Acquisition of RCI Holding

Serco Group PLC
16 December 2004



           SERCO TO SIGNIFICANTLY ENHANCE US MARKET POSITION THROUGH

                     ACQUISITION OF RCI HOLDING CORPORATION



Serco Group plc ('Serco') today announces that it has agreed to purchase RCI
Holding Corporation ('RCI'), which is a leading supplier of business process
management and IT services to the US Federal Government.



This acquisition will significantly increase Serco's competitive position in the
world's largest service contracting market, through RCI's enhanced technology
capabilities and its strong customer relationships with the US Federal
government.



RCI is being acquired for a cash consideration of USD215 million (GBP113 million
*) and will be funded through Serco's existing resources.  The acquisition is on
a debt free basis and Serco's directors believe that it will be earnings
accretive in 2005**.



RCI, founded in 1979, is a contracted service supplier to the Federal
Government.  Key services include IT services, systems engineering, strategic
consulting and HR focused business process management.  RCI's primary market -
the Department of Defense - represents the largest portion of federal spending,
accounting for more than 75 per cent. of total contract amounts.


The acquisition will enhance Serco's North American business in that it will:

-      Expand its position in the largest service contracting market: the US Federal Government
       represents the largest global market for managed services - it is expanding rapidly as the US
       government seeks to improve services and gain better value for money in the face of an ageing
       Federal government workforce and increasing costs.

-      Broaden the customer base: RCI's Federal defence customer base complements Serco's largely
       civil agency and State customer base.  Both have a strong record of contract renewal and
       delivering growth achieved through long term customer relationships.

-      Enhance capabilities: RCI's significant technological and IT services capabilities complement
       Serco's North American change management and service delivery skills.

-      Deliver cost synergies: the acquisition will generate opportunities for reducing costs in the
       combined business.


*      All USD amounts converted at USD1.9 to GBP1.0

**     The statement that the acquisition will be earnings enhancing, pre-goodwill and exceptional
       items, in 2005 when compared to the earnings per share that Serco would have achieved without the
       acquisition, does not constitute a profit forecast and should not be interpreted to mean that the
       earnings per share in 2005, or in any subsequent period, would necessarily match or be greater
       than those for the relevant preceding financial period.



RCI has a strong record of growth.  In 2003, RCI's turnover was USD270 million
(GBP142 million) and profit before tax was USD9.1 million (GBP4.8 million).
Underlying revenue in 2003 was USD256 million (GBP135 million) and profit before
tax was USD11.8 million (GBP6.2 million), after adjusting for contracts which
have been disposed of.  Turnover and profit before tax grew by an average of 23
per cent. and 50 per cent. respectively between 1998 and 2003.  The net assets
of RCI at 31 December 2003 were USD15.4 million (GBP8.1 million).



The Boards of both RCI and Serco believe that there are good prospects for
continued growth given the US government's intentions to further increase the
purchase of contracted services.



The majority of RCI's contracts are of a lower risk 'cost plus' or 'time and
materials' nature.  More importantly this gives Serco critical mass in operating
across the various contracting models used by the US Federal authorities.



As usual for an acquisition of a business undertaking US government contracts,
clearances are required under the US Treasury Committee of Foreign Investment in
US regulations and under Hart-Scott-Rodino.  Serco is confident of being granted
approval, which is anticipated within 90 days.



Serco will integrate RCI with its existing North America business and the
enlarged business will be led by Steve Cuthill, Serco's current group chief
operating officer.  Grant Rumbles replaces Steve Cuthill as group operations
director for the enlarged group.



Christopher Hyman, Chief Executive of Serco, said: 'This transaction is a
significant step forward for us.  North America is one of our chosen markets.
Opportunities in the Federal market are substantial for companies with proven
capabilities and qualifications. This acquisition will give us deeper and
broader access and will enable faster and more profitable growth.



'Critically, the two organisations share similar cultures based on principles of
excellent customer service, long term relationships and employee development and
we believe that this is the right platform from which to build.'



RCI president George Troendle said: 'This transaction positions RCI to continue
our record of growth and will give us the resources and capabilities to achieve
our broader strategic vision - to expand our US business and enter the global
services market.'



For further information, please contact:


Serco Group plc                                             [phone]
Dominic Cheetham, Director of Corporate Communications
Richard Hollins, Head of Investor Relations



The directors of Serco accept responsibility for the information contained in
this announcement.  To the best of the knowledge and belief of the directors of
Serco (who have taken all reasonable care to ensure that such is the case), the
information contained in this announcement for which they accept responsibility
is in accordance with the facts and does not omit anything likely to affect the
import of such information.



Notes to editors:



Serco is one of the world's leading service companies.  By successfully managing
organisational design and change, it helps national and local governments and
commercial clients around the world improve their services.



Serco's North American business employs 2000 people, operates at the Federal,
State and local level and had a 2003 turnover of USD127 million. Key activities
include air traffic control (for the Federal Aviation Administration), fleet
management and local government services.



A fixed US dollar/UK sterling exchange rate of USD1.9/GBP1.0 has been used for
comparative purposes.



Serco has received advice from Lazard in connection with the transaction.








                      This information is provided by RNS
            The company news service from the London Stock Exchange