Following the disposal of its UK-based technical services business last week (see Serco sells Technical Services arm to AMEC), Serco is now casting off the majority of its operations in Germany, back to the local management for a ‘net nil cash consideration’. The disposed business provides installation and support services for the German air defence radar systems, but has expanded into other Serco-related areas like engineering and administrative support services, as well as training, facilities management, field installation and maintenance services, and IT consulting and related services.
The business apparently generated £90m in revenue last year, and has been growing, although at ‘broadly break-even’. So Serco sees the disposal having a ‘broadly neutral impact on adjusted earnings’ for the group. It will however book a £27m accounting loss after factoring in goodwill and disposal related costs. And there is also a £12m loan to settle over the next 18 months.
Serco has decided to hold on to some of the German contracts, such as IT services to the European Space Agency and facilities management for State Street in Europe. Presumably Serco sees more opportunities in these two deals for cross-selling and up-selling services from the wider group. This is something Serco will need to achieve more broadly if is to have better luck nudging its organic growth northwards (see Serco warns on H1 organic growth).