Re Contract

Serco Denholm and Warship Support Agency sign partnering            

           agreement to run Marine Services for the next three years           

The Warship Support Agency ('WSA') and Serco Denholm Limited ('Serco Denholm')
have signed an innovative partnering agreement for the management of the ports
at Devonport, Portsmouth and The Clyde (dual site operation at Faslane and
Great Harbour, Greenock). This three-year agreement and contract is valued at
up to £110 million and extends and builds upon the Marine Services management
contract awarded to Serco Denholm in 1996.

The WSA is an agency of the UK Ministry of Defence ('MoD'), and Serco Denholm
is a joint venture formed to combine the shipping expertise of Denholm Group
and the service industry knowledge of Serco.

The MoD and Serco Denholm have jointly developed this new partnering agreement
to progressively introduce efficiency measures and innovation in order to
reduce the overall output costs of Marine Services. The long-term aim of the
MoD is to prepare Marine Services for a PPP/PFI procurement programme. The
agreement caters for the delivery of In-Port and Out-Of-Port Marine Services
over the next three years whilst generating new and original solutions for the
long-term provision of these services.

Christopher Hyman - Serco's Chief Executive added:

'Serco has long been an advocate of partnering with its customers and strongly
supports the notion of good long-term relationships built on sound working
practices and trust. The formal recognition of this agreement with the WSA and
MoD indicates the clear benefits that accrue to both sides in such an
arrangement. We very much look forward to working with the WSA and identifying
long-term mutually beneficial operational solutions that deliver best value
marine services for the future'.

John Denholm - Denholm's Chief Executive added:

'We are delighted that the Ministry of Defence has awarded this partnering
contract to Serco Denholm. Together with Serco we will continue to provide the
Ministry of Defence with a high standard of service and to generate
efficiencies for the future'.

                                   - Ends -                                    

For further information please contact Serco:

T [phone]

Katherine Stedman Communications Manager, Serco Defence

Ben Woodford Corporate Communications Director, Serco Group

Notes to Editors

  * Serco Denholm provides comprehensive Ship Management, Marine Operations and
    Marine Support to the UK Ministry of Defence, Local Authorities and
    commercial organisations. The Company is a joint venture formed to combine
    the shipping expertise of the Denholm Group and the service industry
    knowledge of Serco.
   
  * Serco has a 90% shareholding in the joint venture with Denholm holding 10%.
   
  * Operating from within the main UK Naval Bases at Devonport, Portsmouth and
    The Clyde (dual site operation at Faslane and Great Harbour, Greenock),
    Serco Denholm operates a diverse chartered fleet of around 150 lighters and
    powered vessels. In each port, Serco Denholm provides a variety of
    services, utilising tugs (some of which are equipped to operate with
    submarines), passenger vessels, pilot boats and lighters. The lighters
    provide stores, fuel, sewage and oily waste collection, water and
    ammunition and a specialist lighter is equipped in Devonport and Portsmouth
    for tank and bilge cleaning.
   
  * Serco Denholm also provide support to a range of activities outside the
    immediate port areas, including Naval aviation operations in Cornwall,
    Submarines exercising in Scottish waters e.g. torpedo recovery and sonar
    operations, Military diving training, Passenger transfer at sea, TRIDENT
    submarine movement at Barrow-in-Furness, Amphibious operations in the UK
    and in Norway, and an Inter island ferry service at Islay Ferry, West
    Scotland.
   
  * Serco Denholm is accredited to ISO 9002 and ISM Code requirements.
   
  * Serco Group plc is an international provider of management services to
    government and industry. The company covers a wide range of activities,
    from controlling satellites and operating computer networks for the
    European Space Agency, to managing and operating the Docklands Light
    Railway where Serco was recently voted National Rail Operator of the year
    for the second year running. The company employs over 34,000 staff in more
    than 35 countries.
   
  * The Denholm Group was founded in 1866 as a ship agency on the Clyde,
    Scotland. It acquired its first ship 'David Sinclair' in 1873 and from
    there built a substantial business in ship owning. Heavy losses in the
    forties prompted a strategic move by Denholm to on-shore activities,
    followed in more recent times by diversification into wider marine and
    industrial services. Today Denholm operates four divisions; Logistics,
    Shipping, Seafoods and Industrial Services.
   
  * More information on the companies can be found at www.serco.com and 
    www.denholm-shipping.co.uk.