Statement re IFRS

Issued: 01 March 2005

Released: 01 March 2005

Contact: See below

                                Serco Group plc                                

                         Update on Transition to IFRS                          

Serco Group plc ('Serco' or 'the Group') today releases the following update on
its transition to International Financial Reporting Standards ('IFRS'). This
follows Serco's presentation on its transition to IFRS on 9 December 2004.

Separately today, the Group has announced its preliminary results for the year
ended 31 December 2004. The preliminary results released today were prepared
under UK Generally Accepted Accounting Principles ('UK GAAP').

The date of transition to IFRS for the Group is 1 January 2004. The Group's
first reported results under IFRS will be for the six months to 30 June 2005
and the first full year reported under IFRS will be the year ending 31 December
2005.

The key points arising from the adoption of IFRS are:

  * The Group's underlying performance, cash flow and ability to pay dividends
    will be unaffected;
   
  * The impact on year on year earnings growth after transition is likely to be
    minimal;
   
  * The fair value concept may introduce volatility into the balance sheet,
    largely due to the inclusion of financial instruments and actuarial gains
    and losses on defined benefit pension schemes;
   
  * On transition, the Group's profit before tax will be principally affected
    by non-amortisation of goodwill, partially offset by a charge for share
    based payment; and
   
  * On transition, net assets will be reduced principally through recognition
    of actuarial losses on defined benefit pension schemes.
   
The Group's analysis of the effect of IFRS is ongoing. In addition, the
interpretation of standards is evolving so further changes may arise, notably
in accounting for pension schemes and private finance initiatives.

However, to assist stakeholders with understanding how existing standards are
likely to affect the Group's reported profit before tax and net assets,
estimates of the main changes to the Group's profit before tax for 2004 and net
assets at 31 December 2004 are set out below. These estimates are indicative
only and may change. The estimates have not been audited.

Summary of estimated changes to profit before tax for the year to 31 December
2004 and net assets at 31 December 2004 under IFRS

                UK Amortisation    Share Pensions Deferred Dividends  Other    Indicative
              GAAP           of    based               tax                             
                     intangible  payment  'SPLAS'           (Note 5)(Note 6)        IFRS
                         assets                   (Note 4)                             
                       (Note 1) (Note 2) (Note 3)                             (Unaudited)
                                                                                       
                £m           £m       £m       £m       £m        £m     £m            £m
                                                                                       
Profit          74            -      (4)        -        -         -      -            70
before tax                                                                             
and                                                                                    
intangible                                                                             
amortisation                                                                           
                                                                                       
Amortisation  (17)           11        -        -        -         -      -           (6)
of                                                                                     
intangibles                                                                            
                                                                                       
Profit          57           11      (4)        -        -         -      -            64
before tax                                                                             
                                                                                       
Net assets     304           11        -    (157)       53         8   (25)           194

Notes:

 1. Under IFRS 3 Business Combinations, goodwill is no longer amortised but is
    subject to annual impairment tests. Other intangible assets continue to be
    amortised over their useful lives.
   
 2. IFRS 2 Share Based Payment results in an incremental charge for share based
    payments over and above the existing UK GAAP amortisation charge in respect
    of the ESOP reserve. Due to changes already implemented in the structure of
    remuneration packages within the Group, this charge is expected to decline
    from 2007.
   
 3. Under IAS 19 Employee Benefits, actuarial gains and losses on defined
    benefit pension schemes may be recognised partially or in full. The
    estimate above assumes that actuarial gains or losses will be recognised in
    full on the balance sheet, with movements reported in the Statement of
    Recognised Income and Expense. Therefore the full IAS 19 deficit on the
    Serco Pension and Life Assurance Scheme ('SPLAS') is included in the
    balance sheet. This adjustment includes the reversal of the SSAP 24
    prepayment of £35 million, which accounts for the difference between
    payments made by the business, the actuarial charge and amortisation of the
    deficit.
   
In addition to SPLAS, the Group and its joint ventures have a number of other
pension obligations that form part of long-term contractual arrangements. Under
IFRS, these obligations are likely to be treated as defined benefit schemes.
The accounting treatment under IFRS for such obligations is the subject of
debate that concerns whether recognition of the IAS 19 deficit on these schemes
should be accompanied by a reduction in reserves or by the inclusion in the
balance sheet of an equivalent intangible asset, which will be amortised over
the remaining contract life. The deficit on these schemes is estimated to be
approximately £60 million, net of deferred tax.

 4. IAS 12 Income Taxes requires deferred tax to be recognised in full. The
    adjustment consists principally of deferred tax on pension liabilities and
    therefore partially offsets the adjustment discussed in note 3.
   
 5. Under IAS 10 Events After the Balance Sheet Date, dividends are recognised
    in the period in which they are declared rather than the period to which
    they relate.
   
 6. Other adjustments principally relate to the requirements of IAS 19 Employee
    Benefits, under which benefits such as accrued holiday entitlement are
    accounted for as they are earned by employees.
   
The above estimates do not include the impact of IAS 39 Financial Instruments:
Recognition and Measurement. IAS 39 is applicable for years commencing on or
after 1 January 2005 and the Group will adopt it from this date.

The estimates have been prepared on the assumption that there is no change to
the accounting treatment of private finance initiatives (PFIs). The accounting
treatment of service concessions, including PFIs, is currently the subject of
debate by the International Financial Reporting Interpretations Committee
(IFRIC). IFRIC is expected to issue an interpretation on accounting for service
concessions.

Under IAS 31 Interests in Joint Ventures, the benchmark treatment for joint
ventures is to proportionately consolidate. This has been assumed in the above
estimates. Proportionate consolidation will change the appearance of the
financial statements, although there will be no effect on reported net assets
or profit.

                                   - Ends -                                    

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

Andrew Jenner, Finance Director

Dominic Cheetham, Corporate Communications Director

Richard Hollins, Head of Investor Relations

Notes to Editors

Serco is one of the world's leading service companies operating on an
international basis in a diverse range of sectors, including transport and
traffic management, justice, defence, aerospace, science, heath, education and
local government.

www.serco.com

Serco Group, Inc.
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Gibbsboro, New Jersey 08026
United States
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Serco Group Pty Limited
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North Sydney, NSW 2060
Australia
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Serco Group plc
Serco House, 16 Bartley Wood Business Park
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RG27 9UY, United Kingdom
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