Serco agrees amendments for Australian contract

9th Nov 2015 08:25

(ShareCast News) - Outsourcing firm Serco Group and the Australian government have reached a deal to amend the terms of a loss-making deal for Armidale Class Patrol Boats.The amendments mean the deal will now end in 2017, five years earlier than originally scheduled, after the group booked a £136m provision in its full year results for 2014, which reflected expected losses on the deal for its scheduled duration.The FTSE 250 company, which will now provide maintenance work on a pre-agreed cost recovery basis subject to strict cost caps and audit processes, also booked a £66m charge on the contract related to receivables impairments.Serco added that while the agreed changes are expected to result in a significantly lower volume of provisions being booked, its trading profit guidance for the full year should not be affected."We are pleased to have reached a mutually beneficial agreement with our customer on this matter," said group chief executive Rupert Soames."Today's amendments represent an equitable solution for both parties."Serco shares were up 6.59% to 105.90p at 0847 GMT on Monday.