account
for the ineffective portion of hedges or transactions that are not designated for hedge accounting under frs 26 any change in assets or
liabilities is recognised immediately in the profit and loss account where a hedge no longer meets the effectiveness criteria any gains or
losses deferred in equity are only transferred to the profit and loss account when the committed or forecast transaction is recognised in
the profit and loss account however where cash flow hedge accounting has been applied for a forecast or committed transaction that is
no longer expected to occur then the cumulative gain or loss that has been recorded in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in the profit and loss account
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 138 serco group plc    139
1 accounting policies continued
derivative financial instruments and hedging activities continued
where the company hedges net investments in foreign entities through currency borrowings the gains or losses on the translation of the
borrowings are recognised in equity gains and losses accumulated in equity are included in the profit and loss account when the foreign
operation is disposed of
current tax
current tax including uk corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that
have been enacted or substantially enacted at the balance sheet date
deferred tax
the charge for taxation takes account of taxation deferred because of differences between the timing of recognition of certain items for
taxation purposes and for accounting purposes deferred tax is recognised in respect of all timing differences that have originated but not
reversed at the balance sheet date where the transactions or events that give rise to an obligation to pay more or less tax in the future
have occurred by the balance sheet date a deferred tax asset is recognised only when it is considered more likely than not that it will 
be recovered
deferred tax is recognised on a nondiscounted basis using tax rates in force at the date the timing differences are expected to reverse  
2 auditors’ remuneration
auditors’ remuneration of £10000 2007 £10000 has been borne by another group company
3 investments held as fixed assets
£m
shares in subsidiary companies at cost
at 1 january 2007 5962
options over parent’s shares awarded to employees of subsidiaries 31
additions
cornwell management consultants plc 83
serco holdings limited 1850
at 1 january 2008 7926
options over parent’s shares awarded to employees of subsidiaries 53
additions
serco holdings limited 500
disposals
serco investments limited 400
cornwell management consultants plc 83
at 31 december 2008 7996
on 31 december 2008 the company acquired one additional share 2007 four additional shares in serco holdings limited for £50m
2007 £185m following the capitalisation of longterm intercompany loans
full details of the principal subsidiaries of serco group plc can be found in note 37 to the group’s consolidated financial statements 
the company directly owns 100 of the ordinary share capital of the following subsidiaries except where stated
name ownership
serco holdings limited 100
serco group hk limited 50
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 139 140 serco group plc
4 debtors
2008 2007
£m £m
amounts due within one year
amounts owed by subsidiary companies 239 155
corporation tax recoverable 101 249
other debtors 02 25
342 429
amounts due after more than one year
amounts owed by joint ventures 07 
other debtors 127 37
deferred tax asset note 8 09 49
143 86
485 515
5 other creditors including taxation and social security
2008 2007
£m £m
other creditors 10 24
6 creditors amounts falling due after more than one year
2008 2007
£m £m
loans 6884 2588
less amounts included in creditors falling due within one year  loans 100 
amounts falling due after more than one year 6784 2588
loans
within one year or on demand 100 
between one and two years 640 1410
between two and five years 5673 471
after five years 471 707
6884 2588
7 derivative financial instruments
2008 2007
assets liabilities assets liabilities
£m £m £m £m
currency swaps 42   63
forward foreign exchange contracts 54 35 07 50
96 35 07 113
analysed as
noncurrent 50 02  97
current 46 33 07 16
96 35 07 113
the company holds derivative financial instruments in accordance with the group’s policy in relation to its financial risk management
details of the disclosures are set out in note 27 of the group’s consolidated financial statements
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 140 serco group plc    141
8 deferred tax asset
2008 2007
£m £m
shortterm timing difference 09 49
the movement in the deferred tax asset during the year was as follows
2008 2007
£m £m
at 1 january 49 54
credited to income statement 03 07
items taken directly to equity 43 12
at 31 december 09 49
9 called up share capital
2008 2007  
number number
£m millions £m millions
authorised
550000000 2007 550000000 ordinary shares of 2p each 110 5500 110 5500
issued and fully paid
485051557 2007 476295589 ordinary shares of 2p each at 1 january 97 4851 95 4763
issued on the exercise of share options  17 02 88
486764440 2007 485051557 ordinary shares of 2p each at 31 december 97 4868 97 4851
the company has one class of ordinary shares which carry no right to fixed income
during the year 1712883 2007 8755968 ordinary shares of 2p each were allotted to the holders of options or their personal
representatives using newly listed shares
10 share premium account
2008 2007
£m £m
at 1 january 2993 2835
premium on shares issued 18 158
at 31 december 3011 2993
11 sharebased payment reserve
2008 2007
£m £m
at 1 january 217 168
options over parent’s shares awarded to employees of subsidiaries 53 31
sharebased payment expense 17 18
at 31 december 287 217
details of the sharebased payment disclosures are set out in note 35 of the group’s consolidated financial statements
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 141 142 serco group plc
12 hedging and translation reserve
2008 2007
£m £m
at 1 january 62 95
fair value gain on cash flow hedges during the period 154 45
tax charge on items taken directly to equity 43 12
net exchange loss on translation of foreign operations 10 
at 31 december 39 62
13 profit and loss account
2008 2007
£m £m
at 1 january 1265 1174
profit for the year 362 270
equity dividends 217 179
at 31 december 1410 1265
as permitted by section 230 of the companies act 1985 the profit and loss account of the company is not presented as part of these
accounts 
14 contingent liabilities
the company has provided certain financial guarantees and indemnities in respect of the loans overdraft and bonding facilities and other
financial commitments of its subsidiaries the total commitment outstanding as at 31 december 2008 was £283m 2007 £166m
the company has also guaranteed overdrafts finance leases and bonding facilities of its joint ventures up to a maximum value of 
£46m 2007 £42m the actual commitment outstanding at 31 december 2008 was £35m 2007 £19m
in addition to this the company has provided performance guarantees and indemnities relating to performance bonds and letters of credit
issued by its banks on its behalf in the ordinary course of business these are not expected to result in any material financial loss
15 related parties
the directors of serco group plc had no material transactions with the company or its subsidiaries during the year other than service
contracts and directors’ liability insurance details of the directors’ remuneration are disclosed in the remuneration report for the group
the company is exempt under the terms of frs 8 ‘related party disclosure’ from disclosing related party transactions with entities that
are part of the serco group plc group full details of the transactions between serco group plc and its related parties can be found in
note 36 to the group’s consolidated financial statements
serco ar2008 p79 qxdserco ar08  design  19032009  1553  page 142 serco group plc    143
shareholder information
group website
go to wwwsercocom to catch up on the
current share price latest news in the
investors section and read the annual
review and accounts
registrars
serco group plc has recently moved its
register of members to a new registrar
equiniti administrative enquiries about the
holding of serco group plc shares and
enquiries in relation to the serco dividend
reinvestment plan drip should be
directed to
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
tel 0871 384 2932 
there is a text phone available on 0871
384 2255 for shareholders with hearing
difficulties
calls to both of these numbers are
charged at 8p per minute from a bt
landline  other telephony provider costs
may vary
callers from outside the uk should use
44 0 121 415 7161
dividend reinvestment plan
you can elect to receive future dividends
as shares rather than cash by participating
in the drip   to register request further
information or to obtain a copy of the
terms and conditions booklet and
mandate form please contact equiniti on
0871 384 2932  alternatively these can
be downloaded from the website
wwwshareviewcouk by choosing the
dividend reinvestment plan heading
within the product centre section
dividends paid direct to your
bank account
• avoid the risk of cheques being lost in
the post
• no need to present cheques for
payment
• dividend credited to your account on
payment date
to set up a dividend mandate or change
your existing mandated details please
register with the shareholder centre via
the shareview website or contact equiniti
on the number provided above
global payment services
for overseas shareholders in certain
countries equiniti offers an overseas
payment service by arrangement with
citibank europe plc  this service offers
shareholders the ability to have their
dividend converted into their local currency
and sent electronically to their local bank
account  to sign up for this service
please contact equiniti on 0871 384 2932
44 0 121 415 7161 if calling from
outside the uk  alternatively you can
download an application form and terms
and conditions from the website
wwwshareviewcouk
electronic communications
you can register for electronic
communications by visiting
wwwshareviewcouk you will need your
shareholder reference number to sign up
after you have registered you will receive
emails alerting you to communications as
they become available in response to our
shareholders’ commitment to electronic
communication serco is very proud to be
a corporate member of the woodland
trust the uk’s leading woodland
conservation charity helping them to plant
and care for uk native woodland during
2008 the trust planted more than one
million native trees in the uk
serco ar2008 p143qxdserco ar08  design  18032009  1655  page 143 144 serco group plc
share dealing
we have arranged the following services that can be used to buy or sell serco shares
alternatively if shareholders hold a share certificate they can also use any bank building
society or stockbroker offering share dealing facilities  shareholders in any doubt about
buying or selling their shares should seek professional financial advice
• for eu shareholders
a telephone and internet dealing service is available through equiniti which provides a
simple way of buying and selling serco shares  commission is 1 with a minimum
charge of £25 for telephone dealing and 05 with a minimum charge of £15 for internet
dealing  for telephone sales call 44 0 845 6037 037 between 830am and 430pm
monday to friday and for internet sales log on to wwwshareviewcoukdealing you will
need your shareholder reference number as shown on your share certificate
cazenove provide a postal dealing service to buy and sell serco shares  all transactions
are undertaken on an execution only basis  for further information please contact
cazenove at postal share dealing service 20 moorgate london ec2r 6da united
kingdom tel 44 0 20 7155 5155
• for non eu shareholders
currently non eu shareholders may buy or sell shares through the cazenove postal
dealing service see above
shareholder profile
the range and size of ordinary shareholding as at 31 december 2008 is set out below
range of shareholdings no of no of 
shareholders  shares 
1  1000 4021 4507 1806563 037
1001 – 5000 3300 3699 7452157 153
5001 – 10000 557 624 3969342 081
10001 – 100000 637 714 20132609 414
100001 – 500000 240 269 56836927 1168
500001 – 1000000 71 080 51592198 1060
1000001 – 10000000 88 099 247272382 5080
10000001 and above 7 008 97702262 2007
total 8921 100 486764440 100
serco ar2008 p143qxdserco ar08  design  18032009  1655  page 144 financial calendar
2009
preliminary results announcement 27 february
exdividend date 4 march
record date 6 march
last date for receiptrevocation 28 april
of drip dividend mandates 
interim management statement 12 may
annual general meeting 12 may 
final dividend pay date 20 may
halfyear results announcement 26 august
financial yearend 31 december
 subject to shareholder approval
 provisional
designed by rare corporate design london wwwrarecorporatecouk
artworked and printed by the midas press wwwmidaspresscouk
printed on 9lives 80 silk which is certified as an fsc
mixed sources product 9lives 80 is produced using
20 recycled wood and fibre 60 fsc certified 
deinked fibre recovered from postconsumer
sources 10 fsc certified virgin tcf fibre and
10 virgin fibre from well managed forests
mixed sources
product group from wellmanaged forests
controlled sources and recycled wood or fibre
wwwfscorg cert no sgscoc003320
©1996 forest stewardship council
1 introduction
2 highlights
4 our business
6 sercos vision and strategy
8 market opportunities
10 chairmans statement
business review
12 chief executives statement
16 operating performance
34 business relationships
35 our people and reputation
36 corporate responsibility
39 finance review
44 principal risks and uncertainties
49 directors secretary and advisors
50 corporate governance report
58 directors report
60 directors profiles
62 directors responsibilities
63 remuneration report
79 independent auditors report
financial statements
81 consolidated income statement
81 consolidated statement of recognised income and expense
82 consolidated balance sheet
83 consolidated cash flow statement
84 notes to the consolidated financial statements
137 serco group plc company financial statements
143 shareholder information
ibc financial calendar
serco ar08ver8 coverserco ar08  design  23032009  1453  page 2 serco people 
the heart of our business
bringing service to life
serco group plc
annual review and accounts 2008
serco group plc  annual review and accounts 2008
serco group plc
registered office
serco house
16 bartley wood business park
bartley way
hook
hampshire rg27 9uy
t 44 01256 745 900
e generalenquiriessercocom
wwwsercocom
serco ar08ver8 coverserco ar08  design  23032009  1453  page 1 serco people 
the heart of our business
bringing service to life
serco group plc
annual review  summary financial statement 2008
serco group plc
registered office
serco house
16 bartley wood business park
bartley way
hook
hampshire rg27 9uy
t 44 01256 745 900
e generalenquiriessercocom
wwwsercocom
serco summaryver8 coverserco ar08  design  24032009  1147  page 1 financial calendar
2009
preliminary results announcement 27 february
exdividend date 4 march
record date 6 march
last date for receiptrevocation 28 april
of drip dividend mandates 
interim management statement 12 may
annual general meeting 12 may 
final dividend pay date 20 may
halfyear results announcement 26 august
financial yearend 31 december
 subject to shareholder approval
 provisional
designed by rare corporate design london wwwrarecorporatecouk
artworked and printed by the midas press wwwmidaspresscouk
printed on 9lives 80 silk which is certified as an fsc
mixed sources product 9lives 80 is produced using
20 recycled wood and fibre 60 fsc certified 
deinked fibre recovered from postconsumer
sources 10 fsc certified virgin tcf fibre and
10 virgin fibre from well managed forests
mixed sources
product group from wellmanaged forests
controlled sources and recycled wood or fibre
wwwfscorg cert no sgscoc003320
©1996 forest stewardship council
1 introduction
2 highlights
4 our business
6 sercos vision and strategy
8 market opportunities
10 chairmans statement
business review
12 chief executives statement
16 operating performance
34 business relationships
35 our people and reputation
36 corporate responsibility
38 finance review
financial statements
43 summary financial statement
56 directors profiles
58 consolidated income statement
58 consolidated statement of recognised income and expense
59 consolidated balance sheet
60 consolidated cash flow statement
61 independent auditors report
62 shareholder information
ibc financial calendar
serco summaryver8 coverserco ar08  design  24032009  1147  page 2 serco group plc 1
serco is an international service company that
combines commercial knowhow with a deep
public service ethos we improve services by
managing people processes technology and
assets more effectively
national and local governments which represent
90 of serco’s business face profound challenges
despite intense budget pressures they must
continue to improve vital services and address
rising public concerns over sustainability security
and service quality in today’s economic climate
major private companies also face issues of cost
efficiency and quality
the result is a growing demand for serco’s skills
in redesigning organisations improving processes
and enabling people to deliver their best
this expertise is rooted in a valuesled culture
and over 40 years’ experience in delivering public
services which has enabled us to build strong
capabilities across different sectors our governing
principles underpin consistent delivery and
customer satisfaction and our management
system allows us to react to changing times
with innovation and agility
serco ar08ver7qxdserco ar08  design  20309  1909  page 1 2 serco group plc
2008 highlights
revenue
2007 £2811m
£3124m
111
adjusted earnings per share
pence
1857
1592
1341
1128
adjusted profit before tax
£m
123
105
87
69
revenue
£m
2811
2548
2260
1637
dividend per share
pence
2008 2007 2006 2005 2004 2008 2007 2006 2005 2004 2008 2007 2006 2005 2004 2008 2007 2006 2005 2004
425
360
297
263
2220 145 3124 500
serco ar08ver7qxdserco ar08  design  20309  1909  page 2 serco group plc 3
strong operational performance and increasing
capabilities in growing markets
• signed contracts valued at £32bn
• win rates of one in two for new bids and 90 of rebids
• organic growth broadly spread across markets and
sectors
• significant progress in developing new markets
• si international integration on track
robust financial performance and secure funding
• strong revenue growth of 111
• adjusted profit before tax margin increase of 30bps
• good cash generation group free cash flow of £942m
• £900m of committed debt funding £64m repayable
in 2010 with over 60 maturing from 2013
substantial order book and continued high revenue
visibility
• order book of £163bn at 31 december 2008
• continued high visibility of 90 of planned revenue for
2009 76 for 2010 and 65 for 2011
growth prospects increasing expect continued strong
performance
• challenging global economic environment fuelling
opportunities for efficient delivery of essential services
in existing and new markets
• flexible and agile business model £26bn pipeline
of opportunities and new markets support expectation
of continued strong performance
• consistent with previous guidance expect revenue
of approximately £5bn and an improvement in
adjusted operating profit margin of around one
per cent to approximately 63 by the end of 2012
adjusted profit before tax
2007 £1232m
£1453m
179
profit before tax
2007 £1146m
£1361m
188
adjusted earnings per share
2007 1857p
2220p
195
earnings per share
2007 1698p
2049p
207
group free cash flow
2007 £976m
£942m
35
dividend per share
2007 425p
500p
176
 excluding material acquisitions disposals and currency effects
note adjusted operating profit adjusted profit before tax and adjusted earnings per share shown above are before amortisation of acquired intangibles as shown on the face
of the group’s income statement and the accompanying notes group free cash flow is free cash flow from subsidiaries and dividends received from joint ventures and is
reconciled in section 3 of the finance review
strong operational performance underpins growth
serco ar08ver7qxdserco ar08  design  20309  1909  page 3 4 serco group plc
our business
our work in civil government includes home
affairs information and communications
technology ict business process outsourcing
bpo education and children’s services health
integrated facilities management and consulting
we manage prisons in the uk australia and germany
electronically monitor offenders develop systems for
law enforcement agencies controlling immigration and
improving civil resilience
we run all education services in two local authority areas
and all children’s services in one area providing services
for over 500 schools and around 20000 children
our expanding health business provides clinical
services to over two million people in a range of
primary and community settings and occupational
health services for private companies local authorities
and notforprofit organisations
we use our ict skills and bpo knowledge to deliver
better faster and cheaper solutions to local
government schools and blue chip private sector
customers in north america the acquisition of
si international has added new records management
and it capabilities which we provide to a number of civil
government agencies during the year we also
acquired infovision now serco bpo the largest
independent bpo business in the indian market
our integrated facilities management business provides
environmental streetscene and other direct services
to councils and also works with hospitals and
private sector customers our consulting capability
raises awareness of serco and enhances our reputation
with potential and existing customers by providing
highvalue advisory services
defence 25 transport 22
civil government 36
science 17
£3124m
26
23
34
17
£2811m
revenue by market 2008
2007
revenue by geography 2008
2007
united kingdom 75
£3124m
6
75
8
11
£2811m
europe  middle east 7
asia pacific 6
north america 12
we organise our business around
market expertise in a variety of sectors
civil government defence transport
and science
civil government
revenue
£1127m
2007 £952m
serco ar08ver7qxdserco ar08  design  20309  1909  page 4 serco group plc 5
serco is a leader in the provision of
support services to the armed forces of
the uk us germany and australia
in the uk we provide training engineering
and operational support to the royal air
force and the flight arms of the british
army and royal navy we put the royal
navy to sea at its three main uk bases
operate and maintain strategic defence
assets such as secure satellite
communications and the defence
academy of the united kingdom and
provide systems engineering safety
assurance and risk management services
in north america following the acquisition
of si international during the year our skills
now encompass information technology
professional services human capital
management engineering and logistics
national security and intelligence and
we serve every branch of the military
we provide training logistics and
operational support services to the
australian department of defence with
a presence on every defence base in
australia and to the german bundeswehr
including our work at one of europe’s
most advanced combat training centres
serco is a major provider of transport
services with our partner nedrailways
we run merseyrail – one of the uk’s best
performing franchises – and northern
rail which is the uk’s largest network
in australia serco owns and operates
great southern rail including the ghan
and indian pacific transcontinental
services
we have substantial experience
of operating light rail systems including the
awardwinning docklands light railway in
london during 2008 we signed the
contract to operate and maintain the
dubai metro system which will commence
operation in september 2009
serco is also a uk market leader in traffic
management systems including the
national traffic control centre for england
which helps motorists to plan their journeys
and make best use of the road network
in air we are one of the world’s largest
private sector providers of air traffic control
services with operations in the uk middle
east and the us
serco is a leader in managing both
sciencebased organisations and the
process of developing transferring and
applying knowledge
we manage the national physical
laboratory npl which is one of the
world’s major scientific establishments
it is our responsibility to maximise the
positive impact of npl’s mission in
measurement standards and science
for business and government
we have an integral role in the uk defence
and civil nuclear industries since 2000
serco as a joint venture partner in awe
management limited has been entrusted
with the management of the uk atomic
weapons establishment which is
responsible for providing the warheads for
the uk’s nuclear deterrent in addition we
have provided independent specialist
nuclear safety advice to the royal navy in
support of its nuclear submarine fleet for
nearly half a century
we also offer specialist technical support
to the uk’s civil nuclear industry providing
safety environmental risk and asset
management advice and operational
solutions across the uk’s civil nuclear sites
transport
revenue
£671m
2007 £655m
defence
revenue
£786m
2007 £721m
science
revenue
£540m
2007 £483m
serco ar08ver7qxdserco ar08  design  20309  1909  page 5 6 serco group plc
serco’s vision and strategy
education in walsall light rail in the middle east
most admired support services
company for the fifth year running
serco continued to strengthen and broaden its portfolio we
won £32bn of contracts increasing our presence in existing
markets both through new contract wins and expanding the
scope and scale of existing contracts and developing new
markets such as local authority strategic partnerships and
light rail in the middle east
reducing our exposure to market fluctuations
our balanced portfolio and our high rebid and new contract win
rates give high visibility of future revenue and protect against
fluctuations in any one of our markets innovation enhances our
competitiveness and allows us to enter new markets and find new
ways of delivering services to customers
our vision is to be the leading
service company in our chosen
markets
the outcomes of our strategy
each of the four elements of our strategy contributes to
one or more of the following outcomes
our strategy for achieving this vision has four elements
our win rate on rebids for existing contracts in 2008 was 90
and we won one in two new bids reflecting our ability to select
only those opportunities where we can differentiate ourselves
we received numerous awards for the quality of our service in our
businesses which are mentioned throughout this report we won
management today’s award for the most admired support
services company for the fifth year running
build a balanced portfolio
we aim to reduce risk and increase opportunity by building a
balanced contract portfolio spread across markets this reduces
our exposure to market fluctuations enables us to select the best
opportunities whichever market they are in and allows us to
transfer expertise from one market to another
maintain high rebid and new win rates
we maintain high win rates through building longterm customer
relationships and by meeting – and often exceeding – customer
expectations this along with our reputation with existing
customers helps us to expand the scope and scale of contracts
during their life retain contracts at rebid and win new contracts
our key achievements in 2008
serco ar08ver7qxdserco ar08  design  20309  1909  page 6 serco group plc 7
serco bpo si international glasgow city council guy’s and st thomas’ pathology
strengthening our position in our chosen markets
we focus our resources on those markets where we see
the best prospects and innovate to satisfy our customers’
needs we supplement our organic growth with carefully
selected acquisitions to expand our footprint
developing new skills and capabilities for the future
we constantly invest in our skills and capabilities to strengthen our
market position we acquire to enhance our capabilities and to
allow us to enter new markets which helps us secure opportunities
for growth in the future
‘leading’ means that we want to be
the best partner to work with the
company people aspire to work for
and the company which delivers
superior returns to shareholders
our ‘chosen markets’ are those
which promise strong revenue growth
attractive margins and the ability to
offer good working conditions for
our people
we took a significant step in our international development by
acquiring si international a provider of information services
technology and network solutions in the substantial us federal
government services market
the acquisition of infovision now serco bpo established serco
in the fastgrowing indian market we also acquired the uk’s
leading independent occupational health service company the
grosvenor group
we signed a pioneering joint venture with glasgow city council for
a range of innovative ict and property services
we developed a new partnership structure with the guy’s and st
thomas’ nhs foundation trust to improve its pathology services
and target the significant pathology market
serco signed two environmental services contracts with an
innovative approach to waste and recycling collection
our marine services and transport businesses partnered to win a
contract to operate the woolwich ferry service
make strategic acquisitions
while we are primarily focused on organic growth
we make acquisitions to acquire new skills which will be important
for future growth and to enter new markets where we see strong
opportunities
develop new models
we respond to emerging opportunities by finding new ways to
deliver services this may mean collaboration between our
divisions bringing together skills and experience which few other
companies can replicate or it may mean partnering with our
customer or the voluntary sector our ability to lead change keeps
us at the forefront of our markets
serco ar08ver7qxdserco ar08  design  21309  1030  page 7 8 serco group plc
market opportunities
at the same time they continue to face
rising demand from their citizens to
improve the delivery of existing public
services and growing challenges in
areas such as climate change
migration security economic
development ageing populations
and congestion
these pressures are increasing demand
from our customers to reduce the costs of
public services and address these broader
challenges we are well positioned to help
them given our strong capabilities across
a broad range of markets our proven track
record in delivering peopleled change and
excellent service and our ability to create
innovative solutions
the strong opportunities for the private
sector in delivering better value for money
services both in the uk and overseas
were confirmed in the independent review
of the public services industry conducted
for the uk government by dr deanne
julius the review which was published in
july 2008 concluded that the uk has the
most developed public services industry in
the world valued at £79bn and saw strong
potential for this to grow further in the uk
and for these skills to be exported into
new markets
the role of the private sector in delivering
efficiencies was further confirmed in the
uk government’s operational efficiency
review announced in july 2008 and due
to report this year the review identifies five
work streams including collaborative
procurement back office and it functions
asset management property and local
initiatives and empowerment and is
seeking to draw on the best of public and
private sector experience to deliver billions
of pounds of savings across these areas
the further development of competitive
neutrality as set out in the uk’s budget in
2008 should also increasingly mean that
there will be equality between the public
sector and private sector or voluntary
agencies when bidding for contracts
looking at prospects across the business
we continue to see strong opportunities in
home affairs rising prison populations are
increasing the demand for prison places
and innovative approaches to offender
management providing serco with
opportunities to expand its work in the
sector in the uk and australia at the same
time border security issues have increased
the pressure on places at immigration
control centres and the demand for
proven consistent approaches to
managing these facilities and associated
services such as escorting
our customers principally national and local
governments are increasingly under pressure to
reduce budgets and to maximise the effectiveness
of their available resources given the current
challenging economic environment
above caring for prisoners at acacia prison
serco ar08ver7qxdserco ar08  design  20309  1909  page 8 serco group plc 9
in the us the incoming administration’s
focus on countering cybersecurity threats
improving information sharing among
agencies modernising healthcare
management and increasing the need
for logistics services with the anticipated
drawdown of combat troops and the
lengthening life expectancies of existing
military platforms provide growing areas of
opportunity for the expanded capabilities
of our north american business
ageing populations are adding significantly
to the pressures on health services and
increasing the need to use existing
resources efficiently the groundbreaking
partnership between serco and guy’s
and st thomas’ nhs foundation trust
establishes a new replicable model to
target the significant national pathology
market which is valued at £25bn and
is growing at 8 to 10 annually with
international opportunities similarly the
acquisition of grosvenor has given us new
opportunities in the fastgrowing market
for occupational health services for public
private and notforprofit organisations
the economic downturn is increasing
the focus on developing new solutions
to increase employment by encouraging
entrepreneurialism and supporting people
in returning to work we see further
opportunities to support small and medium
sized enterprises through initiatives such as
business link and our work with the uk’s
regional development agencies and expect
new opportunities under the government’s
flexible new deal initiative following the
publication of the green paper on welfare
reform in july 2008
local authorities in the uk face a range
of challenges in balancing the requirement
to achieve a 3 annual efficiency gain
as required by the 2007 comprehensive
spending review with the demand for
more responsive public services and their
key role in enabling the delivery of national
policy such as the every child matters
agenda serco has pioneered an innovative
approach to service transformation in our
partnership with glasgow city council
and we see good opportunities to provide
similar services to other local authorities
we also see a strong pipeline in providing
our environmental services to local
authorities
traffic congestion is a growing threat to
economic growth public health and the
wider environment in most regions of the
world responsive dependable traffic
management and reliable costeffective
public transport systems both play vital
roles in the solution we see further
opportunities to grow our presence in
light rail both in dubai as the new metro
network expands and in other countries
including the uk and continental europe
serco’s expertise in traffic management
is also in growing demand as the uk
highways agency increases its investment
in this area and as other countries look to
import the expertise in integrating systems
and data to maximise efficiency of the road
network developed in the uk
we recognise the financial and operational
pressures affecting our defence customers
and are using our expertise to help them
achieve more within existing resource
levels in the uk we remain in constant
dialogue at senior levels as to how we
can contribute to throughlife capability
management and continue to innovate to
help our customers at a local level in the
us we now serve every branch of the
military and see strong opportunities to
grow in key areas such as personnel
support services procurement engineering
and logistics and program management
we also see opportunities to deploy our
skills in other selected markets overseas
we have also identified good growth
opportunities in the indian market where
we launched serco bpo following the
acquisition in december of infovision’s bpo
capabilities rising incomes are creating an
increasing demand from consumers for
services and consequently a growing use of
third parties to deliver them the
outsourced domestic bpo services market
is expected to grow in value to around
us18bn over the next five years and
there is early evidence that there will be
demand for process outsourcing within the
indian public services market
above the joint venture between serco and guy’s and
st thomas’ nhs foundation trust will enhance the
trust’s pathology capabilities
above serco delivers and operates the national traffic
control centre ntcc delivering real time traffic
information to motorists
above providing surface finishing services at
raf cranwell
serco ar08ver7qxdserco ar08  design  20309  1909  page 9 10 serco group plc
chairman’s statement
our substantial order book and pipeline
of opportunities together with our
proven ability to deliver innovation and
efficiency savings to our customers
support our expectation of continued
strong performance going forward
financial results
i am pleased to report on another year of
strong financial performance revenue grew
by 111 to £3124m adjusted profit
before tax adjusted pbt rose by 179
to £1453m and adjusted earnings per
share grew 195 to 2220p the adjusted
pbt margin increased from 44 to 47
as we continue to benefit from efficiency
improvements and management of our
contract portfolio profit before tax rose by
188 to £1361m and earnings per share
was 207 higher at 2049p we delivered
another good cash performance with free
cash flow of £942m and have a strong
funding position with £900m of committed
debt facilities the majority of which are not
repayable until 2013
in december we were included for the
first time in the ftse 100 index which
comprises the uk’s 100 largest
listed companies
2008 was another year of strong performance
for serco with good growth across our markets
and sectors we also made significant progress
in developing new markets and enhancing
our capabilities
kevin beeston
chairman
serco ar08ver7qxdserco ar08  design  20309  1909  page 10 serco group plc 11
dividend
serco’s policy is to increase the total
dividend each year broadly in line with the
increase in underlying earnings the board
has proposed a final dividend of 352p per
share representing an increase on the
2007 final dividend of 166 and bringing
the total dividend for the year to 500p
representing growth of 176 the final
dividend will be paid on 20 may 2009
to shareholders on the register on
6 march 2009
delivering sustainable growth
economic conditions in 2008 were
challenging for governments companies
and citizens alike and whilst no one can
expect to be immune to these conditions
serco has once again demonstrated the
resilience of its business model
budget constraints are fuelling demand for
efficient and costeffective public services
as governments balance their investment in
stimulating economies with the requirement
to control national debt meanwhile citizens
increasingly demand better solutions to
global challenges such as security
congestion and environmental issues
the role of the private sector in supporting
governments in tackling these issues has
become an established part of the solution
the julius review commissioned for the
uk government revealed that the public
services industry employs more than
12 million people in the uk generates
£45bn of value per year and has significant
export potential our growing capabilities
mean that we are now able to address
a broader range of these opportunities
across a larger number of geographies
and sectors
we continue to grow our capabilities both
organically by investing within our existing
business and by acquisition in addition to
a substantial number of new contract wins
and extensions in 2008 we took a significant
step in our international development by
acquiring si international inc a provider of
information services technology and
network solutions in the very large us
federal government services market we
also established a presence in the indian
market where we see strong growth
opportunities through the acquisition of
infovision a bpo company serving the
domestic market
effective management of risk
as well as maximising opportunities for
growth within our business a key element
in delivering sustainable performance
is to manage risks in bids and existing
operations we do this through the serco
management system our robust system
of governance and internal control which
covers all aspects of our business and is
overseen by the board
we carefully select new bidding
opportunities and assess each bid’s
financial profile risks visibility place within
our portfolio and our ability to deliver
excellent service we take a similar
approach to our existing contracts with
regular assessment of performance
and risks which is reviewed on
a continuous basis
we also constantly look to improve our
processes given challenging global
economic conditions in 2008 it was
appropriate that we incorporated our risk
management processes into a broader
framework that encompasses the resilience
of the group as a whole providing us with
further confidence in the visibility and
control environment within our business
our people
finally i would like to thank all serco
employees for their tremendous efforts over
the year and to welcome to the business
those who joined us in 2008 it is the spirit
of innovation of our people and their
commitment to the delivery of excellent
service that distinguishes us and supports
our confidence in the future
“it is the spirit of innovation of our people
and their commitment to the delivery of
excellent service that distinguishes us and
supports our confidence in the future”
dividend per share
2007 425p
500p
176
adjusted earnings per share
2007 1857p
2220p
195
revenue
2007 £2811m
£3124m
111
adjusted profit before tax
2007 £1232m
£1453m
179
serco ar08ver7qxdserco ar08  design  20309  1909  page 11 12 serco group plc
we delivered another year of double
digit revenue growth enhanced our
margins generated good free cash flow
and strengthened our funding position
at the same time we invested in
improving our capabilities systems and
structures across the business
in an economic environment that seems
likely to remain challenging our expectation
of continued strong performance is
underpinned by our continued high revenue
visibility our agility and flexibility in
addressing our customers’ needs and our
ability to direct our resources at the best
opportunities
the strength of our business model and
the commitment of our people mean that
we continue to deliver quality service to
our customers which was again reflected
in our contract win rates during 2008
we maintained our win rates at over 90
on rebids and one in two new bids and in
total we won over 200 contracts valued at
£32bn across a wide range of our markets
expanding presence in
existing markets
we expanded our presence in existing
markets both through new contracts and
expanding the scope and scale of existing
contracts among larger wins in the uk
we won two contracts to deliver a range
of innovative environmental services for
the london borough of hammersmith 
fulham and milton keynes council valued
respectively at £140m and £160m over a
maximum of 14 years and we renewed our
education and children’s services contract
with walsall council which is now valued
at £345m over a longer term of 12 years
we were also awarded a facilities
management contract to manage 29 of
deloittes office facilities and buildings
valued at £50m over five years
in defence we continued to expand
our services to the military in the uk and
overseas in the uk we expanded our
contract valued at £76m over its maximum
tenyear term to provide the naval air
command with engineering and aircraft
support services at yeovilton and culdrose
air stations in australia serco sodexho
defence services a serco joint venture
renewed its contract to provide garrison
support services at six defence bases in
the northern territory and was awarded
a similar contract for the north queensland
region the total value of both contracts to
serco is aus362m in the us we won a
rebid to deliver aviation technical
maintenance and support services to the
us navy which has a total potential value
of us167m over five years and
significantly increases the support we
provide to the space and naval warfare
systems center atlantic
developing new markets
in 2008 we also invested in the
development of a number of new markets
in the local authority market we signed our
first local authority strategic partnership
valued at £265m over ten years with
glasgow city council we continue to
pursue similar opportunities with other local
authorities in april we signed our first light
rail contract in the middle east with an
agreement valued at £500m to operate
and maintain the dubai metro leveraging
the transport capabilities we have
developed in the uk and positioning us
well for further opportunities in the region
our implementation plan for the metro is
on schedule ahead of the start of the
service in september 2009
chief executive’s statement
in 2008 we delivered strong operational and financial
performance while continuing to increase our presence
in existing markets and enter new markets we were
successful in expanding the scope and scale of
existing contracts both on rebids and during the
contract term and won a number of significant
contracts in new markets with strong growth
opportunities
serco ar08ver7qxdserco ar08  design  21309  1030  page 12 13
investing to support our growth
during the year we continued to invest to
support our strong growth this means
ensuring that we have the best people
capabilities systems and business
structures to meet our customers’ needs
and pursue the highervalue opportunities
available to us for example during the
year we began the rollout of our business
academy providing our people with online
access to the latest tools thinking
approaches and techniques at the end of
july we reorganised the central it services
team within our technology business in
order to better align our capabilities with
developing market needs such as in
security and resilience and to improve
efficiency and simplify structures in the
future we will also leverage our new
capabilities in india to support these
and related areas we also completed the
rollout of our sap system in the uk and
the asia pacific business and are now
implementing it in the middle east and
anticipate starting this process in north
america later this year
a strong foundation for growth in the
us government services market
at the end of the year we completed our
acquisition of si international a provider of
information services technology and
network solutions to the us government
for us524m including assumption of
debt in 2008 si international had revenue
of us5755m and underlying adjusted
operating profit of us367m
si international creates a strong foundation
for growth and the delivery of higher value
services in the us government services
market by giving us scale and increased
resources to bid on larger us government
contracts broader customer relationships
access to higher growth areas and
increased capabilities since the year end
“we have a substantial
order book that gives us
high visibility on our
future revenues
together with increasing
growth prospects”
visiting the glasgow partnership team presenting the pulse awards
christopher hyman
chief executive
serco ar08ver7qxdserco ar08  design  20309  1909  page 13 14 serco group plc
chief executive’s statement
continued
we have made good progress in integrating
si international with our existing north
american business and there are early
positive signs that our integrated teams will
be able to apply our enhanced capabilities
across our enlarged customer base
we also entered the indian market through
the acquisition in december of a majority
shareholding in infovision a bpo business
serving the domestic indian market for
£148m and have invested in enhancing
our presence and launching the serco
brand in that market
in january 2009 we announced that we
had formed a partnership with the guy’s
and st thomas’ nhs foundation trust to
improve the trust’s pathology services and
target the pathology market in the uk and
overseas in the uk pathology is a
significant market valued at around £25bn
the 5050 joint venture – the first of its kind –
is branded as gsts pathology and will
operate and enhance the trust’s existing
pathology capabilities under a tenyear
contract valued at around £250m to serco
which started on 1 february 2009
in the nuclear market while we were
disappointed that our consortium did not
win the sellafield nuclear decommissioning
contract we have seen growth in our
nuclear assurance business which is
well placed to take advantage of
increasing nuclear opportunities
in the uk and overseas
a valuesled company
we continue to be focused on our values
our governing principles as we call them
to ensure that we operate in the best
interests of all our stakeholders in the short
medium and longterm by combining a
strong public service ethos with commercial
acumen we seek to create a working
environment that is attractive and rewarding
for employees and gives customers the
confidence they need to entrust their
requirement to deliver excellent service to
us that environment helps serco people all
around the world give their best whether
improving the education a child receives
helping pilots and commuters arrive safely
at their destinations supporting front line
military personnel or assisting businesses
in their plans to grow and prosper
the quality and dedication of our people is
reflected in the many awards we receive
around the world some examples in 2008
include the many employees who received
military service medals for their work in
operational theatres supporting the no 32
the royal squadron and the skynet 5
secure military satellite communications
systems both in iraq and afghanistan
at merseyrail and northern rail employees’
dedication to service has been recognised
at an industry level merseyrail has achieved
a high rating of 90 customer satisfaction
and northern rail was recognised as the
rail operator of the year having continued
to improve reliability and service quality
among many other awards we were
again recognised by our peers as the uk’s
most admired support services company
for the fifth year in a row
“during the year
we continued to
invest to support
our strong growth
this means ensuring
that we have the
best people
capabilities systems
and business
structures to meet
our customers’
needs”
serco ar08ver7qxdserco ar08  design  20309  1909  page 14 serco group plc 15
we were also delighted to celebrate the
achievement of those teams and individuals
nominated by their colleagues to receive
a ‘pulse’ award which is serco’s way of
recognising their efforts in ensuring that
we live our governing principles and
support those around us and in our
wider community our people’s strong
commitment which we find all over
serco is the real bedrock of our growth
as 2008 came to a close approximately
13000 people joined the serco family
through the acquisitions of si international
in the us and infovision in india we chose
these companies very carefully based on
the growing markets they operate in the
skills and capabilities they have and
critically the values that their people
demonstrate we are delighted to welcome
them to the group
outlook and guidance
while the global economic environment
seems likely to remain challenging we have
a substantial order book that gives us high
visibility on our future revenues together
with increasing growth prospects
our longterm contracts and substantial
order book continue to provide excellent
visibility over our revenues over 90 of
which come from government including
a £1bn benefit from si international we had
a substantial order book of £163bn as at
31 december 2008 and we had identified
90 of planned revenue for 2009 76
for 2010 and 65 for 2011
constrained government budgets
drive demand for efficiency and
costeffectiveness in the delivery of public
services especially as governments
balance their investment in providing
economic stimulus with the requirement
to control national debt our strong
capabilities mean that we are well
positioned to provide relevant support
in existing markets and to leverage our
expertise through exporting proven models
to new areas with growing markets and
capabilities our pipeline now stands
at a substantial £26bn including
si international’s pipeline of over £2bn
with our substantial order book excellent
revenue visibility and our ability to direct
our resources flexibly to pursue the best
opportunities we remain confident that our
business will continue to perform strongly
we expect increasing demand for our skills
to support robust revenue growth and see
good opportunities to improve our margins
through our focus on managing our
contract portfolio enhancing our efficiency
and bidding selectively for highervalue work
given the confidence this gives us over the
mediumterm we are guiding to revenue
and margin by the end of 2012 in future
reflecting the operational drivers of our
margin improvement and in line with market
practice we will give our margin guidance
at the operating profit margin level
accordingly and consistent with our
previous guidance our projections are that
our revenue will increase to approximately
£5bn and our adjusted operating profit
margin to approximately 63 by the end
of 2012 excluding material acquisitions
disposals and currency effects
in 2009 we expect to deliver doubledigit
revenue growth and a 30bps increase
in our adjusted pbt margin excluding
si international the addition of
si international is anticipated to increase
our 2009 revenue growth by approximately
10 including the benefit of si international
we expect our adjusted operating profit
margin of 53 in 2008 to increase by
approximately 40bps in 2009 this
2009 guidance excludes material
currency effects
2009
visibility of planned revenue
at 31 december 2008
2010
2011 15 1
12 1
13 1 90
76
65
order book extensions  rebids preferred bidder
76
63
49
76 13
63 12
49 15
“our projections are
that our revenue will
increase to
approximately
£5bn and our
adjusted operating
profit margin to
approximately 63
by the end of
2012”
serco ar08ver7qxdserco ar08  design  20309  1909  page 15 16 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1909  page 16 serco group plc 17
working alongside ceop
the child exploitation and online protection ceop centre is the uk police
agency dedicated to protecting children from sexual abuse
serco works in partnership with the ceop centre to support child protection in
the uk as part of its partnership serco funded the building of a state of the art
behavioural analysis unit bau within the ceop centre in london providing
expert project management support which enabled the bau to be built in just
six weeks
the bau focuses on understanding how offenders with a sexual interest in
children operate and think it is a resource to law enforcement nationally and
internationally who are investigating these types of crimes
the qualitative information the bau obtains is disseminated to law enforcement
via a comprehensive training programme that incorporates a unique national
qualification programme for child protection professionals working in this area
the results from the analysis undertaken directly influences ceop strategy and
operational policy and helps to inform the development of ceop’s thinkuknow
education programme which teaches parents and children about online safety
this programme has to date reached over 375 million children
serco ar08ver7qxdserco ar08  design  20309  1911  page 17 18 serco group plc
in the us the acquisition of
si international has added new
records management and it capabilities
which we provide to a number of civil
government agencies
civil government revenue grew by
184 to £1127m representing 36 of
group revenue 2007 34
home affairs
the uk government is responding
to increasing prisoner numbers with
investment in building new prison facilities
and increasing the capacity of existing
prisons serco is playing an important role
in maximising the impact of this investment
construction has begun on new
houseblock accommodation at hmp
dovegate and hmp lowdham grange
adding 260 new places to each prison and
increasing the combined operating income
of both contracts by over £100m over their
lives the pressures on the prison system
are also increasing demand for associated
services including growth in our court
escorting and electronic monitoring
services as authorities look to alternative
approaches to prison sentences for the
management of offenders
we received positive inspection reports
issued on yarl’s wood immigration removal
centre by hm chief inspector of prisons
and hassockfield secure training centre by
ofsted which commended our people on
the high quality of the care they provide and
further reinforced our reputation for the
provision of specialist care for children and
young people in secure accommodation
ict and bpo
the demand for innovative flexible
approaches to working and people
management combined with the
requirement to achieve value for money
and the requirement for local authorities to
achieve year on year efficiencies is leading
to new opportunities for our it and bpo
management services
in december we acquired a 60
shareholding in infovision the third largest
bpo company serving the indian domestic
market enabling further development of
infovisions bpo business and broadening
our existing customer offering we have
agreed to acquire the remaining 40 of
infovision in two tranches over the next
two years we see strong opportunities
for growth both in bpo and as a provider
of services to the public as the indian
market develops
in civil government our work encompasses sectors
including home affairs healthcare local government
education and children’s services and the corporate
sector providing a broad range of integrated facilities
management it and business process
outsourcing bpo support and consulting services
civil government
2008 revenue
£1127m
36 of group revenue
our work includes
• border protection
• prisons management
• it and itenabled services
• government web portal management
• education and children’s services
• environmental services
• health management and
hospital support
• management consultancy
above skills workshops at acacia
prison
serco ar08ver7qxdserco ar08  design  20309  1911  page 18 serco group plc 19
we have made a successful start to our
landmark £265m partnership with glasgow
city council to transform land property
and information and communications
technology ict services during the first
nine months of the contract we have
surveyed close to 500 properties opened
a new datacentre merged five service
desks into one and delivered some £9m of
transition projects to time cost and quality
the transfer of some 280 seconded staff
into the joint venture has taken place and
we have already reorganised the ict
function to improve service delivery
following our success in glasgow
we signed a new contract with derby city
council and derby homes to provide
it management and support the new
partnership is designed to support
innovative approaches to office and home
working alongside reducing the council’s
carbon footprint and securing cash
efficiencies for both derby city council
and derby homes the contract is
valued at £19m over seven years
our contract with the businesslinkgov
services supporting smes has been
extended to cover the development of
online business support this extra work
with an additional value of £14m per
annum follows positive reviews of our
performance on the contract by the
national audit office we have continued to
develop our business support work across
a number of the uk’s regions with a £2m
fouryear contract to support the south
east’s businesses through a customer
relationship management system additional
funding of £9m to support rural enterprise
in devon cornwall and somerset and
a contract for the london development
agency for its competefor procurement
portal to match buyers and potential
suppliers in the 2012 olympic games
supply chain which has recently secured
additional funding of £18m
in 2008 serco was selected by glasgow city council for a pioneering joint
venture known as access the joint venture provides high quality property
and ict services improving outcomes for glasgow’s citizens while saving the
council more than £70m over ten years
steven purcell leader  glasgow city council says
“ i am both impressed and delighted with what the access team has
achieved in such a short space of time having only signed the contract in
february going live in april was always going to be a difficult goal the
challenges of creating a new business unit and bringing together so rapidly
groups of people from different backgrounds were not insignificant however
the teamwork and sense of purpose exhibited by access working in real
partnership with the council ensured that not only was the april target met
initial service performance results have been excellent and access has
already gone on to become an established wellrespected and effective
member of the wider council team the energy and leadership evident in
access is already beginning to create a real momentum of change and
improvement across the council and i look forward to a successful and
valued partnership”
above access team members on a site visit to glasgow city council chambers
serco ar08ver7qxdserco ar08  design  20309  1911  page 19 20 serco group plc
civil government
continued
integrated services
we saw good growth in 2008 in our
integrated services business which provides
facilities management services to both
public and private sector customers and
environmental services for local authorities
all of whom are looking to reduce overall
expenditure and improve service levels we
were pleased that our work with the norfolk
and norwich health trust was commended
in the department of health’s ‘deep clean
to keep clean’ report which quotes serco
as an example of best practice in
collaborative working
our innovative approach to environmental
services includes introducing electric
vehicles and more efficient route planning
to reduce councils’ carbon footprints
synchronising street cleansing recycling
and refuse collections and actively
promoting recycling during the year
we won contracts with the london
borough of hammersmith  fulham
at a value of £140m over a maximum of
14 years and milton keynes council with
a value of £160m over the same term
we have also won a contract to maintain
parks and sports grounds for the london
borough of newham with a value of £30m
over ten years
we secured a new £50m fiveyear facilities
management contract with deloitte which
covers cleaning security maintenance
helpdesk facilities and the disposal of
confidential waste and won further
corporate facilities management contracts
for cocacola volkswagen and wyeth
medica with a combined value of around
£20m per annum
the signing of a £20m tenyear contract
covering fire and rescue services at cardiff
international airport further secures our
strong position in the uk’s airport facilities
management market adding to existing
contracts with birmingham and filton
airports the new contract covers primary
fire and rescue response adverse weather
response training and maintenance
education and children’s services
during the year we renewed and extended
our contract with walsall council to provide
education and children’s services the
award of the new contract which is valued
at around £345m is for a longer term of
12 years reflecting the success we had
achieved under the previous contract
under the new contract we are working
with the council to ensure that children and
young people achieve the best possible
educational outcomes and also to provide
support to the most vulnerable children
and their families
our contract to provide support for the
national rollout of children’s centres under
sure start’s together for children
programme has been extended following
strong performance under our innovative
‘field force’ model our approach delivered
the target of 2500 rolled out centres ahead
of schedule and we delivered a further
400 centres under the term of the initial
contract under the contract extension
worth £15m over two years the total
number of centres will be increased to
3500 by 2010
our success under together for children
contributed to us winning a separate new
contract under the aiming high for disabled
children programme known as together for
disabled children with a value of £55m
over two years in both these national
programmes we are proud to lead
contracts fully involving voluntary
sector organisations in delivery
above environmental services in
hammersmith and fulham
serco ar08ver7qxdserco ar08  design  20309  1911  page 20 serco group plc 21
this year has seen two major landmarks
in our success in education our primary
school results across walsall and bradford
were ranked the first and seventh
respectively most improved councils for
primary school achievement nationally
between 2001 and 2008 and our
transformation of children’s services at
stoke was recognised by ofsted in the
2008 annual performance assessment
referring to “significant and rapid progress
made” since our appointment
healthcare
excellent service delivery and an innovative
approach to improving performance are
the foundations of our growth across the
healthcare sector
serco occupational health has increased
our presence in this fastgrowing sector
and added new capabilities in managed
healthcare services the business has
won new contracts and extended current
business across both public and private
sector employers serco is now the third
largest provider of occupational health
in the uk
the extension for a further two years of our
outofhours doctors’ service contract for
cornwall and the isles of scilly follows
consistent outperformance of national
targets as recognised by the healthcare
commission and positive feedback from
users of the service the contract extension
is worth £145m
we have signed a new threeyear contract
with doncaster primary care trust to
provide nursing and related services to
hmp lindholme hmp moorlands and
lindholme immigration removal centre
with a value of £4m the contract brings
the number of prisons and immigration
centres to 16 for which we provide
health services
consulting
serco’s consulting business continued to
increase its scale and scope during the
year expanding its highvalue strategic and
advisory level work examples include nhs
connecting for health the rural payments
agency and our work for department for
environment food and rural affairs
defra animal health where we are
working on a major business reform
programme serco’s consultancy team
continues to perform strongly and our
presence on the programme has been
expanded to developing defra’s
capability and managing external
relationships with suppliers
home affairs continues to represent a
growing market with new wins including
the metropolitan police greater
manchester police and the home office
other strong markets for consulting include
the scottish government and education
as the uk government looks to find
efficiencies in the procurement of external
consultancy services our position as an
approved supplier on the office of
government commerce’s buyingsolutions
catalist framework is also leading to an
increased number of new project
opportunities
above measuring noise humidity pollution vibration
and other factors that may lead to ill health
above helping with the care of patients at norfolk and
norwich hospital
serco ar08ver7qxdserco ar08  design  20309  1911  page 21 22 serco group plc
helping to make western australia safer
in 2006 the government of western australia appointed serco to manage
the state’s only privately run prison eighteen months later acacia prison
was ranked by the state inspector as a high performing facility
among the prison’s strengths are its high standard of offender treatment
programmes resettlement services and the prison’s constructive and equitable
regime our staff remain committed to understanding the different cultural challenges
faced by indigenous australians who account for more than 30 of the prison
population the positive and responsive attitude of the serco team reflects the focus
on staff engagement and communication at the prison
rehabilitation and the reentry of prisoners into society is at the heart of what we do
at acacia giving prisoners the opportunity to address their offending behaviour and
develop their potential so they leave better able to find work and contribute
to the community
serco ar08ver7qxdserco ar08  design  20309  1911  page 22 serco group plc 23
serco ar08ver7qxdserco ar08  design  20309  1911  page 23 24 serco group plc
defence
we are well placed to help our customers
by improving efficiency and reducing
costs through providing advice and
consultancy to achieve greater
efficiencies while improving operational
availability and implementing the
delivery of services to improve
operational capability
defence revenue grew by 91 to
£786m representing 25 of group
revenue 2007 26
united kingdom
we are actively engaged with the ministry
of defence at the highest levels to help
them meet their operational challenges
with a focus on improving the availability of
people and equipment to the front line and
ensuring that military staff are able to focus
on core operational tasks
we provide training engineering and
operational support to the royal air force
and the aviation arms of the british army
and royal navy we also support the royal
navy’s three main uk bases operate and
maintain key strategic defence assets such
as secure satellite communications and
the uk’s defence academy and provide
systems engineering safety assurance
and risk management services
we continued to broaden our contribution
to improving the capability of the uk’s
military air operations in 2008 both
through engineering support in the uk and
deployed operations in theatres of conflict
during the year over 50 serco employees
supporting the no 32 the royal
squadron and the skynet 5 secure military
satellite systems were awarded military
service medals for their work in operational
theatres
the potential for growth stemming from
our successful track record in support to
operations is shown in a number of new air
support contracts won during 2008 these
include the tenyear £68m ‘surface finish’
contract covering 16 raf sites including
the falkland islands taking serco’s military
aviation support to over 16 different aircraft
types and a maintenance contract for the
raf glider fleet valued at £6m over a
maximum of seven years
following successful rebids we were also
awarded the £9m fiveyear contract to
provide air traffic control engineering and
flight planning at the british army air corps’
wattisham base and an £85m contract
with the us air force europe to provide
support services at three of its uk
operating bases
2008 revenue
£786m
25 of group revenue
our work includes
• commandcontrol systems
• defence establishments’ management
• economic cost analysis
• logistics consulting
• marine services
• port security
• risk and safety management
• secure it support
• throughlife capability management
• training and personnel services
top providing support services to the
uk mod at its base in gibraltar
above maintaining military aircraft and
helicopters at the royal navy air station
in yeovilton
we are a major provider of operational support
services to the armed forces of the uk the us
canada germany and australia we provide training
engineering and operational support maintain strategic
defence assets and deliver cost analysis human
resources systems engineering safety assurance
and risk management services
serco ar08ver7qxdserco ar08  design  21309  1030  page 24 serco group plc 25
in addition to contracts directly awarded by
the ministry of defence we are benefiting
from an increasing range of opportunities
with other private sector providers bae
systems appointed serco to the £8m
fiveyear maintenance and supply contract
for improving efficiency and aircraft
availability amongst the vc10 aircraft fleet
that bae systems operates at brize
norton we already support the raf tristar
fleet at the base
north america
we provide information services
technology and network solutions and
enterprise management engineering
logistics economic cost analysis and
human resources services to the us
military the acquisition of si international
at the end of the year has significantly
expanded our capabilities and broadened
our customer base we now serve all
branches of the us armed forces
increasing demand for highquality
personnel support services is reflected
in the award of a number of contracts
these included a contract to provide
psychological health services at five
us navy regional commands valued at
approximately us6m over two years
we also renewed our contract valued at
up to us32m over two years with the us
army career and alumni program to provide
career counselling and won a
new contract to support the provision of
advocacy services to soldiers and family
members who are victims of domestic
violence and sexual assault through
a oneyear us10m contract with a
secondyear option we will provide support
services for families of active army national
guard and reserve soldiers under a
us56m extension to our us army’s
integrated family support network contract
we were also awarded a contract worth
us11m annually over a base year
plus one option year to develop the
myarmylifetoo web portal which
provides timely and relevant information
to army families
we successfully rebid for the casualty
support services contract awarded by
the us army casualty and mortuary affairs
operations center which includes manning
the operations center for army casualty
support receiving casualty reports and
providing information and assistance to
nextofkin the initial value of the contract
is us9m for the first year with the
potential to increase to us445m
if all options are exercised
we also won with our partner summit
marketing a contract for the freedom
team salute recognition and commendation
program which has an estimated value of
us21m to serco over two years
the award of the aviation technical
maintenance and support services
contract by us navy spawar systems
center charleston with a potential value
of us167m over five years reaffirms our
track record in delivering high quality air
traffic control and integrated technical
and maintenance aviation services and
strengthens our 11year partnership
with spawar
with greater budget constraints and
increased demand for operational
resources being deployed in the field
emphasis is being placed on cost analysis
and procurement during the year we rebid
successfully for the price fighters cost
analysis contract supporting the us navy’s
weapons procurement program the
contract is valued at approximately
us41m for a base year plus four option
years we were also awarded
a oneyear us23m contract to provide
cost analysis support to the
multinational coalition forces in iraq
we were awarded a us185m contract by
the us space and naval warfare systems
command for the production and delivery
of navigation sensor system interface
navssi components and ongoing
production engineering support services
the navssi system collects and processes
data for weapons combat support and
other onboard information systems the
fiveyear contract combines purchases for
the us navy and the governments of
australia and spain we were also part of a
team awarded contracts under the project
management support services
programme with an overall value to serco
estimated at us25m over five years
middle east and asia pacific
in the middle east as previously reported
we were disappointed to be informed in
february 2008 that the oman ministry
of defence no longer wished to proceed
with its project to develop a military
training college
we provide training logistics and operational
support services to the australian
department of defence and we have
successfully built a presence on every
defence base in australia providing
a firm foundation for organic growth
our joint venture in australia serco sodexho
defence services was awarded the
integrated base services contract for the
north queensland region adding to its
earlier success in winning the base
services contract for the northern territory
the combined value of the two contracts
is aus362m over nine years
above providing engineering support to the apache
helicopters of 7 air assault battalion wattisham station
serco ar08ver7qxdserco ar08  design  20309  1911  page 25 supporting the us navy
serco’s price fighters contracts help the us navy maximise its buying power
under our initial contract which began in 1996 we assessed the fair price of
spare parts since then we have transformed our capabilities in response to the
navy’s evolving needs enabling us to perform increasingly complex analyses of
aircraft weapons and programs we also adapted our methodology to understand
the cost of services such as logistics
serco’s cost analysts engineers and technicians have years of manufacturing
experience and have helped the defense department save over us12bn our
expertise has been a key factor in winning other significant defence service
contracts with the us army
26 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1912  page 26 serco group plc 27
serco ar08ver7qxdserco ar08  design  20309  1912  page 27 28 serco group plc
transport
transport revenue grew by 24 to
£671m representing 22 of group
revenue 2007 23 excluding the
effect of the ending of our contracts to
operate the manchester metrolink and
copenhagen metro in 2007 revenue
growth was 8 reflecting strong
performance across this segment
during the last year our transport
operations continued to leverage skills
developed in the uk to win significant new
business in the middle east and further
develop our presence in us markets
heavy rail
northern rail and merseyrail serco’s two
joint ventures with nedrailways continued
to deliver good growth in 2008 supported
by innovation and excellent service delivery
and have made a good start to 2009
these joint ventures have revenue or profit
sharing agreements and stable subsidies
which account for over 60 of revenue
northern rail was named as ‘train operator
of the year’ and ‘rail business of the year’
at the hsbc rail business awards during
2008 the new hourly service northern rail
has introduced between leeds and
nottingham links these two important
centres directly for the first time in 25 years
and along with the expansion to a half
hourly service on its leedssheffield route
will further improve performance and
enhance the passenger experience
merseyrail has received the highest score
for passenger satisfaction in the latest
national passenger survey for any train
operating company outside london as well
as achieving the uk’s first fully secure rail
network by the department of transport
as all of its 66 stations have been awarded
secure station status serco docklands
was awarded secure station status for its
stations in 2007
our australian rail operation great
southern rail has made appropriate
adjustments to service schedules and
operations after a weaker tourist market
began to impact on passenger numbers
during the second half of the year sales
of the ghan service’s premium platinum
cabins launched in september have
performed well in august we learned
we had not been selected to run the
trains in melbourne australia
we continue to pursue opportunities for
monitoring and maintaining infrastructure
serco was awarded two contracts this year
one by network rail extending our existing
track monitoring and rail grinding contract
valued at £20m over one year with a
possible oneyear extension and one
by virgin trains to upgrade property and
stations on the west coast route valued
at £55m over a maximum fouryear term
our work includes
• air traffic services
• heavy rail operations and maintenance
• light rail operations and maintenance
• traffic control and transport systems
• transport consultancy
2008 revenue
£671m
22 of group revenue
top air traffic control in dubai
above assisting passengers on
merseyrail
we are a major provider of transport services to the uk
and markets in australia the middle east and the us
we operate heavy and light rail systems are a leader in
the development of integrated traffic management
systems and are one of the world’s largest private
sector suppliers of air traffic control services
serco ar08ver7qxdserco ar08  design  20309  1912  page 28 serco group plc 29
light rail
docklands light railway dlr continued to
perform strongly in 2008 the construction
work to extend the railway’s capacity from
twocarriage to threecarriage trains is
proceeding on schedule and the £180m
extension to the line serving woolwich
arsenal was opened in january 2009
our expertise in light rail systems puts us
in an excellent position to meet growing
demand for these services particularly
in the middle east
signed in april 2008 our contract with the
dubai government roads and transport
authority rta to operate and maintain
the first two lines of the new dubai metro
has a value of £500m over 12½ years
the launch of the driverless metro system is
creating considerable local interest and
is expected to lead to further opportunities
in the region through the extension of the
dubai metro network further transport
systems in dubai and the adoption of
similar rail systems in other emirates
our implementation plan which includes
the recruitment of over 3000 employees
is proceeding to schedule ahead of the
formal start of the operating contract in
september 2009
our broad transport capabilities meant that
we were also able to win further business
with the rta during the year these included
a £35m contract to implement ten key
projects under the bus master plan for
dubai and a £2m contract to deliver
a realtime journey planner system which
is accessible online over mobile phones
and through a customer service centre
traffic management
reducing congestion is a priority issue
in the uk with the highways agency
increasing its investment in the area and
emphasis growing on the skills required to
manage motorways and road infrastructure
effectively we are taking a leading role in
developing innovative solutions through
traffic management systems with several
new contract wins during 2008 we signed
a firstyear trial contract with the uk’s
department for transport to undertake a
feasibility and strategy study on time
distanceplace tdp road charging tdp
systems track vehicle movements and offer
road authorities the option of varying costs
to motorists depending on where and when
they use their vehicles we also won a
groundbreaking contract with baa to
maintain the traffic system at heathrow
airport which has the potential to be
replicated around the world
in the us serco secured a us23m
contract to install and manage a new smart
parking system for san francisco as well
as a separate us8m twoyear extension
to our parking meter counting and
collection contract
in hong kong we have renewed our
contracts to operate the aberdeen tunnel
and maintain the shenzhen road corridor
between hong kong and mainland china
under a further contract serco will supply
the latest technology in traffic light
enforcement to the hong kong transport
department in total these contracts are
valued at approximately £23m
civil marine
serco’s expertise in the provision of marine
services to the royal navy led to transport
for london awarding us a new £11m
18month contract to operate the
woolwich ferry opening up further
opportunities in the civil marine market
the free ferry service carries over a million
vehicles and two million passengers a year
and provides an important link to the dlr
air traffic control
in middle east air traffic control services
we rebid successfully on our contract to
provide air traffic control and electronic
engineering services for the united arab
emirates’ area control centre in
abu dhabi the contract with the
general civil aviation authority is worth
£28m over three years
left northern rail serco’s joint venture
with nedrailways was named as uk
train operator of the year in 2008
above operating the woolwich ferry in london
serco ar08ver7qxdserco ar08  design  20309  1912  page 29 30 serco group plc
serco ar08ver7qxdserco ar08  design  20309  1912  page 30 serco group plc 31
servicing an infrastructure for the 21st century
developing longterm relationships with our customers by delivering
excellent service is at the heart of what we do we have supported dubai air
navigation services since 1967 alongside their staff we provide air traffic
control electronic engineering and meteorology services the primary
purpose of the contract is to provide dubai airports company with all the
specialist aviation services it needs to help maximise the capacity and
throughput of aircraft and passengers at dubai
our team has grown from 35 to 160 since the early 1990s we have improved
and expanded our service through innovation helping to enhance safety with an
aviation management system that serco developed and with our customer
introducing sophisticated air traffic control simulators to improve training a two
year project to maximise capacity of the twin parallel runways has resulted in an
increase of aircraft movement capacity of 30 and a decrease in departure
delays as a result of implemented improvements
in 2010 dubai will open the first stage of what is planned to be the largest airport
in the world serco air traffic services staff have been at the heart of the planning
process and been commended for being the most advanced in their preparations
for the opening
serco ar08ver7qxdserco ar08  design  20309  1912  page 31 32 serco group plc
science
science revenue grew by 117 to
£540m representing 17 of group
revenue 2007 17
we continued to see strong
performance from our joint venture to
manage and operate the uk’s atomic
weapons establishment awe the
construction phase of the new orion
building finished as scheduled in march
2008 with the project due for
completion in 2010 awe has also
commenced the planning phase for
project mensa the construction of a
replacement warhead assembly and
disassembly facility at the burghfield
site
in december 2008 bnfl sold its onethird
shareholding in awe management limited
aweml to the californiabased company
jacobs engineering we retain our onethird
stake in aweml in an equal partnership
alongside lockheed martin and jacobs
engineering
the annual rospa awards once again
recognised awe’s excellent health safety
and environmental performance with the
award of the astor trophy for excellence in
occupational health the international
dilmun environmental award and the
sectoral award for outstanding performance
in health and safety
we have been responsible for managing
the work of the national physical
laboratory npl since 1995 supporting its
mission to apply scientific knowledge for
economic and quality of life benefits npl
has won business in the environment
sector including air monitoring projects with
defra and in the security and defence
sector in addition the nobel peace prize
committee recognised the important work
of npl in supporting its peace prize
winners and our diversity and educational
outreach were rewarded with the ‘investor
in wise’ award from women into science
engineering and construction wise
our nuclear assurance business which is
focused on enhancing the performance of
nuclear reactors that generate electricity or
power nuclear submarines has continued
to perform well during the year
our work includes
• materials science
• measurement science
• nuclear assurance
• research establishments’ management
• technical training
2008 revenue
£540m
17 of group revenue
top the analytical science team at npl
is a multidisciplinary team focused on
government priority areas such as
environmental protection energy and
sustainability healthcare and
nanotechnologies
above npl is a recognised source of
expertise on the evaluation of biometrics
technologies
serco manages sciencebased organisations and
develops and applies scientific knowledge for wealth
creation technology innovation and people
management are at the heart of our offering in this
market
serco ar08ver7qxdserco ar08  design  20309  1912  page 32 serco group plc 33
we were appointed as one of a team of
partners to provide engineering and
technical support to british energy’s nuclear
power stations worth up to £30m to the
partners over the next five years and are
well placed to grow the business as nuclear
new build programmes get underway in the
uk and overseas
the business has also completed the main
stage of its extensive refurbishment of the
nuclear laboratory and support complex in
cheshire these facilities which include
nuclear corrosion and high temperature
laboratories strengthen serco’s world class
capabilities in nuclear safety assurance and
regulatory support
“the annual rospa
awards once again
recognised awe’s
excellent health
safety and
environmental
performance”
serco ar08ver7qxdserco ar08  design  20309  1914  page 33 suppliers
alongside the hundreds of services serco
manages through contracts on behalf of
customers the group also has its own
extensive supplier relationships
we take the same approach to suppliers as
we do to customers we look for longterm
relationships in which there is opportunity
for continuous improvement and value
creation based on innovation
in order to continually improve quality and
manage costs the group has standardised
the centralisation of buying goods and
services the number of preferred suppliers
for such goods and services ranging from
commodity computer peripherals to agency
employees has reduced and the
terms and conditions enhanced
procurement policies and processes
are clearly communicated internally and
facilitated through online purchasing systems
which reduce administration costs reduce
wastage improve cash flow and give
contract managers more time to focus
on client needs
joint ventures and strategic
partnerships
serco has a number of joint ventures and
strategic partnerships around the world that
manage service contracts particularly in the
transport defence and science sectors
strong relationships mutual trust and
respect and clarity of role are all essential
ingredients if a service is to be successfully
delivered through a joint venture
in transport for example our partnership
with nedrailways began work at merseyrail
in 2003 and northern rail in 2004
together we have become one of the
uk’s major train operating companies
our partnership at the atomic weapons
establishment has been highly successful
and together we have consistently
exceeded service targets
we continue to create new partnerships
and joint ventures which include innovative
new business models with customers
in 2008 we formed a strategic joint venture
with glasgow city council to improve
services for citizens through cohesive
efficient and higher quality property and
information and communications
technology services in 2009 we
announced that we had formed a
partnership with guys and st thomas
nhs foundation trust to improve the
trusts pathology services and target
the significant national and international
pathology market
relationships with joint venture partners are
the responsibility of the relevant divisional
management teams supported by
members of the group executive team and
board as appropriate regular strategy and
review meetings ensure the joint venture
partners remain firmly committed to working
together to deliver services to clients
our track record for successful partnerships
speaks volumes
34 serco group plc
business relationships
“our reputation for
delivering excellent
service and our
ability to build
longterm
relationships is
behind the
consistent success
serco has enjoyed
to date”
serco ar08ver7qxdserco ar08  design  20309  1914  page 34 serco group plc 35
our people
having skilled qualified engaged and
inspired employees who bring service to
life is essential to our continued success
that is why we are committed to
communicating with supporting and
developing our people we have a strong
culture based on our governing principles –
and we monitor how well we’re putting
them into practice
having great people is the single biggest
factor in the growth and success of our
business and in 2008 we have further
embedded our leadership development
strategy initially focused on our senior
leadership over the course of 2008 we
broadened the programme to develop the
right type and number of leaders across our
entire leadership population this strategy
enables effective performance management
and development plans that are tailored to
the needs of the individual
across the company we are committed to
investing in the professional and technical
skills our staff need to do their jobs we are
always looking to equip and encourage
staff to take on wider roles
to enable our leaders to manage their
people we have developed a
comprehensive suite of employment policies
which support our employees wherever
they are in the world the key employment
policies are made available through line
managers human resources teams and our
intranet they include policies covering
diversity and equality for employees having
children resolving issues health and safety
confidentiality security and ethics and
time off work
as an international company we
experience differing employment legislation
customs and practices in different parts of
the world our approach is always to
respect local differences but not to fall
short of minimum standards
our performance against our policies and
the implications of changing legislation and
best practice is monitored by our human
resources function where we need to
change an approach then appropriate
communications and training are
implemented
our skills for you programme was developed
in partnership with uk government
departments trade unions and training
providers it offers serco staff the chance
to improve their literacy numeracy and
language skills while continuing with their
workplace learning since its introduction
at serco 3221 of our people have been
assessed with 640 achieving a qualification
we know that having highly engaged
employees who live our governing
principles and bring service to life will lead
to even higher performing contracts that is
why we research how engaged our
employees are with serco to us this
research is more than a measurement tool
it is a continuous improvement process for
people issues and a key driver to improved
business performance throughout 2008
across every level of our business we
have put changes in place to improve
engagement and will be measuring the
impact in 2009
we’re passionate about communication
it is natural for us to share information and
bring people together across the world
we have set out how we want employees
across the business to connect to serco
this is delivered through a communications
network programme of channels and
campaigns
in 2008 we launched scoop a magazine
for all serco employees through this
publication we deliver consistent brand and
message and present a 360 degree view
of the serco family we also introduced a
new intranet channel for employees to
connect with their senior leadership
our pulse awards are designed to celebrate
the very best qualities and achievements of
serco people our customers and partners
the awards are closely linked to our
governing principles they recognise
people who excel at innovation inspire
through their leadership demonstrate
outstanding commitment and make an
exceptional impact on communities the
environment or issues such as safety and
ethics
in 2008 48 employees received an award
in the first global pulse awards
our reputation
our reputation for delivering excellent
service and our ability to build longterm
relationships is behind the consistent
success serco has enjoyed to date
customers and potential customers tell us
that corporate reputation is one of the key
criteria in the selection and retention of
private sector partners as a result we
are taking steps to measure customer
advocacy and corporate reputation
consistently on a groupwide basis
we continue to build our reputation
amongst business stakeholders through a
communication programme which includes
the publication of thoughtleading research
and attendance at seminars and conferences
however we recognise that delivering value
to customers and citizens by improving
services’ efficacy and efficiency is the most
significant shaper of our reputation
our people and reputation
above we are committed to investing in the
professional and technical skills our staff need to
do their jobs
serco ar08ver7qxdserco ar08  design  20309  1914  page 35 36 serco group plc
corporate responsibility
serco strives to operate in a way that
has a positive impact on society
our people embody the values that we
have worked so hard to embed throughout
the organisation these values are built on
our governing principles we foster an
entrepreneurial culture we enable our
people to excel we deliver our promises
and we build trust and respect these
values have supported us in becoming one
of the world’s leading service companies
we work in partnership with governments
and commercial organisations around the
world to improve services across many
areas of public life
beyond profits
while financial performance is important
the search for profit is not what defines us
we want not only to achieve the social
outcomes we are often contracted to
deliver but to do it in a way that has
a positive impact on society
setting a strategic framework
as an organisation we are never
complacent we work continually to
improve our systems and processes
like all responsible companies we are
striving to become more sustainable as a
result we have developed our corporate
responsibility framework which recognises
local cultures and conditions across our
diverse operations to put sustainable
development at the heart of our business
the framework consists of five key areas
• to make a positive difference to the
communities we serve
• to reduce our environmental impact
• to reduce our consumption and assure
our supply chain
• to increase our value to our customers
and shareholders
• to realise the potential of our people
key to this whole process is understanding
how we perform so that we can improve
the management decisions we make
we have a core set of performance
indicators that we use to assure ourselves
that we are performing responsibly details
of these are provided in our corporate
responsibility review and are available
on our website
reviewing corporate governance
we undertook a review of our management
system to ensure that our policy framework
is the right one for the size and scale of the
organisation we now are
as we continue to grow we have focused
on how to keep it as simple as possible
and make sure we are using language that
everybody can clearly understand
we need to ensure we have strong links
between our management system risk
management and our internal audit
process so that we have confidence in
both our governance structure and our
management of risk
it is important that our people have
clarity about their roles and accountability
empowering and enabling them to excel
even further leading to better value
all around
measuring performance
an overall assessment is provided by the
business in the community bitc corporate
responsibility index we achieved for the
second year running a gold overall rating
90 this year a new workplace index
was introduced under which we received
platinum banding with a score of 95
along with a community index in which we
achieved platinum status 96 serco’s
leisure business national physical
laboratory and our contract at airbus filton
were again recognised by the bitc awards
for excellence with each receiving a big
tick award for the second year in
succession
our bitc environmental index rating also
improved with a gold banding and overall
score of 89 this was an improvement on
the previous index where we scored 795
these are some of the highlights
taken from our 2008 corporate
responsibility review t o find out
more please visit wwwsercocom
serco ar08ver7qxdserco ar08  design  20309  1914  page 36 serco group plc 37
measuring our environmental performance
has been a particular area of attention
2008 saw a significant step forward with a
comprehensive review of the company’s
environmental performance indicators and
the capture of accurate environmental data
this has provided a baseline of company
performance that we will use to benchmark
future environmental performance against
we recognise we not only have a
responsibility to improve our performance
but also to influence thinking in 2008 serco
cosponsored with the new local
government network an independent local
government think tank a piece of research
looking at potential solutions to the pressing
and immediate challenges and issues
facing the uk waste industry
our lost time incident rate has continued
to improve although the proportion relating
to reportable threeday absence has
increased leading to a pilot to better
manage firstday absence management
by occupational health reflecting external
benchmarks mental and behavioural
diseases and musculoskeletal system
and connective tissue diseases remain the
main reason for referrals we have therefore
established a process to fast track these
referrals to specialists to reduce the time
in resolving them we are also looking at
ways of reducing the number of incidents
the pilot of the ‘backtrack’ system in
the uk has seen a significant reduction in
manual handling manoeuvres where it has
been trialled
in our rail operations both verbal and
physical assault rates have been below
target and reflect the success of a focused
campaign over the last few years
in 2007 we launched the pulse awards
aligned to our governing principles the
awards recognise examples of excellence
in business operations or improvement
environmental and safety initiatives and
leadership they also recognise our wider
responsibilities to society the environment
and the communities we serve this might
be through significant contributions made
to charitable or community organisations
in 2008 the first pulse awards were given
to 118 divisional award winners of which
48 received a global pulse award
embedding ethical guidelines
our company values and ethics are integral
to one another historically our value set
has been clear about where we draw the
lines however as we move into different
countries and cultures and as we diversify
our range of services we need to review
regularly the company’s position on these
that is why we have set up a formal ethics
committee made up of senior
management with very clear guidelines
about its remit it is there to determine the
‘big ticket’ items that define our position
beyond regulatory and statutory
requirements
doing business the right way demands
constant vigilance by its very nature it has
to be a journey without an ending thanks
to the people we employ we are making
real progress in reaching our ambitious
goals
“as an organisation
we are never
complacent we
work continually to
improve our
systems and
processes”
above teaming up with the scouts association to
sponsor their environment badge
above safety is a priority at dubai airport above education classes at kilmarnock prison
above corporate responsibility
review 2008
serco ar08ver7qxdserco ar08  design  20309  1914  page 37 38 serco group plc
finance review
1 financial performance
serco’s strong performance in 2008 is reflected in our financial results with doubledigit revenue growth and a further increase in margins
we generated good cash flow and have a strong funding position
serco’s income statement for the year is summarised in figure 1 below this includes the results of joint ventures which are proportionately
consolidated 
figure 1 income statement
year ended 31 december 2008 2007 increase
£m £m
revenue 31235 28107 111
gross profit 4568 4062 125
administrative expenses 2916 2642
adjusted operating profit 1652 1420 163
investment revenue and finance costs 199 188
adjusted profit before tax 1453 1232 179
amortisation of acquired intangibles 92 86
profit before tax 1361 1146 188
tax 365 322
profit for the year 996 824 209
effective tax rate 268 281
adjusted earnings per share 2220p 1857p 195
earnings per share 2049p 1698p 207
dividend per share 500p 425p 176
11 revenue
revenue grew by 111 to £31235m benefiting from the growth of existing contracts and the contribution of new wins underlying
revenue growth which excludes the effects of changes to currency exchange rates acquisitions disposals and significant contract
divestments was 103 
12 gross margin
gross margin – the average contract margin across our portfolio – was 146 a small increase of 01 on 2007
13 investment revenue and finance costs
investment revenue and finance costs totalled a net cost of £199m 2007 £188m a reduction in the group’s underlying borrowing
costs was offset by an increase in the net pension funding cost charged to the income statement
14 profit before tax
adjusted profit before tax was £1453m an increase of 179 this represented a margin of 47 up from 44 on 2007 profit before
tax increased by 188 to £1361m 
15 tax
the tax charge of £365m 2007 £322m represents an effective tax rate of 268 compared with 281 in 2007 the decrease in the
effective tax rate principally reflects the fall in the uk corporation tax rate from 30 to 28 in april 2008
16 earnings per share eps
adjusted eps rose by 195 to 2220p eps grew by 207 to 2049p 
eps and adjusted eps are calculated on an average number of shares in issue of 4857m during the year 2007 4824m the increase in
the average number of shares in issue resulted from the exercise of employees’ share options
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 38 serco group plc    39
2 dividend
serco’s policy is to increase the total dividend each year broadly in line with the increase in underlying earnings the board has proposed
a final dividend of 352p per share representing an increase on the 2007 final dividend of 166 and bringing the total dividend for the
year to 500p a growth of 176 the final dividend will be paid on 20 may 2009 to shareholders on the register on 6 march 2009
3 cash flow
the group generated a free cash inflow of £942m £34m lower than in 2007 the free cash flow in 2007 benefited from a low working
capital movement and a lower level of cash tax 
figure 2 analyses the cash flow as in previous years we have designed the analysis to show the actual cash performance of the group –
being the cash flows generated by subsidiaries plus the dividends received from joint ventures it therefore differs from the consolidated
cash flow on page 60 which proportionately consolidates the cash flows of joint ventures the adjustment line in figure 2 reconciles the
movement in group cash to the consolidated cash flow
figure 2 cash flow 
year ended 31 december 2008 2007
£m £m
operating profit excluding joint ventures 1078 922
non cash items 394 476
group ebitda 1472 1398
working capital movement 216 02
group operating cash flow 1256 1396
interest 250 256
tax 118 54
net expenditure on tangible and intangible assets 318 479
dividends from joint ventures 372 369
group free cash flow 942 976
disposal of business undertakings 19 33
acquisition of subsidiaries 3222 74
financing 2890 710
special pension contribution – 510
dividends paid 216 179
group net increasedecrease in cash and cash equivalents 413 464
adjustment to include joint venture cash impacts 28 67
net increasedecrease in cash and cash equivalents 441 397
note group ebitda is earnings from subsidiaries excluding joint ventures before interest tax depreciation intangible amortisation and other non cash items
31 group operating cash flow
group operating cash flow of £1256m 2007 £1396m represents a conversion of group ebitda into cash of 85 2007 100 the
strong levels of organic growth in the business require working capital investment and this is reflected in the 2008 movement of £216m 
32 interest
net interest paid was £250m compared to £256m in 2007
33 tax
tax paid was £118m 2007 £54m tax paid in 2007 and the first half of 2008 was lower than expected as a result of the tax relief on the
special pension contributions made in 2006 and 2007 the increase in 2008 reflected that there was no further tax relief available in the
second half of the year on these contributions
cash tax is below the equivalent charge in the income statement as a result of accelerated capital allowances and other timing differences 
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 39 34 net expenditure on tangible and intangible assets
net expenditure on tangible and intangible assets in the year was £318m 2007 £479m this comprised gross expenditure of £487m
representing 20 of revenue excluding joint ventures 2007 22 and disposals of £169m the principal component of disposals was
the sale and leaseback of a number of carriages on the great southern railway in australia this follows similar transactions in previous
years to realise a further part of the substantial investment we have made in acquiring and successfully growing the business since 1999 
35 dividends from joint ventures
dividends received from joint ventures totalled £372m 2007 £369m a conversion rate of 84 2007 100 of joint ventures’ profit
after tax and minority interest excluding costs allocated by group this is in line with our expectation of a conversion rate in the range 
of 8090 
36 disposal of business undertakings
on 23 june 2008 the group disposed of its equity stake in kilmarnock prison services limited in line with our strategy to realise cash
from our equity and subordinated debt in private finance initiatives pfi projects this disposal follows the sale of equity and subordinated
debt in six pfi projects in 2006  profit on disposal of the kilmarnock stake was £27m and the net cash inflow of £19m comprised gross
sale proceeds of £62m offset principally by cash held within the entity to cover future debt repayments of £30m we retain the operating
contract for kilmarnock prison
37 acquisition of subsidiaries 
acquisition of subsidiaries principally comprises the acquisition of si international inc on 29 december 2008 a provider of information
services technology and network solutions to the us government for £2898m the acquisition gave rise to goodwill of £3052m
intangible assets arising on the acquisition have been recognised at £518m and will be amortised on a straightline basis over their
expected lives given the proximity of the acquisition to the group’s year end si international inc made no contribution to the group’s
revenue profit and operating cash flow in 2008
other acquisitions were infovision an indian business process outsourcing company for which we paid £148m for an initial 60
shareholding in december 2008 and the grosvenor health group an occupational health service provider acquired for £190m in 
may 2008
fair values have been determined provisionally in respect of si international inc and infovision and may be subject to adjustment in 
the year
38 financing
the movement in financing resulted primarily from a drawdown on our committed facilities to finance acquisitions made during the year
4 net debt
figure 3 analyses serco’s net debt 
figure 3 net debt
at 31 december 2008 2007
£m £m
group  cash and cash equivalents 1998 1381
group  loans 7088 2633
group  obligations under finance leases 155 127
group recourse net debt 5245 1379
joint venture recourse net cash 445 349
total recourse net debt 4800 1030
group non recourse debt 341 593
total net debt 5141 1623
40 serco group plc
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 40 serco group plc    41
41 group recourse net debt
group recourse net debt increased by £3866m to £5245m the net impact of acquisitions in the year added £3222m to net debt
changes in currency exchange rates increased net debt by £323m group cash and cash equivalents rose to £1998m an increase of
£617m primarily reflecting periodic changes in working capital cash and cash equivalents includes encumbered cash of £104m 
31 december 2007 £119m which is cash securing credit obligations and customer advance payments 
42 group non recourse debt
the groups debt is non recourse if no group company other than the relevant borrower has an obligation to repay the debt under a
guarantee or other arrangement the debt is excluded from all of our credit agreements and other covenant calculations and therefore
has no impact on the group’s ability to borrow 
group non recourse debt reduced by £252m to £341m due to the disposal of our equity stake in kilmarnock prison services limited
the remaining non recourse debt relates to our driver examination services contract in canada
5 pensions
at 31 december 2008 the net liability included in the balance sheet arising from our defined benefit pension scheme obligations was
£205m 31 december 2007 £522m on an asset base of £12bn the net liability has fallen principally as a result of changes in the rpi
and discount rate assumptions used to value the schemes partially offset by lower than expected equity returns in the year figure 4
provides further analysis
figure 4 defined benefit pension schemes
at 31 december 2008 2007
£m £m
group schemes – non contract specific 07 679
contract specific schemes
– reimbursable 896 607
– not certain to be reimbursable 244 140
net retirement benefit liabilities 1147 1426
intangible assets arising from rights to operate franchises and contracts 144 174
reimbursable rights debtor 896 607
deferred tax liabilitiesassets 98 123
net balance sheet liabilities 205 522
serco has three main types of scheme which are accounted for as defined benefit pension schemes each type has its own accounting
treatment under international financial reporting standards these are
• non contract specific – schemes which do not relate to specific contracts or franchises for these schemes we charge the actuarial
gain or loss for the period to the consolidated statement of recognised income and expense sorie
• reimbursable – schemes where we have a right of full cost reimbursement and therefore include both the pension scheme deficit and
offsetting reimbursable rights debtor in the balance sheet and
• not certain to be reimbursable – schemes relating to specific contracts or franchises where the deficit will pass back to the customer or
on to the next contractor at the end of the contract for these schemes we charge the actuarial gain or loss on our share of the deficit
for the period to the sorie recognise a recoverable intangible asset on the balance sheet at the start of the contract or franchise and
amortise the intangible asset to the income statement over the contract or franchise life
serco has limited commercial risk in relation to the contract specific schemes due to either the right of cost reimbursement or because
the deficit will in general pass back to the customer or on to the next contractor at the end of the contract among our non contract
specific schemes the largest is the serco pension and life assurance scheme splas at 31 december 2008 splas had a surplus of
£624m 31 december 2007 a deficit of £287m this movement in the scheme position reflects the reduction in volatility afforded by the
liability driven investment ldi strategy introduced in 2007 and a change in inflation and discount rate assumptions 
figure 5 shows the sensitivity of the liabilities of our pension schemes to changes in discount rates and to adjustments in the principal
actuarial assumptions for the rate of inflation members’ salary increases and life expectancies
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 41 figure 5 pension assumptions and sensitivities 
assumption change in assumption change in liability
discount rate 60 05 9
05 10
price inflation 26 05 7
05 7
salary inflation 31 05 3
05 3
longevity 203 – 244 increase by one year 3
post retirement mortality range for male and female current and future pensioners
6 treasury 
in the year the group replaced its existing £400m bank credit facility with a new fiveyear £400m bank revolving credit facility which
matures in september 2013 the group also arranged a term loan and bilateral facility totalling us dollar 550m to fund the acquisition of
si international inc the term loan and bilateral facility are repayable between september 2010 and september 2013 the facilities which
are syndicated with a group of 13 banks are unsecured as at 31 december 2008 £560m had been drawn down on these facilities
serco has also issued us private placement loan notes totalling £117m which will be repaid evenly from 2011 to 2015
in total the group has £900m of committed debt facilities available giving significant headroom to fund working capital and other 
known requirements
7 going concern
the directors have acknowledged the guidance on going concern and financial reporting published by the financial reporting council in
november 2008 whilst the current economic environment is uncertain the broad base of our contract portfolio and with 90 of our
customers being government bodies the group is well placed to manage its business risks successfully including those risks arising from
the failure of customers to meet contractual obligations and has adequate resources to continue in operational existence for the
foreseeable future 
as disclosed in the chief executive’s statement the group’s revenues are largely derived from longterm contracts with governments
which historically have been largely unaffected by changes in the general economy the contract portfolio is spread across a number of
markets sectors and geographies such that a downturn in any one segment is highly unlikely to affect the group as a whole in addition
with an order book of £163bn and high visibility of future revenue streams 90 in 2009 76 in 2010 and 65 in 2011 the group is
well placed to manage its business risks despite the current uncertain economic climate
the group’s management of exposure to financial risk including liquidity foreign exchange credit interest rate and price risks is disclosed
in note 26 to the annual review and accounts
in september 2008 the group secured mediumterm financing by entering into a fiveyear revolving credit facility and bilateral facilities
eliminating the near term risk of refinancing the £400m bank facility maturing at the end of 2009 including the term loan and us private
placements the group has committed funding of approximately £900m as at 31 december 2008 the headroom on the facilities was in
excess of £300m the first repayment on these new facilities falls due in september 2010 for an amount of us dollar 92m the group
fully expects to meet this repayment through internally generated cash flows in addition we have diversified both the number and
geographical locations of the banks within the syndicate which has risen from nine to thirteen 
based on the information set out above the directors believe that it is appropriate to prepare the financial statements on a going 
concern basis
42 serco group plc
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 42 serco group plc    43
summary financial statement
the summary financial statement has
been produced to allow readers of the
accounts an overview of the financial
affairs of serco group plc and its
subsidiaries the group through the
principal financial statements without the
need to refer to the more detailed annual
review and accounts this summary
financial statement is only a summary of
the annual review and accounts which
contain the full annual accounts other
statutory information and the full directors’
report it does not contain sufficient
information to allow a full understanding of
the results and state of affairs of the
group and of its policies regarding
directors’ remuneration as would be
provided by the full annual statements and
reports
members who wish to receive the full
annual review and accounts for the year
ended 31 december 2008 should write to
the company secretary at the company’s
registered office alternatively a copy of
the annual review and accounts can be
downloaded from wwwsercocom 
the independent auditors’ report on the
full annual review and accounts of the
group for the year ended 31 december
2008 is unqualified and does not contain
any statement containing inadequate
accounting records or failure to obtain
necessary information or expectations 
activities
serco group plc is a holding company
which operates via its subsidiaries and its
joint ventures to improve services by
managing people processes technology
and assets more effectively serco
supports governments agencies and
companies by offering operational
management and consulting expertise in
the aviation defence education health
home affairs local government nuclear
science technology transport and
commercial sectors
dividends
an interim dividend of 148p 2007 –
1213p per ordinary share was paid on 17
october 2008 the directors recommend
a final dividend of 352p 2007 – 302p
per ordinary share which if approved by
shareholders at the annual general
meeting will be paid on 20 may 2009 to
those shareholders on the register at the
close of business on 6 march 2009
directors
the current members of the board
together with biographical details of each
director are set out on pages 56 and 57 
grant rumbles ceased being a director
with effect from 25 march 2008 and
subsequently left serco employment on 16
may 2008
annual general meeting
the annual general meeting of the
company will be held at the queen
elizabeth ii conference centre london on
12 may 2009 at 1100am
the notice convening the meeting
includes an explanation of all the
resolutions to be proposed at the annual
general meeting a copy can be
downloaded from wwwsercocom and is
sent to all shareholders 
corporate responsibility
the group maintains a focus on corporate
responsibility through a structure model
that is applied across the business  our
corporate responsibility model focuses on
our people safety the environment and
the communities we serve  this model
forms an integral part of our management
system and is supported by defined
policies in all of the areas it covers  these
are applied within the context of our
policies on ethics and business conduct
and human rights  activities are reported
quarterly as part of our internal assurance
reporting process
further information on our approach to
corporate responsibility and how we have
delivered our commitments is contained in
the corporate responsibility review which
is available online at wwwsercocom this
site also provides an overview of our
approach to corporate responsibility our
management system and our policies
donations
the group continues to encourage all staff
to participate in their local communities
and has a process to capture investment
on a worldwide basis this measure is
based upon the business in the
community bitc reporting format
the value of this investment in 2008 at
£1767168 2007 £1066527 represents
13 of the group’s pretax profit 
during the year neither the company nor
the group made political donations and
they intend to continue with this policy 
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 43 44 serco group plc
corporate governance
in managing the affairs of the group the
board of serco group plc is committed to
achieving high standards of corporate
governance integrity and business ethics
for all its activities around the world a
fundamental part of the group’s corporate
governance processes is the ethics and
business conduct policy standard that the
company and group have adopted to
support the highest standards of corporate
governance 
throughout 2008 serco group plc
complied fully with the provisions of
section 1 of the 2006 combined code on
corporate governance issued by the
financial reporting council the code
board and committee
structure 
to support the principles of good
governance the board the members of
which are shown on pages 56 and 57 is
responsible for the overall management
and performance of the group and the
approval of its longterm objectives and
commercial strategy and for ensuring that
any necessary corrective action is taken
promptly board meetings are held
quarterly over two days with ad hoc
meetings in between as required 
the following are the main committees of
the board
• audit
• nomination 
• remuneration
the audit and remuneration committees
consist wholly of independent 
nonexecutive directors the nomination
committee consists of the independent
nonexecutive directors and the
chairman 
going concern
the directors have acknowledged the
guidance on going concern and financial
reporting published by the financial
reporting council in november 2008
whilst the current economic environment
is uncertain the group is well placed to
manage its business risks successfully
and has adequate resources to continue in
operational existence for the foreseeable
future given that it has a balanced
portfolio of principally longterm contracts
an order book of £163bn over 90 of its
revenues derived from governments and
substantial debt financing committed for
the mediumterm as at 31 december
2008 the group as a whole had a revenue
visibility of 90 for the next 12 month
period based upon the order book
visibility of planned 2010 and 2011
revenues are already 76 and 65
respectively accordingly the group has
adopted the going concern basis in
preparing the annual review and
accounts
the remuneration committee
the committee determines the overall
remuneration policy for senior
management and the individual
remuneration of the chairman and the
executive directors  this includes base
salary bonus longterm incentives
pensions benefits and terms of
employment including those terms on
which service may be terminated 
remuneration policy
as indicated in last year’s remuneration
report during 2008 the committee
carried out its comprehensive triennial
review of executive remuneration and of
the principles which form the basis of the
company’s remuneration policy  the
objective has been to ensure that the
group’s arrangements are aligned with the
threeyear business plan and best
practice 
as a result of the review several changes
are proposed both to the structure and the
levels of remuneration of executive
directors  these are described in this
report and where appropriate in the
notice of annual general meeting
serco’s remuneration policy adopts the
following principles which are that
executive remuneration should
• support serco’s longterm future
growth strategy and values
• align the financial interests of executives
and shareholders
• provide market competitive reward
opportunities for performance in line with
expectations and deliver significant
financial rewards for sustained out
performance
• enable serco to recruit and retain the
best in all our chosen markets 
• be based on a clear rationale which
participants shareholders and other
stakeholders are able to understand and
support
in setting the remuneration of the
executive directors in particular the non
financial objectives relating to the annual
bonus scheme the remuneration
committee is able to consider corporate
performance on safety environmental
social and corporate governance  the
committee retains discretion to reduce
bonuses or the vesting of awards under
the share plans if performance in these
areas is unsatisfactory
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 44 serco group plc    45
the elements of remuneration
composition
the current remuneration package for
executive directors consists of base salary
annual bonus longer term sharebased
incentives pensions and other benefits
the group’s policy is to ensure that a
significant proportion of the package is
related to performance
the relative proportions of the
performancerelated and fixed elements of
remuneration excluding pension and other
benefits for executive directors  showing
the current and future position and
assuming ‘ontarget’ remuneration  are
shown in the following charts 
base salary
performancerelated annual bonus 
performancerelated longterm
incentives expected value
proposed remuneration for chief executive
proposed remuneration for finance director
base salary
as a consequence of the triennial review
the committee’s policy is to set the base
salaries of the executive directors so as to
ensure that total target remuneration is
competitive
a new comparator group has been
adopted which comprises the companies
within the ftse 51 to 130 that are in the
proprietary database of the committee’s
advisors and covers a range of roles at
and below board level  this is a group of
approximately 30 companies of broadly
similar size and scope to serco in terms of
turnover growth profile and market
capitalisation  the new comparator group
gives access to a more robust and stable
data set and will be used by serco to
benchmark other roles below executive
level across the group 
base salaries are normally reviewed
annually  the committee takes note of
relative pay and employment conditions
within the comparator group and the
company when determining salaries
with effect from 1 september 2008 the
base salaries for christopher hyman and
andrew jenner were increased to
£645000 and £380000 increases of
15 and 10 respectively  these
increases were determined with
consideration to the following
• serco’s strong performance in 2008
• serco’s steady growth and performance
over the past three years
• the market position of these new
salaries which is below median against
the new comparator group and
• the overall impact on total target
remuneration which subject to
shareholders’ approval of the new 
longterm plans will be above median
only if executive directors defer half their
earned bonus
33
45
22
41
34
25
39
37
24
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 45 46 serco group plc
annual bonus
bonus is earned only on the basis of
achievement of a mix of financial and non
financial objectives which are weighted
80 and 20 respectively
financial measures are based on the
serco group results and the nonfinancial
measures are teambased  the three
financial measures for 2008 were based
on turnover adjusted profit before tax and
amortisation and cash conversion  these
measures reflect the growth and margin
improvement strategies of the business
the standards of performance set are
designed to be stretching  the non
financial goals set for 2008 assessed
performance against a number of
strategically important areas
for 2008 the maximum annual bonus
award was 100 of salary  on the basis
of serco’s performance in 2008 annual
awards of 82 of salary have been
determined the executive directors
delivered an excellent financial
performance that exceeded target
serco’s financial performance for the year
is described in more detail in the business
review on page 12 the executive
directors also delivered in full against a
number of strategic objectives in the areas
of leadership development new business
wins and investor relations  
annual bonuses are not pensionable
changes to annual bonus for 2009
following the triennial review annual bonus
potential will be increased from 100 to
150 of base salary for the chief
executive and to 130 of base salary for
the finance director  payments for target
performance will also increase to 75 and
65 of base salary respectively  the level
of difficulty and the standard of
performance required to achieve target
performance will also increase  the mix of
measures will remain as described above
the measure of profit will be profit before
tax adjusted for exceptional items where
appropriate  beyond this the bonus plan
will not change  
the change to annual bonus is designed
to increase the emphasis on performance
and to balance reward for shortterm and
longer term performance in combination
with the proposed new deferred bonus
plan see below the increase to annual
bonus linked to challenging annual
performance measures places greater
emphasis and focus on shortterm
operational performance which is key to
delivering serco’s longer term
performance
sharebased remuneration
longterm share incentives are awarded to
executive directors under the serco group
plc 2006 long term incentive plan ltip
and the serco group plc 2005 executive
option plan eop  all grants and awards
are made pursuant to the rules of the
applicable plans and in accordance with
the model code and policies in relation to
the treatment of the leavers have been
adopted  the measurement of the
performance targets is undertaken by
mercer for the 2006 long term incentive
plan and audited by deloitte llp in
relation the 2005 executive option plan
the conditions relating to the plans are
detailed below 
long term incentive plan
the ltip awards granted to executive
directors are calculated at 100 of salary
at the time of grant  the vesting of awards
depends on the group’s total shareholder
return tsr measured relative to the top
250 companies in the ftse as ranked by
market capitalisation excluding those in
certain sectors such as oil and gas and
financial services
the committee has discretion to vary the
proportion of awards that vest if it
considers that the tsr performance
measure does not appropriately reflect the
underlying financial performance of the
group
for awards that completed their
performance period on 31 december
2008 the group’s tsr performance
relative to its comparator group was in the
top decile and therefore 200 of the
awards will vest
no awards were made under this plan in
2008
there is no retesting under the ltip 
executive option plan 
options granted under the eop may be
exercised after the third anniversary of
grant depending upon the achievement of
a financial performance target over three
years  the options are granted at market
value and awards made to executive
directors are based on 100 of salary as
at the 31 december prior to grant
for awards granted in 2008 achievement
of the performance is measured by
reference to the group’s earnings per
share eps performance relative to the
retail price index rpi over the threeyear
performance period 
the vesting of the grants is based on the
following schedule
• if the level of eps growth is less than
rpi  5 per annum none of the
options may be exercised
• if the level of eps growth is equal to rpi
 5 per annum 40 of the options
may be exercised
• if the level of eps growth is equal to rpi
 10 per annum all of the options
may be exercised
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 46 serco group plc    47
• for an eps growth of between rpi 
 5 and rpi  10 per annum a
proportion of the options between 
40 and 100 may be exercised
for option grants which completed their
performance period on 31 december
2008 the group’s eps growth was
1813 per annum over the threeyear
performance period which resulted in all
options vesting  the level at which
maximum vesting would occur was
1313 per annum
the committee considers that tsr and
eps are the key performance indicators for
serco and are most relevant for measuring
relative shareholder value created and the
group’s underlying financial performance
respectively
relative tsr measures share price growth
and dividend performance against a broad
range of ftse companies and provides
alignment between the interests of
shareholders and executive directors
eps is a key operational measure for
serco and focuses executive directors on
sustainable profitable growth
changes to sharebased remuneration
from 2009
no further awards will be made to
executive directors under the serco group
plc 2005 executive option plan or the
serco group plc 2006 long term
incentive plan provided shareholders
approve the proposed new share plans  
two new plans will subject to shareholder
approval replace the current longterm
share plans  under the deferred bonus
plan executive directors will be invited to
defer up to half of any bonus earned  to
encourage investment executive directors
will normally be eligible for an award of
‘matching’ shares at the end of a 
threeyear period only if they are still 
in employment with serco and two
performance measures have been met
the two measures are independent and
each determines the vesting of half of the
matching shares  the measures are tsr
measured against the companies in the
ftse 51 to 130 excluding investment
trusts and eps growth  the structure for
vesting is the same for both measures  
an award of matching shares of one half of
the gross value of the bonus deferred will
vest for median or threshold performance
and matching shares with a value of two
times the gross value of the deferred
bonus vest for upper quartile or superior
performance at the top end of the range
the eps performance range for 2009
2011 is shown in the notice of annual
general meeting and has been set on the
basis of serco’s business plan and the
expectations of brokers and shareholders
the definition of eps is basic eps
excluding acquisitions and before
amortisation of non acquired intangibles
the serco group plc 2006 long term
incentive plan ltip will subject to
shareholder approval be replaced by a
new performance share plan  annual
awards under the plan will normally have a
face value on grant of 200 of base salary
for the chief executive and 175 of base
salary for the finance director  the normal
limit on annual awards for executive
directors will be subject to a cap of 200
of salary  the shares will normally only
vest at the end of a threeyear period if the
executive directors are still in employment
with serco and two performance
measures have been met  the two
measures are independent  the measures
are tsr measured against the companies
in the ftse 51 to 130 excluding
investment trusts and eps growth
relative tsr performance determines the
vesting of 70 of the shares and eps the
remainder  the structure for vesting is the
same for both measures  the shares will
vest in full only if serco’s performance is
upper quartile or in the case of eps
superior and at the top end of the range
median or threshold performance will
trigger the vesting of 25 of the award  
dividends will be reinvested and
distributed only in respect of shares that
vest under both plans at the end of the
performance period
the remuneration committee decided
that the case for relative tsr and eps as
the performance measures for longterm
sharebased plans remains strong 
relative tsr and eps growth carry equal
weight in respect of the matching shares
awarded under the deferred bonus plan
this is to ensure a balance of internal and
external measures and hence sufficient
‘lineofsight’ to encourage investment in
the plan  in the case of the ltip  greater
weight has been placed on relative tsr to
underscore the importance of longer term
alignment with shareholders’ interests
as now the committee will have discretion
to vary the proportion of awards that vest
under both the performance share plan
and the deferred bonus plan to ensure
that the outcomes are fair and
appropriately reflect the underlying financial
performance of the group
the provisions of the rules of both plans in
respect of ‘good’ leavers and in the event
of a change of control are detailed in the
notice of annual general meeting but in
short time pro rating where the
performance period is truncated and
performance will normally apply
the changes will mean that total target
remuneration is between median and
upper quartile if executive directors invest
in the deferred bonus plan and at median
if they do not which the remuneration
committee believes is reasonable 
sharesave scheme
the group operates a sharesave scheme
no performance conditions are attached
to options granted under the scheme as it
is an allemployee scheme  options
granted to scheme participants are
normally set at a discount of 10 to the
market value of shares at grant  none of
the directors participate in the sharesave
scheme  options were granted in july
2008 under the sharesave scheme to
8123 participants
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 47 48 serco group plc
share ownership policy
in light of the proposed changes to the executive directors’ remuneration the share ownership requirement for the chief executive has
been increased from one to two times base salary  the requirement for the finance director remains one times base salary  executive
directors will be required to retain in shares 50 of the net value of any performance shares or options exercised until they have satisfied
the shareholding requirement
at the end of the year by reference to the share price at that date 45050p executive directors’ share ownership levels were as follows
ordinary shareholding at ordinary shareholding
31 december 2008 as a  of salary
chief executive 166440 116
finance director 104874 124
pensions life assurance and other benefits
serco operates both defined benefit and defined contribution pension schemes  the
executive directors participate in the serco pension and life assurance scheme splas
this is a funded defined benefit scheme which provides for a target pension of twothirds
of pensionable salary following a full career  members contribute to the scheme at rates
varying according to the section of the scheme
christopher hyman and andrew jenner contributed to the scheme at a rate of 95 of
pensionable salary in 2008
from 1 january 2007 serco also introduced smart whereby all members were given the
option to have their pension contributions paid by salary sacrifice under this arrangement
the member makes no normal pension contributions serco makes additional contributions
to splas equal to those that the member would otherwise have made and the member’s
contractual pay is reduced by the amount of these contributions both christopher hyman
and andrew jenner opted to have their contributions paid by smart 
kevin beeston’s pension benefits accrued prior to 6 april 2006 exceeded the new lifetime
allowance which came into force at that date and he opted to cease paying contributions
and accruing benefits in the pension scheme after 6 april 2006
kevin beeston remains entitled to lump sum and widow’s pension benefits should he die
before retirement and while still employed by or an officer of serco
the chairman and executive directors receive a range of other benefits which include a
car private medical insurance permanent health insurance life cover an annual allowance
for independent financial advice and voluntary health checks every two years the
executive directors are also entitled to 25 days’ holiday per year
serco ar2008 sumaryqxdserco ar08  design  20032009  1717  page 48 serco group plc    49
service contracts and compensation
each executive director has a rolling service contract and these contracts will be available for inspection prior to the start of and after the
company’s annual general meeting  the service contracts have a notice period of 12 months
service contracts have been reviewed and are being amended with the agreement of the executive directors to ensure they appropriately
reflect best practice  there have been no payments made during the year in relation to compensation for loss of office
a summary of details relating to each director who served during the year is provided below
date of unexpired term at
name of date joined appointment date of 31 december
director company to the board contract 2008
christopher hyman 30 august 1994 1 april 1999 21 july 2003 rolling contract 
of 12 months 
notice period
andrew jenner 4 november 1996 3 may 2002 21 july 2003 rolling contract
of 12 months 
notice period
grant rumbles 
1
3 july 1982 3 july 2007 3 july 2007 na
1 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  his termination payment was in
accordance with his contractual entitlement and is reported on page 50
the chairman and nonexecutive directors
the group’s policy is that the fees of the chairman and the nonexecutive directors which are determined by the board are set at a level
which will attract individuals with the necessary experience and ability to make a substantial contribution to the group’s affairs
nonexecutive directors of the group are initially appointed for a threeyear term and that appointment may be terminated on three
months’ written notice  the renewal of appointments is not automatic and nonexecutive directors are required to retire and stand for 
reelection in accordance with the company’s articles of association and the combined code on corporate governance
current fee structure
nonexecutive directors’ remuneration consists of cash fees paid monthly with increments for positions of additional responsibility  in
addition reasonable travel and related business expenses are paid  no bonuses are paid to nonexecutive directors the board believe
that payment of fees on a cashonly basis remains appropriate as opposed to the partial payment of fees in shares 
nonexecutive directors are encouraged to hold shares in the group but are not subject to a shareholding requirement  nonexecutive
directors’ fees are not performance related
the fees and terms of engagement of nonexecutive directors are reviewed on an annual basis taking into consideration market practice
and approved by the board 
date of appointment date of letter unexpired term at
to the board of appointment 31 december 2008
chairman
kevin beeston 29 february 1996 1 september 2007 20 months
nonexecutive directors
1

margaret ford 8 october 2003 7 october 2003 9 months
leonard v  broese van groenou 3 april 2006 20 february 2006 3 months
david richardson 2 june 2003 29 may 2003 5 months
tom corcoran 3 december 2007 3 december 2007 23 months
1 nonexecutive directors have a threemonth notice period and no compensation or other benefits are payable on early termination
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 49 50 serco group plc
external appointments
the board believes that the group can benefit from its executive directors holding appropriate nonexecutive directorships of 
companies or independent bodies  such appointments are subject to the approval of the board  fees are retained by the executive
director concerned
christopher hyman was a nonexecutive director in united business media plc until his resignation in may 2008  fees payable in the 
year were £20308
andrew jenner was appointed nonexecutive director of gallifordtry plc on 1 january 2009  fees due in 2009 are £38800
no other feepaying external positions were held by any of the executive directors
directors’ remuneration
this section has been audited by deloitte llp 
the remuneration of the directors for the year was as follows
total total
total remuneration remuneration
estimated value excluding excluding
termination of any non pensions pensions
note remuneration fees bonus arrangements cash benefits 2008 2007
£ £££££ £
kevin beeston 2 210000 nil nil na 62797 272797 905451
christopher hyman 12 588333 nil 528900 na 62872 1180105 1093740
andrew jenner 12 356666 nil 311600 na 63186 731452 697002
grant rumbles 12 117197 nil 80000 706600 26193 929990 348511
leonard v  broese van groenou nil 55000 nil na nil 55000 45000
margaret ford nil 55000 nil na nil 55000 53333
david richardson nil 55000 nil na nil 55000 53333
tom corcoran nil 45000 nil na nil 45000 3750
total 1272196 210000 920500 706600 215048 3324344 3200120
notes
1 the bonuses shown include performance bonuses earned in the period under review but not paid in the financial year
2 the value of the non cash benefits relates to the provision of a car allowance now fully inclusive of all scheme costs including insurance and maintenance and private
healthcare
3 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008 the payment to him detailed under
termination arrangements consisted only of amounts in lieu of notice basic salary and all benefits
4 remuneration is shown gross of salary sacrificed under the smart scheme  see page 48
directors’ shareholdings
the directors’ interests in the shares of the company are detailed in the following table  
ordinary shares of ordinary shares of 
note 2p each fully paid at 2p each fully paid at
1 1 january 2008 31 december 2008
kevin beeston 138218 100000
leonard v  broese van groenou 3375 5375
margaret ford 11686 14481
christopher hyman 2 156457 166440
andrew jenner 2 97062 104874
david richardson 10000 15000
tom corcoran nil 4000
notes
1 ordinary shares are beneficial holdings which include the directors’ personal holdings and those of their spouses and minor children
2 17749 of christopher hyman’s and 10649 of andrew jenner’s shares are held in trust on their behalf under the terms of their participation in the 2003 deferred bonus
scheme  provided such shares remain in trust for three years and subject to certain performance conditions they are also granted an award over an equivalent number of
shares
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 50 serco group plc    51
sharebased incentives
this section has been audited by deloitte llp   
the total share options granted to each person who has served as a director of the company at any time in the financial year were as
follows
i serco group plc 2003 deferred bonus scheme dbs
the dbs has now been closed and no further awards will be made under its terms conditional rights to receive matching shares over
serco group plc’s ordinary shares under the dbs held by directors at 31 december 2008 were as follows
awards 
held at 
31 december earliest 
2008 performance period vesting date
christopher hyman 17749 1 jan 2006 – 31 dec 2008 22 mar 2009
andrew jenner 10649 1 jan 2006 – 31 dec 2008 22 mar 2009
ii serco group plc 2006 long term incentive plan ltip
the conditional rights to serco group plc ordinary shares under the ltip held by directors at 31 december 2008 were as follows
awards held at 
awards 31 december 
held at 2008 or date latest
1 january of cessation earliest exercise
2008 if earlier performance period vesting date date
kevin beeston 147928 147928 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
145205 145205 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
christopher hyman 147928 147928 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
145205 145205 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
122874 122874 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
andrew jenner 88757 88757 1 jan 2006 – 31 dec 2008 5 may 2009 4 may 2016
89589 89589 1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
75699 75699 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
grant rumbles 43550 43550 1 jan 2006 – 31 dec 2008 5 may 2009 30 sep 2009
33892 33892 1 jan 2007 – 31 dec 2009 8 may 2010 30 sep 2009
70213 70213 1 jan 2008 – 31 dec 2010 31 dec 2010 30 sep 2009
notes
1 no awards were granted lapsed or exercised during the period
2 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  all awards held by grant rumbles with
the exception of that made on 12 november 2007 were granted prior to him being appointed executive director  an award made on 8 may 2007 relates to the three year
performance period commencing 1 january 2007  awards that expire prior to the completion of the performance period will be prorated
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 51 52 serco group plc
iii serco group plc long term incentive scheme ltis
the ltis has been superseded by the ltip   the last award to executive directors under the ltis was made in june 2005
awards 
held at 
awards market 31 december 
held at price on 2008 or date date
1 january vesting of cessation of expiry
2008 pence if earlier of awards
kevin beeston 38736 153  4 apr 2010
50797 172  23 nov 2010
40898 240  15 nov 2011
103467 314 103467 5 may 2013
173142 382  26 nov 2013
119411 462 119411 21 dec 2014
christopher hyman 32868 153 32868 4 apr 2010
43540 172 43540 23 nov 2010
35056 240 35056 15 nov 2011
103467 314 103467 5 may 2013
173142 382 173142 26 nov 2013
119411 462 119411 21 dec 2014
andrew jenner 62081 314 62081 5 may 2013
105138 382 105138 26 nov 2013
76101 462 76101 21 dec 2014
grant rumbles 45454 462 45454 30 mar 2010
notes
1 the awards shown in the table have all vested
2 no awards were granted or lapsed during the year
3 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  awards that expire prior to the completion
of the performance period will be prorated
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 52 serco group plc    53
iv serco group plc 1998 and 2005 executive option plan eop
options over serco group plc ordinary shares granted under the 1998 executive option plan and the 2005 executive option plan and
held by directors at 1 january 2008 and 31 december 2008 were as follows
awards
held at
awards 31 december market
held at granted exercised 2008 or date price on exercise
1 january during during of cessation exercise date price
2008 period period if earlier pence pence
kevin beeston 68922  68922 00 451 218
76734  76734 00 424 245
58764  00 58764  426
91321  00 91321  435
135768  00 135768  264
289515  00 289515  153
219320  00 219320  217
183404  00 183404  235
147492  00 147492  339
120798  00 120798  439
christopher hyman 39078  39078 00 450 218
40812  00 40812  245
49830  00 49830  426
78275  00 78275  435
116373  00 116373  264
289515  00 289515  153
219320  00 219320  217
183404  00 183404  235
147492  00 147492  339
120798  00 120798  439
00 123076 00 123076  455
andrew jenner 7422  7422 00 414 245
12336  00 12336  426
18524  00 18524  435
69824  00 69824  264
173709  00 173709  153
133178  00 133178  217
116885  00 116885  235
88495  00 88495  339
74530  00 74530  439
00 75824 00 75824  455
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 53 54 serco group plc
iv serco group plc 1998 and 2005 executive option plan eop continued
awards
held at
awards 31 december market
held at granted exercised 2008 or date price on exercise
1 january during during of cessation exercise date price
2008 period period if earlier pence pence
grant rumbles 4002  00 4002 00 218
12336  00 12336 00 245
9954  00 9954 00 426
13113  00 13113 00 408
26099  00 26099 00 264
12453  00 12453 00 165
52639  00 52639 00 153
58387  00 58387 00 214
89361  00 89361 00 235
67846  00 67846  339
61538  00 61538  439
00 70329 00 70329  455
notes
1 the market price of the company’s ordinary shares at the close of business on 31 december 2008 was 45050p and the range during the year to 31 december 2008 was
32600p to 47200p
2 grant rumbles ceased being a director with effect from 25 march 2008 and subsequently left serco employment on 16 may 2008  all awards held by grant rumbles were
granted prior to him being appointed executive director  awards that expire prior to the completion of the performance period will be prorated
3 awards during the year were made on 28 february 2008
pensions and life assurance
the directors receive pension and life assurance benefits consistent with those provided by other leading companies
further information on the defined benefit schemes operated by the group is set out on page 48 in the event of death in service the
serco supplementary death benefit scheme provides for a lump sum payment
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 54 serco group plc    55
comparison of total shareholder returns
serco group plc total shareholder return tsr vs ftse 350 total return index
value of investment of £100 on 31 december 2003
in drawing this graph it has been assumed that all dividends paid have been reinvested  the tsr level shown at 31 december each year
is the average of the closing daily tsr levels for the 30day period up to and including that date the company’s tsr is compared to that
of the ftse 350 index which is a broad equity market index of which it is a constituent
as detailed earlier tsr is defined as the return shareholders would receive if they held a notional number of shares and received
dividends on those shares over a period of time it measures the percentage growth in the company’s share price together with the value
of any dividends paid assuming that the dividends are reinvested into the company’s shares
31 dec 03
75
100
125
150
175
200
225
250
275
300
31 dec 04 31 dec 05 31 dec 06 31 dec 07 31 dec 08
ftse 350 index serco
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 55 56 serco group plc
directors’ profiles
kevin beeston fcma 46
chairman
3
kevin beeston became nonexecutive
chairman of serco group plc in
september 2007 having previously served
as the groups executive chairman chief
executive and finance director since
joining the group in 1985
he is a member of the cbi presidents
committee and chairman of the cbis
public services strategy board which
promotes the role business has in
transforming the uks public services
in addition he is the nonexecutive
chairman of partnerships in care infinitas
learning bv and domestic and general
ltd and is a nonexecutive director of 
imi plc
christopher hyman ca sa
45
chief executive
christopher hyman was appointed chief
executive of serco group plc in 2002 he
is also chairman of the prince of wales
charity in kind direct and a nonexecutive
director for habitat for humanity and africa
foundation earlier this year christopher
was appointed national ambassador by
the prince of wales for business in the
community he is also a member of the
uk governments honours advisory
committee for economy and uk
commission for employment and skills
christopher graduated from natal
university in durban south africa and
qualified as a chartered accountant
serving with arthur andersen and ernst 
young before joining serco in 1994 as the
european finance director he was
appointed group company secretary in
1996 corporate finance director in 1997
and group finance director in april 1999
he is responsible for setting the vision and
strategy of the group 
from left to right
david richardson nonexecutive director
tom corcoran nonexecutive director
christopher hyman chief executive
margaret baroness ford of cunninghame nonexecutive
director
kevin beeston chairman
leonard v broese van groenou nonexecutive director
andrew jenner finance director
joanne roberts company secretary
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 56 serco group plc    57
andrew jenner aca 40
finance director
andrew joined serco in 1996 as group
financial controller having previously
worked for unilever and deloitte  touche
llp   he became corporate finance
director with additional responsibility for
treasury activities in 1999 and group
finance director in may 2002  andrew
shares responsibility for our relationship
with shareholders and the city with the
chief executive  he is also responsible for
the groups pfi investment business
andrew is a nonexecutive director of
gallifordtry plc
tom corcoran ba phd 64
nonexecutive director
123
tom joined serco in december 2007 as a
nonexecutive director  he brings 40
years of global business experience
particularly in the us aerospace and
defence contracting industry  he is
currently senior advisor to private equity
firm the carlyle group and president of
corcoran enterprises llc a management
consulting firm
tom has held senior positions in the
aerospace defence and electronics
industries including chairman and chief
executive officer of allegheny teledyne
and president and chief operating officer
of lockheed martin’s electronic and space
sectors  during his 26 years with general
electric tom held senior management
positions including vice president and
general manager of ges aerospace
operations
he is also a nonexecutive director of 
aer lingus ltd l3 communications
holdings inc labarge inc arinc inc 
and gencorp inc
leonard v  broese van
groenou msc 62
nonexecutive director
123
leonard joined serco as a nonexecutive
director in april 2006
leonard was previously vicepresident
human resources and a member of the
corporate executive committee of
pennsylvaniabased air products a new
york listed company serving customers in
technology energy healthcare and
industrial markets worldwide where he
served for nearly 30 years  his career at
air products spans numerous international
roles including financial control business
planning operational management and
human resources  he is the chairman of
the netherlands benevolent society
baroness ford of
cunninghame ma mphil 51
senior independent director
123
margaret joined serco in october 2003 as
a nonexecutive director  she spent her
early career in a variety of roles either in the
public sector or as an advisor to
government and is a specialist in
leadership development culture change
and public sector reform  from 1997 to
2000 she was chairman of lothian health
board and from 2000 to 2003 was a non
executive director of ofgem  in december
2007 margaret retired from english
partnerships the national regeneration
agency after six highly successful years
from 2000 to 2005 margaret was a
director of good practice limited the
publishing company that she founded
margaret is managing director social
infrastructure and development royal
bank of canada capital markets and
chairman of irvine bay urban
regeneration company  she is also a
nonexecutive director of grainger plc
david richardson bsc fca
57
nonexecutive director
123
david joined serco as a nonexecutive
director in june 2003  
he has previously held the position of
finance director of whitbread where his
roles in a 20year career have included
eight years as strategy director  david
was instrumental in transforming
whitbread from a brewing and pubs
company into a market leader in hotels
restaurants and leisure clubs 
david is currently a nonexecutive director
of dairy crest group plc forth ports plc
and tomkins plc
1 member of the audit committee
2 member of the remuneration committee
3 member of the nomination committee
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 57 58 serco group plc
2008 2007
£m £m
continuing operations
revenue 31235 28107
cost of sales 26667 24045
gross profit 4568 4062
administrative expenses 2916 2642
other expenses – amortisation of intangibles arising on acquisition 92 86
total administrative expenses 3008 2728
operating profit 1560 1334
investment revenue 82 122
finance costs 281 310
profit before tax 1361 1146
tax 365 322
profit for the year 996 824
attributable to
equity holders of the parent 995 819
minority interest 01 05
earnings per share eps
basic eps 2049p 1698p
diluted eps 2018p 1674p
2008 2007
£m £m
net actuarial gain on defined benefit pension schemes 87 622
actuarial gainloss on reimbursable rights 506 194
net exchange gain on translation of foreign operations 541 128
net fair value gain on cash flow hedges during the year 142 90
tax charge on items taken directly to equity 213 115
recycling of cumulative net hedging reserve on disposal 07 
net income recognised directly in equity 1056 531
profit for the year 996 824
total recognised income and expense for the year 2052 1355
attributable to
equity holders of the parent 2051 1349
minority interest 01 06
consolidated income statement
for the year ended 31 december 2008
consolidated statement of recognised income and expense
for the year ended 31 december 2008
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 58 serco group plc    59
2008 2007
£m £m
noncurrent assets
goodwill 9647 5421
other intangible assets 1913 1394
property plant and equipment 1154 951
trade and other receivables 1211 1046
retirement benefit assets 624 
deferred tax assets 196 516
derivative financial instruments 56 12
14801 9340
current assets
inventories 502 463
trade and other receivables 7195 5736
cash and cash equivalents 2508 1850
derivative financial instruments 50 15
10255 8064
total assets 25056 17404
current liabilities
trade and other payables 7547 6700
current tax liabilities 195 148
obligations under finance leases 45 77
loans 368 135
derivative financial instruments 42 21
8197 7081
noncurrent liabilities
trade and other payables 355 133
obligations under finance leases 127 87
loans 7109 3174
derivative financial instruments 04 112
retirement benefit obligations 1771 1426
provisions 381 186
deferred tax liabilities 259 220
10006 5338
total liabilities 18203 12419
net assets 6853 4985
equity
share capital 97 97
share premium account 3011 2993
capital redemption reserve 01 01
retained earnings 3398 2606
retirement benefit obligations reserve 477 902
sharebased payment reserve 400 346
own shares reserve 197 151
hedging and translation reserve 619 18
equity attributable to equity holders of the parent 6852 4972
minority interest 01 13
total equity 6853 4985
the financial statements were approved by the board of directors on 26 february 2009 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
consolidated balance sheet
at 31 december 2008
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 59 60 serco group plc
2008 2007
£m £m
net cash inflow from operating activities 1626 1341
investing activities
interest received 73 103
disposal of business undertakings 19 25
proceeds from disposal of intangible assets  17
proceeds from disposal of property plant and equipment 175 29
acquisition of subsidiaries net of cash acquired 3222 91
purchase of other intangible assets 204 306
purchase of property plant and equipment 326 262
net cash outflow from investing activities 3485 485
financing activities
interest paid 303 342
dividends paid 216 179
dividend paid to minority interest  12
repayment of loans 786 746
repayment of non recourse loans 75 83
new loan advances 3974 22
other financing 170 
capital element of finance lease repayments 86 84
purchase of own shares for employee benefit trust 92 
proceeds from issue of share capital and exercise of share options 54 171
net cash inflowoutflow from financing activities 2300 1253
net increasedecrease in cash and cash equivalents 441 397
cash and cash equivalents at beginning of year 1850 2179
net exchange gain 217 68
cash and cash equivalents at end of year 2508 1850
consolidated cash flow statement
for the year ended 31 december 2008
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 60 serco group plc    61
independent auditors’ report
independent auditors’
statement to the members of
serco group plc
we have examined the summary financial
statement which comprises the summary
consolidated income statement summary
consolidated balance sheet summary
consolidated statement of recognised
income and expense summary
consolidated cash flow statement and the
summary remuneration report
this report is made solely to the
companys members as a body in
accordance with section 251 of the
companies act 1985  our work has been
undertaken so that we might state to the
company’s members those matters we
are required to state to them in an
auditors’ report and for no other purpose
to the fullest extent permitted by law we
do not accept or assume responsibility to
anyone other than the company and the
company’s members as a body for our
audit work for this report for our audit
report or for the opinions we have formed
respective responsibilities of
directors and auditors
the directors are responsible for preparing
the summarised annual report in
accordance with united kingdom law
our responsibility is to report to you our
opinion on the consistency of the
summary financial statement within the
annual review and summary financial
statement 2008 with the full annual
accounts the directors’ report and the
remuneration report and its compliance
with the relevant requirements of section
251 of the companies act 1985 and the
regulations made thereunder
we also read the other information
contained in the annual review and
summary financial statement 2008 as
described in the contents section and
consider the implications for our report if
we become aware of any apparent
misstatements or material inconsistencies
with the summary financial statement
basis of opinion
we conducted our work in accordance
with bulletin 19996 the auditors’
statement on the summary financial
statement issued by the auditing practices
board for use in the united kingdom our
report on the companys full annual
financial statements describes the basis of
our audit opinion on those financial
statements and the remuneration report
opinion
in our opinion the summary financial
statement is consistent with the full annual
accounts the directors’ report and the
remuneration report of serco group plc
for the year ended 31 december 2008
and complies with the applicable
requirements of section 251 of the
companies act 1985 and the regulations
made thereunder 
deloitte llp
chartered accountants and registered
auditors 
london united kingdom
26 february 2009
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 61 62 serco group plc
shareholder information
group website
go to wwwsercocom to catch up on the
current share price latest news in the
investors section and read the annual
review and accounts
registrars
serco group plc has recently moved its
register of members to a new registrar
equiniti administrative enquiries about the
holding of serco group plc shares and
enquiries in relation to the serco dividend
reinvestment plan drip should be
directed to
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
tel 0871 384 2932 
there is a text phone available on 0871
384 2255 for shareholders with hearing
difficulties
calls to both of these numbers are
charged at 8p per minute from a bt
landline  other telephony provider costs
may vary
callers from outside the uk should use
44 0 121 415 7161
dividend reinvestment plan
you can elect to receive future dividends
as shares rather than cash by participating
in the drip   to register request further
information or to obtain a copy of the
terms and conditions booklet and
mandate form please contact equiniti on
0871 384 2932  alternatively these can
be downloaded from the website
wwwshareviewcouk by choosing the
dividend reinvestment plan heading
within the product centre section
dividends paid direct to your
bank account
• avoid the risk of cheques being lost in
the post
• no need to present cheques for
payment
• dividend credited to your account on
payment date
to set up a dividend mandate or change
your existing mandated details please
register with the shareholder centre via
the shareview website or contact equiniti
on the number provided above
global payment services
for overseas shareholders in certain
countries equiniti offers an overseas
payment service by arrangement with
citibank europe plc  this service offers
shareholders the ability to have their
dividend converted into their local currency
and sent electronically to their local bank
account  to sign up for this service
please contact equiniti on 0871 384 2932
44 0 121 415 7161 if calling from
outside the uk  alternatively you can
download an application form and terms
and conditions from the website
wwwshareviewcouk
electronic communications
you can register for electronic
communications by visiting
wwwshareviewcouk you will need your
shareholder reference number to sign up
after you have registered you will receive
emails alerting you to communications as
they become available in response to our
shareholders’ commitment to electronic
communication serco is very proud to be
a corporate member of the woodland
trust the uk’s leading woodland
conservation charity helping them to plant
and care for uk native woodland during
2008 the trust planted more than one
million native trees in the uk
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 62 serco group plc    63
share dealing
we have arranged the following services that can be used to buy or sell serco shares
alternatively if shareholders hold a share certificate they can also use any bank building
society or stockbroker offering share dealing facilities  shareholders in any doubt about
buying or selling their shares should seek professional financial advice
• for eu shareholders
a telephone and internet dealing service is available through equiniti which provides a
simple way of buying and selling serco shares  commission is 1 with a minimum
charge of £25 for telephone dealing and 05 with a minimum charge of £15 for internet
dealing  for telephone sales call 44 0 845 6037 037 between 830am and 430pm
monday to friday and for internet sales log on to wwwshareviewcoukdealing you will
need your shareholder reference number as shown on your share certificate
cazenove provide a postal dealing service to buy and sell serco shares  all transactions
are undertaken on an execution only basis  for further information please contact
cazenove at postal share dealing service 20 moorgate london ec2r 6da united
kingdom tel 44 0 20 7155 5155
• for non eu shareholders
currently non eu shareholders may buy or sell shares through the cazenove postal
dealing service see above
shareholder profile
the range and size of ordinary shareholding as at 31 december 2008 is set out below
range of shareholdings no of no of 
shareholders  shares 
1  1000 4021 4507 1806563 037
1001 – 5000 3300 3699 7452157 153
5001 – 10000 557 624 3969342 081
10001 – 100000 637 714 20132609 414
100001 – 500000 240 269 56836927 1168
500001 – 1000000 71 080 51592198 1060
1000001 – 10000000 88 099 247272382 5080
10000001 and above 7 008 97702262 2007
total 8921 100 486764440 100
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 63 64 serco group plc
serco ar2008 sumaryqxdserco ar08  design  20032009  1718  page 64 financial calendar
2009
preliminary results announcement 27 february
exdividend date 4 march
record date 6 march
last date for receiptrevocation 28 april
of drip dividend mandates 
interim management statement 12 may
annual general meeting 12 may 
final dividend pay date 20 may
halfyear results announcement 26 august
financial yearend 31 december
 subject to shareholder approval
 provisional
designed by rare corporate design london wwwrarecorporatecouk
artworked and printed by the midas press wwwmidaspresscouk
printed on 9lives 80 silk which is certified as an fsc
mixed sources product 9lives 80 is produced using
20 recycled wood and fibre 60 fsc certified 
deinked fibre recovered from postconsumer
sources 10 fsc certified virgin tcf fibre and
10 virgin fibre from well managed forests
mixed sources
product group from wellmanaged forests
controlled sources and recycled wood or fibre
wwwfscorg cert no sgscoc003320
©1996 forest stewardship council
1 introduction
2 highlights
4 our business
6 sercos vision and strategy
8 market opportunities
10 chairmans statement
business review
12 chief executives statement
16 operating performance
34 business relationships
35 our people and reputation
36 corporate responsibility
38 finance review
financial statements
43 summary financial statement
56 directors profiles
58 consolidated income statement
58 consolidated statement of recognised income and expense
59 consolidated balance sheet
60 consolidated cash flow statement
61 independent auditors report
62 shareholder information
ibc financial calendar
serco summaryver8 coverserco ar08  design  24032009  1147  page 2 serco people 
the heart of our business
bringing service to life
serco group plc
annual review  summary financial statement 2008
serco group plc
registered office
serco house
16 bartley wood business park
bartley way
hook
hampshire rg27 9uy
t 44 01256 745 900
e generalenquiriessercocom
wwwsercocom
serco summaryver8 coverserco ar08  design  24032009  1147  page 1


Summary:
 12 serco group plc
we delivered another year of double
digit revenue growth enhanced our
margins generated good free cash flow
and strengthened our funding position
at the same time we invested in
improving our capabilities systems and
structures across the business
in an economic environment that seems
likely to remain challenging our expectation
of continued strong performance is
underpinned by our continued high revenue
visibility our agility and flexibility in
addressing our customers’ needs and our
ability to direct our resources at the best
opportunities
the strength of our business model and
the commitment of our people mean that
we continue to deliver quality service to
our customers which was again reflected
in our contract win rates during 2008
we maintained our win rates at over 90
on rebids and one in two new bids and in
total we won over 200 contracts valued at
£32bn across a wide range of our markets
expanding presence in
existing markets
we expanded our presence in existing
markets both through new contracts and
expanding the scope and scale of existing
contracts among larger wins in the uk
we won two contracts to deliver a range
of innovative environmental services for
the london borough of hammersmith 
fulham and milton keynes council valued
respectively at £140m and £160m over a
maximum of 14 years and we renewed our
education and children’s services contract
with walsall council which is now valued
at £345m over a longer term of 12 years
we were also awarded a facilities
management contract to manage 29 of
deloittes office facilities and buildings
valued at £50m over five years
in defence we continued to expand
our services to the military in the uk and
overseas in the uk we expanded our
contract valued at £76m over its maximum
tenyear term to provide the naval air
command with engineering and aircraft
support services at yeovilton and culdrose
air stations in australia serco sodexho
defence services a serco joint venture
renewed its contract to provide garrison
support services at six defence bases in
the northern territory and was awarded
a similar contract for the north queensland
region the total value of both contracts to
serco is aus362m in the us we won a
rebid to deliver aviation technical
maintenance and support services to the
us navy which has a total potential value
of us167m over five years and
significantly increases the support we
provide to the space and naval warfare
systems center atlantic
developing new markets
in 2008 we also invested in the
development of a number of new markets
in the local authority market we signed our
first local authority strategic partnership
valued at £265m over ten years with
glasgow city council we continue to
pursue similar opportunities with other local
authorities in april we signed our first light
rail contract in the middle east with an
agreement valued at £500m to operate
and maintain the dubai metro leveraging
the transport capabilities we have
developed in the uk and positioning us
well for further opportunities in the region
our implementation plan for the metro is
on schedule ahead of the start of the
service in september 2009
chief executive’s statement
in 2008 we delivered strong operational and financial
performance while continuing to increase our presence
in existing markets and enter new markets we were
successful in expanding the scope and scale of
existing contracts both on rebids and during the
contract term and won a number of significant
contracts in new markets with strong growth
opportunities
serco ar08ver7qxdserco ar08  design  21309  1030  page 12 13
investing to support our growth
during the year we continued to invest to
support our strong growth this means
ensuring that we have the best people
capabilities systems and business
structures to meet our customers’ needs
and pursue the highervalue opportunities
available to us for example during the
year we began the rollout of our business
academy providing our people with online
access to the latest tools thinking
approaches and techniques at the end of
july we reorganised the central it services
team within our technology business in
order to better align our capabilities with
developing market needs such as in
security and resilience and to improve
efficiency and simplify structures in the
future we will also leverage our new
capabilities in india to support these
and related areas we also completed the
rollout of our sap system in the uk and
the asia pacific business and are now
implementing it in the middle east and
anticipate starting this process in north
america later this year
a strong foundation for growth in the
us government services market
at the end of the year we completed our
acquisition of si international a provider of
information services technology and
network solutions to the us government
for us524m including assumption of
debt in 2008 si international had revenue
of us5755m and underlying adjusted
operating profit of us367m
si international creates a strong foundation
for growth and the delivery of higher value
services in the us government services
market by giving us scale and increased
resources to bid on larger us government
contracts broader customer relationships
access to higher growth areas and
increased capabilities since the year end
“we have a substantial
order book that gives us
high visibility on our
future revenues
together with increasing
growth prospects”
visiting the glasgow partnership team presenting the pulse awards
christopher hyman
chief executive
serco ar08ver7qxdserco ar08  design  20309  1909  page 13 14 serco group plc
chief executive’s statement
continued
we have made good progress in integrating
si international with our existing north
american business and there are early
positive signs that our integrated teams will
be able to apply our enhanced capabilities
across our enlarged customer base
we also entered the indian market through
the acquisition in december of a majority
shareholding in infovision a bpo business
serving the domestic indian market for
£148m and have invested in enhancing
our presence and launching the serco
brand in that market
in january 2009 we announced that we
had formed a partnership with the guy’s
and st thomas’ nhs foundation trust to
improve the trust’s pathology services and
target the pathology market in the uk and
overseas in the uk pathology is a
significant market valued at around £25bn
the 5050 joint venture – the first of its kind –
is branded as gsts pathology and will
operate and enhance the trust’s existing
pathology capabilities under a tenyear
contract valued at around £250m to serco
which started on 1 february 2009
in the nuclear market while we were
disappointed that our consortium did not
win the sellafield nuclear decommissioning
contract we have seen growth in our
nuclear assurance business which is
well placed to take advantage of
increasing nuclear opportunities
in the uk and overseas
a valuesled company
we continue to be focused on our values
our governing principles as we call them
to ensure that we operate in the best
interests of all our stakeholders in the short
medium and longterm by combining a
strong public service ethos with commercial
acumen we seek to create a working
environment that is attractive and rewarding
for employees and gives customers the
confidence they need to entrust their
requirement to deliver excellent service to
us that environment helps serco people all
around the world give their best whether
improving the education a child receives
helping pilots and commuters arrive safely
at their destinations supporting front line
military personnel or assisting businesses
in their plans to grow and prosper
the quality and dedication of our people is
reflected in the many awards we receive
around the world some examples in 2008
include the many employees who received
military service medals for their work in
operational theatres supporting the no 32
the royal squadron and the skynet 5
secure military satellite communications
systems both in iraq and afghanistan
at merseyrail and northern rail employees’
dedication to service has been recognised
at an industry level merseyrail has achieved
a high rating of 90 customer satisfaction
and northern rail was recognised as the
rail operator of the year having continued
to improve reliability and service quality
among many other awards we were
again recognised by our peers as the uk’s
most admired support services company
for the fifth year in a row
“during the year
we continued to
invest to support
our strong growth
this means ensuring
that we have the
best people
capabilities systems
and business
structures to meet
our customers’
needs”
serco ar08ver7qxdserco ar08  design  20309  1909  page 14 serco group plc 15
we were also delighted to celebrate the
achievement of those teams and individuals
nominated by their colleagues to receive
a ‘pulse’ award which is serco’s way of
recognising their efforts in ensuring that
we live our governing principles and
support those around us and in our
wider community our people’s strong
commitment which we find all over
serco is the real bedrock of our growth
as 2008 came to a close approximately
13000 people joined the serco family
through the acquisitions of si international
in the us and infovision in india we chose
these companies very carefully based on
the growing markets they operate in the
skills and capabilities they have and
critically the values that their people
demonstrate we are delighted to welcome
them to the group
outlook and guidance
while the global economic environment
seems likely to remain challenging we have
a substantial order book that gives us high
visibility on our future revenues together
with increasing growth prospects
our longterm contracts and substantial
order book continue to provide excellent
visibility over our revenues over 90 of
which come from government including
a £1bn benefit from si international we had
a substantial order book of £163bn as at
31 december 2008 and we had identified
90 of planned revenue for 2009 76
for 2010 and 65 for 2011
constrained government budgets
drive demand for efficiency and
costeffectiveness in the delivery of public
services especially as governments
balance their investment in providing
economic stimulus with the requirement
to control national debt our strong
capabilities mean that we are well
positioned to provide relevant support
in existing markets and to leverage our
expertise through exporting proven models
to new areas with growing markets and
capabilities our pipeline now stands
at a substantial £26bn including
si international’s pipeline of over £2bn
with our substantial order book excellent
revenue visibility and our ability to direct
our resources flexibly to pursue the best
opportunities we remain confident that our
business will continue to perform strongly
we expect increasing demand for our skills
to support robust revenue growth and see
good opportunities to improve our margins
through our focus on managing our
contract portfolio enhancing our efficiency
and bidding selectively for highervalue work
given the confidence this gives us over the
mediumterm we are guiding to revenue
and margin by the end of 2012 in future
reflecting the operational drivers of our
margin improvement and in line with market
practice we will give our margin guidance
at the operating profit margin level
accordingly and consistent with our
previous guidance our projections are that
our revenue will increase to approximately
£5bn and our adjusted operating profit
margin to approximately 63 by the end
of 2012 excluding material acquisitions
disposals and currency effects
in 2009 we expect to deliver doubledigit
revenue growth and a 30bps increase
in our adjusted pbt margin excluding
si international the addition of
si international is anticipated to increase
our 2009 revenue growth by approximately
10 including the benefit of si international
we expect our adjusted operating profit
margin of 53 in 2008 to increase by
approximately 40bps in 2009 this
2009 guidance excludes material
currency effects
2009
visibility of planned revenue
at 31 december 2008
2010
2011 15 1
12 1
13 1 90
76
65
order book extensions  rebids preferred bidder
76
63
49
76 13
63 12
49 15
“our projections are
that our revenue will
increase to
approximately
£5bn and our
adjusted operating
profit margin to
approximately 63
by the end of
2012”
serco ar08ver7qxdserco ar08  design  20309  1909  page 15