Serco establishes strategic PFI investment part...

Serco establishes strategic PFI investment partnership

4 December 2006

Serco Group plc (Serco) today announces the formation of a strategic PFI
investment partnership with Infrastructure Investors Limited Partnership (I2).
In creating this partnership, Serco has also sold its equity and subordinated
debt in six private finance initiatives (PFI) projects to a wholly owned
subsidiary of I2 for a cash consideration of £76.5m, resulting in a profit on
disposal of £11.4m. Serco has retained the associated long-term operating
contracts.

Under the partnership, I2 will be able to provide equity investment for future
PFI projects for which Serco bids. This gives Serco access to a large and
competitively priced source of capital, enhancing the group's ability to
compete in this market by enabling it to offer better value solutions to
customers.

Serco will continue to deliver services under the existing long-term operating
contracts associated with the disposed PFI investments, and will in addition
provide management services to the I2 subsidiary, Matrix PFI Holdings Limited
(Matrix Holdings). This will ensure that our customers continue to receive high
standards of service.

The estimated net book value of the investments sold to Matrix Holdings was £
62.8m, resulting in a profit on disposal of £11.4m after transaction costs,
which is incremental to previous guidance for 2006. The transaction results in
the removal of £244.2m of non-recourse debt from Serco's balance sheet.

In the year ended 31 December 2005, the disposed investments generated profit
before tax of £9.7m. Whilst this contribution to profit will not be present
going forward we remain confident of achieving our growth and profit
expectations for 2007 and beyond, encouraged by the strong performance in the
business and the interest benefit from this transaction.

Christopher Hyman, chief executive of Serco, said: "We are committed to
supporting the UK Government in improving public services, including the PFI
programme. This strategic partnership with I2 enhances our capacity to innovate
and compete in the PFI market and ensures our customers continue to receive the
quality service they expect and deserve."

A conference call for investors and analysts will take place at 8 a.m. UK time
today.

To join the call, dial [phone] and give the passcode `Serco'.

Separately today, Serco has released its pre-close trading update.

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For further information please contact Serco Group plc: T [phone]

Dominic Cheetham, Corporate Communications Director

Graham Capper, Head of Media and Public Relations

Notes to editors

The investments sold to Matrix Holdings are Serco's 100% holdings in:

  * Ashfield Prison
   
  * Dovegate Prison
   
  * Lowdham Grange Prison
   
  * Hassockfield Secure Training Centre
   
  * the Joint Services Command and Staff College
   
  * the National Traffic Control Centre
   
Serco is an international service company which combines commercial know-how
with a deep public service ethos.

We improve services by managing people, processes, technology and assets more
effectively. We advise policy makers, design innovative solutions, integrate
systems and - most of all - deliver to the public.

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 aerospace,
defence, education, health, home affairs, local government, science,
technology, transport and the commercial sectors.

More information can be found at www.serco.com.

About I2

I2 was created in 2003 to participate in secondary market infrastructure
projects. The I2 fund invests in the equity of existing operational
infrastructure projects in the United Kingdom and European euro currency
countries with a view to creating a diversified low risk portfolio. Investors
in I2, which is chaired by Sir Adrian Montague, include Barclays Private
Equity, Société Générale and 3i.