Serco disposes of ‘non-core’ London transport technology business

Serco has sold its London streets maintenance and UK transport technology business to Cubic Corporation for an estimated value of £43.5 million.

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Serco has sold its London streets maintenance and UK transport technology business to Cubic Corporation for an estimated value of £43.5 million.

Acting CEO Ed Casey has said that the operations had become “non-core” to Serco’s strategy.

The sale comes as the outsourcer faces exclusion from all current and future government contracts and is under investigation by the Serious Fraud Office (SFO) after allegations that it, along with G4S, overcharged on a Ministry of Justice electronic tagging contract.

The controversy resulted in Serco’s chief executive Christopher Hyman stepping down.

Serco also recently warned that its operating profits are going to be £18 million below forecasts and that it will be cutting 400 jobs.

The disposed business provides maintenance for transport infrastructure, such as traffic signals and CCTV systems in London, as well as the design, installation and maintenance of UK transportation management technology.

A statement said that the under Serco’s ownership, “future growth and profitability were expected to be restricted due to limited synergies” with its core UK transport portfolio of operation public transport networks.

For the year to 31 December 2013, the business brought in £42 million of revenue and £8 million of adjusted operating profit.

However, John O’Brien, research director at analyst house TechMarketView, isn’t convinced of the motives behind the sale.

“This view doesn’t quite seem to stack up with our analysis of Serco’s UK transport activities, as at least two big London transport deals, Boris Bikes and the fully automated Docklands Light Railway, are both heavily reliant on technology,” said O’Brien.

“One of differentiators Serco offered this space was its strengths in front line support services and technology services.”

He added: “Serco is going through a very difficult time right now with top management departures and the SFO investigation into its electronic monitoring contract. This latest disposal only adds to further uncertainty around the future shape of Serco’s IT-enabled support services operations once the dust has finally settled.”

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