Interim Results

SERCO GROUP PLC                                       
1 September 1999                  
                                                   

                                 SERCO GROUP plc
                                        
              INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1999
                                        
                             ACHIEVEMENT HIGHLIGHTS
                                        
*    Turnover up 14.8% to £391.5m                             (1998 - £341.0m)
     
*    Profit before tax (pre FRS 10) up 20.1% to £15.6m        (1998 - £13.0m)
     
*    Basic earnings per share (pre FRS 10) up 16.9% at 16.6p  (1998 - 14.2p)
     
*    Dividend up 15.2% to 2.65p net per ordinary share        (1998 - 2.3p)


Richard White, Executive Chairman, Serco Group plc, stated:

'The first half of the year has shown the same high level of performance that
has characterised our business for many years. With the strong market in the UK,
significant growth opportunities internationally and the market demanding the
application of the products and skills in which we excel, I look forward to
continued strong performance in the remaining six months of the year.'

Notes to Editors
Serco Group plc is an international task management contractor to government and
industry, providing comprehensive engineering and support services across a wide
range of applications.

For further information please contact:
Kevin Beeston  - Chief Executive, Serco Group plc     Tel: [phone]
Chris Hyman - Finance Director, Serco Group plc       Tel: [phone]
Richard White - Executive Chairman, Serco Group plc   Tel: [phone]


                                 SERCO GROUP plc
                                        
              INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1999
                                        
                              CHAIRMAN'S STATEMENT

The company's past success has been attributable to a clear strategy intended to
produce consistent growth. This will continue to be the cornerstone of our
business in the future. There are four main elements to this strategy. Firstly,
to maintain a high quality of service to our existing customers, to ensure that
we have a firm foundation on which to base future growth. To create the
environment to attract and retain a highly committed, flexible and professional
team. To replicate our existing management processes in overseas markets.
Finally, to capitalise on our growing capability by addressing more complex
requirements.

In the first half of the year we have renewed or had extended over 90% of
contracts reaching the end of their term. This success rate reflects the high
level of customer satisfaction which has been confirmed in a recent worldwide
customer survey.

This consistent record reflects the quality and dedication of the people that
make up Serco. It is our intention to increase investment in our staff, through
continued training and development, together with investment in technology to
enable us to use our considerable corporate knowledge more effectively.

Our strategy to replicate our existing management processes has been successful
with over 40% of our operating profits now earned outside the UK. This has been
achieved through the organic growth of our existing regional companies as well
as increasing opportunities to enter into strong local partnerships in countries
outside the UK. This will help develop existing markets as well as open up new
ones. Growth has been further enhanced by two strategic acquisitions in the
United States and Italy and by the recently announced acquisition of Elekluft
Elektronik und Luftfahrtgerte GmbH (Elekluft) in Germany.

We continue to use our growing capability to address larger and more complex
opportunities, an ever widening range of Private Finance Initiatives (PFIs) and
a new generation of opportunities to enter into Public Private Partnerships
(PPPs) with the UK and other Governments. An example is the recently announced
proposed sale of a significant share holding in the National Air Traffic Service
(NATS). These opportunities all demand the ongoing development of our service
products in which we continue to make a significant investment through our
operating companies and the Serco Institute.

The company's strategy has continued successfully in the first half of 1999.
Turnover of £392 million was £51 million higher than the first six months of
1998. Pre-tax profits before FRS 10 (Goodwill amortisation) increased by 20.1%
to £15.6 million and by 17.3% to £14.9 million after FRS 10. This results in a
growth in basic earnings per share before and after FRS 10 of 16.9% and 12.2%
respectively. The tax rate for the first half of 1999 has increased to 32.5%,
reflecting the reduction in tax losses available.

The interim dividend for the six months to 30 June 1999 of 2.65 pence net per
ordinary share will be paid on 15 October 1999 to shareholders on the register
at the close of business on 17 September 1999. The interim dividend for 1998 was
2.3 pence net per ordinary share. In the UK we have now signed eleven PFI
contracts with a total operating turnover in excess of £80 million per annum.
One PFI contract, Her Majesty's Prison Moreton Lane, is at the preferred bidder
stage, whilst twelve further projects are being actively pursued and a
significant number of future prospects are being investigated. The current
target projects include a hospital and a number of defence facilities, as well
as new areas, such as the provision of Traffic Control Centres for The Highways
Agency. We already have substantial experience in supplying the Agency with
major traffic control systems, for example the Motorway Incident Detection and
Automatic Signalling System on the M25 London Orbital Motorway.

The remaining business has shown good growth across all areas with significant
additions to existing contracts. These include more than £9 million worth of
external business won by NPL Management Ltd at the National Physical Laboratory
and a requirement from the UK Ministry of Defence to procure a further seven
passenger vessels for our existing port services contracts covering Portsmouth,
Devonport and the Clyde. Our staff were recently involved in a high profile
operation, on behalf of the Imperial War Museum, to manage the refit of HMS
Belfast, the Second World War cruiser moored near Tower Bridge in London. We
provided project management for the move and refit, together with the provision
of five tugs and several support craft. We were awarded an additional contract,
by the Defence Evaluation and Research Agency, to manage, operate and assist in
marketing its seagoing research vessel, the Colonel Templer, for a period of
five years.

Finally, in the UK, Serco's continuing commitment to the Rail industry has been
further rewarded with the securing of a contract valued in excess of £48 million
to operate and maintain Railtrack's new fleet of 25 multi-purpose vehicles.
These vehicles will provide a number of services including improving rail
adhesion, vegetation control and de-icing. The opportunity also exists to
exploit the vehicles commercially for other activities.

We have had a significant presence in Continental Europe for many years through
contracts with international agencies such as the European Space Agency (ESA).
More recently we have been expanding this presence in a number of selected
markets such as Italy, France and Sweden. We believe the time is right for
further growth and we have recently announced an agreement to acquire Elekluft.
Elekluft is a German service company with whom we have had a long association
through joint contracts with ESA. The company was formed in 1961 to provide
installation of, and support to, German air defence radar systems. Today, the
company provides engineering services to German military and aerospace
customers, as well as facilities management services including business process
outsourcing, administrative and technical documentation services to a range of
commercial organisations. This follows our acquisition of the Italian-based
service company Tecnodata last year, which has helped us substantially expand
our business with international agencies across Europe. As a result of the
Tecnodata acquisition we have added over 60 further positions for staff to work
with organisations such as the European Commission, Eurocontrol and the European
Patents Office.

Our business in the Asia Pacific region is operating in a buoyant market,
particularly in Australia and New Zealand where the Defence sector is very
active. We have won a further two garrison support contracts, one for the
Northern Territory which is strategically significant for the Defence Forces in
Australia and the other in Central Sydney. Three other bids in this market
sector are under evaluation. In New Zealand we have seen the same pattern of
additions to our existing contracts. The Trentham Army Base contract, which
provides warehousing, distribution and maintenance services, has been
significantly expanded to include base workshop and repairs, ration pack
production and for the New Zealand Police the provision of warehousing services.
A recently awarded contract with the New Zealand Antarctic Division requires
Serco to provide infrastructure support services to the New Zealand Antarctic
base. This latter task, together with our US Navy air traffic control contract
means we will have some 47 staff, based on the ice, in the Antarctic.

In the Transport sector we have seen a number of high profile contracts
including one for the design, supply and maintenance of an advanced traffic
management system for a portion of the Auckland motorway network. A further
contract associated with the Olympic Games in Sydney, has been awarded by the
Roads and Traffic Authority for New South Wales, involving the design and supply
of intelligent roadside vehicle detector and control equipment. We were,
however, disappointed at being unsuccessful in the competition for the first
tranche of tram and train franchises which were put out to tender by the State
of Victoria. As with our experience of early PFI opportunities in the UK, we
have continued our cautious approach to growing the business, particularly where
it demands the identification and management of new risks.

There are many growth prospects across the region. The Hong Kong government,
with whom we have worked for the last fifteen years, has commenced a systematic
review of all departments to establish those additional operations which might
be transferred to the private sector. These include transport infrastructure,
where we already have an involvement with the operation of certain tunnels, as
well as driver and vehicle licensing functions. We also believe that Japan will
offer opportunities in the longer term and we are moving towards a closer
strategic alliance with the ITOCHU Corporation with the opening of a joint
marketing office in Tokyo. The trigger for this move has been an increasing
interest in PFIs in Japan. The Ministry of International Trade and Industry, the
Ministry of Health and Welfare and the Ministry of Transport are promoting PFIs
as a key element in Japan's economic recovery. Draft legislation enabling PFIs
to be introduced has recently passed through the Japanese Parliament.

In North America the State and Local Government market is offering excellent
opportunities. We signed a contract in August to provide maintenance for 1,470
vehicles belonging to the Washington DC Metropolitan Police Department. This
follows a similar contract started in January for Dayton Power and Light. In the
Aviation sector the Federal Aviation Authority, as part of the re-bid of some of
our existing air traffic control contracts, announced that additional towers
will be offered for operation by the private sector. In Defence, the market is
offering further large opportunities, but continues to be price sensitive as
evidenced by the recent loss of the joint venture contract with the US Navy for
operational support on Diego Garcia. Our aim in developing a presence in the
North American market was to introduce some of the third and fourth generation
service contracts that we operate in the UK and there is growing evidence in the
market of the US government moving in this direction.

The first half of the year has shown the same high level of performance that has
characterised our business for many years. With the strong market in the UK,
significant growth opportunities internationally and the market demanding the
application of the products and skills in which we excel, I look forward to
continued strong performance in the remaining six months of the year.

Richard D White                                       1 September 1999
Executive Chairman


Summary Consolidated Profit and Loss Account For the six months ended 30 June
1999
                                                  Restated
                                        6 Months  6 Months   Year to
                                      to 30.6.99to 30.6.98  31.12.98
                                          £'000      £'000     £'000

Turnover: Group and share of joint ventures - 
continuing operations                    391,546  340,955   687,760 
Less: Share of joint ventures           (69,154)  (55,330) (113,471)

Group turnover                           322,392   285,625   574,289
Cost of sales                           (280,159) (250,246) (499,052)

Gross profit                              42,233    35,379    75,237
Administrative expenses                 (29,839)  (24,057)  (51,042)
Amortisation of goodwill                   (615)     (207)     (823)

Operating profit - continuing operations  11,779    11,115    23,372
Share of operating profit in joint
 ventures                                  5,684     4,077     6,315

Gross operating profit                    17,463    15,192    29,687
Net exceptional items                          -       162       162
Net interest
 Group                                   (1,172)   (1,276)   (2,088)
 Share of joint ventures                 (1,353)   (1,338)   (2,142)

Profit on ordinary activities before 
 taxation                                14,938    12,740    25,619
Taxation on profit on ordinary 
 activities                              (4,855)   (3,949)   (8,199)

Profit on ordinary activities after 
 taxation                                10,083     8,791    17,420
Dividends                                (1,738)   (1,612)  (4,888)

Retained profit                           8,345     7,179   12,532

Earnings per Ordinary Share of 2p each:
Basic earnings per share, after 
amortisation of goodwill                   15.6p    13.9p     27.4p
Basic earnings per share, before 
amortisation of goodwill                   16.6p    14.2p     28.7p

Fully diluted earnings per share, after 
amortisation of goodwill                   15.5p    13.8p     27.0p
Fully diluted earnings per share, before 
amortisation of goodwill                   16.4p    14.1p     28.3p

Dividend per share                         2.65p     2.30p     7.40p

Joint ventures
The interim financial statements have been prepared in accordance with
Financial Reporting Standard 9 - Associates and Joint Ventures, which requires
turnover, operating profit and interest from joint ventures to be disclosed
separately on the face of the Profit and Loss Account.  For comparative
purposes the 1998 interim results have been restated accordingly.

Earnings per share
The calculation of basic and fully diluted earnings per Ordinary Share after
goodwill is based on profits of £10,083,000 for the six months ended 30 June
1999 (1998 - £8,791,000) and the weighted average number of Ordinary Shares of
2p each in issue during the period.

The calculation of basic and fully diluted earnings per Ordinary Share before
goodwill is based on profits of £10,698,000 for the six months ended 30 June
1999 (1998 - £8,998,000) and the weighted average number of Ordinary Shares of
2p each in issue during the period.

Exceptional items
Exceptional items in 1998 have been netted off in the Summary Consolidated
Profit and Loss Account, but are disclosed fully in the 1998 Annual Accounts.
The results for the six months ended 30 June 1998 have been similarly
disclosed.


Summary Consolidated Balance Sheet      As at 30 June 1999

                                           As at     As at     As at
                                         30.6.99   30.6.98  31.12.98
                                          £'000      £'000     £'000

Fixed assets
Intangible asset: Goodwill                25,989    16,664    23,332
Tangible assets                           26,043    24,594    23,962
Investments in joint ventures             12,464    13,380    10,617

Total fixed assets                        64,496    54,638    57,911

Current assets/(liabilities)
Stocks                                     9,328     8,412     9,127
Debtors                                  176,986   161,473   157,365
Cash (net of overdraft)                   26,836    11,494    43,991
Trade and other creditors               (84,321)  (69,256)   (85,381)
Accruals and deferred income            (59,024)  (47,441)  (58,137)

Net current assets                        69,805    64,682    66,965

Long term creditors                     (47,903)  (48,315)  (48,957)
Provisions for liabilities and charges   (3,805)   (3,429)   (3,726)

Equity shareholders' funds                82,593    67,576    72,193


Summary Consolidated Cash Flow Statement  

                                          For the six months ended 30 June 1999

                                                  Restated
                                        6 Months  6 Months   Year to
                                      to 30.6.99 to 30.6.98  31.12.98
                                          £'000      £'000     £'000

Net cash inflow/(outflow) from 
operating activities                       1,360   (13,900)   30,032
Dividends received from joint ventures       874       282     1,023
Returns on investments and servicing of 
finance                                   (1,624)   (1,276)   (2,088)
Taxation                                  (1,002)   (1,124)   (4,404)
Capital expenditure and financial 
investment                               (10,809)   (7,580)   (9,329)
Acquisitions and disposals                  (914)  (13,129)  (15,857)
Equity dividends paid                     (3,299)   (2,828)   (4,302)

Net cash outflow before financing        (15,414)  (39,555)   (4,925)
Financing                                 (1,741)   33,440    31,307

(Decrease)/increase in cash              (17,155)   (6,115)   26,382

Opening balance                           43,991    17,609    17,609
Closing balance                           26,836    11,494    43,991

Interim Report
As required by Section 255 of the Companies Act 1985, notification is hereby
given that the accounting information contained in the Interim Report for 1999
does not comprise a full set of accounts and that no full accounts have been
delivered to the Registrar of Companies. The interim results for both 1998 and
1999 are unaudited whilst the results for the 1998 full year were audited, and
an unqualified audit report was made. The 1998 full year accounts have been
delivered to the Registrar of Companies.

Distribution of Report
Copies of the Report are being sent to all shareholders of Serco Group plc.
Copies can be obtained on request from the Registered Office:

Serco Group plc
Dolphin House
Windmill Road
Sunbury-on-Thames
Middlesex TW16 7HT
United Kingdom