annual report and accounts 2010
bringing 
service to life
sercoar10outercoversindd   1 22032011   1713 additional content throughout the text 
to help with cross referencing links are 
illustrated with the following markers
serco in brief p0203
a valuesled and 
responsible business
p12
chief executive’s 
statement
p1821
operating review p2651
section 2
our business
what we offer our customers 06
our business drivers 07
our strategy and kpis 08
our business model 10
a valuesled and responsible business 12
how serco is structured 14
cross reference to a page with more information
further information available online
section 1
overview
who we are 01
serco in brief 02
how we performed – 2010 highlights 04
section 3
our performance
chairman’s statement 16
chief executive’s statement 18
market opportunities and drivers 22
operating review 26
finance review 52
people 60
corporate responsibility 64
resources 68
principal risks and uncertainties 70
section 4
governance
corporate governance report 80
directors’ report 86
directors’ responsibilities 89
directors’ pro les 90
remuneration report 92
section 5
financial statements
independent auditors’ report 104
consolidated income statement 105
consolidated statement of  
comprehensive income 105
consolidated statement of  
changes in equity 106
consolidated balance sheet 107
consolidated cash flow statement 108
notes to the consolidated  
financial statements 109
uk gaap audit report –  
parent company 161
company balance sheet 162
notes to the company  
financial statements 163
supplementary information 169
directors secretary and advisors 170
shareholder information 171
financial calendar ibc
sercoar10section1indd   2 14032011   1548  serco group plc annual report and accounts 2010  01
serco delivers essential frontline services that matter to millions of people around 
the world
our work for national and local governments involves us in the most important 
areas of public service including transport defence science employment  
offender management it  bpo and education our private sector customers  
are industry leaders
we have nearly 50 years’ experience of helping our customers achieve their goals 
many want us to improve their productivity and service quality others need us  
to support their rapid growth governments face crucial issues such as economic 
stability and development congestion security health and climate change  
they value the innovation and passion we bring to these challenges and the 
collaborative exible and imaginative way we work
serco is a valuesled company and our culture and ethos are at the heart of 
everything we do we give our people real responsibility so they can put their ideas 
into practice and make a difference for our customers and the public our approach 
has made us one of the world’s leading service companies and our vision is to be 
the world’s greatest
our focus on service means that our customers come back to us again and again 
these longterm relationships help us to meet their changing needs and to do what 
we do best
bringing service to life
section 1
who we are
more information on how we bring service  
to life is available on pages 26 to 51
sercoar10section1indd   1 14032011   1416 section 1
02  serco group plc annual report and accounts 2010
what we offer
we use our core capability – peopleled service delivery and change 
management – to improve the quality and ef ciency of essential 
frontline services because this capability is so widely applicable  
we can operate in a broad and growing range of markets around 
the world
we start by analysing a customer’s problems and producing a 
bespoke solution with improved people management at its heart  
this means that we design organisations to remove bureaucracy 
enhance processes instil our values and free people to deliver 
their best
building longterm customer relationships is fundamental to us  
we devolve responsibility to our contract directors allowing them to 
anticipate and respond to customers’ needs the serco management 
system which controls how we operate ensures these actions are 
also in serco’s best interests
for more on what we offer and how we work  
see page 6
our vision and strategy
our vision is to be the world’s greatest service company
everyone in serco discovers their own interpretation of ‘greatest’ 
which supports what they do every day however it is not about 
revenues pro tability or growth it means being the best at what  
we do and how we do it – what we call ‘bringing service to life’
our strategy for achieving this vision has four elements
1
 
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 uctuations enables  
us to select the best opportunities whichever market they are in  
and allows us to transfer expertise from one market to another
2
 
delivering excellent service this means meeting – and often 
exceeding – customer expectations we do this by having the 
responsible behaviours enshrined in our values at the heart of 
everything we do this enables us to build longterm customer 
relationships to expand the scope and scale of contracts during  
their life retain contracts at rebid and win new contracts
serco in brief
more information on the serco management system  
is available on our website
sercoar10section1indd   2 14032011   1416  serco group plc annual report and accounts 2010  03
3
 
making strategic acquisitions while we are primarily focused on 
organic growth we make acquisitions to gain skills which will be 
important for future growth and to enter markets where we see 
strong opportunities
4
 
developing new models we respond to emerging opportunities  
by nding new ways to deliver services this may mean collaboration 
between our divisions bringing together skills and experience which 
few other companies can replicate or partnering with our customer  
or the voluntary sector our ability to lead change keeps us at the 
forefront of our markets
for more on our strategy  
see pages 8 and 9
our track record of success
implementing our strategy – and in particular our emphasis on 
bringing service to life for customers – leads directly to our nancial 
success the focus on service excellence underpins our win rates  
of 90 of rebids and one in two new bids which in turn drive our 
revenue growth
since we listed in 1988 we have rapidly increased our revenue 
primarily through organic growth by securing higher margin  
contracts and managing our cost base we have been able  
to increase our margins at the same time we have delivered 
signi cant improvements in our free cash ow
our success is recognised by others in the many awards we win  
for operational excellence
for more on our recent performance see the operating review  
on pages 26 to 51 and the nance review on pages 52 to 59
the future
customers around the world are looking for help in transforming  
the quality and ef ciency of essential frontline services this creates 
opportunities for serco in new and existing markets and geographies 
our con dence in our prospects is supported by the high revenue 
visibility provided by our order book our existing pipeline of 
opportunities and the growth potential we see across our business
for more on our markets and opportunities  
see page 22
sercoar10section1indd   3 14032011   1416 section 1
04  serco group plc annual report and accounts 2010
how we performed – 2010 highlights
strong performance portfolio of growth 
opportunities ahead
£56bn of contract awards spread internationally
 service quality supports high win rates continue to win one  
in two new bids and 90 of rebids and extensions
 during 2010 signed £42bn of contracts and appointed preferred 
bidder for £14bn of contracts
 40 of revenue generated outside the uk with strong growth  
in the americas and ameaa
 revenue growth of 90 76 excluding currency
 ad usted operating pro t margin increase of 19 basis points to 
60 16 basis points excluding currency
 group free cash ow exceptionally strong at £1858m  
2009 £1373m
 t otal dividend up 176 to 735p re ecting growth in earnings

 economic environment and reform of public services create 
opportunities in new and existing markets 
 customers seeking help to build protect and improve frontline 
services and increase ef ciency 
 headwinds in uk during 2011 as government austerity measures 
and reforms are shaped 
 exposure to different economies through portfolio provides 
resilience and overall growth potential
 substantial pipeline of opportunities
 order book of £166bn at 31 december 2010 £171bn at 
31 december 2009 visibility of 92 of planned revenue for 2011 
77 for 2012 and 66 for 2013
 substantial £29bn pipeline of identi ed opportunities 
 in 2011 expect good organic revenue growth and progress 
towards our 2012 margin guidance and continue to expect an 
increase in revenue to approximately £5bn and in ad usted 
operating pro t margin to approximately 63 by the end of 2012  excluding material acquisitions disposals and currency effects based on 2008 exchange rates
note ad usted operating pro t and ad usted earnings per share shown above are before amortisation of acquired intangibles as shown on the face of the group’s consolidated income 
statement and the accompanying notes 
group free cash ow is free cash ow from subsidiaries and dividends received from oint ventures and is reconciled in section 3 of the nance review 
performance excluding currency has been calculated by translating nonsterling revenue and earnings for the year to 31 december 2010 into sterling at the average exchange rates for those 
currencies in 2009
the order book is the value of future revenues based on all existing signed contracts it excludes contracts at the preferred bidder stage and excludes inde nite delivery inde nite uantity 
idi  contract vehicles where we are one of a number of companies able to bid for speci c task orders within the idi 
the pipeline is the estimated value of all future potential opportunities that are clearly de ned and identi able
news january–december
serco americas 
sends mobile 
hospital to  
support haiti 
earthquake victims
merseyrail named  
as record breaking 
train operator
serco wins  
operator and 
service excellence 
award in australia 
for acacia prison
serco partnership to 
help the uk tackle 
climate change 
through offshore 
wind energy
national awards for 
outstanding safety  
for northern rail  
and the national 
nuclear laboratory
sercoar10section1indd   4 15032011   1513  serco group plc annual report and accounts 2010  05
revenue 2009 £3970m £4327m 
 90
ad usted operating pro t 2009 £2297m £2587m 
 126
operating pro t 2009 £2121m £2413m 
 138
pro t before tax 2009 £1771m £2139m 
 208
adjusted earnings per share 2009 2953p 3469p 
 175
earnings per share 2009 2676p 3188p 
 191
dividend per share 2009 625p 735p 
 176
group free cash ow 2009 £1373m £1858m 
 353
news july–december
barclays cycle hire 
launches in london
first anniversary  
of dubai metro
duncan mackison 
who leads our 
access joint venture 
with glasgow city 
council named 
outsourcing 
professional of 
the year in the uk
john biggin  
director of hmp  
 yoi doncaster 
named guardian 
public servant  
of the year
serco voted uk’s 
second most 
admired company 
and most admired 
services company
sercoar10section1indd   5 14032011   1416 06  serco group plc annual report and accounts 2010
section 2
what we offer our customers
serco is able to operate in a broad and growing  
range of markets because our core capability 
– peopleled service delivery and change 
management – can be applied so widely
our customers want more reliable ef cient and 
productive services we start by analysing their 
problems and producing a bespoke solution  
with improved people management at its heart 
this means that we design organisations to
 remove bureaucracy
 enhance processes
 instil our values and
 free people to deliver their best
in particular we
 use technology to increase ef ciency
 invest throughout the contract’s life so our services keep pace 
with developments
 make the best use of our customers’ assets so we are as cost 
effective as possible and
 share best practice and compare performance across contracts  
to help us constantly improve
specialist and transferable skills
we combine our core capability with the specialist skills we need  
to deliver great service in each of our markets
for example we know exactly what it takes to run a safe and punctual 
metro system to keep a customer’s procurement costs on budget  
to maximise a helicopter’s time on the frontline and to ensure a 
laboratory delivers worldleading research
we can transfer our specialist skills between markets so that 
customers gain from expertise we have honed elsewhere and we 
bring together unique combinations of skills from across serco  
to create innovative solutions to customers’ problems
focus on excellent service
our focus is always on delivering excellent service for customers  
we devolve responsibility to our contract directors so they can act 
quickly and decisively to meet our customers’ needs
how we work is as important to us as what we do the serco 
management system sets out our approach to everything from  
health and safety to our business ethics and our governing principles 
see page 12 underpin the thousands of decisions our people make 
each day ensuring that we always act responsibly our culture and 
way of working frees our people to put their service ethos into action
building longterm relationships
our focus on excellent service comes with a passion for improvement 
we are always looking to do better to be more productive and to nd 
new ways to help our customers
we aim to build longterm and mutually bene cial relationships with 
our customers the closer we are the better we understand their 
goals when our contracts come up for rebid or extension we retain at 
least 90 of them re ecting the value that we deliver for customers
our customers also frequently expand our contracts as they see the 
bene ts of our work rst hand
we have provided air traf c control services in dubai since the 1960s transferring capabilities from the uk has helped us succeed in the 
australian home affairs market
for more on our business model  
see pages 10 and 11
sercoar10section2indd   6 15032011   1511  serco group plc annual report and accounts 2010  07
our business drivers
increasing demand for highquality services
governments around the world face unrelenting demand for better 
services to the public they must also address signi cant challenges 
such as economic development and stability congestion security 
health and climate change at the same time many governments  
face budget de cits which will take years to rectify
the scale of these issues is encouraging governments to make 
transformational changes driving innovation and broadening 
our markets 
our private sector customers are also seeking help to improve 
their service quality ef ciency and productivity
 our markets are large but still have signi cant scope for growth 
for example
 in the uk one of the world’s most developed markets the public 
services industry accounts for only £80bn out of total government 
spending of £620bn
 the us federal government services market accounts for around 
10 of total federal government expenditure
the number of markets we can address also expands as we broaden 
our skills either by combining skills from around our business 
through acquisitions or by partnering with other companies the 
voluntary sector or our customers
the scale of our markets means that we can be selective about the 
opportunities we bid for it also means that our share of any one 
market does not affect our ability to grow
for more on our prospects in our individual markets  
see page 22
our competitive environment
competition is necessary for our markets to operate as it
 encourages customers to put services out to tender
 provides a benchmark to ensure they are getting best value and
 drives innovation
because of the breadth of our business we have a large number  
of competitors however while we see effective competitors in every 
market no organisation competes with us in all of them and only  
a few operate in more than one
our competitors are mainly companies but they can include public
sector bodies we have for example competed against government
owned railway companies and uk national health service trusts
as we enter new markets we meet competitors who specialise in 
those areas competition in our established markets has remained 
steady as our customers focus on trusted providers
improving health outcomes is a signi cant challenge for governments our capabilities in traf c management help to reduce congestion
sercoar10section2indd   7 14032011   1418 08  serco group plc annual report and accounts 2010
section 2
each element of our strategy 
contributes to reducing our 
exposure to market uctuations 
strengthening our position in 
our markets and developing 
new skills and capabilities for 
the future
our strategy and key performance indicators kpis
strategy
description
building a balanced portfolio
we aim to reduce risk and increase opportunities 
by building a balanced contract portfolio spread 
across markets this reduces our exposure to 
market uctuations enables us to select the 
best opportunities whichever market they are in 
and allows us to transfer expertise from one 
market to another
we bene ted from the breadth of our portfolio 
during the year with strong growth in ameaa 
the americas and uk civil government offsetting 
other slower uk markets
we continued to strengthen our portfolio with 
£42bn of contract wins and were appointed 
preferred bidder for a further £14bn of contracts
transferring our skills around the world enabled 
us to enter new markets we won our rst home 
affairs contract in new zealand to manage the 
mt eden and auckland central remand prison 
and were appointed preferred bidder for our  
 rst australian health contract at fiona stanley 
hospital in perth we won a contract with a new 
customer in the us the department of veterans 
affairs and were awarded a number of transport 
consultancy contracts in new countries 
including saudi arabia
adjusted earnings per share eps p
financial
adjusted eps increased by 175 to 3469p 
per share
3469
2010
1592
2006
1857
2007
2220
2008
2953
2009
adjusted eps is our pro t for the nancial year 
excluding the posttax charge for the 
amortisation of intangibles arising on acquisition 
divided by the weighted average number of 
shares in issue during the year adjusted eps 
provides a measure of shareholder return  
that is comparable over time the details of  
the calculation are shown in note 12 to the 
 nancial statements
we use the following kpis 
to monitor our performance 
over time they are split 
between nancial and 
non nancial measures
kpis
revenue £m
revenue represents the amounts due for  
the services we provided during the year  
and includes our share of revenue from 
joint ventures
the 9 growth in the year represents good 
performance against our strategic objectives 
excluding currency effects revenue growth 
was 76
4327
2010
2548
2006
2811
2007
3124
2008
3970
2009
 £m
financial
adjusted operating pro t is our operating pro t 
before the amortisation of intangibles arising  
on acquisition we believe it is the most 
appropriate measure for assessing the 
pro tability of our business
adjusted operating pro t increased by 126 
during 2010 representing an increase in margin 
of 19 basis points to 60
2587
2010
1228
2006
1420
2007
1652
2008
2297
2009
key achievements in 2010
financial
sercoar10section2indd   8 15032011   1514  serco group plc annual report and accounts 2010  09
delivering excellent service
delivering excellent service means meeting – 
and often exceeding – customer expectations 
we do this by having the responsible behaviours 
enshrined in our values at the heart of everything 
we do 
this enables us to build longterm customer 
relationships to expand the scope and scale  
of contracts during their life retain contracts  
at rebid and win new contracts
the quality of our service is re ected in our  
high bid win rates which we maintained at 90 
for rebids and extensions and one in two for 
new bids
during the year we were named britain’s 
mostadmired service company and the second 
mostadmired company overall by management 
t oday other recognition included
  the operator and service excellence award 
in australia
  23 awards and commendations from the 
royal society for the prevention of accidents 
in the uk and
  the defense enterprise architecture 
achievement award and the ‘none in  
a million’ federal aviation administration 
award in the us
making strategic acquisitions
while we are primarily focused on organic 
growth we make acquisitions to gain skills which 
will be important for future growth and to enter 
markets where we see strong opportunities
in 2010 we acquired rb solutions a successful 
provider in the uk revenues and bene ts 
market this strengthened our position in  
this market and enabled us to win ve new 
contracts including dacorum borough council  
and dudley metropolitan borough council  
to provide bene ts processing services
we also continued to gain from the acquisitions 
we have made in recent years which have 
provided a strong platform for organic growth 
for example our us business which we 
expanded with the acquisition of si international 
in 2008 has delivered high organic growth
developing new models
we respond to emerging opportunities by 
 nding 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
the partnering model we pioneered to deliver 
welfare to work services under the uk’s flexible 
new deal – drawing on private and voluntary 
sector providers – will form the basis for the 
government’s new work programme this is  
a tribute to the success of this model as well  
as a substantial opportunity for serco
the success of the model at gsts pathology 
our groundbreaking joint venture with guy’s 
and st thomas’ nhs foundation trust was 
demonstrated when it became the uk’s largest 
provider of pathology services during 2010 with 
the addition of king’s college hospital nhs 
foundation trust to the joint venture
we also created a strategic partnership with 
hertfordshire county council this will improve 
its service delivery and go beyond the scope of 
previous contracting models by offering services 
to other publicsector bodies in the area 
including district councils and the police authority
 £m
financial
group free cash ow increased by 35
1858
2010
854
2006
976
2007
942
2008
1373
2009
carbon dioxide emissions  
tonnes of co
2
£m revenue
 reducing our carbon dioxide emissions is a key 
aim for serco we measure our emissions in 
relation to our revenue to take account of the 
growth in our business
in 2010 we achieved a 73 reduction in  
tonnes of co
2
£m of revenue compared to  
our 2008 baseline
711
2008
687
2009
659
2010
reportable incident rate  
per 100000 employees
the reportable incident rate increased slightly 
during 2010 but remained substantially below 
earlier years
711
2010
1070
2006
1084
2007
999
2008
679
2009
reportable incidents include workrelated 
fatalities major injuries injuries resulting in 
absences from work of more than three days 
workrelated diseases and nearmiss accidents 
the incident rate measures our success in 
providing a safe and secure working environment
group free cash ow represents the free cash 
 ow generated by our subsidiaries plus the 
dividends we receive from joint ventures it 
represents the cash ow to which the group has 
access the calculation of group free cash ow 
is shown in the nance review on page 54 
 sercoar10section2indd   9 15032011   1512 10  serco group plc annual report and accounts 2010
section 2
1
 
selecting markets
we look for markets that
 are politically and economically stable
 offer multiple contracts and good growth
 provide appropriate margins and cash ow and
 allow us to differentiate ourselves from the competition
we also analyse many other factors including
 the market’s drivers
 our understanding of the customers and the way they procure
 ethical and humanrights issues and
 whether we can provide an attractive working environment  
for our people
in new markets we also consider our entry strategy and whether  
we need an innovative contracting model
2
 
identifying opportunities
once we know the market is attractive we identify opportunities  
to pursue we then test the quality of each opportunity including
 our understanding of the customer’s business and vision
 their funding for the project and
 how likely they are to procure
we also compare opportunities against each other to determine  
the best use of our resources
the business lifecycle governance process 
formalises our approach to value creation and 
managing the associated risks it helps us to
 determine the markets we want to be in
 bid successfully for contracts that add most value
 transition these contracts to deliver this value and
 retain and grow them
our business model
summary of the business lifecycle 
governance process
2 
identifying
opportunities
3 
bidding 
selectively
1 
selecting
markets
4 
transitioning
effectively
5 
delivering operational 
excellence
6
deciding
to rebid
yes no
7
rebidding
8
exit
sercoar10section2indd   10 14032011   1418  serco group plc annual report and accounts 2010  11
6
 
deciding to rebid
as we near the end of a contract we decide whether or not to rebid it
although we usually rebid we occasionally decide to exit a contract 
we might do this if for example
 the market has stopped growing or become too price  
competitive or
 we can get a greater return elsewhere
7
 
rebidding
our longterm relationships and service quality help us retain around 
90 of our contracts at rebid and extension
we approach the rebid as if it were a new contract designing ways  
to deliver even greater quality and productivity often the customer 
requests more services over a longer term so a rebid can be 
considerably larger than the original contract
once we have secured the rebid we return to the transition phase 
beddingin our innovations and any new services we have taken on
8
 
exit
when we nish a contract we do so in the right way
where appropriate we work closely with the incoming contractor  
to protect the interests of both the customer and the people who  
will transfer from us when our contract ends this is also important 
because we may have other contracts with the customer or want  
to work with them in the future
3
 
bidding selectively
bidding can be expensive and take many months so we only bid  
for opportunities that meet our criteria and where we have a strong 
chance of winning
the bidding stage has numerous steps from our initial submission  
to being shortlisted to our nal bid during the process we develop  
a detailed solution for the customer and test it thoroughly at every 
step we review the opportunity and con rm that we want to proceed
once the customer selects us the nal step is to negotiate and  
sign the contract
4
 
transitioning effectively
effectively transitioning a new contract is vital
we ensure that we have the right planning and controls in place to 
start work seamlessly on day one as we implement the solution we 
developed during bidding we also transfer knowledge from the bid 
team to the contract management and continue to strengthen our 
customer and stakeholder relationships
5
 
delivering operational excellence
we aim to deliver operational excellence and continual improvement
devolving responsibility to our contract directors allows them to 
innovate and respond to our customers’ needs it also makes our 
business scalable enabling us to manage a growing contract portfolio
the serco management system sets out our control framework 
ensuring we work safely and responsibly and safeguarding the needs 
of our stakeholders and serco every decision we make must be in 
line with our governing principles see page 12
working in the right way helps us to build longterm relationships  
this often leads to the customer expanding our contract during its  
life which is important for our growth it also positions us to win the 
contract at rebid
sercoar10section2indd   11 15032011   1512 12  serco group plc annual report and accounts 2010
section 2
a valuesled business
serco could not succeed without the skill and dedication of our 
people around the world they embody our culture and live our 
values which truly differentiate us from our competition and underpin 
the way we run the company
our values which are encapsulated in our governing principles are 
central to our culture and inform every decision we make by living 
these values we ensure that we deliver the excellent service on which 
our success depends
1
 
we foster an entrepreneurial culture 
we are passionate about building innovative and successful serco businesses 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
2
 
we enable our people to excel 
our success comes from our commitment and energy to go the extra mile 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
3
 
we deliver our promises 
we do what we say we will do to meet expectations 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 pro t
4
 
we build trust and respect 
we build respect by operating in a safe socially responsible consistent and honest manner 
we never compromise on safety and we always operate in an ethical and responsible 
manner we listen in doing so we treat others as we would wish to be treated ourselves 
and challenge when we see something is wrong we integrate with our communities
our governing principles
a responsible business
our governing principles emphasise the importance of corporate 
responsibility to serco we want to be good corporate citizens but 
acting responsibly also makes sound business sense and is essential 
to our strategy only by working in the right way can we deliver 
excellent service continue to build our balanced contract portfolio  
and attract the partners with whom we create new contracting models
we divide corporate responsibility into four pillars – health and safety 
people community and the environment our work for our customers 
encompasses all four pillars but there are many things we do which 
go beyond our contractual or legal requirements
pages 64 to 67 give more details about our approach to corporate 
responsibility and how we performed during the year
a valuesled and responsible business
sercoar10section2indd   12 14032011   1418  serco group plc annual report and accounts 2010  13
sercoar10section2indd   13 14032011   1418 14  serco group plc annual report and accounts 2010
section 2
15
64
21
■ united 
     kingdom
■ united states
■ other 
     countries
22
26
23
20
■ civil 
     government
■ defence 
     science 
     and nuclear
■ local 
     government 
     and commercial
■ americas
■ ameaa
9 11
22
26
21
20
■ civil 
     government
■ defence 
     science 
     and nuclear
■ local 
     government 
     and commercial
■ americas
■ ameaa
at the start of 2010 we created 
 ve new divisions based around 
our principal markets so that 
we could maximise our focus on 
growth and opportunities and 
maintain a exible and devolved 
organisation which responds  
to our customers’ needs 
how serco is structured
civil government includes our uk and european operations  
in home affairs custodial immigration and eld services and 
border security and control transport rail metro and roads 
welfare to work and health 
revenue by division 2010 revenue by division 2009
revenue by geography 2010 revenue by geography 2009
defence science and nuclear brings together our uk  
and european businesses providing operational support  
in the defence market our sciencebased businesses  
our energy market operations and our nuclear safety  
and assurance business 
£11269m
98
2009 £10263m
2010 revenue
£9108m
–11
2009 £9212m
2010 revenue
civil government
defence science and nuclear
20
60
20
■ united 
     kingdom
■ united states
■ other 
     countries
sercoar10section2indd   14 14032011   1418  serco group plc annual report and accounts 2010  15
local government and commercial incorporates our uk  
and european it and business process outsourcing bpo 
operations integrated and environmental services leisure 
education consulting and commercial businesses 
americas provides professional technology and management 
services focused on the us federal government including  
every branch of the military key civilian agencies and the 
intelligence community 
ameaa consists of our operations in africa middle east  
asia including hong kong and india and australasia through  
which we provide a range of services including rail and metro 
transport aviation offender management immigration health 
defence bpo local government and commercial 
more information on the services provided by each of our divisions  
is included in the operating review which begins on page 26
£4812m
412
2009 £3407m
2010 revenue
£8539m
55
2009 £8092m
2010 revenue
£9539m
93
2009 £8726m
2010 revenue
local government and commercial
americas
ameaa
sercoar10section2indd   15 14032011   1418 16  serco group plc annual report and accounts 2010
section 3
their values but it is much more demanding  
to ingrain these in the culture of the 
organisation especially one employing some 
70000 people around the world such that 
one sees them being lived each day in the 
decisions that management make the service 
provided to customers and the manner in 
which the business deals with its people
shortly after taking the chair i attended 
our 2009 pulse awards that recognised 
individuals and teams who have excelled 
during the preceding year in living our 
governing principles focused on 
achievements in innovation commitment 
impact and leadership those who won 
awards were impressive testament to the 
many at serco for whom their job is much 
more than just turning up for work each 
morning examples were our staff at 
lowdham grange prison whose projects 
helped forge new bonds between offenders 
and their children and thereby reduce the 
probability of reoffending and those at our 
family services business unit in north 
america who gave up weekends and 
holidays to build a licensed clinical social 
worker practice to help members  
of the us armed forces cope with issues 
such as posttraumatic stress disorder 
complementing this ethos of public service  
i have also found an equally strong 
entrepreneurial drive to deliver against 
objectives create value and develop 
innovative solutions to problems serco has  
a ‘can do’ mentality but one built on the 
foundations of a strong management system 
that ensures rigorous analysis of potential 
opportunities and their inherent risks 
meticulous implementation of the transition 
and transformation stages of new contracts 
and effective governance of ongoing 
activities in 2010 we implemented the 
barclays cycle hire scheme for transport for 
london in just 11 months from being granted 
the contract to the launch on 30 july  
we had 5000 speciallydesigned bicycles  
in place across 315 sites together with the 
supporting infrastructure and membership 
and billing systems 
serco’s breadth is in my view one of our 
great strengths we now have signi cant 
interests outside the uk – our americas 
business turned over £095bn in 2010 whilst 
in australia we are a major employer this 
geographic reach allows us to bene t from 
the strong economic growth being 
experienced in australia the middle east  
in my rst statement since 
being appointed chairman  
in may 2010 i thought i might 
give some initial impressions  
of our business 
since joining i have sought to gain as broad 
as possible an exposure to and understanding 
of the diverse activities that now comprise 
serco travelling around the united states 
the middle east india and australia as well 
as extensively within the uk i have visited 
over 30 of our sites across very different 
business streams such as defence offender 
management education transport and 
health before being approached to join the 
board of serco i obviously knew the name 
but had only limited awareness of the range 
of activities undertaken by the group from 
setting greenwich mean time at the national 
physical laboratory to providing air traf c 
control services at dubai international airport 
despite this diversity what i have found are 
very strong unifying competencies and values 
that set the company apart having served for 
many years as a nonexecutive director of 
government departments i recognise clearly 
the public service ethos – a deepseated 
desire to make a difference – within the serco 
staff i have met in prisons schools and 
hospitals to name a few many businesses 
talk about guiding principles and publish  
chairman’s statement
sercoar10section3aindd   16 14032011   1419  serco group plc annual report and accounts 2010  17
backdrop i am pleased to be able to propose 
a nal dividend for 2010 of 515p per share 
an increase of 170 on last year’s nal 
which would bring our total dividend  
for 2010 to 735p per share 176 up  
on 2009 over the past ve years serco  
has delivered a total shareholder return 
consistently ahead of the average for  
the ftse 100 
not only has the last year seen the retirement 
of kevin beeston my predecessor as 
chairman but 2010 also marked the 
retirement of both margaret ford our senior 
independent director since 2003 and tom 
corcoran who had been a nonexecutive 
director for the last three years bringing 
speci c us insight to the board we owe 
much to all three for their contribution to the 
successful progress of serco during their 
time on the board and in particular to kevin 
who started with the company in 1985 and 
was progressively finance director chief 
executive and executive chairman prior  
to his assuming the role of nonexecutive 
chairman in 2007 may i take this opportunity 
to extend them our best wishes for the future 
at the same time i would like to welcome  
paul brooks to our board in such a multi
faceted business i believe it is important  
to plan ahead for succession to key roles 
bringing individuals on to the board early  
to allow them to learn the business ahead  
of assuming particular functions david 
richardson has chaired our audit committee 
since 2003 and will therefore come to the 
end of his allotted nine years in 2012 i am 
therefore delighted that paul has agreed  
to join us and assume the role of audit chair 
following david’s retirement paul is very well 
quali ed for this having been group chief 
financial of cer of experian the ftse 50 
global information services company since 
2001 we will shortly return the board  
to its previous size once we complete the 
current recruitment process 
as an employer of some 70000 people 
across the world serco is deeply conscious 
of its responsibilities to the communities in 
which employees live and work and we seek 
to support them in their involvement in 
activities to help those less fortunate than 
they in this context i would like to say how 
delighted we all were to see the recent award 
of a cbe to chris hyman for both his 
charitable work and his business 
achievements a summary of our approach  
to corporate responsibility and some 
examples of the contributions that we 
make can be found in our corporate 
responsibility review on our website  
we are also very aware of the impact  
of what we do on our environment and 
considerations as to how best to lessen 
this impact are an integral part of the 
planning of each of our activities 
serco is a learning organisation seeking 
to improve what it does by listening to 
feedback from its stakeholders and its 
people if we make mistakes we put them 
right and learn from them the board is  
no exception and each year we undertake 
an evaluation of what the board does  
and how it does it this evaluation being 
facilitated externally every third year  
as chairman i will also undertake an 
annual development review with each 
director and my own performance will  
be appraised by my board colleagues  
led by david richardson who takes over 
the role of senior independent director
may i nish by thanking everyone who has 
contributed to making serco the business 
it is today i am very proud to have been 
invited to become its chairman 
alastair lyons cbe 
chairman
and india to offset the more challenging 
environment of the uk and to a lesser 
degree the us equally our breadth of 
activities allows us to take advantage of 
developing thinking in different countries 
towards delivering services to the public 
outsourcing and contracting when 
proposing for new opportunities we can 
reference existing successes elsewhere  
a good example being the contribution our 
hospital services activities in the uk made  
to our selection as preferred bidder for the 
substantial fiona stanley hospital contract  
in perth western australia – our rst major 
health activity in australia we recognise  
in the way in which we have designed our 
management structure the value that can  
be created by people across different parts  
of our business working together to share 
experience skills and ideas when visiting 
our immigration and offender management 
sites in australia i met employees with 
experience in our uk prisons and detention 
centres some on secondment others who 
had decided to take their careers forward in 
that region such interoperability played a 
signi cant role in serco being awarded a 
nz 300m prison management contract in 
new zealand
whilst the nancial crisis has imposed 
shortterm constraints on government 
spending in the uk i am con dent in  
our substantial pipeline of identi ed bid 
opportunities across the world and strong 
order book hence maintaining our forward 
guidance we have sought to be innovative in 
our thinking as to how to derive better service 
outcomes an example is our approach to  
the welfare to work market in the uk in which 
we partner with small companies and 
charities with vital local knowledge and 
expertise to deliver tailored solutions to the 
needs of individual bene t recipients in order 
to get them back into work quickly and 
remain off bene t the underlying need to 
deliver frontline public services more 
ef ciently and economically will i believe 
create signi cant new opportunities for 
our business
our achievements in 2010 as discussed in 
detail by chris hyman in his chief executive’s 
statement are ones of which chris and his 
executive team our wider management and 
employees can be justi ably proud growing 
our business by 90 and our pro t before 
tax by 208 during this period demonstrates  
the resilience of our business model and  
the capability of our people against this 
sercoar10section3aindd   17 14032011   1420 18  serco group plc annual report and accounts 2010
section 3
our colleagues across the 
world deliver essential services 
and their achievements have 
led to a strong nancial 
performance in very challenging 
times we expect serco’s 
position in new diverse and 
expanding international markets 
to deliver ongoing bene ts  
our agility and capacity  
to innovate underpin our 
con dence in continued growth 
across all our regions
overview of the year
2010 was a successful year for serco thanks 
to the commitment of our people to delivering 
quality essential services that matter to 
millions of people our continued focus  
on excellent service for our customers 
resulted in high win rates and strong 
operational and nancial performance in very 
challenging times 
 serco delivered a strong nancial 
performance in 2010 with revenue growth of 
90 to £43267m organic growth was 
76 excluding currency effects
this growth demonstrated the capability 
resilience and bene ts of our portfolio  
and our ability to develop new sectors and 
geographies as economic headwinds began 
to be felt in the uk revenue growth was 
particularly strong in ameaa and we 
achieved a very good second half in the 
americas in the uk good momentum from 
wins in 2009 drove growth in civil government 
markets while austerity measures began to 
be felt particularly in the defence and local 
government markets
adjusted operating pro t rose by 126 to 
£2587m re ecting a 19 basis point increase 
in adjusted operating pro t margin to 60 
16 basis points increase excluding currency 
the group delivered exceptionally strong  
free cash ow of £1858m compared with 
£1373m in 2009 cash bene ted by around 
£20m from asset sale proceeds a particularly 
high level of joint venture dividends and low 
tax payments
our policy is to increase the total dividend 
each year broadly in line with the increase  
in underlying earnings adjusted earnings  
per share rose 175 to 3469p per share 
re ecting this growth the board has 
proposed a nal dividend of 515p per share 
bringing the total dividend for the year to 
735p up 176 compared with the previous 
year the nal dividend will be paid subject 
to shareholder approval on 17 may 2011 to 
shareholders on the register on 11 march 2011
chief executive’s statement
sercoar10section3aindd   18 15032011   1335  serco group plc annual report and accounts 2010  19
 in 2010 we signed contracts valued at 
£42bn across a wide range of markets  
and were appointed preferred bidder for  
a further £14bn of contracts our wins 
included signi cant contract extensions  
and expansions as well as new contracts  
in existing and new geographies and sectors 
the value of these wins does not include  
a number of inde nite delivery inde nite 
 uantity idi  contracts in the us which  
we quali ed for and which have a combined 
ceiling value of us 4bn these enable us to 
compete against other appointed companies 
for one or more of the speci c task orders 
within the idi  
among the notable expansions and 
extensions to contracts during the year were
 a twoyear extension to our joint venture’s 
northern rail contract valued to serco  
at approximately £530m
 a renewed and expanded tenyear £100m 
contract to provide services at raf halton 
and raf high wycombe
 a renewed and expanded us 170m 
 veyear air traf c control contract with  
the us federal aviation administration
 one renewed contract and one new 
contract with the us navy to provide 
hazardous materials management  
valued at approximately us 84m over 
3 years and us 88m over ve years 
respectively and
 a renewed tenyear contract with the royal 
australian navy for our 5050 joint venture 
with p o valued to serco at a 250m
we had a number of important contract wins 
during 2010 these included
 a 25year £650m environmental services 
contract with sandwell metropolitan 
borough council
 a £415m 26 year contract to provide 
and operate a new prison at belmarsh 
west london
 a tenyear contract with king’s college 
hospital nhs foundation trust for our 
gsts pathology joint venture valued at 
around £110m to serco
 a £200m eightyear strategic partnership 
with hertfordshire county council and 
 a veyear transportation management 
contract with the state of georgia 
department of transportation valued 
at us 50m 
transferring our skills and capabilities across 
our business helps us to expand into new 
geographies and sectors and we had further 
success during 2010 of particular note 
we were
 awarded our rst home affairs contract  
in new zealand to manage the mt eden 
and auckland central remand prison 
valued at up to nz 300m £140m over 
ten years and
 appointed preferred bidder for our rst 
contract in the australian health market – 
a substantial tenyear contract to provide 
services at fiona stanley hospital in perth 
in addition there were many smaller contracts 
won by transferring capabilities including  
a veyear contract with a new us customer 
the department of veterans affairs to provide 
human capital solutions and transport 
consultancy including a contract for the 
makkah metro in saudi arabia 

the economic environment reform of public 
services and nation building are driving strong 
demand for the ef cient delivery of essential 
frontline services creating opportunities for 
serco in both new and existing markets our 
broad capabilities and track record of delivery 
allow us to support customers as they look 
for help in transforming the quality and 
ef ciency of these services and in tackling 
key challenges such as economic stability 
and development congestion security 
health and climate change
we launched the barclays cycle hire 
scheme just 11 months after winning the 
contract
we continue to grow our presence in the 
australasian home affairs market
for details of some of the many smaller and 
mediumsized contract wins see our contract 
news updates
for more details of these and other contract 
awards see the operating review on pages 
26 to 51
sercoar10section3aindd   19 14032011   1420 20  serco group plc annual report and accounts 2010
section 3
chief executive’s statement
international platforms from which to grow 
organically and bene t from the potential for 
rapid expansion of those markets we also 
see signi cant potential in india where we 
have recently established our presence 
the us is the largest government contracting 
market in the world and our skills and 
capabilities enhanced by those of our 2008 
acquisition of si international enable us to 
participate successfully 
we are well positioned to grow our share  
of the addressable federal services market 
which is valued at over us 150bn per 
annum while the government is seeking  
to reduce expenditure in certain areas such 
as large weapons programmes we expect  
to see substantial opportunities in emerging 
priority areas such as it infrastructure 
cybersecurity federal health and energy
ef cient it  
in asia paci c we have an active bid pipeline 
driven by the need for better infrastructure 
and services in a scally conservative 
environment governments in australia  
are aiming to return their budgets to  
surplus helping to build a solid pipeline  
of opportunities in areas such as health  
justice and defence 
in markets such as the middle east and india 
we continue to expect further opportunities 
arising from the demand for new services 
including public transport systems facilities 
management education health services  
and national security
while we are primarily focused on organic 
growth we will continue to acquire new  
skills and capabilities where they bring 
opportunities for growth in new markets  
and sectors such as the us federal market 
and international bpo markets
 during 2010 we set a new vision for serco – 
to be the world’s greatest service company
being the greatest is not about the size  
of our revenues pro ts or growth it means 
being the best at what we do and how we  
do it so we deliver maximum bene t for  
our customers everyone in serco discovers 
their own interpretation of ‘greatest’ which 
supports what they do every day – bringing 
service to life
in the uk the government’s comprehensive 
spending review has created a pressing 
need for public services to increase their 
ef ciency in the face of reduced budgets  
and our markets are not immune we signed 
a memorandum of understanding with the 
cabinet of ce in november to deliver cost 
savings on a number of contracts this year 
further developing our strong partnership  
with the uk government while these savings 
are not material to the group results they 
combine with other headwinds including the 
cancellation of one prison the phasing out of 
the business link contracts and the pending 
developments in public service reform  
to create a challenging environment in 2011 
the uk government has stated that the public 
sector does not have to deliver the services  
it commissions this is paving the way for the 
private and voluntary sectors to participate 
more fully in newer markets such as welfare 
to work and offender rehabilitation and for 
the development of new delivery models 
such as mutual organisations we also expect 
to see service providers increasingly paid for 
the results they deliver a model with which 
we already have considerable experience 
particularly in the flexible new deal contracts 
which are now planned to end in  
june 2011 these are to be replaced by the  
work programme framework and we have 
been selected as a bidder for contracts in 
seven of the 11 regions
we continue to work positively with our 
customers in the uk as they look for solutions 
to their nancial and operational challenges 
we are con dent that our opportunities to 
support those needs will become clearer later 
this year and we expect these to drive further 
growth we are anticipating that a 
forthcoming parliamentary white paper on 
open public services will outline in more 
depth how private and voluntary sector 
organisations could deliver additional uk 
public services
our international portfolio spread across 
many expanding economies and markets 
remains an important and proven element  
of our strategy our businesses outside the 
uk now account for 40 of our revenues  
and we are bene ting from the broader 
capabilities and contract portfolios we have 
developed in recent years our progress  
in establishing home markets in the us 
australia and the middle east gives us strong 
we are well positioned to grow our share of 
the addressable us federal services market
we expect further opportunities in the middle 
east arising from the demand for new 
services
sercoar10section3aindd   20 14032011   1420  serco group plc annual report and accounts 2010  21
our northern rail joint venture was 2010 train 
operator of the year 
we have excellent visibility of future revenue 
due to the signed contracts that make up  
our order book contracts we expect to 
extend and rebid and contracts at the 
preferred bidder stage which we expect to 
sign at 31 december 2010 our order book 
stood at £166bn compared with £171bn  
at the end of 2009 re ecting our contract 
signings during year the ending of our uk 
flexible new deal contracts and the cost 
savings on a number of contracts we have 
delivered to the uk cabinet of ce we had 
visibility at 31 december of 92 of planned 
revenue for 2011 77 for 2012 and 66  
for 2013 our pipeline of opportunities is 
currently £29bn 
for 2011 we expect good organic revenue 
growth and progress towards our 2012 
margin guidance whilst this re ects the 
contracts we have won in 2010 and the 
opportunities we expect to see across our 
regions during 2011 we have also taken into 
account the headwinds in the uk we expect 
the opportunities arising from the changed 
economic environment in the uk to begin  
to emerge from late 2011 
prospects beyond the current year are 
encouraging and we continue to expect by 
the end of 2012 an increase in revenue to 
approximately £5bn and in adjusted operating 
pro t margin to approximately 63 
christopher hyman cbe 
chief executive
note excluding material acquisitions disposals and 
currency effects and based on 2008 exchange rates
bringing service to life describes what we  
do in two ways it captures how we breathe 
new life into services transforming their 
ef ciency productivity and effectiveness  
and it recognises that the services we deliver 
make a difference to millions of lives around 
the world
in this report we have highlighted just  
a few examples of how we bring service  
to life these examples typify our approach  
to service the commitment and passion  
of our people and the outcomes we deliver 
for our customers
people
serco has some 70000 people delivering 
essential services around the world our 
success is not only the result of their hard 
work but also their commitment to our values 
and service ethos i thank them for their 
outstanding contribution to serco and to  
our customers in 2010
we have a clear strategy for managing and 
developing our people which in turn supports 
our overall strategy and vision to be the 
world’s greatest service company we have  
to be the best at managing people
our people strategy is to
 develop leaders who are t for the future 
and who will thrive as serco grows
 have people who bring service to life  
who are fully integrated and engaged  
with serco and whom we can develop  
to achieve their full potential and 
 make it easier to manage our people  
by continually enhancing our systems 
and processes
we made further good progress against each 
part of this strategy in 2010
reiterating guidance
our guidance re ects the growth potential we 
see across all our regions supported by our 
high revenue visibility and substantial pipeline 
of opportunities 
serco’s success is a result of the hard work 
values and service ethos of our people
we help uk councils increase recycling 
rates and reduce waste sent to land ll
for more information on our people see 
pages 60 to 63
sercoar10section3aindd   21 14032011   1811 22  serco group plc annual report and accounts 2010
section 3
at the start of 2010 we created 
 ve new divisions based  
around our principal markets 
this allowed us to maximise  
our focus on growth and 
opportunities and maintain  
a exible and devolved 
organisation which responds  
to our customers’ needs
both the sections on market opportunities 
and drivers and the operating review  
are presented according to these divisions
 civil government
 defence science and nuclear
 local government and commercial
 americas and
 ameaa africa middle east asia 
and australasia
our markets offer a broad range of 
opportunities as governments address 
substantial budget de cits and face continued 
pressure to improve public services some 
governments are implementing de cit 
reduction programmes and require ongoing 
ef ciencies in the delivery of essential 
frontline services which others are seeking  
to invest in creating or improving services  
all are addressing signi cant challenges 
including unemployment and economic 
development ageing and growing 
populations migration security congestion 
and climate change
faced with this governments are increasingly 
recognising the bene ts of opening new 
areas of public service to competition 
studies have demonstrated that competition 
can reduce the cost of public services by 
1030 and stimulate innovation in delivery 
uk
in the uk the economic environment has 
created a pressing need for more ef cient 
public services in the face of reduced 
budgets in its comprehensive spending 
review the government stated its intention  
to move from being a deliverer of services  
to becoming a procurer and is now looking 
to promote choice increase accountability 
and devolve powers away from the centre 
the competed public services market has 
potential to increase signi cantly in pursuit  
of ef ciency it was estimated in 2008 to  
be valued at some £80bn representing only  
one third of the government’s expenditure 
on services
we are anticipating headwinds in the current 
year whilst decisions on reform are resolved 
and customers develop their plans for future 
spending however a number of government 
reviews including those into defence and 
security transport and welfare and a 
forthcoming parliamentary white paper on 
open public services may result in new 
opportunities for the private and voluntary 
sector organisations to deliver services we 
expect further clarity as the year progresses
 welfare is an area of signi cant uk 
government expenditure the work 
programme is britain’s biggest employment 
programme for decades and will also be the 
 rst major move to a system of payment by 
results the contracts are substantially larger 
longer and have greater scope than the 
current flexible new deal contracts as they 
will extend support to other groups including 
the 25 million people claiming incapacity 
bene t the work programme will be let 
through framework agreements to allow for 
faster and more exible procurement and  
will adopt the model we have successfully 
pioneered of subcontracting frontline delivery 
to networks of providers there is also 
potential for other employmentrelated 
support services contracts to be let through 
this framework over the next ve years 
including subsequent contracts that attract 
european social fund support 
in home affairs the rst three existing 
publicsector prisons are being markettested 
in 2011 we also see opportunities arising 
from the drive to manage the existing prison 
estate more effectively reduce reoffending 
and improve the ef ciency of probation 
where a £16bn market is opening up  
in addition we are well placed to help with 
the proposed move to more community 
sentences for offenders for example through 
our capabilities in electronic monitoring and 
rehabilitation of offenders
the uk health budget is approximately  
20 of government spending at more than 
£100bn per annum and reforms are focused 
on greater ef ciency and improved 
market opportunities and drivers
serco has made a successful start in the 
growing welfare to work market
we see opportunities to grow our pathology 
joint venture
sercoar10section3aindd   22 14032011   1421  serco group plc annual report and accounts 2010  23
also exploring how we can apply our 
operations and maintenance capability in 
critical national infrastructure to the wider 
renewable energy market and establishing  
a centre for carbon measurement
 in uk local government councils are under 
signi cant pressure from reductions in central 
government grants a freeze on council tax 
increases reductions in business rates and 
increased service demands from citizens 
this is driving interest in strategic partnering 
service sharing process reengineering 
personalisation of services and in some 
areas engagement with the voluntary sector 
we are currently in discussions with more 
than 20 local authorities about how we can 
help them to transform service delivery our 
successful bids into en eld borough council 
hertfordshire county council and sandwell 
metropolitan borough council are examples 
of how we have applied our broad and deep 
capabilities we are committed to partnering 
with the voluntary sector and small and 
mediumsized enterprises to develop 
solutions which address our customers’ needs 
we are also engaging actively with a number 
of local authorities to discuss models for  
the outsourcing of education and children’s 
services in the wake of the spending review 
and education white papers our partnership 
models offering shared revenue and pro t 
have been well received we anticipate a 
number of opportunities coming to market 
in 2011
we are seeing a revolution in the way  
health services are delivered increased 
opportunities to build on our integrated 
facilities management offering to acute 
hospital trusts and reaching into middle of ce 
services such as human resources and 
 nance our success in transferring these 
skills as part of our proposition for fiona 
stanley hospital in australia where we are 
preferred bidder demonstrates the value of 
our experience
outcomes we see opportunities to grow  
our pathology joint venture and provide 
facilities management and support services 
to healthcare establishments and gp 
commissioners we will also look at further 
opportunities to manage nhs hospitals  
and expand in offender healthcare
 in the uk defence market the government 
has moved to a ‘national security’ policy  
with the publication of the strategic defence 
and security review sdsr in october 2010 
bringing together a number of markets  
in which we currently have presence and are 
increasing our potential the sdsr also 
identi ed target reductions to the number  
of civil servants and the armed forces over 
the next ve years involving new ways of 
working and a more radical approach to  
the delivery of both backof ce services  
and procurement implementation of these 
changes is likely to provide opportunities  
for serco to support the ministry of defence 
mod in change management transition 
and the provision of complex integrated 
services we are one of two bidders awaiting 
the decision on the recruiting partnering 
project for the army and one of three bidders 
on the future outsourced activities 
programme for royal navy recruits 
in wider security and civil resilience markets 
we are pursuing opportunities such as the 
longterm provision of outsourced training 
services to the london fire and emergency 
planning authority
the uk’s scienti c establishments have a 
critical role in addressing challenges such  
as economic recovery climate change and 
national and energy security we are in a 
strong position to contribute given our 
experience of managing the national physical 
laboratory the national nuclear laboratory 
the atomic weapons establishment and our 
nuclear assurance business our partnership 
with the mod on the chemical biological 
radiological and nuclear protection delivery 
t eam also enables us to bid for further 
partnerships within the mod 
in the energy sector the uk government 
faces signi cant challenges in securing the 
country’s longterm needs while tackling 
climate change our participation ranges from 
delivering regulatory and technical services in 
the nuclear newbuild programme to reducing 
the radar interference of windfarms we are 
uk councils are looking for help with 
transforming service delivery
the scienti c establishments we run will help 
the uk government address challenges 
such as climate change and energy security
sercoar10section3aindd   23 14032011   1421 24  serco group plc annual report and accounts 2010
section 3
market opportunities and drivers
ameaa
in australia and new zealand there  
is a growing range of opportunities 
in the justice sector we are seeing a number 
of newbuild and existing prisons being  
put to the market as governments challenge 
the traditional approach 
we also continue to pursue the emerging 
health market in both australia and hong 
kong as governments encourage the private 
and voluntary sectors to challenge traditional 
service delivery models for the build nance 
and operation of hospitals 
our defence strategy in australia continues  
to develop with opportunities in areas  
such as logistics and garrison support  
the government’s strategic reform 
programme will support the creation  
of some of these opportunities through 
reviews of warehousing distribution and 
equipment maintenance 
serco’s operations in the middle east centre 
on the united arab emirates this region 
remains buoyant for serco as governments 
progress with infrastructure and public 
service projects in transport education and 
health we continue to build on our core 
markets in the region particularly in facilities 
management transport and aviation and  
are well placed to move into new markets  
of health education and defence with a 
strong pipeline of opportunities for the 
foreseeable future 
in india we continue to develop our presence 
in the domestic bpo market in addition  
our global transport team is shaping 
signi cant opportunities in both the middle 
east and india including rail road and traf c 
management marine services and aviation

the us market which is the largest 
government contracting market in the world 
offers serco opportunities in both the federal 
defense and federal civilian markets 
in the us federal services market of which 
our addressable share is valued at us 150bn 
per annum out of a total of us 300bn we 
expect the increasing reliance on information 
technology to continue to present signi cant 
opportunities for serco it is essential for 
successful government operations and we 
expect increasing demand in areas where  
we have strong capabilities such as systems 
engineering cybersecurity program 
management command and control  
and logistics systems modernisation 
additionally the federal government 
continues to face workforce shortages and to 
rely on contractors serco expects to grow in 
managed services including human capital 
management military personnel support 
services records management business 
process outsourcing and logistics supply 
operations with our scale capabilities and 
past performance we are well positioned to 
bid and win larger contracts 
we quali ed on a number of inde nite 
delivery inde nite uantity idi  contract 
vehicles where we are one of a number of 
companies able to bid for speci c task orders 
within the idi  notable examples awarded 
during 2010 included a veyear personnel 
support services idi contract with the us 
army allowing us to compete with 16 other 
awardees for up to us 26bn of task orders 
we are also eligible to compete with 11 other 
awardees for task orders within a studies  
and analysis idi contract with the us army 
amounting to us 13bn over ve years in 
addition we along with 13 other companies 
are signed up to a veyear recruiting and 
retention idi contract for up to us 274m  
of task orders to provide program analysis 
information technology counselling and 
training with the us army
since the year end the us navy’s space and 
naval warfare systems command has 
named serco as one of four winners for an 
idi contract to support the navy in the 
installation and testing of command control 
communications computers intelligence 
surveillance and reconnaissance c4isr 
systems the contract has a ceiling value  
of us 14bn over a threeyear base period 
with a twoyear option period
the us is the world’s largest government 
contracting market
transport is one of the markets where we 
see further opportunities in the middle east
sercoar10section3aindd   24 14032011   1421  serco group plc annual report and accounts 2010  25
sercoar10section3aindd   25 14032011   1421 26  serco group plc annual report and accounts 2010
bringing service 
to life
section 3
operating review  civil government 
the barclays cycle hire scheme london
sercoar10section3bindd   26 14032011   1422  serco group plc annual report and accounts 2010  27
communities we work in by creating jobs in areas of london with 
high unemployment we placed our call centre in en eld and our 
operations centre in islington and then recruited around three 
quarters of our 280 staff through jobcentre plus which helps  
people of working age get off welfare and into work
we are also helping young people into work with our 
apprenticeships in total we have 27 apprentices aged 18 to 25 
they are learning mechanical and engineering skills undertaking 
routine maintenance and keeping our bikes roadworthy the next 
step is for them to train to become quali ed mechanics
there will be further bene ts for customers and more scope for  
job creation as barclays cycle hire extends towards east london  
in readiness for the 2012 olympics the planned expansion will 
increase the area covered to 65km² with around 8000 hire bikes 
available from 600 docking stations
during 2010 we launched a brand new way of travelling round 
the streets of london – the barclays cycle hire scheme in just  
a few months the distinctive bikes have become an integral part of 
the city’s streetscape by the end of the year customers had made 
215 million journeys and the scheme had 112000 registered 
members in a survey 91 of members said they were happy with 
the service which we deliver on behalf of transport for london
barclays cycle hire is the rst such scheme in the uk and 
demonstrates our ability to take on new challenges for our customers 
we were able to draw on operational nancial commercial and 
transition expertise from around serco to launch the service within 
just 11 months of signing the contract this success was re ected  
in serco being highly commended at the mayor’s procurement 
awards 2010
the scheme has made a big difference to the lives of those travelling 
around london but we have also been able to make life better for the 
…in transport
sercoar10section3bindd   27 14032011   1422 28  serco group plc annual report and accounts 2010
section 3
employment we have been awarded a place 
on the framework to deliver the government’s 
new work programme in seven regions the 
maximum number that could be awarded to 
one organisation
2010 performance
civil government’s revenue grew 98  
to £11269m 2009 £10263m and 
represented 26 of group revenue in both 
2010 and 2009 the growth which was 
particularly strong considering the change  
in accounting for train operating company 
track access charges which reduced 
revenue by £265m derived principally from 
the large contracts awarded in 2009 which 
became operational during 2010 these 
included the flexible new deal contracts 
under the welfare to work programme which 
started in october 2009 and the barclays 
cycle hire scheme in london we also 
bene ted from contract wins during 2010 such 
as the expansion in september of the gsts 
pathology joint venture to include king’s 
college hospital nhs foundation trust 
transport – rail and metro
we run three of the best performing  
train operating contracts in the uk
both northern rail and merseyrail joint 
ventures with abellio continued to deliver 
strong operating performances 
northern rail achieved 908 punctuality  
as of the last period and overall satisfaction  
in the national passenger survey was 82  
– unchanged from the previous year it has 
recently been awarded train operator of the 
year in the rail business awards recognising 
the investment made by serco and abellio 
above and beyond the franchise requirements 
in addition northern rail received two top 
national awards and four commendations  
in the railway industry innovation awards  
as well as the top transport title from the 
royal society for the prevention of accidents 
for the second year running
our work in civil government 
covers the home affairs  
health transport and welfare  
to work sectors
in home affairs we are the uk’s leading 
private provider of custodial accommodation 
operating four prisons with a fth belmarsh 
west under construction we also run a 
young offender institution and a secure 
training centre we provide court escort  
and custody services as well as electronic 
monitoring of offenders and individuals 
released on bail we run two immigration 
removal centres and provide immigration 
control case management homeland 
security and technology services
in health our groundbreaking pathology  
joint venture with guy’s and st thomas’ and 
king’s college hospital nhs foundation 
trusts combines their clinical excellence with 
our management expertise we are one of the 
uk’s leading providers of occupational health 
services supporting the health and well
being of over 450000 of our customers’ 
employees nationwide we are also the 
leading independent provider of custodial 
health services providing for thousands of 
people in custody across the uk we deliver 
unscheduled care services in cornwall 
providing reliable access to doctors and 
appropriate medical assistance outside 
normal working hours
we are a key provider of transport in the  
uk through our rail metro road and ferry 
services with our partner abellio we run  
both northern rail the uk’s largest train 
franchise and merseyrail the uk’s most 
punctual train operator in london we 
operate the docklands light railway the 
woolwich ferry and the east london traf c 
control system we designed implemented 
and operate transport for london’s award
winning barclays cycle hire scheme  
we deliver national motorway traf c 
infrastructure services install and maintain 
road safety cameras and run the national 
traf c control centre
we began operations as a leading prime 
contractor of welfare to work services in 
october 2009 since then our delivery 
network has helped approximately 18000 
longterm unemployed people into 
operating review  civil government 
we are a key provider of transport services 
in the uk including traf c management
the docklands light railway carried more 
than 75 million passengers in 2010
the operating review outlines 
contract wins which are 
signi cant because of their 
value or their contribution to 
our business development 
we also won numerous other 
smaller and mediumsized 
contracts details of some of 
which can be found on our 
website at wwwsercocom
further information available online
sercoar10section3bindd   28 14032011   1422  serco group plc annual report and accounts 2010  29
merseyrail was the uk’s most punctual 
railway during 2010 with 952 of trains on 
time over the year and was also the 
highestrated train operating company with a 
93 satisfaction rating in the independent 
national passenger survey 
on the docklands light railway the roll out 
of a full threecarriage service has increased 
capacity by 50 customer satisfaction was 
954 for overall service and 963 for safety 
and security in the fourth quarter of 2010 
increased service reliability resulted in 971 
of trains running to schedule on the most 
recent gures passenger numbers grew 
again in 2010 and were 93 higher at 
752 million journeys
northern rail signed a twoyear extension  
to its franchise on the same terms as its 
existing contract serco’s share of the 
extension to september 2013 is valued  
at approximately £530m 
in rail technology we have completed our 
contracted development work on the asset 
inspection train for the london underground 
and following earlier delays now look 
forward to the nal handover
we launched barclays cycle hire for 
transport for london by the end  
of the year over 110000 members had 
registered and the scheme is also now 
available to casual users in total over 
2 million journeys have been made to date  
and in a survey 91 of members said they  
were happy with the service the scheme’s 
success has resulted in plans to extend it 
towards east london in readiness  
for the 2012 olympics increasing the area 
covered to 65km² around 8000 hire bikes 
will be available from 14400 docking points 
spread across 600 docking stations
we are the uk’s leading independent provider 
of custodial health services 
the barclays cycle hire scheme saw more 
than 2 million journeys in just ve months
our merseyrail joint venture is the uk’s most 
punctual railway
sercoar10section3bindd   29 14032011   1423 a theatre workshop at hmp  yoi doncaster
30  serco group plc annual report and accounts 2010
bringing service 
to life
section 3
operating review  civil government 
sercoar10section3bindd   30 14032011   1423  serco group plc annual report and accounts 2010  31
…in offender  
management
hmp  yoi doncaster holds an offender on average for just 
1216 weeks making its population one of the hardest to 
rehabilitate when john biggin took over as the prison’s director  
he was prepared for the challenge “i had a vision for the prison  
and the difference it could make to people’s lives” he says
john sharpened the prison’s focus on reducing reoffending 
introducing innovative schemes and a zero tolerance for violence 
and drugs research shows that offenders with strong family ties 
are six times less likely to reoffend so new fathers now have a 
separate visiting area helping them to bond with feed and bathe 
their babies visits take place outside in summer and the prison 
arranges family activities
a new directorate brings outside groups into the prison helping 
doncaster achieve more without extra funding one example  
is the theatre work with the central school of speech and drama 
“our restorative justice project gave the men a real insight into  
their impact on victims” says john “when they performed in the 
houseblocks the audience also got the message”
to help offenders reenter the community doncaster’s team helps 
them access housing bene ts employment or training charity 
catch22 provides roundtheclock mentoring after an offender 
leaves prison
john’s initiatives have produced a sharp drop in violence drug use 
and smuggling by visitors the next step will be payment by results 
with part of our revenue at doncaster dependent on reduced 
reoffending six months after release 
in recognition of his achievements john was voted the 2010 
guardian public servant of the ear underpinning his success  
is serco’s way of working “i was encouraged to have a vision and  
to realise it” he says “serco gave me the chance to get doncaster 
ahead of the game” 
sercoar10section3bindd   31 14032011   1423 32  serco group plc annual report and accounts 2010
section 3
operating review  civil government 
home affairs 
we signed a contract with the ministry of 
justice to provide and operate a new prison 
at belmarsh west london the contract has 
a value to us of approximately £415m over 
26½ years the prison will be built by our 
construction partner skanska with equity  
and debt nance secured from third parties 
and is on track to be completed in the rst 
half of 2012 belmarsh west is the rst uk 
prison contract to be awarded to an alliance 
of the private and voluntary sectors with our 
partners turning point and catch22 we will 
focus on costeffective care and successful 
rehabilitation creating an environment that 
prepares those in our care for release 
we were disappointed to be informed that 
having been appointed preferred bidder  
to provide and operate a further prison at 
maghull the project would not go ahead  
as a result of the comprehensive spending 
review we fully understand the decision and 
look forward to working with the government 
on its proposals to deliver innovative 
effective rehabilitation to reduce reoffending
we were awarded a number of contract 
extensions including a twoyear extension 
valued at £38m to our contract to run 
colnbrook immigration removal centre and 
a threeyear £32m extension to our contract 
to manage yarl’s wood immigration removal 
centre we were also awarded an additional 
two years for our electronic monitoring 
contract for scotland valued at around £10m 
and signed a oneyear extension to our 
electronic monitoring contract for england 
and wales valued at an additional £38m of 
revenue at current levels
in border security and control the home 
of ce has announced the termination of its 
eborders contract with raytheon the prime 
supplier of this advanced border control  
and security services programme to the  
uk border agency as a subcontractor on  
the programme we are continuing to ful l  
our obligations to operate key parts of the 
existing service and continue to work with  
the uk border agency on how we can  
best support them in the future on the 
eborders programme 
we were delighted that john biggin director 
of hmp  yoi doncaster was named public 
servant of the year at the guardian public 
service awards this is the rst time a private 
sector employee has received such an 
award we also received a british safety 
council five star health and safety audit 
award for hmp dovegate and recognition  
in the healthcare 100 awards for our work  
at yarl’s wood immigration removal centre
welfare to work 
we have made a successful start in the 
welfare to work market as prime contractor 
under our three flexible new deal fnd 
contracts with the department for work and 
pensions dwp we help people claiming 
jobseeker’s allowance who have been 
unemployed for more than 12 months to nd 
sustainable work we achieve this through our 
unique model of subcontracting to networks 
of successful providers including private 
public and voluntary sector organisations 
since the start of these contracts in october 
2009 we have enabled nearly 18000 people 
to move back into employment 
these existing fnd contracts and all other 
existing backtowork schemes will now end 
in june 2011 and be replaced by the work 
programme which will be substantially larger 
longer and have greater scope it will extend 
support to additional groups including those 
who have been unemployed for less than 
12 months and those claiming incapacity 
bene ts contracts are being tendered for  
in 2011 and let through a new framework on 
which we are placed in seven out of eleven 
available regions across the uk each region 
is made up of between one and three 
contact package areas in which there will  
be at least two suppliers this offers the 
opportunity for us to substantially extend  
our footprint in the market 
our welfare to work team has expanded  
into an adjacent market winning a number  
of contracts valued in aggregate at around 
£19m to implement job deal which helps 
exoffenders nd jobs the programme is 
jointly funded by the european social fund 
and the dwp  and is managed by the national 
offender management service
we extended our electronic monitoring 
contracts for england and wales and 
scotland
we have helped nearly 18000 people into 
employment through our welfare to work 
contracts
serco is the uk’s leading private provider of 
custodial accommodation
sercoar10section3bindd   32 14032011   1423  serco group plc annual report and accounts 2010  33
health
king’s college hospital nhs foundation 
trust king’s joined gsts pathology our 
joint venture with guy’s  st thomas’ nhs 
foundation trust and awarded it a contract 
to provide pathology services this will  
result in incremental revenue to serco of 
approximately £110m over ten years king’s 
has one of the largest integrated automated 
laboratories in europe and will further 
enhance the range of tests available to gsts 
pathology’s customers 
gsts pathology is now the uk’s largest 
pathology service provider and has achieved 
considerable success in improving service 
levels among a wide range of improvements 
cervical cancer screening times and the 
turnaround times for some forms of diabetic 
monitoring tests have been halved we have 
achieved even better results for hiv 
genotyping assays reducing the time taken 
from 28 to 10 days
our joint venture is now the uk’s largest 
provider of pathology services 
sercoar10section3bindd   33 14032011   1424 34  serco group plc annual report and accounts 2010
section 3
operating review  defence science and nuclear 
bringing service 
to life
the depth maintenance facility at rnas culdrose
sercoar10section3cindd   34 14032011   1424  serco group plc annual report and accounts 2010  35
our services are missioncritical so we form a team with our 
customers to ensure they get what they need we then employ 
people with a real depth of knowledge and the service ethos  
to make this happen 
we encourage innovation to overcome our customers’ issues  
for example peter morrissey an aircraft welder on the merlin 
support contract invented a new way to repair merlin exhausts  
when spare parts were in short supply by preventing the need  
for slow and costly offsite repairs peter made sure the helicopters 
were available for the royal navy and saved more than £26m  
over four years
the outcome of our approach is that helicopters spend more time  
on the frontline and we get excellent feedback from our customers 
as well as receiving numerous awards and commendations  
the culdrose team scored an average of nine out of ten in a recent 
ministry of defence customer satisfaction survey
royal naval air station culdrose in cornwall uk is europe’s 
largest military helicopter unit serco has a crucial role helping to 
maximise the time those helicopters are available for deployment
we have two contracts at culdrose under our multiactivity contract 
with the fleet air arm of the navy command our wide range of 
services includes supporting the sea king helicopters used in search 
and rescue missions and providing jet pilots for training exercises 
our second contract is to provide a deep maintenance facility for 
merlin helicopters on behalf of their manufacturer agustawestland 
serco began operating at culdrose in 1996 since then our services 
have grown substantially from 26 employees at the start we now 
have more than 350 at the base as one indication of the scale of our 
work we deliver 10 million litres of fuel each year ensuring the 
helicopters are ready to y
…in uk defence
sercoar10section3cindd   35 14032011   1424 36  serco group plc annual report and accounts 2010
section 3
defence science and nuclear 
dsn delivers services to the 
uk and german governments
in the uk we provide training engineering 
and operational support to the royal air 
force and the aviation arms of the british 
army and royal navy we also support the 
royal navy’s three main uk bases and 
operate and maintain strategic assets such 
as secure satellite communications the 
defence academy of the united kingdom 
the emergency planning college and the 
uk’s ballistic missile early warning system  
at raf fylingdales we provide systems 
engineering safety assurance and risk 
management services and support the 
essential defence and force protection 
research carried out at the defence science 
and technology laboratory 
in germany we have supported the german 
armed forces for over 40 years delivering 
training logistics and operational support 
services we also provide facilities 
management prison and it services to 
commercial companies and the german 
government
we manage the national physical laboratory 
one of the world’s major scienti c 
establishments with our partners battelle 
and the university of manchester we also 
manage the national nuclear laboratory  
one of the uk’s leading technology service 
providers and a centre of excellence in 
nuclear nonproliferation
we have an integral role in the uk defence 
and civil nuclear industries our joint  
venture with lockheed martin and jacobs 
engineering manages the uk atomic 
weapons establishment awe which 
provides the warheads for the uk’s nuclear 
deterrent in addition we have provided 
nuclear safety advice to the royal navy’s 
submarine eet 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 we support the operation of  
over 20 nuclear reactors
2010 performance
dsn’s revenue reduced by 11 to £9108m 
2009 £9212m which represented 21  
of group revenue 2009 23 this decline 
re ected a slowdown in advance of the  
uk election and the strategic defence  
and security review during 2010 both in 
decision making and in major 
contract awards 
key awards last year included a renewed and 
expanded multiactivity contract valued at 
£100m over ten years to provide services at 
raf halton which we have served since 
1997 and raf high wycombe the home of 
headquarters air command at raf brize 
norton the main gateway for british military 
personnel on overseas operations the 
ministry of defence mod awarded us a 
contract for up to six years to deliver essential 
support services worth approximately £35m 
we have supported the raf there since 1997 
and this contract con rms and reinforces our 
position supporting the mod’s programme 
future brize which will see raf brize norton 
develop into the core air transport and 
air refuelling station 
utilising our scienti c capabilities our joint 
venture to manage and operate awe 
continues to achieve excellent delivery 
against key milestones the awe 
transformation programme is delivering 
signi cant bene ts working with the mod to 
reduce costs while maintaining performance 
levels in addition we have delivered the 
project orion laser facility a worldleading 
high energy density physics experimental 
facility on time and to the mod’s 
requirements we are delighted that  
a team from awe has been awarded  
a commendation by the mod’s chief 
scienti c advisor for work on collaborative 
arms veri cation with norway 
bridging the defence and energy markets  
a new eightyear contract with the mod 
valued at around £20m to serco will help  
the uk tackle climate change through 
offshore wind energy as prime contractor 
we are working with lockheed martin to 
introduce radar technology that resists 
interference from wind farms removing a 
signi cant obstacle to the roll out of offshore 
wind power across the uk this new 
technology has already been commended for 
innovation at the 2010 national buying  
selling energy awards
operating review  defence science and nuclear 
serco has supported the raf at brize 
norton since 1997
we manage scienti c establishments 
including the worldleading national physical 
laboratory
we enable the royal navy to move in and 
out of port at its three main uk bases
sercoar10section3cindd   36 14032011   1424  serco group plc annual report and accounts 2010  37
in the civil energy market westinghouse 
appointed serco as its lead nuclear safety 
advisor in the uk serco’s role is to lead  
a team of experts to help westinghouse 
complete step 4 of the generic design 
assessment for the ap1000 a critical stage in 
the reactor design approval process being 
conducted by the uk nuclear regulators 
which is due to complete in 2011 the 
contract is strategically important for serco 
coming at the beginning of a new  
era for nuclear energy in the uk
our european defence operations secured 
over £50m in new business and renewals  
of existing contracts including several with the 
german ministry of defence this included the 
planning and installation of communications 
and laboratory equipment and a contract to 
deliver deployable network solutions
in the expanding training market we secured 
a 15year contract worth more than £55m to 
manage and operate the emergency planning 
college epc on behalf of the cabinet of ce 
placing us at the heart of uk civil resilience 
and positioning us well for future opportunities 
we manage all services at the epc including 
training delivery and support sales and 
marketing nance estate management ict 
and security 
national physical laboratory npl 
commercial revenues have expanded and 
they now represent more than 30 of its 
overall income this includes orders from  
the environmental and sustainability sectors 
responding to environmental legislation  
and the growing sustainability agenda 
customers include eon bp  veolia 
environment and the department of food 
and rural affairs the business case for a 
centre for carbon measurement has been 
developed and is being considered with  
our stakeholder community it will support 
national and international efforts to 
understand and mitigate climate change 
through accelerating the development of  
the lowcarbon technology sector npl also 
received the highest recognition after a paper 
coauthored by npl scientists was cited in 
support of the nobel prize in physics
the national physical laboratory grew its 
commercial revenues to more than 30 of its 
overall income 
sercoar10section3cindd   37 14032011   1424 38  serco group plc annual report and accounts 2010
section 3
bringing service 
to life
operating review  local government and commercial 
…in local
government
as part of this en eld – like all local authorities – wants more citizens 
to access its services online this reduces costs and makes services 
available quickly and easily to users at a time that suits them 
enabling safe and secure access is vital that is why en eld has 
adopted a pioneering new service we have created in partnership  
with microsoft and identity management specialists gb group
users will only have to register their details the rst time they use  
the system once their identity has been veri ed they are issued 
with a unique electronic identity token’ for all their online 
transactions with the council
“we are incredibly pleased with the potential bene t this service 
provides to our citizens in terms of secure access and safe 
transactions” says councillor andrew stafford cabinet member  
for finance at en eld “it marks a step change in our approach to 
using technology to improve the customer experience and to save 
money which we can use to protect frontline services”
 serco has delivered information and communication technology 
ict services to the london borough of en eld since 1999 in 2010 
we signed a new contract with en eld to provide ict services for  
up to nine years under this contract we provide it support operate 
the council’s it network data centre and helpdesk and deliver 
programme management for projects
the contract guarantees 20 cost savings for en eld we will realise 
these ef ciencies by introducing new services such as helping 
council employees increase their effectiveness through exible and 
mobile working 
we will also help the council transform the way it interacts with the 
local community increasing access to services and improving the 
council’s ability to offer a more focused and personalised approach
sercoar10section3dindd   38 14032011   1425  serco group plc annual report and accounts 2010  39
 sercoar10section3dindd   39 14032011   1425 40  serco group plc annual report and accounts 2010
section 3
in the uk local government 
and commercial lg c 
delivers essential services for 
more than 100 local authorities 
helping them to serve their 
communities
we improve services for our customers 
increasing productivity and delivering better 
outcomes for them and the public we listen 
so we can innovate and tailor our solutions  
to meet our customers’ aspirations  
building longterm strategic partnerships  
in the process 
our solutions meet a wide range of local 
government’s current and emerging needs 
with services covering streetscene waste 
management and recycling egovernment 
leisure education and children’s services 
economic development and enterprise 
support and information and 
communications technology ict
we also implement service transformation 
programmes employing technology  
to deliver more effective ef cient and 
responsive services
our business in the private sector is 
dominated by multiservice facilities 
management contracts delivering a range  
of services from helpdesk operations to 
buildings maintenance reception services 
catering cleaning chauffeur services and 
stores management – in fact any activity  
that is noncore for our customers

the revenue of lgc increased by 55 to 
£8539m 2009 £8092m which represented 
20 of group revenue in both 2010 and 2009
growth was driven by a number of 2009  
wins which became operational during 2010 
including a full range of environmental 
services for the london borough of bexley 
expanding our presence in integrated 
services markets with the plymouth hospitals 
nhs trust and airbus as well as support 
services for the european space agency  
and peterborough city council’s ict services 
this performance was robust given business 
link services provided for the london and 
south east regional development agencies 
were reduced in scope and some customers 
delayed decisions on discretionary project 
work following the outcome of the 
comprehensive spending review

we signed a new contract with hertfordshire 
county council to deliver a groundbreaking 
strategic partnership the contract due to 
commence in april 2011 is valued at up to 
£200m over eight years and will achieve 
ef ciency savings for the council of at least 
£25m we will provide front and back of ce 
operations including ict services business 
processes such as nance payroll and 
human resources and support services such 
as facilities management customer contact 
centres and occupational health these 
services will also be offered to other public 
sector bodies in the area including 
hertfordshire’s ten district councils and the 
county’s police authority the new contract 
builds on our 18year track record of working 
with the council and is signi cantly larger 
than the existing £8m per annum service
we successfully rebid our contract to provide 
ict support services to the london borough 
of en eld the new contract will deliver 
guaranteed cost savings of 20 for the 
council improve services for its employees 
and improve communication and interaction 
with residents the initial veyear contract  
is valued at £24m with an option to extend 
for a further four years
the replacement of regional development 
agencies with local enterprise partnerships 
and related funding cuts will see our regional 
business link services close by the end of 
2011 although there may be new 
opportunities with the introduction of 
business support programmes from national 
and local government it is not yet clear when 
these will start to emerge 
in march 2010 we acquired rb solutions a 
successful provider in the revenues and 
bene ts market this gave us an additional 
capability in this market enabling us to win 
 ve new contracts including dacorum 
borough council and dudley metropolitan 
borough council to provide bene ts 
processing services 
operating review  local government and commercial 
t echnology helps councils improve 
ef ciency and service quality
we help uk councils increase recycling 
rates and reduce the waste sent to land ll
sercoar10section3dindd   40 14032011   1425  serco group plc annual report and accounts 2010  41
we secured two contracts with the european 
space agency esa valued at €35m over the 
 rst three years strengthening our position as 
a leading service provider to europe’s space 
and technology agencies under the rst 
contract we are leading a consortium to 
provide operations and maintenance to 
esa’s earth observation programme  
the second is an expansion of an existing 
contract covering engineering and 
management support for the esa earth 
observation payload data ground segment 
we were delighted that duncan mackison 
who leads our highlysuccessful access 
joint venture with glasgow city council was 
named outsourcing professional of the year 
by the national outsourcing association

sandwell metropolitan borough council 
awarded us its new 25year waste 
improvement plan contract valued at  
around £650m we are providing refuse and 
recycling collection services street cleansing 
services and delivering waste processing and 
disposal including the construction of  
a new waste transfer station our innovative 
approach will increase recycling rates and 
signi cantly reduce the amount of waste  
sent to land ll this will help the council  
meet government recycling targets and 
reduce costs such as land ll taxes 
norfolk and norwich university hospital 
extended our contract for a further ve years 
until 2016 the extension under which we will 
continue to provide a full range of integrated 
nonclinical support services is valued 
at £75m 
we also began our contract to provide 
facilities management services to the new 
forth valley royal hospital in scotland  
one of the most modern and wellequipped 
hospitals in europe our services include 
operating and maintaining a team of robotic 
vehicles which help to keep patient areas 
free of trolleys and other related items 
reduce infection risks and free up our staff  
to focus on patients’ priorities the contract  
is valued at £600m over 30 years
 our education services contracts in bradford 
and walsall continued to perform well  
we were delighted that our bradford contract 
continues to deliver signi cant improvements 
at key stage two 73 of pupils are now 
achieving level 4 or higher in english and 
maths combined equivalent to the national 
average at gcse level more than twice as 
many of the district’s 16yearolds gained 5 
ac grades in 2010 719 compared with 
2001 343 when serco was asked to 
manage education services in bradford in 
july our tenyear contract with bradford 
council comes to an end and we will transfer 
the responsibility for all education services 
back to the council 
in walsall we are continuing to see signi cant 
improvements at both key stage two and four 
at key stage two pupils are achieving above 
national averages in ‘level four and above’ 
for english and maths and at key stage four 
improvements in the most important measure 
of ve good gcses including english and 
maths continue to outpace national 
improvements by some margin 
we are a leading provider to europe’s space 
and technology agencies
norfolk and norwich university hospital 
extended our integrated support services 
contract for a further ve years
our education contracts continue to deliver 
good results for pupils 
sercoar10section3dindd   41 14032011   1425 42  serco group plc annual report and accounts 2010
section 3
operating review  americas 
bringing service 
to life
 our logistics team based in williamsburg 
virginia works with the us navy expeditionary medical support 
command to make this happen
having a clean modern hospital for navy doctors to work in  
means that lives are saved and communities have somewhere  
to go for their urgent medical needs these hospitals might be 
meeting military requirements in isolated areas of afghanistan  
or responding to humanitarian crises in the aftermath of natural 
disasters because they have to be prepared for many different 
situations the equipment our team organises includes everything 
from ambulances and generators to scalpels and ct scanners
…in us defence
as well as an eye for detail the ability to respond quickly is vital  
just days after the earthquake struck haiti our team had assembled 
16000 items of supplies to set up a 150bed hospital
we also maintain and repair the hightech equipment used to give 
more complex medical attention items like lifesupport machines 
laboratory equipment and refrigerators for blood all need looking 
after as they leave one eld hospital pass back through our 
warehouses and then go on to their next destination
less than a year after our contract began we have been given a 
bravo ulu award by our customer’s commanding of cer bravo 
 ulu refers to the signal ags of the letters b and  when own 
together from a navy ship’s mast they traditionally mean ‘well done’
sercoar10section3eindd   42 14032011   1705  serco group plc annual report and accounts 2010  43
 sercoar10section3eindd   43 14032011   1426 44  serco group plc annual report and accounts 2010
section 3
2010 performance
revenue grew 93 8 excluding currency 
effects to £9539m 2009 £8726m this 
represented 22 of group revenue both in 
2010 and 2009 growth in the second half of 
the year was very strong following lower growth 
in the rst half largely re ecting a particularly 
strong prior period this strong organic growth 
arose from new task orders in both federal 
defence and civilian contracts including 
program management work for an intelligence 
agency and the canadian driver examination 
services as it recovered the backlog 
following strike action we also bene ted in 
the second half from 109 task orders valued 
at us80m under the governmentwide 
singleaward idiq for command control 
computer communications intelligence 
information technology surveillance and 
reconnaissance c4i2tsr 
a key focus during the year was to increase 
collaboration between our business units and 
leverage our wide range of capabilities across 
our customer base several of our business 
units came together to win new work with the 
department of veterans affairs valued at 
approximately us20m over its rst oneyear 
base period with additional funding expected 
for the four option years we will provide 
programme management a knowledge 
managementbased web portal with job hiring 
tools elearning elements and simulations 
videos and chat rooms mobile web technologies 
a call centre and career coaching 
other examples of integrated working include 
expanding the use of our ‘command control 
communications and computer’ skills across 
all branches of the military the department  
of homeland security and the intelligence 
community we are also using our enterprise 
architecture capabilities to support more 
department of defense agencies and 
commands exploring opportunities to use 
our economic cost analysis expertise with the 
us air force and the intelligence community 
and looking to expand our logistics support 
to additional military customers
many government agencies use idiq 
contract vehicles where we are one of a 
number of companies able to bid for task 
orders to leverage our position fully we have 
increased resources to respond to key 
opportunities under these vehicles which 
include alliant hrsolutions seaporte of ce 
of personnel management’s training and 
management assistance program and 
several general services administration 
we are a leading provider of 
professional technology and 
management services focused 
on the us federal government 
we provide missioncritical 
services to every branch of the 
us military key federal civilian 
agencies and the intelligence 
community we are ranked in 
the top 30 us federal 
government contractors 
we apply our awardwinning enterprise 
architecture to de ne design and satisfy 
defense agencies’ command control 
communications computer and intelligence 
requirements we provide communication 
system installations for the us navy’s eet 
and are one of the largest systems 
contractors for the us air force space 
command supporting a wide range of 
military satellite systems  
our support for wounded soldiers ensures 
they have the medical attention bene ts and 
services they need we help soldiers 
transition to civilian life and provide personnel 
and family services to two million soldiers and 
their families we designed software and 
provide systems data centers and call 
centers to support four million government 
employees with their retirement plans we 
issue more than 12 million identi cation 
cards to defense personnel
we process over 20 million visa transactions 
each year for the department of state and 
manage more than 62 million active records 
and handle applications received by the 
department of homeland security us 
citizenship and immigration services we 
have installed detection systems in over 100 
locations in 30 countries to help prevent a 
nuclear threat from entering the us
our work includes overseeing the pre
classi cation of all us patents we also 
provide webbased support for usagov 
and other egovernment initiatives 
we manage 65 federal aviation 
administration control towers and have 
received ve safety and excellence awards 
our transportation business includes a 
contract with the georgia department of 
transportation to manage install and 
maintain its intelligent transportation system
operating review  americas 
our logistics team in williamsburg virginia 
equips temporary hospitals for the us navy
we help the us military with its critical 
communications
we support the us navy’s procurement 
handling and disposal of hazardous 
materials
sercoar10section3eindd   44 14032011   1706  serco group plc annual report and accounts 2010  45
department schedules including facilities 
management and it  we have also 
strengthened our business development 
team re ecting our greater concentration  
on larger prime contracts
other awards included the renewal of a  
single award idiq where there are no other 
awardees contract with the us navy’s 
commander fleet and industrial supply 
centers to support the procurement 
management issuance and disposal of 
hazardous materials hazmat the contract 
has a sixmonth base period with three 
oneyear option periods and is valued at 
approximately us84m including the options 
we also received a new single award idiq 
contract to perform hazmat management 
services and provide consolidated hazmat 
reutilisation and inventory management to the 
us navy’s fleet and industrial supply center 
norfolk the contract has a oneyear base 
period with four oneyear option periods  
and is valued at approximately us88m  
if all option years are exercised
the naval operational logistics support 
center awarded us a new singleaward idiq 
contract to provide program management 
and technical services the contract has  
a oneyear base period and four oneyear 
options with a ceiling value of us44m  
if all option years are exercised
we strengthened our position on major us 
government programs through an award by 
the us army of an idiq contract to compete 
for task orders supporting the assistant 
secretary of the army manpower and reserve 
affairs we are among 12 awardees on this 
us13bn contract allowing us to compete 
for work in areas such as business planning 
and research and evaluation the contract 
has a veyear term comprising a oneyear 
base period and four oneyear option periods
within the civilian arena we were awarded  
a contract to provide air traf c control 
services to the federal aviation 
administration contract tower program 
valued at approximately us170m over ve 
years we are also contracted to provide 
comprehensive management installation  
and maintenance of the georgia department 
of transportation’s intelligent transportation 
system valued at approximately us50m 
over ve years 
we run georgia’s intelligent transportation 
system
we provide air traf c control services at 65 
towers for the federal aviation administration 
we were pleased to receive the 2010  
defense enterprise architecture achievement 
award for supporting the air force space 
command’s joint space operations center 
mission system programme we also won  
the ‘none in a million’ federal aviation 
administration award for achieving – for the 
second time – one million errorfree 
operations at goodyear arizona air traf c 
control as well as the bravo zulu award  
for exceptional work on behalf of the navy 
expeditionary medical support command  
for relief efforts in haiti 
sercoar10section3eindd   45 14032011   1426 46  serco group plc annual report and accounts 2010
section 3
operating review  ameaa 
bringing service 
to life
the dubai metro united arab emirates
sercoar10section3findd   46 14032011   1427  serco group plc annual report and accounts 2010  47
…in metro services
some issues may be escalated to our management forum and  
become part of broader initiatives such as our ‘zero delay days’  
these campaigns select one issue such as delays caused by 
platform screen doors and aim to have one day where none occurs 
we then measure our performance and feed back to our people  
so they understand that what they do has a positive impact
we also embrace other sources of feedback the metro is subject to 
a number of surveys including the government’s dubai excellence 
programme which focuses on worldclass customer service we also 
ask our customer – the dubai roads and transport authority – for its 
views on how we are doing this is essential for us to improve our 
performance further
carefully managing network projects and the system’s growth is 
vital with a further 19 stations due in 2011 our project team treats 
our operational team as its customer so that everyone focuses on 
maintaining our service standards as new stations open
the sercorun dubai metro launched in september 2009  
and has grown rapidly during 2010 it carried 388 million 
passengers and expanded from 10 stations to 26 despite this level 
of change the metro’s performance has been exceptional for a new 
system during 2010 we achieved availability and punctuality of 
996 and 979 respectively and in december 100 of trains  
hit their punctuality targets
managing growth while delivering to the highest standards requires 
the right processes and procedures and a partnership approach  
to working with our customer and contractors ultimately though  
it is our culture and our people’s desire to improve that make 
the difference
our internal performance ‘attribution’ process is an important tool 
here we investigate every train delay so we know what caused it 
and why we then develop actions and plans to prevent a recurrence 
or reduce its impact we repeat this process every day
sercoar10section3findd   47 14032011   1427 48  serco group plc annual report and accounts 2010
section 3
ameaa includes our 
businesses in africa the middle 
east asia and australasia
in australia new zealand and hong kong 
we have contracts in defence offender 
management immigration transport health 
infrastructure services and consulting our 
two defence joint ventures make us a key 
partner of the australia defence force we 
have the only contract in new zealand for a 
privately operated prison and our two 
australian prisons have received numerous 
awards and positive independent 
inspections in 2010 we successfully 
transitioned additional immigration sites with 
an increase from ve to 23 we own and 
operate great southern rail in australia and 
we are the largest tunnel operator in hong 
kong in 2011 we will enter the australian 
health market through a contract at fiona 
stanley hospital
the middle east is home to some of serco’s 
oldest contracts in aviation which continue to 
expand as the region’s air traf c grows we 
are the largest international player in surface 
transport in the region most notably we 
operate the dubai metro the world’s largest 
and mostadvanced driverless light rail 
system and the rst of its kind in the gulf and 
middle east our technology business serves 
the telecommunications marine and 
biomedical sectors we have also expanded 
our facilities management fm business 
recently winning a contract to provide 
integrated fm services at the new york 
university in abu dhabi
india is the second fastest growing economy 
in the world and presents opportunities for 
serco our bpo operation delivers value
driven products in the banking insurance 
telecom and retail sectors we also see 
demand for new services in india particularly 
in transport and healthcare as we leverage 
our global experience to build local capability 
for these markets 
2010 performance
revenue grew 412 to £4812m 2009 
£3407m and represented 11 of group 
revenue up from 9 in 2009 excluding  
the impact of currency particularly given  
the strong australian dollar growth was 26 
this high revenue growth re ects the 
contracts that became operational during  
late 2009 and early 2010 in our markets  
in australia the middle east and india 
in home affairs in australia we continue  
to work with the australian department  
of immigration and citizenship to transform 
its immigration services while expanding 
capacity to support the increasing number  
of people in our care serco has been 
recognised for the transformation we have 
achieved our humane approach the 
constructive mood in the centres and the 
positive relationship between our employees 
and the people in our care
in defence our 5050 joint venture with  
po maritime services renewed its contract 
valued at a250m to us to provide harbour 
and offshore services to the royal australian 
navy for ten years
we expanded into a new market when  
we were appointed preferred bidder for a 
substantial tenyear contract at fiona stanley 
hospital in perth when it opens in 2014  
the 783bed hospital will be a major tertiary 
hospital for the area we will provide all 
nonclinical services including managed 
equipment services transport procurement 
sterilisation and clerical services drawing on 
our extensive experience of hospital support 
contracts in the uk
operating review  ameaa 
we expanded our air traf c control and 
airside engineering services in dubai
our joint venture with po maritime services 
renewed its contract with the royal 
australian navy
in india our bpo operation is developing 
products for banking insurance telecom 
and retail customers
sercoar10section3findd   48 14032011   1427  serco group plc annual report and accounts 2010  49
we were delighted to win the operator and 
service provider excellence award at the 
prestigious national infrastructure awards 
the award recognises our high standards  
at acacia western australia’s only privately
operated prison borallon correctional centre 
was awarded two minister’s awards for 
excellence for its innovative recycling project 
and health initiatives
in december we entered another new  
market when we were appointed preferred 
bidder to manage the mt eden and auckland 
central remand prison in new zealand  
the contract signed in february 2011  
to commence in august 2011 includes 
rehabilitation and reintegration programmes 
for prisoners as well as logistics and 
infrastructure management the sixyear 
contract has an option for a further four years 
and is valued at around nz300m over the 
full ten years 
in the middle east the dubai metro has 
continued to achieve high levels of service 
with availability and punctuality at 996  
and 979 respectively for the year 
388 million passengers used the metro 
during 2010 and a further 16 stations opened 
bringing the total to 26 we also expanded 
our presence in dubai through a veyear 
£15m contract to operate and maintain the 
54km palm jumeirah monorail 
we were delighted to play our part in  
the opening of dubai’s second airport dubai 
world central – al maktoum international 
where we provide air traf c control and 
airside engineering services this is an 
addition valued at around £35m per annum 
to our existing contract with dubai airports 
company which dates back to the 1960s  
with a value of approximately £250m
elsewhere in the middle east we won  
a oneyear £105m contract to deliver 
operations and maintenance consultancy 
services to the al mashaaer al mugaddassah 
metro southern line in makkah kingdom  
of saudi arabia 
india continues to present excellent 
opportunities for the future our bpo 
operation is developing valuedriving 
products for banking insurance telecom  
and retail customers
we focus on the dignity respect and 
wellbeing of everyone we care for in 23 
australian immigration centres
the dubai metro delivered exceptional 
service levels in 2010
great southern rail runs the ghan australia’s 
iconic transcontinental railway 
sercoar10section3findd   49 14032011   1428 50  serco group plc annual report and accounts 2010
section 3
bringing service 
to life
operating review  ameaa 
…in immigration
management
the number of people we employ has also risen sharply requiring 
us to spend more than a1m on training we have lived up to  
our commitment to employ local people including more  
indigenous australians 
working in the right way has always been a fundamental part of  
what we do so we ensured that we did not compromise on our 
decency agenda – focusing on the dignity respect and wellbeing  
of the people in our care for example every client is allocated a 
client support of cer to look after their needs while they stay with us 
we also provide activities such as english lessons sport art and 
living skills classes serco exceeds the contract’s requirements for 
providing these activities and programmes
we have received recognition from visitors for the transformation  
we have achieved along with our humane approach the 
constructive mood and the positive relationship between our 
employees and the people in our care
controlling borders is a key task for governments in australia 
we support the department of immigration and citizenship through 
our contract to manage immigration centres throughout the country
unrest in countries such as afghanistan iran and sri lanka has  
seen the number of people in our care surge to unprecedented 
levels at the end of 2010 there were around 6500 people in 
detention more than four times the number when we began the 
contract the ve facilities we ran have expanded to 23
coping with this increase in demand for our services has required 
 exibility innovation and plenty of hard work we created a 
commissioning team so we could react quickly when new facilities 
were opened and called on the support of our civil government 
colleagues in the uk this allowed our contract management team 
to concentrate on the smooth operation of all the centres 
sercoar10section3findd   50 14032011   1428 immigration services australia
 serco group plc annual report and accounts 2010  51
sercoar10section3findd   51 14032011   1428 52  serco group plc annual report and accounts 2010
section 3
finance review
overview 
our business delivered 
a strong nancial 
performance in 2010 with 
revenue growing 90 and 
adjusted operating pro t 
increasing by 126 our 
adjusted operating margin 
increased by 19 basis 
points adjusted eps grew 
by 175 to 3469p free 
cash ow grew by 353 
to £1858m and group 
recourse net debt reduced 
by £841m to £3036m 
1 income statement
serco’s income statement for the year is summarised in figure 1 below this includes the 
results of joint ventures which are proportionately consolidated 
figure 1 income statement
 2010 2009 
year ended 31 december £m £m increase
revenue 43267 39700 90
gross pro t 6443 5868 98
administrative expenses 3856 3571 80
adjusted operating pro t 2587 2297 126
investment revenue and nance costs 274 350
adjusted pro t before tax 2313 1947 188
amortisation of acquired intangibles 174 176
pro t before tax 2139 1771 208
tax  571 469 217
pro t for the year 1568 1302 204
effective tax rate 267 265
adjusted earnings per share 3469p 2953p 175
earnings per share  3188p 2676p 191
dividend per share 735p 625p 176
sercoar10section3gindd   52 14032011   1429  serco group plc annual report and accounts 2010  53
11 revenue
revenue grew by 90 to £43267m 76 excluding currency effects organic revenue 
growth excluding currency effects was 76 and re ects the growth of existing contracts  
and the contribution of new contracts started in 2009 and 2010 
1 uste o erating ro t
adjusted operating pro t increased by 126 to £2587m representing an adjusted operating 
pro t margin of 60 adjusted operating pro t margin increased by 19 basis points 16 basis 
points excluding currency effects 
1 investment revenue an nance costs
investment revenue and nance costs totalled a net cost of £274m 2009 £350m  
a decrease of £76m the decrease excluding currency effects was £74m the principal 
reasons for this decrease were reduced average borrowings during the year lower interest 
rates and a decrease in the net pension nance cost
1 uste ro t e ore ta adjusted pro t before tax was £2313m an increase of 188 excluding currency effects  
the adjusted pro t before tax margin was 53 an increase of 40 basis points
1 a the tax charge of £571m 2009 £469m represents an effective rate of 267 compared with 
265 in 2009 the slight increase in the rate is principally due to changes in the mix of taxable 
pro ts across the group
16 earnings per share eps
adjusted eps rose by 175 to 3469p eps grew by 191 to 3188p eps and adjusted  
eps are calculated on an average share base of 4915m during the year 2009 4866m  
the increase in the average share base principally resulted from a full weighting of shares 
issued during 2009
sercoar10section3gindd   53 14032011   1429 54  serco group plc annual report and accounts 2010
section 3
finance review
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 nal dividend of 515p per share 
representing an increase on the 2009 nal dividend of 170 and bringing the total dividend 
for the year to 735p a growth of 176 the nal dividend will be paid subject to shareholder 
approval on 17 may 2011 to shareholders on the register as at 11 march 2011
 the group generated an exceptionally strong free cash performance with an in ow of £1858m 
2009 £1373m an increase of 353 this included bene ts of around £20m from asset 
sales proceeds a particularly high level of joint venture dividends and low tax payments
figure 2 analyses the cash ow as in previous years we have designed the analysis to show 
the underlying cash performance of the group – the cash ows generated by subsidiaries  
plus the dividends received from joint ventures it therefore differs from the consolidated  
cash ow on page 108 which proportionately consolidates the cash ows of joint ventures 
the adjustment line in figure 2 reconciles the movement in group cash to the consolidated 
cash ow
figure  ash o 
 2010 2009 
year ended 31 december £m £m
operating pro t excluding joint ventures 1767 1506
non cash items 792 754
group ebitda 2559 2260
working capital movement 306 272
group operating cash ow 2253 1988
interest 252 315
tax  240 265
net expenditure on tangible and intangible assets 418 498
dividends from joint ventures 515 463
 1858 1373
disposal of investmentssubsidiaries – 06
acquisition of subsidiaries 23 154
financing 1881 368
special pension contribution 200 –
dividends paid 323 259
group net decreaseincrease in cash and cash equivalents 569 598
adjustment to include joint venture cash impacts 87 141
net decreaseincrease in cash and cash equivalents 482 739
note group ebitda is earnings from subsidiaries excluding joint ventures before interest tax depreciation intangible 
amortisation and other non cash items
sercoar10section3gindd   54 14032011   1429  serco group plc annual report and accounts 2010  55
 1 roup operating cash o group operating cash ow of £2253m 2009 £1988m re ects a conversion of group  
ebitda into cash of 880 2009 880 the working capital movement of £306m  
re ects the requirements of a growing business
32 interest
net interest paid was £252m compared to £315m in 2009 re ecting the reduction in group 
recourse net debt since 2009 and lower interest rates
33 a t ax paid was £240m 2009 £265m the reduction in tax paid during 2010 is due to increases 
in accelerated capital allowances and other timing differences in the period additional tax relief 
on the december 2010 special pension contribution and tax refunds received during the year 
in 2011 we expect the cash tax rate to trend closer to our effective tax rate this is principally 
as a result of a higher proportion of overseas taxable pro ts which more than offsets the 
bene t of the tax relief on the special pension contribution
3 et e pen iture on tangi e an intangi e assets
net expenditure on tangible and intangible assets in the year was £418m 2009 £498m 
gross expenditure excluding disposals was £511m 2009 £523m representing 14  
of group revenue excluding joint ventures 2009 16 
on 30 june 2010 as part of forming a strategic partnership with patni computer systems ltd 
patni a leading global provider of information technology services and business solutions  
to provide services in education and elearning in the uk and irish markets we disposed  
of a learning software product to patni cash realised from the sale was £70m and pro t  
on disposal of this asset was £14m
in 2011 we are planning to invest around £20m in the implementation of sap for hr across 
the group
3 ivi en s rom oint ventures
dividends received from joint ventures totalled £515m 2009 £463m re ecting an 
uncharacteristically high conversion rate of joint ventures’ pro t after tax and non controlling 
interests into dividends this high rate re ected the impairment charge of £42m resulting  
from our exit from the noncore south african joint venture equity aviation excluding this  
the conversion rate of dividends from joint ventures was approximately 95 in 2011  
we expect the conversion rate to be closer to the normal rate of 8090
36 financing
the movement in nancing resulted primarily from repayments on our bank facilities and  
non recourse debt 
sercoar10section3gindd   55 14032011   1429 56  serco group plc annual report and accounts 2010
section 3
finance review
4 net debt
figure 3 analyses serco’s net debt 
figure 3 et e t
 2010 2009 
at 31 december £m £m
group – cash and cash equivalents 2040 2537
group – loans 4826 6191
group – obligations under nance leases 250 223
group recourse net debt 3036 3877
joint venture recourse net cash 661 582
total recourse net debt 2375 3295
group non recourse debt  237 290
total net debt 2612 3585
 1 roup recourse net e t
group recourse net debt decreased by £841m to £3036m 
cash and cash equivalents includes encumbered cash of £109m 2009 £112m this is cash 
securing credit obligations and customer advance payments
 2 roup non recourse e t
the group’s debt is non recourse if no group company other than the relevant borrower has 
an obligation to repay the debt under a guarantee or other arrangement the debt is excluded 
from all of our credit agreements and other covenant calculations and therefore has no impact 
on the group’s ability to borrow 
group non recourse debt reduced by £53m to £237m as a result of £76m payments  
made in line with the debt repayment schedule on debt relating to our driver examination 
services contract in canada offset by £23m increase in non recourse debt due to 
exchange movements
sercoar10section3gindd   56 14032011   1429  serco group plc annual report and accounts 2010  57
5 pensions
the group operates a number of de ned bene t schemes and de ned contribution schemes 
at 31 december 2010 the net liability included in the balance sheet arising from our de ned 
bene t pension scheme obligations was £830m 2009 £1136m on a pension scheme asset 
base of £15bn 
figure  e ne ene t pension schemes
 2010 2009 
at 31 december £m £m
group schemes – non contract speci c  761 1200
contract speci c schemes  
– reimbursable 1234 1443
– not certain to be reimbursable 267 299
net retirement bene t liability  2262 2942
intangible assets arising from rights to operate  
 franchises and contracts  89 114
reimbursable rights debtor  1234 1443
deferred tax assets 109 249
net balance sheet liabilities 830 1136
the total pension charge included in operating pro t for the year ended 31 december 2010 
including the proportionate share of joint ventures increased to £1065m 2009 £924m 
within this charge the group’s contributions to uk and other de ned contribution pension 
schemes increased to £760m 2009 £648m the service charge relating to the group’s 
de ned bene t schemes was £305m 2009 £276m and the movement was principally  
as a result of changes to the discount rate and in ation assumptions as at the end of 2009  
and increases in payroll
serco has three main types of scheme which are accounted for as de ned bene t pension 
schemes each type has its own accounting treatment under international financial reporting 
standards these are
 non contract speci c – schemes which do not relate to speci c contracts or franchises  
for these schemes we charge the actuarial gain or loss for the year to the consolidated 
statement of comprehensive income the soci
 reimbursable – schemes where we have a right of full cost reimbursement and therefore 
include both the pension scheme de cit and offsetting reimbursable rights debtor in the 
balance sheet and
 not certain to be reimbursable – schemes relating to speci c contracts or franchises  
where the de cit 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 
de cit for the year to the soci 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
sercoar10section3gindd   57 14032011   1429 58  serco group plc annual report and accounts 2010
section 3
finance review
serco has limited commercial risk in relation to the contract speci c schemes due to either  
the right of cost reimbursement or because the de cit will in general pass back to the 
customer or on to the next contractor at the end of the contract among our non contract 
speci c schemes the largest is the serco pension and life assurance scheme splas  
at 31 december 2010 splas had a de cit of £164m 2009 de cit of £547m this de cit 
which is calculated under ias 19 using market rates at the period end re ects  
the effect of the market conditions on investment returns in the year and the net impact of  
a decrease in in ation assumptions offset by a decrease in the applicable discount rate
we have now completed the regular triennial review of splas the actuarial de cit of splas 
used in the review and calculated using prudent longterm valuation assumptions was £141m 
at 6 april 2009 and was approximately £93m at 31 december 2010 following this review  
the group agreed with the trustees to make a cash contribution of £60m to the scheme  
with £20m paid in december 2010 and £40m in january 2011 we continue to review the  
level of bene ts and contributions under the scheme in the light of our business needs and 
changes to pension legislation 
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 in ation members’ salary 
increases and life expectancies 
figure 5 pension assumption sensitivities 
  change in  change in 
 assumption assumption liability
discount rate 54 05 – 9
   –05 10
price in ation 31 rpi and 26 cpi 05 8
   –05 –7
salary 35 05 2
   –05 –2
longevity 208 – 245 increase by  
   one year 3
 post retirement mortality range for male and female current and future pensioners
sercoar10section3gindd   58 14032011   1429  serco group plc annual report and accounts 2010  59
6 treasury 
the group’s bank credit facilities comprise a £4000m syndicated revolving credit facility a 
syndicated amortising term loan for us dollar 3964m and bilateral revolving credit facilities  
for £350m and eur 125m the syndicated revolving credit facility matures in september 2013 
whilst the syndicated term loan is repayable between september 2011 and september 2013 
the bilateral facilities mature in december 2011 and april 2012 respectively in relation to the 
syndicated term loan the next scheduled repayment of us dollar 138m is due in september 
2011 as at 31 december 2010 £3298m had been drawn down on these combined facilities 
2009 £4577m excluding the effects of currency on the us dollar denominated debt the 
equivalent draw down would have been £320m 
in addition to the bank credit facilities serco has loan notes in issue under a private placement 
of £1177m which will be repaid evenly from 2011 to 2015 all of the credit facilities of the 
group detailed above are unsecured
7 going concern
the directors have acknowledged the guidance ‘going concern and liquidity risk guidance 
for directors of uk companies 2009’ published by the financial reporting council in october 
2009 whilst the current economic environment remains uncertain the broad base of our 
contract portfolio and with over 90 of our customers being government bodies the group  
is well placed to manage its business risks as discussed in the section ‘principal risks and 
uncertainties’ successfully and has adequate resources to continue in operational existence 
for the foreseeable future 
the group’s revenues are largely derived from longterm contracts with governments which 
historically have been largely unaffected by changes in the general economy the contract 
portfolio is spread across a number of markets sectors and geographies such that a downturn 
in any one segment is unlikely to affect the group as a whole in addition with an order book  
of £166bn and high visibility of future revenue streams 92 in 2011 77 in 2012 and 66  
in 2013 the group is well placed to manage its business risks despite the current uncertain 
economic climate
in september 2008 the group secured mediumterm nancing by entering into a ve year 
syndicated revolving credit facility and bilateral facilities including the term loan and us  
private placements the group has in excess of £816m of committed credit facilities as at 
31 december 2010 the headroom on the facilities was approximately £369m the next 
repayment on these facilities falls due in september 2011 for an amount of us dollar 138m 
the group fully expects to meet this repayment through internally generated cash ows  
based on the information set out above the directors believe that it is appropriate to prepare 
the nancial statements on a going concern basis 
andrew jenner 
finance director
sercoar10section3gindd   59 14032011   1429 60  serco group plc annual report and accounts 2010
section 3
people
serco’s rapid growth means 
that we have a continually 
increasing number of 
employees around the world 
we have therefore created a 
clear framework for managing 
and developing our people  
so that we can help them be as 
good as they can be and deliver 
great service to our customers
our people strategy has three main 
components we want to
 develop leaders who are t for the future 
and who will thrive as serco grows
 have people who bring service to life  
who are fully integrated and engaged  
with serco and who we can develop  
to achieve their full potential and 
 make it easier to manage our people  
by continually enhancing our systems 
and processes
developing our leaders
as a devolved and fastgrowing organisation 
serco has a high demand for capable and 
motivated leaders who have the potential  
to grow with us they are responsible for 
managing operations securing our growth 
and creating the environment in which our 
people can do what they do best serve 
customers with passion and skill the way 
they lead is as important as what they deliver
we have created a leadership model known 
as h³ – heart head and hands these 
components describe how great leaders  
in serco behave with an emphasis on our 
governing principles and our customers  
the components of the model are 
summarised below
heart this covers our leaders’ motives and 
demonstration of our governing principles 
we want them to create our culture through 
personal example and have the courage to 
stand by their convictions
head this relates to intellectual and personal 
capacity we want leaders who can solve 
complex problems take a longterm view 
inspire and in uence others focus on 
outcomes innovate be resilient and be 
adaptable to a situation’s needs
hands this covers skills knowledge and 
experience we want our leaders to be skilled 
at shaping and delivering the plans and 
capabilities that will drive our performance 
and growth
behind each of these components is a further 
set of criteria which explain the desired 
behaviours and the standards against which 
we appraise our leaders’ performance 
during 2010 we extended the h³ model  
to managers beyond our leadership group 
we also completed our global talent review 
which we began in 2009 this involved every 
business unit around the world identifying its 
current and future leaders enabling us to 
create comprehensive succession plans and 
talent pipelines to support our growth as part 
of this we have built a customised talent 
database and established crossdivisional 
talent pools in our corporate functions for 
example we have a global talent pool in 
 nance and a ukwide pool in business 
development
2010 also saw us introduce or expand a 
range of other initiatives to help our leaders 
develop for example we rolled out the 
management foundations programme 
developed by our civil government business 
to other parts of our business initially the uk 
divisions and corporate functions 
management foundations will be accredited 
by the chartered management institute and 
helps our people to be valuesled managers 
we also introduced a broad range of toolkits 
for talent and performance management 
which are available through the online serco 
business academy the business academy 
aims to make learning accessible to all of 
our people
sercoar10section3gindd   60 14032011   1429  serco group plc annual report and accounts 2010  61
integrating engaging and 
developing our people
we are dependent on the skill and 
enthusiasm of our people they enable us  
to deliver great service to our customers  
and are ultimately responsible for the strength 
of our reputation and our ability to grow  
we therefore need to integrate new joiners 
effectively engage with all our people and 
help them achieve their potential we also 
recognise outstanding achievements through 
our global pulse awards
integrating ne peop e
serco’s growth means that several thousand 
people join us every year we typically nd 
that they bring with them a service ethos  
that matches our own given that a large 
proportion of our employees also began  
their careers delivering services in the  
public sector our approach to managing 
contracts liberates our people to put this 
ethos into action
the best method of spreading our values  
is for our people to see them in action  
our leaders have a key role to play by 
making decisions in accordance with our 
values we also prioritise communication with 
our people particularly in the transition phase 
after we have won a contract so that they 
understand serco and the way we work
our approach – and the outcome – is the 
same around the world while there are 
always cultural differences between countries 
our values are universal and our people 
embrace them wherever they are based
t o help new joiners become part of serco  
we have developed the welcome experience 
this is a range of materials and events which 
ensure that joining serco is welcoming and 
engaging and is in addition to any induction 
at a local level
sercoar10section3gindd   61 14032011   1429 62  serco group plc annual report and accounts 2010
section 3
people
 eve oping our peop e
enabling our people to excel is one of  
our governing principles meaning their 
development is key that development ranges 
from informal onthejob training through to 
specialist and technical training increasingly 
we are moving to a “blended learning” 
approach with an appropriate balance  
of facetoface and webbased learning
during the year we enhanced our 
performance management process creating 
new toolkits for managers and leaders to 
enable them to become even better at setting 
objectives creating development plans and 
reviewing performance this will allow us to 
set individual objectives for our people and  
to manage them in line with those objectives 
we have also developed a performance 
calibration process enabling us to identify 
high achievers and those who need help  
to improve their performance
recognising achievement
our pulse awards are designed to celebrate 
the very best qualities and achievements of 
serco people our customers and partners 
the awards are closely linked to our 
governing principles they recognise people 
who excel at innovation inspire through  
their leadership demonstrate outstanding 
commitment and make an exceptional  
impact on communities the environment  
or in areas such as safety and ethics in 2010 
we recognised 152 individuals and teams 
with an award
managing our people
we continually look to improve our ef ciency 
including the ways we manage our people 
our aim is to have intuitive easy to use tools 
processes and systems which make it easier 
to manage our growing workforce and deliver 
even higher levels of productivity and service 
as a result 
we are therefore developing a new platform 
called ‘empower – transforming people 
management’ which will transform how we 
manage people across our business this is 
our rst ever global change programme and 
builds on a successful pilot we undertook in 
our dubai metro contract the programme 
commenced in january 2011 and will 
complete in 2012
the new materials we have created include
 discover serco passports which help 
guide and direct new people we have 
one for leaders and another for managers 
with a third version being developed for 
all employees
 the people pack which helps new leaders 
understand the importance of their role 
and the tools available to enable them to 
be a great leader
 discover serco elearning which is 
available for any new employee through 
the serco business academy and
 discover serco contract visits
engaging ith our peop e
we once again undertook our annual global 
employee survey called viewpoint this gives 
us important insights into how we can run 
serco better particularly at a local level 
resulting in greater engagement with our 
people and enhanced service for customers 
we were pleased that the response rate to the 
survey rose and are working to drive actions 
that arise from the feedback we receive
we introduced a number of innovations in 
2010 to improve engagement with existing 
and potential new employees such as
 our us serco scholars program which 
provides educational grants to the 
children of employees
 payroll giving in north america and india
 the uk bike4work scheme to encourage 
people to use environmentally friendly 
forms of transport when travelling to and 
from work as well as getting tter and
 enhancing the recruitment section of our 
website both to raise the calibre of 
recruits and to improve the visitor 
experience
we continued our relationship with david 
macleod and nita clarke following the 2009 
launch of their review engaging for success 
which examined employee engagement  
and how to enable it our civil government 
division has also carried out research  
on establishing links between employee 
engagement and business performance
sercoar10section3gindd   62 14032011   1429  serco group plc annual report and accounts 2010  63
the new platform will give us a standard 
approach to managing people with a 
common set of processes for each part of  
the employee lifecycle this is supported  
by a suite of selfservice online tools for both 
managers and employees such as starters 
and leavers forms annual leave requests and 
rostering tools for shift working which  
will enable us to plan more ef ciently and 
increase utilisation but also take into account 
each employee’s preferences the platform 
will also streamline and standardise our 
approach to recruitment and help us to 
manage absenteeism in a more consistent 
and effective way
the outcome will be a simpler and more 
effective system freeing up time for our 
managers to focus on delivering to 
customers the platform will also support  
our growth for example by enabling  
us to transition contracts more quickly 
and effectively
2011 objectives
 t o make it easier to manage people the 
focus will be to develop and implement the 
programme called ‘empower – t ransforming 
people management’
 t o develop leaders who are t for the 
future we will be looking to further embed 
the talent review and successionplanning 
process across a wider proportion of our 
management population
 t o engage and motivate employees to 
bring service to life we will continue to 
research and analyse the link between 
engagement and performance
objectives and performance
2010 objective result comment
t o make it easier 
to manage people
t o develop leaders 
who are t for 
the future
t o engage and 
motivate employees 
to bring service 
to life
ongoing
ongoing
ongoing
we invested in a new platform as 
described in ‘managing our people’ above
we pro led 200 of our most senior leaders 
career and development planning is under 
way and will be incorporated into the 2011 
objective setting and appraisal process 
this process has been extended to our 
emerging leaders we undertook 
succession planning across the whole 
business and our divisions have focused 
on developing their talent pipeline
an online module called ‘discover serco’ 
was launched companywide during 2010 
we have also developed an online induction 
toolkit which launched on our internet in 
january 2011 the companywide 
viewpoint survey was conducted again in 
2010 and 78 of employees responded an 
increase of 2 percentage points over 2009 
work has progressed to link engagement 
to performance and contributed to the uk 
governmentsponsored task force on 
employee engagement
sercoar10section3gindd   63 14032011   1539 64  serco group plc annual report and accounts 2010
section 3
corporate responsibility
the uk’s national physical laboratory for 
example logged more than 16 million 
working hours without a reportable injury 
our contract at bluescope steel in illawarra 
australia reported 11 million such hours 
in the americas our lost days incident rate 
has dropped 10 yearonyear continuing 
our strong and improving safety record in 
the region
serious incidents are rare when they do 
happen we learn from them in april 2010 
serco was found guilty of breaching the 
health and safety at work etc act 1974 for 
failing to ensure that automatic trains did not 
hit unauthorised persons on the tracks  
at the docklands light railway in london this 
 nding followed the death of robert carter at 
all saints station in 2007 immediately after 
the incident we undertook thorough reviews 
of the circumstances and implemented new 
procedures so that this particular type of 
accident could be avoided in the future 
looking forward we will continue to 
strengthen our safety culture through 
leadership oversight stakeholder 
engagement and effective policies systems 
and processes to support the achievement 
of our safety targets our priorities are
 to reduce the amount of lost time due  
to incidents through active rehabilitation
 offering a consistent level of occupational 
health support to all serco employees
 monitoring kpis for muscoskeletal mental 
and behavioural and reportable diseases
 a continued focus on reducing 
reportable incidents
 developing systems and processes  
to manage and monitor nearmisses
 embedding a single health safety and 
environmental management system and 
standard operating procedures across  
all of our operations and
 ensuring competency in health and  
safety management and consistent 
training standards 
achieving our vision to be  
the world’s greatest service 
company requires us to work in 
the right way and to meet our 
responsibilities to our 
customers the public our 
employees our partners and 
suppliers as a result corporate 
responsibility cr is part of 
who we are and how we 
behave
we divide our approach into four pillars – 
people health and safety community  
and the environment our work for our 
customers encompasses all of these areas 
but there are many things we do which go 
beyond our contractual or legal requirements 
our approach to managing our 
responsibilities is summarised below  
we also publish a corporate responsibility 
review each year which gives more details of 
our activities and the way we embed cr in 
our business
our people
pages 60 to 63 explain our people strategy 
our 2010 initiatives to improve the ways in 
which we develop engage motivate and 
manage them and our objectives for 2011
health and safety
our aspiration is zero harm to our people  
and customers this means we set high 
standards – often above our legal 
requirements – so that we do everything  
we can to prevent incidents 
embedded in the serco management 
system our framework for how we manage 
our business are our health and safety 
policies and standards we audit ourselves 
against these standards building on good 
practice and addressing performance that 
falls short
some of the biggest challenges we face  
are routine risks to health and safety  
slips trips and falls are the most common 
incidents and prevention requires diligence 
and dedication this year saw a number of 
notable achievements 
our contract at bluescope steel australia 
logged 11 million working hours without a 
reportable injury
apprentices at our contract with the london 
borough of newham learn new skills which 
prepare them for the future
sercoar10section3gindd   64 14032011   1430  serco group plc annual report and accounts 2010  65
divers inspecting pontoons at our marine 
services contract in davenport uk
fire training delivered by serco at the 
international fire training centre in the uk
objectives and performance
2010 objective result comment
t o continue focusing on 
reducing reportable incidents 
ris to achieve our target of 
a 30 reduction in our staff 
ri rate by the end of 2012 
against the 2008 benchmark 
of 998 the target for 2010 
was a 20 reduction to 799
target  
met
our ri rate was 711 per 100000 
employees this achieves our 2010 target 
and is only 12 short of our 2012 target 
it also demonstrates good performance 
against external benchmarks the uk’s 
labour force survey for allindustries 
benchmark is 820 per 100000
t o reduce the amount of lost 
time as a result of incidents 
through active rehabilitation 
our challenging target is for 
a 50 reduction by the end 
of 2012 against 2008 
baseline average 15 days
target  
off 
track
at an average of 186 days in 2010 we 
are not on track having shown a year  
on year increase in lost time this partly 
re ects an increase in higherrisk 
business operations signi cant 
management effort is being put in  
to redress this situation with a focus  
on early intervention to rehabilitate 
employees and help them back to work 
more timely handling of longterm 
disability cases and rootcause analysis
t o develop systems and 
processes to manage and 
monitor nearmiss events 
more effectively our target  
is to establish a baseline for 
future improvements for 2012
target  
on 
plan
work is ongoing to establish the systems 
and processes to deliver this
2011 objectives
 t o continue focusing on reducing the 
amount of time lost as a result of 
incidents to achieve our target we aim to 
be back on trajectory to reach our target 
of a 50 reduction in lost time per incident 
against the 2008 benchmark by 2012
 t o continue focusing on reducing 
reportable incidents based on current 
performance we have revised our target 
to 599 to re ect a 40 reduction in staff ri 
rate by 2012 against the 2008 benchmark
 t o develop systems and processes to 
manage and monitor nearmiss events 
more effectively our target remains to 
establish a baseline for future 
improvements for 2012
sercoar10section3gindd   65 14032011   1430 66  serco group plc annual report and accounts 2010
section 3
during the last three years we have provided 
work placements to 35 students and 9 people 
have found employment in the hospital  
we have now expanded the programme  
to three more of our uk hospital contracts 
overall we are committed to investing 1  
of our pretax pro ts every year in projects  
to help our communities this year we have 
donated £2271575 which represents 11
corporate responsibility
at hmp  yoi doncaster we help offenders 
strengthen bonds with their families
we encourage offenders to take part in 
community projects at acacia prison 
australia
community
the work we do often directly serves our  
local communities many of our people 
also live in these communities and we 
want them to be proud of what we give 
back to society whether it is money or 
management skills work experience or 
interview training to help young people 
 nd jobs there are hundreds of projects 
run by serco people that enhance our 
reputation as an organisation and  
quietly and without fanfare improve  
life for local people
how we offer support is largely down to 
our divisions and contracts they are in 
the best position to understand the needs 
of their communities how those needs 
align with our customers’ objectives and 
how they relate to our employees 
the result is a wide range of activities from 
fundraising for the royal flying doctor 
service in australia or for orphans in india 
to providing student work placements at 
hmp  yoi doncaster in the uk 
we also encourage our businesses to think 
longterm for example in the us we have 
worked with the military child education 
coalition since 2007 and in the uk we  
have supported project search since 2008  
project search which involves our customer 
– the norfolk and norwich university hospital 
– and other organisations helps people  
with learning dif culties to develop their 
con dence and skills in the workplace  
objectives and performance
2010 objective result comment
t o provide employment 
opportunities for the 
longterm unemployed and 
young people
on 
plan
we expanded project search from one 
uk hospital to four this is a partnership 
with the national health service and 
other organisations to help people with 
learning dif culties into the workplace 
we initiated a project in our uk divisions 
to identify work placement opportunities 
for students and to encourage the 
creation of new and meaningful 
opportunities a survey identi ed current 
practice and data to help future planning 
this will be an ongoing objective
t o build trust in the 
communities in which we 
operate through responsible 
business operations and 
behaviour
on 
plan
during 2010 we were able to better 
identify our current uk practices in 
relation to working with the voluntary 
sector in december 2010 we 
participated in a pilot project to help build 
the capacity of black and asian minority 
organisations in manchester see case 
study in the marketplace section of our 
2010 corporate responsibility review
t o continue to invest in the 
communities in which we 
work and serve
t arget 
met
we invested £2271575 into society 
which equates to 11 of our pretax 
pro ts in 2010
2011 objectives
 t o continue to invest 1 of our pretax  
pro ts into society
 t o continue to promote the theme  
of employability
 t o continue to develop our relationships 
with charities social enterprise and 
community organisations 
 t o promote employee volunteering
 t o promote payroll giving
sercoar10section3gindd   66 14032011   1431  serco group plc annual report and accounts 2010  67
environment
our zeroharm aspiration applies as much  
to the environment as it does to health and 
safety our policy places a clear responsibility 
on everyone in serco to minimise our 
environmental impact
this policy has three drivers the rst is 
ethical safeguarding the planet for current 
and future generations is the right thing  
to do second irreproachable environmental 
credentials are now a commercial imperative 
the third driver is nancial 
re ecting our devolved nature the best 
place to manage our impact is locally  
for example in the united arab emirates we 
are a member of the emirates environmental 
group which encourages tree planting and 
recycling in australia through our actions 
use of potable water in melbourne’s parks 
and gardens dropped by 75 
objectives and performance
2010 objective result comment
t o achieve a 10 reduction 
in co
²
 tonnes£m revenue 
by end 2010 against the 
2008 benchmark
t arget 
missed
in the uk we achieved a reduction of 
726 in co
²
 tonnes£m against 2008 
we were pleased to achieve the uk’s 
carbon trust standard requiring a 25 
yearonyear reduction in co
²
 emissions
t o embed a single 
environmental management 
system and operating 
procedures across 
all operations
t arget 
met
the environmental management system 
is an integral part of our revised serco 
management system launched 2011 
and applies globally
t o implement a carbon 
accounting system to ensure 
accurate consumption 
reporting on energy fuel 
used for business travel 
waste and water
t arget 
met
the greenstones acco2unt enterprise 
system went live in the uk in 2010 and 
will be implemented across the rest of 
our business in 2011
however as we have developed our group 
strategy we have had to understand our 
overall impact as a business given the sheer 
range and diversity of our work this has been 
a challenge to address it in 2010 we 
introduced acco2unt carbon management 
software this gives us the data we need  
and helped us to join the bestperforming 
10 of ftse 350 organisations according  
to the carbon disclosure project 
we can now see where we generate  
carbon dioxide emissions which helps us  
to prioritise areas for action we set ourselves 
the objective of achieving carbon trust 
standard certi cation which required us  
to demonstrate
 a minimum of 25 yearonyear reduction 
in our carbon footprint relative to revenue 
for two consecutive years
 effective carbon measurement and
 effective carbon management at all sites
2011 objectives
 t o achieve a 15 reduction in co
²
 
tonnes£m revenue against the 2008 
benchmark by end of 2012 
 t o retain the carbon trust standard
it was a considerable task but in january 
2011 we reached our target this makes 
us one of only 530 companies so far – of 
around 5000 required to participate in the 
carbon reduction commitment energy 
ef ciency scheme crc – to have 
carbon trust standard certi cation 
the certi cation covers all of serco’s uk 
sites required to participate in the crc 
and will enhance our score and placement 
in the crc performance league table to 
be published by the environment agency 
in october 2011 
one challenge in meeting our aspirations 
is that we often share our customers’ 
facilities without full control over our 
workplace we are unable to capture 
information relating to our impact and  
we are limited in the measures we can  
put in place to reduce our footprint  
in those instances we work with our 
customers to reduce impact 
improvement does not come overnight or  
by edict but gradually through the efforts  
of thousands of people around the world 
united by the conviction that this is worth 
doing – and doing well 
sercoar10section3gindd   67 14032011   1636 68  serco group plc annual report and accounts 2010
section 3
resources
business relationships
customers
our ability to develop longterm relationships 
with our customers is a central part of our 
business model daytoday responsibility for 
meeting our customers’ needs lies with our 
contract directors our approach to working 
with our customers is set out in our governing 
principles see page 12 which aim to 
empower our contract directors and ensure 
that we deliver highquality service
we maintain relationships at all levels with  
our customers so they are aware of how we 
can help them and we can anticipate their 
changing needs and identify opportunities  
at an early stage these relationships lie with 
our divisional and group leaders
our reputation with our existing customers is 
also vital in winning new work many factors 
in uence our reputation including
 the quality of our service
 our values and publicservice ethos
 our capacity to innovate and
 our engagement with our employees  
and other stakeholders such as 
local communities
we believe that our high rebid and new bid 
win rates demonstrate the strength of our 
reputation with new and existing customers
suppliers
effective procurement signi cantly 
contributes to achieving our vision and 
delivering effective service to our customers 
we aim to be professional in all our dealings 
with suppliers and to establish mutually 
bene cial relationships in which suppliers 
want repeat business with us and have us  
as their ‘customer of choice’ 
we have a dedicated procurement and supply 
chain team which is responsible for putting 
this approach into practice as part of this 
they continue to enhance our systems and 
processes for choosing and managing our 
suppliers this helps us to maximise the value 
of our supplier relationships makes it quicker 
and cheaper for us to transact with them and 
assists with understanding and monitoring 
areas such as environmental impact before 
our people make a decision to buy
our businesses have many common 
purchasing needs for this reason we aim  
to work with carefully chosen preferred 
suppliers enabling us to achieve better terms 
and conditions and make the most of our 
economies of scale our teams are also able 
to procure locally when appropriate drawing 
on the expertise of our divisional procurement 
specialists to manage the process effectively
we continue to focus on developing our 
relationships with all of our suppliers 
including small and mediumsized 
enterprises smes in 2011 we will  
be looking at ways to enhance this further  
we have a longstanding programme in  
place to improve the way we work with  
our suppliers following the public attention  
on our relationships with our suppliers in 
november 2010 we looked again at the 
improvement programme we had in place 
and introduced a number of additional steps 
including support to smes who often supply 
the specialist or local knowledge we need to 
deliver services to our customers 
serco is a member of minority supplier 
development uk a notforpro t organisation 
which provides a direct link between 
companies and ethnicminority businesses 
to enable the building of mutually bene cial 
business relationships
sercoar10section3gindd   68 14032011   1431  serco group plc annual report and accounts 2010  69
joint venture partners
serco has a number of joint ventures with 
commercial partners and customers 
our joint ventures with abellio run northern 
rail which is the country’s largest train 
franchise and merseyrail the uk’s most 
punctual train operator
awe management limited our highly 
successful joint venture with lockheed  
martin and jacobs engineering group  
inc manages the uk’s atomic weapons 
establishment 
in australia dms maritime our joint venture 
with po maritime services is a key partner 
for the australian defence force adf and 
other agencies in partnership with sodexo 
we also deliver garrison support services  
to the adf through serco sodexo defence 
services pty limited
we also have successful joint ventures with 
customers we created gsts pathology with 
guy’s and st thomas’ nhs foundation trust 
to transform its pathology services in 2010 
king’s college hospital nhs foundation 
trust also became a partner in the joint 
venture access is our joint venture with 
glasgow city council designed to streamline 
and maximise the use of the council’s 
property and ict assets
strong relationships based on mutual  
trust and respect and clarity of roles  
are essential ingredients if a joint venture  
is to deliver excellent customer service  
our divisional management teams are 
responsible for relationships with our joint 
venture partners supported by members  
of the group executive committee and board 
as appropriate this includes holding regular 
strategy and review meetings with our 
partners
strategic partners
we often deliver services as part of a 
consortium either as prime contractor or  
as a subcontractor this allows us to bring 
together companies with the skills to meet  
the precise requirements of a bid
our values and the open and honest way  
in which we work also make us an attractive 
partner for voluntarysector organisations 
who often lack the scale and experience  
to access major government programmes 
examples include
 our model for providing welfare to work 
services in the uk which utilises a 
network of commercial and voluntary
sector partners and
 our contract to run belmarsh west prison 
in alliance with voluntarysector partners 
turning point and catch22
responsibility for relationships with our 
strategic partners lies with the relevant 
contract and divisional management
sercoar10section3gindd   69 14032011   1431 70  serco group plc annual report and accounts 2010
section 3
our approach to risk within the  
serco management system
the sms sets out policy standards  
systems and processes that identify review 
and report risks at all levels of our business 
and in the group as a whole with the aim of 
safeguarding our shareholders’ investments 
and our assets and reputation at each level 
within our business risk management 
processes re ect the nature of the activities 
being undertaken and the business and 
operational risks inherent in them and 
therefore the level of control considered 
necessary to protect our interests and those 
of our stakeholders 
these risk management processes were 
subject to comprehensive review during 
2010 as part of a broader review of the sms 
this ensures that they re ect the nature of  
the activities we undertake and the business 
and operational risks inherent in them and 
therefore the level of control we consider 
necessary to protect our interests and those 
of our stakeholders
these controls and processes fall into  
four main areas identi cation assessment 
planning and control and monitoring  
so that we
 identify business objectives that re ect  
the interests of all stakeholders and the 
risks associated with the achievement  
of these objectives
 regularly assess our exposure  
to risk including through the regular 
measurement of key risk indicators
 control and reduce risk as far  
as reasonably practicable or  
achievable through costeffective  
risk treatment options 
 identify new risks as they arise and remove 
those risks that are no longer relevant
ris i enti cation
in identifying the potential risks associated 
with the achievement of our business 
objectives we consider both external factors 
arising from the environment within which  
we operate and internal risks arising from  
the nature of our business its controls and 
processes and our management decisions 
principal risks and uncertainties
serco has a wellestablished  
and embedded system of 
internal control including 
 nancial operational and 
compliance controls and risk 
management designed to 
safeguard shareholders’ 
investments and our assets 
and reputation 
the board has overall responsibility for  
our internal control system and for reviewing 
its effectiveness and has delegated to 
management the implementation of policies 
on risk and control 
risk management is fundamental to how we 
manage the business we have developed 
robust systems and processes to identify  
and manage the key risks facing each of  
our businesses and the group as a whole 
and all parts of the business have appropriate 
risk and crisis management plans that meet 
de ned policy standards 
during the year we have implemented the 
recommendations resulting from the risk 
management review completed in 2009  
this has seen the establishment of the group 
risk management committee a formal 
committee of the executive committee 
which provides governance and oversight of 
risk further we have changed and improved 
the approach to the assessment of risk as 
well as standardising and enhancing the 
reporting format 
these enhancements to our risk management 
processes have been incorporated within  
our risk management policies systems and 
processes which conform to the combined 
code’s requirements and form part  
of the serco management system sms  
a comprehensive review of the sms was 
completed in 2010 the revised sms has 
been approved and reissued by the board
such systems and processes 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 
con rms that this process has been in place 
for the year under review and up to the date of 
approval of the annual report and accounts
sercoar10section3gindd   70 14032011   1431  serco group plc annual report and accounts 2010  71
risk mitigation involves us identifying 
appropriate measures including contingency 
plans to reduce the severity of the impact  
of the risks should they occur this includes 
developing crisis management plans in 
response to risks whose potential impact 
warrants a speci c management process
the sms requires every contract to develop  
a risk management plan re ecting assessed 
risks and supported by appropriate measures 
and contingency plans to mitigate the impact 
of the risks
risk monitoring
changes in our external environment internal 
structures and management decisions may 
all affect the nature and extent of the risks  
to which the group is exposed 
our risk monitoring process therefore 
regularly monitors changes to our business 
and the external environment to ensure that 
we respond appropriately to reduce the 
impact of emerging risks 
principal risks
the group risk register identi es the principal 
risks facing the business including those  
that are managed directly at a group level 
they are managed through a formal process 
this identi es the business objectives and 
the interests of shareholders and other 
stakeholders that are likely directly or 
indirectly to in uence the business’s 
performance and its value
the group’s key stakeholders include but 
are not limited to shareholders customers 
suppliers staff trade unions government 
regulators banks and insurers the way  
we operate as a responsible company 
recognises the interests of the community  
in areas such as social environmental and 
ethical impact as described under corporate 
responsibility on pages 64 to 67
the most signi cant risks relate to our 
reputation and to operational and nancial 
performance a number of our risks re ect 
social environmental and ethical issues but 
these do not currently represent signi cant 
threats to our strategy 
once identi ed we document risks in risk 
registers which are maintained at a contract 
business unit programme divisional and 
group level these risk registers change as 
new risks emerge and existing risks diminish 
so that the registers re ect the current key 
risks we review risk registers at least 
quarterly and more frequently as required 
the group risk management committee 
reviews the group risk register quarterly 
ahead of formal review by the board
risk assessment
we assess the potential effect of each 
identi ed risk on the achievement of our 
business objectives and wider stakeholder 
interests to do so we use a risk scoring 
system based on our assessment of the 
probability of a risk materialising and the 
effect if it does this is assessed from 
three perspectives
 the risk’s signi cance to the achievement 
of our business objectives
 the risk’s signi cance to society including 
on public safety and the environment and
 our ability to in uence control and 
mitigate the risk
analysis of our key risks allows us to assess 
the probability of disruption to our business 
objectives and highlights critical areas that 
require management attention in 2010 an 
updated risk assessment matrix has been 
implemented providing improved clarity in 
the de nition of probability assessment
risk planning and control
we assign each identi ed and assessed  
risk to a risk owner who is responsible for 
controlling and managing it and developing a 
robust and effective plan to reduce or mitigate 
the risk risk owners are required to report to 
the board on speci c risks the board may 
ask for additional information or request an 
audit to provide additional assurance 
risk reduction involves taking early 
management action to remove or reduce 
identi ed risks before they can affect the 
contract or project we consider options to 
eliminate reduce or control the risks as part 
of the risk identi cation and analysis process 
sercoar10section3gindd   71 14032011   1431 72  serco group plc annual report and accounts 2010
section 3
 we monitor and regularly review key 
performance indicators these include 
analysis of business performance and 
variances from plan occupational health 
and safety incidents and error and 
exception reporting
 selective recruitment succession  
planning and other human resource 
policies and practices ensure that staff 
skills are aligned with serco’s current  
and future needs
 we maintain insurance policies against 
losses arising from circumstances such 
as damage or destruction of physical 
assets theft legal liability for thirdparty 
loss and professional advice we review 
the adequacy of our insurance cover at 
regular intervals
 our investment committee meets regularly 
to ensure appropriate governance and the 
management of risk associated with larger 
or higher risk bids acquisitions disposals 
and areas of signi cant capital expenditure
 we apply robust project management  
and change implementation disciplines to 
all major projects including new contract 
transitions acquisitions new technology 
applications change programmes and 
other major initiatives
 the directors’ report describes  
our approach to health safety and 
environmental protection quali ed and 
experienced staff in each business unit 
provide advice and support on health 
safety and environmental issues and 
undertake regular audits
 we have safety specialists in our aviation 
rail defence nuclear and marine 
businesses who report to the board and 
maintain and further develop the very high 
standards expected in these industries
 the chief information of cer is responsible 
for ensuring that systems and processes 
are in place to ensure the con dentiality 
integrity and availability of sensitive 
information and the associated 
information systems that support our 
business activities
summarised on the following pages are  the 
key risks we have identi ed that could have a 
material impact on our reputation our 
operations or our nancial performance
we also have material investments in a 
number of joint ventures where we have  
joint control over management practices  
our representatives within these companies 
ensure that their processes and procedures 
for identifying and managing risk are 
appropriate and that internal controls exist 
and are regularly monitored 
we keep reputational and emerging risks 
under active review and inform the board of 
changes emerging risks cover longerterm 
risks that could represent a threat to our 
activities but which are not yet suf ciently 
de ned to be included as active risks 
examples of these risks include climate 
change and changes in key markets
managing and mitigating risk
our risk management process enables us  
to understand our operational risk pro le 
while operational risk can never be 
eliminated we endeavour to minimise the 
impact by the consistent implementation  
of the sms ensuring that appropriate 
infrastructure controls systems staff  
and processes are in place
some of our key management and control 
techniques de ned in the sms are set 
out below
 our operating processes fully re ect the 
principles of clear delegation of authority 
and segregation of duties
 our group risk management committee 
meets quarterly to ensure that risks 
internal control and business assurance  
are effectively managed and reviewed
 comprehensive business review 
processes ensure we meet customer 
expectations regulatory requirements 
and performance criteria including 
operational effectiveness investment 
returns cash ow requirements 
and pro tability
principal risks and uncertainties
sercoar10section3gindd   72 14032011   1431  serco group plc annual report and accounts 2010  73
in addition to these programmes each 
operating division maintains a divisional risk 
register from which we develop a divisional 
internal audit programme this programme 
selects a number of contracts for review 
based on certain key risks these reviews  
are completed through a selfassessment 
programme focused on testing the controls 
which manage and mitigate these key risks 
divisional audit committees which track  
and report on the progress of the divisional 
internal audit programme meet three times 
a year
the head of internal audit oversees the 
internal audit process as well as acting as 
the conduit for sharing best practice and 
 agging emerging risks to ensure each part 
of the business bene ts from the wider scale 
of the group’s assurance activity 
in addition to internal audit many parts of our 
business are subject to other reviews of their 
controls by third parties including industry 
regulators iso standards customers and 
other external audits this thirdparty scrutiny 
signi cantly increases the scope of auditing 
conducted across the group each year 
the board con rms that the actions it 
considers necessary are being taken to 
remedy the failings and weaknesses which  
it has determined to be signi cant from its 
review of the internal controls across the 
group the board con rms that it has not 
been advised of material weaknesses in 
 nancial reporting as part of the review  
of the internal control system
 our ethics committee has responsibility 
for the review of ethical issues that may 
arise from our current and future activities
 the company secretary manages a 
con dential reporting service to which 
staff can report illegal dangerous 
dishonest or unethical activities this 
process was enhanced and relaunched  
at the end of 2010
 we have crisis and business continuity 
plans in place to manage crisis events 
both within divisions and the group
internal audit
an integral part of risk management is 
assurance that the controls identi ed to 
manage risks are operating and effective  
the head of internal audit is responsible for 
delivery of the assurance strategy ensuring 
our assurance programme remains aligned 
to test the key controls managing the group’s 
risks internal audit is delivered at three levels 
across the business
 group internal audit
 functional internal audit and
 divisional internal audit
the head of internal audit leads the  
group internal audit programme which  
is independently delivered by kpmg llp   
its ndings are reported directly to the group 
audit committee in addition to the audits 
conducted by kpmg the head of internal 
audit supplements the programme by 
conducting periodic special reviews as 
requested by the serco group plc board  
or executive committee from time to time 
the functional internal audit programme 
supplements the group internal audit 
programme it addresses nance processes 
and controls through a centrally provided 
audit programme delivered by divisional 
management on a peer to peer basis as well 
as audit programmes completed by group 
functional specialists covering health safety 
and environment and it systems and 
security policy compliance 
sercoar10section3gindd   73 14032011   1431 74  serco group plc annual report and accounts 2010
section 3
principal risks and uncertainties
market risks
 risk
descriptioncomment impact mitigation
as a major proportion of serco’s customers are governments and 
governmental agencies a substantial part of the business is dependent  
on government policies budget priorities and regulatory or political 
constraints in particular those regarding maintaining and improving public 
infrastructure which could have a signi cant impact on the size scope 
timing and duration of contracts and orders under them and therefore  
on the level of business that we may win as such these businesses  
are susceptible to changes in government government policy budget 
allocations and the political environment primarily in the uk and the us 
any reduction in such government expenditure and funding could result  
in a suspension cancellation termination or nonrenewal of contracts 
revenues may also be adversely affected by changes to the uk 
government’s or us government’s policy in respect of outsourcing
 reduction in market opportunities
 changes to terms of existing  
or new contracts
 failure to meet growth  
or pro t expectations
 business strategy
 diverse business across 
geographies and markets
 business signi cantly focused 
on developed markets with 
strong and established legal 
systems providing protection  
to changes in contract terms
 risk
descriptioncomment impact mitigation
failure to win material bids or renew material contracts could restrict 
growth opportunities for the future or have an adverse impact on serco’s 
business nancial condition and results of operations further a 
signi cant number of serco’s contracts with the uk government the us 
government and other public sector customers including renewals and 
extensions of previous contracts are awarded through formal competitive 
bidding processes competitive bidding processes present a number  
of risks including substantial cost and management time and effort to 
prepare bids and proposals for contracts that may not be won in addition 
there is often a long period between a successful competition tender offer 
and entering into de nitive contractual documentation and nancial close 
and in some cases nancial close may not occur 
 failure to meet growth  
or pro t expectations
 signi cant nancial loss  
or cost overrun
 damage to reputation  
resulting in loss of existing  
or new business
 impact on strategic objectives
 business lifecycle governance 
process embedded in sms
 governance structure managed 
through investment committee 
programme and project boards 
divisional and contract boards
 business strategy and targets 
managed through internal boards
 regular review and monitoring 
of risk registers
 gate review and formal  
signoff process
sercoar10section3gindd   74 14032011   1431  serco group plc annual report and accounts 2010  75
operational risks
 risk
descriptioncomment impact mitigation
serco has a number of complex programmes which it is contracted  
to deliver for the customer these are often let on a xed price basis 
irrespective of the actual costs incurred and therefore if costs exceed  
the contract ceiling the company may not be able to obtain full 
reimbursement further some projects require delivery in accordance  
with speci ed milestones on agreed dates signi cant adverse nancial 
consequences can be imposed where milestones are not met or a project 
is not delivered on time the length and complexity of such projects mean 
that management estimates can be particularly dif cult to make and could 
turn out to be inaccurate
 failure to meet growth  
or pro t expectations
 signi cant nancial loss  
or cost overrun
 loss of contract revenue  
related to operations and 
service charges
 damage to reputation  
resulting in loss of existing  
or new business
 impact on strategic objectives
 robust bidding and contract 
review process including 
 nancial technical and 
commercial reviews
 governance structure managed 
through investment committee 
programme and project boards 
divisional and contract boards
 robust cost accounting
 internal audit
 business strategy and targets
 regular review and monitoring 
of risk registers
 gate review and formal  
signoff process
 quality management systems
 risk
descriptioncomment impact mitigation
t o deliver our commitments we must ensure that we have ef cient 
operations our operational ef ciency programme facilitates delivery  
of operational change and sustainable margin improvement failure to 
deliver may impact our ability to deliver business commitments
 erosion of pro t
 impact on competitiveness
 damage to reputation  
resulting in loss of existing  
or new business
 failure to meet customer 
expectations and 
business strategy
 business strategy and 
supporting plans
 internal governance structure
 business review
 internal audit
 leancontinuous improvement 
programme
 quarterly management reporting
any harm to the company’s reputation could adversely impact business risk
descriptioncomment impact mitigation
the company is dependent on maintaining its reputation in each 
jurisdiction in which it operates in order to maintain and grow its business 
it is exposed to the risk that litigation misconduct operational failures and 
negative publicity could harm its reputation in addition the company’s 
reputation could also be adversely affected if its services or the services 
performed by its subcontractors do not perform as expected any harm  
to its reputation could have a material adverse effect on its business 
 nancial condition and results of operations
 failure to meet growth  
or pro t expectations
 signi cant nancial loss  
or cost overrun
 loss of contract revenue  
related to operations and 
service charges
 damage to reputation  
resulting in loss of existing  
or new business
 impact on strategic objectives
 robust bidding and contract 
review process including 
 nancial technical and 
commercial reviews
 governance structure managed 
through investment committee 
programme and project boards 
divisional and contract boards
 business strategy and targets
 regular review and monitoring 
of risk registers
 gate review and formal  
signoff process
 quality management systems
sercoar10section3gindd   75 14032011   1431 76  serco group plc annual report and accounts 2010
section 3
principal risks and uncertainties
operational risks continued
governance risks
major it failure or prolonged loss of critical it systems risk
descriptioncomment impact mitigation
the it strategy is focused on standardising common processes 
establishing common business systems and enabling ways of working by 
providing and embedding tools that support what we do within this the 
company has de ned enterprise applications these are key information 
technology based business systems within serco they include sap for 
finance procurement and human resources payroll risk management 
safety assurance email intranet and nimbus control for process 
excellence systems failings in the systems have the potential to seriously 
impact the management of the business
 damage to reputation  
resulting in loss of existing  
or new business
 impact on strategic objectives
 inability to meet contract 
requirements or perform core 
business processes
 costly to rectify and potential for 
dilution of shareholder returns
 signi cant media attention and 
future scrutiny
 information policies and 
systems and governance 
structure
 data recovery capability 
designed into systems  
and periodically tested
 design out single points 
of failure
 server and system performance 
monitoring and reporting
 capacity management
 data backup and business 
continuity plans in place
 risk
descriptioncomment impact mitigation
serco’s operations are principally in the uk the us europe the uae 
australia and india certain of our businesses carry out work in other 
countries such as canada costa rica hong kong afghanistan iraq  
and china operating in international markets brings with it inherent risks 
including bribery and corruption particularly in certain developing nations 
we recognise that proposed uk legislation around bribery and corruption  
will establish more stringent legal requirements
 legal action and nes against 
the company
 disbarment from tender lists
 damage to reputation  
resulting in loss of existing  
or new business
 signi cant media attention  
and future scrutiny
 policies and systems embedded 
in sms
 code of conduct
 ethics committee
 speak up process
 ethics and compliance 
programme and training
 risk assessment
 thirdparty contracts
major information security breach risk
descriptioncomment impact mitigation
serco must comply with restrictions on the use of con dential and 
classi ed data and provide for secure transmission of such information 
this is a heightened risk particularly with respect to government  
contracts due to the sensitive and con dential nature of government  
data despite controls to ensure the con dentiality of such information 
serco may breach restrictions or be subject to attack from computer 
programmes that attempt to penetrate its network security and 
misappropriate con dential information
 damage to reputation resulting 
in loss of existing or new 
business disquali cation from 
future tenders contract 
termination etc
 impact on strategic objectives
 costly to rectify and potential for 
dilution of shareholder returns
 criminal and civil action
 contract and business external 
accreditations withdrawn
 signi cant media attention  
and future scrutiny
 information systems policy 
systems and embedded 
governance structure
 think privacy campaign to raise 
awareness and strengthen 
control processes
 user and data management 
including data encryption 
information classi cation  
data cleansing and 
password controls
 iso 27000 certi cation
 internal and external audit
sercoar10section3gindd   76 14032011   1431  serco group plc annual report and accounts 2010  77
 risk
descriptioncomment impact mitigation
we must understand our environmental impacts manage them and 
measure our performance to demonstrate improvement fuel poverty  
is likely to signi cantly impact energy prices increases in energy costs  
are conservatively estimated at 10 per year for many years to come  
we need to make sure we are managing our consumption to minimise  
the cost and reduce our carbon emissions we also need to recognise  
and respond to increasing legislation for example the uk government’s 
carbon reduction commitment
 legal action and nes against 
the company
 signi cant nancial loss
 disbarment from tender lists
 damage to reputation  
resulting in loss of existing  
or new business
 signi cant media attention  
and future scrutiny
 environmental policy 
and systems 
 environment oversight group
 aspects and impacts 
assessment
 iso 14001
 carbon trust standard
 reporting methodology 
and systems
 environmental strategy 
objectives and targets 
 risk
descriptioncomment impact mitigation
serco must comply with laws and regulations relating to the formation 
administration and performance of government contracts that affect  
how it does business and may impose added costs further it is required 
to obtain environmental and safety permits from various government 
authorities which require periodic renewal or review of their conditions 
failure to comply with any of these regulations could result in civil and 
criminal penalties and administrative sanctions including termination  
of contracts forfeiture of pro ts harm to its reputation suspension of 
payments nes and suspension or debarment from doing business 
with government
 substantial monetary damages 
or criminal violations
 damage to reputation  
resulting in loss of existing  
or new business
 disbarment from tender lists
 signi cant media attention  
and future scrutiny
 policies and systems embedded 
in sms
 code of conduct
 risk assessment
 thirdparty contracts
 system certi cation and 
regulatory approval
 internal board and 
governance structure
 staff induction and training
major accident or incident risk
descriptioncomment impact mitigation
it is possible that a major catastrophic event such as a major train 
derailment or air traf c accident could occur at one of the projects in 
relation to which serco has provided professional design construction  
engineering or support services such a catastrophic event could result  
in the personal injury or death of one or more employees of the company 
employees of other subcontractors working on the project or members  
of the public signi cant actionable environmental harm andor extensive 
damage to thirdparty property in the event that such a catastrophic event 
is found or perceived to be caused by the negligence of serco it could 
subject the company to claims for personal injury wrongful death 
property damage by customers subcontractors governments employees 
or members of the public which could lead to the payment of extensive 
damages and result in signi cant adverse publicity and reputational  
harm such adverse publicity and reputational harm could lead to a loss 
of business
 deaths or serious injuries to 
employees or third parties
 major environmental damage
 severe nancial impact  
 ne by regulators suspension 
of operating licence 
compensation clean up etc
 loss of business disquali cation 
from future tenders contract 
termination etc
 contract and business external 
accreditations withdrawn
 signi cant media attention
future scrutiny
 criminal and civil action against 
company or individuals
 robust management systems 
subject to external regulatory 
and internal audit
 system certi cation and 
regulatory approval
 formal oversight through group 
risk management committee 
health safety and environment 
oversight group divisional  
and internal boards
 crisis management and business 
continuity plans in place
 insurance
 strategy objectives targets  
and regular reporting
 formal assurance structure 
operating within de ned 
competencies
 staff induction and training
sercoar10section3gindd   77 14032011   1431 78  serco group plc annual report and accounts 2010
section 3
principal risks and uncertainties
people risks
finance risks
failure to manage unionindustrial relations risk
descriptioncomment impact mitigation
a signi cant number of serco’s employees are members of trade unions  
in the united kingdom and a number are members of trade unions in the 
united states and other countries these include operations where a 
failure to manage relationships may result in industrial action by serco  
staff in highpro le business operations ie where there will be signi cant 
reputational damage client or media attention some sectors of the 
business are subject to union recognition agreements the company 
maintains a number of relationships with trade unions and staff through 
work councils and other bodies
 failure to deliver contractual 
requirements
 instability and loss of 
business continuity
 dilution of brand and values
 reduced employee 
engagement 
 damage to reputation  
resulting in loss of existing  
or new business
 signi cant media attention  
and future scrutiny
 policies and systems embedded 
in sms
 industrial relations strategy
 industrial relations 
working group 
 stakeholder management  
of key relationships
 annual external independent 
remuneration review
 job structure and 
grading system
 employment engagement 
strategy
the impairment of goodwill could adversely impact reported results risk
descriptioncomment impact mitigation
goodwill accounts for approximately onethird of the serco group’s 
recorded total assets as at 31 december 2010 serco evaluates goodwill 
for impairment annually or more frequently when evidence of potential 
impairment exists any decrease in expected cash ows or a deterioration 
in market conditions could require serco to record future impairment 
charges that could have a material impact on the nancial position and 
results of operations
 inability to meet pro t 
expectations
 damage to reputation and 
shareholder con dence
 impact on strategic objectives
 internal board and 
governance structure
 strategic plans
 business plans
 business lifecycle 
governance process
 financial review and reporting
failure to attract and retain senior management and other key employees risk
descriptioncomment impact mitigation
the success of the company depends on the efforts abilities experience 
and expertise of the senior management teams and on recruiting 
retaining motivating effectively communicating with and developing  
highly skilled and competent people at all levels of the organisation  
there can be intense competition for personnel from other companies and 
organisations and there may at any time be shortages in the availability of 
appropriately skilled people at all levels within serco further the company 
cannot guarantee the retention of such key executives and technical 
personnel the failure of the company to retain andor recruit additional  
or substitute senior managers andor other key employees could have  
a material adverse effect on its business 
 increased cost in recruitment 
activity and time taken to 
 ll roles
 instability and loss of 
business continuity
 dilution of brand and values
 reduced employee 
engagement through loss  
of compelling leadership
 strengthen competitors  
loss of leaders to them
 impact on business –  
risk of not achieving level  
of planned growth
 people policies and  
systems strategy and targets 
supported by governance 
structure including 
remuneration committee
 succession planning
 leadership model
 annual external independent 
remuneration review
 job structure and 
grading system
 t alent database and leadership 
development programme
 employment engagement 
strategy including annual 
staff survey
sercoar10section3gindd   78 14032011   1431  serco group plc annual report and accounts 2010  79
 risk
descriptioncomment impact mitigation
the international nature of serco’s business means it is exposed to 
 uctuations in foreign currency exchange rates in relation to various 
currencies primarily the us dollar the australian dollar and the euro 
arising from the translation of earnings in addition some of serco’s  
bank debt is denominated in currencies other than pound sterling
 material effect on the group’s 
future results of operations  
and nancial position
 the group hedges shortterm 
transaction risks that are 
material in value
 management of translational risk 
by the part currency matching  
of borrowings with the net 
assets of overseas subsidiaries
fluctuations in interest rates risk
descriptioncomment impact mitigation
historically serco has nanced its operations partly through cash ow 
generated by bank debt adverse movements in interest rates could 
therefore impact pro tability and net assets
 inability to meet 
pro t expectations 
 impact on competitiveness
 impact net assets
 fixed rate debt instruments  
and interest rate derivatives  
that swap oating for xed rates 
 risk
descriptioncomment impact mitigation
serco operates de ned bene t pension schemes for qualifying employees 
of its subsidiaries in the uk and other european countries in addition  
we have interests in joint ventures which operate de ned bene t schemes 
for qualifying employees the nature of a de ned bene t scheme means 
that the funding levels of the schemes are subject to factors outside 
serco’s control which could create or impact a de cit in the scheme at 
future actuarial valuations if the de cit in the scheme increases at future 
actuarial valuations the group may be required to make additional cash 
contributions to the schemes in the future preventing the use of cash  
for other purposes which could have a material impact on the group’s 
business nancial condition and results of operations over the long term
 inability to meet pro t 
expectations
 increase in cash contributions  
to our pension schemes
 actuarial assessment of 
scheme liabilities
 appropriate investment 
management
 hr policy systems and 
governance structure including 
remuneration committee  
and board of pension trustees
 annual external independent 
remuneration review
 industrial relations strategy
 independent measurement  
of asset returns
 internal audit
sercoar10section3gindd   79 14032011   1431 80  serco group plc annual report and accounts 2010
corporate governance report 
section 4
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 business 
conduct and ethics standard that the company and group have adopted 
throughout 2010 serco group plc complied fully with the provisions of section 1 of the 2008 combined code on corporate governance issued 
by the financial reporting council the code the paragraphs below together with the ‘our performance’ section on pages 16 to 79 and the 
remuneration report on pages 92 to 103 provide details of how the company has applied the principles and complies with the provisions of  
the code 
in may 2010 the financial reporting council published a new code the uk corporate governance code the governance code which 
replaces the code for nancial years beginning on or after 29 june 2010 the frc has stated that changes have been made to help company 
boards to become more effective and more accountable to shareholders in light of the governance code we are reviewing and will introduce 
additional elements of governance and internal control processes as appropriate for example the board has decided that all directors should 
stand for reelection on an annual basis commencing at the company’s annual general meeting in may 2011
the board of directors
board composition
currently the board has six members the chairman two executive directors and three nonexecutive directors two nonexecutive directors 
retired at the end of 2010 as at the date of this report one new nonexecutive director has been appointed and an externallyled recruitment 
process is ongoing for at least one other no individual or group of individuals dominates the board’s decisionmaking 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 pro les of all directors can be found on pages 90 and 91 
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 governance function is 
tasked by the group to develop and oversee corporate processes for the identi cation and management of business risks and the appropriate 
application of the serco management system sms and corporate responsibility activities throughout the group the ‘our performance’ section 
on pages 16 to 79 details the internal control and risk policies procedures and management framework adopted by the group the corporate 
responsibility review is available online at wwwsercocom and illustrates how serco’s approach to corporate assurance and responsibility 
translates from the board into everyday working practices 
con icts of interest
the company’s articles of association as approved by shareholders at the company’s 2010 annual general meeting include provisions 
re ecting recommended practice concerning con icts of interest the board has in place procedures for directors to report any potential 
or actual con icts to the other members of the board for their authorisation where appropriate in deciding whether to authorise a con ict or 
potential con ict of interest only noninterested directors ie those that have no interest in the matter under consideration will be able to 
take the relevant decision in taking the decision the directors must act in a way they consider in good faith will be most likely to promote the 
company’s success in addition the directors may impose conditions or limitations when giving authorisation if they think this is appropriate 
the process of reviewing con icts disclosed and authorisations given is repeated at least annually any con icts or potential con icts 
considered by the board and any authorisations given are recorded in the board minutes and in a register of directors’ con icts which is 
maintained by the company secretary
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 nancial and operating plans
 major capital expenditure acquisitions or divestments
 annual and halfyear nancial results
 satisfying itself as to the integrity of nancial information
 dividend policy
 ensuring adequate succession planning for the board and senior management and appointing and removing directors the company 
secretary and committee members
 treasury policy
 review of the effectiveness of the group’s system of internal control and risk management process
 training and development of the board and the company secretary
other speci c responsibilities are delegated to board committees which operate within clearly de ned terms of reference details of the 
responsibilities delegated to the committees are given on pages 83 and 84
  serco group plc annual report and accounts 2010  81
information o 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 
historically board meetings have been held four times a year over two days at a time from 2011 onwards an additional two board meetings will 
be held for one day each which will focus on strategy development for both the group and individual divisions board meetings are structured 
to allow open discussion of the strategy trading and nancial 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 as required
the attendance of individual directors at board meetings held during the year is shown in the table on page 82
company secretary and independent advice
the company secretary is responsible for advising the board on all corporate governance matters ensuring both that all board procedures are 
followed and good information ow 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
the roles of the chairman and the chief executive are separately held and the division of their responsibilities is clearly established set out in 
writing and agreed by the board
as chairman alastair lyons is responsible for 
 ensuring the effectiveness and successful operation 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 training and development takes place 
 board succession planning
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 executive committee 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 shareholders and industry organisations
 
senior independent director
following the retirement of margaret ford who served as senior independent director throughout 2010 david richardson was appointed to 
that role in january 2011 as part of this role david is available to shareholders if they have any issues or wish to discuss any aspects of the 
company’s business without the executive directors or chairman present 
external directorships for executive directors
the board considers that executive directors can gain valuable experience and knowledge through appropriate and limited nonexecutive 
appointments in other listed companies or independent sector organisations the board is careful to ensure that any such appointments do not 
compromise the effective management of the group and that these are approved in advance of any appointments being taken up details of the 
fees received by executive directors for external appointments can be found in the remuneration report on page 96 
signi cant other commitments of the chairman
alastair lyons is nonexecutive chairman of admiral group plc deputy chairman and senior independent director of bovis homes group plc 
senior independent director of phoenix group holdings and a nonexecutive director of the towergate insurance group
the board believes that alastair holds a wellbalanced portfolio of positions which allow him to perform his duties as chairman appropriately
reelection of directors
the company’s articles of association stipulate that each director shall retire but be eligible for reelection at the annual general meeting 
held in the third calendar year following the year in which he or she was elected or last reelected by the company 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 
excluding the chairman who have served for more than nine years will be subject to annual reelection
in accordance with provisions contained within the governance code and applying to the company from 2011 all directors will be retiring and 
standing for reelection at the 2011 annual general meeting their names are set out in the notice of annual general meeting furthermore all 
directors standing for reelection will do so on an annual basis at each subsequent annual general meeting
 82  serco group plc annual report and accounts 2010
corporate governance report 
section 4
the nonexecutive directors 
independence
all the nonexecutive directors are independent of management and have no crossdirectorships or signi cant links which could materially 
interfere with the exercise of independent judgement 
term of appointment
all nonexecutive directors are appointed for an initial term of three years thereafter subject to satisfactory performance they may serve one or 
two additional threeyear terms with a thorough review of their continued independence and suitability to continue as nonexecutive directors 
being undertaken if they are to remain on the board for more than nine years the terms and conditions of the appointment of the directors are 
summarised in the remuneration report on page 97 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 this took place in 2010 in respect of kevin beeston’s 
tenure as chairman of the company the performance of the current chairman will be assessed on completion of his rst year in position  
in 2011
board meetings and attendance
from 2011 the board will hold its meetings on a bimonthly basis with ad hoc meetings in between if required the frequency and content of 
board meetings are reviewed by the board annually 
the attendance of the individual directors at board and committee meetings of which they were members during 2010 was as follows
    board audit remuneration nomination
    5 meetings  3 meetings 4 meetings 2 meetings
kevin beeston    2 2 na na 1
alastair lyons    4 4 na na 11
tom corcoran    5 3 3 2
christopher hyman    5 na na na
andrew jenner    5 na na na
leonard v broese van groenou     5 3 4 2
margaret ford    5 3 4 2
david richardson    5 3 4 2
notes
1 na means that the speci ed 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 where a number is given in brackets against a director’s attendance this is the number of meetings which took place during their tenure 
board effectiveness
induction
on joining the board directors are given background information describing the company and its activities they receive an induction pack 
which includes information on all the governance processes of the group the roles and responsibilities of the board committees and other 
management teams and a range of other appropriate information about the group its activities and its advisors meetings are arranged with a 
range of key people from across the group on a structured basis to assist with a director’s induction visits are also arranged where possible 
to a number of contracts around the country in 2010 alastair lyons completed an exceptionally thorough programme of meetings and site 
visits both in the uk and overseas meeting management and employees of the group as well as other key external stakeholders such as the 
external auditors and company brokers 
continued professional development
during 2010 the board members were all engaged in a range of training and professional development activities in october 2010 the audit 
committee attended an internal workshop to gain an in depth understanding of the groupwide internal audit approach its effectiveness and 
relationship with the wider governance framework including the sms and risk management methodology
the board considers the training needs of the executive and nonexecutive directors plus the company secretary all board members 
are encouraged to attend relevant training courses at the company’s expense the development needs of the directors and the company 
secretary fall within the remit of the chairman who reviews and agrees these individually
  serco group plc annual report and accounts 2010  83
performance evaluation 
the group recognises the importance of a comprehensive evaluation process for the board and ensures that comments and recommendations 
are considered carefully and implemented where appropriate to ensure its continued development a formal evaluation has been undertaken 
of the performance of the board and its committees during 2010 the evaluation was performed in november 2010 by all directors through 
the completion of an evaluation questionnaire followed by onetoone meetings as appropriate matters covered by the board questionnaire 
included the effectiveness and frequency of board meetings risk and risk management group strategy the structure and composition 
of the board including diversity and the skillset and experience of its members stakeholder engagement and a traditional analysis of its 
strengths weakness opportunities and threats  there was general agreement that overall the board and its committees continued to operate 
effectively throughout the period it was noted that the board was in a transitional period both in terms of being led by a new chairman and 
the recruitment of new nonexecutive directors following retirements and the effective induction and integration of the latter were cited as key 
determinants of the continuing successful operation of the board
the directors continue to believe the openness and experience of the board members are key strengths directors feel well informed and 
believe that key issues such as risk and strategy are very well managed within rigorous processes with suf cient opportunity for challenge and 
debate the increased number of board meetings proposed from 2011 onwards was noted as a development that would further strengthen the 
robustness of the company’s stewardship and deepen the understanding by and communication between board members 
the gender imbalance of the board following the retirement of margaret ford was noted as part of the evaluation the board is fully supportive 
of the emphasis placed on diversity in particular gender diversity within the governance code and this is a focus in the current recruitment of 
nonexecutive directors to the board
the use of an external facilitator was considered for the evaluation of the board and all its committees however as the board had undergone  
a number of changes during 2010 it was considered to be more appropriate to undertake an externally facilitated evaluation in 2011  further it 
is the board’s intention to comply with the requirements of the governance code and carry out such an external evaluation at least once every 
three years 
in addition 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 was carried out during the year for kevin beeston and will be for the new chairman alastair lyons 
during 2011 
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 re ect any 
changes in good practice and governance these are available online at wwwsercocom 
committees are authorised to obtain outside legal or other independent professional advice if they consider it necessary 
the audit committee and audit committee report
membership the audit committee consists solely of independent nonexecutive directors it is chaired by david richardson and comprises 
leonard v broese van groenou and since february 2011 paul brooks margaret ford and tom corcoran served on the committee  
throughout 2010 
the chairman of the committee has recent and relevant experience for this role the audit committee met three times during the year at the 
invitation of the committee the finance director the head of internal audit kpmg llp the group’s internal audit providers and deloitte llp 
the external auditor attend meetings the committee meets with each of the internal auditors external auditor and the head of internal audit 
separately at least once a year all directors have access to the minutes of the audit committee meetings 
responsibilities the main responsibilities of the audit committee are 
 t o monitor the integrity of the nancial statements of the company including interim management statements and any formal 
announcements relating to the company’s nancial performance reviewing signi cant nancial reporting judgements contained in them
 t o monitor and review the internal audit programme and ensure that the internal audit function is adequately resourced and has appropriate 
standing with the company 
 t o review management’s and the internal auditors’ reports on the effectiveness of systems for internal nancial control nancial reporting and 
risk management
 t o consider the appointment reappointment and removal of the external auditor and assess independence and objectivity of the external 
auditor ensuring that key partners are rotated at appropriate intervals and relevant uk professional and regulatory requirements are taken 
into account
 t o recommend the audit fee to the board and preapprove any fees in respect of nonaudit services provided by the external auditor and to 
ensure that the provision of nonaudit services does not impair the external auditor’s independence or objectivity
 t o discuss with the external auditor before the audit commences the nature and scope of the audit and to review the auditor’s quality control 
procedures and steps taken by the auditor to respond to changes in regulatory and other requirements
 t o oversee the process for selecting the external auditor and make appropriate recommendations through the board to the shareholders to 
consider at the annual general meeting
additionally in accordance with the combined code the committee is responsible for a formal whistleblowing policy and procedure which 
applies throughout the group responsibility for the operation of this policy has been delegated to the company secretary 
 84  serco group plc annual report and accounts 2010
corporate governance report 
section 4
members of the audit committee have received updates on accounting standards and generally accepted accounting practice on a quarterly 
basis as part of the finance director’s report to the board and also on a halfyearly basis from the external auditor
during 2010 the audit committee discharged fully its responsibilities listed above and in doing so considered the following
 corporate governance report and statement of directors’ responsibilities for inclusion in the 2009 annual review and accounts
 2010 halfyear report and auditor’s report thereon
 2010 external audit fees
 review of and enhancement to the whistleblowing process
 assessment of the audit committee 
 2010 internal audit programme and the proposed 2011 programme 
 the continuing independence of the external auditor
nonaudit services the committee has recon rmed its policy on the provision of audit and nonaudit services by deloitte llp  it determined 
three categories of services approved eg audit and related assurance services permitted eg tax compliance and due diligence and not 
permitted eg designimplementation of nancial information systems and quasi management services the committee the company and 
deloitte llp all monitor compliance with the policy and review at each meeting the fees earned and the estimates for the year 
the group has complied with the policy throughout the year where appropriate nonaudit services have been provided by companies other 
than deloitte llp to safeguard auditor objectivity and independence 
auditor’s independence the independence objectivity and effectiveness of the external auditor have been examined by the committee and 
discussions were held regarding their terms of engagement and remuneration the appointment of senior statutory auditor is rotated every 
 ve years as such the 2010 audit will be the rst of richard knights’ tenure following his appointment to the role at the end of nigel mercer’s 
in 2010 there are no contractual obligations that restrict the company’s current choice of external auditor the committee recommended to 
the board that deloitte llp be proposed for reappointment at the forthcoming 2011 annual general meeting this recommendation has been 
accepted and will be proposed to shareholders
the nomination committee
membership the nomination committee is chaired by alastair lyons and comprises david richardson leonard v broese van groenou and 
paul brooks the committee met twice during 2010 margaret ford and tom corcoran served on the committee throughout 2010 and kevin 
beeston was also a member during his tenure in 2010
responsibilities matters considered during the year included succession and contingency planning board structure and composition and the 
appointment of successors to kevin beeston margaret ford and tom corcoran  
the committee has responsibility for the identi cation and nomination for the approval of the board of candidates to ll board vacancies as 
and when they arise engaging external search consultants as and when necessary 
the nominations committee completed a robust tender process which resulted in relevant rms of external executive search consultants being 
engaged for the appointment of the new chairman and new nonexecutive directors in consultation with the chosen search consultants 
speci cations were drawn up of the roles and attributes were identi ed that were felt to be essential for their effective performance including 
what would be considered acceptable in terms of time commitment   
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 92 to 103
executive committees
throughout 2010 a new executive committee has operated which is chaired by the chief executive and comprises 11 other members 
including the group finance director regional chief executives and other selected corporate function heads the committee has delegated 
responsibility from the board to ensure the effective direction and control of the business and to deliver the group’s longterm strategy 
and goals the committee met ten times during the year to review the group’s activities and discuss management and operational issues 
representatives from across the serco business were invited to the meetings as appropriate to discuss aspects of their business or give 
presentations on speci c topics 
relationship with shareholders
the company’s relationship with shareholders is given a high priority the annual report and accounts is available to all shareholders both in 
hard copy and online at wwwsercocom
we no longer produce a printed report of our halfyear results instead a letter summarising these results is issued to shareholders and a copy 
of the full stock exchange announcement is available on request 
regular trading updates are published ahead of close periods and before the annual general meeting by press release in addition press 
releases and stock exchange announcements are made regarding signi cant contracts or transactions all trading announcements are also 
posted on the group’s website wwwsercocom
  serco group plc annual report and accounts 2010  85
annual general meeting
individual shareholders have the opportunity at the annual general meeting to question the chairman and through him the chairs of the various 
board committees and other directors details of the meeting are set out in the notice of annual general meeting which is sent to shareholders 
and which contains the text of the resolutions to be proposed and explanatory notes for the rst time in 2010 shareholders attending the 
agm were invited to vote by means of a poll a poll re ects the number of voting rights exercisable by each member and is considered by the 
board to be a more democratic method of voting such poll voting will again take place at the 2011 agm shareholders are advised of the total 
number of votes lodged for each resolution in the categories ‘for’ and ‘against’ together with the number of ‘votes withheld’ this information is 
also posted on the group’s website wwwsercocom 
institutional investors
the chief executive and finance director have regular dialogue with institutional investors the chairman also meets with institutional investors 
from time to time as appropriate the company’s investor relations programme and daytoday activities are managed by the head of investor 
relations as part of the role of senior independent director david richardson is also available to meet shareholders as margaret ford was 
throughout her tenure should it be required
the board receives an investor relations report at each meeting 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 
signi cant 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 the corporate responsibility review and information on voting at the annual general meeting it also has a link directly to 
the company’s registrars allowing shareholders to view their shareholding online and to vote on the resolutions set out in the notice of annual 
general meeting
business conduct
serco group operates within a management system that de nes the policies standards and processes to be applied wherever we operate 
integral to this is our policy on business conduct and ethics that applies to all business divisions operating companies and business units 
throughout the world this policy outlines the group’s position on a wide range of ethical and legal issues including con icts of interest nancial 
inducements human rights and legal and regulatory compliance it applies to directors and to all employees regardless of their position or 
location recognising that ethical dilemmas may arise in a growing company the group has an ethics consultation process that is to be followed 
to determine the group’s position on particular issues to support this process an ethics committee comprising members of the executive 
team with a quorum of three and chaired by the marketing director meets as required usually monthly as the leadership of the company the 
executive team will make any ne judgements about what it considers acceptable or otherwise 
in 2010 serco undertook a review of its whistleblowing service and introduced a new outsourced ethics hotline for employees to report any 
concerns they may have or report any wrongdoing that they do not feel able to raise with their line manager human resources colleagues or 
through other reporting channels in addition to the hotline which is available tollfree worldwide in several languages employees can also 
make reports via email or the internet the company secretary investigates independently any issues raised 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 governance details of the group’s internal control and risk management processes are  
contained in pages 70 to 79 of the ‘our performance’ section the board con rms that the actions it considers necessary have been taken 
to remedy any failings and weaknesses which it has determined to be signi cant from its review of the group’s internal controls and risk 
management processes
going concern
the directors have acknowledged the guidance on going concern and nancial reporting published by the financial reporting council in 
october 2009 this is discussed in the finance review starting on page 52 
approved by the board of directors and signed on its behalf by
joanne roberts
secretary
1 march 2011
 86  serco group plc annual report and accounts 2010
directors’ report 
section 4
annual report and accounts
the directors have pleasure in presenting the annual report and accounts of the group for the year ended 31 december 2010 comparative 
 gures used in this report are for the year ended 31 december 2009 the corporate governance report set out on pages 80 to 85 forms part of 
the statutory directors’ report
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 who seek a trusted partner with a 
solid track record of providing assured service excellence our people offer operational management and consulting expertise in the aviation 
bpo defence education environmental services facilities management health home affairs information and communications technology 
knowledge services local government science and nuclear transport welfare to work and the commercial sectors
the chairman’s statement and the remainder of the ‘our performance’ section on pages 16 to 79 report on the activities during the year post 
balance sheet events and likely future developments the information in these reports which is required to ful l the requirements of the business 
review is incorporated in this directors’ report by reference 
share capital
the issued share capital of the company together with the details of shares issued during the year is shown in note 28 to the consolidated 
financial statements
the powers of the directors to issue or buy back shares are restricted to that approved at the company’s annual general meeting
the rules relating to the appointment and replacement of directors are contained in the company’s articles of association changes to the 
articles of association must be approved by the shareholders in accordance with the legislation in force from time to time
dividends 
an interim dividend of 220p 2009 185p per ordinary share was paid on 15 october 2010 the directors recommend a nal dividend of 
515p 2009 440p per ordinary share which if approved by shareholders at the annual general meeting will be paid on 17 may 2011 to those 
shareholders on the register at the close of business on 11 march 2011 
substantial shareholdings
as at the date of this report the company had been noti ed under rule 5 of the disclosure rules and transparency rules of the financial 
services authority of the following holdings of voting rights in its shares 
      number of shares
      millions  held
morstan nominees limited      251 511
capital research and management company     250 508
aa sa      250 507
lloyds banking group plc      242 496 
fidelity international limited      239 493 
baillie gifford  co      240 492
newton investment management limited      236   485
legal  general group plc      195 399
ignis investment services limited      155 315
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 90 and 91
at the conclusion of the company’s annual general meeting in may 2010 kevin beeston retired from the board and alastair lyons was 
appointed nonexecutive chairman of serco group plc
on 31 december 2010 margaret ford and tom corcoran retired from their positions as nonexecutive directors of the company  
on 26 january 2011 the company announced the appointment of paul brooks as a nonexecutive director of the company with effect from  
1 february 2011 paul’s experience and knowledge will complement the skills and knowledge of the other board members it is the intention that 
paul will take over as audit committee chairman on the eventual retirement of david richardson  
  serco group plc annual report and accounts 2010  87
directors’ interests
with the exception of the executive directors’ service contracts and the nonexecutive directors’ letters of appointment there are no contracts 
in which any director has an interest
certain change in control conditions are included in the service contracts of directors which provide compensation or reduction of notice 
periods in the event of a change in control of the company
details of the directors’ interests in the ordinary shares and options over the ordinary shares of the company are set out in the remuneration 
report on pages 92 to 103
annual general meeting
the annual general meeting of the company will be held at the institution of engineering and technology iet savoy place london  
wc2r 0bl on 9 may 2011 at 1100am
the notice of annual general meeting together with explanatory notes is sent to shareholders with this report
financial risk policies
a summary of the group’s treasury policies and objectives relating to nancial risk management including exposure to associated risks is on 
pages 136 to 142
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 whilst subject to groupwide principles
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 arrangements are made 
wherever practicable 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 a share option scheme and a long 
term incentive plan 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 group maintains a focus on corporate responsibility through a structure model that is applied across the business our corporate 
responsibility model focuses on our people safety the environment and the communities we serve this model forms an integral part of our 
management system and is supported by de ned policies in all of the areas it covers these are applied within the context of our policies on 
business conduct and ethics activities are reported quarterly as part of our internal assurance reporting process
further information on our approach to corporate responsibility and how we have delivered our commitments is contained in the corporate 
responsibility review which is available online at wwwsercocom this site also provides an overview of our approach to corporate 
responsibility our management system and our policies
creditor payment policies
the group requires each of its business units to negotiate and agree terms and conditions for payment for the supply of capital and revenue 
items just as keenly as they negotiate prices and other commercial matters 
suppliers are made aware of the terms and the way in which disputes are to be settled payment is then made in accordance with those terms
the group’s average creditor payment terms in 2010 were 31 days 2009 32 days 
 88  serco group plc annual report and accounts 2010
section 4
donations 
the group continues to encourage all staff to participate in their local communities and has a process to assess both the value and type of 
investment on a worldwide basis this measure is based upon the business in the community bitc reporting format
the value of this investment in 2010 at £2271575 2009 £1746261 represents 106 of the group’s pretax pro t 
during the year neither the company nor the group made political donations and they intend to continue with this policy within the us business 
there exists a political action committee pac which is funded entirely by employees and their spouses the serco pac and its contributions 
are administered in strict accordance with regulatory requirements employee contributions are entirely voluntary and no pressure is placed on 
employees to participate under us law an employeefunded pac must bear the name of the employing company
financial statements
at the date of this report as far as each director is aware there is no relevant audit information of which the group’s auditors are unaware each 
director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to 
establish that the group’s auditors are aware of that information
auditors
deloitte llp have expressed their willingness to continue in of ce 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
1 march 2011
directors’ report 
  serco group plc annual report and accounts 2010  89
the directors are responsible for preparing the annual report directors’ report directors’ remuneration report and the nancial statements in 
accordance with applicable law and regulations
company law requires the directors to prepare nancial statements for each nancial year under that law the directors are required by the 
international accounting standard ias regulation to prepare the group nancial statements under international financial reporting standards 
ifrs as adopted by the european union the group nancial statements are also required by law to be properly prepared in accordance with 
the companies act 2006 and article 4 of the ias regulation 
ias 1 requires that ifrs nancial statements present fairly for each nancial year the group’s nancial position nancial performance and cash 
 ows this requires the faithful representation of the effects of transactions other events and conditions in accordance with the de nitions 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 ifrss 
this requires directors 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 speci c requirements in ifrss are insuf cient to enable users to understand the 
impact of particular transactions other events and conditions on the group’s nancial position and nancial performance and
 make an assessment of the company’s ability to continue as a going concern
the directors have elected to prepare the parent company nancial statements in accordance with united kingdom generally accepted 
accounting practice uk accounting standards and applicable law the parent company nancial statements are required by law to give 
a true and fair view of the state of affairs of the company and of the pro t or loss of the company for that period in preparing these nancial 
statements the directors are required to
 select suitable accounting policies and then apply them consistently
 make judgments and estimates that are reasonable and prudent
 state whether applicable uk accounting standards have been followed and
 prepare the nancial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business
the directors are responsible for keeping proper accounting records that are suf cient to show and explain the company’s transactions and 
disclose with reasonable accuracy at any time the nancial position of the company and enable them to ensure that the parent company 
 nancial statements comply with the companies act 2006 they are also responsible for safeguarding the assets of the company and hence for 
taking reasonable steps for the prevention and detection of fraud and other irregularities
the directors are responsible for the maintenance and integrity of the corporate and nancial information included on the company’s website 
legislation in the united kingdom governing the preparation and dissemination of nancial statements may differ from legislation in other 
jurisdictions
responsibility statement
we con rm to the best of our knowledge
 the nancial statements prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets 
liabilities nancial position and pro t or loss of the company and the undertakings included in the consolidation taken as a whole and
 the management report which is incorporated into the directors’ report includes a fair review of the development and performance of the 
business and the position of the company and the undertakings included in the consolidation taken as a whole together with a description of 
the principal risks and uncertainties they face 
approved by the board of directors and signed on its behalf by
joanne roberts
secretary
1 march 2011
directors’ responsibilities
 90  serco group plc annual report and accounts 2010
directors’ proﬁles
section 4
alastair lyons cbe 57
job title chairman
appointment alastair was appointed a nonexecutive director of serco group plc in march 2010 becoming chairman at the conclusion of the 
company’s agm in may 2010
responsibilities alastair is responsible for the effective operation of the board and oversight of corporate governance he is chair of the 
nomination committee
experience in his executive career alastair was group finance director and subsequently chief executive of the national  provincial building 
society when the society was acquired in 1996 by abbey national he joined the abbey national main board as managing director of its 
insurance division
in 1997 he became chief executive of the pensions specialist npi where he led its demutualisation and acquisition by amp  subsequent to which 
he joined natwest in 1999 as director of corporate projects
a chartered accountant with an ma in economics from trinity college cambridge alastair has been a nonexecutive director of successively 
the department for work  pensions and the department for transport
external appointments alastair has been chairman of admiral group plc the direct motor insurer since 2000 in 2008 he was appointed 
deputy chairman of bovis homes group plc one of the uk’s leading quoted house builders in march 2010 he was appointed senior 
independent director and audit chair of phoenix group holdings the uk’s largest closed life and pension fund consolidator and in february 
2011 he was appointed nonexecutive director of the towergate insurance group
christopher rajendran hyman cbe 47
job title chief executive
appointment christopher was appointed chief executive of serco group plc in 2002
responsibilities christopher is responsible for the formation and implementation of the group’s global strategy as well as the daytoday 
management of the business operations and our relationship with the city and key stakeholders he provides leadership and representation of 
the group with major customers shareholders and industry organisations
experience christopher graduated from natal university in durban south africa and quali ed 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
external appointments christopher is chairman of the prince of wales’ charity in kind direct and a trustee of the africa foundation he is also 
a trustee director of the board for business in the community a member of the uk commission for employment and skills and is chairman 
of the prince’s seeing is believing programme in the 2010 queen’s birthday honours christopher was awarded a cbe for his services to 
business and charity
alastair lyons christopher hyman andrew jenner
david richardson leonard v broese van groenou paul brooks
  serco group plc annual report and accounts 2010  91
andrew mark jenner 42
job title finance director
appointment andrew was appointed group finance director in may 2002
responsibilities andrew is responsible for the group’s nancial management reporting and control operational ef ciency and risk 
management and assurance he shares responsibility with the chief executive for our relationship with our key stakeholders and the city
experience andrew a chartered accountant joined serco in 1996 as group financial controller having previously worked for unilever and 
deloitte  t ouche llp  he became corporate finance director with additional responsibility for treasury activities in 1999 before joining the 
board in 2002
external appointments andrew is a nonexecutive director of galliford try plc one of the uk’s leading construction and housebuilding groups 
and is chairman of its audit committee
david richardson 59
job title senior independent director
appointment david joined serco as a nonexecutive director in june 2003 
responsibilities david is chair of the audit committee and a member of the remuneration and nomination committees
experience david a chartered accountant 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 until september 2010 david also served as a nonexecutive director of tomkins plc
external appointments david is the chairman of forth ports plc and director of the supervisory board of world hotels ag
leonard v broese van groenou 64
job title nonexecutive director
appointment leonard joined serco as a nonexecutive director in april 2006
responsibilities leonard is chair of the remuneration committee and a member of the audit and nomination committees
experience leonard was previously vicepresident human resources and member of the corporate executive committee of pennsylvania
based 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 spanned numerous international roles including nancial control business planning 
operational management and human resources
external appointments leonard is the chairman of the netherlands benevolent society
paul brooks 57
job title nonexecutive director
appointment paul joined serco as a nonexecutive director in february 2011
responsibilities paul is a member of the audit and nomination committees
experience paul quali ed as a chartered accountant with kpmg having graduated from cambridge university with an economics degree he 
joined experian in 1999 as finance director of its former international division and has been chief financial of cer of experian since october 
2001 he was appointed to its board of directors in july 2006
external appointments paul is an executive director of experian plc 
 92  serco group plc annual report and accounts 2010
remuneration report
section 4
introduction
the following report details the remuneration policy and the actual remuneration of the directors of the group for the year ended  
31 december 2010 in preparing this report consideration has been given to the disclosure requirements of the 2008 combined code  
and of the companies act 2006 a resolution to approve this report will be proposed at the annual general meeting on 9 may 2011
the remuneration committee
the remuneration committee the committee consists solely of independent nonexecutive directors it is chaired by leonard v broese van 
groenou and through 2010 comprised margaret ford david richardson and tom corcoran margaret ford and tom corcoran retired from the 
board along with the committees of serco group plc on 31 december 2010
the chairman of the company and the executive directors may attend meetings of the committee at its discretion and as appropriate they are 
not in attendance when their own remuneration arrangements are discussed
the committee met 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 82
the committee determines the overall remuneration policy for senior management and the individual remuneration of the chairman and the 
executive directors this includes base salary bonus longterm incentives pensions bene ts and terms of employment including those terms 
on which service may be terminated 
advisors to the remuneration committee
the committee has been advised by towers watson originally appointed in may 2008 they have provided advice to the committee 
throughout the year on the overall remuneration policy and philosophy consulting services have also been provided to the group by towers 
watson in relation to retirement bene ts and pay data in this regard the committee is satis ed that any potential con icts are appropriately 
managed the committee has also carefully reviewed the voluntary code of conduct in relation to executive consulting in the uk fees paid to 
t owers watson during the period totalled £122000 the majority of which related to services provided for executive remuneration during the 
year the committee considered and approved the terms of engagement and remuneration of the advisors
the group human resources director geoff lloyd also provides advice and guidance to the committee
remuneration policy
in 2008 the committee carried out a comprehensive triennial review of executive remuneration and of the principles which form the basis of 
the company’s remuneration policy as a result of the review changes were made to both the structure and the levels of remuneration for the 
executive directors these were detailed in the 2009 annual review and accounts during 2011 a further triennial review will be carried out and 
any changes will be set out in detail in next year’s report
serco’s remuneration policy adopts the following principles which are that executive remuneration should
 support serco’s longterm future growth strategy and values
 align the nancial interests of executives and shareholders
 provide market competitive reward opportunities for performance in line with expectations and deliver signi cant nancial rewards for 
sustained outperformance
 enable serco to recruit and retain the best in all our chosen markets 
 be based on a clear rationale which participants shareholders and other stakeholders are able to understand and support
in setting the remuneration of the executive directors in particular the non nancial objectives relating to the annual bonus scheme the 
remuneration committee is able to consider corporate performance on safety environmental social and corporate governance matters the 
committee retains discretion to reduce bonuses or the vesting of awards under the share plans if performance in these areas is unsatisfactory
  serco group plc annual report and accounts 2010  93
the elements of remuneration
composition
the remuneration package for executive directors consists of base salary annual bonus longterm sharebased incentives pension and other 
bene ts the group’s policy is to ensure that a signi cant proportion of the package is related to performance
the relative proportions of the performancerelated and xed elements of remuneration excluding pension and other bene ts for executive 
directors  assuming ‘ontarget’ remuneration  is shown below 
base salary 
performancerelated annual bonus
performancerelated longterm incentives expected value
remuneration for chief executive remuneration for finance director
34
25
37
24
39 41
base salary
the committee’s policy is to set the base salaries of the executive directors so as to ensure that total target remuneration is competitive base 
salaries are normally reviewed annually the committee takes note of relative pay and employment conditions within the comparator group and 
the company when determining salaries
the committee is satis ed that the size pro le of the companies in towers watson’s database is representative of the companies in the  
ftse 51 to 130 it also believes that it is important that the same sources of market data are used across the company to ensure consistency 
the committee considered carefully whether base salaries for christopher hyman and andrew jenner should be increased in 2010 having 
particular regard to the following
 serco’s continuing strong performance in 2009 and 2010 including its growth in international markets since salaries were last increased with 
effect from september 2008 in 2009 earnings per share increased by 306 and in the rst half of 2010 by 199
 the strong personal contribution of both individuals towards the creation of value for shareholders
 the current dif cult economic environment
 relative salary levels in the comparator group
 the increased scope of the role of the finance director resulting from an internal reorganisation that means he is now also responsible for the 
group’s operational ef ciency agenda
a comprehensive explanation of the business performance during the year has been provided in the ‘our performance’ section on  
pages 16 to 79
with effect from 1 september 2010 the salaries of the executive directors were increased to £700000 and £412500 respectively an increase of 
85 in both cases 
t o ensure that pay and conditions across the group are taken into account when making decisions on executive directors’ pay the 
remuneration committee was briefed about the overall decisions on base salaries and pay bill increases for serco’s executive committee 
and employees across the group the remuneration committee is satis ed that the principles and considerations that were applied to 
executive directors are as far as possible applied to all employees pay levels are designed to be competitive fair and to re ect the skills and 
performance of individual employees individual pay increases in excess of those granted to the executive directors were awarded to various 
employees for reasons including promotion and increased scope of role
the impact of these increases on the competitive market position of total remuneration including pension is to maintain the competitive 
position established at the time of the last triennial review
 94  serco group plc annual report and accounts 2010
remuneration report
section 4
annual bonus
bonus is earned on the basis of achievement of a mix of nancial and non nancial objectives which are weighted 80 and 20 respectively 
payment for target performance is at 75 of base salary for the chief executive and 65 of base salary for the finance director
financial measures are based on the serco group results and the non nancial measures are individually set the three nancial measures for 
2010 were based on turnover adjusted pro t before tax and amortisation and cash conversion these measures re ect the growth and margin 
improvement strategies of the business the standards of performance set are designed to be stretching the non nancial goals set for 2010 
assessed performance against a number of strategically important objectives for each individual
the maximum annual bonus opportunity is 150 of base salary for the chief executive and 130 of base salary for the finance director on 
the basis of serco’s performance in 2010 annual awards of 1368 and 11752 of salary have been determined the executive directors 
delivered a nancial performance that exceeded each of the quantitative targets serco’s nancial performance for the year is described in more 
detail in the ‘our performance’ section starting on page 16 the executive directors also delivered strongly against their personal objectives to 
implement the group’s strategy introduce new management structures and ensure performance of key contracts further the new chairman 
was inducted into the business during the period
the bonus objectives for 2011 have been set on a similar basis
annual bonuses are not pensionable
sharebased remuneration
longterm share incentives are awarded to executive directors under the serco group plc deferred bonus plan dbp and the serco group plc 
performance share plan psp 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 leavers have been adopted the measurement of the performance targets is undertaken by 
mercer for the dbp and the psp  and in relation to the earnings per share eps element of the targets is audited by deloitte llp  the conditions 
relating to the plans are detailed below 
deferred bonus plan
executive directors can elect to defer for three nancial years up to 50 of the bonus earned by purchasing shares in the company pursuant 
to the terms of the dbp  the shares purchased will be matched by the company if stretching performance targets are met
the two performance measures are independent and each determines the vesting of half of the matching shares the measures are tsr 
compared to the companies in the ftse 51 to 130 excluding investment trusts and eps growth relative tsr and eps growth carry equal 
weight in respect of the matching shares awarded under the dbp  the structure for vesting is the same for both measures
tsr element
 no matching shares will be awarded if the group does not meet or exceed the median tsr of the comparator group
 an award of matching shares of one half of the gross value of the bonus deferred will vest for median or threshold performance 
 an award of matching shares with a value of two times the gross value of the deferred bonus vest for upper quartile or superior performance 
at the top end of the range
eps element
 if the annual compound growth in eps does not meet 9 threshold then no matching shares will vest
 if compound growth in eps is at 9 threshold then 25 of this part of the matching award will vest 
 for compound growth in eps of between 9 threshold and 14 maximum then this part of the award will vest on a straight line basis 
to 100
for the award made under the dbp and the psp in 2009 the structure for vesting for the rst year of the performance period is annual growth in 
eps of 13 at threshold to 19 at maximum
the de nition of eps is basic eps excluding material acquisitions disposals currency movements and before amortisation of acquired 
intangibles
the committee has discretion to vary the proportion of awards that vest under the dbp to ensure that the outcomes are fair and appropriately 
re ect the underlying nancial performance of the group
in 2010 both the chief executive and the finance director elected to defer 50 of their earned bonus into the dbp 
  serco group plc annual report and accounts 2010  95
performance share plan
the psp awards granted to the executive directors are calculated at a face value on grant of 200 of base salary for the chief executive and 
175 of base salary for the finance director 
the shares will normally only vest at the end of a threeyear period if the executive directors are still in employment with serco and two 
performance measures have been met the two measures which are independent are tsr compared to the companies in the ftse 51 to 
130 excluding investment trusts and eps growth relative tsr performance determines the vesting of 70 of the shares and eps growth 
the remainder greater weight has been placed on relative tsr to underscore the importance of longer term alignment with shareholders’ 
interests the structure for vesting is the same for both measures the shares will vest in full only if serco’s performance is upper quartile or in 
the case of eps growth superior and at the top end of the range median or threshold performance will trigger the vesting of 25 of the award 
performance between medianthreshold and upper quartilesuperior will be on a straightline basis
dividends will be reinvested and distributed under both plans only in respect of shares that vest at the end of the performance period
the committee has discretion to vary the proportion of awards that vest under the plans to ensure that the outcomes are fair and appropriately 
re ect the underlying nancial performance of the group
the committee considered the ongoing appropriateness of relative tsr and eps as the performance measures for longterm sharebased 
plans and agreed that no changes should be made at this point in time this will be reviewed once again as part of the triennial review for 
executive remuneration which as referenced above will commence in 2011 
prior to 2009 sharebased incentive awards were made under the serco group plc 2006 long term incentive plan ltip and the serco group 
plc 2005 executive option plan eop the conditions relating to these plans are detailed below
long term incentive plan ltip
the ltip awards granted to executive directors were calculated at 100 of salary at the time of grant the vesting of awards depends 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 
such as oil and gas and nancial services
the committee has discretion to vary the proportion of awards that vest if it considers that the tsr performance measure does not 
appropriately re ect the underlying nancial performance of the group
the nal award under this plan completed its performance period on 31 december 2010 the group’s tsr performance relative to its 
comparator group was between median and upper quartile and therefore 6877 of the awards will vest
there is no retesting under the ltip 
executive option plan eop
options granted under the eop may be exercised after the third anniversary of grant depending upon the achievement of a nancial 
performance target over three years the options are granted at market value and awards made to executive directors were based on 100 of 
salary as at the 31 december prior to grant
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 the nal option grant under this plan which completed its performance period on 31 december 2010 the group’s eps growth was 2273 
per annum over the threeyear performance period which resulted in all options vesting the level at which maximum vesting would occur was 
1269 per annum
sharesave scheme
the group operates a sharesave scheme no performance conditions are attached to options granted under the scheme as it is an all
employee 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 
 96  serco group plc annual report and accounts 2010
remuneration report
section 4
share ownership policy
the share ownership requirement for the chief executive is two times base salary and one times base salary for the finance director executive 
directors are required to retain in shares 50 of the net value of any performance shares or options exercised until they satisfy the shareholding 
requirement
at the end of the year by reference to the share price at that date executive directors’ share ownership levels were as follows
    ordinary shareholding at ordinary shareholding at
    31 december 2010 5555p 31 december 2009 530p
o
    no of shares  of salary no of shares  of salary
chief executive    777889 617 735510 604
finance director    289574 390 198075 276
 serco operates both de ned bene t and de ned contribution pension schemes the executive directors participate in the serco pension and 
life assurance scheme splas this is a funded de ned bene t scheme which provides for a target pension of twothirds of pensionable 
salary following a full career members contribute to the scheme at rates varying according to the section of the scheme
from 1 january 2007 serco also introduced smart whereby all members were given the option to have their pension contributions paid by 
salary sacri ce under this arrangement the member makes no normal pension contributions serco makes additional contributions to splas 
equal to those that the member would otherwise have made and the member’s contractual pay is reduced by the amount of these contributions 
both christopher hyman and andrew jenner opted to have their contributions paid by smart  
kevin beeston’s pension bene ts accrued prior to 6 april 2006 exceeded the new lifetime allowance which came into force at that date and he 
opted to cease paying contributions and accruing bene ts in the pension scheme after 6 april 2006 kevin beeston retired at the conclusion of 
the company’s 2010 agm on 11 may 2010
christopher hyman opted to cease accruing bene ts in the pension scheme after 1 april 2010 and andrew jenner has opted to cease accrual 
after 31 december 2010
since 1 april 2010 christopher hyman has been in receipt of a cash allowance equal to 33 of his base salary in lieu of further pension 
provision from 1 january 2011 andrew jenner will also receive a cash allowance equal to 33 of his base salary in lieu of pension provision 
the executive directors remain entitled to lump sum and widow’s pension bene ts should they die before retirement and while still employed by 
serco
the executive directors receive a range of other bene ts which comprise 25 days’ holiday per year a car private medical insurance private 
health insurance life cover an annual allowance for independent nancial advice and voluntary health checks every two years
service contracts and compensation
each executive director has a rolling service contract and these contracts will be available for inspection prior to the start of and after the 
company’s annual general meeting 
the service contracts have a notice period of 12 months the company reserves the right to make a payment in lieu of notice in addition where 
a director leaves the company following a change of control whether or not he is dismissed or he elects to leave on notice he will be entitled 
to receive a payment equivalent to 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 of ce
a summary of details relating to each director who served during the year is provided below
     date of  unexpired term at
    date joined appointment to date of 31 december
name of director   company the board contract 2010
christopher hyman   30 august 1994 1 april 1999 10 june 2009 rolling contract of 12 months’
       notice period
andrew jenner   4 november 1996 3 may 2002 10 june 2009 rolling contract of 12 months’
       notice period
external appointments
the board believes that the group can bene t from its executive directors holding appropriate nonexecutive directorships of companies or 
independent bodies such appointments are subject to the approval of the board fees are retained by the executive director concerned
andrew jenner served as a nonexecutive director of galliford try plc during the year fees payable in the year were £38000
no other feepaying external positions were held by any of the executive directors
  serco group plc annual report and accounts 2010  97
the chairman and nonexecutive directors
the group’s policy is that the fees of the chairman and the nonexecutive directors which are determined by the board are set at a level which 
will attract individuals with the necessary experience and ability to make a substantial contribution to the group’s affairs
nonexecutive directors of the group are initially appointed for a threeyear term and that appointment may be terminated on three months’ 
written notice the renewal of appointments is not automatic and nonexecutive directors are required to retire and stand for reelection in 
accordance with the company’s articles of association and the uk corporate governance code and formerly the combined code
as at 31 december 2010 the nonexecutive directors of the group had no personal nancial interest in the matters determined by the board 
there are no con icts of interest arising from crossdirectorships and no involvement in the daytoday running of the group the nonexecutive 
directors do not participate in the group’s incentive or pension schemes or receive other bene ts 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 nonexecutive directors nonexecutive directors’ fees are 
not performance related
nonexecutive directors are encouraged to hold shares in the group but are not subject to a shareholding requirement 
the fees and terms of engagement of nonexecutive directors are reviewed on an annual basis taking into consideration market practice and 
are approved by the board 
the standard annual fees payable for the chairman and nonexecutive directors during the nancial year under review are shown in the table 
below 
      1 january 2010 to 11 may 2010
      £
chairman 
1
     230000
      11 may 2010 to date
      £
chairman 
2
     250000
      1 january 2010 to date
      £
board member     50000
senior independent director     10000
     1 january to 30 june 2010  1 july 2010 to date
     £ £
audit committee chairmanship    10000 12500
remuneration committee chairmanship    10000 10000
1
 prior to leaving kevin beeston received a range of other bene ts which included a car private medical insurance private health insurance life cover an annual 
allowance for independent nancial advice and voluntary health checks every two years
2
 alastair lyons’ remuneration consists of cash fees paid monthly in addition reasonable travel and related business expenses are paid no bonuses are payable
a summary of details relating to each nonexecutive director who served during the year is provided below
  date of appointment date of letter unexpired term at 
  to the board of appointment 31 december 2010 
3
chairman
kevin beeston
 1
  29 february 1996 1 september 2007 
alastair lyons
 2 4
  16 march 2010 15 march 2010 28 months
nonexecutive directors
 4

margaret ford
 5
  8 october 2003 7 october 2003 
leonard v broese van groenou  3 april 2006 20 february 2006 15 months
david richardson  2 june 2003 29 may 2003 17 months
t om corcoran
 5
  3 december 2007 3 december 2007 
1
 kevin beeston retired from the board of serco group plc at the conclusion of the company’s 2010 annual general meeting on 11 may 2010 
2
 alastair lyons was appointed as chairman at the conclusion of the annual general meeting on 11 may 2010 and up until this date served as a 
nonexecutive director
3
 the unexpired term relates to the current contract and is subject to shareholder approval 
4
 nonexecutive directors have a threemonth notice period and no compensation or other bene ts are payable on early termination
5
 margaret ford and tom corcoran retired from the board of serco group plc on 31 december 2010
 98  serco group plc annual report and accounts 2010
remuneration report
section 4
directors’ remuneration
this section has been audited by deloitte llp 
the remuneration of the directors for the year ended 31 december 2010 was as follows
     total  total total 
     estimated  remuneration remuneration 
     value of any  excluding excluding 
     non cash  pensions pensions 
  remuneration fees bonus benets allowance 2010 2009
 note £ £ £ £ £ £ £
kevin beeston 12 162378 nil nil 23898 nil 186276 286693
alastair lyons 6 nil 199038 nil nil nil 199038 nil
christopher hyman 1345 663333 nil 957600 72279 165688 1858900 1578682
andrew jenner 134 390833 nil 484770 72692 nil 948295 887843
leonard v broese van groenou 6 nil 60000 nil nil nil 60000 56700
margaret ford 67 nil 60000 nil nil nil 60000 56700
david richardson 6 nil 61250 nil nil nil 61250 56700
t om corcoran 67 nil 50000 nil nil nil 50000 46700
total  1216544 430288 1442370 168869 165688 3423759 2970018
notes
1 the value of the non cash bene ts relates to the provision of a car allowance fully inclusive of all scheme costs including insurance and maintenance and  
private healthcare
2 kevin beeston retired from the board of serco group plc at the conclusion of the company’s 2010 annual general meeting on 11 may 2010
3 the bonuses shown include performance bonuses earned in the period under review but not paid until the following nancial year
4 remuneration is shown gross of salary sacri ced under the smart scheme see page 96
5 the allowance comprises payments made to christopher hyman in lieu of pension calculated as a percentage of base salary from which he makes his own 
pension arrangements see page 96 for further details
6 in addition reasonable travel and related business expenses are paid but are not subject to uk income tax
7 margaret ford and tom corcoran retired from the board of serco group plc on 31 december 2010
directors’ shareholdings
the directors’ interests in the shares of the company are detailed in the following table 
   ordinary shares of 2p each fully  ordinary shares of 2p each fully
  note paid at 31 december 2010  paid at 1 january 2010 or if later the
  1 or date of cessation if earlier date of appointment as director
kevin beeston  2 25 293925
alastair lyons   15000 nil
leonard v broese van groenou   5375 5375
margaret ford  3 1766 14841
christopher hyman  45 777889 735510
andrew jenner  4 289574 198075
david richardson   15000 15000
t om corcoran  3 4000 4000
notes
1 ordinary shares are bene cial holdings which include the directors’ personal holdings and those of their spouses and minor children
2 kevin beeston retired from the board of serco group plc at the conclusion of the company’s 2010 annual general meeting on 11 may 2010
3 margaret ford and tom corcoran retired from the board of serco group plc on 31 december 2010
4 80682 of christopher hyman’s and 43969 of andrew jenner’s shares are held in trust on their behalf under the terms of their participation in the deferred 
bonus plan provided such shares remain in trust for three years and subject to certain performance conditions they are also granted an award over matching 
shares equivalent to two times the gross bonus initially used for the share purchase
5 security has been granted to christopher hyman’s bank over 85564 ordinary shares held in his name
  serco group plc annual report and accounts 2010  99
sharebased incentives
this section has been audited by deloitte llp  
the total share options granted to each person who has served as a director of the company at any time in the nancial year were as follows
i serco group plc deferred bonus plan dbp
conditional rights to receive matching shares over serco group plc’s ordinary shares under the dbp held by directors at 31 december 2010 
were as follows
 awards  market  awards 
 held at  price granted held at 31 
 1 january date of at award during december
 2010 award pence the period 2010 performance period vesting date
christopher hyman 130754 12 jun 2009 404  130754 1 jan 2009 – 31 dec 2011 12 jun 2012
  29 mar 2010 602 144666 144666 1 jan 2010 – 31 dec 2012 29 mar 2013
andrew jenner 76232 11 jun 2009 408  76232 1 jan 2009 – 31 dec 2011 11 jun 2012
  29 mar 2010 602 73865 73865 1 jan 2010 – 31 dec 2012 29 mar 2013
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 page 94
3 no awards vested or were exercised during the period
ii serco group plc performance share plan psp
the conditional rights to serco group plc ordinary shares under the psp held by directors at 31 december 2010 were as follows
  awards  market  awards 
  held at  price granted held at 31 
  1 january date of at award during december  earliest latest
  2010 award pence the period 2010 performance period vesting date exercise date
christopher hyman 315789 22 jun 2009 408  315789 1 jan 2009 – 31 dec 2011 22 jun 2012 21 jun 2019
   6 apr 2010 604 213750 213750 1 jan 2010 – 31 dec 2012 6 apr 2013 5 apr 2020
andrew jenner 162790 22 jun 2009 408  162790 1 jan 2009 – 31 dec 2011 22 jun 2012 21 jun 2019
   6 apr 2010 604 110190 110190 1 jan 2010 – 31 dec 2012 6 apr 2013 5 apr 2020
notes
1 awards take the form of nominal cost options
2 awards made are calculated at a face value on grant of 200 and 175 of base salary for the chief executive and finance director respectively
3 the performance conditions attached to the awards are described on page 95
4 no awards vested or were exercised during the period
 100  serco group plc annual report and accounts 2010
remuneration report
section 4
iii serco group plc 2006 long term incentive plan ltip
the ltip has been replaced by the psp  the last award under the ltip was made in november 2007 the conditional rights to serco group plc 
ordinary shares under the ltip held by directors at 31 december 2010 were as follows
       awards 
       held at 31 
       december
  awards  market  market 2010 or 
  held at  price vested price on date of 
  1 january date of on grant during vesting cessation  earliest latest
  2010 award pence the period pence if earlier performance period vesting date exercise date
kevin beeston 145205 29 nov 2006 373 283760 565  1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
christopher hyman 145205 29 nov 2006 373 283760 565  1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
  122874 12 nov 2007 456   122874 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
andrew jenner 89589 29 nov 2006 373 175075 565  1 jan 2007 – 31 dec 2009 31 dec 2009 28 nov 2016
  75699 12 nov 2007 456   75699 1 jan 2008 – 31 dec 2010 31 dec 2010 11 nov 2017
notes
1 awards take the form of nominal cost options
2 awards made are calculated at 100 of salary at the time of grant
3 the tsr performance condition is measured relative to the top 250 companies in the ftse as ranked by market capitalisation excluding those in certain sectors 
which are not comparable with the group
4 no awards were granted or lapsed during the period
5 the performance conditions attached to the awards which vested on 31 december 2009 achieved performance between upper quartile and upper decile resulting 
in 19542 of the award vesting
6 on 31 december 2010 the performance conditions attached to the awards made on 12 november 2007 were satis ed performance between median and upper 
quartile was achieved resulting in 6877 of the award vesting
7 awards held by kevin beeston relate to his tenure as an executive director prior to september 2007 kevin beeston retired from the board of serco group plc at 
the conclusion of the company’s 2010 annual general meeting on 11 may 2010
8 the aggregate of the total theoretical gains on options exercised by directors during 2010 amounted to £419 million this is calculated by reference to the 
difference between the closing midmarket price of the shares on the date of exercise and the exercise price of the options disregarding whether such shares 
were sold or retained on exercise and is stated before tax of the 742595 options exercised 103042 shares were retained
  serco group plc annual report and accounts 2010  101
iv serco group plc 1998 and 2005 executive option plan eop
options over serco group plc ordinary shares granted under the eop and held by directors at 31 december 2010 were as follows
   awards held at 
 awards  31 december
 held at  2010 or date market price
 1 january exercised of cessation on exercise exercise price date from which date of expiry 
 2010 during period if earlier date pence pence exercisable of options
kevin beeston 120798 120798  591 439 19 mar 2010 18 mar 2017
christopher hyman 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
 123076  123076  455 27 feb 2011 26 feb 2018
andrew jenner 18524 18524  574 435 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
 75824  75824  455 27 feb 2011 26 feb 2018
notes
1  the nal award to executive directors under this plan was made in february 2008
2  the awards shown in the table are the maximum number of shares that can vest under the performance conditions
3  the extent to which an award will vest is measured by reference to the group’s earnings per share eps performance relative to the retail price index rpi over 
the threeyear performance period
4  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
5  no payment was made for the grant of the awards
6  grants of options under the eop 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 2010 was 5555p and the range during the year to 31 december 
2010 was 4939p to 651p
8  no grants were made during the year
9  for options granted which completed their performance period on 31 december 2010 the group’s eps growth was 2273 per annum over the threeyear 
performance period which resulted in 100 options vesting the level at which maximum vesting would occur was 1269 per annum
10 awards held by kevin beeston relate to his tenure as an executive director prior to september 2007 kevin beeston retired from the board of serco group plc at 
the conclusion of the company’s 2010 annual general meeting on 11 may 2010
11 the aggregate of the total theoretical gains on options exercised by directors during 2010 amounted to £02 million this is calculated by reference to the 
difference between the closing midmarket price of the shares on the date of exercise and the exercise price of the options disregarding whether such shares 
were sold or retained on exercise and is stated before tax the 139322 options exercised were all sold
 102  serco group plc annual report and accounts 2010
remuneration report
section 4
comparison of total shareholder returns 
serco group plc total shareholder return tsr vs ftse 100 total return index
value of investment of £100 on 31 december 2005
31 dec 05
75
100
125
150
175
200
225
31 dec 06 31 dec 07 31 dec 08 31 dec 09 31 dec 10
ftse 100 index serco
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 
100 index which is a broad equity market index of which it is a constituent
as detailed earlier tsr is de ned 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
  serco group plc annual report and accounts 2010  103
pensions and life assurance
this section has been audited by deloitte llp 
the directors receive pension and life assurance bene ts consistent with those provided by other leading companies
the details of the de ned bene t schemes operated by the group are set out in the note on page 143 in the event of death in service the serco 
supplementary death bene t scheme provides for a lump sum payment
the accrued pension bene ts of all directors under the serco pension and life assurance scheme which is a de ned bene t scheme are as 
follows
  transfer  transfer   gross increase
  value of  value of  increase increase in accrued value of
  accrued  accrued director’s in transfer in accrued pension increase t otal
  bene ts at  bene ts at contributions value during pension during the in accrual accrued
  31 december  31 december for the the year during year net over the pension at
  2010 2009 year 4  the year of ination year year end
  1 2 3 123 5 6 7 8
  £ £ £ £ £ pa £ pa £ £ pa
kevin beeston 3659422 3564341  95081 8000   287460
christopher hyman 1744001 1702542  41459 14536 9626 134386 121268
andrew jenner 929133 857573  71560 14893 12141 148113 74730
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 for andrew jenner 
or to the date of ceasing accrual in the scheme for kevin beeston and christopher hyman the increase in accrued pension during the year is shown both as a 
gross increase and excluding any increase in respect of in ation
b  the increase in the accrued pension of andrew jenner allows for both the increase in his nal pensionable salary over the year and for the accrual of a further 
year’s pensionable service as a result of a further year’s active membership of the scheme
c  the increase in accrued pension for christopher hyman allows for the increase in his nal pensionable salary and the accrual of an extra three months’ 
pensionable service until 1 april 2010 when he ceased accruing bene ts in the scheme
d  with effect from 1 april 2010 christopher hyman opted to receive a cash alternative equal to 33 of his base pay excluding bonuses in lieu of any further 
pension provision christopher remains entitled to lump sum and widow’s pension bene ts should he die before retirement and whilst employed by serco
e  the pension of kevin beeston increased in line with in ation until his retirement from the board at the conclusion of the company’s agm on 11 may 2010 the 
increase net of in ation shown in 6 is therefore zero
f  transfer values have been calculated in accordance with the current transfer value regulations the assumptions to be used for calculating transfer values have 
been reviewed by the trustees during the year and updated to re ect changes in long term expectations for in ation and improvements in life expectancy the net 
impact of these changes has resulted in lower transfer values than would have applied with the previous assumptions however market movements over the year 
have acted to increase transfer values the difference between the transfer values at the beginning and end of the year shown in 4 includes not only the effect 
of the increase in accrual and salaries and changes in the transfer value assumptions but also the effect of uctuations in the transfer value due to factors beyond 
the control of the company and the directors such as stock market movements
g  the value of the net increase in accrual represents the incremental value to the director of his service during the year or the date the director left the scheme in 
the case of andrew jenner the value of the net increase is calculated on the assumption that his service terminated at the year end it is based on the increase in 
the accrued pension net of in ation based on the increase in retail prices index
h the 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
i  both directors who were active members of the scheme have opted to have their contributions paid by the company under a salary sacri ce arrangement and 
hence no contributions were paid by the directors during the year
j  kevin beeston left serco employment and ceased being a director on 11 may 2010 his total accrued pension is his deferred pension at that date
k andrew jenner ceased to be a member of the pension scheme with effect from 31 december 2010 opting to receive a cash alternative equal to 33 of his 
base pay excluding bonuses in lieu of any further pension provision andrew remains entitled to lump sum and widow’s pension bene ts should he die before 
retirement and whilst employed by serco
share dilution
awards granted under the serco group plc share plans are met either by the issue of new shares or by shares held in trust when awards vest 
the committee monitors the number of shares issued under its various share plans and their impact on dilution limits the relevant dilution limits 
established by the association of british insurers in respect of all share plans 10 in any rolling ten year period and discretionary share plans 
5 in any rolling tenyear period were based on the company’s issued share capital at 31 december 2010 595 and 461 respectively
the group has an employee bene t trust which is administered by an independent trustee and which holds ordinary shares in the company to 
meet various obligations under the share plans in april 2010 a loan of £23 million was made to the employee bene t trust in order to nance 
the purchase of shares to satisfy the ongoing liabilities under the company’s employee share plans
the trust held 3436547 and 4710201 ordinary shares at 1 january 2010 and 31 december 2010 respectively
approved by the board of directors and signed on its behalf by
joanne roberts
secretary
1 march 2011
 104  serco group plc annual report and accounts 2010
section 5
independent auditor’s 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 2010 which comprise the consolidated 
income statement the consolidated statement of comprehensive income the consolidated statement of changes in equity the consolidated 
balance sheet the consolidated cash flow statement and the related notes 1 to 36 the nancial reporting framework that has been applied in 
their preparation is applicable law and international financial reporting standards ifrss as adopted by the european union
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 2006 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 
auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement the directors are responsible for the preparation of the group nancial 
statements and for being satis ed that they give a true and fair view our responsibility is to audit and express an opinion on the group nancial 
statements in accordance with applicable law and international standards on auditing uk and ireland those standards require us to comply 
with the auditing practices board’s ethical standards for auditors
 an audit involves obtaining evidence about the amounts and disclosures in the nancial statements suf cient to give reasonable assurance 
that the nancial statements are free from material misstatement whether caused by fraud or error this includes an assessment of whether 
the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed the 
reasonableness of signi cant accounting estimates made by the directors and the overall presentation of the nancial statements
opinion on the group financial statements
in our opinion the group financial statements
 give a true and fair view of the state of the group’s affairs as at 31 december 2010 and of its pro t for the year then ended
 have been properly prepared in accordance with ifrss as adopted by the european union and
 have been prepared in accordance with the requirements of the companies act 2006 and article 4 of the ias regulation
opinion on other matters prescribed by the companies act 2006
in our opinion the information given in the directors’ report for the nancial year for which the nancial statements are prepared is consistent 
with the group financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you if in our opinion
 certain disclosures of directors’ remuneration speci ed by law are not made or
 we have not received all the information and explanations we require for our audit
under the listing rules we are required to review
 the directors’ statement contained within the corporate governance report in relation to going concern and
 the part of the corporate governance statement relating to the company’s compliance with the nine provisions of the june 2008 combined 
code speci ed for our review and
 certain elements of the report to shareholders by the board on directors’ remuneration
other matter
we have reported separately on the parent company financial statements of serco group plc for the year ended 31 december 2010 and on 
the information in the directors’ remuneration report that is described as having been audited 
richard knights senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor 
london united kingdom
1 march 2011
independent auditor’s report
  serco group plc annual report and accounts 2010  105
      2010 2009
     note £m £m
continuing operations
revenue      45 43267 39700
cost of sales      36824 33832
      6443 5868
administrative expenses      3856 3571
  before amortisation of intangibles arising on acquisition   2587 2297
other expenses  amortisation of intangibles arising on acquisition   14 174 176
     56 2413 2121
investment revenue     8 39 27
finance costs     9 313 377
      2139 1771
tax     10 571 469
      1568 1302
attributable to
equity holders of the parent      1567 1302
noncontrolling interest      01 
basic eps     12 3188p 2676p
diluted eps     12 3135p 2645p
consolidated statement of comprehensive income
for the year ended 31 december
      2010 2009
     note £m £m
 1302
 net actuarial gainloss on de ned bene t pension schemes
1
   26 499 2590
actuarial lossgain on reimbursable rights
1
     26 384 1171
net exchange gainloss on translation of foreign operations
2
    190 99
fair value gainloss on cash ow hedges during the year
2
     17 63
t ax chargecredit on items taken directly to equity
3
    10 17 452
recycling of cumulative net hedging reserve
2
     03 02
 175
attributable to
equity holders of the parent      1875 175
noncontrolling interest      01 
1
 recorded in retirement bene t obligations reserve in the consolidated statement of changes in equity
2
 recorded in hedging and translation reserve in the consolidated statement of changes in equity
3
 of the tax chargecredit a debit of £43m 2009 credit of £396m was recorded in the retirement bene t obligations reserve a debit of £06m 2009 credit of 
£14m was recorded in the hedging and translation reserve a credit of £32m 2009 £42m was recorded in the sharebased payment reserve
consolidated income statement
for the year ended 31 december  
 106  serco group plc annual report and accounts 2010
section 5
     retirement share  hedging

 £m £m £m £m £m £m £m £m £m £m
at 1 january 2009 97 3011 01 3398 477 400 197 619 6852 01
t otal comprehensive income  
for the year    1302 1023 42  146 175 
shares transferred to option  
holders on exercise of share options 01 30    18 91  104 
dividends paid     259     259 
expense in relation to sharebased 
payment      72   72 
purchase of own shares for  
employee benet trust esop       24  24 
 t otal comprehensive income  
for the year shares transferred to option  
holders on exercise of share options dividends paid  expense in relation to sharebased 
payment purchase of own shares for  
employee bene t trust esop 
consolidated statement of changes in equity
for the year ended 31 december  
  serco group plc annual report and accounts 2010  107
      2010 2009
     note £m £m
noncurrent assets
goodwill     13 8995 8984
other intangible assets     14 1450 1644
property plant and equipment     16 1354 1292
trade and other receivables     19 1567 1814
deferred tax assets     22 381 480
derivative nancial instruments      25 35 25
      13782 14239
current assets
inventories     18 654 659
trade and other receivables     19 7902 7209
cash and cash equivalents     20 2793 3194
derivative nancial instruments     25 39 14
      11388 11076
total assets      25170 25315
current liabilities
trade and other payables     24 8055 7716
current tax liabilities      195 141
obligations under nance leases     23 71 60
loans     21 1595 1107
derivative nancial instruments     25 24 55
      9940 9079
noncurrent liabilities
trade and other payables     24 222 231
obligations under nance leases     23 193 180
loans     21 3546 5432
derivative nancial instruments     25 52 17
retirement benet obligations     26 2262 2942
provisions     27 396 423
deferred tax liabilities     22 146 90
      6817 9315
total liabilities      16757 18394
net assets      8413 6921
equity
share capital     28 99 98
share premium account     29 3067 3041
capital redemption reserve      01 01
retained earnings      5685 4441
retirement benet obligations reserve     30 1428 1500
sharebased payment reserve     30 587 496
own shares reserve     30 275 130
hedging and translation reserve     30 677 473
equity attributable to equity holders of the parent     8413 6920
noncontrolling interest       01
total equity      8413 6921
the financial statements were approved by the board of directors on 1 march 2011 and signed on its behalf by 
  
  
 
christopher hyman andrew jenner
chief executive finance director
consolidated balance sheet
at 31 december
 108  serco group plc annual report and accounts 2010
section 5
      2010 2009
     note £m £m
    31 2410 2351
interest received      33 21
disposal of investmentsbusiness undertakings      06
proceeds from disposal of property plant and equipment     61 37
proceeds from disposal of intangible assets      73 
acquisition of subsidiaries net of cash acquired    15 21 147
purchase of other intangible assets       209 173
purchase of property plant and equipment      354 389
     417 645
interest paid      279 336
dividends paid     11 323 259
noncontrolling interest dividends paid      02 
cash in ow from matured derivative nancial instruments     16 
repayment of loans      1678 668
repayment of non recourse loans      76 65
new loan advances      101 338
capital element of nance lease repayments     87 57
purchase of own shares for employee bene t trust esop     230 24
proceeds from issue of share capital and exercise of share options    83 104
     2475 967
     482 739
     3194 2508
net exchange gainloss      81 53
    20 2793 3194
consolidated cash flow statement
for the year ended 31 december
  serco group plc annual report and accounts 2010  109
 1 general information
serco group plc the group is a company incorporated in the united kingdom under the companies act 2006 the address of the registered 
of ce 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 105 to 160 have been prepared in accordance with international financial reporting standards ifrss 
adopted for use in the european union and therefore the group nancial statements comply with article 4 of the eu ias regulation
the financial statements have been prepared on the historical cost basis the following principal accounting policies adopted have been 
applied consistently in the current and preceding nancial year except as stated below
as discussed in more detail in the finance review these financial statements have been prepared on the going concern basis
adoption of new and revised standards
in the current year the following new and revised standards and interpretations have been adopted and have affected the amounts reported  
in these financial statements
ifrs 3 2008 business combinations
ifrs 3 2008 includes a number of signi cant changes to the accounting for business combinations all acquisition costs are now required 
to be expensed as incurred rather than capitalised as part of the cost of acquisitions any changes to the cost of an acquisition resulting from 
an event taking place after the date of acquisition including those arising from adjustments to contingent consideration are required to be 
recognised in the income statement rather than in goodwill any adjustments to contingent consideration in respect of acquisitions made prior 
to 1 january 2010 will continue to be accounted for under ifrs 3 2004
amendments to ias 27 consolidated and separate financial statements
the amendments to ias 27 affect the treatment of acquisitions and disposals achieved in stages and focus on whether or not this results in 
a change in control acquisitions and disposals that do not result in a change in control are accounted for within reserves and goodwill is not 
remeasured where control is lost all assets liabilities and noncontrolling interests are derecognised and the resulting gain or loss after any 
proceeds is recognised in pro t or loss
the following new and revised standards and interpretations have been adopted in the current year their adoption has not had any signi cant 
impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements 
ias 28 2008 investments in associates
the revisions to ias 28 require that where there is a loss of signi cant in uence over an associate the investor measures any investment 
retained in the former associate at fair value with any consequential gain or loss recognised in the income statement
amendment to ias 39 financial instruments recognition and measurement eligible hedged items
this amendment provides clari cation on two aspects of hedge accounting identifying in ation as a hedged risk or portion and hedging  
with options
ifrs 1 revised firsttime adoption of international financial reporting standards and amendments to ifrs 1 additional exemptions for 
firsttime adopters
these amendments provide additional exemptions on rsttime adoption of ifrs in relation to oil and gas assets and leases
amendments to ifrs 2 group cashsettled sharebased payment transactions
these amendments provide clari cation on the scope of ifrs 2 as well as the accounting for group cashsettled sharebased payment 
transactions in the separate nancial statements of the entity receiving the goods or services when another group entity of shareholder has  
the obligation to settle the award
ifric 17 distribution of noncash assets to owners
this interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends  
to its shareholders
ifric 18 transfers of assets from customers
this interpretation addresses the accounting by recipients for transfers of property plant and equipment from customers and concludes that 
when the item of property plant and equipment transferred meets the de nition of an asset from the perspective of the recipient the recipient 
should recognise the asset at its fair value on the date of the transfer with the credit being recognised as revenue in accordance with ias 18
improvements to ifrss april 2009
notes to the consolidated financial statements
 110  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 2 signiﬁcant accounting policies continued 
basis of consolidation
the consolidated nancial statements incorporate the nancial 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 nancial and operating policies of an investee entity so as to obtain bene ts 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 nancial 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
noncontrolling interests represent the portion of pro t 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
changes in segmental information
from the start of 2010 the group repositioned its business to maximise the focus on growth and opportunities and to ensure that it maintains  
a exible and devolved organisation which is responsive to its customers’ needs from 1 january 2010 the group reorganised its business into  
 ve new divisions focused on the group’s principal markets civil government local government and commercial defence science and 
nuclear americas and ameaa the key changes arising from its previous segments are as follows
civil government the uk and europe healthcare home affairs and welfare to work business is included in the new civil government division 
the uk and europe consulting education integrated services it and bpo businesses are part of the new local government and commercial 
division and the civil government businesses in north america and the rest of the world are allocated to the americas and ameaa  
divisions respectively 
defence has transferred to defence science and nuclear with the exception of those businesses operating in the geographical regions of 
americas and ameaa 
transport has been transferred to civil government with the exception of businesses operating in the geographical regions of americas  
and ameaa 
science has transferred to defence science and nuclear
as a consequence of these changes previously published nancial information has been restated
business combinations
acquisitions of subsidiaries and businesses are accounted for using the acquisition method the consideration for each 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 acquisition related costs are recognised in pro t or loss as incurred
where applicable the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement 
measured at its acquisition date fair value subsequent changes in fair values are adjusted against the cost of acquisition where they qualify 
as measurement period which is subject to a maximum of one year adjustments all other subsequent changes in the fair value of contingent 
consideration classi ed as an asset or liability are accounted for in accordance with the relevant accounting standards changes in the fair value 
of contingent consideration classi ed as equity are not recognised
the acquiree’s identi able 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 except where a different treatment is mandated by another standard
goodwill arising on acquisition is recognised as an asset at the date that control is acquired goodwill is measured as the excess of the sum of 
the consideration transferred the amount of any noncontrolling interest and the fair value of any previously held equity interest in the acquired 
entity over the net of the acquisition date amounts of the identi able assets and liabilities acquired
if after reassessment the group’s interest in the net fair value of the acquiree’s identi able net assets exceeds the sum of the consideration 
transferred the amount of any noncontrolling interest and the fair value of any previously held equity interest in the acquired entity the excess  
is recognised immediately in the income statement
any adjustments to contingent consideration in respect of acquisitions made prior to 1 january 2010 will continue to be re ected in goodwill  
in accordance with ifrs 3 2004
  serco group plc annual report and accounts 2010  111
 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 identi able 
assets and liabilities of a subsidiary associate or jointlycontrolled entity at the date of acquisition goodwill is initially recognised as an asset at 
cost and is subsequently measured at cost less any accumulated impairment losses goodwill which is recognised as an asset is reviewed for 
impairment at least annually any impairment is recognised immediately in pro t or loss and is not subsequently reversed 
for the purpose of impairment testing goodwill is allocated to each of the group’s cashgenerating units cgus expected to bene t from the 
synergies of the combination cgus to which goodwill has been allocated are tested for impairment annually or more frequently when there is 
an indication that the unit may be impaired if the recoverable amount of the cgu is less than the carrying amount of the unit the impairment 
loss is allocated rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit prorata on the 
basis of the carrying amount of each asset in the unit an impairment loss recognised for goodwill is not reversed in a subsequent period
on disposal of a subsidiary associate or jointlycontrolled entity the attributable amount of goodwill is included in the determination of the pro t 
or loss on disposal
goodwill arising on acquisitions before the date of transition to ifrs has been retained at the previous uk gaap amounts subject to being 
tested for impairment at that date goodwill written off to reserves under uk gaap prior to 1998 has not been reinstated and is not included  
in determining any subsequent pro t or loss on disposal
investments in joint ventures
the group’s investments in joint ventures are reported in the nancial 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 nancial statements or reported as separate line items within the group’s nancial statements
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 designed 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
of ce equipment 20  33
leased equipment the higher of the rate produced by the lease term or useful life
the gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying 
amount of the asset and is recognised in the income statement
 112  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 2 signiﬁcant accounting policies continued 
other intangible assets
customer relationships represent the value of contracts acquired on the acquisition of subsidiaries and are amortised over the average length  
of contracts
development expenditure is capitalised as an intangible asset only if all of the following conditions are met
 an asset is created that can be separately identi ed
 it is probable that the asset created will generate future economic bene ts and
 the development cost of the asset can be measured reliably
purchased software and development expenditure is amortised over the period in which the group is expected to bene t 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  
de ned bene t pension scheme and it is not virtually certain that contributions will be recovered from the customer but where the  
group’s obligation to contribute to the scheme ends when the contract ends the intangible assets represent the group’s share of  
scheme net liabilities on the date that contracts commence and are amortised on a straightline basis over the contract life
impairment of tangible and intangible assets
annually the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those 
assets have suffered an impairment loss if any such indication exists the recoverable amount of the asset is estimated in order to determine 
the extent of the impairment loss if any where the asset does not generate cash ows that are independent from other assets the group 
estimates the recoverable amount of the cgu to which the asset belongs a cgu is the smallest group of assets that generates cash in ows 
from continuing use that are largely independent of the cash ows of other assets or groups of assets for the purpose of impairment testing 
the goodwill acquired in a business combination is allocated to cashgenerating units that are expected to bene t from the synergies of  
the combination 
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 ows are 
discounted to their present value using a pretax discount rate that re ects current market assessments of the time value of money and the risks 
speci c to the asset for which the estimates of future cash ows have not been adjusted
if the recoverable amount of an asset or cgu is estimated to be less than its carrying amount the carrying amount of the asset or cgu is 
reduced to its recoverable amount an impairment loss is recognised as an expense immediately impairment losses recognised in respect of 
cgus are allocated rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other 
assets in the unit group of units on a prorata basis
an impairment loss in respect of goodwill is not reversed in respect of other assets impairment losses recognised in prior periods are 
assessed at each reporting date for indications that the loss has decreased or no longer exists where an impairment loss subsequently 
reverses the carrying amount of the asset or cgu is increased to the revised estimate of its recoverable amount but so that the increased 
carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation had no impairment 
loss been recognised for the asset or cgu in prior years a reversal of an impairment loss is recognised as income immediately
impairment losses and reversals are included within administrative expenses within the consolidated income statement
revenue recognition
revenue is measured at the fair value of the consideration received or receivable and represents amounts due for goods and services provided 
in the normal course of business net of discounts vat and other sales related taxes
sales of goods are recognised when goods are delivered and title has passed
interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable which is the 
rate that exactly discounts estimated future cash receipts through the expected life of the nancial asset to that asset’s net carrying amount
dividend income from investments is recognised when the shareholders’ rights to receive payment have been established
revenue on repeat servicebased contracts is recognised as services are provided
revenue from longterm projectbased contracts is recognised in accordance with the group’s accounting policy below
  serco group plc annual report and accounts 2010  113
 2 signiﬁcant accounting policies continued 
longterm projectbased and repeat service contracts
the group has a number of longterm contracts for the provision of complex projectbased services where the outcome of such longterm 
projectbased contracts can be measured reliably revenue and costs are recognised by reference to the stage of completion of the contract 
activity at the balance sheet date in accordance with ias 18 revenue and ias 11 construction contracts this is measured by the proportion 
of contract costs incurred for work performed to date compared to the estimated total contract costs except where this would not be 
representative of the stage of completion variations in contract work claims and incentive payments are included to the extent that they have 
been agreed with the customer or are virtually certain of being received
where the outcome of a longterm projectbased contract cannot be estimated reliably contract revenue is recognised to the extent of contract 
costs that are probable to 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 on a straight
line basis over the life of the contract
segmental information
segmental information is based on internal reports about components of the group that are regularly reviewed by the group’s chief operating 
decision maker in order to allocate resources to the segments and to assess their performance
items excluded from segments comprise corporate expenses speci c corporate expenses are allocated to the corresponding segments 
segment assets comprise goodwill other intangible assets property plant and equipment inventories trade and other receivables excluding 
corporation tax recoverable and any retirement bene t asset liabilities comprise trade and other payables and retirement bene t obligations 
inventories
inventories are stated at the lower of cost and net realisable value and comprise service spares parts awaiting installation and longterm 
projectbased contract balances cost comprises direct materials and where applicable direct labour costs that have been incurred in bringing 
the inventories to their present location and condition 
leases
leases are classi ed as nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the 
lessee all other leases are classi ed as operating leases
assets held under nance 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 nance lease 
obligation lease payments are apportioned between nance 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
t otal 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 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 rate prevailing on 
the date when the fair value was determined gains and losses arising on retranslation are included in the net pro t 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 
consolidated statement of comprehensive income soci
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
 114  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 2 signiﬁcant accounting policies continued 
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 expense in the period in which they are incurred

payments to de ned contribution pension schemes are charged as an expense as they fall due
for de ned bene t pension schemes the cost of providing bene ts is determined using the projected unit credit actuarial cost 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 soci
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 bene ts are already vested and is amortised on a straightline basis over the 
average period until the bene t becomes vested gains and losses on curtailments or settlements are recognised in the period in which the 
curtailment or settlement occurs
the retirement bene t obligation recognised in the balance sheet represents the present value of the de ned bene t obligation as adjusted for 
unrecognised past service costs and as reduced by the fair value of scheme assets any asset resulting from this calculation is limited to past 
service cost plus the present value of available refunds and reductions in future contributions to the plan
the economic bene t from refunds is only recognised to the extent that the group has an unconditional right to receive a refund
t o the extent that an economic bene t is available as a reduction in contributions and there is a minimum funding requirement the economic 
bene t available as a reduction in contributions is calculated at the present value of
a the estimated future service cost in each year less
b the estimated minimum funding contributions required in respect of the future accrual and bene ts in that year
de ned bene t obligations arising from contractual obligations
where the group takes on a contract and assumes the obligation to contribute variable amounts to the de ned bene t 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 de ned bene t 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 re ects 
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 de cits 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 soci
where the group takes on a contract and assumes the obligation to contribute variable amounts to the de ned bene t 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 de ned bene t 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 nancial asset at fair value being the fair value of the reimbursable rights in the consolidated 
income statement the expense relating to the de ned bene t 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 soci the change in fair value of the reimbursable rights that is not presented in the income statement is reported in the soci
multiemployer pension schemes
multiemployer pension schemes are classi ed as a de ned contribution pension scheme or a de ned bene t pension scheme under the terms 
of the scheme
when suf cient information is not available to use de ned bene t accounting for a multiemployer de ned bene t pension scheme the group 
accounts for the scheme as if it were a de ned contribution scheme
  serco group plc annual report and accounts 2010  115
 2 signiﬁcant accounting policies continued 
tax
the tax expense represents the sum of current tax expense and deferred tax expense
current tax expense is based on taxable pro t for the year taxable pro t differs from net pro t 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  
pro ts will be available against which these items can be utilised
deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of an 
asset and liability in a transaction other than a business combination and at the time of the transaction affects neither the tax pro t nor the 
accounting pro t
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 
suf cient taxable pro ts 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 legally 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
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
sharebased payment
the group has applied the requirements of ifrs 2 sharebased payment amended january 2008 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 makes equitysettled sharebased payments to certain employees and operates an hmrc approved save as you earn saye share 
option scheme open to eligible employees which allows the purchase of shares at a discount these are measured at fair value at the date of 
grant the fair value is expensed on a straightline basis over the vesting period based on the group’s estimate of shares that will eventually 
vest saye options are treated as cancelled when employees cease to contribute to the scheme resulting in an acceleration of the remainder  
of the related expense
where the fair value of share options requires the use of a valuation model fair value is measured by use of the binomial lattice or monte carlo 
simulation models depending on the type of scheme as set out in note 33 the expected life used in the models has been adjusted based 
on management’s best estimate for the effects of nontransferability exercise restrictions and behavioural considerations where relevant the 
value of the option has also been adjusted to take account of market conditions applicable to the option
trade receivables
trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less 
provision for impairment a provision for impairment of trade receivables is established when there is objective evidence that the group will not 
be able to collect all amounts due according to the original terms of the contract signi cant nancial dif culties of the debtor probability that the 
debtor will enter bankruptcy or nancial 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 an allowance for doubtful debts and the amount of the loss is recognised in the income 
statement within administrative expenses when a trade receivable is uncollectible it is written off against the allowance for doubtful debts 
subsequent recoveries of amounts previously written off are credited against administrative expenses
 116  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 2 signiﬁcant accounting policies continued 
cash and cash equivalents
cash and cash equivalents comprise cash in hand and balances with banks and similar institutions which are readily convertible to known 
amounts of cash and which are subject to insigni cant changes in value and have a maturity of three months or less this de nition is also  
used for the consolidated cash ow statement
dividends
dividends are recorded in the group’s consolidated nancial statements in the period in which they are declared appropriately authorised and 
no longer at the discretion of the company
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 nance cost in respect of the accounting period and reduced by payments made in the period loans which are unhedged 
are stated at amortised cost using the effective interestrate method accrued interest is recorded separately from the associated borrowings 
within current liabilities
loans are described as non recourse loans and classi ed 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
 the group enters into a variety of derivative nancial instruments to manage the exposure to interest rate and foreign exchange risk including 
foreign exchange forward contracts and interest rate swaps further details of derivative nancial instruments are given in note 25
derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair 
value at each balance sheet date a derivative with a positive fair value is recognised as a nancial asset whereas a derivative with a negative 
fair value is recognised as a nancial liability the resulting gain or loss is recognised in pro t or loss immediately unless the derivative is 
designated and effective as a hedging instrument in which event the timing of the recognition in pro t or loss depends on the nature of 
the hedge relationship the group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or rm 
commitments fair value hedges hedges of highly probable forecast transactions or hedges of foreign currency risk of rm commitments  
cash ow hedges or hedges of net investments in foreign operations
a derivative is presented as a noncurrent asset or a noncurrent liability if the remaining maturity of the instrument is more than 12 months and  
it is not expected to be realised or settled within 12 months other derivatives are presented as current assets or current liabilities
embedded derivatives
derivatives embedded in other nancial instruments or other host contracts are treated as separate derivatives when their risks and 
characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through pro t or loss 
hedge accounting
the group designates certain hedging instruments which include derivatives embedded derivatives and nonderivatives in respect of foreign 
exchange risk as either fair value hedges cash ow hedges or hedges of net investments in foreign operations hedges of foreign exchange 
risk on rm commitments are accounted for as cash ow hedges
at the inception of the hedge relationship the entity documents the relationship between the hedging instrument and the hedged item along 
with its risk management objectives and its strategy for undertaking various hedge transactions furthermore at the inception of the hedge and 
on an ongoing basis the group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting 
changes in fair values or cash ows of the hedged item 
details of the fair values of the derivative instruments used for hedging purposes and movements in the hedging and translation reserve in 
equity are detailed in the soci and described in note 25 
fair value hedges
changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in pro t or loss immediately together 
with any changes in the fair value of the hedged item that is attributable to the hedged risk the change in the fair value of the hedging 
instrument and the change in the hedged item attributable to the hedged risk are recognised in the line of the income statement relating to the 
hedged item 
hedge accounting is discontinued when the group revokes the hedging relationship the hedging instrument expires or is sold terminated 
exercised or no longer quali es for hedge accounting the adjustment to the carrying amount of the hedged item arising from the hedged risk 
is amortised to pro t or loss from that date 
  serco group plc annual report and accounts 2010  117
 2 signiﬁcant accounting policies continued 
cash ow hedges
the effective portion of changes in the fair value of derivatives that are designated and qualify as cash ow hedges are deferred in equity  
the gain or loss relating to the ineffective portion is recognised immediately in pro t or loss 
amounts deferred in equity are recycled to pro t or loss in the periods when the hedged item affects pro t or loss in the same line of the 
income statement as the recognised hedged item however when the forecast transaction that is hedged results in the recognition of a non
 nancial asset or a non nancial liability the gains and losses previously deferred in equity are transferred from equity and included in the initial 
measurement of the cost of the non nancial asset or non nancial liability
hedge accounting is discontinued when the group revokes the hedging relationship the hedging instrument expires or is sold terminated 
exercised or no longer quali es for hedge accounting any cumulative gain or loss deferred in equity at that time remains in equity and is 
recognised when the forecast transaction is ultimately recognised in pro t or loss when a forecast transaction is no longer expected to occur 
the cumulative gain or loss that was deferred in equity is recognised immediately in pro t or loss 
hedges of net investments in foreign operations
hedges of net investments in foreign operations are accounted for similarly to cash ow hedges any gain or loss on the hedging  
instrument relating to the effective portion of the hedge is recognised in equity and accumulated in the hedging and translation reserve  
the gain or loss relating to the ineffective portion is recognised immediately in pro t or loss and is included in the ‘net exchange gainloss  
on translation of foreign operations’ line item 
gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation reserve 
are reclassi ed to pro t or loss in the same way as exchange differences relating to the foreign operations
provisions
provisions are recognised when the group has a present obligation as a result of a past event and it is probable that the group will be required 
to settle that obligation provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the 
balance sheet date
new standards and interpretations not applied
at the date of authorisation of these financial statements the following standards and interpretations which have not been applied in these 
financial statements were in issue but not yet effective and in some cases had not yet been adopted by the eu
 ias 24 revised related party disclosures
 amendment to ias 32 financial instruments presentation classi cation of rights issues
 amendments to ifrs 1 limited exemption from comparative ifrs 7 disclosures for firsttime adopters
 amendments to ifrs 7 financial instruments disclosures
 ifrs 9 financial instruments
 amendment to ifric 14 prepayment of a minimum funding requirement
 ifric 19 extinguishing financial liabilities with equity instruments
 improvements to ifrss may 2010
the directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group’s nancial 
statements in the period of initial application with the exception of amounts reported and disclosures in respect of the group’s nancial assets 
and nancial liabilities on adoption of ifrs 9 however it is not practicable at this stage to provide a reasonable estimate of the effect
 118  serco group plc annual report and accounts 2010
section 5
notes to the consolidated 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 signi cant effect on the amounts recognised in the nancial statements apart from those involving estimations 
which are dealt with below
revenue and pro t recognition of longterm projectbased contracts
revenue and pro t 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 signi cant 
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next nancial 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 ows of cashgenerating units and also the selection of 
appropriate discount rates which involves judgement to calculate present values see note 13 the carrying value of goodwill is £8995m 
2009 £8984m at the balance sheet date
retirement bene t obligations
the calculation of retirement bene t obligations is dependent on material key assumptions including discount rates future returns on assets and 
future contribution rates see note 26 the value of retirement bene t obligations at the balance sheet date is £2262m 2009 £2942m details 
of the impact of changes in assumptions relating to retirement bene t obligations are disclosed in the finance review page 52
 4 revenue
an analysis of the group’s revenue is as follows
      2010 2009
      £m £m
rendering of services      41035 38240
revenue from longterm projectbased contracts     2232 1460
revenue as disclosed in the consolidated income statement    43267 39700
investment revenue note 8      39 27
t otal revenue as dened in ias 18      43306 39727
 5 segmental information
information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance 
focuses on the categories of customer identi ed using their respective markets details of the different products and services provided by 
each operating segment are included in the our business and our performance sections of this report from 1 january 2010 the group has 
reapportioned its business into ve new divisions the group’s reportable operating segments under ifrs 8 operating segments are
reportable segments operating segments
civil government  uk and europe civil government and transport 
defence science and nuclear uk and europe defence and sciencebased businesses
local government and commercial uk and europe it and bpo integrated services education and commercial businesses
americas us defence intelligence and federal civil government agencies operations 
  and canadian operations and
ameaa africa middle east asia including hong kong and india and australasia
the accounting policies of the reportable segments are the same as the group’s accounting policies described in note 2 
  serco group plc annual report and accounts 2010  119
 5 segmental information continued
the following is an analysis of the group’s revenue and results by operating segment in the year ended 31 december 2010 
reportable segments
year ended 31 december 2010    local
   defence  government 
  civil  science and
  government and nuclear commercial americas ameaa total
  £m £m £m £m £m £m
revenue   11269 9108 8539 9539 4812 43267
result
segment result  664 773 531 640 320 2928
corporate expenses       515
 investment revenue       39
finance costs       313
 tax       571
goodwill    19  12 31
property plant and equipment segments  37 84 113 14 104 352
property plant and equipment corporate       02
       354
intangible assets segments   02 13 18 49 35 117
intangible assets corporate        92
       209
depreciation and amortisation
depreciation segments  72 26 151 48 91 388
depreciation corporate       06
       394
amortisation of intangibles arising on acquisition 
segments  02  27 139 06 174
amortisation – other segments  36 17 53 13 12 131
amortisation – other corporate       131
       436
segment assets
reportable segment assets  2922 4080 5335 6945 2510 21792
corporate assets       90
       21882
segment liabilities
reportable segment liabilities  2430 3133 1760 1335 858 9516
corporate liabilities       1023
       10539
 stated on a cash basis including acquisitions but excluding nance leases
 120  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 5 segmental information continued
reportable segments
restated    
year ended 31 december 2009   defence  local 
  civil  science government
  government and nuclear and commercial americas ameaa t otal
  £m £m £m £m £m £m
revenue   10263 9212 8092 8726 3407 39700
result
segment result   450 779 470 618 241 2558
corporate expenses       437
       2121
investment revenue       27
finance costs       377
       1771
tax       469
       1302
goodwill  51  11   62
property plant and equipment segments  94 22 132 39 89 376
property plant and equipment corporate       24
       400
intangible assets segments   20 09 25 41 11 106
intangible assets corporate        69
       175
depreciation segments  83 27 127 71 28 336
depreciation corporate       08
       344
amortisation of intangibles arising on acquisition 
segments  03  26 142 05 176
amortisation – other segments  37 17 53 13 12 132
amortisation – other corporate       97
       405
segment assets
reportable segment assets  2844 4474 5387 6612 1972 21289
corporate assets       300
       21589
segment liabilities
reportable segment liabilities  2422 3406 2078 1057 540 9503
corporate liabilities       1386
       10889
 stated on a cash basis including acquisitions but excluding nance leases
  serco group plc annual report and accounts 2010  121
 5 segmental information continued
      2010 2009
      £m £m
segment assets comprise
goodwill      8995 8984
other intangible assets      1450 1644
property plant and equipment      1354 1292
trade and other receivables – noncurrent      1567 1814
inventories      654 659
trade and other receivables – current excluding corporation tax recoverable note 19   7862 7196
      21882 21589
      2010 2009
      £m £m
segment liabilities comprise
trade and other payables – current      8055 7716
trade and other payables – noncurrent      222 231
retirement benet obligations      2262 2942
      10539 10889
geographic information
     noncurrent  noncurrent
    revenue assets revenue assets
    2010 2010 2009 2009
    £m £m £m £m
united kingdom    25864 7079 25419 7349
united states    8803 4632 8192 4048
other countries    8600 1655 6089 2337
total    43267 13366 39700 13734
 noncurrent assets exclude nancial instruments and deferred tax assets
revenues from external customers are attributed to individual countries on the basis of the location of the customer
information about major customers
the group has two major governmental customers which each represent more than 10 of group revenues the customers’ revenues were 
respectively £24183m 2009 £23516m across all reported segments other than americas and ameaa and £8505m 2009 £7961m within 
the americas segment
 122  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 6 operating proﬁt
operating pro t is stated after chargingcrediting
      2010 2009
      £m £m
net foreign exchange lossesgains      18 34
research and development costs      623 471
loss on disposal of property plant and equipment     08 20
depreciation and impairment of property plant and equipment note 16    394 344
amortisation of intangible assets – arising on acquisition note 14    174 176
amortisation and impairment of intangible assets – other note 14    262 229
impairment of goodwill note 13      42 
staff costs note 7      18373 16940
allowance for doubtful debts charged to income statement note 19    22 14
fair value adjustment on nancial instruments
 recycling of amounts on discontinued cash ow hedges note 25d    03 02
 forward foreign exchange contracts nondesignated hedges note 25a    14 30
operating lease payments      1286 1045
operating lease income       01
amounts payable to deloitte llp and their associates by the company and its subsidiary undertakings in respect of audit and nonaudit 
services are shown below
      2010 2009
      £m £m
fees payable to the company’s auditor for the audit of the company’s annual accounts   09 09
       
fees payable to the company’s auditor and their associates for other services to the group    
 audit of the company’s subsidiaries pursuant to legislation     07 07
total audit fees      16 16
       
other services pursuant to legislation      01 01
 tax services      02 02
 other services      03 03
total nonaudit fees      06 06
other services relate to consulting services provided to the group
  serco group plc annual report and accounts 2010  123
 7 staff costs
the average monthly number of employees including executive directors was
      2010 2009
       number number
civil government      11313 11540
defence science and nuclear      8516 9182
local government and commercial      11477 11400
americas      10192 10286
ameaa      17014 15036
unallocated      287 266
total      58799 57710
average monthly numbers of employees for joint ventures are included on a proportionately consolidated basis in the table above
aggregate remuneration comprised
      2010 2009
      £m £m
wages and salaries      15829 14677
social security costs      1391 1267
other pension costs note 26      1065 924
      18285 16868
sharebased payment expense note 33      88 72
total      18373 16940
 8 investment revenue
      2010 2009
      £m £m
interest receivable on other loans and deposits     39 27
      39 27
 9 finance costs
      2010 2009
      £m £m
interest payable on non recourse loans      14 16
interest payable on obligations under nance leases     22 18
interest payable on other loans      237 268
movement in discount on provisions and deferred consideration    12 12
net interest payable on retirement bene t obligations note 26    28 63
      313 377
 124  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 10 tax
10 a income tax recognised in the income statement
      2010 2009
      £m £m
current income tax
current income tax expense      633 562
adjustments in respect of prior years      81 91
deferred tax
current year      25 20
adjustments in respect of prior years      06 18
      571 469
the tax expense for the year can be reconciled to the pro t in the consolidated income statement as follows
      2010 2009
      £m £m
      2139 1771
t ax calculated at a rate of 28 2009 28      599 496
expenses not deductible for tax purposes      36 38
unrelieved tax losses       25 21
effect of the use of unrecognised tax losses       04
impact of changes in statutory tax rates      08 
untaxed income       09
overseas rate differences      32 34
tax incentives      42 34
adjustments in respect of prior years      87 73
tax charge      571 469
10 b income tax recognised in the soci
      2010 2009
      £m £m
current tax
relating to cash ow hedges       03
t aken to retirement benet obligations reserve     97 05
t aken to sharebased payment reserve      27 32
deferred tax
relating to cash ow hedges      06 17
t aken to retirement benet obligations reserve     140 391
t aken to sharebased payment reserve      05 10
      17 452
the income tax expense for the year is based on the uk statutory rate of corporation tax for the period of 28 2009 28 the impact of 
changes in statutory tax rates relates principally to the reduction of the uk corporation tax rate from 28 to 27 from 1 april 2011 which was 
enacted on 27 july 2010 this change has resulted in a deferred tax charge arising from the reduction in the balance sheet carrying value of 
deferred tax assets to re ect the anticipated rate of tax at which those assets are expected to reverse the uk government has also indicated 
that it intends to enact future reductions in the main tax rate of 1 each year down to 24 by 1 april 2014 we estimate that the future rate 
changes would further reduce the uk deferred tax assets and liabilities recognised but the actual impact will be dependent on the deferred  
tax position at that time
  serco group plc annual report and accounts 2010  125
 1 1 dividends
      2010 2009
      £m £m
amounts recognised as distributions to equity holders in the year
final dividend for the year ended 31 december 2009 of 440p per share on 4905 million ordinary shares 
2009 final dividend for the year ended 31 december 2008 of 352p per share on 4811million ordinary shares 216 169
interim dividend for the year ended 31 december 2010 of 220p per share on 4882 million ordinary shares 
2009 interim dividend for the year ended 31 december 2009 of 185p per share on 4890 million ordinary shares 107 90
      323 259
proposed nal dividend for the year ended 31 december 2010 of 515p per share on 4885 million 
ordinary shares 2009 440p on 4905 million ordinary shares    252 216
 
the proposed nal dividend for 2010 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 30
 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 note 14 to assist in the understanding of the underlying performance  
of the business
the calculation of the basic and diluted eps is based on the following data
number of shares
      2010 2009
      millions millions
weighted average number of ordinary shares for the purpose of basic eps    4915 4866
effect of dilutive potential ordinary shares share options     84 56
weighted average number of ordinary shares for the purpose of diluted eps    4999 4922
earnings per share
     per share   per share
    earnings amount  earnings amount
    2010 2010 2009 2009
    £m pence £m pence
earnings for the purpose of basic eps being net pro t attributable to the 
equity holders of the parent     1567 3188 1302 2676
add back
amortisation of intangible assets arising on acquisition net of tax 
of £36m 2009 £41m    138 281 135 277
adjusted earnings before amortisation of intangible assets arising 
on acquisition    1705 3469 1437 2953
earnings for the purpose of basic eps    1567 3188 1302 2676
effect of dilutive potential ordinary shares     053  031
diluted eps    1567 3135 1302 2645
at 31 december 2010 options over nil 2009 894000 shares were excluded from the weighted average number of shares used for calculating 
diluted earnings per share because their exercise price was above the average share price for the year and they were therefore antidilutive
 126  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 13 goodwill
       £m
at 1 january 2009       9632
additions       62
reduction in deferred consideration payable on infovision      165
exchange differences       545
at 1 january 2010       8984
additions       31
impairment       42
reduction in deferred consideration payable on infovision      127
reduction in deferred consideration payable on sandrunner      10
exchange differences       159
at 31 december 2010       8995
goodwill is attributable to the excess of consideration over the fair value of net assets acquired and includes expected synergies existing 
contracts future growth prospects staff knowledge expertise and customer contacts
additions during the year include goodwill in respect of the acquisitions of rb solutions limited and the trade and liabilities of hyit knowledge 
systems private limited note 15
during the year the group exited its remaining business in the noncore south african market a joint venture providing aviation ground handling 
services following the nonrenewal of its license accordingly an impairment charge of £42m has been recognised in the consolidated income 
statement as an administrative expense the recoverable amount is based on fair value less costs to sell the impairment expense attributable 
to the joint venture’s goodwill is allocated to corporate expenses in the group’s segmental information note 5
the goodwill acquired in business combinations is allocated at acquisition to the cashgenerating units cgus that are expected to bene t 
from that business combination at the start of the nancial year a group restructuring took place including a combination of certain business 
units triggering a reassessment of the level at which cash in ows are largely independent of each other therefore in accordance with ias 36 
the group’s cgus were rationalised and this process incorporated the reallocation of some immaterial goodwill balances to the revised cgus 
goodwill has been allocated to cgus in the following operating segments
       restated
      2010 2009
      £m £m
civil government      621 612
defence science and nuclear      1055 1069
local government and commercial      2955 2953
americas      4082 3957
ameaa      282 393
at 31 december       8995 8984
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired the recoverable 
amount of each cgu is based on value in use calculations
key assumptions
the value in use calculations use riskadjusted cash ow projections based on nancial plans approved by senior management covering  
a veyear period and include a terminal value based on the projections for the nal year of that plan with an in ationary growth rate 
assumption applied the key assumptions affecting the cgus are discussed below
shortterm growth rates
shortterm revenue growth rates used in each cgu veyear plan are based on internal data regarding the current pipeline of opportunities  
and published industry forecasts for the relevant market further discussion of the group’s order book and pipeline is provided in the  
our business and our performance sections
  serco group plc annual report and accounts 2010  127
 13 goodwill continued
terminal growth rates
the cash ows subsequent to the veyear period are based upon management’s estimate of the growth rates of the sectors in which the cgus 
operate where possible these have been derived with reference to external sources the range of terminal growth rates applied to the cgus 
within each operating segment are set out below
       
civil government       25
defence science and nuclear       25
local government and commercial       25
americas       30
ameaa       25  70
these rates do not exceed the average longterm growth rates forecast for the individual market sectors
discount rate
pretax discount rates derived from the group’s posttax weighted average cost of capital have been used in discounting the projected 
riskadjusted cash ows these rates are adjusted for risks speci c to the market in which the cgu operates including but not limited to 
geographic and economic risks contract length and customer type
the range of pretax discount rates applied to the cgus within each operating segment are disclosed below
       
civil government       92
defence science and nuclear       91  92
local government and commercial       91
americas       99
ameaa       96  129
sensitivity analysis
sensitivity analysis has been performed for each key assumption and the directors have not identi ed any reasonably possible material 
changes in the key assumptions that would cause the carrying value of goodwill to exceed the recoverable amount
 128  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 14 other intangible assets
     acquisition related  other
o
     software and pension
   customer  licences and development related
   relationships franchises expenditure intangibles total
   £m £m £m £m £m
cost 
at 1 january 2010    717 695 1339 266 3017
additions    29 228  257
disposals     232  232
exchange differences   17 59 10  86
at 31 december 2010   734 783 1345 266 3128
amortisation and impairment
at 1 january 2010   225 441 555 152 1373
charge for the year   99 75 237 25 436
disposals     174  174
exchange differences   03 39 01  43
at 31 december 2010   327 555 619 177 1678
net book value
at 31 december 2010   407 228 726 89 1450
     acquisition related  other
o
     software and pension
   customer  licences and development related
   relationships franchises expenditure intangibles total
   £m £m £m £m £m
cost
at 1 january 2009    775 681 1208 267 2931
arising on acquisition of a company   02    02
additions     173  173
disposals    18 42  60
reclassi cations to tangible assets     05  05
exchange differences   60 32 05 01 24
at 31 december 2009   717 695 1339 266 3017
amortisation and impairment
at 1 january 2009   121 369 391 123 1004
charge for the year   109 67 199 30 405
disposals    18 42  60
exchange differences   05 23 07 01 24
at 31 december 2009   225 441 555 152 1373
net book value
at 31 december 2009   492 254 784 114 1644
customer relationships are amortised over the 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 £174m 2009 £176m
the group is carrying £726m 2009 £784m in relation to software and development expenditure which includes assets relating to the group’s 
sap nancerelated systems of £427m 2009 £328m the average amortisation period of these assets has six years 2009 ve years 
remaining the group is carrying £407m 2009 £492m in relation to customer relationships of which the principal component is £340m 2009 
£392m relating to si international inc the remaining average life of these customer relationship intangible assets is approximately ve years 
2009 six years
  serco group plc annual report and accounts 2010  129
 15 acquisitions
during the year the group completed the following acquisitions which have been accounted for in accordance with ifrs 3 business 
combinations 2008
15 a rb solutions limited
on 17 february 2010 the group acquired 100 of the share capital in rb solutions limited net assets acquired total £01m purchased for 
consideration of £15m of cash and £05m in deferred consideration paid on 17 august 2010
the acquisition gives rise to £19m of goodwill relating to future opportunities in local government business process outsourcing none of the 
goodwill recognised is expected to be deductible for corporate income tax purposes
rb solutions limited is based in the uk and provides remote processing services to local government 
costs of £03m have been expensed in relation to the acquisition and integration of rb solutions limited
15 b hyit knowledge systems private limited
on 28 august 2010 the group acquired the trade and liabilities of hyit knowledge systems private limited net liabilities acquired were 
inr3000 £00m for a purchase consideration of inr150m £02m of cash and inr772m £10m in deferred consideration to be paid 
contingent on future performance of the acquired trade and liabilities
the acquisition gives rise to £12m of goodwill relating to future opportunities in the local geoinformatics market none of the goodwill 
recognised is expected to be deductible for corporate income tax purposes
hyit knowledge systems private limited is based in hyderabad india providing clientsite geoinformatics and technical support  
staf ng services 
due to the small size of the acquisitions full ifrs 3 disclosures have not been presented
 130  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 16 property plant and equipment
     short machinery 
    freehold   leasehold motor vehicles
    land and  building furniture
    buildings improvements and equipment total
    £m £m £m £m
cost
at 1 january 2010    74 471 2652 3197
additions     24 445 469
disposals     01 222 223
exchange differences    02 14 102 114
at 31 december 2010    72 508 2977 3557
accumulated depreciation and impairment
at 1 january 2010    33 202 1670 1905
charge for the year    02 56 336 394
disposals      154 154
exchange differences     05 53 58
at 31 december 2010    35 263 1905 2203
net book value
at 31 december 2010    37 245 1072 1354
     short machinery 
    freehold   leasehold motor vehicles
    land and  building furniture
    buildings improvements and equipment total
    £m £m £m £m
cost
at 1 january 2009    76 390 2464 2930
additions    01 110 396 507
reclassi cation from intangible assets      05 05
disposals     26 327 353
arising on acquisition of subsidiaries      11 11
exchange differences    03 03 103 97
at 31 december 2009    74 471 2652 3197
accumulated depreciation and impairment
at 1 january 2009    33 179 1564 1776
charge for the year    02 49 293 344
disposals     20 276 296
exchange differences    02 06 89 81
at 31 december 2009    33 202 1670 1905
net book value
at 31 december 2009    41 269 982 1292
the carrying amount of the group’s machinery motor vehicles furniture and equipment includes an amount of £239m 2009 £221m in 
respect of assets held under nance leases
the carrying amount of the group’s shortleasehold building improvements includes an amount of £23m 2009 £30m in respect of assets 
held under nance leases
  serco group plc annual report and accounts 2010  131
 17 joint ventures
the group’s interests in joint ventures are reported in the consolidated nancial statements using the proportionate consolidation method
the effect of the group’s joint ventures on the consolidated income statement and consolidated balance sheet is as follows
income statement
      2010 2009
      £m £m
revenue      7941 7860
expenses      7295 7245
operating prot      646 615
investment revenue      22 10
finance costs      05 05
prot before tax      663 620
tax      172 149
share of posttax results of joint ventures      491 471
operating pro t is after allocating £07m 2009 £28m of costs incurred by group
balance sheet
      2010 2009
      £m £m
noncurrent assets      1567 1864
current assets      1734 1454
current liabilities      1460 1298
noncurrent liabilities      1411 1625
net assets      430 395
 18 inventories
      2010 2009
      £m £m
service spares      298 226
parts awaiting installation      74 180
longterm projectbased contract balances      282 253
      654 659
as at 31 december 2010 £nil 2009 £nil of advances received from customers were included within longterm projectbased contract 
balances as at 31 december 2010 the group had £nil 2009 £nil of contract retentions held by customers
 132  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 19 trade and other receivables
      2010 2009
      £m £m
trade and other receivables noncurrent
amounts owed by joint ventures      47 27
amounts recoverable on retirement bene t obligations note 26    1234 1443
other debtors      286 344
      1567 1814
      2010 2009
      £m £m
trade and other receivables current
trade receivables      5794 5147
other amounts recoverable on contracts      649 652
prepayments and accrued income      967 814
other debtors      452 583
      7862 7196
corporation tax recoverable      40 13
      7902 7209
as of 31 december 2010 trade receivables of £42m 2009 £46m were considered to be impaired impairments to trade receivables  
are based on speci c estimated irrecoverable amounts and provisions on outstanding balances greater than a year old unless there is rm 
evidence that the balance is recoverable the amount of the provision was £42m as of 31 december 2010 2009 £34m primarily because  
our customers either have a sovereign credit rating being government organisations or are blue chip private sector companies 
the ageing of trade receivables is as follows
      2010 2009
      £m £m
neither impaired nor past due      4880 4385
not impaired but overdue by less than 30 days     569 409
not impaired but overdue by between 30 and 60 days     140 118
not impaired but overdue by more than 60 days     205 223
impaired      42 46
allowance for doubtful debts      42 34
      5794 5147
movements on the group allowance for doubtful debts are as follows
      2010 2009
      £m £m
at 1 january       34 27
charged to income statement       22 14
utilised      14 06
exchange differences       01
at 31 december      42 34
the maximum exposure to credit risk in relation to trade receivables at the reporting date is the fair value of trade receivables the group does 
not hold any collateral as security
  serco group plc annual report and accounts 2010  133
 20 cash and cash equivalents
   other   other
  sterling  currencies total sterling  currencies total
  2010  2010 2010 2009 2009 2009
  £m £m £m £m £m £m
cash of project companies securing 
credit obligations   73 73  43 43
customer advance payments   36 36  69 69
other cash and shortterm deposits  1085 1599 2684 2008 1074 3082
total cash and cash equivalents  1085 1708 2793 2008 1186 3194
 cash of project companies and customer advance payments totalling £109m 2009 £112m are encumbered cash balances
cash and cash equivalents which are presented as a single class of assets on the face of the balance sheet comprise cash at bank and other 
shortterm highly liquid investments with a maturity of three months or less
 21 loans
  non    non
  recourse  other  recourse  other
  loans loans total loans loans total
  2010 2010 2010 2009 2009 2009
  £m £m £m £m £m £m
loans are repayable as follows
on demand or within one year  80 1515 1595 72 1035 1107
between one and two years  79 1143 1222 73 1458 1531
between two and ve years  78 2242 2320 145 3514 3659
after ve years   04 04  242 242
  237 4904 5141 290 6249 6539
less amount due for settlement within one year 
shown within current liabilities  80 1515 1595 72 1035 1107
amount due for settlement after one year 157 3389 3546 218 5214 5432
the carrying amounts and fair values of the loans are as follows
    carrying   carrying
    amount fair value amount fair value
    2010 2010 2009 2009
    £m £m £m £m
non recourse loans    237 253 290 313
other loans    4904 5068 6249 6388
    5141 5321 6539 6701
the fair values are based on cash ows discounted using a rate based on the borrowing rate associated with the loan all loans are held at 
amortised cost
 134  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 22 deferred tax
deferred income taxes are calculated in full on temporary differences under the liability method using local substantively enacted tax rates 
the gross movement on the deferred income tax account is as follows
      2010 2009
      £m £m
at 1 january – assetliability      390 59
income statement chargecredit note 10      19 02
items recognised in equity and in other comprehensive income note 10    141 418
exchange differences      05 29
at 31 december – asset      235 390
the movement in deferred tax assets and liabilities during the year was as follows
  temporary  sharebased
  differences  payment and retirement derivative other

  £m £m £m £m £m £m
at 1 january 2010  226 178 254 10 174 390
creditedcharged to income statement  56 87 21 01 182 19
items recognised in equity and in other 
comprehensive income   05 140 06  141
exchange differences  03 01   07 05
at 31 december 2010  173 271 135 03 01 235
the movement in deferred tax assets and liabilities during the previous year was as follows
  temporary  sharebased
  differences  payment and retirement derivative other
  on assets employee bene t nancial temporary 
  intangibles benets schemes instruments differences total
  £m £m £m £m £m £m
at 1 january 2009  265 187 75 06 100 59
creditedcharged to income statement  05 15 62 01 75 02
items recognised in equity and in other 
comprehensive income   10 391 17  418
exchange differences  34 04   01 29
at 31 december 2009  226 178 254 10 174 390
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 scal authority the following is the analysis of the deferred tax balances  
after offset for nancial reporting purposes
      2010 2009
      £m £m
deferred tax liabilities      146 90
deferred tax assets      381 480
      235 390
at the balance sheet date the group did not recognise deferred tax assets of £97m 2009 £56m which principally relate to unused tax losses 
of £318m 2009 £261m losses of £13m 2009 £13m expire within ve years losses of £110m 2009 £21m expire within 610 years 
losses of £126m 2009 £116m expire within 1520 years and losses of £69m 2009 £111m may be carried forward inde nitely
at the balance sheet date the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which 
deferred tax liabilities have not been recognised was £01m 2009 £04m no liability has been recognised in respect of these differences 
because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences  
will not reverse in the foreseeable future 
  serco group plc annual report and accounts 2010  135
 23 obligations under ﬁnance leases
     present value   present value
    minimum of minimum  minimum of minimum
    lease lease  lease lease
    payments payments  payments payments
    2010 2010  2009 2009
    £m £m £m £m
amounts payable under nance leases
within one year    88 71 75 60
between one and ve years    205 182 176 153
after ve years    13 11 30 27
    306 264 281 240
less future nance charges    42  41 
present value of lease obligations    264 264 240 240
less amount due for settlement within one year shown under current liabilities 88 71 75 60
amount due for settlement after one year   176 193 165 180
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
 24 trade and other payables
      2010 2009
      £m £m
trade and other payables current
trade creditors      2038 1977
other creditors      1524 1264
accruals and deferred income      4492 4470
amounts owed to joint ventures      01 05
      8055 7716
the average credit period taken for trade purchases is 31 days 2009 32 days
      2010 2009
      £m £m
trade and other payables noncurrent
other creditors      222 231
      222 231
 136  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 25 financial risk management
25 a fair value of nancial instruments
i hierarchy of fair value
the group held the following nancial instruments which fall within the scope of ias 39 financial instruments recognition and measurement  
at 31 december
 carrying amount  comparison carrying amount  comparison
 measurement basis fair value measurement basis fair value
 
   fair value   fair value
  amortised  hierarchy  amortised  hierarchy
  cost   level 2  cost   level 2
  2010 2010 2010 2009 2009 2009
  £m £m £m £m £m £m
loans and receivables
trade receivables note 19  5794  5794 5147  5147
other nancial assets note 25e  08  08 08  08
 derivative nancial instruments current   39   14
derivative nancial instruments noncurrent   35   25
financial liabilities at amortised cost
trade payables note 24  2038  2038 1977  1977
loans note 21  5141  5321 6539  6701
 derivative nancial instruments current   24   55
derivative nancial instruments noncurrent   52   17
the directors estimate that the carrying amounts of trade receivables and trade payables approximate to their fair value
the fair values of loans are based on cash ows discounted using a rate based on the borrowing rate associated with the loan all loans are 
held at amortised cost
the fair values of derivative nancial instruments are calculated based on a discounted cash ow analysis using appropriate quoted interest 
rates for the duration of the instruments as noted below
 currency swaps and interest rate swaps are measured at the present value of estimated future cash ows the present value of foreign 
currency balances are converted at the year end exchange rate
 forward foreign exchange contracts are measured using quoted forward exchange rates matching the maturities of the contracts 
 commodity contracts are measured at the present value of estimated cash ows with reference to quoted forward prices for gas oil 
the classi cation of the fair value measurement falls into three levels based on the degree to which the fair value is observable the levels are 
as follows
level 1 derived from unadjusted quoted prices in active markets for identical assets or liabilities
level 2 derived from other observable market data for the assets or liabilities and
level 3 derived from valuation techniques using data that is not based on observable market data
based on the above the derivative nancial instruments held by the group at 31 december 2010 are considered to fall into level 2 there were 
no transfers between level 1 and 2 during the year
  serco group plc annual report and accounts 2010  137
 25 financial risk management continued
25 a fair value of nancial instruments continued
ii fair value of derivative nancial instruments
the fair valuation of derivative nancial instruments results in a net liability of £02m 2009 £33m comprising noncurrent assets of £35m 
2009 £25m current assets of £39m 2009 £14m current liabilities of £24m 2009 £55m and noncurrent liabilities of £52m  
2009 £17m
      movement 
     movement in fair value 
     in fair value of non

    £m £m £m £m
currency swaps    05 15  10
forward foreign exchange contracts    interest rate swaps    commodity futures contracts              movement 
     movement in fair value 
     in fair value of non
    1 january of cash ow designated  31 december
     2009 hedges hedges  2009
    £m £m £m £m
currency swaps    42 47  05
forward foreign exchange contracts    22 15 30 23
interest rate swaps     21  21
commodity futures contracts    04 20  16
    60 63 30 33
25 b financial risk
the board is ultimately responsible for ensuring that nancial and non nancial risks are monitored and managed within acceptable and 
known parameters the board delegates authority to the executive team to manage nancial risks the group’s treasury function acts as a 
service centre and operates within clearly de ned guidelines and policies that are approved by the board the guidelines and policies de ne 
the nancial 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
 138  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 25 financial risk management continued
25 c liquidity risk
i credit facilities
the group maintains committed credit facilities to ensure that it has suf cient liquidity to maintain its ongoing operations as at 31 december 
the group’s committed credit facilities and corresponding borrowings were as follows
    amount drawn undrawn total facility
    2010 2010 2010 2010
   currency millions £m £m £m
syndicated revolving credit facility   gbp 4000 766 3234 4000
syndicated term loan facility   usd 3964 2532  2532
bilateral revolving credit facility   gbp 350  350 350
bilateral revolving credit facility   eur 125  107 107
     3298 3691 6989
    amount drawn undrawn total facility
    2009 2009 2009 2009
   currency millions £m £m £m
syndicated revolving credit facility   gbp 4000 1205 2795 4000
syndicated term loan facility   usd 4880 3022  3022
bilateral revolving credit facility   gbp 350 350  350
bilateral revolving credit facility   eur 125  107 107
     4577 2902 7479
the group’s bank credit facilities comprise a £4000m syndicated revolving credit facility a syndicated amortising term loan for  
us dollar 3964m and bilateral revolving credit facilities for £350m and euro 125m the syndicated revolving facility matures in  
september 2013 whilst the syndicated term loan is repayable between september 2011 and september 2013 the bilateral facilities  
mature in december 2011 and april 2012 respectively
the banking facilities are unsecured and have nancial and non nancial covenants and obligations typical of these arrangements
the group has outstanding private placements of £1177m which amortise in equal annual instalments from 2011 to 2015 the private 
placements comprise a tranche of £830m and a tranche of us dollar 550m which is hedged by two cross currency swaps note 25d
  serco group plc annual report and accounts 2010  139
 25 financial risk management continued
25 c liquidity risk continued
ii maturity of nancial liabilities
the group’s nancial 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 ows based on the earliest date on which the group can be required to pay
   on demand  between between
   or within one and  two and after

   £m £m £m £m £m
trade creditors   2038    2038
obligations under nance leases   88 61 144 13 306
loans   1595 1222 2320 04 5141
future loan interest   160 114 112 03 389
derivative nancial liabilities   54 09 01  64
at 31 december 2010   3935 1406 2577 20 7938
   on demand  between between
   or within one and  two and after
   one year two years ve years ve years t otal
   £m £m £m £m £m
trade creditors   1977    1977
obligations under nance leases   75 78 98 30 281
loans   1107 1531 3659 242 6539
future loan interest   260 205 283 12 760
derivative nancial liabilities   57 12 04  73
at 31 december 2009   3476 1826 4044 284 9630
the group’s derivative nancial liabilities are settled on both a net and gross basis depending upon the terms of each derivative nancial 
instrument the maturity of the group’s undiscounted derivative nancial liabilities is as follows
     forward foreign
    currency  exchange interest

    £m £m £m £m
on demand or within one year     24 30 54
between one and two years     04 05 09
between two and ve years     01   01
at 31 december 2010     29 35 64
     forward foreign
    currency  exchange interest
    swaps contracts rate swaps total
    £m £m £m £m
on demand or within one year    01 19 37 57
between one and two years     06 06 12
between two and ve years    01 06 03  04 
at 31 december 2009    02 31 40 73
 140  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 25 financial risk management continued
25 d foreign exchange risk
i transactional
the group’s business does not involve a signi cant amount of crossborder trade and therefore the group is not exposed to substantial 
foreign currency transaction risk as sales and costs are closely matched within each overseas operation any material transactional exposures 
that do arise are hedged by group treasury using forward foreign exchange contracts
ii translational
the foreign exchange exposure on the us dollar tranche of the private placements has been fully hedged into sterling the exposure on  
us dollar drawings under the bank facilities is hedged against the net investment in our us business
central funding of individual businesses gives rise to monetary assets and liabilities the currency of funding is selected to ensure that any 
foreign exchange risk resides with group this risk is then managed by the group’s treasury function using forward foreign exchange contracts 
and any natural hedge positions that may exist
iii forward foreign exchange contracts and currency swaps
the group utilises currency derivatives to hedge signi cant future transactions and cash ows the group is party to a variety of foreign 
currency forward contracts and swap contracts in the management of its exchange rate exposures these contracts are primarily denominated 
in the currencies of the group’s principal markets
at 31 december 2010 the net total notional amount of outstanding forward foreign exchange and currency swap contracts to which the group 
is committed is negative £596m 2009 positive £748m these arrangements are mainly designed to address signi cant exchange exposures 
for the next ve years 2009 six years
 at 31 december 2010 the group held a number of currency swaps designated as cash ow hedges against us dollar private placements 
fixed interest cash ows denominated in us dollars are exchanged for xed interest cash ows denominated in sterling the pro le of these 
currency swaps held by the group is as follows
    receivable payable
   notional usd gbp
   amount interest rate interest rate
  2010 2010 2010 2009 2009 2009
 usd m  
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 ow hedges with a notional amount of £295m  
2009 £213m
all currency derivatives designated as cash ow hedges are highly effective and the fair value gain of £22m 2009 £62m loss has been 
deferred in equity no balances in relation to ineffectiveness have been recognised in the consolidated income statement amounts in the 
hedging reserve are recycled to the income statement as the hedged transactions affect the income statement a loss of £03m 2009 £02m 
has been included in the consolidated income statement and the remaining loss of £01m 2009 £04m is expected to be recognised in the 
consolidated income statement in future periods
iv hedges of net investments in foreign entities
the group has us dollar denominated borrowings some of which have been designated as a hedge of part of the net investment in its 
acquired subsidiaries in the us and euro denominated borrowings some of which have been designated as a hedge of part of the net 
investment in its subsidiaries in europe the carrying value of the designated borrowings was £3385m 2009 £3862m the foreign exchange 
loss of £121m 2008 £470m gain on translation into sterling of the borrowings has been recognised within the group’s hedging and 
translation reserve the hedge is highly effective no amounts have been recognised in the consolidated income statement
v currency sensitivity
the group’s currency exposures that result in net currency gains and losses in the income statement and equity arise principally from us dollar 
and canadian dollar nancial instruments at 31 december 2010 if the us dollar had weakened by 10 against sterling with all other variables 
held constant posttax pro t for the year would have been £01m lower 2009 £01m mainly as a result of movements on working capital equity 
would have been £306m higher 2009 £312m mainly due to exchange gains on net investment hedges denominated in us dollars however 
this would be predominantly offset by exchange losses on the retranslation of the net assets of the us subsidiaries at 31 december 2010  
if the us dollar had weakened by 10 against the canadian dollar with all other variables held constant posttax pro t for the year would have 
been unaffected 2009 unaffected equity would have been £06m higher 2009 £06m due to canadian dollar denominated noncurrent 
intercompany borrowings
  serco group plc annual report and accounts 2010  141
 25 financial risk management continued
25 e interest rate risk
the group’s policy is to hedge core borrowing requirements to protect against adverse interest rate movements exposure to interest rate risk 
arises principally on changes to us dollar and sterling interest rates
i interest rate management
an analysis of nancial assets and liabilities exposed to interest rate risk is set out below
financial assets    weighted    weighted
      average xed
   floating fixed interest rate
  rate rate received rate rate received
  2010 2010 2010 2009 2009 2009
  £m £m  £m £m 
cash and cash equivalents  2793   3194 
other nancial assets  02 06 600 02 06 600
  2795 06  3196 06
financial liabilities    weighted    weighted
      average xed
   floating fixed interest rate
  rate rate paid rate rate paid
  2010 2010 2010 2009 2009 2009
  £m £m  £m £m 
non recourse canadian dollar loans   237 527  290 527
sterling loans  192 1186 583 711 1186 583
us dollar loans  1063 2235 253 1442 2787 320
other loans  228  91 122 01 1200
  1483 3658  2275 4264
exposure to interest rate uctuations is mitigated through the use of interest rate derivatives excluded from the above analysis is £264m of 
amounts payable under nance leases which are subject to xed rates of interest 2009 £240m
ii interest rate swaps
during 2009 the group entered into interest rate swaps to manage its exposure to interest rate risk on us dollar 450m debt by swapping 
 oating for xed interest rates the pro le of the interest rate swaps is as follows
     payable usd
      weighted receivable
    notional average  usd
    value interest rate interest rate
    2010 2010 2010
maturity    usd m  
march 2011    150 160 3 month usd libor
march 2012    300 183 3 month usd libor
     payable usd
      weighted receivable
    notional average  usd
    value interest rate interest rate
    2009 2009 2009
maturity    usd m  
march 2011    150 160 3 month usd libor
march 2012    300 183 3 month usd libor
the swaps were designated as cash ow hedges and are highly effective the fair value loss of £15m has therefore been deferred within equity 
2009 £21m loss 
 142  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 25 financial risk management continued
25 e interest rate risk continued
iii interest rate sensitivity
the sensitivity analysis below shows the exposure to interest rates for both derivative and nonderivative nancial liabilities at the balance sheet 
date and on average balances held throughout the past year a 100 basis point increase in interest rates with all other variables held constant 
would have resulted in a gain on posttax pro t for the year to 31 december 2010 of £07m 2009 £03m the gain on equity due to a 100 basis 
point movement would have been £21m 2009 £43m due to movements in the fair value of derivative nancial instruments held as  
cash ow hedges
25 f price risk 
the group is exposed to commodity price risk through its joint venture rail operations due to the volatility in the price of fuel 
 
the maturity pro le of the three 2009 two commodity derivatives used by the joint ventures to reduce this risk is as follows
      notional payable

      2010 2010

january 2011  september 2011      185 2895
january 2011  september 2011      108 3970
january 2011  september 2013      742 4296
      notional payable
       value xed rate
      2009 2009
maturity      million litres p per litre
january 2010  september 2010      94 3380
january 2010  september 2011      449 2895
all commodity derivatives were designated as cash ow hedges and were highly effective during the year a gain of £10m 2009 £20m has 
therefore been deferred within equity
i price risk sensitivity
an increase of us dollar 02 per litre in the price of fuel at the balance sheet date would result in a gain of £71m in equity 2009 £35m the 
sensitivity to changes in fuel prices resulting from changes in exchange rates is included within the currency sensitivity analysis see note 25d 
25 g credit risk
the group’s principal nancial assets are cash and cash equivalents and trade and other receivables
the group’s credit risk is relatively low because a high proportion of our customers have a sovereign or sovereignlike credit rating and the 
group has a large number of counterparties and customers external credit checks are completed for all new non government customers 
before signing a contract above £100000 credit vetting for new government body customers is performed by an internal review of the client’s 
ability to pay and timeliness of payment the review includes a consideration of the expected contract budget as well as economic and industry 
factors and the budget holders’ position within the government body at quarterly intervals a management credit worthiness review for all 
ongoing customers with material outstanding balances is undertaken including an assessment to determine if there has been any deterioration 
in the customer’s payment history and a review of the total credit authorised to the customer throughout the group
the group’s treasury function only transacts with counterparties that have as a minimum a longterm public rating from two recognised credit 
rating agencies of ‘single a’ it also ensures that no exposure to any one institution at any given time exceeds a preapproved exposure limit
25 h capital risk 
the group’s key objectives when managing capital are to ensure the group has suf cient funds to meet current and future business 
requirements to provide returns for shareholders and bene ts for other stakeholders and to maintain an optimal capital structure 
access to capital takes many forms and includes access to the equity market debt capital market and bank market during 2010 the group 
maintained suf cient debt facilities that ensured its objectives were met
  serco group plc annual report and accounts 2010  143
 26 retirement beneﬁt schemes
the group has accounted for pensions in accordance with ias 19 employee bene ts the group operates a number of de ned bene t 
schemes and de ned contribution schemes the pension charge for the year ended 31 december 2010 including the proportionate share  
of joint ventures was £1065m 2009 £924m
26 a de ned bene t schemes
the group operates de ned bene t schemes for qualifying employees of its subsidiaries in the uk and europe in addition the group has 
interests in joint ventures which operate de ned bene t schemes for qualifying employees
the assets of the funded schemes are held independently of the group’s assets in separate trustee administered funds the group’s major 
schemes are valued by independent actuaries annually using the projected unit credit actuarial cost method this re ects service rendered by 
employees to the dates of valuation and incorporates actuarial assumptions primarily regarding discount rates used in determining the present 
value of bene ts projected rates of salary growth and longterm expected rates of return for scheme assets discount rates are based on  
the market yields of highquality corporate bonds in the country concerned longterm expected rates of return for scheme assets are based  
on published brokers’ forecasts for each category of scheme assets pension assets and liabilities in different de ned bene t schemes are not 
offset unless the group has a legally enforceable right to use the surplus in one scheme to settle obligations in the other scheme and intends  
to exercise this right
i balance sheet values
the amounts recognised in the balance sheet are grouped together as follows
contract speci c  irtually certain costs reimbursed
the group has an obligation to contribute to the pension scheme over the term of the contract at rebid any de cit 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 de ned 
bene t obligation the group’s share of the de ned bene t 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 income statement the expense relating to this de ned bene t plan has been presented net of the amount recognised for the 
reimbursement resulting in a nil charge to the income statement
contract speci c  not certain costs reimbursed
these are prefunded de ned bene t schemes the group has obligations to contribute variable amounts to the pension schemes over the 
terms of the related contracts at rebid any de cit or surplus would transfer to the next contractor the group has recognised as a liability the 
de ned bene t 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 soci the intangible assets are amortised over the term of the contracts
non contract speci c
these consist of a prefunded de ned bene t scheme which does not relate to any speci c 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 de ned bene t 
scheme both of which do not relate to any speci c contract any liabilities arising are recognised in full
ii triennial funding valuation
among our non contract speci c schemes the largest is the serco pension and life assurance scheme splas the most recent full actuarial 
valuation of this scheme was undertaken as at 6 april 2009 and resulted in an actuarially assessed de cit of £141m following this review the 
group agreed with the trustees to make cash contributions of 30 of members’ pensionable salaries until 2019 plus lump sum payments 
of £20m which was paid in december 2010 and £40m which was paid in january 2011 we continue to review the level of bene ts and 
contributions under the scheme in light of our business needs and changes to pension legislation
 144  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
the assets and liabilities of the schemes at 31 december are  virtually not certain
    certain costs  costs non contract

    2010 2010 2010 2010
    £m £m £m £m
scheme assets at fair value
equities    1322 2552 366 4240
bonds except ldi    561 451 166 1178
liability driven investments ldi     93 6513 6606
gilts     338 11 349
property    178 265 95 538
cash and other    487 324 1349 2160
annuity policies     10 251 261
fair value of scheme assets    2548 4033 8751 15332
present value of scheme liabilities    3782 5104 9515 18401
net amount recognised    1234 1071 764 3069
members’ share of decit     267 15 282
franchise adjustment     537  537
effect of ifric 14       12 12
net pension liability    1234 267 761 2262
related assets
intangible assets note 14     89  89
trade and other receivables note 19    1234   1234
    1234 89  1323
    virtually not certain
    certain costs  costs non contract
    reimbursed reimbursed specic total
    2009 2009 2009 2009
    £m £m £m £m
scheme assets at fair value
equities    1436 2300 414 4150
bonds except ldi    527 209 152 888
liability driven investments ldi      4936 4936
gilts     544 09 553
property    164 204 89 457
cash and other    118 263 1932 2313
annuity policies     29 243 272
fair value of scheme assets    2245 3549 7775 13569
present value of scheme liabilities    3688 4763 8993 17444
net amount recognised    1443 1214 1218 3875
members’ share of decit     335 33 368
franchise adjustment     580  580
effect of ifric 14       15 15
net pension liability    1443 299 1200 2942
related assets
intangible assets note 14     114  114
trade and other receivables note 19    1443   1443
    1443 114  1557
liabilities in relation to unfunded schemes included above amount to £487m 2009 £487m
certain of the group’s non contract speci c schemes have 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 in ation and 
interest swap overlays the assumed expected rate of return is taken to be gilts 07 2009 gilts 07
  serco group plc annual report and accounts 2010  145
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
in some schemes employee contributions vary over time to meet a speci ed proportion of the overall costs including a proportion of any 
de cit 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 income statement for these schemes are net of the proportion attributed to employees the amounts attributed to 
employees are shown separately in the reconciliation of changes in the fair value of scheme assets and liabilities
the amounts recognised in the financial statements for the year are analysed as follows
    virtually not certain
    certain costs  costs non contract

    2010 2010 2010 2010
    £m £m £m £m
recognised in the income statement
current service cost – employer    97 155 147 399
past service cost      03 03
reimbursed to employer    97   97
 expected return on scheme assets – employer   166 184 460 810
interest on franchise adjustment     34  34
interest cost on scheme liabilities – employer   215 204 502 921
reimbursed to employer    49   49
finance incomecost     14 42 28
included within the soci
actual return on scheme assets    241 357 817 1415
less expected return on scheme assets    166 253 474 893
    75 104 343 522
other actuarial gainslosses    138 37 198 23
actuarial gains recognised in the soci    213 141 145 499
change in ifric 14      03 03
change in franchise adjustment     77  77
change in members’ share     80 17 97
reimbursed to employer    213   213
actuarial losses on reimbursable rights    213 157 14 384
 146  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
    virtually not certain
    certain costs  costs non contract
    reimbursed reimbursed specic total
    2009 2009 2009 2009
    £m £m £m £m
recognised in the income statement
current service cost – employer    70 122 147 339
past service cost      07 07
reimbursed to employer    70   70
    122 154 276
expected return on scheme assets – employer   122 143 353 618
interest on franchise adjustment     11  11
interest cost on scheme liabilities – employer   161 156 414 731
reimbursed to employer    39   39
finance cost     02 61 63
included within the soci
actual return on scheme assets    383 425 609 1417
less expected return on scheme assets    123 199 363 685
    260 226 246 732
other actuarial gains and losses    852 894 1576 3322
actuarial losses recognised in the soci    592 668 1330 2590
change in ifric 14      01 01
change in franchise adjustment     393  393
change in members’ share     167 18 185
reimbursed to employer    592   592
actuarial gains on reimbursable rights    592 560 19 1171
total pension cost recognised in the soci    108 1311 1419
  serco group plc annual report and accounts 2010  147
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
cumulative actuarial losses recognised since 1 january 2004 are £420m 2009 losses of £535m
changes in the fair value of scheme liabilities are analysed as follows
    virtually not certain
    certain costs  costs non contract

    £m £m £m £m
at 1 january 2009    2672 3564 7198 13434
current service cost – employer    70 122 147 339
current service cost – employee     48 06 54
past service costs      07 07
scheme participants’ contributions    25 07 11 43
interest cost – employer    161 156 414 731
interest cost – employee     60 11 71
benets paid    92 88 334 514
actuarial gains and losses    852 894 1576 3322
exchange differences      43 43
at 1 january 2010    3688 4763 8993 17444
current service cost – employer    97 155 147 399
current service cost – employee     62 05 67
past service costs      03 03
scheme participants’ contributions    31 06 09 46
interest cost – employer    215 204 502 921
interest cost – employee     76 13 89
benets paid    111 125 337 573
actuarial gains and losses    138 37 198 23
exchange differences      18 18
at 31 december 2010    3782 5104 9515 18401
changes in the fair value of plan assets are analysed as follows
    virtually not certain
    certain costs  costs non contract

    £m £m £m £m
at 1 january 2009    1776 2973 7192 11941
expected return on scheme assets – employer   122 143 353 618
expected return on scheme assets – employee    56 10 66
employer contributions    154 179 291 624
contributions by employees    25 60 16 101
benets paid    92 88 334 514
actuarial gains and losses    260 226 246 732
exchange differences      01 01
at 1 january 2010    2245 3549 7775 13569
expected return on scheme assets – employer   166 184 460 810
expected return on scheme assets – employee     69 14 83
employer contributions    141 189 483 813
contributions by employees    32 63 13 108
benets paid    111 125 337 573
actuarial gains and losses    75 104 343 522
exchange differences       
at 31 december 2010    2548 4033 8751 15332
employer contributions for non contract speci c schemes in 2010 include a £20m special contribution paid in december 2010
 148  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
history of experience gains and losses
   2010 2009 2008 2007 2006
experience adjustments arising on scheme assets
amount £m   522 732 2637 14 458
percentage of the fair value of scheme assets  3 5 22 0 4
experience adjustments arising on scheme liabilities
amount £m   42 582 01 51 131
percentage of the present value of scheme liabilities  0 3 0 0 1
fair value of scheme assets £m   15332 13569 11941 13428 11868
present value of scheme liabilities £m   18401 17444 13434 15009 14651
de cit £m   3069 3875 1493 1581 2783
the normal contributions expected to be paid during the nancial year ending 31 december 2011 are £596m  nancial year ended 31 december 
2010 £607m
assumptions in respect of the expected return on scheme assets are based on market expectations of returns over the life of the related 
obligation due consideration has been given to current market conditions as at 31 december 2010 in respect to in ation interest bond yields 
and equity performance when selecting the expected return on assets assumptions
the expected yield on bond investments with xed interest rates is derived from their market value the yield on equity investments contains an 
additional premium an ‘equity risk premium’ to compensate investors for the additional anticipated returns of holding this type of investment 
when compared to bond yields management have concluded that an appropriate equity risk premium is 41 2009 41 
the overall expected return on assets is calculated as the weighted average of the expected returns for the principal asset categories held  
by scheme
      2010 2009
       
main assumptions
rate of salary increases      350 370
rate of increase in pensions in payment     260 cpi and 310 rpi 330
rate of increase in deferred pensions     260 cpi and 310 rpi 330
ination assumption     260 cpi and 310 rpi 330
discount rate      540 580
expected rates of return on scheme assets
 equities    830 860
 bonds except ldi    540 580
  ldi    490 520
 gilts    420 450
   property    545 575
   cash and other    050 050
 annuity policies    540 580
      2010 2009
      years years
postretirement mortality
  current pensioners at 65  – male   208 203
    current pensioners at 65  – female   233 232
    future pensioners at 65  – male   224 216
    future pensioners at 65  – female   245 244
  serco group plc annual report and accounts 2010  149
 26 retirement beneﬁt schemes continued
26 a de ned bene t schemes continued
 the uk government announced in its june 2010 budget that when they publish the statutory increase gure in the future they will use the cpi 
measure of in ation rather than rpi this was con rmed on 8 december 2010 
certain of the group’s pension schemes re ect the lower liability where bene ts are explicitly based on statutory increases in the rules in  
31 december 2010 pension liability gures if this change had not occurred the net liability of the pension schemes on the group balance sheet 
would have been £592m greater there is no impact on the operating pro t of the current year due to applying  
the change 
26 b de ned contribution schemes
the group paid employer contributions of £619m 2009 £494m into uk and other de ned contribution schemes foreign state pension 
schemes and multiemployer schemes including those of joint ventures
prefunded de ned bene t schemes treated as de ned contribution
serco accounts for certain prefunded de ned bene t schemes relating to contracts as de ned contribution schemes because the contributions 
are xed until the end of the current concession and at rebid any surplus or de cit would transfer to the next contractor cash contributions are 
recognised as pension costs and no asset or liability is shown on the balance sheet 
 27 provisions
   employee
   related property contract other total
   £m £m £m £m £m
at 1 january 2009   59 98 112 190 459
charged to income statement   24  09 19 52
released to income statement     05  05
utilised during the year   06 12 07 28 53
unwinding of discount    04 03  07
exchange differences    10 08 19 37
at 1 january 2010   77 80 104 162 423
charged to income statement   35 01 02 23 61
released to income statement    09 09 27 45
utilised during the year   06 12 22 27 67
unwinding of discount    03 03  06
exchange differences   04 03 02 09 18
at 31 december 2010   110 66 80 140 396
employee related provisions relate to longterm service awards and terminal gratuities liabilities which have been accrued and are based on 
contractual entitlement together with an estimate of the probabilities that employees will stay until retirement and receive all relevant amounts
property provisions relate to leased properties which are either under utilised or vacant and where the unavoidable costs associated with the 
lease exceed the economic bene ts expected to be required management has calculated the provision based on the discounted cash out ows 
required to settle the lease obligations 
contract provisions primarily relate to si international inc where as required under ias 37 a provision has been taken for a loss making 
onerous contract management has used the present value of the estimated future cash out ows required to settle the contract obligations  
in determining the provision
other provisions are held for legal and other costs that the group expects to incur over an extended period these costs are based on past 
experience of similar items and other known factors and represent management’s best estimate of the likely outcome
 150  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 28 share capital
     number   number
    2010 2010 2009 2009
    £m millions £m millions
issued and fully paid
490912075 2009 486764440 ordinary shares of 2p each at 1 january  98 4909 97 4868
issued on the exercise of share options    01 23 01 41
493220805 2009 490912075 ordinary shares of 2p each at 31 december 99 4932 98 4909
the company has one class of ordinary shares which carry no right to xed income
during the year 2308730 2009 4147635 ordinary shares of 2p each were allotted to the holders of sharebased awards or their personal 
representatives using newly listed shares
 29 share premium account
      2010 2009
      £m £m
at 1 january       3041 3011
premium on shares issued      26 30
at 31 december       3067 3041
 30 reserves
30 a retirement bene t obligations reserve
the retirement bene t obligations reserve represents the actuarial gains and losses recognised in respect of annual actuarial valuations for 
de ned bene t retirement schemes the fair value adjustments on reimbursable rights and the related movements in deferred tax balances
30 b sharebased payment reserve
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 satis ed by own shares
30 c own shares reserve
the own shares reserve represents the cost of shares in serco group plc purchased in the market and held by the serco group plc employee 
share ownership trust esop to satisfy options under the group’s share options schemes at 31 december 2010 the esop held 4710201 
2009 3436547 shares equal to 10 of the current allotted share capital 2009 07 the market value of shares held by the esop as at  
31 december 2010 was £262m 2009 £182m
30 d hedging and translation reserve
the hedging and translation reserve represents foreign exchange differences arising on translation of the group’s overseas operations and 
movements relating to cash ow hedges
  serco group plc annual report and accounts 2010  151
 31 notes to the consolidated cash ﬂow statement

      2010 2009
       £m
 2121
adjustments for
sharebased payment expense       72
depreciation of property plant and equipment      344
amortisation and impairment of intangible assets      405
loss on disposal of property plant and equipment      20
pro t on disposal of intangible assets       
impairment of goodwill       
movement in provisions       06
 2956
decreaseincrease in inventories       151
increase in receivables       311
increase in payables       248
special contribution to de ned bene t pension scheme note 26     
 2742
tax paid       391
 2351
additions to xtures and equipment during the year amounting to £100m 2009 £119m were nanced by new nance leases
  at      at

cash and cash equivalents  non recourse loans  other loans  obligations under nance leases    at      at
  1 january    exchange non cash 31 december
  2009 cash ow acquisitions differences movements 2009
  £m £m £m £m £m £m
cash and cash equivalents  2508 730 09 53  3194
non recourse loans  341 65  14  290
other loans  7136 330 25 582  6249
obligations under nance leases  172 57  06 119 240
  5141 1182 16 509 119 3585
 acquisitions represent the net cashdebt acquired on acquisition
 152  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 32 capital and other commitments
      2010 2009
      £m £m
capital expenditure contracted but not provided
  property plant and equipment      17 55
included within the balances above is joint venture capital expenditure contracted but not provided in relation to property plant and equipment 
of £nil 2009 £12m
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable operating 
leases which fall due as follows
      2010 2009
      £m £m
within one year      1120 1067
between one and ve years      2406 2073
after ve years      1293 1235
      4819 4375
principal lease commitments are within the civil government segment with future minimum lease payments totalling £2311m 2009 £1810m 
these leases relate primarily to administrative and operational buildings track and rolling stock within the train operating companies  
the length of the leases is concurrent with the period of the franchises and the terms of the leases are xed during this period
  serco group plc annual report and accounts 2010  153
 33 sharebased payment expense
the group recognised the following expenses related to equitysettled sharebased payment transactions
      2010 2009
      £m £m
executive option plan      02 05
long term incentive scheme and plan      25 45
sharesave 2008      10 18
transformational share scheme      02 01
performance share plan      44 02
deferred bonus plan      05 01
      88 72
executive option plan eop
options granted under the eop may be exercised after the third anniversary of grant dependent upon the achievement of a nancial 
performance target over three years the options are granted at market value and awards made to eligible employees are based on between 
50 and 100 of salary as at 31 december prior to grant if the options remain unexercised after a period of ten years from the date of grant 
the options expire furthermore options may be forfeited if the eligible employee leaves the group before the options vest details of the 
movement in all eop options are as follows
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january     6857 272 10948 265
granted during the year      88 388
exercised during the year    2620 279 3634 250
lapsed during the year    280 347 545 298
outstanding at 31 december     3957 263 6857 272
of these options 3534982 2009 5992295 were exercisable at the end of the year with a weighted average exercise price of £242  
2009 £248
the options outstanding at 31 december 2010 had a weighted average contractual life of 32 years 2009 37 years 
the exercise prices for options outstanding at 31 december 2010 ranged from £139 to £455 2009 £139 to £490
the weighted average share price at the date of exercise approximates to the weighted average share price during the year which was £581 
2009 £441
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 
there were no new options granted under executive option plans during the year
 154  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 33 sharebased payment expense continued
long term incentive scheme ltis and long term incentive plan ltip
awards made to eligible employees under the above schemes are structured as options with a zero exercise price and may be exercised after 
the third anniversary of grant the extent to which an award vests and therefore becomes exercisable is measured by reference to the growth 
in the group’s earnings per share eps or total shareholder return tsr over the performance period of three nancial years 
if the options remain unexercised after a period of ten years from the date of grant the options expire furthermore options may be forfeited if 
the eligible employee leaves the group before the options vest details of the movement in all ltis and ltip options are as follows
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january    5623 nil 8214 nil
granted during the year     nil 351 nil
exercised during the year    1786 nil 2383 nil
lapsed during the year    146 nil 559 nil
outstanding at 31 december    3691 nil 5623 nil
of these options 1544054 2009 896487 were exercisable at the end of the year
the options outstanding at 31 december 2010 had a weighted average contractual life of 68 years 2009 76 years
there were no grants of ltip options during the year during the prior year two grants of ltip options were made one grant with tsr 
performance conditions the other with eps growth performance conditions the monte carlo simulation model is considered to be the most 
appropriate for valuing options granted under schemes where there are changes in performance conditions by which the options are measured 
such as for the tsrbased awards
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
for the ltip options with eps growth performance conditions the fair value is considered to be their face value less the present value of any 
dividend payments not paid over the vesting period 
  serco group plc annual report and accounts 2010  155
 33 sharebased payment expense continued
transformational share scheme
awards made to eligible employees under the transformational share scheme are structured as options with a £nil exercise price and are 
exercisable after the third anniversary of the grant 
the employee must exercise the options no later than 30 days after the vesting date furthermore if the eligible employee leaves the group 
before the options vest the options may be forfeited
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january    86 nil 39 nil
granted during the year    33 nil 53 nil
exercised during the year     nil  nil
lapsed during the year     nil 6 nil
outstanding at 31 december    119 nil 86 nil
none of these options were exercisable at the end of the year 2009 none
the options outstanding at 31 december 2010 had a weighted average contractual life of 08 years 2009 13 years
the fair value of options granted under the transformational share scheme is considered to be equal to their face value as at the grant date 
less the present value of any dividend payments over the vesting period this model is considered to be most appropriate for valuing options 
granted under this scheme as the options have a £nil exercise price and are not subject to any performance conditions
the assumptions for determining the face value less any dividends are
      2010 2009
weighted average share price      590p 366p
weighted average exercise price      nil nil
expected volatility      na na
expected life      3 years 2 years
risk free rate      na na
expected dividends      10 14
 156  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 33 sharebased payment expense continued
performance share plan psp
under the psp  eligible employees have been granted options with an exercise price of two pence awards vest after the performance period 
of three years and are subject to the achievement of two performance measures the primary performance measure is tsr and the second 
performance measure is based on eps growth
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january    479 nil  nil
granted during the year    3523 002 479 nil
exercised during the year     nil  nil
lapsed during the year    58 nil  nil
outstanding at 31 december    3944 002 479 nil
none of these options were exercisable at the end of the year 2009 none
the options outstanding at 31 december 2010 had a weighted average contractual life of 92 years 2009 95 years
in the year four grants were made with 70 of the options granted subject to tsr performance conditions and 30 subject to eps growth 
performance conditions
the options subject to tsr performance conditions were valued using the monte carlo simulation model the options subject to eps growth 
performance conditions were deemed to have fair values equal to their face value less the present value of any dividend payments not received 
over the vesting period
the monte carlo simulation model is considered to be the most appropriate for valuing options granted under schemes where there are 
changes in performance conditions by which the options are measured such as for the tsrbased awards
the inputs into the monte carlo simulation model for options granted during the year with tsr performance conditions are
      2010 2009
weighted average share price      615p 406p
weighted average exercise price      2p nil
expected volatility      289 288
expected life      3 years 3 years
risk free rate      19 22
expected dividends       12
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 
the assumptions for options granted during the year with eps growth performance conditions are
      2010 2009
weighted average share price      615p 406p
weighted average exercise price      2p nil
expected volatility      na na
expected life      3 years 3 years
risk free rate      na na
expected dividends       12
  serco group plc annual report and accounts 2010  157
 33 sharebased payment expense continued
deferred bonus plan dbp
under the dbp  eligible employees are entitled to use up to 50 of their earned annual bonus to purchase shares in the group at market price 
provided they remain in employment for this period the shares are retained for that period and the two performance measures which are the 
same as the psp scheme being tsr and eps growth have been met the group will make a matching share award for shares purchased by 
employees in 2010 the match was on a basis of two times the gross bonus deferred
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january    207 nil 28 nil
granted during the year    219 nil 207 nil
exercised during the year     nil 28 nil
lapsed during the year     nil  nil
outstanding at 31 december    426 nil 207 nil
none of these options were exercisable at the end of the year 2009 none
the options outstanding at 31 december 2010 had a weighted average contractual life of 19 years 2009 25 years
in the year one grant was made with 50 of the deferred bonus subject to tsr performance conditions and 50 subject to eps growth 
performance conditions 
the portion subject to tsr performance conditions was valued using the monte carlo simulation model the portion subject to eps growth 
performance conditions was deemed to have a fair value equal to their face value less the present value of any dividend payments not received 
over the vesting period
the monte carlo simulation model is considered to be the most appropriate for valuing options granted under schemes where there are 
changes in performance conditions by which the options are measured such as for the tsrbased awards
the inputs into the monte carlo simulation model for options granted during the year with tsr performance conditions are
      2010 2009
weighted average share price      602p 404p
weighted average exercise price      nil nil
expected volatility      289 289
expected life      3 years 3 years
risk free rate      18 18 to 24
expected dividends       12
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 
the assumptions for options granted during the year with eps growth performance conditions are
      2010 2009
weighted average share price      602p 404p
weighted average exercise price      nil nil
expected volatility      na na
expected life      3 years 3 years
risk free rate      na na
expected dividends       12
 158  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 33 sharebased payment expense continued
sharesave 2008
the sharesave 2008 scheme provides for a purchase price equal to the daily average market price on the date of grant less 10 the options 
can be exercised for a period of six months following their vesting details of the movement in sharesave 2008 options are as follows
     weighted  weighted
     average  average
    number of  exercise number of  exercise
    options price options price
    2010 2010 2009 2009
    thousands £ thousands £
outstanding at 1 january    6106 40 6760 40
granted during the year     nil  nil
exercised during the year    248 40 5 40
lapsed during the year    379 40 649 40
outstanding at 31 december    5479 40 6106 40
of these options 16278 2009 none were exercisable at the end of the year 
the options outstanding at 31 december 2010 had a weighted average contractual life of 12 years 2009 21 years given that options granted 
under the sharesave plan can be exercised at any time after vesting management consider the binomial lattice model to be appropriate to 
value the options granted under this scheme the binomial lattice model allows exercise over a window in time from vesting date to expiry 
date and assumes option holders make economically rational exercise decisions
  serco group plc annual report and accounts 2010  159
 34 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 
trading transactions
during the year group companies entered into the following material transactions with joint ventures
      2010 2009
      £m £m
royalties and management fees receivable      20 16
dividends receivable      515 463
      535 479
the following receivable balances relating to joint ventures were included in the consolidated balance sheet
      2010 2009
      £m £m
current
loans      01 06
      2010 2009
      £m £m
noncurrent
loans      35 22
joint venture receivable and loan amounts outstanding have arisen from transactions undertaken during the general course of trading are 
unsecured and will be settled in cash interest arising on loans is based on libor or its equivalent with an appropriate margin no guarantee 
has been given or received no provisions are required for doubtful debts in respect of the amounts owed by the joint ventures
remuneration of key management personnel
the directors of serco group plc had no material transactions with the group during the year other than service contracts and directors’ liability 
insurance 
the remuneration of the key management personnel of the group is set out below in aggregate for each of the categories speci ed in  
ias 24 related party disclosures
      2010 2009
      £m £m
shortterm employee benets      75 32
postemployment benets      08 04
sharebased payment expense      28 15
      111 51
the key management personnel comprise the executive directors nonexecutive directors and members of the executive committee  
2010 19 individuals 2009 9 individuals
 160  serco group plc annual report and accounts 2010
section 5
notes to the consolidated financial statements
 35 list of principal undertakings
the company has taken advantage of the exemption under section 4102 of the companies act 2006 by providing information only in relation 
to undertakings whose results or nancial position in the opinion of the directors principally affected the nancial statements 
a complete list of subsidiary and associated undertakings will be attached to the next serco group plc annual return to companies house 
the percentage of equity capital held directly or indirectly 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  2010 2009
united kingdom serco limited 100 100
 npl management limited 100 100
rest of europe 
germany serco gmbh 100 100
ameaa 
australia serco australia pty limited 100 100
 great southern rail limited 100 100
north america
usa serco services inc  100 100
joint venture undertakings  2010 2009
united kingdom awe management limited 33 33
 merseyrail services holding company limited 50 50
 northern rail holdings limited 50 50
ameaa
australia serco sodexo defence services pty limited 50 50
all joint ventures are accounted for using the proportionate consolidation method all the subsidiaries of the group have been consolidated 
all the principal subsidiaries of serco group plc and its joint venture undertakings are engaged in the provision of support services
 36 contingent liabilities
the company has guaranteed overdrafts nance leases and bonding facilities of its joint ventures up to a maximum value of £82m  
2009 £70m the actual commitment outstanding at 31 december 2010 was £56m 2009 £43m
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 
 nancial loss
the group is aware of claims and potential claims which involve or may involve legal proceedings against the group the directors are of the 
opinion having regard to legal advice received and the group’s insurance arrangements that it is unlikely that these matters will in aggregate 
have a material effect on the group’s nancial position
  serco group plc annual report and accounts 2010  161
independent auditor’s 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 2010 which comprise the 
company balance sheet and the related notes 1 to 16 the nancial reporting framework that has been applied in their preparation is applicable 
law and united kingdom accounting standards united kingdom generally accepted accounting practice
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 2006 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 
auditor’s 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 auditor
as explained more fully in the directors’ responsibilities statement the directors are responsible for the preparation of the parent company 
financial statements and for being satis ed that they give a true and fair view our responsibility is to audit and express an opinion on the parent 
company financial statements in accordance with applicable law and international standards on auditing uk and ireland those standards 
require us to comply with the auditing practices board’s ethical standards for auditors
 an audit involves obtaining evidence about the amounts and disclosures in the nancial statements suf cient to give reasonable assurance that 
the nancial statements are free from material misstatement whether caused by fraud or error this includes an assessment of whether the 
accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed the 
reasonableness of signi cant accounting estimates made by the directors and the overall presentation of the nancial statements
opinion on the parent company financial statements
in our opinion the parent company financial statements
 give a true and fair view of the state of the parent company’s affairs as at 31 december 2010
 have been properly prepared in accordance with united kingdom generally accepted accounting practice and
 have been prepared in accordance with the requirements of the companies act 2006
opinion on other matters prescribed by the companies act 2006
in our opinion
 the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the companies act 2006 and
 the information given in the directors’ report for the nancial year for which the nancial statements are prepared is consistent with the parent 
company financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters where the companies act 2006 requires us to report to you if in our opinion
 adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been received from 
branches not visited by us or
 the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the 
accounting records and returns or
 certain disclosures of directors’ remuneration speci ed by law are not made or
 we have not received all the information and explanations we require for our audit
other matter
we have reported separately on the group financial statements of serco group plc for the year ended 31 december 2010 
richard knights senior statutory auditor
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london united kingdom
1 march 2011
uk gaap audit report – parent company
 162  serco group plc annual report and accounts 2010
section 5
       2009
      2010 restated
     note £m £m
fixed assets
investments in subsidiary undertakings     3 8121 8055
      8121 8055
current assets
amounts owed by subsidiary companies due after more than one year    5853 7588
debtors amounts due within one year     4 56 61
debtors amounts due after more than one year    4 156 146
derivative nancial instruments due within one year    7 22 05
derivative nancial instruments due after more than one year    7 18 14
cash at bank and in hand       
      6105 7814
creditors amounts falling due within one year
bank loans and overdrafts     6 2006 657
loans     6 236 100
amounts owed to subsidiary companies      457 2231
trade creditors      07 03
other creditors including taxation and social security    5 16 11
derivative nancial instruments     7 21 52
accruals and deferred income      101 47
      2844 3101
net current assets      3261 4713
total assets less current liabilities      11382 12768
creditors amounts falling due after more than one year    6 3358 5185
amounts owed to subsidiary companies      2430 2511
provisions      10 
derivative nancial instruments     7 48 17
net assets      5536 5055
capital and reserves
called up share capital     9 99 98
share premium account     10 3067 3041
capital redemption reserve      01 01
own shares     11 275 130
sharebased payment reserve     12 387 328
hedging and translation reserve     13 04 15
pro t and loss account     14 2261 1732
shareholders’ funds      5536 5055
 note 1
the financial statements of the company registered number 2048608 were approved by the board of directors on 1 march 2011 and signed 
on its behalf by 
  
  
 
christopher hyman andrew jenner
chief executive finance director
company balance sheet
at 31 december
  serco group plc annual report and accounts 2010  163
 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 nancial 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 and on the going concern basis
restatement
the prior year gures have been restated to reclassify the assets and liabilities of the serco group plc employee share ownership trust esop 
from amounts owed by subsidiary companies due within one year to an own share reserve this has resulted in a decrease in both current 
debtors and reserves of £154m
fixed asset investments
investments held as xed 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 
saye share option scheme open to eligible employees which allows the purchase of shares at a discount these are measured at fair value at 
the date of grant the fair value is expensed on a straightline basis over the vesting period based on the company’s estimate of shares that will 
eventually vest
where the fair value of share options requires the use of a valuation model fair value is measured by use of the binomial lattice or monte carlo 
simulation models depending on the type of scheme the expected life used in the models has been adjusted based on management’s best 
estimate for the effects of nontransferability exercise restrictions and behavioural considerations where relevant the value of the option has 
also been adjusted to take account of market conditions applicable to the option
dividends
dividends are approved by the board of directors and recorded in the company’s nancial statements in the period in which they are declared 
appropriately authorised and no longer at the discretion of the company
notes to the company financial statements
 164  serco group plc annual report and accounts 2010
section 5
notes to the company financial statements
 1 accounting policies continued
 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 pro t and loss account except where the derivative is a designated cash ow 
hedging instrument the accounting treatment of derivatives classi ed 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 ow hedge and
 a hedge of a net investment in a foreign entity
gains and losses on fair value are recorded in the pro t and loss account with the gain or loss on the hedged item attributable to the  
hedged risk
gains or losses on cash ow hedges that are regarded as highly effective are recognised in equity where the forecast transaction results in a 
 nancial asset or liability only gains or losses previously recognised in equity are reclassi ed to pro t or loss in the same period as the asset 
or liability affects pro t or loss where the forecast transaction or commitment results in a non nancial 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 pro t 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  
pro t 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 pro t and loss account where a hedge no longer meets the effectiveness criteria any gains or  
losses deferred in equity are only transferred to the pro t and loss account when the committed or forecast transaction is recognised in the 
pro t and loss account however where cash ow 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 pro t 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 pro t and loss account when the foreign 
operation is disposed of
 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
 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 
  serco group plc annual report and accounts 2010  165
 2 auditor’s remuneration
fees payable to the company’s auditor for the audit of the company’s annual accounts of £10000 2009 £10000 have been borne by another 
group company
 3 investments held as ﬁxed assets
       £m
shares in subsidiary companies at cost
at 1 january 2010       8055
options over parent’s shares awarded to employees of subsidiaries     66
at 31 december 2010       8121
       £m
shares in subsidiary companies at cost
at 1 january 2009       7996
options over parent’s shares awarded to employees of subsidiaries     59
at 31 december 2009       8055
full details of the principal subsidiaries of serco group plc can be found in note 35 to the group’s consolidated financial statements the 
company directly owns 100 of the ordinary share capital of the following subsidiaries except where stated
name        ownership
serco holdings limited       100
serco group hk limited       50
 4 debtors
       restated
      2010 2009
      £m £m
amounts due within one year
amounts owed by subsidiary companies       02
corporation tax recoverable      30 34
other debtors      26 25
      56 61
amounts due after more than one year
amounts owed by joint ventures      34 09
other debtors      94 106
deferred tax asset note 8      28 31
      156 146
      212 207
 note 1
 5 other creditors including taxation and social security
      2010 2009
      £m £m
other creditors      16 11
 166  serco group plc annual report and accounts 2010
section 5
notes to the company financial statements
 6 creditors amounts falling due after more than one year
      2010 2009
      £m £m
loans      5600 5942
less amounts included in creditors falling due within one year – loans    236 100
less amounts included in creditors falling due within one year – bank loans  overdrafts   2006 657
amounts falling due after more than one year     3358 5185
loans are repayable as follows
within one year or on demand      2242 757
between one and two years      1118 1438
between two and ve years      2240 3511
after ve years       236
      5600 5942
 7 derivative ﬁnancial instruments
    assets liabilities assets liabilities
    2010 2010 2009 2009
    £m £m £m £m
currency swaps    09   05
interest rate swaps     35 11 31
forward foreign exchange contracts    31 34 08 33
    40 69 19 69
analysed as
noncurrent    18 48 14 17
current    22 21 05 52
    40 69 19 69
the company holds derivative nancial instruments in accordance with the group’s policy in relation to its nancial risk management details of 
the disclosures are set out in note 25 of the group’s consolidated financial statements
 8 deferred tax asset
      2010 2009
      £m £m
capital allowances in excess of depreciation     02 
short term timing differences      26 31
      28 31
the movement in the deferred tax asset during the year was as follows
      2010 2009
      £m £m
at 1 january      31 09
charged to prot and loss account      01 01
items taken directly to equity      02 23
at 31 december      28 31
  serco group plc annual report and accounts 2010  167
 9 called up share capital
     number   number
    2010 2010 2009 2009
    £m millions £m millions
issued and fully paid
490912075 2009 486764440 ordinary shares of 2p each at 1 january  98 4909 97 4868
issued on the exercise of share options    01 23 01 41
493220805 2009 490912075 ordinary shares of 2p each at 31 december 99 4932 98 4909
the company has one class of ordinary shares which carry no right to xed income
during the year 2308730 2009 4147635 ordinary shares of 2p each were allotted to the holders of options or their personal representatives 
using newly listed shares
 10 share premium account
      2010 2009
      £m £m
at 1 january       3041 3011
premium on shares issued      26 30
at 31 december       3067 3041
 1 1 own shares
the own shares reserve represents the cost of shares in serco group plc purchased in the market and held by the serco group plc employee 
share ownership trust esop to satisfy options under the group’s share option schemes at 31 december 2010 the esop held 4710201 
2009 3436547 shares equal to 10 of the current allotted share capital 2009 07 the market value of shares held by the esop as at  
31 december 2010 was £262m 2009 £182m
 12 sharebased payment reserve
       restated
      2010 2009
      £m £m
at 1 january      328 274
options over parent’s shares awarded to employees of subsidiaries     66 59
sharebased payment expense      22 13
share options to holders on exercise       29 18
at 31 december      387 328
 note 1
details of the sharebased payment disclosures are set out in note 33 of the group’s consolidated financial statements
 13 hedging and translation reserve
      2010 2009
      £m £m
at 1 january       15 39
fair value gainloss on cash ow hedges during the period     05 81
t ax chargecredit on items taken directly to equity     02 23
net exchange gain on translation of foreign operations     08 04
at 31 december       04 15
 168  serco group plc annual report and accounts 2010
section 5
notes to the company ﬁnancial statements
 14 proﬁt and loss account
       restated
      2010 2009
      £m £m
at 1 january      1732 1417
prot for the year      852 574
equity dividends      323 259
at 31 december      2261 1732
 note 1
as permitted by section 408 of the companies act 2006 the pro t and loss account of the company is not presented as part of these accounts 
 15 contingent liabilities
the company has provided certain nancial guarantees and indemnities in respect of the loans overdraft and bonding facilities and other 
 nancial commitments of its subsidiaries the total commitment outstanding as at 31 december 2010 was £1260m 2009 £365m
the company has also guaranteed overdrafts nance leases and bonding facilities of its joint ventures up to a maximum value of £82m  
2009 £70m the actual commitment outstanding at 31 december 2010 was £56m 2009 £43m
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 nancial loss
 16 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 group full details of the transactions between serco group plc and its related parties can be found in note 34 to the group’s 
consolidated financial statements
  serco group plc annual report and accounts 2010  169
fiveyear record
   2010 2009 2008 2007 2006
revenue  £m 4327 3970 3124 2811 2548
adjusted operating prot  £m 2587 2297 1652 1420 1228
adjusted operating margin   598 579 529 505 482
pro t before tax  £m 2139 1771 1361 1146 1074
group free cash ow   £m 1858 1373 942 976 854
group recourse net debt  £m 3036 3877 5245 1379 1719
t otal net debt  £m 2612 3585 5141 1623 2059
adjusted earnings per share   pence 3469p 2953p 2220p 1857p 1592p
dividend per share  pence 735p 625p 500p 425p 360p
supplementary information
 170  serco group plc annual report and accounts 2010
section 5
chairman
alastair lyons cbe
  
directors
leonard v broese van groenou
paul brooks
christopher hyman cbe
andrew jenner
david richardson
nonexecutive
senior independent director
secretary
joanne roberts

serco house
16 bartley wood business park
bartley way
hook
hampshire
rg27 9uy
serco group plc is registered in
england and wales no 2048608
auditors
deloitte llp
2 new street square
london 
ec4a 3bz
investment bankers
ubs limited
1 finsbury avenue
london 
ec2m 2pp
stockbrokers
jp  morgan cazenove
125 london wall
london
ec2y 5aj
merrill lynch international
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
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
directors secretary and advisors
  serco group plc annual report and accounts 2010  171
group website
go to wwwsercocom to catch up on the current share price latest news in the investors section and read the annual report and accounts
registrars
administrative enquiries about the holding of serco group plc shares and enquiries in relation to the serco dividend reinvestment plan drip 
should be directed to
equiniti
aspect house
spencer road
lancing
west sussex
bn99 6da
t el 0871 384 2932
there is a text phone available on 0871 384 2255 for shareholders with hearing dif culties
calls to both of these numbers are charged at 8p per minute from a bt landline other telephony provider costs may vary
callers from outside the uk should use 44 0 121 415 7047 
t elephone lines are open 830am to 530pm monday to friday
dividend reinvestment plan
you can elect to receive future dividends as shares rather than cash by participating in the drip  to register request further information or to 
obtain a copy of the terms and conditions booklet and mandate form please contact equiniti on 0871 384 2932 alternatively these can be 
downloaded from the website wwwshareviewcouk by choosing the dividend reinvestment plan heading within the product centre section
dividends paid direct to your bank account
 avoid the risk of cheques being lost in the post
 no need to present cheques for payment
 dividend credited to your account on payment date
t o set up a dividend mandate or change your existing mandated details please register with the shareholder centre via the shareview website 
or contact equiniti on the number provided above
global payment services
for overseas shareholders in certain countries equiniti offers an overseas payment service by arrangement with citibank europe plc this 
service offers shareholders the ability to have their dividend converted into their local currency and sent electronically to their local bank 
account to sign up for this service please contact equiniti on 0871 384 2932 44 0 121 415 7047 if calling from outside the uk alternatively 
you can download an application form and terms and conditions from the website wwwshareviewcouk
electronic communication
you can register for electronic communications by visiting wwwshareviewcouk you will need your shareholder reference number to sign up 
after you have registered you will receive emails alerting you to communications as they become available in response to our shareholders’ 
commitment to electronic communication serco is very proud to be a corporate member of the woodland trust the uk’s leading woodland 
conservation charity helping them to plant and care for uk native woodland during 2010 the trust planted more than half a million native trees 
in the uk 
shareholder information
 172  serco group plc annual report and accounts 2010
share dealing
serco does not endorse any one service for the buying and selling of its shares however arrangements have been made with the following 
independent share dealing providers to offer all shareholders competitive charges 
alternatively if shareholders hold a share certi cate 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 nancial advice
shareview 
a telephone and internet dealing service is available through equiniti which provides a simple way of buying and selling serco shares 
commission is 15 with a minimum charge of £25 for telephone dealing and 1 with a minimum charge of £20 for internet dealing  
for telephone dealing call 44 0 845 6037 037 between 830am and 430pm monday to friday and for internet dealing log on to  
wwwshareviewcoukdealing you will need your 11 digit shareholder reference number which will be shown on either your share  
certi cate or recent dividend tax voucher 
stocktrade
we have arranged a telephone sharedealing service with stocktrade for purchasessales of serco shares you should call 0845 601 0995 
between 800am and 430pm monday to friday and quote low co 330 callers from outside the uk should call 44 0131 240 0508 
commission is charged at 05 on amounts to £10000 and 02 on the excess thereafter subject to a minimum charge of £1750 further 
details and other dealing options can be found at wwwstocktradecoukserco
please note that uk share purchases will be subject to 05 stamp duty the above services are not available to us residents

the range and size of ordinary shareholding as at 31 december 2010 is set out below
   number of   number of
range of shareholdings   shareholders   shares 
1  1000   3998 4996  1714237 035
1001 – 5000   2680 3349  6024751 122
5001 – 10000   464 580  3296423 067
10001 – 100000   536 670  16392113 332
100001 – 500000   201 251  48989397 993
500001 – 1000000   45 056  32053535 650
1000001 – 10000000   67 084  183878496 3728
10000001 and above   11 014  200871853 4073
total   8002 100  493220805 100
section 5
shareholder information
  2011
preliminary results announcement 2 march
exdividend date 9 march
record date 11 march
last date for receiptrevocation of drip dividend mandates  20 april
interim management statement 9 may
annual general meeting 9 may 
final dividend pay date 17 may
halfyear results announcement 24 august
financial yearend 31 december
 subject to shareholder approval
 provisional
financial calendar
printed on cocoon silk 50 which is certi ed 
as an fsc product manufactured with 50 
recycled bres and 50 virgin bres
designed by 85four
www85fourcom
printed by the midas press ltd
wwwmidaspresscouk
 serco group plc
registered of ce
serco house
16 bartley wood business park
bartley way
hook
hampshire rg27 9u t 44 01256 745 900
e generalenquiries sercocom
wwwsercocom
sercoar10outercoversindd   2 22032011   1713


Summary:
 section 1
04  serco group plc annual report and accounts 2010
how we performed – 2010 highlights
strong performance portfolio of growth 
opportunities ahead
£56bn of contract awards spread internationally
 service quality supports high win rates continue to win one  
in two new bids and 90 of rebids and extensions
 during 2010 signed £42bn of contracts and appointed preferred 
bidder for £14bn of contracts
 40 of revenue generated outside the uk with strong growth  
in the americas and ameaa
 revenue growth of 90 76 excluding currency
 ad usted operating pro t margin increase of 19 basis points to 
60 16 basis points excluding currency
 group free cash ow exceptionally strong at £1858m  
2009 £1373m
 t otal dividend up 176 to 735p re ecting growth in earnings

 economic environment and reform of public services create 
opportunities in new and existing markets 
 customers seeking help to build protect and improve frontline 
services and increase ef ciency 
 headwinds in uk during 2011 as government austerity measures 
and reforms are shaped 
 exposure to different economies through portfolio provides 
resilience and overall growth potential
 substantial pipeline of opportunities
 order book of £166bn at 31 december 2010 £171bn at 
31 december 2009 visibility of 92 of planned revenue for 2011 
77 for 2012 and 66 for 2013
 substantial £29bn pipeline of identi ed opportunities 
 in 2011 expect good organic revenue growth and progress 
towards our 2012 margin guidance and continue to expect an 
increase in revenue to approximately £5bn and in ad usted 
operating pro t margin to approximately 63 by the end of 2012  excluding material acquisitions disposals and currency effects based on 2008 exchange rates
note ad usted operating pro t and ad usted earnings per share shown above are before amortisation of acquired intangibles as shown on the face of the group’s consolidated income 
statement and the accompanying notes 
group free cash ow is free cash ow from subsidiaries and dividends received from oint ventures and is reconciled in section 3 of the nance review 
performance excluding currency has been calculated by translating nonsterling revenue and earnings for the year to 31 december 2010 into sterling at the average exchange rates for those 
currencies in 2009
the order book is the value of future revenues based on all existing signed contracts it excludes contracts at the preferred bidder stage and excludes inde nite delivery inde nite uantity 
idi  contract vehicles where we are one of a number of companies able to bid for speci c task orders within the idi 
the pipeline is the estimated value of all future potential opportunities that are clearly de ned and identi able
news january–december
serco americas 
sends mobile 
hospital to  
support haiti 
earthquake victims
merseyrail named  
as record breaking 
train operator
serco wins  
operator and 
service excellence 
award in australia 
for acacia prison
serco partnership to 
help the uk tackle 
climate change 
through offshore 
wind energy
national awards for 
outstanding safety  
for northern rail  
and the national 
nuclear laboratory
sercoar10section1indd   4 15032011   1513  serco group plc annual report and accounts 2010  05
revenue 2009 £3970m £4327m 
 90
ad usted operating pro t 2009 £2297m £2587m 
 126
operating pro t 2009 £2121m £2413m 
 138
pro t before tax 2009 £1771m £2139m 
 208
adjusted earnings per share 2009 2953p 3469p 
 175
earnings per share 2009 2676p 3188p 
 191
dividend per share 2009 625p 735p 
 176
group free cash ow 2009 £1373m £1858m 
 353
news july–december
barclays cycle hire 
launches in london
first anniversary  
of dubai metro
duncan mackison 
who leads our 
access joint venture 
with glasgow city 
council named 
outsourcing 
professional of 
the year in the uk
john biggin  
director of hmp  
 yoi doncaster 
named guardian 
public servant  
of the year
serco voted uk’s 
second most 
admired company 
and most admired 
services company
sercoar10section1indd   5 14032011   1416