Once described as "the biggest company you've never heard of", Serco is in an unusual and enviable position. While many large firms fear the economic downturn and pressure on military and other budgets, the UK company believes its experience in service provision will present major new business opportunities.
Serco has achieved sixfold growth since it was floated on the London Stock Exchange in the late 1980s, with yearly revenues approaching £50 million ($70.9 million). Its activities are now valued at more than £3 billion a year. The company's 55,000 employees work across sectors as diverse as public transport and defence in 35 countries.
Military support contracts account for a quarter of current business, and the company's expertise is in demand, says Tom Burnet, defence operations managing director for Serco Defence, Science and Technology. "We make sure that people get the most out of what they've got, and operate it leanly, efficiently, effectively and at best value for money."
While many of the long-term effects of the financial crisis are uncertain, Burnet believes "we will have a customer who is being asked to do more with less. Serco has built a substantial business in doing just that."
In its UK core market, Serco plays a key role in a number of long-term UK government/private sector initiatives ranging from the Ministry of Defence's Skynet 5 satellite communications system to the Joint Services Command and Staff College and the Atomic Weapons Establishment.
 |
|---|
© Serco |
Ex-military employees work as instructors for the Royal Air Force's support helicopter and multi-engine rear crew communities, fly BAE Systems Hawks to support Royal Navy training, and provide surface finishing and painting services on multiple aircraft types at 15 RAF sites in the UK. Serco personnel also deliver once military-staffed responsibilities such as security, maintenance and air movements services at many main UK operating bases.
On projects such as Skynet 5, its employees are deployed to Afghanistan and Iraq either as sponsored reservists or under Contractors on Deployed Operations guidelines. But Burnet stresses: "We would never compel anybody to do anything that they didn't want to. It would fly in the face of Serco values about how we should be treating people."
Many of Serco's contracts have relied on the transition of MoD and serving military personnel to the private sector, with these accounting for some of the 20,000-plus formerly public sector employees which have joined the company.
Burnet says Serco's success hinges on attracting and retaining trained, skilled and motivated personnel, and paying competitive salaries. It keeps a recruitment database of more than 1,000 engineers, but maintaining this pipeline is a constant challenge. It is addressing possible future skills shortages by increasing investment in apprenticeships.
Another recent growth area for Serco has been in securing subcontracts from manufacturers such as AgustaWestland and BAE Systems, supporting British Army and Royal Navy helicopters and RAF tanker-transports, for example.
"We do things cheaper: I don't have to pay for factories," says Burnet, who believes that such relationships will develop further. "I'm talking to pretty much all the equipment primes about how I can bring to bear these skills and my cost base, which allows me to be startlingly competitive on price. I'm happy to be judged on quality, and delighted to be judged on price."
Less than 0.5% of Hook, Hampshire-based Serco personnel have overhead roles.
"In terms of what's driving the OEM and the customer, it's about demonstrating a level of competency, and then it's about 'we need to drive this price down'," Burnet says.
Emerging prospects for new business could also include delivering simulation-based distributed training for the RAF, and supporting the MoD in Cyprus, Burnet says. Australia, mainland Europe, the Middle East and the USA are also targets for fresh contracts.
A $750 million debt facility agreed last year funded two acquisitions and more may follow.
With fresh contracts being pursued and its status strengthening as one of the UK's prestigious group of FTSE 100 companies, the only part of Serco's portfolio to be at risk over the next few years could be its anonymity.
Source: Flight International
