Friday, 10 September 2010

CASE 039 - Serco

Serco, the biggest company you have never heard of

It inspects schools, trains our armed forces, helps protect our borders, they have a few contract to do with the NHS elderly hospital and home care services,
maintains our nuclear weapons, runs our trains and operates all our prisons and prisoners.

Most of the public will never have heard of Serco, a FTSE 100 company that does
all of the above and more.

Led by South African Chris Hyman, Serco is also making money doing it and today
underlined it is proving one of the recession winners. Profits in the first six
months of the year – one of the toughest the UK economy has faced for decades –
jumped 33pc to £83.4m. However, Serco’s journey into the DNA of Britain’s public infrastructure, like
those of rival support services companies Capita and Interserve, began before
the recession arrived. All have benefited from the growing culture of outsourcing services under
Labour, and Serco expects this trend to continue as the gaping hole in the
public finances forces the Government to cut back. Serco has secured a record number of contracts in 2009 so far, worth £4bn, as
its revenues climbed 30pc to £1.95bn. The deals includes a contract to design, build and operate Boris Johnson’s
cycle hire scheme for London and to operate two new prisons at Belmarsh in
London and Maghull in Liverpool. These come on top of Serco’s existing services, which include operating
London’s Docklands Light Railway, running the Northern Rail and Merseyrail
train networks, providing the Ministry of Defence with air surveillance and
control systems, and delivering infrastructure and intelligence to the UK
Border Agency. To complete the list, Serco also has a six-year contract with Ofsted to run
inspections in the Midlands at schools and further education colleges. In
defence, the company is battling to win the rights to run the Army’s
recruitment programme and already helps to train armed forces about using
Britain’s fleet of aircraft, such as the Chinook and Apache helicopters.

In partnership with Lockheed Martin and Jacobs Engineering, Serco also manages
the Atomic Weapons Establishment, which provides and maintains Britain’s atomic

Revenues from civil government work increased 49pc in the period and a bullish
Serco expects this trend to continue, giving it even more control of Britain’s
infrastructure. The company estimates that local authorities have endured a
£4bn deficit in income for over the last two years as a result of the recession
and that, by 2012 it will have revenues of £5bn.

In the results, Mr Hyman says: “The financial crisis and subsequent economic
slowdown means that governments around the world are contending with increasing
demand for high quality services whilst also facing a sharp deterioration in
public finances. They continue to experience growing demand for quality
services from their citizens. “We believe this is also leading to a greater acceptance of innovative ways of
achieving these changes, a broader range of markets to be addressed, and an
increase in the size and term of change programmes in order to achieve the
scale of efficiencies required. Not surprisingly, the shares rose 4pc following the results.
The conservative government years ago wanted to sell off all the UK's services to private companies, Serco is now 1 of the biggest simply coz
they are tight as a ducks arse, they have cut costs big time, cheap as chips, which is why they rake the profit in
Over 70,000 employees, net income of 130 billion - Serco operates in various sectors:

Transport: Serco operates London's Docklands Light Railway Woolwich Ferry and Cycle Hire scheme (all for Transport for London), and Great Southern Railways in Australia. Serco also has a joint venture with NedRailways, the UK arm of Dutch national rail operator Nederlandse Spoorwegen, to operate passenger trains in the UK: Serco-NedRailways has a 25 year concession for Merseyrail in Liverpool and operates Northern Rail services in the north of England. Serco also operates the Dubai Metro. Serco formerly operated the Copenhagen Metro with Ansaldo STS, until selling its share with effect from 1 January 2008. In addition, Serco Rail Operations operates infrastructure monitoring trains in the UK. Serco's Home Affairs division, run by Tom Riall, also operates speed camera systems throughout the UK and designs, writes and tests the software that controls the matrix message signs, signals, emergency roadside telephones (SOS) and traffic monitoring on England's motorway network including the National Traffic Control Centre.

Science: Serco manages the UK's National Physical Laboratory.

Detention: Serco supplies electronic tagging devices for offenders and asylum seekers. In Britain, Serco runs four prisons, a Young Offenders Institution and a Secure Training Centre. It also operates two Immigration Removal Centres. Serco is also responsible for the contracted-out court escort services in the south-east area (formerly a role undertaken by HM Prison Service). In addition, Serco runs Hunfeld Prison in Germany. In Australia Serco runs Acacia Prison in Western Australia and Borallon Correctional Facility in Queensland

Defence: Serco holds defence contracts worldwide including the UK Government’s first modern outsourced contract for the operation and maintenance of the UK Ballistic Missile Early Warning System at RAF Fylingdales; contracts are also held for the operation and maintenance of RAF Brize Norton, RAF Halton and RAF Northolt in the UK and RAF Ascension Island in the mid-Atlantic. Serco also provides support services to garrisons in Australia. Serco also manages many aspects of operations at the Defence College of Management and Technology in Shrivenham. Serco is one of three partners in the consortium which manages the Atomic Weapons Establishment. Royal Navy marine services: Serco Denholm, a joint venture with the Denholm Group, is responsible for fleet support at the three main UK naval bases, HMNB Portsmouth, HMNB Devonport and HMNB Clyde.

Aviation: Serco provides air traffic control services at international airports in Dubai, Bahrain and at some smaller airports in the USA. Since 2004 Serco have also had £5m a year from the US government to manage airports in Iraq.
Health: Serco provide facilities management services at the Norfolk and Norwich University Hospital, Leicester Royal Infirmary, and Wishaw General Hospital.

Education: Serco holds a 10 year contract with Bradford City Council to manage and operate the local education authority, providing education support services to the City's schools, and similarly manages and operates Walsall and Stoke-on-Trent local education authorities. Serco is one of Ofsted's three Regional Inspection Service Providers, responsible for school inspections in the English Midlands. Serco is also the provider of a Student information system, Facility, used in schools and colleges in several countries.

Drivers' licensing: Serco, through a purpose-made division Serco DES, holds a 10 year, $114 million contract with the Province of Ontario to operate the province's DriveTest driver examination centres. These tests include vision, road, and knowledge tests for all persons seeking to become a licensed automobile driver in the province.

Leisure: Serco operates a number of leisure centres across the UK including the Manchester Aquatics Centre, the aquatic venue for the 2002 Commonwealth Games in Manchester.

Serco also administers a number of publicly funded websites in the UK, including the Business Link website.
Serco presently runs the IT Infrastructure for the London Borough of Southwark winning the 5 year tender in 2007.
Serco operates in Continental Europe, the Middle East, the Asia Pacific region and North America, but the majority of its turnover still comes from the UK.

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