New Serco blow as £125m DLR contract is lost

Serco has lost a £125m-a-year contract to run London’s Docklands Light Railway to a joint venture partly controlled by the French government.

The outsourcing giant had been operating the DLR since 1997 but was beaten by Keolis and Amey Rail in the tendering process. Keolis’ major shareholder is France’s state rail operator, SNCF.

The news is a huge blow to Serco’s new boss Rupert Soames, who this week admitted he expected to write down the value of some of Serco’s largest contracts.

The company, which operates London’s Boris bike scheme, has been under intense pressure since last year when it was found to have overcharged the Government on contracts to tag offenders.

It has already downgraded its 2014 profit forecasts three times and launched a share placing to raise cash.

David Stretch, the managing director of Serco’s transport business, said: “We are obviously disappointed that we have not been selected to continue to manage and operate the DLR. We will continue to provide DLR passengers with the best possible service until the new operator starts later this year and we will work closely with them to ensure a seamless handover.”

Serco said the DLR contract had generated about £90m, or 2 per cent, of its annual revenues at a margin “significantly below the average level the group achieves on its contracts”. The seven-year Keolis contract is worth £700m.

Transport for London’s managing director for Underground and rail services, Mike Brown, said that the DLR “supports regeneration across a huge area of London”, and added: “The decision to appoint Keolis Amey Docklands was reached after a thorough and competitive procurement process, which will ensure the DLR continues to deliver an ever-improving high-quality, value-for-money service.”