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
improving service increasing value
annual review  accounts 2007
bringing service to life
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contents
1 introduction
4 highlights
6 our business
8 chairman’s statement
business review
10 chief executive’s statement
13 governing principles 
14 serco strategy
16 operating performance
28 market development
30 contractual relationships
31 resources
32 finance review
38 principal risks and uncertainties
43 directors secretary and advisors
44 corporate governance report
52 directors’ report
54 directors’ profiles
56 directors’ responsibilities
57 remuneration report
71 independent auditors’ report
financial statements
73 consolidated income statement
73 consolidated statement of
recognised income and expense
74 consolidated balance sheet
75 consolidated cash flow statement
76 notes to the 
financial statements
122 serco group plc 
company financial statements
130 shareholder information
132 financial calendar  our customers – primarily national and local
governments – face profound challenges they
must improve vital services despite intense
budget pressures they must adapt to citizens
rising expectations and make services flexible
and responsive they must meet sustainability
targets and address the imperatives of security
and safety
in order to meet these challenges governments
are turning to private sector partners who can
help them transform services and reduce costs
major private companies also face issues of cost
efficiency and quality meaning they too can
benefit from our work
this creates strong and growing demand for
sercos expertise and we are ideally placed to
respond for more than 40 years we have built
up unrivalled capabilities and broadened our
business and addressable markets into sectors
ranging from air traffic control to running
scientific establishments
serco group plc    1 what serco offers
we can operate in a
broad range of sectors
because our core
product is peopleled
change management
we analyse a customer’s problems and
produce a bespoke solution with the
improved management of people at its
heart 
we redesign organisations to remove
bureaucracy improve processes and
liberate people to deliver their best
we introduce technology and continue
to invest during the life of the contract
and – crucially – we instil our culture and
values our governing principles and
publicservice ethos focus us on delivering
the best for our customers our people
and the wider community
building longterm customer relationships
is fundamental to serco this means
meeting – and often exceeding – our
customers’ expectations we invest in
relationships by providing innovation and
continuous improvement we devolve
responsibility giving contract directors
the freedom to anticipate and respond
to customers’ changing requirements
the serco management system which
controls how we operate ensures that
these actions are also in the best interests
of serco and its shareholders
serco’s vision and strategy
our vision is to be the
leading service company
in our chosen markets 
‘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
our strategy for achieving this vision has
four elements
building 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 anotherther
maintaining high rebid and new win
rates our service excellence results in a
rebid win rate above 90 we also win
one in two new contracts reflecting our
ability to select only those opportunities
where we can differentiate ourselves
making strategic acquisitions while
we are primarily focused on organic
growth we make acquisitions to acquire
new skills and to enter new markets
where we see strong opportunities
developing 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
1
2
3
2 serco group plc serco’s track record of success
our emphasis on bringing
service to life for
customers leads directly
to our financial success
and we have grown
quickly in recent years
since we listed in 1988 we have
consistently delivered doubledigit revenue
growth we have been able to leverage
this scale and manage our contract
portfolio driving our margins higher at the
same time we have delivered consistent
improvements in our free cash flow
our success is also recognised by others
we are frequently voted the uk’s leading
support services company in
management today’s most admired
company awards 
the future
we are optimistic about
our future our markets
continue to grow strongly
and offer substantial
opportunities both in the
uk and increasingly
overseas we also have
stronger capabilities
across more sectors to
meet our customers’
needs than ever before
serco’s substantial order book contributes
to excellent visibility of future revenues
and our pipeline of identified opportunities
reinforces our confidence 
the success we have achieved to date
underpins our confidence of delivering
doubledigit revenue growth for the
foreseeable future the quality of our
opportunities – and our ongoing portfolio
management and efficiency improvement
– will also allow us to further increase our
margins
1 support services at norfolk and norwich university hospital
2 the ghan transcontinental service in australia
3 court escort service in london
4 multiactivity contract at rnas yeovilton
5 maintenance at the atomic weapons establishment
6 running education services in walsall
4
5 6
serco group plc    3 4 serco group plc highlights
highlights
revenue
2006 £2548m 
£2811m 
103
revenue 
£m 
adjusted profit before tax
£m 
dividend per share 
pence
adjusted earnings per share
pence 
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
1556 1637 2260 2548 2811 63 69 87 105 123 1086 1128 1341 1592 1857 234 263 297 360 425
2003 adjusted profit before tax and adjusted earnings per share are estimated under ifrs serco group plc    5 highlights
adjusted profit before tax
2006 £1050m 
£1232m
173
profit before tax
2006 £1074m 
£1146m
67
adjusted earnings per share
2006 1592p 
1857p 
166
earnings per share
2006 1662p 
1698p
22
group free cash flow
2006 £854m 
£976m
143
dividend per share
2006 360p 
425p
181
success across our markets
• signed £36bn of contracts and appointed preferred bidder for
a further £10bn
• record level of international awards including dubai metro
over £400m us postal service 260m logcap iv
225m and borallon correctional centre aus100m
• significant progress in other new markets including glasgow
city council strategic partnership £265m in local authority
market and eborders £200m in homeland security
• excellent progress in existing markets including marine
services £750m in uk defence forth valley £450m in
uk integrated facilities management and yarl’s wood £85m in
uk home affairs
• maintained rebid win rate at more than 90 and continued to
win one in two new bids
strong margin and cash performance
• adjusted pbt margin up from 41 to 44
• group free cash flow increased by 143 to £976m
• strong balance sheet with group recourse net debt reduced
to £1379m
broad pipeline supports excellent visibility
• order book at new record of £147bn at 31 december 2007
• contracts valued at an additional £10bn at preferred bidder
stage
• visibility of 91 of planned revenue for 2008 76 for 2009
and 63 for 2010
• £27bn of further opportunities identified
growing markets and higher margins underpin positive outlook
• uk and international markets continue to generate increasing
opportunities
• confident of doubledigit revenue growth for the foreseeable
future
• guidance for adjusted pbt margin of 30 basis point increase
for both 2008 and 2009
note adjusted profit before tax adjusted pbt and adjusted earnings per share are before amortisation of acquired intangibles and the £114m gain on sale of pfi
investments in 2006 as shown on the face of the group’s income statement group free cash flow is from subsidiaries and joint venture dividends and is reconciled in
section 3 of the finance review
international success builds on uk strengths 6 serco group plc our business
revenue by geography 2007
2006
uk 75
£2811m
6
74
8
12
£2548m
europe 
middle east 8
asia pacific 6
north america 11
defence 26
transport 23
civil government 34
science 17
£2811m
25
25
34
16
£2548m
revenue by market 2007
2006
our business
we organise our business around dedicated market
expertise in a variety of sectors civil government
defence transport and science
revenue
£952m
88 
civil government
serco’s work in civil government
encompasses home affairs information
and communications technology ict
business process outsourcing education
and children’s services health integrated
facilities management and consulting
our home affairs work includes managing
prisons in the uk australia and germany
electronically monitoring offenders
developing 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
we use our ict skills and business
process knowledge to deliver better
faster and cheaper ict solutions to local
government schools and blue chip
private sector customers our integrated
facilities management business provides
environmental streetscene and other
direct services to councils and also works
with hospitals and private customers
our consulting capability raises awareness
of serco and enhances our reputation
with potential and existing customers by
providing highvalue advisory services serco group plc    7 our business
revenue
£655m
47
transport
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 in march 2008 we will be signing
the contract to operate and maintain the
dubai metro system which is planned to
be the largest driverless metro system in
the world this breakthrough contract
substantially increases serco’s transport
sector presence in the middle east
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
revenue
£721m
118 
defence
serco is a major provider 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 we are gaining critical
mass with strength in providing enterprise
management engineering logistics
economic cost analysis and human
resources services to the military in
particular the us army and us navy
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
revenue
£483m
199 
science
serco is a world 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 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 we do this
as part of awe management limited a
25year joint venture with lockheed
martin uk and british nuclear group
bng 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 chairman’s statement
i am delighted to report on another year of strong growth
the success we have achieved in 2007 underpins our
confidence in delivering doubledigit growth for the
foreseeable future
8 serco group plc chairman’s statement
kevin beeston chairman financial results
i am delighted to report on another year of
strong growth revenue grew by 103
to £2811m adjusted profit before tax
adjusted pbt rose by 173 to
£1232m and adjusted earnings per share
grew 166 to 1857p the adjusted pbt
margin increased from 41 to 44
benefiting from our management of the
contract portfolio and continued efficiency
improvements profit before tax rose by
67 to £1146m and earnings per share
were 22 higher at 1698p profit before
tax and earnings per share in 2006
included the benefit of the oneoff gain on
sale of our pfi investments
our cash performance continued to be
strong with group free cash flow
increasing 143 to £976m this
contributed to a reduction in group
recourse net debt of more than £34m to
£1379m the strength of our balance
sheet was further enhanced by the
decline in our net pension liabilities
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
302p per share representing an increase
on the 2006 final dividend of 184 and
bringing the total dividend for the year to
425p growth of 181 the final
dividend will be paid on 21 may 2008 to
shareholders on the register on
7 march 2008
board
there were a number of changes to the
composition of the board during the year
as announced on 31 august 2006 
i moved from executive chairman to
nonexecutive chairman on 1 september
2007 grant rumbles our chief operating
officer was appointed an executive
director on 3 july 2007
deanne julius retired on 29 october 2007
as a nonexecutive director and from her
post as senior independent director 
i would like to thank her for her considerable
contribution to our development and wish
her well baroness ford of cunninghame
was appointed the new senior independent
director from the same date
thomas corcoran joined serco as a non
executive director on 3 december 2007
thomas is a member of the remuneration
audit nomination and training and
development committees
managing our growth
one of serco’s great strengths is its long
term customer relationships we nurture
these by devolving responsibility to the
contract level giving our people the
freedom to anticipate and respond to
customers’ changing requirements 
this delivers excellent organic growth but
it also creates a need to make sure that
these actions are applied consistently and
in the best interests of serco and its
shareholders
over many years we have developed a
robust system of governance and internal
controls which we call the serco
management system it covers all areas
of our operations from finance through to
bidding for new contracts and we
continue to evolve it to ensure it keeps
pace with serco’s rapid development 
this allows us to operate in a devolved
manner while ensuring consistency and
an upward line of accountability and
control to the board the quality of these
processes is evident in our operational
and financial performance the right
balance between flexibility and control is
essential and maintaining this balance will
ensure a successful future for serco
growing markets and higher margins
underpin positive outlook
our markets continue to generate a broad
range of highquality opportunities for
serco both in the uk and internationally
the success we have achieved in 2007
underpins our confidence in delivering
doubledigit growth for the foreseeable
future at the same time our focus on
managing our contract portfolio enhancing
our efficiency and bidding selectively for
highervalue work will allow us to further
increase our margins and we expect a 30
basis point improvement in our adjusted
pbt margin in each of 2008 and 2009
i look forward to reporting to shareholders
on our progress in 2008
serco group plc    9 chairman’s statement 10 serco group plc business review – chief executive’s statement
chief executive’s statement
in 2007 we reaped the benefits of our strategy of increasing
value we won important contracts in existing markets
continued to build our position in new markets and were
awarded record levels of international business 
christopher hyman chief serco group plc    11 business review – chief executive’s statement
in 2007 we reaped the benefits of our
strategy of increasing value we won
important contracts in existing markets
continued to build our position in new
markets and were awarded record levels
of international business 
we delivered another year of doubledigit
revenue growth enhanced our margins
further increased our free cash flow and
strengthened our balance sheet 
i am pleased to say that we maintained
our win rates at more than 90 for rebids
and one in two for new bids we signed
£36bn of contracts and were appointed
preferred bidder for further contracts
valued at around £1bn
highlights of our success in existing
markets included the substantial increase
in value of our royal navy marine services
contract to around £750m over 15 years
and the signing of the £450m 30year
contract to provide services to the new
nhs forth valley acute hospital 
the capabilities we acquired in 2005 with
itnet and rci enabled us to enter
exciting new markets two good
examples were homeland security where
as a key member of the trusted borders
consortium we were awarded a tenyear
home office contract to develop and
implement the ‘eborders’ project and
the local government strategic partnership
market where we won a contract with
glasgow city council worth £265m to
provide property information and
communication technology services
a record level of international awards was
also a key feature our performance in the
us was particularly strong with wins
including a renewed and significantly
increased contract with the us postal
service worth 260m a cost analysis
logistics planning and supply chain
consulting contract for the us army worth
225m and two contracts for the space
and naval warfare systems center to
assist with antiterrorism systems with a
total potential value of around 180m
elsewhere we also made significant
progress we were appointed preferred
bidder for a £400m contract to operate
and maintain the dubai metro a contract
we will be signing in march 2008 and in
australia we won the contract to run
borallon correctional centre worth
around aus100m over five years as well
as a fouryear safety camera contract in
victoria valued at aus90m
such successes demonstrate the growing
international demand for the services we
have developed within the uk market
appropriately the theme for this report is
‘increasing value’ in delivering essential
services we touch many people and our
challenge is to deliver increasing value to
them all – customers employees
investors and the communities in which
we operate this focus has been
consistent throughout our history and as
with so much in serco the starting point
is our customers and by extension the
citizens they serve given that the
expectations of citizens rise every day
increasing value means a continuous
improvement in quality
at the same time our customers expect
significant savings as noted elsewhere in
this report a study by the serco institute
shows that introducing competition into
public services delivers average cost
reductions of 20 and sometimes much
more 12 serco group plc business review – chief executive’s statement
but there is more to increasing value than
just improving quality and cost our
customers are also asking us to manage
more and more complexity for them as
well as to support them with their broader
social objectives 
being a thriving valuesled company
creates value for employees our public
service ethos makes serco a rewarding
place to work helping us to attract and
retain the best people our growth
enables our people to take their careers 
in new directions
the quality of our people is reflected in
the awards we receive amongst these
for the fourth year in a row serco was
voted the uk’s most admired support
services company and this year was
ranked as the country’s fourth most
admired company overall these awards
conducted by management today have
become a benchmark for excellence
increasing value for our customers and
other stakeholders also increases value
for investors delivering highquality
services helps us to renew and expand
existing contracts and win work with new
customers our ability to address the
broader needs of our customers helps us
to establish a leadership position that also
drives our growth
our success in 2007 keeps us optimistic
about the future at the end of the year
our order book stood at a record £147bn
and we were preferred bidder on
contracts valued at £1bn giving us
excellent visibility of our revenue for the
next few years 
opening new markets in the uk and
overseas has also significantly increased
the breadth and depth of our pipeline of
opportunities which now stands at
£27bn the breadth gives us confidence
of achieving doubledigit growth for the
foreseeable future while the depth allows
us to select higher margin work enabling
us to deliver further margin improvement
this optimism is not limited to our
financial performance the strength of our
business our commercial knowhow and
the deep public services ethos which our
people bring to life every day mean that
we will continue to increase value for all 
of our stakeholders
2008
2009
2010
76
61
48 13 2
13 2
13 2 91
76
63
preferred bidder
order book
extensions and rebids
visibility of planned revenue
at 31 december 2007  serco group plc    13 business review – governing principles
serco’s governing principles
all serco employees are expected to adhere to 
the highest standards in dealing with colleagues
customers suppliers or shareholders by setting
these standards and by supporting each other
we aim to get the best out of our people and
subsequently the best service for our customers
this is vital to our ongoing business
we foster an entrepreneurial culture
we are passionate about building innovative and successful businesses
this means we succeed by encouraging and generating new ideas we trust our people to deliver 
we embrace change and by taking measured risks encourage creative thinking
we enable our people to excel
our success comes from our commitment and energy to go the extra mile
this means we are responsible to each other and can expect support when we need it most 
we expect our people to achieve more by recognising and harnessing the power of individuals 
we value people for their knowledge ideas and potential to contribute
we deliver our promises
we do what we say we will do to meet expectations
this means we only promise what we can deliver if we make mistakes we put them right 
we are clear about what we need to achieve and we expect to make a fair profit
we build trust and respect
we build trust and respect by operating in a safe socially responsible consistent and 
honest manner
this means we never compromise on safety we listen we treat others as we would wish to be 
treated and challenge when we see something is wrong 14 serco group plc business review – serco’s strategy
serco’s strategy has four key elements which bring
benefits to our customers and hence to our
shareholders the four elements are to
1 build a balanced portfolio of market facing
businesses
this allows us to select the best opportunities for growth to reduce our risk by avoiding concentration of
revenue in a small number of contracts and to share good practice and experience across the group
2 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
3 make strategic acquisitions to obtain new skills or
enter markets
organic growth has been the principal driver of serco’s success however we also make acquisitions to
bring in new skills which will be important for future growth or to enter new markets where we see strong
prospects
4 develop new models in existing and emerging
markets
we are constantly looking at new ways to deliver services in response to our customers’ changing needs
examples of how we do this include thorough collaboration between our divisions partnering with third
parties including the public private and voluntary sectors and the development of new frameworks such
as payment on outcomes serco group plc    15 business review – serco’s strategy
we have grown strongly and consistently in the 
20 years since we listed 
by following our strategy we believe we will continue
to grow strongly since each of the four elements of
our strategy contributes to one or more of the
following outcomes
balanced 
portfolio
high
win rates
strategic
acquisitions
new 
models
• 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 allows us to enter new markets and
find new ways of delivering services to customers
• 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 16 serco group plc business review – operating performance – civil government
civil government is our largest segment and includes
home affairs information technology and business
process outsourcing integrated facilities management
health education and children’s services consulting
and much of our work in the private sector 
2007 saw an increasing requirement for
technological content in these markets
as customers looked to procure more
sophisticated services segmental
revenue increased by 88 to £952m
representing 34 of group revenue
2006 34
home affairs
we had two notable successes with the
uk home office trusted borders a
consortium of which serco is a key
member signed a contract to develop
and implement the nation’s eborders
project an advanced border control and
management programme serco is
responsible for infrastructure and service
management the contract is valued at
around £200m to serco over ten years
we also won a contract to manage and
operate yarl’s wood immigration removal
centre the contract began in april 2007
for an initial three years with optional
extensions for up to eight years over the
full eight years the contract is valued at
around £85m
we continued to build our presence in the
australian home affairs market winning
contracts to manage and operate
borallon correctional centre and to
provide safety camera services borallon
near brisbane accommodates 500 male
prisoners this contract with the
queensland department of corrective
services is valued at around aus100m
over five years with the potential for a
further fiveyear extension the safety
camera contract is with the victoria
department of justice the fouryear
contract is valued at aus90m with the
potential for a threeyear extension
it and bpo services
in uk local government glasgow city
council approved the creation of a
partnership with serco to transform the
council’s land property and information
and communications technology ict
services the partnership will be worth
£265m to serco over ten years and will
also position us to support the council on
transformational projects to improve the
council’s efficiency and service delivery
the partnership is the first of its kind in
scotland and is expected to save the
council more than £70m 
we also secured a £30m tenyear
partnership with ealing council to provide
ict support and southwark council
selected serco to provide and support its
ict infrastructure in a fiveyear deal
valued at £26m west sussex county
council appointed us for an it partnership
to manage desktop services more
effectively and offer access to our wider it
and business process capabilities the
contract is valued at around £14m over
seven years west sussex is a new
customer for serco
we successfully rebid our contract with
regione lombardia one of the largest
local authorities in europe to provide
outsourced services for its it infrastructure
the initial contract is valued at around
£14m over six years with additional
services identified expected to expand this
some of the things we do
• border protection
• prisons management
• education and children’s services
• environmental services
• government portal management
• health management and hospital
support
• it and itenabled services
• management consultancy
civil government
revenue
£952m
88  serco group plc    17
providing resources to help
businesses bloom
businesslinkgov brings together business information from more than 600 
governmental and agency experts in one easytoaccess website by providing
the tools and resources which businesses really need such as grant forms and
annual leave calculators businesslink has become one of the key gateways
between government and the business community
serco won the contract to deliver the already successful businessgov programme
in 2005 we have worked to increase awareness of the programme improving
communication aligning with other major business initiatives across government
and coordinating channels to promote continuity of information to businesses
we are personalising services to the needs of individual businesses eliminating
duplication of information and promoting efficiency at the same time we are
making it easier for businesses to transact with government our enhancements
to delivery will reduce costs by more than £25m over the life of the contract
a key development has been to put in place systems to ensure that the
businesslink website is delivering tangible value to business a survey in 2007
showed a marked increase in the value delivered from c£2bn to £4bn this
translates into a saving of £100 for uk businesses for every £1 invested by the
programme the national audit office recognises the programme as an example
of best practice
business review – operating performance – civil government 18 serco group plc business review – operating performance – civil government
severn trent – one of the world’s largest
private water companies – awarded serco
a fiveyear it infrastructure framework
contract valued at around £40m
we will provide programme and project
management consulting technical
delivery it engineering and technology
refresh services
we continued to enhance our position as
the leader in the uk business support
market winning a contract with the south
west regional development agency to
provide the businesslink service for
cornwall devon and somerset
the contract is for 28 months and is
valued at around £15m
the us postal service engineering
organization appointed serco to provide
engineering technical project
management and it services the two
year contract has four twoyear options
and over the full ten years has a potential
value of 260m a sizeable increase over
our previous contract the latest contract
broadens our role to include management
services focused on enhancing
efficiencies quality assurance services
and testing of mail processing equipment
the us office of personnel management
awarded serco two indefinitedelivery
indefinitequantity idiq contracts under
the training management assistance
program these programs assist
government agencies in developing
workforce planning and management
strategies elearning and other training
solutions the contracts give serco the
opportunity to compete for a share of
500m of work over the next five years
integrated facilities management
our integrated facilities management
business had several notable successes
we signed a £450m 30year contract to
provide support to the new nhs forth
valley acute hospital drawing on our
healthcare experience to influence the
hospital’s design and thereby enhance
infection control innovations include
segregation of patient visitor and goods
traffic as well as the introduction of proven
robotic technology to support the
movement of goods around the hospital
site the contract will begin in 2010
we signed contracts to provide
operational management to the united
arab emirates university in al ain £70m
over ten years and to deliver property
management and support services to
state street bank £50m over five years
we were also awarded contracts to
provide support services to coca cola at
its london headquarters £10m over five
years and to volkswagen’s uk
headquarters under a twoyear rolling
contract valued at £35m per annum
mid suffolk and babergh district councils
awarded us a contract in a
groundbreaking shared services
partnership for waste and recycling
services the contract is for up to 21
years and is valued at around £80m
mid sussex district council also
appointed us to provide refuse recycling
and street cleaning services the contract
is for up to 21 years and is valued at
around £74m serco group plc    19 business review – operating performance – civil government
education and children’s services
stokeontrent city council awarded us a
contract to transform their childrens
services the contract is valued at £5m
over three years with the potential for
substantial growth the contract is to lead
and manage all the council’s services for
education and children’s social care
consulting
over the past year we have been building
our consulting business with a focus on
supporting our clients in the transformation
of their businesses serco has many years
of experience in the delivery of public
services across a broad range of sectors
and we are now applying this experience
through three key parts of our
transformation proposition – policy and
strategy advice on transformation the
design and implementation of solutions
and ensuring that change is sustainable
and realises benefits through the effective
management of human capital
against this backdrop we developed the
business with the acquisition of cornwell
management consultants plc adding new
capabilities in information and knowledge
management while increasing our
capacity in project and programme
management and enterprise architecture
we also acquired er consultants limited
er as part of our building of capability in
the area of sustainable change er brings
experience and skills in leadership
development and organisation design and
development these are key issues for
many organisations and the acquisition
enhances our ability to help our current
customers and also to target new blue
chip customers in the commercial sector 
our consulting expertise resulted in our
selection for a number of important
frameworks in 2007 we were one of ten
firms chosen to provide consultancy to
uk government departments looking to
undertake transformational projects as
part of the fouryear £15bn catalist
framework serco was one of only two
suppliers included in all five categories of
the metropolitan police’s fouryear £200m
development services framework
we were one of ten suppliers selected for
the ministry of defence’s mod fouryear
£100m catalogue framework the main
route for the mod to acquire consultancy
services we also qualified as one of only
four providers of project and programme
management resources to the
department for environment food and
rural affairs the potential value of the
framework to the qualified suppliers is
£80m over four years 20 serco group plc business review – operating performance – defence
revenue in defence increased by 118 to £721m
representing 26 of group revenue 2006 25
2007 was a year of strong organic growth in defence
supplemented by demand for our valueadded
services
united kingdom
we had a highly successful year in
winning new business in the uk defence
market primarily in support of the royal
navy and royal air force
the key win in the uk was a contract
with the mod to deliver marine services to
the royal navy the mod selected our
joint venture with denholm shipping and
infrastructure investors i
2
 for a 15year
private finance initiative pfi contract
valued at around £1bn of which serco’s
operating contract represents £750m
this is a sizeable increase on our
previous operating contract under which
we have provided marine services to the
royal navy since 1996
serco will manage operate and maintain
a fleet of around 110 vessels providing
services that enable the royal navy to
put to sea the joint venture will also
bring over 30 new vessels into service
during the early years of the contract
enhancing service flexibility and
responsiveness and helping to meet the
royal navy’s demanding operational
requirements serco chose i
2
in 2006 to
become its strategic partner for financing
and investment in pfis in this project i
2
will provide all the subordinated debt and
the largest proportion of the equity 49
serco retains 41 of the equity as well as
daytoday management of the joint
venture so as to implement the
successful transition of the project over
the first 18 months
the mod awarded us a contract to
manage the maintenance repair and
operation of the uk armed forces’ estate
facilities in gibraltar the contract is valued
at around £50m over five years with a
further two option years and the potential
for additional work we will also provide
military logistics workshops and marine
services support to the naval base and
other mod operations
the naval air command appointed serco
preferred bidder for a partnering contract
valued at around £7m per annum we will
provide aviation engineering and aircraft
support at two royal naval air stations
yeovilton and culdrose improving the
availability of aircraft and trained aircrew to
the fleet air arm at a time of considerable
operational pressure the work will build
on the operational support we already
provide to the royal navy’s aircraft
we were also awarded a contract to
provide a range of services at raf
lyneham home to the uk’s tactical air
transport force of hercules aircraft and
one of the largest and busiest operational
stations in the raf in addition to
providing base support facilities
management and logistics services serco
will support the no 1 air mobility wing
tactical medical wing and no 4 force
protection wing this win will further
strengthen serco’s relationships with air
command and key equipment
manufacturers such as rolls royce
the contract is for four years with three
option years and is valued at around
£34m over the full seven years
some of the things we do
• 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
defence
revenue
£721m 
118 enhancing the royal navy’s
operational capacity
the uk armed forces are faced with unprecedented challenges playing their part
in protecting national and international security against a background of budgetary
restraint increasing the effectiveness of assets and equipment makes an
important contribution to their operational capacity
serco denholm a joint venture led by serco has been providing essential
operational support to the royal navy for more than a decade over that period
we have built a highly effective working relationship
in december 2007 serco denholm marine services signed a new 15year
contract with the ministry of defence to deliver a wide range of marine services to
the royal navy the contract is worth £750m to serco a significant increase on
the previous contract reflecting the strength of our relationship with the royal navy 
we are also managing more complexity for the customer around 240 staff and
the services of the royal maritime auxiliary service transfer to serco from april
2008 and serco denholm will also bring an additional 30 vessels into service
under a pfi arrangement to add to the 110 existing vessels these new vessels
are being procured by serco denholm to meet the navys future fleet
requirements and to enhance support to trials and worldwide training
serco group plc    21 business review – operating performance – defence we were awarded the apache helicopter
interim support arrangement contract by
agustawestland the prime contractor for
apache ‘depth’ maintenance at
wattisham in the uk depth maintenance
involves stripping the aircraft down and
reassembling with repaired or new parts
as necessary the contract is valued at
around £15m to serco over three years
serco was also awarded a multiactivity
support services contract for british
forces on the south atlantic bases of
ascension island and the falkland islands
the contract is valued at around £20m
over five years
united states
our north american defence business
won a record level of new contracts
against a continued backdrop of pressure
on noncombat operations the us army
awarded us a contract to provide cost
analysis logistics planning and supply
chain consulting services under the
logistics civil augmentation program iv
logcap iv this idiq contract has a
oneyear base period with four annual
options for a fiveyear total period and
a potential value of 225m 
the space and naval warfare systems
center spawar awarded us two
contracts to assist the navy and other
government agencies with antiterrorism
systems under the first contract we will
evaluate integrate and install advanced
antiterrorism systems at navy ports
around the world this idiq contract has
a total potential value of 64m over five
years the second contract extends that
relationship with spawar to other
government agencies the contract is
valued at around 62m over three years
and could reach 115m if all five of the
sixmonth award options are exercised
the us navy selected us for the major
portion of the sea enterprise contract
this idiq contract is to provide
engineering and installation services for
command control communication
computers intelligence and
reconnaissance systems at ship shore
and submarine locations on the west
coast of the united states it has a 
oneyear base period with four annual
options for a maximum term of five years
and a potential value of around 156m 
a key objective is to reduce the costs of
installations by improving productivity and
achieving longterm efficiencies
22 serco group plc business review – operating performance – defence serco group plc    23 business review – operating performance – transport
transport revenues grew by 47 to £655m
representing 23 of group revenue 2006 25
a key feature of the year was the use of our uk 
skills to secure international opportunities
light rail
the dubai government roads and
transport authority rta selected serco
as preferred bidder to operate and
maintain the initial two lines of the new
dubai metro the first such system in the
region and an important development for
the city we will be signing the contract in
march 2008 the contract includes 
prelaunch consultancy and planning
with operations and maintenance running
for five years from autumn 2009 and the
potential for a further fiveyear extension
the contract is valued at more than
£400m over this 125 year period
serco will run the operations control
centre maintain rolling stock track and
station facilities and provide train
attendants and all station staff the lines
will cover 76 kilometres of track and are
predicted to carry 200m passengers per
year ultimately the rta intends to
extend the dubai metro to more than 300
kilometres making it the world’s largest
driverless metro system
during the year we finished our contracts
to operate the manchester metrolink and
the copenhagen metro we did not renew
the contracts at rebid as we continue to
actively manage our contract portfolio
traffic management
in the uk we successfully rebid our
contract with transport for london to
maintain traffic signal control equipment
and provide related services the contract
is for five years with the potential for a
further twoyear extension and is valued
at around £60m over seven years serco
will provide cover for all traffic control
equipment including traffic signals
crossings automatic number plate
recognition cameras and traffic
information signs the services cover
central london and the city including
important transport link points for the
2012 olympics
serco operates the national traffic control
centre ntcc on behalf of the highways
agency we were pleased that the ntcc
achieved final completion in may 2007
recognising the delivery of quality services
and continuing innovation at this world
first facility we have successfully rolled
out the travel time variable messaging
system providing valuable realtime
information for drivers
in the us the georgia department of
transportation appointed us to run the
state’s traffic management center this is
serco’s first traffic management contract
in north america the contract is for up to
four years and is valued at 12m
serco also won two parkingrelated
contracts with the city of chicago valued
at more than 10m over the next five
years we will provide managed
operations mechanical maintenance
identification parking enforcement and
revenue reporting 
some of the things we do
• air traffic services
• heavy rail operations and maintenance
• light rail operations and maintenance 
• traffic control and transport systems
• transport consultancy 
transport
revenue
£655m 
47  24 serco group plc business review – operating performance – transport
heavy rail
northern rail which we operate in a joint
venture with nedrailways carried nearly
79m passengers in 2007 and achieved a
strong operational performance despite
the severe floods in the summer northern
rails success has led to it winning two
prestigious national awards public
transport operator of the year at the
national transport awards 2007 and the
example of excellence in the rural action
category at the 2007 business in the
community awards our other joint
venture with nedrailways – merseyrail –
was the best performing railway in the
country in terms of reliability and
punctuality surpassing its previous best
performance in 2005
great southern rail our australian rail
operation performed well in 2007 with
good growth on both the ghan and
indian pacific services the overland
service between melbourne and adelaide
was relaunched in may 2007 since when
its patronage has increased by more than
50
network rail awarded serco two
contracts during the year we extended
our contract for infrastructure monitoring
and rail grinding services the extension is
valued at approximately £45m over two
years network rail also appointed us to
operate locomotives on the test routes of
the european rail traffic management
system ertms piloting scheme ertms
is a new signalling methodology that will
ultimately be rolled out across europe
the contract is valued at around £5m
over three years
air traffic control
we successfully rebid our contract to
provide air traffic control airside
operations engineering and
meteorological services in support of the
department of civil aviation at dubai
international airport the contract has a
value of £175m over two years
we also renewed our contract at bahrain
international airport to provide air traffic
control electronic engineering and
maintenance project planning and
consultancy and administrative support
the contract is valued at around £13m
over three years serco group plc    25
reducing congestion through
enhancing driver information
the growing number of road journeys puts enormous pressure upon infrastructure
and capacity resulting in frustration lost time and consequent cost to the economy
road building is not a sustainable option one solution is to allow drivers to make
better use of the existing network
serco was selected by the highways agency in march 2001 to deliver and operate
its national traffic control centre ntcc the ntcc collects traffic data from
thousands of roadside sensors combined with information from hundreds of
operational partners including the police highways agency traffic officers ports
and airports and local highway authorities 
ntcc analyses this data and delivers real time traffic information via the traffic
england website wwwtrafficenglandcom and phone service 08700 660115
and through broadcast partners giving motorists the information they need to
plan their journeys and avoid delays making the best use of road capacity
reducing driver stress and improving road safety
serco continues to increase the value of the service by exploring new ways of
reaching drivers and giving them the information they need when and where they
need it most 
in 2007 we introduced new roadside signs on motorways to give drivers predicted
travel times between junctions based upon realtime information following a
successful pilot this service has been rolled out across the network publishing
over a million messages every month
business review – operating performance – transport 26 serco group plc business review – operating performance – science 26 serco group plc
science revenues grew by 199 to £483m
representing 17 of group revenue 2006 16
technology and innovation are at the heart of our
offering in this market
our joint venture with british nuclear
group bng and lockheed martin to
operate the uk’s atomic weapons
establishment awe continued to
perform strongly the infrastructure
upgrade programme is progressing well
with the facility to house the orion
research project due to open on schedule
in march 2008 this facility will cover both
weapons research and civil science
studies such as evolving stars and super
dense matter the construction of energy
efficient offices for up to 1400 staff is
also on time and on budget as previously
reported bng is in the process of
disposing of its shareholding in awe and
we hope this will be completed later this
year
serco technical and assurance services
serco tas won several contracts in the
nuclear market during the year 
a consortium led by serco tas was
awarded a £15m contract to provide
specialist technical and engineering
support to magnox reactor sites over
the next five years a range of specialist
nuclear technical services will be provided
including safety case management
systems engineering analysis of safety
critical structures and systems and
technical advice on waste management 
serco tas in partnership with golder
associates was also awarded a £10m
twoyear contract to examine and develop
plans to clean up contaminated land at
sellafield the work will include
assessment of the condition of the land
and groundwater mathematical modelling
development of a strategy for dealing with
the contamination and identifying the
technologies and actions needed for 
clean up
the nuclear decommissioning authority
nda appointed a consortium led by the
the washington division of the us
company urs as preferred bidder to
manage the uk’s lowlevel radioactive
waste repository at drigg in west
cumbria serco tas is an integrated sub
contractor and will provide regulatory
safety and environmental technical
support to the consortium the tenyear
contract can be extended to up to
17 years
some of the things we do
• materials science
• measurement science
• nuclear assurance
• research establishments
management
• technical training
science
revenue
£483m
199  ensuring the highest safety
and training standards
the atomic weapons establishment awe which is responsible for the design
build maintenance and decommissioning of the warheads for the united
kingdoms nuclear deterrent has been central to the country’s defence for more
than 50 years awe is managed and operated for the ministry of defence by awe
management limited a joint venture between serco group plc lockheed martin
corporation and british nuclear group under a contract that runs until 2025
awe is a complex environment where safety is the number one priority the royal
society for the prevention of accidents recognises awe’s commitment to ensuring
the highest standards of safety throughout its operations and has awarded it their
prestigious gold medal for achieving five consecutive gold awards for
occupational health and safety in addition awe has been awarded the sir
george earle trophy for the most outstanding performance in health and safety by
a company or organisation as well as the astor trophy for the best managed
occupational health programme
essential to its continued success is the development and retention of skills
across a broad spectrum a notable achievement in 2007 was the successful
establishment of the awe programme management academy along with
representatives from our awe management limited partners a team of serco
consultants undertook the planning and implementation of a comprehensive suite
of training programmes these have the goal of ensuring that there are sufficient
people in the future who are qualified to successfully lead the multiple and highly
complex awe programmes and projects the programme management academy
will train around 1000 staff in its first year of operation
serco group plc    27 serco group plc    27 business review – operating performance – science 28 serco group plc business review – market development
market development 
serco’s markets continue to expand rapidly as local
and national governments face budget deficits and
everincreasing pressure from citizens to improve
public services
governments increasingly recognise the
benefits of opening up public service
monopolies to competition and innovation
a review by the serco institute of 200
government and academic studies
spanning 30 years 12 countries and five
sectors found that competition resulted in
typical cost savings of 20 with savings
as high as 3040 in some cases
value for money in public services is driven
by innovation and smarter ways of
working in the uk the government has
launched a major study to help it
understand the contribution of the public
service industry and how the government
can support it including the potential to
export the uk’s expertise in this area
turning to individual markets we expect
to see continued strong growth in home
affairs in the uk we are well established
across all areas and we are expanding our
footprint in australia key drivers include
the threat of global terrorism concern
about immigration perceptions of rising
crime and the continued rise in prisoner
numbers these will increase
governments’ use of the private sector to
provide capacity and to develop new
capabilities to meet new threats
health and ‘welfare to work’ offer major
future growth areas for serco the uk’s
national health service needs to deliver
efficiency savings and meet stretching
targets and serco can play a critical
supporting role we plan to offer better
value for money clinical services to the
primary sector and to provide fully
managed healthcare solutions that deliver
the information and support needed by
clinicians and patients the uk
government is also increasingly looking to
the private sector to help the jobless
move back into employment we are well
positioned to play a role in this important
new market
uk local authorities face major challenges
creating opportunities for serco the
government’s 2007 comprehensive
spending review requires councils to
deliver 3 annual efficiency savings a
degree of financial pressure new to many
council leaders and chief executives
they will look to service providers for
innovative and costeffective solutions
in addition local government
reorganisation is creating a number of
unitary authorities with greater
responsibilities this inevitably involves
backoffice consolidation in particular in
itbased services serco is well placed to
help finally local authorities are being
given a greater remit to shape their area
and deliver local priorities notably through
agencies such as the police health and
highways serco’s track record in reducing
crime and in improving the environment
school performance and transport gives
us a pivotal role with our broad
understanding of the local agenda placing
us in a unique position in the market
in defence the public debate in the uk
about the level of funding to equip and
support the armed forces has intensified
throughout the year our core business
lies in helping government achieve greater
value for money and it is on that basis
that we have continued to work with the
mod as it refreshes its defence industrial
strategy serco group plc    29 business review – market development
our track record in the provision of
operational support services to the front
line commands and our independence
from equipment manufacturers position
us well to deliver significant growth
this will be achieved by using our role as
an integrator of people infrastructure
training and technology to help the mod
deliver throughlife capability management
and by leveraging our extensive
capabilities in operational support and
training into new overseas markets 
we have a significant position in the us
defence market and have broadened our
offerings which should serve us well as
that sector continues to evolve to an
imminent postiraq era in particular there
is a continuing demand for our services to
military personnel and their families where
we have a solid track record we are well
positioned to provide logistics services as
the military and other government
agencies face greater pressures to reduce
costs and for advanced port security and
other antiterrorismforce protection
applications an area where we see
continued emphasis in the near future
in transport we continue to monitor
opportunities to address congestion and
improve traffic efficiency we have built
strong links with customers in the uk and
around the world to further this in the
united arab emirates there are substantial
opportunities to grow our presence in the
transport market with the development of
the dubai metro this system will be
expanded over time and we anticipate a
growing pipeline of opportunities with the
rapid expansion of dubai and further
transport innovation across the emirates
in particular abu dhabi our reputation for
service delivery and working closely with
clients is bringing a substantial range of
opportunities across both light rail and
traffic control systems that fit within our
strategy
we have engaged with the uk
government on future options for its
trading funds and agencies these
options include the governmentowned
contractoroperated goco model of
which our successful operations at awe
and the national physical laboratory are
examples goco is an attractive
operating model where it is strategically
important to retain a public stake in an
organisation and we will continue to work
with government to examine its full
potential while exploring other contractual
mechanisms
in the uk nda market our primary focus
is on producing a competitive bid for
sellafield sbb nuclear the consortium of
serco bechtel and the babcock 
wilcox company is one of four invited by
the nda to submit final tenders tender
responses are scheduled to be returned
to the nda in the spring of 2008 with the
announcement of the winning bidder
planned for the summer of 2008
sbb nuclear is a unique and highly
effective team with a proven track record
of safely and securely delivering high
performance at awe and at nuclear sites
in the us through partnership with
employees and local communities
together our consortium has experience
of successful transition at 26 major sites
in the uk and us we look forward to
continuing to work with the nda and the
stakeholders at sellafield through the
concluding stages of the competition
process there are also a number of other
opportunities including the decommissioning
of the magnox reactors dounreay and
other smaller sites we will continue to
review the attractiveness of these
opportunities as the market develops
we continue to study the potential for our
serviceled model to be introduced into a
number of new markets while many of
these markets are at an early stage
china india and south africa look likely to
present opportunities in the medium term 30 serco group plc business review – contractual relationships
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 long
term 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 steadily
standardised the centralisation of buying
of 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
our track record for successful
partnerships speaks volumes
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 with lockheed martin and
bng at the atomic weapons
establishment has been highly successful
and together we have consistently
exceeded service targets
we continue to create new partnerships
ssb nuclear our consortium with bechtel
and babcock  wilcox was formed to
support the uk nuclear decommissioning
authority’s cleanup programme
we also expect that strategic partnerships
and joint ventures with customers will be
important to our business in future
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
contractual relationships  serco group plc    31 business review – resources
our people
we know that our people are the key to
our continuing success and so we have
developed a comprehensive suite of
employment policies to 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 group we experience
differing employment legislation customs
and practice 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 
serco has developed bespoke
programmes to assist people working in
management and front line roles
our business managers’ programme
leads to a diploma in management from
the chartered management institute
helping our managers develop their
business insight and people skills we
also have a groundbreaking relationship
with the institute of directors which
underpins the strategic role of contract
and divisional board membership 
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 brush up their literacy
numeracy and language skills while
continuing with their workplace learning
at the end of 2007 more than 3000 of
our people had been assessed with nearly
500 achieving a qualification
the 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 four 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 addition the special heart award
celebrates the most heroic acts of bravery
and courage where people save lives or
overcome formidable obstacles to achieve
their goals
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 their
key criteria in the selection and retention
of privatesector 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
resources 32 serco group plc business review – finance review
serco continued to grow strongly in 2007 with another
doubledigit increase in revenue at the same time we
successfully increased our margins and free cash flow 
and further strengthened our balance sheet
andrew jenner finance director
finance review serco group plc    33 business review – finance review
1 financial performance
serco’s income statement for the year is summarised in figure 1 below this includes
the results of joint ventures which are proportionately consolidated 
as announced in our 2007 interim results we have adopted a new pro forma profit
measure profit before tax and amortisation of acquired intangibles adjusted profit
before tax figure 1 also shows adjusted earnings per share which is calculated
before the amortisation of acquired intangibles for 2006 the adjusted measures also
exclude the gain on sale of our pfi investments of £114m
year ended 31 december 2007 2006 increase
£m £m
revenue 28107 25482 103
gross profit 4062 3657 111
administrative expenses 2642 2429
adjusted operating profit 1420 1228 156
investment revenue and finance costs 188 178
adjusted profit before tax 1232 1050 173
amortisation of acquired intangibles 86 90
gain on sale of pfi investments – 114
profit before tax 1146 1074 67
tax 322 279
profit for the year 824 795 36
effective tax rate 281 260
adjusted earnings per share 1857p 1592p 166
earnings per share 1698p 1662p 22
dividend per share 425p 360p 181
11 revenue
revenue grew by 103 to £28107m benefiting from the growth of existing contracts
and the contribution of new wins
12 gross margin
gross margin – the average contract margin across our portfolio – was 145 a small
increase on 2006
13 investment revenue and finance costs
investment revenue and finance costs totalled a net cost of £188m 2006 £178m 
in december 2006 we sold a number of our pfi investments to infrastructure investors
limited the loss of net interest income from these investments was largely offset by
the increase in net interest income from our retirement benefit obligations
14 adjusted profit before tax
adjusted profit before tax was £1232m an increase of 173 this represented a
margin of 44 up from 41 last year
figure 1 income statement 34 serco group plc business review – finance review
15 gain on sale of pfi investments
2006 included an £114m oneoff gain on the sale of pfi investments the sale was
part of our creation of a strategic pfi investment partnership with i
2
 there was no
corresponding gain in 2007
16 profit before tax 
profit before tax increased by 67 to £1146m profit before tax excluding the gain on
sale in 2006 was up by 194
17 tax
the tax charge of £322m 2006 £279m represents an effective rate of 281
compared with 260 in 2006 the underlying rate in 2006 was 291 before the gain
on sale of the pfi investments the decrease in the underlying rate is primarily due to
the mix of taxable profits
18 earnings per share eps
adjusted eps rose by 166 to 1857p eps grew by 22 to 1698p 
eps and adjusted eps are calculated on an average share base of 4824m during the
period 2006 4712m the increase in the average share base resulted from the
exercise of employees’ share options
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 302p per
share representing an increase on the 2006 final dividend of 184 and bringing the
total dividend for the year to 425p growth of 181 the final dividend will be paid on
21 may to shareholders on the register on 7 march
3 cash flow
the group generated a free cash inflow of £976m 2006 £854m an increase of 143
figure 2 analyses the cash flow as in previous years we have designed the analysis to
show the true cash performance of the group – the cash flows generated by
subsidiaries plus the dividends received from joint ventures it therefore differs from the
consolidated cash flow on page 75 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 serco group plc    35 business review – finance review
year ended 31 december 2007 2006
£m £m
operating profit excluding joint ventures 922 879
non cash items 521 350
group ebitda 1443 1229
working capital movement 47 21
group operating cash flow 1396 1208
interest 256 106
tax 54 67
expenditure on tangible and intangible assets 479 477
dividends from joint ventures 369 296
group free cash flow 976 854
disposal of joint ventures 33 –
acquisition of subsidiaries 74 –
cash received on sale of pfi investments – 765
cash disposed of and transaction costs on sale of pfis – 583
other financing 710 986
special pension contribution 510 190
dividends paid 179 145
group net decrease in cash and cash equivalents 464 285
adjustment to include joint venture cash impacts 67 103
net decrease in cash and cash equivalents 397 182
31 group operating cash flow
group operating cash flow of £1396m 2006 £1208m reflects a conversion of group
ebitda into cash of 97 2006 98 this was a strong cash performance given the
level of organic growth in the business
32 interest
net interest paid was £256m compared to £106m in 2006 the increase is mainly due
to lower cash interest receipts after the disposal of pfi investments in december 2006
33 tax
tax paid was £54m 2006 £67m cash tax is below the equivalent tax charge in the
income statement this reflects timing differences and the availability of tax relief on the
special pension contributions of £19m in december 2006 and £51m in january 2007
34 expenditure on tangible and intangible assets
expenditure on tangible and intangible assets in the year was £479m 2006 £477m
this represents 22 of revenue excluding joint ventures 2006 25 expenditure in
2007 included the completion of the rollout of our sap system in the uk
35 dividends from joint ventures
dividends received from joint ventures totalled £369m 2006 £296m a conversion
rate of 100 2006 87 of joint ventures’ profit after tax and minority interest
excluding costs allocated by group going forward we expect conversion in the range
of 8090
note group ebitda is earnings from subsidiaries excluding joint ventures before interest tax depreciation
intangible amortisation and other non cash items
figure 2 cash flow  36 serco group plc business review – finance review
36 other financing
the movement in other financing resulted from repayments of our loans and the
maturing of one of our private placements in december 2007 for £432m
4 net debt
figure 3 analyses serco’s net debt
at 31 december 2007 2006
£m £m
group schemes – non contract specific 679 1578
contract specific schemes
– reimbursable 607 676
– not certain to be reimbursable 140 239
net retirement benefit liabilities 1426 2493
intangible assets arising from rights to operate 
franchises and contracts 174 206
reimbursable rights debtor 607 676
deferred tax assets 123 411
net balance sheet liabilities 522 1200
41 group recourse net debt
group recourse net debt decreased from £1719m to £1379m due to the cash flows
generated by the business
included within group recourse net debt is £119m 2006 £106m of encumbered
cash this is cash of pfi and other project companies 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 – such as a special purpose company for a pfi – 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 £29m to £593m during the year due to
scheduled repayments the non recourse debt relates to the kilmarnock prison
contract and our driver examination services contract in canada
5 pensions
at 31 december 2007 the net liability included in the balance sheet arising from our
defined benefit pension scheme obligations was £522m 2006 £1200m figure 4
provides further analysis
figure 4 defined benefit pension schemes
at 31 december 2007 2006
£m £m
group – cash and cash equivalents 1381 1778
group – loans 2633 3344
group – obligations under finance leases 127 153
group recourse net debt 1379 1719
joint venture recourse net cash 349 282
total recourse net debt 1030 1437
group non recourse debt 593 622
total net debt 1623 2059
figure 3 net debt serco group plc    37 business review – finance review
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 the 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
• 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 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 2007 splas had a deficit of £287m
31 december 2006 £1170m the reduction in the deficit reflects the movement in
bond yields and the action we have taken to ensure appropriate funding for the
scheme including the special pension contribution of £51m in january 2007
figure 5 shows the sensitivity of the liabilities of our pension schemes to changes in
discount rates and to adjustments in the actuarial assumptions for the rate of inflation
members’ salary increases and life expectancies
change in assumption change in liability
discount rate 05 9
05 10
price inflation 05 7
05 7
salary 05 3
05 3
longevity increase by one year 275
6 treasury 
the group’s principal debt finance consists of a £400m bank credit facility comprising a
term loan facility and a revolving credit facility at 31 december 2007 we had £141m
31 december 2006 £163m outstanding on the term loans and the revolving facility
was undrawn interest is charged at a rate of 45 basis points over libor on
borrowings under the facility the facility is unsecured and matures in december 2009 
serco has also issued loan notes under two private placements the first private
placement for £432m matured in december 2007 and was fully repaid the second
for £1170m amortises evenly from 2011 to 2015 
figure 5 pension assumption sensitivities 38 serco group plc business review  principal risks and uncertainties
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
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 group plc    39 business review  principal risks and uncertainties
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
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 long
term 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 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 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 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 financial market
instability influenza pandemic climate
change and changes in key markets 
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 40 serco group plc business review  principal risks and uncertainties
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 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 phaseins 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 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 
• 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 activities 
• the company secretary manages the
confidential reporting service
whistleblowing 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 and
legal liability for third party loss
the adequacy of the insurance cover
is reviewed at regular intervals serco group plc    41 business review  principal risks and uncertainties
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 performance
against targets and advises the board on
policy and future activities to enhance
best practice in 2007 cag reviewed
internal controls including risk
management health safety and
environmental management as a result
a number of activities have been included
in cag’s 2008 programme to strengthen
performance in these areas
cag sponsors five specialist groups
• an assurance network group chaired
by the assurance director and
comprising senior assurance
representatives from across the group
during the year this group met four
times to review policy and procedures
and the development integration and
dissemination of the sms that defines
how the group operates
• a risk oversight group chaired by the
risk director comprising 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 the aviation safety director
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 rail safety oversight group chaired
by the integrated transport non
executive director with special interest
in safety and comprising the rail safety
representatives from across the group
oversees the safety management
systems within serco’s rail businesses in
the united kingdom middle east and
australia
• a corporate responsibility steering
group chaired by the chief operating
officer provides direction on projects that
address the social and environmental
issues affecting our staff and the
communities within which we work
internal audit
during 2007 grant thornton continued to
provide an internal audit function within
the group in addition to that provided by
internal peer review and cag their
programme is complementary to the
group’s broader programme and has
been designed to address internal control
and risk management processes and the
recommendations of the combined code
grant thornton 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 42 serco group plc business review  principal risks and uncertainties
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 assurance
network and the risk oversight and rail
safety oversight groups
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 we
come into contact with 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
details of our performance in 2007 and
targets and objectives for 2008 are
included in the 2007 corporate
responsibility report and at
wwwsercocom serco group plc    43 directors secretary and advisors
directors secretary and advisors
chairman kevin beeston
directors leonard v broese van groenou
thomas a corcoran
baroness ford of cunninghame
christopher hyman
andrew jenner
david richardson
grant rumbles
secretary joanne roberts
registered
office serco house
16 bartley wood business park
bartley way
hook
hampshire
rg27 9uy
auditors deloitte  touche llp
hill house
1 little new street
london
ec4a 3tr
investment
bankers ubs limited
1 finsbury avenue
london 
ec2m 2pp
stockbrokers jp morgan 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 computershare investor services plc
the pavilions
po box 82
bridgwater road
bristol
bs99 7nh
nonexecutive director
senior independent director 44 serco group plc corporate governance report
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 
in 2007 serco group plc fully complied
with the provisions of the code of best
practice as issued by the financial
reporting council in 2003 and as
superseded by the combined code on
corporate governance issued by the
financial reporting council in june 2006
the code the company is required
to explain how it has applied the
principles set out in the code
the paragraphs below together with the
business review on pages 10 to 42 and
the remuneration report on pages 57 to
70 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 eight members
the nonexecutive chairman three
executive directors and four non
executive 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 54 and 55
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 10 to 42 details the
internal control and risk policies
procedures and management framework
adopted by the group
the corporate responsibility report
which covers the whole spectrum of
corporate assurance processes and
outcomes for 2007 is available online at
wwwsercocom and illustrates how
serco’s approach to corporate assurance
and responsibility translates from the
board into everyday working practices
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 serco group plc    45 corporate governance report
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 48 to 50
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 in
which they were eligible to attend is
shown in the table on page 47
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
on 1 september 2007 after 22 years with
serco and as communicated to
shareholders in 2006 kevin beeston
moved from executive chairman to 
nonexecutive chairman 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
baroness ford of cunninghame margaret
ford was appointed senior independent
director on 29 october 2007 in place of
deanne julius who retired as a director
on the same date 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  46 serco group plc corporate governance report
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 61
significant other commitments of
the chairman
kevin beeston is nonexecutive
chairman of partnerships in care infinitas
learning and domestic and general ltd
and holds nonexecutive director
positions on the boards of imi plc and
ipswich town football club plc kevin is
also a member of the cbi president’s
committee and chairman of the cbi’s
public services strategy board and is
commissioner for the tuc’s commission
on vulnerable employment the board
continues to believe that kevin holds a
wellbalanced portfolio of positions which
allow him to appropriately perform his
duties as chairman
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 2008 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
crossdirectorships 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
directors’ remuneration report on page
61 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  serco group plc    47 corporate governance report
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
2007 was as follows
board effectiveness induction
on joining the board directors are given background information describing the
company and its activities
thomas a corcoran who was appointed on 3 december 2007 received an induction
pack which included 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 he also
met with a range of key people from across the group on a structured basis to assist his
induction visits were also arranged to a number of contracts around the country grant
rumbles was appointed to the board on 3 july 2007 and received an induction pack
which included appropriate information about the roles and responsibilities of the board
and its committees and information on all governance processes of the board he also
attended relevant training on the duties of a plc director 
continued professional development
during 2007 the board members were all engaged in a range of training and
professional development activities these activities are reported to the training and
development committee which also considers the training needs of all directors and
the company secretary all board members are encouraged to attend relevant training
courses at the company’s expense
training 
board audit remuneration development nomination
4 meetings
2
3 meetings 4 meetings 1 meeting 2 meetings
kevin beeston 4 na na 1 2
thomas a corcoran
3
00 000
christopher hyman 4 na na na na
andrew jenner 4 na na na na
leonard v broese van groenou 3 3 4 1 2
margaret ford 4 3 41 2
deanne julius
4
3 2 31 1
david richardson 4 3 4 1 2
grant rumbles
5
2 na 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 four full board meetings which are run over two days 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 thomas a corcoran was appointed to the board as nonexecutive director on 3 december 2007
4 deanne julius retired as a director on 29 october 2007
5 grant rumbles was appointed to the board on 3 july 2007 48 serco group plc corporate governance report
performance evaluation
in october 2007 a rigorous evaluation of
the board and its committees was
undertaken which included a formal
evaluation questionnaire and one to one
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 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 the outcomes from the
board’s appraisal were discussed fully
at the november 2007 board meeting
the principal finding from the evaluation
was confirmation that the board remains
effective and in some cases best in class
all directors feel that the board and
company is open professional and
enjoyable to be a part of and that
appropriate information is provided to the
board in the furtherance of its
responsibilities aspects for further
development were largely procedural and
covered such areas as developments in
reporting formats and the balance of
business presentations and formal papers
to the board all recommendations from
the evaluation have been implemented
in carrying out the performance
evaluation process the board considered
appointing an independent evaluator but
concluded that its own process was
sufficiently rigorous
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 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 is
chaired by david richardson and
comprises margaret ford leonard v
broese van groenou and deanne julius
until her retirement in october 2007
thomas a corcoran joined the
committee on his appointment as 
nonexecutive director to the board on 
3 december 2007
the committee consists solely of
independent nonexecutive directors 
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 director of corporate
assurance grant thornton the group’s
internal audit providers and deloitte 
touche llp the external auditors attend
meetings the committee meets with
each of the internal auditors external
auditors and corporate assurance teams
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 serco group plc    49 corporate governance report
• 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 agm
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 principles 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 2007 the audit committee
considered the following
• corporate governance report and
directors’ statement of responsibilities
for inclusion in the 2006 annual review
and accounts
• 2007 interim statement and auditors’
report thereon
• 2007 external audit fees
• review of the whistleblowing policy
• assessment of the audit committee and
the external and internal auditors
• 2007 internal audit programme and the
proposed 2008 programme
• work undertaken and fees incurred by
the external auditors to ensure that the
external auditors remain independent of
the group
nonaudit services during the year the
group has complied with the policy set
by the audit committee in respect of the
provision of audit and nonaudit services
by deloitte  touche llp the group’s
external auditors where appropriate
nonaudit services have been provided
by companies other than deloitte 
touche 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 recommended to the
board that deloitte  touche llp be
proposed for reappointment at the
forthcoming 2008 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 until her retirement deanne
julius thomas a corcoran joined the
committee on his appointment as 
nonexecutive director to the board on 
3 december 2007 the committee met
twice during 2007
responsibilities matters considered
during the year included the appointment
of grant rumbles as executive director
and thomas a corcoran as 
nonexecutive director margaret ford as
senior independent director and
leonard v broese van groenou as chair
of the remuneration committee
the committee engaged external head
hunters in the recruitment of 
thomas a corcoran who applied rigorous
selection procedures in proposing a
number of candidates for the committee’s
consideration the committee each
individually met with thomas before his
recommended appointment to the board  50 serco group plc corporate governance report
in addition the committee considered the
board structure and composition going
forward including succession and
contingency plans for each of the executive
directors and the appointment of margaret
ford as senior independent director and of
leonard v  broese van groenou as chair of
the remuneration committee 
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 57 to 70
the training and
development committee
membership the training and
development committee is chaired by
kevin beeston and comprises margaret
ford david richardson leonard v
broese van groenou and until her
retirement deanne julius thomas a
corcoran joined the committee on his
appointment to the board on 3
december 2007 
responsibilities the committee met
once during 2007 to consider the
training needs of all directors and the
company secretary
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 
16 senior managers representing each of
the group’s operating divisions and a
number of functional heads it also
includes all three of the executive
directors the gmb meets formally three
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 five members
including the three 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 
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 by election or on request
in addition an interim report is produced
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
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 meeting which is sent to
shareholders and which contains the text
of the resolutions to be proposed and
explanatory notes  serco group plc    51 corporate governance report
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 to
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 day to day
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
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 2008 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 for the
2008 annual general meeting
business conduct
serco group has published an ethics
and business conduct policy standard
that applies to all business divisions
operating companies and business units
throughout the world 
the policy outlines 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 the policy applies
to directors and to all employees
regardless of their position or location
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 38 to 42 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
the directors confirm that they have a
reasonable expectation that the group
has adequate resources to continue in
operational existence for the foreseeable
future and therefore continue to adopt 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
27 february 2008 52 serco group plc directors’ report
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
2007 comparative figures used in this
report are for the year ended 
31 december 2006
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 8 to
9 and the business review on pages 10
to 42 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 123p 2006 –
105p per ordinary share was paid on 17
october 2007 the directors recommend
a final dividend of 302p 2006 – 255p
per ordinary share which if approved by
shareholders at the annual general
meeting will be paid on 21 may 2008 to
those shareholders on the register at the
close of business on 7 march 2008 
substantial shareholdings
as at 25 february 2008 the company had
been notified under rule 5 of the
disclosure and transparency rules of the
financial services authority of the following
holdings of voting rights in its shares 
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 54 to 55
grant rumbles was appointed to the board
as chief operating officer on 3 july 2007
deanne julius retired as a nonexecutive
director on 29 october 2007 thomas a
corcoran was appointed a nonexecutive
director on 3 december 2007
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 of control conditions are
included in the service contracts of
directors which provide compensation or
reduction of notice periods in the event of
a change of 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
57 to 70
no of shares
millions  held
fmr corp and fidelity international limited 480 990
hbos plc 205 422
resolution investment services limited 201 415
aegon uk plc group of companies 198 409
legal  general group plc 193 398 serco group plc    53 directors’ report
annual general meeting
the annual general meeting of the
company will be held at the queen
elizabeth ii conference centre london 
on 13 may 2008 at 1100am
the notice of the 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 101 to 104
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
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 for senior
management which effectively aligns
their interests with those of shareholders
by requiring that performance criteria are
achieved prior to exercise
corporate responsibility
the company has implemented across the
group policies on environmental health
and safety matters and operates an ethics
and business conduct policy standard 
further information on environmental and
employee health and safety matters is
contained in the corporate responsibility
report which is also available online at
wwwsercocom
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 2007 were 24 days 2006 26
days company 16 days 2006 20 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 at
£1066527 2006 £942340 represents
09 of the group’s pretax profit and
represents a 131 increase on
investment made in 2006 
during the year neither the company nor
the group made political donations and
they intend to continue with this policy
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 himselfherself aware of any
relevant audit information and to
establish that the group’s auditors are
aware of that information
auditors
deloitte  touche 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
27 february 2008 54 serco group plc directors’ profiles
directors’ profiles
christopher hyman ca sa
44
chief executive 
christopher hyman was appointed chief
executive of serco group plc in 2002 
he is also nonexecutive director of
united business media plc the prince of
wales’ charity in kind direct habitat for
humanity and the borneo tropical
rainforest foundation he is also a
member of the uk government’s honours
advisory committee for economy
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 
kevin beeston fcma 45
chairman
1 4
chair of the nomination and training
and development committees
kevin beeston became nonexecutive
chairman of serco group plc in
september 2007 having previously served
as the group’s executive chairman chief
executive and finance director 
he is a member of the cbi president’s
committee and chairman of the cbi’s
public services strategy board which
promotes the role business has in
transforming the uk’s public services and
he is a commissioner for the tuc’s
commission on vulnerable employment
in addition he is the nonexecutive
chairman of partnerships in care infinitas
learning and domestic and general ltd
and holds nonexecutive director
positions on the boards of imi plc and
ipswich town football club plc
from left to right
joanne roberts company secretary
leonard v broese van groenou nonexecutive director
christopher hyman chief executive
andrew jenner finance director
kevin beeston chairman
david richardson nonexecutive director
margaret baroness ford of cunninghame nonexecutive director
grant rumbles chief operating officer serco group plc    55 directors’ profiles
andrew jenner aca 39
finance director
andrew jenner joined serco in 1996
having previously worked for unilever and
deloitte  touche llp he has held a
number of positions at serco including
group financial controller and corporate
finance director andrew became group
finance director and joined the board in
may 2002 as well as setting the group’s
financial strategy andrew is responsible
for its pfi investment business and the
development of risk management across
the group he shares responsibility for 
our relationship with shareholders and the
city with the chief executive
thomas a corcoran ba phd
63 
nonexecutive director
1 2 3 4
thomas corcoran 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
thomas 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 thomas held senior
management positions including vice
president and general manager of ges
aerospace operations
he is also nonexecutive director of aer
lingus ltd l3 communications holdings
inc labarge inc remec inc and 
arinc inc
leonard v broese van
groenou msc 61
nonexecutive director
1 2 3 4 
chair of the remuneration 
committee
leonard v broese van groenou joined
serco as a nonexecutive director in april
2006 leonard was previously vice
president human resources and 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
baroness ford of
cunninghame ma mphil
50
senior independent director 
1 2 3 4
margaret ford 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 from 2000
to 2005 margaret was a director of good
practice limited the publishing company
that she founded 
in december 2007 margaret retired from
english partnerships the national
regeneration agency after six highly
successful years margaret is managing
director social infrastructure and
development royal bank of canada
capital markets and chairman of irvine
bay urban regeneration company
david richardson bsc fca
56
nonexecutive director 
1 2 3 4
chair of the audit committee 
david richardson joined serco as a non
executive 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 a nonexecutive director of dairy
crest group plc forth ports plc tomkins
plc and the restaurant group plc
grant rumbles 50
chief operating officer
grant rumbles is chief operating officer
of serco group plc 
having joined serco in 1982 grant has
led several serco divisions including
continental europe middle east and the
group’s it and bpo division 
in 2001 he was appointed to the global
management board and in 2004 he was
promoted to chief operating officer
responsible for the daytoday operations
of the group grant is also responsible for
leading the development of best practice
corporate responsibility and sustainable
growth across the group 
grant is a member of the executive board
of the prince’s trust construction and
business services leadership group 
1 member of the training and development committee
2 member of the audit committee
3 member of the remuneration committee
4 member of the nomination committee 56 serco group plc directors’ responsibilities
directors’ responsibilities
the directors are responsible for preparing
the annual review and accounts the
directors are required to prepare financial
statements for the group in accordance
with international financial reporting
standards ifrs the companies act
1985 and article 4 of the ias regulation
they have elected to prepare financial
statements for the company in
accordance with uk generally accepted
accounting principles uk gaap 
company law requires the directors to
prepare such financial statements in
accordance with ifrs the companies
1985 and article 4 of the ias regulation
ias 1 ‘presentation of financial
statements’ requires that 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 board’s ‘framework for the
preparation and presentation of financial
statements’ in virtually all circumstances
a fair presentation will be achieved by
compliance with all applicable ifrs 
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
• provide additional disclosures when
compliance with the specific
requirements of ifrs is insufficient to
enable users to understand the impact
of particular transactions other events
and conditions on the group’s financial
position and financial performance
the directors are responsible for keeping
proper accounting records which disclose
with reasonable accuracy at any time the
financial position of the group for
safeguarding the assets for taking
reasonable steps for the prevention and
detection of fraud and other irregularities
and for the preparation of a directors’
report and directors’ remuneration
report which comply with the
requirements of the companies act 1985
the directors are also responsible for the
maintenance and integrity of the
company website legislation in the
united kingdom governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
27 february 2008 serco group plc    57 remuneration report
• provide market competitive reward
opportunities for performance in line
with expectations but have the potential
to deliver significant financial rewards for
sustained outperformance
• reflect uk market norms
• be supported by a clear rationale which
participants shareholders and other
stakeholders are able to understand
in setting remuneration of the executive
directors in particular the corporate
objectives relating to the annual bonus
scheme the remuneration committee is
able to consider corporate performance
on environmental social and corporate
governance issues and retains discretion
to reduce bonuses or share incentives
should performance in these areas be
unsatisfactory
the committee believes that the existing
executive remuneration principles remain
appropriate but will be carrying out a
further triennial review during 2008 and
any changes will be set out in detail in
next year’s report
remuneration report
introduction
the following report details the
remuneration policy and the actual
remuneration of the directors of the group
for the year ended 31 december 2007 
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 13 may 2008
the remuneration
committee
the remuneration committee the
committee comprises all the independent
nonexecutive directors leonard v
broese van groenou chair margaret
ford david richardson and deanne
julius until her retirement in october
2007 thomas a corcoran joined the
committee on his appointment as non
executive director to the board on 
3 december 2007 leonard v broese van
groenou succeeded margaret ford as
chair of the committee on 29 october
2007 on her appointment as senior
independent director 
christopher hyman chief executive may
attend meetings of the committee at its
discretion and as appropriate lucy
adams group human resources
director also provides advice and
guidance to the committee the
executive directors are not in attendance
when their own remuneration
arrangements are discussed
the committee met four 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 47
the committee determines the overall
remuneration policy for senior
management and the individual
remuneration packages 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
during the year the committee has been
advised by mercer limited mercer who
were appointed by the committee in 2005
following a competitive tendering process
advice has been sought from mercer on
matters surrounding remuneration policy
and philosophy benchmarking exercises
for both individual executive directors and
remuneration packages as a whole based
on current market trends 
mercer also provides benchmarking data
to the group from time to time and advice
to the trustees of the serco pension and
life assurance scheme the committee
does not consider there to be any conflict
in relation to mercer acting both for the
committee and the pension trustees and
with them providing data to the group
remuneration policy and
practice
during 2005 the committee carried out
its triennial comprehensive review of
executive remuneration to ensure that the
group’s arrangements continue to be
aligned with the business strategy and
current best practice 
as a result of the review changes were
made to the 2006 remuneration structure
and packages which were detailed in the
2005 and subsequent annual review and
accounts and have been followed since
the following principles described below
have been adopted to determine the
remuneration package of the executive
directors the remuneration should
• support serco’s business strategy
• align the financial interests of executives
and shareholders 58 serco group plc remuneration report
remuneration package
composition
the current remuneration package for
executive directors consists of base
salary annual bonus longterm incentives
pensions and other benefits the group’s
policy is to ensure that a significant
proportion of the package is performance
related even at target levels
the relative proportions of performance
and nonperformance related remuneration
for an executive director’s ‘ontarget’
remuneration are shown in the chart below
base salary
the committee’s policy is to set the base
salaries of the executive directors at the
median of a comparator group of
companies which consists of 14
companies in the ftse 250 index of
broadly similar size and business fit
salaries are normally reviewed annually
and the committee takes note of relative
pay and employment conditions within
the comparator group in determining
salary increases
in 2007 the base salaries for christopher
hyman andrew jenner and grant
rumbles were increased by 566
550 and 667 respectively base
salary increases are in line with executive
pay increases in the comparator group 
annual bonuses
for 2007 the annual bonuses for
executive directors were to be calculated
as follows
• the threshold payment at 20 of base
salary 
• the target payment at 50 of base salary
• the maximum payment at 100 of
base salary
the criteria for performance measurement
comprise a mix of financial and corporate
measures that account for 80 and 20
of the bonus allocation respectively
financial measures are based on the
serco group results and the corporate
measures are team based the financial
measures for 2007 were based on
turnover adjusted pbt and cash
conversion these measures reflect the
growth and margin improvement
strategies of the business and are
extremely stretching at the maximum end
the 20 allocated to corporate measures
was split between performance on a
number of strategically important projects
including leadership development new
business success sap implementation
and investor relations
based on the achievement of stretching
turnover and adjusted pbt of £2811m
and £123m respectively and achievement
of the goals under the personal
objectives a bonus equal to 889 of
base salary will be paid for performance
during 2007 the bonus is calculated on
the salary at the time of the award
annual bonuses are not pensionable
46
36
18
performancerelated annual bonus
target
base salary
performancerelated longterm
incentives expected value serco group plc    59 remuneration report
the proportion of awards that vest will be
determined by the following schedule
• no part of the awards will vest if the
group’s tsr is below the median of the
comparator group
• 30 of awards will vest for median
performance
• 100 of awards will vest for upper
quartile performance
• between median and upper quartile
performance a proportion between
30 and 100 of the awards will vest
pro rata
• 200 of awards will vest for top decile
performance 
• between upper quartile and top decile
a proportion between 100 and 200
will vest pro rata
the committee has discretion to vary the
proportion of awards that vests if it considers
that the tsr performance measure does
not appropriately reflect the underlying
financial performance of the group
there is no retesting under the ltip
executive option plan 
the serco group plc 2005 executive
option plan eop was approved at the
annual general meeting held in april 2005
as a replacement for the serco group
1998 executive option plan since the
approval of the 2005 plan no options
have been granted under the 1998 plan
which is now closed
deferred bonus scheme
for bonuses paid in respect of the 2003
2004 and 2005 financial years the annual
bonus plan included the ability for the
executive directors to defer a portion of
the bonus earned participants could elect
to defer for three financial years up to
100 of the bonus earned by purchasing
shares in the group pursuant to the terms
of 2003 deferred bonus scheme the
shares purchased will be matched by the
company if stretching performance
targets are met
the performance condition for matching
shares on deferred bonuses is total
shareholder return tsr relative to
companies comprising the ftse 350 index
and measured over the threeyear deferral
period the matching shares awarded are
based on the following criteria 
• no matching shares will be awarded if
the group does not meet or exceed the
median tsr of the comparator group
• a one for two match of shares deferred
will be made if performance is at the
median 
• a one for one match of shares deferred
will be made if performance is at or
above the upper quartile
there is no further opportunity for the
executive directors to defer bonuses paid
for the bonuses paid in respect of the
2004 financial year and deferred for the
three financial years up to 31 december
2007 tsr performance relative to the
comparator group was in the upper
quartile 84th percentile a one for one
match of shares deferred will be made in
march 2008 
sharebased incentives
longterm share incentives are awarded
to executive directors under the serco
group plc 2006 long term incentive plan
and the serco group plc 2005 executive
option plan previous long term share
incentives were granted under the serco
group 2005 long term incentive
scheme and 1998 executive option
plan the various scheme and plan rules
have all been approved by shareholders
at annual general meetings 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 ernst  young in
relation to the long term incentive
scheme and executive option plan while
mercer undertake the measurement for
the 2006 long term incentive plan the
conditions relating to the schemes are
detailed below 
long term incentive plan 
shareholders approved the serco group
plc 2006 long term incentive plan ltip
at the annual general meeting held in
may 2006 the ltip awards granted to
executive directors are calculated at
100 of salary at the time of grant 
an award of 100 of salary was made 
at the normal annual award time in
november 2007 for evaluation between 
1 january 2008 and 31 december 2010 
the vesting of awards made during 2007
will depend on the group’s tsr 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  60 serco group plc remuneration report
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 
pre 1 january 2003 grants for grants
made in relation to performance periods
commencing up to and including 
1 january 2002 the extent to which an
option vests and therefore becomes
exercisable is measured by reference to
absolute growth in the group’s earnings
per share eps over the threeyear
performance period
the vesting of the grants is based on the
following schedule
• if the annual compound growth in eps
is less than 10 none of the options
may be exercised
• if compound growth in eps is more than
15 all of the options may be exercised
• for a compound growth in eps of
between 10 and 15 a proportion of
the options may be exercised
post 1 january 2003 grants for awards
granted on or after 1 january 2003
achievement of the performance is
measured by reference to the group’s
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
• 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
2007 the group’s eps growth was
1856 per annum over the threeyear
performance period which resulted in all
options vesting the level at which
maximum vesting would occur was
1346 per annum
long term incentive scheme
prior to the approval of the 2006 long
term incentive plan awards were granted
under the long term incentive scheme
ltis awards granted under the ltis may
be exercised after the third anniversary of
grant once confirmation has been received
from the auditors regarding the
achievement of the performance criteria
pre 1 january 2003 awards for awards
made in relation to performance periods
commencing up to and including 
1 january 2002 the extent to which an
award vests and therefore becomes
exercisable is measured by reference to
the absolute growth in the group’s eps
over the performance period of three
financial years
the vesting of the awards is based on 
the following criteria
• full vesting will only occur if the
cumulative eps growth over the three
year performance period is at least 64
• awards will partially vest where the
cumulative eps growth is at least 35 
• awards will vest on a straight line basis
for each percentage increase in eps
growth above 35 over the threeyear
period until full vesting is achieved
post 1 january 2003 awards 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 index at the start
of the performance period 
the vesting of the awards is based on the
following schedule
• no part of the awards will vest if the
group’s performance is below the
median of the comparator group over
the threeyear performance period 
• 40 of the awards will vest if
performance is at the median
• the awards vest in full if performance
reaches or exceeds the upper quartile
• for performance between the median
and the upper quartile a proportion
between 40 and 100 of the
awards will vest pro rata
for awards which completed their
performance period on 31 december
2007 the group’s tsr performance was
in the upper quartile 84th percentile of
the comparator group over the threeyear
performance period resulting in the
awards vesting in full 
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 serco group plc    61 remuneration report
the group’s policy is that the fees of 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
as at 31 december 2007 the non
executive directors of the group have no
personal financial interest in the matters
determined by the board there are no
conflicts of interest arising from cross
directorships 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 
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 non
executive 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 non
executive directors are reviewed on an
annual basis and approved by the board 
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 the options granted under the
scheme in 2004 matured on 1 june 2007 
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 may be retained by the executive
director concerned 
christopher hyman is a nonexecutive
director of united business media plc for
which the fees payable in the year were
£45000 he does not receive any other
fees from nonexecutive directorships held
no other feepaying external positions were
held by any of the executive directors
pensions and life assurance 
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
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 8 of
pensionable salary up to 31 december
2006 subject to inland revenue limits
prior to 6 april 2006 this rate increased
to 95 with effect from 1 january 2007 
however from this date 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 and grant rumbles’
pension benefits accrued prior to 6 april
2006 exceeded the new lifetime
allowance which came into force at that
date and they opted to cease paying
contributions and accruing benefits in the
pension scheme after 6 april 2006 since
that time and prior to his becoming 
nonexecutive chairman kevin beeston
had been in receipt of a cash allowance
equal to 33 of his base salary in lieu of
further pension provision this ceased on
1 september 2007 
grant rumbles is in receipt of a cash
allowance of 22 of his base salary in lieu
of further pension provision
kevin beeston and grant rumbles
remain entitled to lump sum and widow’s
pension benefits should they die before
retirement and whilst still employed by or
an officer of serco 
nonexecutive directors
on 1 september 2007 after 22 years
with serco and as communicated to
shareholders in 2006 kevin beeston
moved from executive chairman to non
executive chairman as from this date he
is no longer eligible to participate in the
group’s annual bonus and longterm
incentive plans save those grants made
during his tenure as an executive director 62 serco group plc
the standard annual fees payable for nonexecutive directors during the financial year
under review are shown in the table below 
1
the chairman has the use of a fully maintained office for company business a company car plus private
health and longterm disability insurance life insurance and personal accident and business travel insurance
are also provided under the terms of the company’s policy
service contracts and compensation
each executive director has a rolling service contract with the company and these
service contracts will be available for inspection prior to the start of and after the
company’s annual general meeting the service contracts all 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 the equivalent of up to one year’s
remuneration the service contracts do not provide for termination payments to be
made in any other circumstances
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
from 1 september 2007 to date
£
chairman
1
200000
1 january 2007 to 28 february 2007 from 1 march 2007 to date
£ £
board member 35000 45000
committee chairmanship 10000 10000
senior independent director 5000 10000
date of 
date joined appointment to date of unexpired term at 
name of director company the board contract 31 december 2007
nonexecutive chairman
kevin beeston 29 april 1985 29 february 1996 1 september 2007 30 months
executive directors
christopher hyman 30 august 1994 1 april 1999 21 july 2003 rolling contract with 
12 months notice period
andrew jenner 4 november 1996 3 may 2002 21 july 2003 rolling contract with 
12 months notice period
grant rumbles 3 july 1982 3 july 2007 3 july 2007 rolling contract with 
12 months notice period
date of appointment date of letter unexpired term at  
to the board of appointment 31 december 2007
nonexecutive directors
margaret ford 8 october 2003 7 october 2003 21 months
leonard v broese van groenou 3 april 2006 20 february 2006 15 months
david richardson 2 june 2003 29 may 2003 17 months
thomas a corcoran 3 december 2007 3 december 2007 35 months
note nonexecutive directors have a threemonth notice period and no compensation or other benefits are payable 
on early termination
remuneration report serco group plc    63 remuneration report
notes
1 ordinary shares are beneficial holdings which include the directors’ personal holdings and those of their
spouses and minor children 
2 27779 of christopher hyman’s and 16667 of andrew jenner’s shares are held in trust on their behalf under
the terms of their participation in the 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
3 grant rumbles was appointed to the board on 3 july 2007
4 thomas a corcoran was appointed to the board on 3 december 2007
directors’ remuneration
this section has been audited by deloitte  touche llp
the remuneration of the directors for the year was as follows
total estimated total total 
value of any remuneration remuneration
other excluding excluding
non cash pensions pensions 
note remuneration fees bonus benefits allowance 2007 2006
£ £££ £ £ £
kevin beeston 123 353332 66668 314113 55699 115639 905451 1202888
christopher hyman 127 540000 nil 497840 55900 nil 1093740 1077104
andrew jenner 127 334500 nil 306705 55797 nil 697002 683347
grant rumbles 4 156667 nil 142240 15137 34467 348511 –
leonard v broese
van groenou nil 45000 nil nil nil 45000 26250
margaret ford nil 53333 nil nil nil 53333 41665
deanne julius 5 nil 43333 nil nil nil 43333 40000
david richardson nil 53333 nil nil nil 53333 45000
thomas a corcoran 6 nil 3750 nil nil nil 3750 nil
total 1384499 265417 1260898 182533 150106 3243453 3116254
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 and private healthcare
3 the allowance comprises payments made to kevin beeston whilst he was executive chairman and grant
rumbles in lieu of pension calculated as a percentage of base salary from which they make their own
pension arrangements further details as set out in the section on directors’ pensions on page 69
4 grant rumbles was appointed to the board on 3 july 2007 remuneration is only disclosed for the period
from his appointment
5 deanne julius retired from the board on 29 october 2007
6 thomas a corcoran was appointed to the board on 3 december 2007
7 remuneration is shown gross of salary sacrificed under the smart scheme see page 61
directors’ shareholdings
the directors’ interests in the shares of the company are detailed in the following table
each of the executive directors is encouraged to maintain a shareholding equal to one
years’ base salary to be built up over three years where newly appointed to the board
ordinary shares of 2p
each fully paid at 
1 january 2007 or ordinary shares of 2p
note if later the date of each fully paid at
1 appointment as director 31 december 2007
kevin beeston 159413 138218
leonard v broese van groenou 1935 3375
margaret ford 7392 11686
christopher hyman 2 134885 156457
andrew jenner 2 84351 97062
david richardson 10000 10000
grant rumbles 3 nil nil
thomas a corcoran 4 nil nil 64 serco group plc remuneration report
sharebased incentives
this section has been audited by deloitte  touche 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 2007 were as follows
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 conditions attached to the awards are described on page 59
4 on 31 december 2007 the performance conditions attached to the awards made on 9 march 2005 were
satisfied though the awards may not be exercised until 9 march 2008 as described on page 59 
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 2007 were as follows 
awards market market awards 
held at price vested price held at
1 january at grant during on vesting 31 december earliest 
2007 pence the period pence 2007 performance period vesting date 
kevin beeston 21557 217 21557 418 – 1 jan 2004 – 31 dec 2006 2 mar 2007
christopher hyman 21557 217 21557 418 – 1 jan 2004 – 31 dec 2006 2 mar 2007
10030 242 – – 10030 1 jan 2005 – 31 dec 2007 9 mar 2008
17749 334 – – 17749 1 jan 2006 – 31 dec 2008 22 mar 2009
andrew jenner 12711 217 12711 418 – 1 jan 2004 – 31 dec 2006 2 mar 2007
6018 242   6018 1 jan 2005 – 31 dec 2007 9 mar 2008
10649 334   10649 1 jan 2006 – 31 dec 2008 22 mar 2009
awards market awards
held at price granted held at
1 january on grant during 31 december earliest latest
2007 pence the period 2007 performance period vesting date exercise date
kevin beeston 147928 349 – 147928 1 jan 2006  31 dec 2008 4 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 4 may 2009 4 may 2016
145205 373 – 145205 1 jan 2007  31 dec 2009 31 dec 2009 28 nov 2016
– 456 122874 122874 1 jan 2008  31 dec 2010 31 dec 2010 11 nov 2017
andrew jenner 88757 349 – 88757 1 jan 2006  31 dec 2008 4 may 2009 4 may 2016
89589 373 – 89589 1 jan 2007  31 dec 2009 31 dec 2009 28 nov 2016
– 456 75699 75699 1 jan 2008  31 dec 2010 31 dec 2010 11 nov 2017
grant rumbles
6
43550 349 – 43550 1 jan 2006  31 dec 2008 4 may 2009 4 may 2016
– 510 33892 33892 1 jan 2007  31 dec 2009 7 may 2010 7 may 2017
– 456 70213 70213 1 jan 2008  31 dec 2010 31 dec 2010 11 nov 2017
notes
1 the performance conditions attached to the awards are described on page 59
2 awards take the form of nominal cost options
3 awards made are calculated at 100 of salary at the time of grant 
4 no awards vested lapsed or were exercised during the period 
5 awards during the year were made on 12 november 2007
6 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 serco group plc    65 remuneration report
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 market market awards
held at price vested price on held at date of
1 january at grant during the vesting 31 december earliest expiry of
2007 pence period pence 2007 performance period vesting date awards
kevin beeston 38736 426 – 153 38736 1 jan 2000 – 31 dec 2002 31 dec 2002 4 apr 2010
50797 490 – 172 50797 1 jan 2001 – 31 dec 2003 31 dec 2003 23 nov 2010
40898 465 – 240 40898 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 119411 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 119411 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 76101 462 76101 1 jan 2005 – 31 dec 2007 31 dec 2007 21 dec 2014
grant rumbles
6
45454 231 45454 462 45454 1 jan 2005 – 31 dec 2007 31 dec 2007 21 dec 2014
notes
1 the awards shown in the table are the maximum amount of shares that can vest under the performance
conditions the performance conditions attached to the awards are described on page 60
2 no awards were exercised awarded or lapsed during the year
3 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
4 awards take the form of nominal cost options
5 awards made are calculated at 100 of salary at the time of grant
6 all awards held by grant rumbles were granted prior to him being appointed executive director 66 serco group plc remuneration report
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 executive directors at 
1 january 2007 and 31 december 2007 were as follows
market
awards held price on
granted exercised at 31 exercise date from date 
awards held during during december date exercise price which of expiry
at 1 january 2007 period period 2007 pence pence exercisable of options
kevin beeston 82710 – 13788 68922 434 218 21 may 2001 20 may 2008
76734 – – 76734 – 245 1 apr 2002 31 mar 2009
58764 – – 58764 – 426 5 apr 2003 4 apr 2010
91321 – – 91321 – 435 28 mar 2004 27 mar 2011
135768 – – 135768 – 264 3 may 2005 2 may 2012
289515 – – 289515 – 153 6 may 2006 5 may 2013
219320 – – 219320 – 217 3 mar 2007 2 mar 2014
183404 – – 183404 – 235 29 apr 2008 28 apr 2015
147492 – – 147492 – 339 5 may 2009 4 may 2016
– 120798 – 120798 – 439 19 mar 2010 18 mar 2017
christopher hyman 39078 – – 39078 – 218 21 may 2001 20 may 2008
40812 – – 40812 – 245 1 apr 2002 31 mar 2009
49830 – – 49830 – 426 5 apr 2003 4 apr 2010
78275 – – 78275 – 435 28 mar 2004 27 mar 2011
116373 – – 116373 – 264 3 may 2005 2 may 2012
289515 – – 289515 – 153 6 may 2006 5 may 2013
219320 – – 219320 – 217 3 mar 2007 2 mar 2014
183404 – – 183404 – 235 29 apr 2008 28 apr 2015
147492 – – 147492 – 339 5 may 2009 4 may 2016
– 120798 – 120798 – 439 19 mar 2010 18 mar 2017
andrew jenner 7422 – – 7422 – 245 1 apr 2002 31 mar 2009
12336 – – 12336 – 426 5 apr 2003 4 apr 2010
18524 – – 18524 – 435 28 mar 2004 27 mar 2011
69824 – – 69824 – 264 3 may 2005 2 may 2012
173709 – – 173709 – 153 6 may 2006 5 may 2013
133178 – – 133178 – 217 3 mar 2007 2 mar 2014
116885 – – 116885 – 235 29 apr 2008 28 apr 2015
88495 – – 88495 – 339 5 may 2009 4 may 2016
– 74530 – 74530 – 439 19 mar 2010 18 mar 2017 serco group plc    67 remuneration report
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 59 to 60
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 options lapsed during the year
5 no payment was made for the grant of the awards
6 grants of options under the 1998 executive option plan are calculated at 100 of salary at the time of
grant 
7 the market price of the company’s ordinary shares at the close of business on 31 december 2007 was
46225p and the range during the year to 31 december 2007 was 37900p to 51425p
8 awards during the year were made on 19 march 2007
9 all awards held by grant rumbles were granted prior to him being appointed executive director
iv serco group plc 1998 and 2005 executive option plan eop continued
market
awards held price on
granted exercised at 31 exercise date from date 
awards held during during december date exercise price which of expiry
at 1 january 2007 period period 2007 pence pence exercisable of options
grant rumbles
9
4002 – – 4002 – 218 21 may 2001 20 may 2008
12336 – – 12336 – 245 1 apr 2002 31 mar 2009
9954 – – 9954 – 426 5 apr 2003 4 apr 2010
13113 – – 13113 – 408 20 mar 2004 19 mar 2011
26099 – – 26099 – 264 3 may 2005 2 may 2012
12453 – – 12453 – 165 6 sept 2005 5 sept 2012
52639 – – 52639 – 153 6 may 2006 5 may 2013
58387 – – 58387 – 214 30 apr 2007 29 apr 2014
89361 – – 89361 – 235 29 apr 2008 28 apr 2015
67846 – – 67846 – 339 5 may 2009 4 may 2016
– 61538 – 61538 – 439 19 mar 2010 18 mar 2017 68 serco group plc remuneration report
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 2002
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 in 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 02
75
100
125
150
175
200
225
250
275
300
325
31 dec 03 31 dec 04 31 dec 05 31 dec 06 31 dec 07
ftse 350 index serco serco group plc    69 remuneration report
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 grant rumbles became a director with effect from 3 july 2007 the pension note above covers accrual over
the whole year and also shows the transfer value of his accrued benefits at the end of the previous year 
c the pensions which kevin beeston and grant rumbles had accrued up to 5 april 2006 when they opted
out of the scheme are increased in line with their pensionable remuneration averaged over three years
since 5 april 2006 the increase in kevin beeston’s accrued pension over the year to 31 december 2007 is
largely due to inflation as shown by columns 5 and 6 the increase in grant rumbles’ accrued pension is
a result of a significant increase in his basic remuneration over the past year
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 of pensionable service as a
result of a further year’s active membership of the scheme
d transfer values have been calculated in accordance with version 92 of the guidance note gn11 issued by
the actuarial profession the assumptions used for calculating transfer values were reviewed during the year
and updated to reflect improvements in mortality expectations and the investment strategy of the scheme
this has resulted in higher transfer values than would have applied using the previous assumptions the
difference between the transfer values at the beginning and end of the year shown in 4 includes not only
the effect of the changes in the assumptions 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 
e the value of the increase in accrual shown in 7 is the value of the net increase in pension shown in 6 and
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 
f with effect from 1 january 2007 christopher hyman and andrew jenner opted to have their contributions
paid by the company under smart salary sacrifice and hence no contributions were paid by the directors
during the year
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 christopher hyman also benefits from a defined contribution arrangement to which the company
contributed prior to april 2005 the company’s contributions to this arrangement were 15 of remuneration
in excess of the permitted maximum under the approved scheme there were no contributions to this
arrangement in 2007 
i andrew jenner also benefits from a defined contribution arrangement to which the company contributed
prior to june 2005 the company’s contributions to this arrangement were 15 of remuneration in excess
of the permitted maximum under the approved scheme there were no contributions to this arrangement 
in 2007 
pensions and life assurance
this section has been audited by deloitte  touche 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 note 28
in the event of death in service each scheme provides for a lump sum payment as well
as a dependant’s pension
the accrued pension benefits of all directors under the serco pension and life
assurance scheme which is a defined benefit scheme are as follows
gross increase in
transfer value transfer value increase increase accrued value of 
of accrued of accrued directors’ in transfer in accrued pension increase in total
benefits at benefits at contributions value pension during the accrual accrued
31 december 31 december for the during during year net of over the pension at
2007 2006 year the year the year inflation year year end
4 
1 2 3 123 5 6 7 8
£ £ £ ££ £££
kevin beeston 2921990 1966075 – 955915 13392 3302 35455 272106
christopher hyman 776483 370763 – 405720 18677 17044 218589 60544
andrew jenner 363309 151823 – 211486 11131 10300 113354 32440
grant rumbles 2164769 1400899 – 763870 20553 15899 246046 139884 70 serco group plc remuneration report
share dilution
new shares are issued in order to satisfy
options granted under the 1998 and 2005
executive option plans sharesave
scheme long term incentive scheme
and 2006 long term incentive plan in the
ten year period to 31 december 2007
awards made under the group’s share
schemes represented 482 2006
307 of the company’s issued share
capital leaving available dilution headroom
of 518 2006 693
employee benefit trust
the group has an employee benefit trust
which is administered by an independent
trustee and which holds ordinary shares in
the company to meet the various
obligations under the group’s 1998 and
2005 executive option plans long term
incentive scheme 2006 long term
incentive plan and deferred bonus
scheme the trust held 5250152 and
4849759 ordinary shares at 1 january
2007 and 31 december 2007 respectively 
kevin beeston christopher hyman
andrew jenner and grant rumbles
together with all employees are potential
beneficiaries of the trust and are deemed
to be interested in all the shares held in
the trust
approved by the board of directors and
signed on its behalf by
joanne roberts
secretary
27 february 2008 serco group plc    71 independent auditors’ report
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 directors’
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 director’s remuneration and
other transactions is not disclosed
we review whether the corporate
governance statement reflects the
company’s 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 board’s
statements on internal control cover all
risks and controls or form an opinion on
the effectiveness of the group’s corporate
governance procedures or its risk and
control procedures
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 2007 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 directors’
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 2007
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 directors’ remuneration
report and the group financial statements
in accordance with applicable law and
international financial reporting
standards ifrs 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
independent auditors’ report 72 serco group plc independent auditors’ report
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 chairman’s
statement the unaudited part of the
directors’ remuneration report the
business review and the corporate
governance statement 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 directors’ remuneration report
to be audited it also includes an
assessment of the significant estimates
and judgments made by the directors in
the preparation of the group financial
statements and of whether the
accounting policies are appropriate to the
group’s 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 directors’
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 directors’
remuneration report to be audited
opinion
in our opinion
• the group financial statements give a
true and fair view in accordance with
ifrs as adopted by the european
union of the state of the group’s affairs
as at 31 december 2007 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 directors’ 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  touche llp
chartered accountants and registered
auditors 
london
27 february 2008 serco group plc    73 financial statements
2007 2006
note £m £m
continuing operations
revenue 45 28107 25482
cost of sales 24045 21825
gross profit 4062 3657
administrative expenses 2642 2429
other expenses – amortisation of intangibles arising on acquisition 14 86 90
total administrative expenses 2728 2519
gain on sale of pfi investments – 114
operating profit 56 1334 1252
investment revenue 8 122 317
finance costs 9 310 495
profit before tax 1146 1074
tax 10 322 279
profit for the year 824 795
attributable to
equity holders of the parent 819 783
minority interest 05 12
earnings per share eps
basic eps 12 1698p 1662p
diluted eps 12 1674p 1643p
2007 2006
note £m £m
net actuarial gain on defined benefit pension schemes 28 32 622 789
actuarial loss on reimbursable rights 28 32 194 534
net exchange gainloss on translation of foreign operations 32 128 123
fair value gain on cash flow hedges during the year 32 90 22
tax charge on items taken directly to equity 32 115 70
net income recognised directly in equity 531 84
profit for the year 824 795
total recognised income and expense for the year 1355 879
attributable to
equity holders of the parent 1349 871
minority interest 06 08
consolidated income statement
for the year ended 31 december 2007
consolidated statement of recognised income and expense
for the year ended 31 december 2007 74 serco group plc financial statements
2007 2006
note £m £m
noncurrent assets
goodwill 13 5421 5285
other intangible assets 14 1394 1261
property plant and equipment 17 951 936
trade and other receivables 20 1046 1105
deferred tax assets 23 516 737
derivative financial instruments 27 12 –
9340 9324
current assets
inventories 19 463 517
trade and other receivables 20 5736 4633
cash and cash equivalents 21 1850 2179
derivative financial instruments 27 15 –
8064 7329
total assets 17404 16653
current liabilities
trade and other payables 25 6700 5419
current tax liabilities 148 130
obligations under finance leases 24 77 83
loans 22 135 579
derivative financial instruments 27 21 106
7081 6317
noncurrent liabilities
trade and other payables 25 133 104
obligations under finance leases 24 87 115
loans 22 3174 3461
derivative financial instruments 27 112 142
retirement benefit obligations 28 1426 2493
provisions 29 186 223
deferred tax liabilities 23 220 199
5338 6737
total liabilities 12419 13054
net assets 4985 3599
equity
share capital 30 97 95
share premium account 31 2993 2835
capital redemption reserve 01 01
retained earnings 32 2606 1966
retirement benefit obligations reserve 32 902 1195
sharebased payment reserve 32 346 255
own shares reserve 32 151 164
hedging and translation reserve 32 18 213
equity attributable to equity holders of the parent 4972 3580
minority interest 13 19
total equity 4985 3599
the financial statements were approved by the board of directors on 27 february 2008 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
consolidated balance sheet
at 31 december 2007 serco group plc    75 financial statements
2007 2006
note £m £m
net cash inflow from operating activities 33 1341 1595
investing activities
interest received 103 324
disposal of joint ventures 16 25 182
proceeds from disposal of intangible assets 17 –
proceeds from disposal of property plant and equipment 29 14
acquisition of subsidiaries net of cash acquired 15 91 –
purchase of other intangible assets 306 304
purchase of property plant and equipment 262 278
net cash outflow from investing activities 485 62
financing activities
interest paid 342 422
dividends paid 11 179 145
dividend paid to minority interest 12 10
repayment of borrowings 746 1034
new loan advances 22 94
capital element of finance lease repayments 84 86
proceeds from issue of share capital and exercise of share options 171 141
decrease in non recourse loans 83 253
net cash outflow from financing activities 1253 1715
net decrease in cash and cash equivalents 397 182
cash and cash equivalents at beginning of year 2179 2407
net exchange gainloss 68 46
cash and cash equivalents at end of year 21 1850 2179
consolidated cash flow statement
for the year ended 31 december 2007 76 serco group plc notes to the financial statements
notes to the 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
these financial statements on pages 73 to 121 have been prepared in accordance with international financial reporting standards
ifrs 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
the group adopted ifrs 7 ‘financial instruments disclosures’ and the complementary amendment to ias 1 ‘presentation of
financial statements – capital disclosures’ from 1 january 2007 ifrs 7 introduces new disclosures relating to financial
instruments this standard does not have any impact on the classification or valuation of the group’s financial instruments and
covers disclosures only
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’ 
previously amortisation of intangibles was shown separately within administrative expenses in the income statement and was
excluded from the adjusted earnings per share calculation only amortisation of intangibles arising on acquisition is now shown
separately in the income statement and excluded from the adjusted earnings per share calculation the 2006 comparatives have
been represented there is no change to operating profit or administrative costs in total as a result of this change in presentation
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 serco group plc    77 notes to the financial statements
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 or jointlycontrolled entity at the date of acquisition
goodwill is recognised as an intangible asset goodwill is not amortised and is reviewed for impairment at least annually any
impairment is recognised immediately in the income statement and is not subsequently reversed
on disposal of a subsidiary 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 carried forward as the unadjusted uk gaap amounts
goodwill written off to reserves under uk gaap prior to 1998 has not been reinstated
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 receivable 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
revenue from longterm projectbased contracts is recognised in accordance with the group’s accounting policy below
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
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
unallocated items comprise mainly corporate expenses specific corporate expenses are allocated to the corresponding segments
segment assets comprise goodwill other intangible assets property plant and equipment inventories and trade and other
receivables excluding corporation tax recoverable liabilities comprise trade and other payables retirement benefit obligations and
other creditors 
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’ 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
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 phase in costs directly related to phase in programmes of contracts are treated as an integral part of
contract costs and are recognised in accordance with the stage of completion as described above 78 serco group plc notes to the financial statements
2 significant accounting policies continued
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
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
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
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 serco group plc    79 notes to the financial statements
2 significant accounting policies continued
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 taxable
profit nor the accounting profit
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 80 serco group plc notes to the financial statements
2 significant accounting policies continued
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 consolidated 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 of eight years
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
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 excluding goodwill
the group reviews the carrying amounts of its tangible and intangible assets annually 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 
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 serco group plc    81 notes to the financial statements
2 significant accounting policies continued
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 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 payments to certain employees and operates an inland revenue approved
save as you earn 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
accounting for pfi contracts
within public private partnership ppp projects including private finance initiative pfi projects where the concession agreement
transfers limited risks and rewards associated with ownership to the contractors during the period of initial asset construction costs
incurred as a direct consequence of financing designing and constructing the asset are shown as pfi assets in the course of
construction within noncurrent trade and other receivables on completion of the asset construction phase the asset is transferred
within trade and other receivables to a pfi debtor
revenues received from the customer are apportioned between capital repayments and operating revenue the finance income
element of the capital repayment is shown as notional interest receivable within investment revenue
the group has one 2006 – one fully owned special purpose company spc which is used for the purpose of running the pfi business 
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
uncollectable 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
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 of certain spcs and joint ventures 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 82 serco group plc notes to the financial statements
2 significant accounting policies continued
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 at the balance sheet date the gain or loss on remeasurement is taken to the income statement 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 group 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
• a hedge of net investment in a foreign entity
changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement within
finance costs together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk
the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges 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 recognised in the income statement 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 income statement
for the ineffective portion of hedges or transactions that are not designated for hedge accounting under ias 39 any change in assets
or liabilities is recognised immediately in the income statement where a hedge no longer meets the effectiveness criteria any gains or
losses deferred in equity are only transferred to the income statement when the committed or forecast transaction is recognised in the
income statement 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 income statement
where the group 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 income statement when the foreign
operation is partially disposed of or sold
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
during the year the iasb and ifric have issued the following standards and interpretations with an effective date after the date of
these financial statements
international accounting standards iasifrss effective date
ias 23 amendment borrowing costs 1 january 2009
ifrs 8 operating segments 1 january 2009
international financial reporting interpretations committee ifric
ifric 11 ifrs 2 – group and treasury share transactions 1 january 2008
ifric 12 service concession arrangements 1 january 2008
ifric 14 ias 19 – the limit on a defined benefit asset minimum
funding requirements and their interaction 1 january 2008
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 serco group plc    83 notes to the financial statements
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 above 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 £5421m 2006 – £5285m 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 £1426m
2006 – £2493m details of the impact of changes in assumptions relating to retirement benefit obligations are disclosed in the
finance review page 37
4 revenue
an analysis of the group’s revenue is as follows
2007 2006
£m £m
rendering of services 28107 25482
revenue as disclosed in the consolidated income statement 28107 25482
investment revenue note 8 122 317
total revenue as defined in ias 18 28229 25799 84 serco group plc notes to the financial statements
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 2007 £m £m £m £m £m
revenue 952272056550483028107
result
segment result 468 498 267 457 1690
unallocated 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 156 53 102 16 327
goodwill 98 – 14 – 112
intangible assets – segments 118 12 13 05 148
intangible assets – unallocated 162
310
depreciation and amortisation
depreciation 177 62 46 17 302
amortisation – segments 113 06 38 15 172
amortisation – unallocated 60
232
segment assets
business segment assets 7763 2906 1499 2274 14442
unallocated assets 561
15003
segment liabilities
business segment liabilities 2814 2338 1080 1794 8026
unallocated liabilities 233
8259 serco group plc    85 notes to the financial statements
5 segmental information continued
market segments
civil government defence transport science total
year ended 31 december 2006 £m £m £m £m £m
revenue 8750 6448 6257 4027 25482
result
segment result 420 412 267 369 1468
unallocated expenses 330
gain on sale of pfi investments 114
operating profit 1252
investment revenue 317
finance costs 495
profit before tax 1074
tax 279
profit for the year 795
capital expenditure including acquisitions
property plant and equipment 139 47 104 14 304
goodwill – –– – –
intangible assets – segments 36 03 75 04 118
intangible assets – unallocated 258
376
depreciation and amortisation
depreciation 178 62 46 14 300
amortisation – segments 105 01 29 14 149
amortisation – unallocated 13
162
segment assets
business segment assets 7153 2495 1509 2083 13240
unallocated assets 497
13737
segment liabilities
business segment liabilities 2370 2843 1169 1508 7890
unallocated liabilities 126
8016
geographical segments
europe and
united kingdom north america middle east asia pacific 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 190 12 30 95 327
goodwill 98 – 14 – 112
intangible assets 293 11 05 01 310
assets
geographical segment assets 11158 2078 1175 592 15003 86 serco group plc notes to the financial statements
5 segmental information continued
geographical segments
europe and
united kingdom north america middle east asia pacific total
year ended 31 december 2006 £m £m £m £m £m
revenue 18865 2953 2134 1530 25482
capital expenditure including acquisitions
property plant and equipment 198 19 43 44 304
goodwill –– – – –
intangible assets 355 – 21 – 376
assets
geographical segment assets 10021 1995 1243 478 13737
2007 2006
£m £m
segment assets comprise
goodwill 5421 5285
other intangible assets 1394 1261
property plant and equipment 951 936
trade and other receivables – noncurrent 1046 1105
inventories 463 517
trade and other receivables – current excluding tax recoverable 5728 4633
15003 13737
2007 2006
£m £m
segment liabilities comprise
trade and other payables – current 6700 5419
trade and other payables – noncurrent 133 104
retirement benefit obligations 1426 2493
8259 8016 serco group plc    87 notes to the financial statements
6 operating profit
operating profit is stated after chargingcrediting
2007 2006
£m £m
net foreign exchange gainslosses 11 03
research and development costs 449 442
loss on disposal of property plant and equipment 13 11
depreciation of property plant and equipment note 17 302 300
amortisation of intangible assets – arising on acquisition note 14 86 90
amortisation of intangible assets – other note 14 146 72
staff costs note 7 11836 11155
bad debt provision charged to income statement note 20 05 05
fair value adjustment on financial instruments
 recycling of amounts on discontinued cash flow hedge 03 –
 forward foreign exchange contracts nondesignated hedges 11 –
operating lease payments 1084 1139
operating lease income 01 02
amounts payable to deloitte  touche llp and their associates by the company and its subsidiary undertakings in respect of audit
and nonaudit services are shown below
2007 2006
£m £m
fees payable to the company’s auditors for the audit of the company’s annual accounts 08 07
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 08 08
total audit fees 16 15
other services pursuant to legislation 02 01
tax services 04 07
other services 02 01
total nonaudit fees 08 09 88 serco group plc notes to the financial statements
7 staff costs
the average monthly number of employees including executive directors was
2007 2006
number number
civil government 17916 17894
defence 11676 10660
transport 8114 8206
science 3525 3062
unallocated 214 264
total 41445 40086
their aggregate remuneration comprised
2007 2006
£m £m
wages and salaries 10116 9584
social security costs 920 876
other pension costs note 28 750 647
11786 11107
sharebased payment expense note 35 50 48
total 11836 11155
8 investment revenue
2007 2006
£m £m
net fair value adjustments on derivative financial instruments 03 –
interest receivable by pfi companies 32 256
interest receivable on other loans and deposits 55 61
net interest receivable on retirement benefit obligations note 28 32 –
122 317
9 finance costs
2007 2006
£m £m
net fair value adjustments on derivative financial instruments – 05
interest payable on non recourse loans 37 180
interest payable on obligations under finance leases 10 06
interest payable on other loans 263 285
net interest payable on retirement benefit obligations note 28 – 19
310 495 serco group plc    89 notes to the financial statements
10 tax
2007 2006
£m £m
current tax
uk corporation tax 122 174
foreign tax 111 77
adjustment in respect of prior years
uk corporation tax 39 85
foreign tax 01 03
193 163
deferred tax 
current year 165 51
adjustment in respect of prior years 36 65
129 116
322 279
the charge for the year can be reconciled to the profit in the consolidated income statement as follows
2007 2006
£m £m
profit before tax 1146 1074
tax calculated at a rate of 30 2006  30 344 322
expenses not deductible for tax purposes 65 56
unrelieved tax losses and different tax rates on overseas earnings 32 12
untaxed income and the effect of the use of unrecognised tax losses 13 22
untaxed income on sale of pfi investments – 34
tax incentives 30 32
adjustments in respect of prior years 76 23
tax charge 322 279 90 serco group plc notes to the financial statements
11 dividends
2007 2006
£m £m
amounts recognised as distributions to equity holders in the year
final dividend for the year ended 31 december 2006 of 255p per share on 4711 million ordinary  
shares 2006 – final dividend for the year ended 31 december 2005 – 206p on 4630 million
ordinary shares 120 95
interim dividend for the year ended 31 december 2007 of 123p per share on 4789 million ordinary 
shares 2006 – interim dividend for the year ended 31 december 2006 – 105p on 4695 million
ordinary shares 59 50
179 145
proposed final dividend for the year ended 31 december 2007 of 302p per share on
4802 million ordinary shares 2006 – 255p on 4711 million ordinary shares 145 120
the proposed final dividend for 2007 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 and the gain on sale of pfi
investments 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
2007 2006
millions millions
weighted average number of ordinary shares for the purpose of basic eps 4824 4712
effect of dilutive potential ordinary shares share options 68 55
weighted average number of ordinary shares for the purpose of diluted eps 4892 4767
earnings 2007 2006
earnings per share earnings per share 
amount amount
£m pence £m pence
earnings for the purpose of basic eps being net profit attributable
to the equity holders of the parent 819 1698 783 1662
less
gain on sale of pfi investments –– 114 242
add back
amortisation of intangible assets arising on acquisition net of tax
of £09m 2006  £09m 77 159 81 172
adjusted earnings before amortisation of intangible assets and
gain on sale of pfi investments 896 1857 750 1592
earnings for the purpose of basic eps 819 1698 783 1662
effect of dilutive potential ordinary shares – 024 – 019
diluted eps 819 1674 783 1643
at 31 december 2007 options over 27000 2006 – 33 million shares were excluded from the weighted average number of shares
used for calculating diluted earnings per share because their exercise price was below the average share price for the year and they
were therefore antidilutive serco group plc    91 notes to the financial statements
13 goodwill
cost £m
at 1 january 2006 5445
additions –
exchange differences 160
at 1 january 2007 5285
additions 112
exchange differences 24
at 31 december 2007 5421
goodwill has been allocated to cashgenerating units cgus in the following business segments
2007 2006
cost £m £m
civil government 3255 3186
defence 970 985
science 1023 991
transport 173 123
at 31 december 5421 5285
in 2006 goodwill relating to rci and itnet was reported separately in 2007 these are shown within the defence £909m and civil
government £2609m sectors respectively in line with how the group monitors its goodwill internally
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired
the recoverable amounts of the cgus are determined from value in use calculations using cash flow projections based on financial
plans approved by senior management covering a five year period the key assumptions for the value in use calculations are those
regarding the discount rates growth rates and expected changes to revenue and direct costs during the period management
estimates discount rates using pretax rates that reflect current market assessments of the time value of money and the risks specific
to the cgus the growth rates are based on industry growth forecasts changes in revenue and direct costs are based on past
practices the group’s order book and expectations of future changes in the market
the group prepares cash flow forecasts derived from the most recent financial plans approved by management for the next five
years including a terminal value based on an estimated growth rate of 225 this rate does not exceed the average longterm
growth rate for the uk
the rates used to discount the forecast cash flows for the group are as follows
2007 2006
 
civil government 118 – 135 118 – 135
defence 113 – 123 113 – 123
science 113 113
transport 118 118 92 serco group plc notes to the financial statements
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 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
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 2006 224 627 250 224 1325
additions – 02 331 43 376
disposals 02 – – – 02
reclassifications – 12 12 – –
transfers – – 22 – 22
exchange differences 02 69 02 – 69
at 31 december 2006 220 548 617 267 1652
amortisation
at 1 january 2006 26 152 35 34 247
charge for the year 30 60 45 27 162
reclassifications – 01 01 – –
exchange differences 01 20 03 – 18
at 31 december 2006 55 191 84 61 391
net book value
at 31 december 2006 165 357 533 206 1261
the following amortisation rates have been determined for the intangible assets acquired during this year
• 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 £86m 2006 – £90m serco group plc    93 notes to the financial statements
15 acquisitions
a during the first half of the year equity aviation holdings pty limited a 50 joint venture company acquired several small
companies equity aviation provides ground handling services to the aviation industry
b on 16 may 8 august and 31 december 2007 the group acquired cornwell management consultants plc alexander hughes
interim management limited and er consultants limited respectively all of these companies are involved in the provision of
consultancy services to the public and private sector
c on 1 december 2007 the group acquired all of the issued share capital of business link devon and cornwall limited bldc
bldc provides business link services to the south west of england
the total consideration for all acquisitions was £144m
all transactions have been accounted for in accordance with ifrs 3 ‘business combinations’
fair value 
net assets acquired were
book value adjustments fair value
£m £m £m
intangible assets – 04 04
property plant and equipment 11 02 09
debtors 85 03 82
cash and cash equivalents 18 – 18
loans 03 – 03
provisions – 04 04
creditors 77 03 74
net assets acquired 34 02 32
goodwill 112
total consideration 144
satisfied by
£m
consideration paid in january 2008 29
consideration paid in 2007 98
purchase consideration 127
directly attributable costs 17
total consideration 144
net cash outflow arising on acquisitions
£m
purchase consideration paid in 2007 98
directly attributable costs paid in 2007 11
cash and cash equivalents acquired 18
91
acquisitions contributed £156m to revenue and £08m to the group’s profit before tax for the period between the date of acquisition
and the balance sheet date if the acquisitions had taken place at the start of the year the group’s revenue and profit before tax
would have been approximately £10m and £03m higher respectively 94 serco group plc notes to the financial statements
16 disposals
during the year ended 31 december 2007 serco disposed of its investments in the following joint ventures
date of disposal joint venture  held
serco gulf llc 31 may 2007 49
serco guthrie pte ltd 22 june 2007 50
serco project engineering ltd 23 july 2007 50
the aggregated financial effect of the disposals on the consolidated accounts for the period is as follows
net assets disposed of were
£m
property plant and equipment 07
inventories 14
trade and other receivables 80
cash and cash equivalents 32
trade and other payables 56
accruals and deferred income 04
loans 05
tax 09
59
the gain on sale is calculated as follows
£m
cash consideration received in 2007 63
deferred consideration 03
less
net assets disposed of 59
gain on sale of joint venture investments 07
the net cash inflow arising on disposal is as follows
£m
cash consideration received in 2007 63
less
cash disposed of 32
cash inflow in relation to 2007 disposals 31
transaction costs paid during the year in relation to 2006 disposals 06
net cash inflow 25 serco group plc    95 notes to the financial statements
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 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
elimination 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
elimination 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
machinery
short motor
freehold leasehold vehicles
land and building furniture and
buildings improvements equipment total
£m £m £m £m
cost
at 1 january 2006 113 224 1954 2291
additions 12 18 274 304
disposals 18 16 249 283
reclassifications 22 22 – –
transfers – – 82 82
exchange differences 01 06 65 72
at 31 december 2006 84 242 1832 2158
accumulated depreciation and impairment
at 1 january 2006 37 95 1129 1261
charge for the year 04 22 274 300
eliminated on disposals 03 15 240 258
reclassifications 13 13 – –
transfers – – 41 41
exchange differences – 03 37 40
at 31 december 2006 25 112 1085 1222
net book value
at 31 december 2006 59 130 747 936 96 serco group plc notes to the financial statements
17 property plant and equipment continued
the carrying amount of the group’s machinery motor vehicles furniture and equipment includes an amount of £174m
2006 – £181m in respect of assets held under finance leases
the carrying amount of the group’s freehold land and buildings includes an amount of £nil 2006 – £02m in respect of assets held
under finance leases
the carrying amount of the group’s shortleasehold building improvements includes an amount of £10m 2006 – £05m in respect of
assets held under finance leases
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
2007 2006
£m £m
revenue 6801 6433
expenses 6389 6060
operating profit 412 373
investment revenue 49 33
finance costs 09 13
profit before tax 452 393
tax 121 86
profit for the year 331 307
minority interest 03 06
share of posttax results of joint ventures 328 301
operating profit is after allocating £40m 2006 – £40m of costs incurred by group
balance sheet
2007 2006
£m £m
noncurrent assets 1026 1040
current assets 1242 1045
current liabilities 1233 928
noncurrent liabilities 755 904
net assets 280 253
19 inventories
2007 2006
£m £m
service spares 149 196
parts awaiting installation 112 110
longterm projectbased contract balances 202 211
463 517 serco group plc    97 notes to the financial statements
20 trade and other receivables
2007 2006
£m £m
trade and other receivables noncurrent
pfi debtor 274 298
amounts owed by joint ventures 06 23
amounts recoverable on retirement benefit obligations note 28 607 676
other debtors 159 108
1046 1105
2007 2006
£m £m
trade and other receivables current
trade receivables 4181 3401
other amounts recoverable on contracts 503 453
pfi debtor 24 15
corporation tax recoverable 08 –
prepayments and accrued income 513 398
other debtors 507 366
5736 4633
 the pfi debtor analysed above is funded by a non recourse loan of £225m 2006 – £248m
the directors estimate that the carrying amount of trade debtors approximates to their fair value
as of 31 december 2007 trade receivables of £14m 2006 – £18m 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 only £14m as of 
31 december 2007 2006 – £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
2007 2006
£m £m
neither impaired nor past due 3346 2751
not impaired but overdue by less than 30 days 534 406
not impaired but overdue by between 30 and 60 days 135 97
not impaired but overdue by more than 60 days 166 143
impaired 14 18
bad debt provision 14 14
4181 3401
movements on the group bad debt provision are as follows
2007 2006
£m £m
at 1 january 14 13
charged to income statement 05 05
utilised 05 04
at 31 december 14 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 98 serco group plc notes to the financial statements
21 cash and cash equivalents
other other
sterling currencies total sterling currencies total
2007 2007 2007 2006 2006 2006
£m £m £m £m £m £m
cash of pfi and other project companies
securing credit obligations 17 40 57 17 35 52
customer advance payments – 62 62 – 54 54
other cash and shortterm deposits 976 755 1731 1577 496 2073
total cash and cash equivalents 993 857 1850 1594 585 2179
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
2007 2007 2007 2007 2006 2006 2006 2006
£m £m £m £m £m £m £m £m
loans are repayable as follows
on demand or within one year 28 59 48 135 33 56 490 579
between one and two years 52 59 1443 1554 20 51 49 120
between two and five years 76 188 519 783 68 159 1930 2157
after five years 69 62 706 837 127 108 949 1184
225 368 2716 3309 248 374 3418 4040
less amount due for settlement 
within one year shown within 
current liabilities 28 59 48 135 33 56 490 579
amount due for settlement 
after one year 197 309 2668 3174 215 318 2928 3461
the carrying amounts and fair values of the loans are as follows
carrying amount fair value
2007 2006 2007 2006
£m £m £m £m
non recourse loans relating to pfi assets 225 248 210 228
other non recourse loans 368 374 382 391
other loans 2716 3418 2746 3432
3309 4040 3338 4051
the fair values are based on cash flows discounted using a rate based on the borrowing rate associated with the loan all loans apart
from a private placement repaid in december 2007 are valued at amortised cost serco group plc    99 notes to the financial statements
23 deferred tax
deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax rate of 28 
2006 – 30 from 1 april 2008 the uk corporation tax rate is 28
the gross movement on the deferred income tax account is as follows
2007 2006
£m £m
at 1 january 538 09
income statement charge note 10 129 116
disposals – 683
items taken directly to equity 115 20
exchange differences 02 –
at 31 december 296 538
the movement in deferred tax assets and liabilities during the year was as follows
temporary sharebased
differences payment retirement derivative other
on assets employee benefits 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
the movement in deferred tax assets and liabilities during the previous year was as follows
temporary sharebased
differences payment retirement derivative other
on assets employee benefits financial temporary
intangibles benefits schemes instruments differences total
£m £m £m £m £m £m
at 1 january 2006 856 153 528 104 62 09
creditedcharged to income statement 11 04 57 01 65 116
disposals 733 – – 50 – 683
items taken directly to equity – 41 60 01 – 20
at 31 december 2006 112 190 411 52 03 538
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
2007 2006
£m £m
deferred tax liabilities 220 199
deferred tax assets 516 737
296 538
at the balance sheet date the group did not recognise deferred tax assets of £77m 2006 – £132m in respect of the aggregate of
deductible temporary differences unused tax losses and unused tax credits 100 serco group plc notes to the financial statements
24 obligations under finance leases
present value present value
minimum of minimum minimum of minimum
lease lease lease lease 
payments payments payments payments
2007 2007 2006 2006
£m £m £m £m
amounts payable under finance leases
within one year 86 77 95 83
between one and five years 91 75 120 110
after five years 14 12 12 05
191 164 227 198
less future finance charges 27 – 29 –
present value of lease obligations 164 164 198 198
less amount due for settlement within one year 
shown under current liabilities 86 77 95 83
amount due for settlement after one year 78 87 103 115
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
2007 2006
£m £m
trade and other payables current
trade creditors 1737 1276
other creditors 1372 1337
accruals and deferred income 3588 2806
amounts owed to joint ventures 03 –
6700 5419
trade and other payables noncurrent 133 104
the average credit period taken for trade purchases is 24 days 2006 – 26 days the directors estimate that the fair value of trade
creditors approximates to their carrying amount serco group plc    101 notes to the financial statements
26 financial risk management
the group held the following financial instruments at 31 december
carrying amount
2007 2006
£m £m
financial assets
derivative financial instruments at fair value note 27 27 –
loans and receivables at amortised cost – trade receivables note 20 4181 3401
– other financial assets note 26 02 13
– cash and cash equivalents note 21 1850 2179
6060 5593
financial liabilities
derivative financial instruments at fair value note 27 133 248
at fair value through profit and loss – loans note 22 – 392
at amortised cost – loans note 22 3309 3648
– trade creditors note 25 1737 1276
– obligations under finance leases note 24 164 198
5343 5762
net financial instruments 717 169
financial risk
the board is ultimately responsible for ensuring that financial and nonfinancial risk 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 available funds to maintain its ongoing operations 
the group’s main committed credit facility the bank facility expires in december 2009 and comprises term loans of £26m and
us dollar 229m and an undrawn £255m revolving credit facility 
the bank facility is unsecured and has financial and nonfinancial covenants and obligations typical of this type of arrangement 
the group has a private placement for £117m outstanding which amortises in equal annual instalments from 2011 to 2015 
the private placement comprises a tranche of £83m and a tranche of us dollar 55m which is hedged by two cross currency
swaps note 27a 
foreign exchange risk
the group’s business does not involve a significant amount of crossborder trade and consequently the group is not exposed to
substantial foreign currency transaction risk as sales and costs are approximately matched within overseas operations material
transactional exposures that do arise are hedged by forward foreign exchange contracts 
the foreign exchange exposure on the us dollar tranche of the private placement has been fully hedged into sterling the foreign
exposure on the us dollar bank facility is hedged against the net investment in the subsidiaries in the us and an internal loan
receivable denominated in us dollars
central funding of individual business units gives rise to monetary assets and liabilities centrally and in the business units the
currency of resultant debt is selected to ensure that any foreign exchange risk is borne and managed by the group’s treasury
function the risk of which is mitigated by using forward foreign exchange contracts  102 serco group plc notes to the financial statements
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 trade and other receivables have a sovereign or close to
sovereign 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 for credit vetting for new government body
customers there is 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 holder’s position within the government body
at quarterly intervals a management credit worthiness review for all ongoing customers with material outstanding balances is
undertaken including a review 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 transacts with counterparties that have a minimum long term and short term public rating of single a
and a1p1 only it also ensures that no exposure to any one institution at any given time exceeds a predetermined exposure limit
interest rate risk
the group’s interest rate risk arises on variable rate borrowings under the bank facility the group’s policy is to hedge core
borrowing requirements to protect against adverse interest rate movements
price risk
the group is exposed to commodity price risk through its joint venture rail operations the joint venture has used commodity
derivatives to mitigate some of this risk see note 27c
26 a currency management
the group’s currency exposures that give rise to net currency gains and losses on financial instruments that are recognised in the
income statement and equity arise principally with respect to us dollar with sterling and us dollar with canadian dollar financial
instruments the fluctuations in other exchange rates do not significantly alter the value of financial instruments at 31 december
2007 if the us dollar had weakened by 10 against sterling with all other variables held constant posttax profit for the year would
have been £07m lower 2006 – £10m lower mainly as a result of exchange losses on cash and derivative financial instruments
equity would have been £06m lower 2006 – £08m lower mainly due to exchange losses on commodity futures contracts
denominated in us dollars at 31 december 2007 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 £09m higher 2006 – £08m higher mainly as a result of
exchange gains on us dollar denominated noncurrent intercompany borrowings equity would have been £04m higher 
2006 – £04m higher due to canadian dollar denominated noncurrent intercompany borrowings serco group plc    103 notes to the financial statements
26 b interest rate management
an analysis of financial assets and liabilities exposed to interest rate risk is set out below
i financial assets
2007 2006
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 1850 –– 2179 ––
other financial assets 02 12 600 13 18 612
1852 12 2192 18
ii financial liabilities
2007 2006
weighted weighted
average fixed average fixed 
interest rate interest rate 
floating rate fixed rate paid floating rate fixed rate paid
£m £m  £m £m 
non recourse sterling loans 
related to pfi assets – 225 735 – 248 735
non recourse canadian dollar loans – 368 453 – 374 453
sterling loans 260 1205 570 650 1419 599
us dollar loans 1174 – – 1207 – –
other loans 29 48 800 87 55 800
1463 1846 1944 2096
excluded from the above analysis is £164m of amounts payable under finance leases which are subject to fixed rates of interest
2006 – £198m
iii interest rate sensitivity
the sensitivity analyses below 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 2007 of
£06m 2006 – £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 £17m 2006 – £21m mainly due to the movement in the fair value of derivative financial
instruments held as cash flow hedges 104 serco group plc notes to the financial statements
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 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
ondemand between between 
or within one and two and after
one year two years five years five 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
ondemand between between 
or within one and two and after
one year two years five years five years total
£m £m £m £m £m
loans 579 120 2157 1184 4040
loan interest 237 197 315 218 967
finance leases 95 66 54 12 227
derivative financial liabilities 61 25 66 29 181
trade creditors 1276 – – – 1276
at 31 december 2006 2248 408 2592 1443 6691
26 d capital risk management
the group manages capital to ensure that it has available resources and access to markets to ensure the continued growth of the
group and to meet immediate shortterm borrowing requirements 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 appropriate capital structure that complies with loan covenants and other measures access to capital takes many forms and
includes but is not exhaustive to equity markets debt capital markets and bank markets
during 2007 the group maintained sufficient debt facilities which 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 risk 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
£50m increase 2006 – £63m 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 group plc    105 notes to the financial statements
27 derivative financial instruments 
derivative financial instruments total a net liability of £106m 2006 – £248m comprising noncurrent assets of £12m 2006 – nil
current assets of £15m 2006 – nil current liabilities of £21m 2006 – £106m and noncurrent liabilities of £112m 2006 – £142m
movement movement movement in 
in fair in fair fair value of cash flow cash flow
1 january value of cash value of fair nondesignated hedges hedges 31 december
2007 flow hedges value hedges hedges disposed of created 2007
£m £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 fair value hedges relates to the maturing of currency swaps and a forward foreign exchange contract
see note 27a the movement in the fair value of cash flow hedges includes an amount of £34m relating to the maturing of a
currency swap see note 27 a
movement movement movement in 
in fair in fair fair value of cash flow cash flow
1 january value of cash value of fair nondesignated hedges hedges 31 december
2006 flow hedges value hedges hedges disposed of created 2006
£m £m £m £m £m £m £m
currency swaps 47 53 14 – – – 114
forward foreign exchange contracts 58 21 10 02 – – 91
interest rate swaps 247 76 – 08 165 23 21
commodity futures contracts – 22 – – – – 22
352 20 24 06 165 23 248
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 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
forward foreign exchange contracts comprise an asset of £08m a current liability of £14m and a noncurrent liability of £37m
forward
foreign commodity
currency exchange interest futures 
swaps contracts rate swaps contracts total
at 31 december 2006 £m £m £m £m £m
on demand or within one year 51 45 04 06 106
between one and two years 03 11 03 04 21
between two and five years 09 24 08 12 53
after five years 51 11 06 – 68
114 91 21 22 248
the fair value of the group’s derivative financial instruments is based on quoted market prices for equivalent instruments at the
balance sheet date 106 serco group plc notes to the financial statements
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 swaps in the management of its exchange rate exposures the instruments purchased 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 contracts to which the group is
committed is £501m 2006 – £773m
these arrangements are mainly designed to address significant exchange exposures for the next 18 months
cash flow hedges
at 31 december 2007 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
2007 2006
receivable receivable
notional usd payable gbp notional usd payable gbp
amount interest rate interest rate amount interest rate interest rate
maturity usdm   usdm  
december 2007 – – – 390 68 76
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
£156m 2006 – £260m
all currency derivatives designated as cash flow hedges are highly effective and the fair value movement of £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 a loss of
£14m had been recognised in the hedging reserve and this is recycled to the income statement as the hedged transaction affects
the income statement a loss of £03m 2006 – loss of £05m has been included in the income statement and the remaining loss of
£06m is expected to be recognised in the income statement in 2008
fair value hedges
during 2007 currency swaps and a forward foreign exchange contract designated as fair value hedges matured the currency
swaps had a notional amount of us dollar 31m receiving a fixed interest rate of 681 and paying a floating rate based on libor on
the notional amount the swaps were hedging the exposure to changes in the fair value of the group’s us dollar denominated private
placement loans the forward foreign exchange contract with a notional amount of us dollar 15m was hedging the foreign exchange
exposure on the final repayment of the group’s us dollar denominated private placement loans a gain of £43m 2006 – £24m has
been recognised in the income statement in respect of the forward foreign exchange contract and currency swaps offset by a loss of
£40m 2006 – £25m arising on the maturity of the private placement loan
27 b interest rate swaps
cash flow hedges
the group uses an interest rate swap to manage its exposure to interest rate risk on its non recourse loan related to pfi assets by
swapping this loan from floating to fixed rates the profile of the interest rate swap is as follows
at 31 december 2007 and 31 december 2006
notional payable gbp receivable gbp 
value interest rate interest rate
maturity £m  
june 2015 234 73 libor
apart from a small portion the swap is designated and highly effective as a cash flow hedge and the fair value movement of £01m
has been deferred as a credit in equity £26000 2006 – £01m has been recognised as a gain in the income statement within
investment income and finance cost an amount of £01m 2006 – £38m has been offset against hedged interest payments made in
the period serco group plc    107 notes to the financial statements
27 c 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
variable quantity 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 the commodity futures contracts are designated as cash flow hedges and are highly
effective and the fair value movement of £42m has been deferred as a credit in equity no amounts have been recognised in the
income statement
27 d hedge of net investment in foreign entity
the group has us dollar denominated borrowings some of which it has designated as a hedge of part of the net investment in its
subsidiaries in the us the carrying value of the designated borrowings was £246m 2006 – £250m the foreign exchange gain of
£04m 2006 – £35m on translation of the borrowings into sterling has been recognised within the group’s hedging and translation
reserve the hedge is highly effective so no amounts have been recognised in the income statement
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 2007
including the proportionate share of joint ventures was £750m 2006 – £647m
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 the 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 all of which do not relate to any specific contract any liabilities arising are recognised in full 108 serco group plc notes to the financial statements
28 a defined benefit schemes continued
the assets and liabilities of the schemes at 31 december are
virtually not certain non
certain costs costs 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 surplus – 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
virtually not certain non
certain costs costs contract
reimbursed reimbursed specific total
year ended 31 december 2006 £m £m £m £m
scheme assets at fair value
equities 1640 2403 3077 7120
bonds 386 328 1041 1755
gilts – 105 1676 1781
property 134 234 124 492
cash and other 43 158 276 477
annuity policies – 04 239 243
fair value of scheme assets 2203 3232 6433 11868
present value of scheme liabilities 2879 3750 8022 14651
net amount recognised 676 518 1589 2783
members’ share of deficit – 48 11 59
franchise adjustment – 231 – 231
net pension liability 676 239 1578 2493
related assets
intangible assets note 14 – 206 – 206
trade and other receivables note 20 676 – – 676
676 206 – 882
liabilities in relation to unfunded schemes included above amount to £381m 2006 – £362m serco group plc    109 notes to the financial statements
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 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 non
certain costs costs 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 costs – 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 and losses 112 158 338 608
actuarial gains and losses 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 – 76 352 428 110 serco group plc notes to the financial statements
28 a defined benefit schemes continued
virtually not certain non
certain costs costs contract
reimbursed reimbursed specific total
year ended 31 december 2006 £m £m £m £m
recognised in the consolidated income statement
current service cost  employer 94 133 208 435
past service cost – – 13 13
reimbursed to employer 94 – – 94
recognised in arriving at operating profit – 133 221 354
expected return on scheme assets  employer 128 119 319 566
interest on franchise adjustment – 19 – 19
interest cost on scheme liabilities  employer 136 118 358 612
reimbursed to employer 08 – – 08
finance costs – 20 39 19
included within the sorie
actual return on scheme assets 212 377 498 1087
less expected return on scheme assets 128 172 329 629
84 205 169 458
other actuarial gains and losses 102 150 79 331
actuarial gains and losses recognised in the sorie 186 355 248 789
change in franchise adjustment – 241 – 241
change in members’ share – 104 03 107
reimbursed to employer 186 – – 186
actuarial gains and losses on reimbursable rights 186 345 03 534
total pension cost recognised in the sorie – 10 245 255
cumulative actuarial gains recognised in equity since 1 january 2004 are £291m 2006 – losses £137m
changes in the fair value of plan liabilities are analysed as follows
virtually not certain non
certain costs costs contract
reimbursed reimbursed specific total
£m £m £m £m
at 1 january 2006 2803 3077 7591 13471
arising on acquisition – 542 79 621
current service cost – employer 94 133 208 435
current service cost – employee – 57 06 63
past service cost – – 13 13
plan participants’ contributions 08 06 50 64
interest cost – employer 136 118 358 612
interest cost – employee – 46 09 55
benefits paid 60 79 206 345
actuarial gains and losses 102 150 79 331
foreign currency differences – – 07 07
at 31 december 2006 2879 3750 8022 14651
arising on curtailment – – 08 08
current service cost – employer 99 153 212 464
current service cost – employee – 59 07 66
past service cost – 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 31 december 2007 2966 3917 8126 15009 serco group plc    111 notes to the financial statements
28 a defined benefit schemes continued
changes in the fair value of plan assets are analysed as follows
virtually not certain non
certain costs costs contract
reimbursed reimbursed specific total
£m £m £m £m
at 1 january 2006 1954 2399 5574 9927
arising on acquisition – 369 88 457
expected return on plan assets  employer 128 119 319 566
expected return on plan assets  employee – 53 10 63
employer contributions 89 120 413 622
contributions by employees 08 46 55 109
benefits paid 60 79 195 334
actuarial gains and losses 84 205 169 458
at 31 december 2006 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
employer contributions for non contract specific schemes in 2007 include a £51m special contribution paid in january 2007 
a special contribution of £19m was paid in december 2006
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
2007 2006 2005 2004
experience adjustments arising on scheme assets
amount £m 14 458 1036 102
percentage of scheme assets 0 4 10 1
experience adjustments arising on scheme liabilities
amount £m 51 131 118 64
percentage of the present value of scheme liabilities 0 1 1 1
fair value of scheme assets £m 13428 11868 9927 7765
present value of scheme liabilities £m 15009 14651 13471 10555
deficit £m 1581 2783 3544 2790
the normal contributions expected to be paid during the financial year ended 31 december 2008 are £543m 112 serco group plc notes to the financial statements
28 a defined benefit schemes continued
2007 2006
 
main assumptions
rate of salary increases 300 – 470 300 – 440
rate of increase in pensions in payment 320 290
rate of increase in deferred pensions 320 290
inflation assumption 320 290
discount rate 570 520
expected rates of return on scheme assets
equities 795 795
bonds except ldi 570 520
ldi 470 –
gilts 450 450
property 575 575
cash and other 550 500
annuity policies 570 520
2007 2006
years years
postretirement mortality
current pensioners at 65 – male 203 202
current pensioners at 65 – female 231 230
future pensioners at 65 – male 216 215
future pensioners at 65 – female 243 243
for some of the smaller schemes allowance for expected future improvements in life expectancy has been made by reducing the
discount rate by 025 2006 – 020 per annum from the rate shown above
28 b defined contribution schemes
the group paid employer contributions of £261m 2006 – £204m 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 group plc    113 notes to the financial statements
29 provisions
employee 2007 employee 2006
related other total related other total
£m £m £m £m £m £m
at 1 january 73 150 223 77 186 263
reclassification from creditors ––– 07 – 07
arising from acquisitions – 04 04 –– –
charged to income statement 19 – 19 26 47 73
released to income statement – 52 52 20 18 38
utilised during the year 04 06 10 15 65 80
exchange differences 02 – 02 02 – 02
at 31 december 90 96 186 73 150 223
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
other provisions include amounts relating to property contracts and restructuring
30 share capital
2007 2006
number number
£m millions £m millions
authorised
550000000 2006 – 550000000 ordinary shares of 2p each 110 5500 110 5500
issued and fully paid
476295589 2006 – 468231512 ordinary shares of 2p each at 1 january 95 4763 94 4682
issued on the exercise of share options 02 87 01 81
485051557 2006 – 476295589 ordinary shares of 2p each at 
31 december 97 4850 95 4763
the company has one class of ordinary shares which carry no right to fixed income
during the year 8755968 2006 – 8064077 ordinary shares of 2p each were allotted to the holders of options or their personal
representatives using newly listed shares
31 share premium account
2007 2006
£m £m
at 1 january 2835 2695
premium on shares issued 158 140
at 31 december 2993 2835 114 serco group plc notes to the financial statements
32 reserves
retained earnings
2007 2006
£m £m
at 1 january 1966 1328
dividends paid note 11 179 145
profit for the year attributable to equity holders of the parent 819 783
at 31 december 2606 1966
other reserves 
retirement hedging
benefit sharebased own and
obligations payment shares translation
reserve reserve reserve reserve total
£m £m £m £m £m
at 1 january 2006 1390 166 164 151 1539
net actuarial gain on defined benefit pension schemes 789 – – – 789
actuarial loss on reimbursable rights 534 – – – 534
credit in relation to sharebased payment expense – 48 – – 48
net exchange loss on translation of foreign operations – – – 123 123
amounts transferred to income statement in relation to
sale of pfi investments – – – 90 90
fair value gain on cash flow hedges during the year – – – 22 22
tax charge on cash flow hedges – – – 50 50
tax chargecredit on items taken directly to equity 60 41 – 01 20
at 31 december 2006 1195 255 164 213 1317
at 1 january 2007 1195 255 164 213 1317
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
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 31 december 2007 902 346 151 18 725
 in 2007 these amounts represent £115m of tax charge taken directly to equity in the sorie 2006  £70m tax charge
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 the esop to satisfy options under the group’s share options schemes at 31 december 2007 the
esop held 4849759 2006 – 5250152 shares equal to 10 of the current allotted share capital 2006 – 11 the market value
of shares held by the esop as at 31 december 2007 was £22211896 2006 – £20055581
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 serco group plc    115 notes to the financial statements
33 notes to the consolidated cash flow statement
reconciliation of operating profit to net cash inflow from operating activities
2007 2006
£m £m
operating profit for the year 1334 1252
adjustments for
sharebased payment expense 50 48
depreciation of property plant and equipment 302 300
amortisation of intangible assets 232 162
loss on disposal of property plant and equipment 13 11
profit on disposal of joint ventures 07 –
gain on derivatives 11 –
gain on sale of pfi investments – 114
operating cash inflow before movements in working capital 1913 1659
decreaseincrease in inventories 59 139
increasedecrease in receivables 1014 107
increase in payables 1086 218
movement in provisions 43 45
special contribution to defined benefit pension scheme note 28 510 190
cash generated by operations before pfi debtor movement 1491 1610
movement on pfi debtor 15 174
cash generated by operations after pfi debtor movement 1506 1784
tax paid 165 189
net cash inflow from operating activities 1341 1595
additions to fixtures and equipment during the year amounting to £42m 2006 – £23m were financed by new finance leases
analysis of net debt
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
at 1 at 31
january acquisitions exchange non cash december
2006 cash flow disposals differences movements 2006
£m £m £m £m £m £m
cash and cash equivalents 2407 364 182 46 – 2179
non recourse loans related to pfi assets 2782 197 2423 – 86 248
other non recourse loans 710 56 – 56 224 374
other loans 4603 940 – 181 64 3418
obligations under finance leases 264 86 – 03 23 198
5952 915 2605 194 179 2059
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
non cash movements in 2006 primarily relate to a joint venture debt certain terms of this debt were renegotiated in 2006 and this
allows us to offset a related debtor and the non recourse debt in our accounts thereby reflecting the economic reality of the contract 116 serco group plc notes to the financial statements
34 capital and other commitments
2007 2006
£m £m
capital expenditure contracted but not provided 20 16
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable
operating leases which fall due as follows
2007 2006
£m £m
within one year 970 903
between one and five years 2581 2507
after five years 1387 1731
4938 5141
future minimum rentals receivable under noncancellable operating leases where the group is the lessor are as follows
2007 2006
£m £m
within one year 01 02
between one and five years 06 06
after five years 02 03
09 11
35 sharebased payment expense
the group recognised the following expenses related to equitysettled sharebased payment transactions
2007 2006
£m £m
executive option plan 09 17
long term incentive scheme and plan 37 15
sharesave 2004 04 16
50 48
executive option plan eop
options granted under the eop may be exercised after the third anniversary of grant dependant 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 10 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
2007 2006
weighted weighted
average average
number of exercise number of exercise
options price options price
’000 £ ’000 £
outstanding at 1 january 16530 242 24695 222
granted during the year 443 439 565 339
exercised during the year 2991 220 7554 183
lapsed during the year 258 283 1176 231
outstanding at 31 december 13724 253 16530 242
11939768 2006 – 13577169 of these options were exercisable at the end of the year
the options outstanding at 31 december 2007 had a weighted average contractual life of 448 years 2006 – 555 years
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 group plc    117 notes to the financial statements
35 sharebased payment expense continued
the inputs into the binomial lattice model for options granted during the year are
2007 2006
weighted average share price 475p 304p
weighted average exercise price 445p 339p
expected volatility 337 398
expected life 5 years 5 years
risk free rate 51 48
expected dividends 08 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 nominal 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 10 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
2007 2006
weighted weighted
average average
number of exercise number of exercise
options price options price
’000 £ ’000 £
outstanding at 1 january 4040 nil 2578 nil
granted during the year 3055 nil 2475 nil
exercised during the year 33 nil 335 nil
lapsed during the year 22 nil 678 nil
outstanding at 31 december 7040 nil 4040 nil
1529440 2006 – 1051758 of these options were exercisable at the end of the year
the options outstanding at 31 december 2007 had a weighted average contractual life of 833 years 2006 – 835 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
2007 2006
weighted average share price 425p 314p
weighted average exercise price nil nil 
expected volatility 214 to 221 236 to 270
expected life 3 years 3 years
risk free rate 47 to 55 48 to 50
expected dividends 08 08
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 118 serco group plc notes to the financial statements
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
2007 2006
weighted weighted
average average
number of exercise number of exercise
options price options price
’000 £ ’000 £
outstanding at 1 january 6274 172 7057 172
exercised during the year 6094 172 175 172
lapsed during the year 110 172 608 172
outstanding at 31 december 70 172 6274 172
the options outstanding at 31 december 2007 had a weighted average contractual life of nil years 2006 – 080 years options were
valued using the black scholes model as this model reflects the fact that the options are exercisable only for a short period of six
months following their vesting an expected life of three years and three months is the mid point between the vesting and expiry
dates the model used the following assumptions when the options were granted in 2004
weighted average share price 260p
weighted average exercise price 172p
expected volatility 476
expected life 325 years
risk free rate 47
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 group plc    119 notes to the financial statements
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
2007 2006
£m £m
sales of goods and services – 09
royalties and management fees receivable 12 10
dividends receivable 369 296
381 315
the following receivable balances relating to joint ventures were included in the consolidated balance sheet
2007 2006
£m £m
current
loans 17 25
2007 2006
£m £m
noncurrent
loans 06 01
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 executive committee including executive directors who are 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’
2007 2006
£m £m
shortterm employee benefits 38 39
postemployment benefits 07 05 
sharebased payment expense 19 17
64 61
 the shortterm employment benefits include performance bonuses earned under the period under review but not paid in the financial year 120 serco group plc notes to the financial statements
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 2007 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 2007 2006
united kingdom
serco limited 100 100
sercodenholm limited 90 90
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
serco manchester leisure limited 100 100
serco geografix limited 100 100
kilmarnock prison 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 railway pty limited 100 100
serco maps pty limited 100 100
serco traffic camera services pty limited 100 –
china serco group consultants shanghai limited 100 100
hong kong serco group hong kong limited 100 100
north america
canada serco facilities management inc 100 100
serco des inc 100 100
us serco inc 100 100
serco management services inc tennessee 100 100 serco group plc    121 notes to the financial statements
37 list of principal undertakings continued
joint venture undertakings 2007 2006
united kingdom
serco gulf engineering limited 50 50
awe management limited 33 33
merseyrail electrics 2002 limited 50 50
northern rail 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 –
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 holdings pty 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 2007 group companies had branches in uae bahrain south africa oman luxembourg and gibraltar
all the principal subsidiaries of the 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 £42m
2006 – £38m the actual commitment outstanding at 31 december 2007 was £19m 2006 – £16m
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 122 serco group plc uk gaap directors’ responsibilities
uk gaap directors’ responsibilities – company
directors’ responsibilities
company law requires the directors to prepare accounts and notes for each financial
year which give a true and fair view of the state of affairs of the company as at the end
of the financial year and of the profit and loss of the company for that period in
preparing those accounts and notes the directors are required to
• select suitable accounting policies and apply them consistently
• make judgements and estimates that are reasonable and prudent
• state whether applicable accounting standards have been followed
the directors are responsible for ensuring proper accounting records are kept which
disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the accounts and notes comply with the companies act
1985 they are also responsible for the company’s system of internal control for
safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities
approved by the board of directors and signed on its behalf by
joanne roberts
secretary
serco house
16 bartley wood business park
bartley way
hook
hampshire
rg27 9uy
27 february 2008 serco group plc    123 uk gaap audit report
uk gaap audit report – parent company
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 judgments made
by the directors in the preparation of the
parent company financial statements and
of whether the accounting policies are
appropriate to the company’s
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 company’s affairs as at 31
december 2007
• 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  touche llp
chartered accountants and registered
auditors 
london
27 february 2008
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 2007
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 2007
and on the information in the directors’
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 principles 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 124 serco group plc uk gaap company balance sheet
2007 2006
note £m £m
fixed assets
investments in subsidiary undertakings 3 7926 5962
7926 5962
current assets
amounts owed by subsidiary companies due after more than one year 1328 1851
debtors amounts due within one year 4 429 585
debtors amounts due after more than one year 4 86 96
derivative financial instruments 7 07 –
cash at bank and in hand 362 1133
2212 3665
creditors amounts falling due within one year
loans 6 – 392
amounts owed to subsidiary companies 1330 27
trade creditors 02 01
other creditors including taxation and social security 5 24 20
derivative financial instruments 7 16 91
accruals and deferred income 105 170
1477 701
net current assets 735 2964
total assets less current liabilities 8661 8926
creditors amounts falling due after more than one year 6 2588 2808
amounts owed to subsidiary companies 1465 1831
derivative financial instruments 7 97 109
net assets 4511 4178
capital and reserves
called up share capital 9 97 95
share premium account 10 2993 2835
capital redemption reserve 01 01
sharebased payment reserve 11 217 168
hedging and translation reserve 12 62 95
profit and loss account 13 1265 1174
equity shareholders’ funds 4511 4178
the financial statements were approved by the board of directors on 27 february 2008 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
company balance sheet
at 31 december 2007 serco group plc    125 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
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 payments to certain employees and operates an inland revenue approved 
save as you earn 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
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
• a hedge of 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
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
notes to the company financial statements 126 serco group plc notes to the company financial statements
1 accounting policies continued
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 2006 – £10000 has been borne by another group company
3 investments held as fixed assets
£m
shares in subsidiary companies at cost
at 1 january 2006 7582
options over parent’s shares awarded to employees of subsidiaries 36
additions 859
impairment of investments 07
disposals 2508
at 31 december 2006 5962
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 31 december 2007 7926
on 16 may 2007 the company acquired 100 of cornwell management consultants plc
on 31 december 2007 the company acquired four additional shares in serco holdings limited for £185m following the
capitalisation of long term 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 investments limited 100
cornwell management consultants plc 100
serco group hk limited 50 serco group plc    127 notes to the company financial statements
4 debtors
2007 2006
£m £m
amounts due within one year
amounts owed by subsidiary companies 155 213
corporation tax recoverable 249 372
other debtors 25 –
429 585
amounts due after more than one year
other debtors 37 42
deferred tax asset note 8 49 54
86 96
515 681
5 other creditors including taxation and social security
2007 2006
£m £m
other creditors 24 20
6 creditors amounts falling due after more than one year
2007 2006
£m £m
loans 2588 3200
less amounts included in creditors falling due within one year  loans – 392
amounts falling due after more than one year 2588 2808
loans
within one year or on demand – 392
between one and two years 1410 –
between two and five years 471 1877
after five years 707 931
2588 3200
7 derivative financial instruments
2007 2006
assets liabilities assets liabilities
£m £m £m £m
currency swaps – 63 – 114
forward foreign exchange contracts 07 50 – 86
07 113 – 200
analysed as
noncurrent 07 97 – 109
current – 16 – 91
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 128 serco group plc notes to the company financial statements
8 deferred tax asset
2007 2006
£m £m
shortterm timing difference 49 54
the movement in the deferred tax asset during the year was as follows
2007 2006
£m £m
at 1 january 54 29
credited to income statement 07 15
items taken directly to equity 12 10
at 31 december 49 54
9 called up share capital
2007 2006
number number
£m millions £m millions
authorised
550000000 2006 – 550000000 ordinary shares of 2p each 110 5500 110 5500
issued and fully paid
476295589 2006 – 468231512 ordinary shares of 2p each at 1 january 95 4763 94 4682
issued on the exercise of share options 02 87 01 81
485051557 2006 – 476295589 ordinary shares of 2p each at 
31 december 97 4850 95 4763
the company has one class of ordinary shares which carry no right to fixed income
during the year 8755968 2006 – 8064077 ordinary shares of 2p each were allotted to the holders of options or their personal
representatives using newly listed shares
10 share premium account
2007 2006
£m £m
at 1 january 2835 2695
premium on shares issued 158 140
at 31 december 2993 2835
11 sharebased payment reserve
2007 2006
£m £m
at 1 january 168 125
options over parent’s shares awarded to employees of subsidiaries 31 36
sharebased payment expense 18 12
tax charge on items taken directly to equity – 05
at 31 december 217 168
details of the sharebased payment disclosures are set out in note 35 of the group’s consolidated financial statements serco group plc    129 notes to the company financial statements
12 hedging and translation reserve
2007 2006
£m £m
at 1 january 95 60
fair value gainloss on cash flow hedges during the period 45 50
tax chargecredit on items taken directly to equity 12 15
at 31 december 62 95
13 profit and loss account
2007 2006
£m £m
at 1 january 1174 1050
profit for the year 270 269
equity dividends 179 145
at 31 december 1265 1174
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 overdrafts and bonding facilities and other
financial commitments of its subsidiaries the total commitment outstanding as at 31 december 2007 was £166m 2006 – £174m
the company has also guaranteed overdrafts finance leases and bonding facilities of its joint ventures up to a maximum value of
£42m 2006 – £38m the actual commitment outstanding at 31 december 2007 was £19m 2006 – £16m
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 130 serco group plc shareholder information
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
administrative enquiries about the holding
of serco group plc shares and enquiries
in relation to the serco dividend re
investment plan drip should be
directed to
computershare investor services plc
po box 82
the pavilions
bridgwater road
bristol bs99 7nh
shareholder helpline 
44 0870 873 5839
wwwcomputersharecom
dividend reinvestment plan
you can elect to receive future dividends
as shares rather than cash by
participating in the drip for further
information or to register please contact
computershare on the number provided
above for a copy of the terms and
conditions booklet and mandate form
dividends paid direct to your
bank account
• avoids 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 investor centre
via the computershare website or
contact computershare on the number
provided above
global payment services
for overseas shareholders in certain
countries computershare offers a global
payment service this service offers
shareholders the ability to have their
dividend converted into their local
currency and sent electronically to their
local bank account for a fixed fee of £5
to sign up for this service you need to
register with computershare’s investor
centre service at
wwwukcomputersharecominvestor
electronic communication
serco is very proud to participate in etree
etree is a service through which you can
register to receive communications about
serco electronically by signing up via
etree for electronic communications you
will receive emails alerting you to
communications as they become
available as part of the programme serco
will also donate a native sapling per
participating shareholder to the
woodland trust to participate in etree
you will need your shareholder reference
number and register at
wwwetreeukcomserco serco group plc    131 shareholder information
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 shareholdersshare account members
telephoneinternet buy or sell shares over the telephone or internet through
computershare investor services for telephone purchases or sales call 
0870 873 5839 between 800am and 430pm monday to friday for internet
purchases or sales log on to wwwcomputersharecomdealinguk
postal cazenove  co limited 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 sharedealing service 
20 moorgate london ec2r 6da united kingdom tel 44 0 20 7155 5155
• for non eu shareholders
currently non eu shareholders may only buy or sell shares through the cazenove
postal service see above
shareholder profile
the range and size of ordinary shareholding as at 31 december 2007 is set out below
range of shareholdings no of shareholders  no of shares 
1  1000 4120 4450 1890947 039
1001 – 5000 3553 3838 8042396 166
5001 – 10000 591 638 4189022 086
10001 – 100000 641 692 20453459 422
100001 – 500000 205 221 49397220 1018
500001 – 1000000 49 053 35394769 730
1000001 – 10000000 89 096 208598028 4301
10000001 and above 11 012 157083776 3238
total 9259 10000 485049617 10000 2008
27 february preliminary results announcement
5 march exdividend date
7 march record date
29 april last date for receiptrevocation of drip dividend mandates 
13 may interim management statement
13 may annual general meeting
21 may final dividend pay date
27 august interim results announcement
october interim dividend pay date
november interim management statement
31 december financial year end
financial calendar
financial calendar 132 serco group plc designed by rare corporate design london wwwrarecorporatecouk
artworked and printed by turners wwwturnersmpscouk
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 accredited virgin tcf fibre and
10 virgin fibre from sustainable forests
mixed sources
product group from wellmanaged forests
controlled sources and recycled wood or fibre
wwwfscorg cert no sgscoc003161
©1996 forest stewardship council
contents
1 introduction
4 highlights
6 our business
8 chairman’s statement
business review
10 chief executive’s statement
13 governing principles 
14 serco strategy
16 operating performance
28 market development
30 contractual relationships
31 resources
32 finance review
38 principal risks and uncertainties
43 directors secretary and advisors
44 corporate governance report
52 directors’ report
54 directors’ profiles
56 directors’ responsibilities
57 remuneration report
71 independent auditors’ report
financial statements
73 consolidated income statement
73 consolidated statement of
recognised income and expense
74 consolidated balance sheet
75 consolidated cash flow statement
76 notes to the 
financial statements
122 serco group plc 
company financial statements
130 shareholder information
132 financial calendar  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
improving service increasing value
annual review  accounts 2007
bringing service to life
serco group plc annual review and accounts 2007 improving service increasing value
annual review  summary financial statement 2007
bringing service to life
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 designed by rare corporate design london wwwrarecorporatecouk
artworked and printed by turners wwwturnersmpscouk
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 accredited virgin tcf fibre and
10 virgin fibre from sustainable forests
mixed sources
product group from wellmanaged forests
controlled sources and recycled wood or fibre
wwwfscorg cert no sgscoc003161
©1996 forest stewardship council
contents
1 introduction
4 highlights
6 our business
8 chairman’s statement
10 chief executive’s statement
13 governing principles
14 serco’s strategy
16 operating performance
28 market development
30 finance review
36 summary financial statement
47 directors’ profiles
49 consolidated income statement
49 consolidated statement of
recognised income and expense
50 consolidated balance sheet
51 consolidated cash flow statement
52 independent auditors’ statement
53 shareholder information
55 financial calendar our customers – primarily national and local
governments – face profound challenges they
must improve vital services despite intense
budget pressures they must adapt to citizens
rising expectations and make services flexible
and responsive they must meet sustainability
targets and address the imperatives of security
and safety
in order to meet these challenges governments
are turning to private sector partners who can
help them transform services and reduce costs
major private companies also face issues of cost
efficiency and quality meaning they too can
benefit from our work
this creates strong and growing demand for
sercos expertise and we are ideally placed to
respond for more than 40 years we have built
up unrivalled capabilities and broadened our
business and addressable markets into sectors
ranging from air traffic control to running
scientific establishments
serco group plc    1 what serco offers
we can operate in a
broad range of sectors
because our core
product is peopleled
change management
we analyse a customer’s problems and
produce a bespoke solution with the
improved management of people at its
heart 
we redesign organisations to remove
bureaucracy improve processes and
liberate people to deliver their best
we introduce technology and continue
to invest during the life of the contract
and – crucially – we instil our culture and
values our governing principles and
publicservice ethos focus us on delivering
the best for our customers our people
and the wider community
building longterm customer relationships
is fundamental to serco this means
meeting – and often exceeding – our
customers’ expectations we invest in
relationships by providing innovation and
continuous improvement we devolve
responsibility giving contract directors
the freedom to anticipate and respond
to customers’ changing requirements
the serco management system which
controls how we operate ensures that
these actions are also in the best interests
of serco and its shareholders
serco’s vision and strategy
our vision is to be the
leading service company
in our chosen markets 
‘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
our strategy for achieving this vision has
four elements
building 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 anotherther
maintaining high rebid and new win
rates our service excellence results in a
rebid win rate above 90 we also win
one in two new contracts reflecting our
ability to select only those opportunities
where we can differentiate ourselves
making strategic acquisitions while
we are primarily focused on organic
growth we make acquisitions to acquire
new skills and to enter new markets
where we see strong opportunities 
developing 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
1
2
3
2 serco group plc serco’s track record of success
our emphasis on bringing
service to life for
customers leads directly
to our financial success
and we have grown
quickly in recent years
since we listed in 1988 we have
consistently delivered doubledigit revenue
growth we have been able to leverage
this scale and manage our contract
portfolio driving our margins higher at the
same time we have delivered consistent
improvements in our free cash flow
our success is also recognised by others
we are frequently voted the uk’s leading
support services company in
management today’s most admired
company awards 
the future
we are optimistic about
our future our markets
continue to grow strongly
and offer substantial
opportunities both in the
uk and increasingly
overseas we also have
stronger capabilities
across more sectors to
meet our customers’
needs than ever before
serco’s substantial order book contributes
to excellent visibility of future revenues
and our pipeline of identified opportunities
reinforces our confidence 
the success we have achieved to date
underpins our confidence of delivering
doubledigit revenue growth for the
foreseeable future the quality of our
opportunities – and our ongoing portfolio
management and efficiency improvement
– will also allow us to further increase our
margins
1 support services at norfolk and norwich university hospital
2 the ghan transcontinental service in australia
3 court escort service in london
4 multiactivity contract at rnas yeovilton
5 maintenance at the atomic weapons establishment
6 running education services in walsall
4
5 6
serco group plc    3 4 serco group plc highlights
highlights
revenue
2006 £2548m 
£2811m 
103
revenue 
£m 
adjusted profit before tax
£m 
dividend per share 
pence
adjusted earnings per share
pence 
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
1556 1637 2260 2548 2811 63 69 87 105 123 1086 1128 1341 1592 1857 234 263 297 360 425
2003 adjusted profit before tax and adjusted earnings per share are estimated under ifrs serco group plc    5 highlights
adjusted profit before tax
2006 £1050m 
£1232m
173
profit before tax
2006 £1074m 
£1146m
67
adjusted earnings per share
2006 1592p 
1857p 
166
earnings per share
2006 1662p 
1698p
22
group free cash flow
2006 £854m 
£976m
143
dividend per share
2006 360p 
425p
181
success across our markets
• signed £36bn of contracts and appointed preferred bidder for
a further £10bn
• record level of international awards including dubai metro
over £400m us postal service 260m logcap iv
225m and borallon correctional centre aus100m
• significant progress in other new markets including glasgow
city council strategic partnership £265m in local authority
market and eborders £200m in homeland security
• excellent progress in existing markets including marine
services £750m in uk defence forth valley £450m in
uk integrated facilities management and yarl’s wood £85m in
uk home affairs
• maintained rebid win rate at more than 90 and continued to
win one in two new bids
strong margin and cash performance
• adjusted pbt margin up from 41 to 44
• group free cash flow increased by 143 to £976m
• strong balance sheet with group recourse net debt reduced
to £1379m
broad pipeline supports excellent visibility
• order book at new record of £147bn at 31 december 2007
• contracts valued at an additional £10bn at preferred bidder
stage
• visibility of 91 of planned revenue for 2008 76 for 2009
and 63 for 2010
• £27bn of further opportunities identified
growing markets and higher margins underpin positive outlook
• uk and international markets continue to generate increasing
opportunities
• confident of doubledigit revenue growth for the foreseeable
future
• guidance for adjusted pbt margin of 30 basis point increase
for both 2008 and 2009
note adjusted profit before tax adjusted pbt and adjusted earnings per share are before amortisation of acquired intangibles and the £114m gain on sale of pfi
investments in 2006 as shown on the face of the group’s income statement group free cash flow is from subsidiaries and joint venture dividends and is reconciled in
section 3 of the finance review
international success builds on uk strengths 6 serco group plc our business
revenue by geography 2007
2006
uk 75
£2811m
6
74
8
12
£2548m
europe 
middle east 8
asia pacific 6
north america 11
defence 26
transport 23
civil government 34
science 17
£2811m
25
25
34
16
£2548m
revenue by market 2007
2006
our business
we organise our business around dedicated market
expertise in a variety of sectors civil government
defence transport and science
revenue
£952m
88 
civil government
serco’s work in civil government
encompasses home affairs information
and communications technology ict
business process outsourcing education
and children’s services health integrated
facilities management and consulting
our home affairs work includes managing
prisons in the uk australia and germany
electronically monitoring offenders
developing 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
we use our ict skills and business
process knowledge to deliver better
faster and cheaper ict solutions to local
government schools and blue chip
private sector customers our integrated
facilities management business provides
environmental streetscene and other
direct services to councils and also works
with hospitals and private customers
our consulting capability raises awareness
of serco and enhances our reputation
with potential and existing customers by
providing highvalue advisory services serco group plc    7 our business
revenue
£655m
47
transport
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 in march 2008 we will be signing
the contract to operate and maintain the
dubai metro system which is planned to
be the largest driverless metro system in
the world this breakthrough contract
substantially increases serco’s transport
sector presence in the middle east
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
revenue
£721m
118 
defence
serco is a major provider 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 we are gaining critical
mass with strength in providing enterprise
management engineering logistics
economic cost analysis and human
resources services to the military in
particular the us army and us navy
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
revenue
£483m
199 
science
serco is a world 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 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 we do this
as part of awe management limited a
25year joint venture with lockheed
martin uk and british nuclear group
bng 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 chairman’s statement
i am delighted to report on another year of strong growth
the success we have achieved in 2007 underpins our
confidence in delivering doubledigit growth for the
foreseeable future
8 serco group plc chairman’s statement
kevin beeston chairman financial results
i am delighted to report on another year of
strong growth revenue grew by 103
to £2811m adjusted profit before tax
adjusted pbt rose by 173 to
£1232m and adjusted earnings per share
grew 166 to 1857p the adjusted pbt
margin increased from 41 to 44
benefiting from our management of the
contract portfolio and continued efficiency
improvements profit before tax rose by
67 to £1146m and earnings per share
were 22 higher at 1698p profit before
tax and earnings per share in 2006
included the benefit of the oneoff gain on
sale of our pfi investments
our cash performance continued to be
strong with group free cash flow
increasing 143 to £976m this
contributed to a reduction in group
recourse net debt of more than £34m to
£1379m the strength of our balance
sheet was further enhanced by the
decline in our net pension liabilities
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
302p per share representing an increase
on the 2006 final dividend of 184 and
bringing the total dividend for the year to
425p growth of 181 the final
dividend will be paid on 21 may 2008 to
shareholders on the register on
7 march 2008
board
there were a number of changes to the
composition of the board during the year
as announced on 31 august 2006 
i moved from executive chairman to
nonexecutive chairman on 1 september
2007 grant rumbles our chief operating
officer was appointed an executive
director on 3 july 2007
deanne julius retired on 29 october 2007
as a nonexecutive director and from her
post as senior independent director 
i would like to thank her for her considerable
contribution to our development and wish
her well baroness ford of cunninghame
was appointed the new senior independent
director from the same date
thomas corcoran joined serco as a non
executive director on 3 december 2007
thomas is a member of the remuneration
audit nomination and training and
development committees
managing our growth
one of serco’s great strengths is its long
term customer relationships we nurture
these by devolving responsibility to the
contract level giving our people the
freedom to anticipate and respond to
customers’ changing requirements 
this delivers excellent organic growth but
it also creates a need to make sure that
these actions are applied consistently and
in the best interests of serco and its
shareholders
over many years we have developed a
robust system of governance and internal
controls which we call the serco
management system it covers all areas
of our operations from finance through to
bidding for new contracts and we
continue to evolve it to ensure it keeps
pace with serco’s rapid development 
this allows us to operate in a devolved
manner while ensuring consistency and
an upward line of accountability and
control to the board the quality of these
processes is evident in our operational
and financial performance the right
balance between flexibility and control is
essential and maintaining this balance will
ensure a successful future for serco
growing markets and higher margins
underpin positive outlook
our markets continue to generate a broad
range of highquality opportunities for
serco both in the uk and internationally
the success we have achieved in 2007
underpins our confidence in delivering
doubledigit growth for the foreseeable
future at the same time our focus on
managing our contract portfolio enhancing
our efficiency and bidding selectively for
highervalue work will allow us to further
increase our margins and we expect a 30
basis point improvement in our adjusted
pbt margin in each of 2008 and 2009
i look forward to reporting to shareholders
on our progress in 2008
serco group plc    9 chairman’s statement
2003 2004 2005 2006 2007
47 56 74 85 98
group free cash flow
£m  10 serco group plc chief executive’s statement
chief executive’s statement
in 2007 we reaped the benefits of our strategy of increasing
value we won important contracts in existing markets
continued to build our position in new markets and were
awarded record levels of international business 
christopher hyman chief executive serco group plc    11 chief executive’s statement
in 2007 we reaped the benefits of our
strategy of increasing value we won
important contracts in existing markets
continued to build our position in new
markets and were awarded record levels
of international business 
we delivered another year of doubledigit
revenue growth enhanced our margins
further increased our free cash flow and
strengthened our balance sheet 
i am pleased to say that we maintained
our win rates at more than 90 for rebids
and one in two for new bids we signed
£36bn of contracts and were appointed
preferred bidder for further contracts
valued at around £1bn
highlights of our success in existing
markets included the substantial increase
in value of our royal navy marine services
contract to around £750m over 15 years
and the signing of the £450m 30year
contract to provide services to the new
nhs forth valley acute hospital 
the capabilities we acquired in 2005 with
itnet and rci enabled us to enter
exciting new markets two good
examples were homeland security where
as a key member of the trusted borders
consortium we were awarded a tenyear
home office contract to develop and
implement the ‘eborders’ project and
the local government strategic partnership
market where we won a contract with
glasgow city council worth £265m to
provide property information and
communication technology services
a record level of international awards was
also a key feature our performance in the
us was particularly strong with wins
including a renewed and significantly
increased contract with the us postal
service worth 260m a cost analysis
logistics planning and supply chain
consulting contract for the us army worth
225m and two contracts for the space
and naval warfare systems center to
assist with antiterrorism systems with a
total potential value of around 180m
elsewhere we also made significant
progress we were appointed preferred
bidder for a £400m contract to operate
and maintain the dubai metro a contract
we will be signing in march 2008 and in
australia we won the contract to run
borallon correctional centre worth
around aus100m over five years as well
as a fouryear safety camera contract in
victoria valued at aus90m
such successes demonstrate the growing
international demand for the services we
have developed within the uk market
appropriately the theme for this report is
‘increasing value’ in delivering essential
services we touch many people and our
challenge is to deliver increasing value to
them all – customers employees
investors and the communities in which
we operate this focus has been
consistent throughout our history and as
with so much in serco the starting point
is our customers and by extension the
citizens they serve given that the
expectations of citizens rise every day
increasing value means a continuous
improvement in quality
at the same time our customers expect
significant savings as noted elsewhere in
this report a study by the serco institute
shows that introducing competition into
public services delivers average cost
reductions of 20 and sometimes much
more 12 serco group plc chief executive’s statement
but there is more to increasing value than
just improving quality and cost our
customers are also asking us to manage
more and more complexity for them as
well as to support them with their broader
social objectives 
being a thriving valuesled company
creates value for employees our public
service ethos makes serco a rewarding
place to work helping us to attract and
retain the best people our growth
enables our people to take their careers 
in new directions
the quality of our people is reflected in
the awards we receive amongst these
for the fourth year in a row serco was
voted the uk’s most admired support
services company and this year was
ranked as the country’s fourth most
admired company overall these awards
conducted by management today have
become a benchmark for excellence
increasing value for our customers and
other stakeholders also increases value
for investors delivering highquality
services helps us to renew and expand
existing contracts and win work with new
customers our ability to address the
broader needs of our customers helps us
to establish a leadership position that also
drives our growth
our success in 2007 keeps us optimistic
about the future at the end of the year
our order book stood at a record £147bn
and we were preferred bidder on
contracts valued at £1bn giving us
excellent visibility of our revenue for the
next few years 
opening new markets in the uk and
overseas has also significantly increased
the breadth and depth of our pipeline of
opportunities which now stands at
£27bn the breadth gives us confidence
of achieving doubledigit growth for the
foreseeable future while the depth allows
us to select higher margin work enabling
us to deliver further margin improvement
this optimism is not limited to our
financial performance the strength of our
business our commercial knowhow and
the deep public services ethos which our
people bring to life every day mean that
we will continue to increase value for all 
of our stakeholders
2008
2009
2010
76
61
48 13 2
13 2
13 2 91
76
63
preferred bidder
order book
extensions and rebids
visibility of planned revenue
at 31 december 2007  serco group plc    13 governing principles
serco’s governing principles
all serco employees are expected to adhere to 
the highest standards in dealing with colleagues
customers suppliers or shareholders by setting
these standards and by supporting each other
we aim to get the best out of our people and
subsequently the best service for our customers
this is vital to our ongoing business
we foster an entrepreneurial culture
we are passionate about building innovative and successful businesses
this means we succeed by encouraging and generating new ideas we trust our people to deliver 
we embrace change and by taking measured risks encourage creative thinking
we enable our people to excel
our success comes from our commitment and energy to go the extra mile
this means we are responsible to each other and can expect support when we need it most 
we expect our people to achieve more by recognising and harnessing the power of individuals 
we value people for their knowledge ideas and potential to contribute
we deliver our promises
we do what we say we will do to meet expectations
this means we only promise what we can deliver if we make mistakes we put them right 
we are clear about what we need to achieve and we expect to make a fair profit
we build trust and respect
we build trust and respect by operating in a safe socially responsible consistent and 
honest manner
this means we never compromise on safety we listen we treat others as we would wish to be 
treated and challenge when we see something is wrong 14 serco group plc serco’s strategy
serco’s strategy has four key elements which bring
benefits to our customers and hence to our
shareholders the four elements are to
1 build a balanced portfolio of market facing
businesses
this allows us to select the best opportunities for growth to reduce our risk by avoiding concentration of
revenue in a small number of contracts and to share good practice and experience across the group
2 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
3 make strategic acquisitions to obtain new skills or
enter markets
organic growth has been the principal driver of serco’s success however we also make acquisitions to
bring in new skills which will be important for future growth or to enter new markets where we see strong
prospects
4 develop new models in existing and emerging
markets
we are constantly looking at new ways to deliver services in response to our customers’ changing needs
examples of how we do this include thorough collaboration between our divisions partnering with third
parties including the public private and voluntary sectors and the development of new frameworks such
as payment on outcomes serco group plc    15 serco’s strategy
we have grown strongly and consistently in the 
20 years since we listed 
by following our strategy we believe we will continue
to grow strongly since each of the four elements of
our strategy contributes to one or more of the
following outcomes
balanced 
portfolio
high
win rates
strategic
acquisitions
new 
models
• 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 allows us to enter new markets and
find new ways of delivering services to customers
• 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 16 serco group plc operating performance – civil government
civil government is our largest segment and includes
home affairs information technology and business
process outsourcing integrated facilities management
health education and children’s services consulting
and much of our work in the private sector 
2007 saw an increasing requirement for
technological content in these markets
as customers looked to procure more
sophisticated services segmental
revenue increased by 88 to £952m
representing 34 of group revenue
2006 34
home affairs
we had two notable successes with the
uk home office trusted borders a
consortium of which serco is a key
member signed a contract to develop
and implement the nation’s eborders
project an advanced border control and
management programme serco is
responsible for infrastructure and service
management the contract is valued at
around £200m to serco over ten years
we also won a contract to manage and
operate yarl’s wood immigration removal
centre the contract began in april 2007
for an initial three years with optional
extensions for up to eight years over the
full eight years the contract is valued at
around £85m
we continued to build our presence in the
australian home affairs market winning
contracts to manage and operate
borallon correctional centre and to
provide safety camera services borallon
near brisbane accommodates 500 male
prisoners this contract with the
queensland department of corrective
services is valued at around aus100m
over five years with the potential for a
further fiveyear extension the safety
camera contract is with the victoria
department of justice the fouryear
contract is valued at aus90m with the
potential for a threeyear extension
it and bpo services
in uk local government glasgow city
council approved the creation of a
partnership with serco to transform the
council’s land property and information
and communications technology ict
services the partnership will be worth
£265m to serco over ten years and will
also position us to support the council on
transformational projects to improve the
council’s efficiency and service delivery
the partnership is the first of its kind in
scotland and is expected to save the
council more than £70m 
we also secured a £30m tenyear
partnership with ealing council to provide
ict support and southwark council
selected serco to provide and support its
ict infrastructure in a fiveyear deal
valued at £26m west sussex county
council appointed us for an it partnership
to manage desktop services more
effectively and offer access to our wider it
and business process capabilities the
contract is valued at around £14m over
seven years west sussex is a new
customer for serco
we successfully rebid our contract with
regione lombardia one of the largest
local authorities in europe to provide
outsourced services for its it infrastructure
the initial contract is valued at around
£14m over six years with additional
services identified expected to expand this
some of the things we do
• border protection
• prisons management
• education and children’s services
• environmental services
• government portal management
• health management and hospital
support
• it and itenabled services
• management consultancy
civil government
revenue
£952m
88  serco group plc    17
providing resources to help
businesses bloom
businesslinkgov brings together business information from more than 600 
governmental and agency experts in one easytoaccess website by providing
the tools and resources which businesses really need such as grant forms and
annual leave calculators businesslink has become one of the key gateways
between government and the business community
serco won the contract to deliver the already successful businessgov programme
in 2005 we have worked to increase awareness of the programme improving
communication aligning with other major business initiatives across government
and coordinating channels to promote continuity of information to businesses
we are personalising services to the needs of individual businesses eliminating
duplication of information and promoting efficiency at the same time we are
making it easier for businesses to transact with government our enhancements
to delivery will reduce costs by more than £25m over the life of the contract
a key development has been to put in place systems to ensure that the
businesslink website is delivering tangible value to business a survey in 2007
showed a marked increase in the value delivered from c£2bn to £4bn this
translates into a saving of £100 for uk businesses for every £1 invested by the
programme the national audit office recognises the programme as an example
of best practice
operating performance – civil government 18 serco group plc operating performance – civil government
severn trent – one of the world’s largest
private water companies – awarded serco
a fiveyear it infrastructure framework
contract valued at around £40m
we will provide programme and project
management consulting technical
delivery it engineering and technology
refresh services
we continued to enhance our position as
the leader in the uk business support
market winning a contract with the south
west regional development agency to
provide the businesslink service for
cornwall devon and somerset
the contract is for 28 months and is
valued at around £15m
the us postal service engineering
organization appointed serco to provide
engineering technical project
management and it services the two
year contract has four twoyear options
and over the full ten years has a potential
value of 260m a sizeable increase over
our previous contract the latest contract
broadens our role to include management
services focused on enhancing
efficiencies quality assurance services
and testing of mail processing equipment
the us office of personnel management
awarded serco two indefinitedelivery
indefinitequantity idiq contracts under
the training management assistance
program these programs assist
government agencies in developing
workforce planning and management
strategies elearning and other training
solutions the contracts give serco the
opportunity to compete for a share of
500m of work over the next five years
integrated facilities management
our integrated facilities management
business had several notable successes
we signed a £450m 30year contract to
provide support to the new nhs forth
valley acute hospital drawing on our
healthcare experience to influence the
hospital’s design and thereby enhance
infection control innovations include
segregation of patient visitor and goods
traffic as well as the introduction of proven
robotic technology to support the
movement of goods around the hospital
site the contract will begin in 2010
we signed contracts to provide
operational management to the united
arab emirates university in al ain £70m
over ten years and to deliver property
management and support services to
state street bank £50m over five years
we were also awarded contracts to
provide support services to coca cola at
its london headquarters £10m over five
years and to volkswagen’s uk
headquarters under a twoyear rolling
contract valued at £35m per annum
mid suffolk and babergh district councils
awarded us a contract in a
groundbreaking shared services
partnership for waste and recycling
services the contract is for up to 21
years and is valued at around £80m
mid sussex district council also
appointed us to provide refuse recycling
and street cleaning services the contract
is for up to 21 years and is valued at
around £74m serco group plc    19 operating performance – civil government
education and children’s services
stokeontrent city council awarded us a
contract to transform their childrens
services the contract is valued at £5m
over three years with the potential for
substantial growth the contract is to lead
and manage all the council’s services for
education and children’s social care
consulting
over the past year we have been building
our consulting business with a focus on
supporting our clients in the transformation
of their businesses serco has many years
of experience in the delivery of public
services across a broad range of sectors
and we are now applying this experience
through three key parts of our
transformation proposition – policy and
strategy advice on transformation the
design and implementation of solutions
and ensuring that change is sustainable
and realises benefits through the effective
management of human capital
against this backdrop we developed the
business with the acquisition of cornwell
management consultants plc adding new
capabilities in information and knowledge
management while increasing our
capacity in project and programme
management and enterprise architecture
we also acquired er consultants limited
er as part of our building of capability in
the area of sustainable change er brings
experience and skills in leadership
development and organisation design and
development these are key issues for
many organisations and the acquisition
enhances our ability to help our current
customers and also to target new blue
chip customers in the commercial sector 
our consulting expertise resulted in our
selection for a number of important
frameworks in 2007 we were one of ten
firms chosen to provide consultancy to
uk government departments looking to
undertake transformational projects as
part of the fouryear £15bn catalist
framework serco was one of only two
suppliers included in all five categories of
the metropolitan police’s fouryear £200m
development services framework
we were one of ten suppliers selected for
the ministry of defence’s mod fouryear
£100m catalogue framework the main
route for the mod to acquire consultancy
services we also qualified as one of only
four providers of project and programme
management resources to the
department for environment food and
rural affairs the potential value of the
framework to the qualified suppliers is
£80m over four years 20 serco group plc operating performance – defence
revenue in defence increased by 118 to £721m
representing 26 of group revenue 2006 25
2007 was a year of strong organic growth in defence
supplemented by demand for our valueadded
services
united kingdom
we had a highly successful year in
winning new business in the uk defence
market primarily in support of the royal
navy and royal air force
the key win in the uk was a contract
with the mod to deliver marine services to
the royal navy the mod selected our
joint venture with denholm shipping and
infrastructure investors i
2
 for a 15year
private finance initiative pfi contract
valued at around £1bn of which serco’s
operating contract represents £750m
this is a sizeable increase on our
previous operating contract under which
we have provided marine services to the
royal navy since 1996
serco will manage operate and maintain
a fleet of around 110 vessels providing
services that enable the royal navy to
put to sea the joint venture will also
bring over 30 new vessels into service
during the early years of the contract
enhancing service flexibility and
responsiveness and helping to meet the
royal navy’s demanding operational
requirements serco chose i
2
in 2006 to
become its strategic partner for financing
and investment in pfis in this project i
2
will provide all the subordinated debt and
the largest proportion of the equity 49
serco retains 41 of the equity as well as
daytoday management of the joint
venture so as to implement the
successful transition of the project over
the first 18 months
the mod awarded us a contract to
manage the maintenance repair and
operation of the uk armed forces’ estate
facilities in gibraltar the contract is valued
at around £50m over five years with a
further two option years and the potential
for additional work we will also provide
military logistics workshops and marine
services support to the naval base and
other mod operations
the naval air command appointed serco
preferred bidder for a partnering contract
valued at around £7m per annum we will
provide aviation engineering and aircraft
support at two royal naval air stations
yeovilton and culdrose improving the
availability of aircraft and trained aircrew to
the fleet air arm at a time of considerable
operational pressure the work will build
on the operational support we already
provide to the royal navy’s aircraft
we were also awarded a contract to
provide a range of services at raf
lyneham home to the uk’s tactical air
transport force of hercules aircraft and
one of the largest and busiest operational
stations in the raf in addition to
providing base support facilities
management and logistics services serco
will support the no 1 air mobility wing
tactical medical wing and no 4 force
protection wing this win will further
strengthen serco’s relationships with air
command and key equipment
manufacturers such as rolls royce
the contract is for four years with three
option years and is valued at around
£34m over the full seven years
some of the things we do
• 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
defence
revenue
£721m 
118 enhancing the royal navy’s
operational capacity
the uk armed forces are faced with unprecedented challenges playing their part
in protecting national and international security against a background of budgetary
restraint increasing the effectiveness of assets and equipment makes an
important contribution to their operational capacity
serco denholm a joint venture led by serco has been providing essential
operational support to the royal navy for more than a decade over that period
we have built a highly effective working relationship
in december 2007 serco denholm marine services signed a new 15year
contract with the ministry of defence to deliver a wide range of marine services to
the royal navy the contract is worth £750m to serco a significant increase on
the previous contract reflecting the strength of our relationship with the royal navy 
we are also managing more complexity for the customer around 240 staff and
the services of the royal maritime auxiliary service transfer to serco from april
2008 and serco denholm will also bring an additional 30 vessels into service
under a pfi arrangement to add to the 110 existing vessels these new vessels
are being procured by serco denholm to meet the navys future fleet
requirements and to enhance support to trials and worldwide training
serco group plc    21 operating performance – defence we were awarded the apache helicopter
interim support arrangement contract by
agustawestland the prime contractor for
apache ‘depth’ maintenance at
wattisham in the uk depth maintenance
involves stripping the aircraft down and
reassembling with repaired or new parts
as necessary the contract is valued at
around £15m to serco over three years
serco was also awarded a multiactivity
support services contract for british
forces on the south atlantic bases of
ascension island and the falkland islands
the contract is valued at around £20m
over five years
united states
our north american defence business
won a record level of new contracts
against a continued backdrop of pressure
on noncombat operations the us army
awarded us a contract to provide cost
analysis logistics planning and supply
chain consulting services under the
logistics civil augmentation program iv
logcap iv this idiq contract has a
oneyear base period with four annual
options for a fiveyear total period and
a potential value of 225m 
the space and naval warfare systems
center spawar awarded us two
contracts to assist the navy and other
government agencies with antiterrorism
systems under the first contract we will
evaluate integrate and install advanced
antiterrorism systems at navy ports
around the world this idiq contract has
a total potential value of 64m over five
years the second contract extends that
relationship with spawar to other
government agencies the contract is
valued at around 62m over three years
and could reach 115m if all five of the
sixmonth award options are exercised
the us navy selected us for the major
portion of the sea enterprise contract
this idiq contract is to provide
engineering and installation services for
command control communication
computers intelligence and
reconnaissance systems at ship shore
and submarine locations on the west
coast of the united states it has a 
oneyear base period with four annual
options for a maximum term of five years
and a potential value of around 156m 
a key objective is to reduce the costs of
installations by improving productivity and
achieving longterm efficiencies
22 serco group plc operating performance – defence serco group plc    23 operating performance – transport
transport revenues grew by 47 to £655m
representing 23 of group revenue 2006 25
a key feature of the year was the use of our uk 
skills to secure international opportunities
light rail
the dubai government roads and
transport authority rta selected serco
as preferred bidder to operate and
maintain the initial two lines of the new
dubai metro the first such system in the
region and an important development for
the city we will be signing the contract in
march 2008 the contract includes 
prelaunch consultancy and planning
with operations and maintenance running
for five years from autumn 2009 and the
potential for a further fiveyear extension
the contract is valued at more than
£400m over this 125 year period
serco will run the operations control
centre maintain rolling stock track and
station facilities and provide train
attendants and all station staff the lines
will cover 76 kilometres of track and are
predicted to carry 200m passengers per
year ultimately the rta intends to
extend the dubai metro to more than 300
kilometres making it the world’s largest
driverless metro system
during the year we finished our contracts
to operate the manchester metrolink and
the copenhagen metro we did not renew
the contracts at rebid as we continue to
actively manage our contract portfolio
traffic management
in the uk we successfully rebid our
contract with transport for london to
maintain traffic signal control equipment
and provide related services the contract
is for five years with the potential for a
further twoyear extension and is valued
at around £60m over seven years serco
will provide cover for all traffic control
equipment including traffic signals
crossings automatic number plate
recognition cameras and traffic
information signs the services cover
central london and the city including
important transport link points for the
2012 olympics
serco operates the national traffic control
centre ntcc on behalf of the highways
agency we were pleased that the ntcc
achieved final completion in may 2007
recognising the delivery of quality services
and continuing innovation at this world
first facility we have successfully rolled
out the travel time variable messaging
system providing valuable realtime
information for drivers
in the us the georgia department of
transportation appointed us to run the
state’s traffic management center this is
serco’s first traffic management contract
in north america the contract is for up to
four years and is valued at 12m
serco also won two parkingrelated
contracts with the city of chicago valued
at more than 10m over the next five
years we will provide managed
operations mechanical maintenance
identification parking enforcement and
revenue reporting 
some of the things we do
• air traffic services
• heavy rail operations and maintenance
• light rail operations and maintenance 
• traffic control and transport systems
• transport consultancy 
transport
revenue
£655m 
47  24 serco group plc operating performance – transport
heavy rail
northern rail which we operate in a joint
venture with nedrailways carried nearly
79m passengers in 2007 and achieved a
strong operational performance despite
the severe floods in the summer northern
rails success has led to it winning two
prestigious national awards public
transport operator of the year at the
national transport awards 2007 and the
example of excellence in the rural action
category at the 2007 business in the
community awards our other joint
venture with nedrailways – merseyrail –
was the best performing railway in the
country in terms of reliability and
punctuality surpassing its previous best
performance in 2005
great southern rail our australian rail
operation performed well in 2007 with
good growth on both the ghan and
indian pacific services the overland
service between melbourne and adelaide
was relaunched in may 2007 since when
its patronage has increased by more than
50
network rail awarded serco two
contracts during the year we extended
our contract for infrastructure monitoring
and rail grinding services the extension is
valued at approximately £45m over two
years network rail also appointed us to
operate locomotives on the test routes of
the european rail traffic management
system ertms piloting scheme ertms
is a new signalling methodology that will
ultimately be rolled out across europe
the contract is valued at around £5m
over three years
air traffic control
we successfully rebid our contract to
provide air traffic control airside
operations engineering and
meteorological services in support of the
department of civil aviation at dubai
international airport the contract has a
value of £175m over two years
we also renewed our contract at bahrain
international airport to provide air traffic
control electronic engineering and
maintenance project planning and
consultancy and administrative support
the contract is valued at around £13m
over three years serco group plc    25
reducing congestion through
enhancing driver information
the growing number of road journeys puts enormous pressure upon infrastructure
and capacity resulting in frustration lost time and consequent cost to the economy
road building is not a sustainable option one solution is to allow drivers to make
better use of the existing network
serco was selected by the highways agency in march 2001 to deliver and operate
its national traffic control centre ntcc the ntcc collects traffic data from
thousands of roadside sensors combined with information from hundreds of
operational partners including the police highways agency traffic officers ports
and airports and local highway authorities 
ntcc analyses this data and delivers real time traffic information via the traffic
england website wwwtrafficenglandcom and phone service 08700 660115
and through broadcast partners giving motorists the information they need to
plan their journeys and avoid delays making the best use of road capacity
reducing driver stress and improving road safety
serco continues to increase the value of the service by exploring new ways of
reaching drivers and giving them the information they need when and where they
need it most 
in 2007 we introduced new roadside signs on motorways to give drivers predicted
travel times between junctions based upon realtime information following a
successful pilot this service has been rolled out across the network publishing
over a million messages every month
operating performance – transport 26 serco group plc operating performance – science 26 serco group plc
science revenues grew by 199 to £483m
representing 17 of group revenue 2006 16
technology and innovation are at the heart of our
offering in this market
our joint venture with british nuclear
group bng and lockheed martin to
operate the uk’s atomic weapons
establishment awe continued to
perform strongly the infrastructure
upgrade programme is progressing well
with the facility to house the orion
research project due to open on schedule
in march 2008 this facility will cover both
weapons research and civil science
studies such as evolving stars and super
dense matter the construction of energy
efficient offices for up to 1400 staff is
also on time and on budget as previously
reported bng is in the process of
disposing of its shareholding in awe and
we hope this will be completed later this
year
serco technical and assurance services
serco tas won several contracts in the
nuclear market during the year 
a consortium led by serco tas was
awarded a £15m contract to provide
specialist technical and engineering
support to magnox reactor sites over
the next five years a range of specialist
nuclear technical services will be provided
including safety case management
systems engineering analysis of safety
critical structures and systems and
technical advice on waste management 
serco tas in partnership with golder
associates was also awarded a £10m
twoyear contract to examine and develop
plans to clean up contaminated land at
sellafield the work will include
assessment of the condition of the land
and groundwater mathematical modelling
development of a strategy for dealing with
the contamination and identifying the
technologies and actions needed for 
clean up
the nuclear decommissioning authority
nda appointed a consortium led by the
the washington division of the us
company urs as preferred bidder to
manage the uk’s lowlevel radioactive
waste repository at drigg in west
cumbria serco tas is an integrated sub
contractor and will provide regulatory
safety and environmental technical
support to the consortium the tenyear
contract can be extended to up to
17 years
some of the things we do
• materials science
• measurement science
• nuclear assurance
• research establishments
management
• technical training
science
revenue
£483m
199  ensuring the highest safety
and training standards
the atomic weapons establishment awe which is responsible for the design
build maintenance and decommissioning of the warheads for the united
kingdoms nuclear deterrent has been central to the country’s defence for more
than 50 years awe is managed and operated for the ministry of defence by awe
management limited a joint venture between serco group plc lockheed martin
corporation and british nuclear group under a contract that runs until 2025
awe is a complex environment where safety is the number one priority the royal
society for the prevention of accidents recognises awe’s commitment to ensuring
the highest standards of safety throughout its operations and has awarded it their
prestigious gold medal for achieving five consecutive gold awards for
occupational health and safety in addition awe has been awarded the sir
george earle trophy for the most outstanding performance in health and safety by
a company or organisation as well as the astor trophy for the best managed
occupational health programme
essential to its continued success is the development and retention of skills
across a broad spectrum a notable achievement in 2007 was the successful
establishment of the awe programme management academy along with
representatives from our awe management limited partners a team of serco
consultants undertook the planning and implementation of a comprehensive suite
of training programmes these have the goal of ensuring that there are sufficient
people in the future who are qualified to successfully lead the multiple and highly
complex awe programmes and projects the programme management academy
will train around 1000 staff in its first year of operation
serco group plc    27 serco group plc    27 operating performance – science 28 serco group plc market development
market development 
serco’s markets continue to expand rapidly as local
and national governments face budget deficits and
everincreasing pressure from citizens to improve
public services
governments increasingly recognise the
benefits of opening up public service
monopolies to competition and innovation
a review by the serco institute of 200
government and academic studies
spanning 30 years 12 countries and five
sectors found that competition resulted in
typical cost savings of 20 with savings
as high as 3040 in some cases
value for money in public services is driven
by innovation and smarter ways of
working in the uk the government has
launched a major study to help it
understand the contribution of the public
service industry and how the government
can support it including the potential to
export the uk’s expertise in this area
turning to individual markets we expect
to see continued strong growth in home
affairs in the uk we are well established
across all areas and we are expanding our
footprint in australia key drivers include
the threat of global terrorism concern
about immigration perceptions of rising
crime and the continued rise in prisoner
numbers these will increase
governments’ use of the private sector to
provide capacity and to develop new
capabilities to meet new threats
health and ‘welfare to work’ offer major
future growth areas for serco the uk’s
national health service needs to deliver
efficiency savings and meet stretching
targets and serco can play a critical
supporting role we plan to offer better
value for money clinical services to the
primary sector and to provide fully
managed healthcare solutions that deliver
the information and support needed by
clinicians and patients the uk
government is also increasingly looking to
the private sector to help the jobless
move back into employment we are well
positioned to play a role in this important
new market
uk local authorities face major challenges
creating opportunities for serco the
government’s 2007 comprehensive
spending review requires councils to
deliver 3 annual efficiency savings a
degree of financial pressure new to many
council leaders and chief executives
they will look to service providers for
innovative and costeffective solutions
in addition local government
reorganisation is creating a number of
unitary authorities with greater
responsibilities this inevitably involves
backoffice consolidation in particular in
itbased services serco is well placed to
help finally local authorities are being
given a greater remit to shape their area
and deliver local priorities notably through
agencies such as the police health and
highways serco’s track record in reducing
crime and in improving the environment
school performance and transport gives
us a pivotal role with our broad
understanding of the local agenda placing
us in a unique position in the market
in defence the public debate in the uk
about the level of funding to equip and
support the armed forces has intensified
throughout the year our core business
lies in helping government achieve greater
value for money and it is on that basis
that we have continued to work with the
mod as it refreshes its defence industrial
strategy serco group plc    29 market development
our track record in the provision of
operational support services to the front
line commands and our independence
from equipment manufacturers position
us well to deliver significant growth
this will be achieved by using our role as
an integrator of people infrastructure
training and technology to help the mod
deliver throughlife capability management
and by leveraging our extensive
capabilities in operational support and
training into new overseas markets 
we have a significant position in the us
defence market and have broadened our
offerings which should serve us well as
that sector continues to evolve to an
imminent postiraq era in particular there
is a continuing demand for our services to
military personnel and their families where
we have a solid track record we are well
positioned to provide logistics services as
the military and other government
agencies face greater pressures to reduce
costs and for advanced port security and
other antiterrorismforce protection
applications an area where we see
continued emphasis in the near future
in transport we continue to monitor
opportunities to address congestion and
improve traffic efficiency we have built
strong links with customers in the uk and
around the world to further this in the
united arab emirates there are substantial
opportunities to grow our presence in the
transport market with the development of
the dubai metro this system will be
expanded over time and we anticipate a
growing pipeline of opportunities with the
rapid expansion of dubai and further
transport innovation across the emirates
in particular abu dhabi our reputation for
service delivery and working closely with
clients is bringing a substantial range of
opportunities across both light rail and
traffic control systems that fit within our
strategy
we have engaged with the uk
government on future options for its
trading funds and agencies these
options include the governmentowned
contractoroperated goco model of
which our successful operations at awe
and the national physical laboratory are
examples goco is an attractive
operating model where it is strategically
important to retain a public stake in an
organisation and we will continue to work
with government to examine its full
potential while exploring other contractual
mechanisms
in the uk nda market our primary focus
is on producing a competitive bid for
sellafield sbb nuclear the consortium of
serco bechtel and the babcock 
wilcox company is one of four invited by
the nda to submit final tenders tender
responses are scheduled to be returned
to the nda in the spring of 2008 with the
announcement of the winning bidder
planned for the summer of 2008
sbb nuclear is a unique and highly
effective team with a proven track record
of safely and securely delivering high
performance at awe and at nuclear sites
in the us through partnership with
employees and local communities
together our consortium has experience
of successful transition at 26 major sites
in the uk and us we look forward to
continuing to work with the nda and the
stakeholders at sellafield through the
concluding stages of the competition
process there are also a number of other
opportunities including the decommissioning
of the magnox reactors dounreay and
other smaller sites we will continue to
review the attractiveness of these
opportunities as the market develops
we continue to study the potential for our
serviceled model to be introduced into a
number of new markets while many of
these markets are at an early stage
china india and south africa look likely to
present opportunities in the medium term 30 serco group plc finance review
serco continued to grow strongly in 2007 with another
doubledigit increase in revenue at the same time we
successfully increased our margins and free cash flow 
and further strengthened our balance sheet
andrew jenner finance director
finance review serco group plc    31 finance review
1 financial performance
serco’s income statement for the year is summarised in figure 1 below this includes
the results of joint ventures which are proportionately consolidated 
as announced in our 2007 interim results we have adopted a new pro forma profit
measure profit before tax and amortisation of acquired intangibles adjusted profit
before tax figure 1 also shows adjusted earnings per share which is calculated
before the amortisation of acquired intangibles for 2006 the adjusted measures also
exclude the gain on sale of our pfi investments of £114m
year ended 31 december 2007 2006 increase
£m £m
revenue 28107 25482 103
gross profit 4062 3657 111
administrative expenses 2642 2429
adjusted operating profit 1420 1228 156
investment revenue and finance costs 188 178
adjusted profit before tax 1232 1050 173
amortisation of acquired intangibles 86 90
gain on sale of pfi investments – 114
profit before tax 1146 1074 67
tax 322 279
profit for the year 824 795 36
effective tax rate 281 260
adjusted earnings per share 1857p 1592p 166
earnings per share 1698p 1662p 22
dividend per share 425p 360p 181
11 revenue
revenue grew by 103 to £28107m benefiting from the growth of existing contracts
and the contribution of new wins
12 gross margin
gross margin – the average contract margin across our portfolio – was 145 a small
increase on 2006
13 investment revenue and finance costs
investment revenue and finance costs totalled a net cost of £188m 2006 £178m 
in december 2006 we sold a number of our pfi investments to infrastructure investors
limited the loss of net interest income from these investments was largely offset by
the increase in net interest income from our retirement benefit obligations
14 adjusted profit before tax
adjusted profit before tax was £1232m an increase of 173 this represented a
margin of 44 up from 41 last year
figure 1 income statement 32 serco group plc finance review
15 gain on sale of pfi investments
2006 included an £114m oneoff gain on the sale of pfi investments the sale was
part of our creation of a strategic pfi investment partnership with i
2
 there was no
corresponding gain in 2007
16 profit before tax 
profit before tax increased by 67 to £1146m profit before tax excluding the gain on
sale in 2006 was up by 194
17 tax
the tax charge of £322m 2006 £279m represents an effective rate of 281
compared with 260 in 2006 the underlying rate in 2006 was 291 before the gain
on sale of the pfi investments the decrease in the underlying rate is primarily due to
the mix of taxable profits
18 earnings per share eps
adjusted eps rose by 166 to 1857p eps grew by 22 to 1698p 
eps and adjusted eps are calculated on an average share base of 4824m during the
period 2006 4712m the increase in the average share base resulted from the
exercise of employees’ share options
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 302p per
share representing an increase on the 2006 final dividend of 184 and bringing the
total dividend for the year to 425p growth of 181 the final dividend will be paid on
21 may to shareholders on the register on 7 march
3 cash flow
the group generated a free cash inflow of £976m 2006 £854m an increase of 143
figure 2 analyses the cash flow as in previous years we have designed the analysis to
show the true cash performance of the group – the cash flows generated by
subsidiaries plus the dividends received from joint ventures it therefore differs from the
consolidated cash flow on page 51 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 serco group plc    33 finance review
year ended 31 december 2007 2006
£m £m
operating profit excluding joint ventures 922 879
non cash items 521 350
group ebitda 1443 1229
working capital movement 47 21
group operating cash flow 1396 1208
interest 256 106
tax 54 67
expenditure on tangible and intangible assets 479 477
dividends from joint ventures 369 296
group free cash flow 976 854
disposal of joint ventures 33 –
acquisition of subsidiaries 74 –
cash received on sale of pfi investments – 765
cash disposed of and transaction costs on sale of pfis – 583
other financing 710 986
special pension contribution 510 190
dividends paid 179 145
group net decrease in cash and cash equivalents 464 285
adjustment to include joint venture cash impacts 67 103
net decrease in cash and cash equivalents 397 182
31 group operating cash flow
group operating cash flow of £1396m 2006 £1208m reflects a conversion of group
ebitda into cash of 97 2006 98 this was a strong cash performance given the
level of organic growth in the business
32 interest
net interest paid was £256m compared to £106m in 2006 the increase is mainly due
to lower cash interest receipts after the disposal of pfi investments in december 2006
33 tax
tax paid was £54m 2006 £67m cash tax is below the equivalent tax charge in the
income statement this reflects timing differences and the availability of tax relief on the
special pension contributions of £19m in december 2006 and £51m in january 2007
34 expenditure on tangible and intangible assets
expenditure on tangible and intangible assets in the year was £479m 2006 £477m
this represents 22 of revenue excluding joint ventures 2006 25 expenditure in
2007 included the completion of the rollout of our sap system in the uk
35 dividends from joint ventures
dividends received from joint ventures totalled £369m 2006 £296m a conversion
rate of 100 2006 87 of joint ventures’ profit after tax and minority interest
excluding costs allocated by group going forward we expect conversion in the range
of 8090
note group ebitda is earnings from subsidiaries excluding joint ventures before interest tax depreciation
intangible amortisation and other non cash items
figure 2 cash flow  34 serco group plc finance review
36 other financing
the movement in other financing resulted from repayments of our loans and the
maturing of one of our private placements in december 2007 for £432m
4 net debt
figure 3 analyses serco’s net debt
at 31 december 2007 2006
£m £m
group schemes – non contract specific 679 1578
contract specific schemes
– reimbursable 607 676
– not certain to be reimbursable 140 239
net retirement benefit liabilities 1426 2493
intangible assets arising from rights to operate 
franchises and contracts 174 206
reimbursable rights debtor 607 676
deferred tax assets 123 411
net balance sheet liabilities 522 1200
41 group recourse net debt
group recourse net debt decreased from £1719m to £1379m due to the cash flows
generated by the business
included within group recourse net debt is £119m 2006 £106m of encumbered
cash this is cash of pfi and other project companies 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 – such as a special purpose company for a pfi – 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 £29m to £593m during the year due to
scheduled repayments the non recourse debt relates to the kilmarnock prison
contract and our driver examination services contract in canada
5 pensions
at 31 december 2007 the net liability included in the balance sheet arising from our
defined benefit pension scheme obligations was £522m 2006 £1200m figure 4
provides further analysis
figure 4 defined benefit pension schemes
at 31 december 2007 2006
£m £m
group – cash and cash equivalents 1381 1778
group – loans 2633 3344
group – obligations under finance leases 127 153
group recourse net debt 1379 1719
joint venture recourse net cash 349 282
total recourse net debt 1030 1437
group non recourse debt 593 622
total net debt 1623 2059
figure 3 net debt serco group plc    35 finance review
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 the 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
• 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 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 2007 splas had a deficit of £287m
31 december 2006 £1170m the reduction in the deficit reflects the movement in
bond yields and the action we have taken to ensure appropriate funding for the
scheme including the special pension contribution of £51m in january 2007
figure 5 shows the sensitivity of the liabilities of our pension schemes to changes in
discount rates and to adjustments in the actuarial assumptions for the rate of inflation
members’ salary increases and life expectancies
change in assumption change in liability
discount rate 05 9
05 10
price inflation 05 7
05 7
salary 05 3
05 3
longevity increase by one year 275
6 treasury 
the group’s principal debt finance consists of a £400m bank credit facility comprising a
term loan facility and a revolving credit facility at 31 december 2007 we had £141m
31 december 2006 £163m outstanding on the term loans and the revolving facility
was undrawn interest is charged at a rate of 45 basis points over libor on
borrowings under the facility the facility is unsecured and matures in december 2009 
serco has also issued loan notes under two private placements the first private
placement for £432m matured in december 2007 and was fully repaid the second
for £1170m amortises evenly from 2011 to 2015 
figure 5 pension assumption sensitivities 36 serco group plc 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
members who wish to receive the full
annual review and accounts for the year
ended 31 december 2007 should write to
the company secretary at the company’s
registered office alternatively a copy of
the full 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
2007 is unqualified and does not contain
any statement containing inadequate
accounting records or failure to obtain
necessary information or explanations 
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 123p 2006 –
105p per ordinary share was paid on 
17 october 2007 the directors
recommend a final dividend of 302p
2006 – 255p per ordinary share which 
if approved by shareholders at the annual
general meeting will be paid on 21 may
2008 to those shareholders on the
register at the close of business on 7
march 2008 
directors
the current members of the board
together with biographical details of each
director are set out on pages 47 to 48
grant rumbles was appointed to the
board as chief operating officer on 3 july
2007 deanne julius retired as a non
executive director on 29 october 2007
thomas a corcoran was appointed a
nonexecutive director on 3 december
2007
annual general meeting
the annual general meeting of the
company will be held at the queen
elizabeth ii conference centre london 
on 13 may 2008 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 
summary financial statement
corporate responsibility
the company has implemented across
the group policies on environmental
health and safety matters and operates an
ethics and business conduct policy
standard 
further information on environmental and
employee health and safety matters is
contained in the corporate responsibility
report which is also available online at
wwwsercocom
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 at
£1134941 2006 £942340 represents
1 of the group’s pre tax profit and
represents a 204 increase on
investment made in 2006 
during the year neither the company nor
the group made political donations and
intends to continue with this policy
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  serco group plc    37 summary financial statement
in 2007 serco group plc fully complied
with the provisions of code of best
practice set out in section 1 of july 2003
financial reporting council and as
superseded by the combined code on
corporate governance issued by the
financial reporting council in june 2006
“the code” 
board and committee
structure
to support the principles of good
corporate governance the board the
members of which are shown on pages
47 to 48 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 there are four
regular board meetings a year held over
two days and further meetings as
needed 
the following are the main committees of
the board
• audit
• remuneration 
• nomination
• training and development
the audit and remuneration committees
consist wholly of independent non
executive directors 
going concern
the directors confirm that they have a
reasonable expectation that the group
has adequate resources to continue in
operational existence for the foreseeable
future and therefore continue to adopt 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 packages 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 and
practice
during 2005 the committee carried out
its triennial comprehensive review of
executive remuneration to ensure that the
group’s arrangements continue to be
aligned with the business strategy and
current best practice 
as a result of the review changes were
made to the 2006 remuneration structure
and packages which were detailed in the
2005 and subsequent annual review and
accounts and have been followed since
the following principles described below
have been adopted to determine the
remuneration package of the executive
directors the remuneration should
• support serco’s business strategy
• align the financial interests of executives
and shareholders
• provide market competitive reward
opportunities for performance in line
with expectations but have the
potential to deliver significant financial
rewards for sustained outperformance
• reflect uk market norms
• be supported by a clear rationale which
participants shareholders and other
stakeholders are able to understand
in setting remuneration of the executive
directors in particular the corporate
objectives relating to the annual bonus
scheme the remuneration committee is
able to consider corporate performance
on environmental social and corporate
governance issues and retains discretion
to reduce bonuses or share incentives
should performance in these areas be
unsatisfactory
the committee believes that the existing
executive remuneration principles remain
appropriate but will be carrying out a
further triennial review during 2008 and
any changes will be set out in detail in
next year’s report 38 serco group plc summary financial statement
remuneration package
composition
the current remuneration package for
executive directors consists of base
salary annual bonus longterm incentives
pensions and other benefits the group’s
policy is to ensure that a significant
proportion of the package is performance
related even at target levels
the relative proportions of performance
and nonperformance related remuneration
for an executive director’s ‘ontarget’
remuneration are shown in the chart below
base salary
the committee’s policy is to set the base
salaries of the executive directors at the
median of a comparator group of
companies which consists of 14
companies in the ftse 250 index of
broadly similar size and business fit
salaries are normally reviewed annually
and the committee takes note of relative
pay and employment conditions within
the comparator group in determining
salary increases
in 2007 the base salaries for christopher
hyman andrew jenner and grant
rumbles were increased by 566
550 and 667 respectively base
salary increases are in line with executive
pay increases in the comparator group 
annual bonuses
for 2007 the annual bonuses for
executive directors were to be calculated
as follows
• the threshold payment at 20 of base
salary 
• the target payment at 50 of base salary
• the maximum payment at 100 of
base salary
the criteria for performance measurement
comprise a mix of financial and corporate
measures that account for 80 and 20
of the bonus allocation respectively
financial measures are based on the
serco group results and the corporate
measures are team based the financial
measures for 2007 were based on
turnover adjusted pbt and cash
conversion these measures reflect the
growth and margin improvement
strategies of the business and are
extremely stretching at the maximum end
the 20 allocated to corporate measures
was split between performance on a
number of strategically important projects
including leadership development new
business success sap implementation
and investor relations
based on the achievement of stretching
turnover and adjusted pbt of £2811m
and £123m respectively and achievement
of the goals under the personal
objectives a bonus equal to 889 of
base salary will be paid for performance
during 2007 the bonus is calculated on
the salary at the time of the award
annual bonuses are not pensionable
46
36
18
performancerelated annual bonus
target
base salary
performancerelated longterm
incentives expected value serco group plc    39 summary financial statement
the proportion of awards that vest will be
determined by the following schedule
• no part of the awards will vest if the
group’s tsr is below the median of the
comparator group
• 30 of awards will vest for median
performance
• 100 of awards will vest for upper
quartile performance
• between median and upper quartile
performance a proportion between
30 and 100 of the awards will vest
pro rata
• 200 of awards will vest for top decile
performance 
• between upper quartile and top decile
a proportion between 100 and 200
will vest pro rata
the committee has discretion to vary the
proportion of awards that vests if it considers
that the tsr performance measure does
not appropriately reflect the underlying
financial performance of the group
there is no retesting under the ltip
executive option plan 
the serco group plc 2005 executive
option plan eop was approved at the
annual general meeting held in april 2005
as a replacement for the serco group
1998 executive option plan since the
approval of the 2005 plan no options
have been granted under the 1998 plan
which is now closed
deferred bonus scheme
for bonuses paid in respect of the 2003
2004 and 2005 financial years the annual
bonus plan included the ability for the
executive directors to defer a portion of
the bonus earned participants could elect
to defer for three financial years up to
100 of the bonus earned by purchasing
shares in the group pursuant to the terms
of 2003 deferred bonus scheme the
shares purchased will be matched by the
company if stretching performance
targets are met
the performance condition for matching
shares on deferred bonuses is total
shareholder return tsr relative to
companies comprising the ftse 350 index
and measured over the threeyear deferral
period the matching shares awarded are
based on the following criteria 
• no matching shares will be awarded if
the group does not meet or exceed the
median tsr of the comparator group
• a one for two match of shares deferred
will be made if performance is at the
median 
• a one for one match of shares deferred
will be made if performance is at or
above the upper quartile
there is no further opportunity for the
executive directors to defer bonuses paid
for the bonuses paid in respect of the
2004 financial year and deferred for the
three financial years up to 31 december
2007 tsr performance relative to the
comparator group was in the upper
quartile 84th percentile a one for one
match of shares deferred will be made in
march 2008 
sharebased incentives
longterm share incentives are awarded
to executive directors under the serco
group plc 2006 long term incentive plan
and the serco group plc 2005 executive
option plan previous longterm share
incentives were granted under the serco
group 2005 long term incentive
scheme and 1998 executive option
plan the various scheme and plan rules
have all been approved by shareholders
at annual general meetings 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 ernst  young in
relation to the long term incentive
scheme and executive option plan while
mercer undertake the measurement for
the 2006 long term incentive plan the
conditions relating to the schemes are
detailed below
long term incentive plan 
shareholders approved the serco group
plc 2006 long term incentive plan ltip
at the annual general meeting held in
may 2006 the ltip awards granted to
executive directors are calculated at
100 of salary at the time of grant 
an award of 100 of salary was made 
at the normal annual award time in
november 2007 for evaluation between 
1 january 2008 and 31 december 2010 
the vesting of awards made during 2007
will depend on the group’s tsr 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  40 serco group plc summary financial statement
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 
pre 1 january 2003 grants for grants
made in relation to performance periods
commencing up to and including 
1 january 2002 the extent to which an
option vests and therefore becomes
exercisable is measured by reference to
absolute growth in the group’s earnings
per share eps over the threeyear
performance period
the vesting of the grants is based on the
following schedule
• if the annual compound growth in eps
is less than 10 none of the options
may be exercised
• if compound growth in eps is more than
15 all of the options may be exercised
• for a compound growth in eps of
between 10 and 15 a proportion of
the options may be exercised
post 1 january 2003 grants for awards
granted on or after 1 january 2003
achievement of the performance is
measured by reference to the group’s
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
• 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
2007 the group’s eps growth was
1856 per annum over the threeyear
performance period which resulted in all
options vesting the level at which
maximum vesting would occur was
1346 per annum
long term incentive scheme
prior to the approval of the 2006 long
term incentive plan awards were granted
under the long term incentive scheme
ltis awards granted under the ltis may
be exercised after the third anniversary of
grant once confirmation has been received
from the auditors regarding the
achievement of the performance criteria
pre 1 january 2003 awards for awards
made in relation to performance periods
commencing up to and including 
1 january 2002 the extent to which an
award vests and therefore becomes
exercisable is measured by reference to
the absolute growth in the group’s eps
over the performance period of three
financial years
the vesting of the awards is based on 
the following criteria
• full vesting will only occur if the
cumulative eps growth over the three
year performance period is at least 64
• awards will partially vest where the
cumulative eps growth is at least 35 
• awards will vest on a straight line basis
for each percentage increase in eps
growth above 35 over the threeyear
period until full vesting is achieved
post 1 january 2003 awards 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 index at the start
of the performance period 
the vesting of the awards is based on the
following schedule
• no part of the awards will vest if the
group’s performance is below the
median of the comparator group over
the threeyear performance period 
• 40 of the awards will vest if
performance is at the median
• the awards vest in full if performance
reaches or exceeds the upper quartile
• for performance between the median
and the upper quartile a proportion
between 40 and 100 of the
awards will vest pro rata
for awards which completed their
performance period on 31 december
2007 the group’s tsr performance was
in the upper quartile 84th percentile of
the comparator group over the threeyear
performance period resulting in the
awards vesting in full 
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 serco group plc    41 summary financial statement
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 the options granted under the
scheme in 2004 matured on 1 june 2007 
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 may be retained by the executive
director concerned 
christopher hyman is a nonexecutive
director of united business media plc for
which the fees payable in the year were
£45000 he does not receive any other
fees from nonexecutive directorships held
no other feepaying external positions were
held by any of the executive directors
pensions and life assurance 
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
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 8 of
pensionable salary up to 31 december
2006 subject to inland revenue limits
prior to 6 april 2006 this rate increased
to 95 with effect from 1 january 2007 
however from this date 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 and grant rumbles’
pension benefits accrued prior to 6 april
2006 exceeded the new lifetime
allowance which came into force at that
date and they opted to cease paying
contributions and accruing benefits in the
pension scheme after 6 april 2006 since
that time and prior to his becoming 
nonexecutive chairman kevin beeston
had been in receipt of a cash allowance
equal to 33 of his base salary in lieu of
further pension provision this ceased on
1 september 2007 
grant rumbles is in receipt of a cash
allowance of 22 of his base salary in lieu
of further pension provision
kevin beeston and grant rumbles
remain entitled to lump sum and widow’s
pension benefits should they die before
retirement and whilst still employed by or
an officer of serco 
nonexecutive directors
on 1 september 2007 after 22 years
with serco and as communicated to
shareholders in 2006 kevin beeston
moved from executive chairman to non
executive chairman as from this date he
is no longer eligible to participate in the
group’s annual bonus and longterm
incentive plans save those grants made
during his tenure as an executive director
the group’s policy is that the fees of 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 42 serco group plc summary financial statement
service contracts and compensation
each executive director has a rolling service contract with the company and these
service contracts will be available for inspection prior to the start of and after the
company’s annual general meeting the service contracts all have a notice period of
12 months nonexecutive directors do not have service contracts
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 
date joined appointment to date of unexpired term at 
name of director company the board contract 31 december 2007
nonexecutive chairman
kevin beeston 29 april 1985 29 february 1996 1 september 2007 30 months
executive directors
christopher hyman 30 august 1994 1 april 1999 21 july 2003 rolling contract with 
12 months notice period
andrew jenner 4 november 1996 3 may 2002 21 july 2003 rolling contract with 
12 months notice period
grant rumbles 3 july 1982 3 july 2007 3 july 2007 rolling contract with 
12 months notice period
date of appointment date of letter unexpired term at  
to the board of appointment 31 december 2007
nonexecutive directors
margaret ford 8 october 2003 7 october 2003 21 months
leonard v broese van groenou 3 april 2006 20 february 2006 15 months
david richardson 2 june 2003 29 may 2003 17 months
thomas a corcoran 3 december 2007 3 december 2007 35 months
note nonexecutive directors have a threemonth notice period and no compensation or other benefits are payable 
on early termination serco group plc    43 summary financial statement
notes
1 ordinary shares are beneficial holdings which include the directors’ personal holdings and those of their
spouses and minor children 
2 27779 of christopher hyman’s and 16667 of andrew jenner’s shares are held in trust on their behalf under
the terms of their participation in the 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
3 grant rumbles was appointed to the board on 3 july 2007
4 thomas a corcoran was appointed to the board on 3 december 2007
directors’ remuneration
this section has been audited by deloitte  touche llp
the remuneration of the directors for the year was as follows
total estimated total total 
value of any remuneration remuneration
other excluding excluding
non cash pensions pensions 
note remuneration fees bonus benefits allowance 2007 2006
£ £££ £ £ £
kevin beeston 123 353332 66668 314113 55699 115639 905451 1202888
christopher hyman 127 540000 nil 497840 55900 nil 1093740 1077104
andrew jenner 127 334500 nil 306705 55797 nil 697002 683347
grant rumbles 4 156667 nil 142240 15137 34467 348511 –
leonard v broese
van groenou nil 45000 nil nil nil 45000 26250
margaret ford nil 53333 nil nil nil 53333 41665
deanne julius 5 nil 43333 nil nil nil 43333 40000
david richardson nil 53333 nil nil nil 53333 45000
thomas a corcoran 6 nil 3750 nil nil nil 3750 nil
total 1384499 265417 1260898 182533 150106 3243453 3116254
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 and private healthcare
3 the allowance comprises payments made to kevin beeston whilst he was executive chairman and grant
rumbles in lieu of pension calculated as a percentage of base salary from which they make their own
pension arrangements further details as set out in the section on directors’ pensions on page 45
4 grant rumbles was appointed to the board on 3 july 2007 remuneration is only disclosed for the period
from his appointment
5 deanne julius retired from the board on 29 october 2007
6 thomas a corcoran was appointed to the board on 3 december 2007
7 remuneration is shown gross of salary sacrificed under the smart scheme see page 41
directors’ shareholdings
the directors’ interests in the shares of the company are detailed in the following table
each of the executive directors is encouraged to maintain a shareholding equal to one
years’ base salary to be built up over three years where newly appointed to the board
ordinary shares of 2p
each fully paid at 
1 january 2007 or ordinary shares of 2p
note if later the date of each fully paid at
1 appointment as director 31 december 2007
kevin beeston 159413 138218
leonard v broese van groenou 1935 3375
margaret ford 7392 11686
christopher hyman 2 134885 156457
andrew jenner 2 84351 97062
david richardson 10000 10000
grant rumbles 3 nil nil
thomas a corcoran 4 nil nil 44 serco group plc summary financial statement
sharebased incentives
i serco group plc 2003 deferred bonus scheme dbs
this scheme 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 scheme held by directors at 31 december 2007 were as follows
awards held at 
31 december 2007 performance period earliest vesting date
christopher hyman 10030 1 jan 2005  31 dec 2007 9 mar 2008
17749 1 jan 2006  31 dec 2008 22 mar 2009
andrew jenner 6018 1 jan 2005  31 dec 2007 9 mar 2008
10649 1 jan 2006  31 dec 2008 22 mar 2009
iiserco group plc 2006 long term incentive plan ltip
the conditional rights to serco group plc ordinary shares under the 2006 long term
incentive plan held by directors at 31 december 2007 were as follows 
awards held at market price on award
31 december 2007 pence performance period
kevin beeston 147928 349 1 jan 2006  31 dec 2008
145205 373 1 jan 2007  31 dec 2009
christopher hyman 147928 349 1 jan 2006  31 dec 2008
145205 373 1 jan 2007  31 dec 2009
122874 456 1 jan 2008  31 dec 2010
andrew jenner 88757 349 1 jan 2006  31 dec 2008
89589 373 1 jan 2007  31 dec 2009
75699 456 1 jan 2008  31 dec 2010
grant rumbles 43550 349 1 jan 2006  31 dec 2008
33892 510 1 jan 2007  31 dec 2009
70213 456 1 jan 2008  31 dec 2010
iii serco group plc long term incentive scheme ltis
the ltis has been superseded by the serco group plc 2006 long term incentive plan
the last award to executive directors under the scheme was made in june 2005
those shares that vested on 31 december 2007 had a market price of 462 pence
awards held at awards held at
1 january 2007 vested during the period 31 december 2007
kevin beeston 526451 119411 526451
christopher hyman 507484 119411 507484
andrew jenner 243320 76101 243320
grant rumbles 45454 45454 45454 serco group plc    45 summary financial statement
iv serco group plc 1998 and 2005 executive option plan eop
options over serco group plc ordinary shares granted under the 1998 executive share
option plan and the 2005 executive share option plan and held by executive directors
at 1 january 2007 and 31 december 2007 were as follows
options market exercise
held at granted exercised price on price of new balance as
1 january during during exercise date options granted at 31 december
2007 period period pence pence 2007
kevin beeston 1285028 120798 13788 434 439 1392038
christopher hyman 1164099 120798 – – 439 1284897
andrew jenner 620373 74530 – – 439 694903
grant rumbles 346190 61538 – – 439 407728
pensions and life assurance
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 on 
page 41 in the event of death in service each scheme provides for a lump sum
payment as well as a dependant’s pension
years of total accrued pension at 
age pensionable service year end
£
kevin beeston 45 21 272106
christopher hyman 44 10 60544
andrew jenner 39 6 32440
grant rumbles 50 24 139884 46 serco group plc summary financial statement
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 2002
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 in 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 02
75
100
125
150
175
200
225
250
275
300
325
31 dec 03 31 dec 04 31 dec 05 31 dec 06 31 dec 07
ftse 350 index serco serco group plc    47 directors’ profiles
from left to right
joanne roberts company secretary
leonard v broese van groenou nonexecutive director
christopher hyman chief executive
andrew jenner finance director
kevin beeston chairman
david richardson nonexecutive director
margaret baroness ford of cunninghame nonexecutive director
grant rumbles chief operating officer
directors’ profiles
christopher hyman ca sa
44
chief executive 
christopher hyman was appointed chief
executive of serco group plc in 2002 
he is also nonexecutive director of
united business media plc the prince of
wales’ charity in kind direct habitat for
humanity and the borneo tropical
rainforest foundation he is also a
member of the uk government’s honours
advisory committee for economy
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 
kevin beeston fcma 45
chairman
1 4
chair of the nomination and training
and development committees
kevin beeston became nonexecutive
chairman of serco group plc in
september 2007 having previously served
as the group’s executive chairman chief
executive and finance director 
he is a member of the cbi president’s
committee and chairman of the cbi’s
public services strategy board which
promotes the role business has in
transforming the uk’s public services and
he is a commissioner for the tuc’s
commission on vulnerable employment
in addition he is the nonexecutive
chairman of partnerships in care infinitas
learning and domestic and general ltd
and holds nonexecutive director
positions on the boards of imi plc and
ipswich town football club plc 48 serco group plc directors’ profiles
andrew jenner aca 39
finance director
andrew jenner joined serco in 1996
having previously worked for unilever and
deloitte  touche llp he has held a
number of positions at serco including
group financial controller and corporate
finance director andrew became group
finance director and joined the board in
may 2002 as well as setting the group’s
financial strategy andrew is responsible
for its pfi investment business and the
development of risk management across
the group he shares responsibility for 
our relationship with shareholders and the
city with the chief executive
thomas a corcoran ba phd
63 
nonexecutive director
1 2 3 4
thomas corcoran 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
thomas 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 thomas held senior
management positions including vice
president and general manager of ges
aerospace operations
he is also nonexecutive director of aer
lingus ltd l3 communications holdings
inc labarge inc remec inc and 
arinc inc
leonard v broese van
groenou msc 61
nonexecutive director
1 2 3 4 
chair of the remuneration 
committee
leonard v broese van groenou joined
serco as a nonexecutive director in april
2006 leonard was previously vice
president human resources and 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
baroness ford of
cunninghame ma mphil
50
senior independent director 
1 2 3 4
margaret ford 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 from 2000
to 2005 margaret was a director of good
practice limited the publishing company
that she founded 
in december 2007 margaret retired from
english partnerships the national
regeneration agency after six highly
successful years margaret is managing
director social infrastructure and
development royal bank of canada
capital markets and chairman of irvine
bay urban regeneration company
david richardson bsc fca
56
nonexecutive director 
1 2 3 4
chair of the audit committee 
david richardson joined serco as a non
executive 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 a nonexecutive director of dairy
crest group plc forth ports plc tomkins
plc and the restaurant group plc
grant rumbles 50
chief operating officer
grant rumbles is chief operating officer
of serco group plc 
having joined serco in 1982 grant has
led several serco divisions including
continental europe middle east and the
group’s it and bpo division 
in 2001 he was appointed to the global
management board and in 2004 he was
promoted to chief operating officer
responsible for the daytoday operations
of the group grant is also responsible for
leading the development of best practice
corporate responsibility and sustainable
growth across the group 
grant is a member of the executive board
of the prince’s trust construction and
business services leadership group 
1 member of the training and development committee
2 member of the audit committee
3 member of the remuneration committee
4 member of the nomination committee serco group plc    49 financial statements
2007 2006
£m £m
continuing operations
revenue 28107 25482
cost of sales 24045 21825
gross profit 4062 3657
administrative expenses 2642 2429
other expenses – amortisation of intangibles arising on acquisition 86 90
total administrative expenses 2728 2519
gain on sale of pfi investments – 114
operating profit 1334 1252
investment revenue 122 317
finance costs 310 495
profit before tax 1146 1074
tax 322 279
profit for the year 824 795
attributable to
equity holders of the parent 819 783
minority interest 05 12
earnings per share eps
basic eps 1698p 1662p
diluted eps 1674p 1643p
2007 2006
£m £m
net actuarial gain on defined benefit pension schemes 622 789
actuarial loss on reimbursable rights 194 534
net exchange gainloss on translation of foreign operations 128 123
fair value gain on cash flow hedges during the year 90 22
tax charge on items taken directly to equity 115 70
net income recognised directly in equity 531 84
profit for the year 824 795
total recognised income and expense for the year 1355 879
attributable to
equity holders of the parent 1349 871
minority interest 06 08
consolidated income statement
for the year ended 31 december 2007
consolidated statement of recognised income and expense
for the year ended 31 december 2007 50 serco group plc financial statements
2007 2006
£m £m
noncurrent assets
goodwill 5421 5285
other intangible assets 1394 1261
property plant and equipment 951 936
trade and other receivables 1046 1105
deferred tax assets 516 737
derivative financial instruments 12 –
9340 9324
current assets
inventories 463 517
trade and other receivables 5736 4633
cash and cash equivalents 1850 2179
derivative financial instruments 15 –
8064 7329
total assets 17404 16653
current liabilities
trade and other payables 6700 5419
current tax liabilities 148 130
obligations under finance leases 77 83
loans 135 579
derivative financial instruments 21 106
7081 6317
noncurrent liabilities
trade and other payables 133 104
obligations under finance leases 87 115
loans 3174 3461
derivative financial instruments 112 142
retirement benefit obligations 1426 2493
provisions 186 223
deferred tax liabilities 220 199
5338 6737
total liabilities 12419 13054
net assets 4985 3599
equity
share capital 97 95
share premium account 2993 2835
capital redemption reserve 01 01
retained earnings 2606 1966
retirement benefit obligations reserve 902 1195
sharebased payment reserve 346 255
own shares reserve 151 164
hedging and translation reserve 18 213
equity attributable to equity holders of the parent 4972 3580
minority interest 13 19
total equity 4985 3599
the financial statements were approved by the board of directors on 27 february 2008 and signed on its behalf by
christopher hyman andrew jenner
chief executive finance director
consolidated balance sheet
at 31 december 2007 serco group plc    51 financial statements
2007 2006
£m £m
net cash inflow from operating activities 1341 1595
investing activities
interest received 103 324
disposal of joint ventures 25 182
proceeds from disposal of intangible assets 17 –
proceeds from disposal of property plant and equipment 29 14
acquisition of subsidiaries net of cash acquired 91 –
purchase of other intangible assets 306 304
purchase of property plant and equipment 262 278
net cash outflow from investing activities 485 62
financing activities
interest paid 342 422
dividends paid 179 145
dividend paid to minority interest 12 10
repayment of borrowings 746 1034
new loan advances 22 94
capital element of finance lease repayments 84 86
proceeds from issue of share capital and exercise of share options 171 141
decrease in non recourse loans 83 253
net cash outflow from financing activities 1253 1715
net decrease in cash and cash equivalents 397 182
cash and cash equivalents at beginning of year 2179 2407
net exchange gainloss 68 46
cash and cash equivalents at end of year 1850 2179
consolidated cash flow statement
for the year ended 31 december 2007 52 serco group plc independent auditors’ 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 opinions on those
financial statements and the directors
remuneration report
opinion
in our opinion the summary financial
statement is consistent with the full annual
accounts the directors’ report and the
directors’ remuneration report of serco
group plc for the year ended 31
december 2007 and complies with the
applicable requirements of section 251 of
the companies act 1985 and the
regulations made thereunder 
deloitte  touche llp
chartered accountants and registered
auditors 
london
27 february 2008
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 statement of recognised
income and expense summary
consolidated balance sheet and the
summary consolidated cash flow
statement and the summary directors’
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 summary financial statement in
accordance with united kingdom law
our responsibility is to report to you our
opinion on the consistency of the
summary financial statement with the full
annual accounts the directors’ report and
the directors’ 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 summary financial
statement 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
independent auditors’ statement serco group plc    53
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
administrative enquiries about the holding
of serco group plc shares and enquiries
in relation to the serco dividend re
investment plan drip should be
directed to
computershare investor services plc
po box 82
the pavilions
bridgwater road
bristol bs99 7nh
shareholder helpline 
44 0870 873 5839
wwwcomputersharecom
dividend reinvestment plan
you can elect to receive future dividends
as shares rather than cash by
participating in the drip for further
information or to register please contact
computershare on the number provided
above for a copy of the terms and
conditions booklet and mandate form
dividends paid direct to your
bank account
• avoids 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 investor centre
via the computershare website or
contact computershare on the number
provided above
global payment services
for overseas shareholders in certain
countries computershare offers a global
payment service this service offers
shareholders the ability to have their
dividend converted into their local
currency and sent electronically to their
local bank account for a fixed fee of £5
to sign up for this service you need to
register with computershare’s investor
centre service at
wwwukcomputersharecominvestor
electronic communication
serco is very proud to participate in etree
etree is a service through which you can
register to receive communications about
serco electronically by signing up via
etree for electronic communications you
will receive emails alerting you to
communications as they become
available as part of the programme serco
will also donate a native sapling per
participating shareholder to the
woodland trust to participate in etree
you will need your shareholder reference
number and register at
wwwetreeukcomserco
shareholder information
shareholder information 54 serco group plc shareholder information
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 shareholdersshare account members
telephoneinternet buy or sell shares over the telephone or internet through
computershare investor services for telephone purchases or sales call 
0870 873 5839 between 800am and 430pm monday to friday for internet
purchases or sales log on to wwwcomputersharecomdealinguk
postal cazenove  co limited 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 sharedealing service 
20 moorgate london ec2r 6da united kingdom tel 44 0 20 7155 5155
• for non eu shareholders
currently non eu shareholders may only buy or sell shares through the cazenove
postal service see above
shareholder profile
the range and size of ordinary shareholding as at 31 december 2007 is set out below
range of shareholdings no of shareholders  no of shares 
1 – 1000 4120 4450 1890947 039
1001 – 5000 3553 3838 8042396 166
5001 – 10000 591 638 4189022 086
10001 – 100000 641 692 20453459 422
100001 – 500000 205 221 49397220 1018
500001 – 1000000 49 053 35394769 730
1000001 – 10000000 89 096 208598028 4301
10000001 and above 11 012 157083776 3238
total 9259 10000 485049617 10000 serco group plc    55 financial calendar
2008
27 february preliminary results announcement
5 march exdividend date
7 march record date
29 april last date for receiptrevocation of drip dividend mandates 
13 may interim management statement
13 may annual general meeting
21 may final dividend pay date
27 august interim results announcement
october interim dividend pay date
november interim management statement
31 december financial year end
financial calendar 56 serco group plc designed by rare corporate design london wwwrarecorporatecouk
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10 virgin fibre from sustainable forests
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contents
1 introduction
4 highlights
6 our business
8 chairman’s statement
10 chief executive’s statement
13 governing principles
14 serco’s strategy
16 operating performance
28 market development
30 finance review
36 summary financial statement
47 directors’ profiles
49 consolidated income statement
49 consolidated statement of
recognised income and expense
50 consolidated balance sheet
51 consolidated cash flow statement
52 independent auditors’ statement
53 shareholder information
55 financial calendar improving service increasing value
annual review  summary financial statement 2007
bringing service to life
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


Summary:
 chairman’s statement
i am delighted to report on another year of strong growth
the success we have achieved in 2007 underpins our
confidence in delivering doubledigit growth for the
foreseeable future
8 serco group plc chairman’s statement
kevin beeston chairman financial results
i am delighted to report on another year of
strong growth revenue grew by 103
to £2811m adjusted profit before tax
adjusted pbt rose by 173 to
£1232m and adjusted earnings per share
grew 166 to 1857p the adjusted pbt
margin increased from 41 to 44
benefiting from our management of the
contract portfolio and continued efficiency
improvements profit before tax rose by
67 to £1146m and earnings per share
were 22 higher at 1698p profit before
tax and earnings per share in 2006
included the benefit of the oneoff gain on
sale of our pfi investments
our cash performance continued to be
strong with group free cash flow
increasing 143 to £976m this
contributed to a reduction in group
recourse net debt of more than £34m to
£1379m the strength of our balance
sheet was further enhanced by the
decline in our net pension liabilities
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
302p per share representing an increase
on the 2006 final dividend of 184 and
bringing the total dividend for the year to
425p growth of 181 the final
dividend will be paid on 21 may 2008 to
shareholders on the register on
7 march 2008
board
there were a number of changes to the
composition of the board during the year
as announced on 31 august 2006 
i moved from executive chairman to
nonexecutive chairman on 1 september
2007 grant rumbles our chief operating
officer was appointed an executive
director on 3 july 2007
deanne julius retired on 29 october 2007
as a nonexecutive director and from her
post as senior independent director 
i would like to thank her for her considerable
contribution to our development and wish
her well baroness ford of cunninghame
was appointed the new senior independent
director from the same date
thomas corcoran joined serco as a non
executive director on 3 december 2007
thomas is a member of the remuneration
audit nomination and training and
development committees
managing our growth
one of serco’s great strengths is its long
term customer relationships we nurture
these by devolving responsibility to the
contract level giving our people the
freedom to anticipate and respond to
customers’ changing requirements 
this delivers excellent organic growth but
it also creates a need to make sure that
these actions are applied consistently and
in the best interests of serco and its
shareholders
over many years we have developed a
robust system of governance and internal
controls which we call the serco
management system it covers all areas
of our operations from finance through to
bidding for new contracts and we
continue to evolve it to ensure it keeps
pace with serco’s rapid development 
this allows us to operate in a devolved
manner while ensuring consistency and
an upward line of accountability and
control to the board the quality of these
processes is evident in our operational
and financial performance the right
balance between flexibility and control is
essential and maintaining this balance will
ensure a successful future for serco
growing markets and higher margins
underpin positive outlook
our markets continue to generate a broad
range of highquality opportunities for
serco both in the uk and internationally
the success we have achieved in 2007
underpins our confidence in delivering
doubledigit growth for the foreseeable
future at the same time our focus on
managing our contract portfolio enhancing
our efficiency and bidding selectively for
highervalue work will allow us to further
increase our margins and we expect a 30
basis point improvement in our adjusted
pbt margin in each of 2008 and 2009
i look forward to reporting to shareholders
on our progress in 2008
serco group plc    9 chairman’s statement