30th Mar 2015 07:09
LONDON (Alliance News) - Serco Group PLC Monday said it is selling Great Southern Rail to Australian private equity firm Allegro Funds for GBP2.5 million in cash, as part of its disposal programme of businesses identified as not being core to its future strategy.
The company's 2014 strategy review identified that Great Southern Rail, which runs tourist services in Australia, was not aligned with its future strategy given its "historical lack of profitability" as well as "limited synergies" with the rest of Serco's transport portfolio.
Great Southern Rail's revenue in 2014 was GBP58 million, and it posted an operating loss before exceptional items of GBP3 million. It suffered an exceptional charge of GBP37 million relating to a non-cash impairment and break costs of leases to be settled in cash by Serco.
Serco said the disposal is not expected to have a material impact on its trading profit, which is forecast to be around GBP90 million for the year. Its revenue forecast of approximately GBP3.5 billion will reduce by about GBP50 million, and it expects to be charged a net exceptional loss on disposal of approximately GBP6 million, driven by lease-break cash costs that could not be provided for in 2014.
"Serco needs to concentrate on its core as a leading supplier of public services and we cannot provide the focus and investment GSR needs to thrive. We will continue to build a strong transport business where Serco's capabilities can be deployed and transferred internationally, and our recent contract award to support the new North South Railway in Saudi Arabia is testament to the progress we are making," Chief Executive Rupert Soames said in a statement.
The sale is expected to complete in the coming months.
Serco shares were trading down 0.1% at 168.00 pence early Monday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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