Serco eyes sale of environmental services, leisure arms - source

By Neil Maidment

LONDON, Oct 9 (Reuters) - Struggling British outsourcer Serco Group Plc (Other OTC: SECCF - news) is looking to sell off its environmental services and leisure businesses as part of an overhaul designed to restore its fortunes, a source close to the situation told Reuters on Thursday.

Serco's strategy and businesses are being reviewed by new boss Rupert Soames as he plots its recovery from a disastrous spell of contract problems and a UK government work ban that has sparked profit warnings, a cash call and a restructuring.

The company's environmental services business has a 1.5 billion pound ($2.4 billion) order book and contracts spanning up to 30 years, Serco's website says. The leisure division manages 70 facilities on behalf of 22 clients across the UK.

Serco has already exited some UK healthcare contracts and in August Soames said it would pursue further disposals of operations considered non-core, as the group reported half-year results showing a 59 percent drop in adjusted operating profit.

The source said the environmental services arm, which runs contracts from waste and recycling collection to street cleaning and landscaping, and its leisure business, which manages facilities on behalf of clients including local authorities and universities, were up for sale.

The source did not say how much the two operations were likely to fetch.

Serco, whose services stretch from managing Britain's Atomic Weapons Establishment to running Dubai's Metro (Other OTC: MTRAF - news) and military support for the UK and United States, declined to comment.

Soames will outline the review of his findings at Serco's annual results in March.

Shares (Berlin: DI6.BE - news) in the group, which operates in some 30 countries but makes almost half of its revenue in Britain, have fallen by almost 47 percent over the past year and were flat at 279.4 pence by 1243 GMT.

(1 US dollar = 0.6184 British pound) (Editing by David Holmes)