Serco Group terminates loss-making contracts

13th Dec 2013 07:47

International service company Serco Group said it will end two loss-making contracts following a review of its clinical health operations.The contacts, together with a third loss-making contract, will lead to a total non-cash exceptional charge of £17m.The group is ending its contract early with the Braintree Hospital as the predicted level of patient referrals has not materialised since taking over management of the facility in 2011. The anticipated early termination of the contract in December 2014 requires a non-cash onerous contract provision covering estimated future losses of approximately £3m to be charged in the 2013 financial year.The financial results for the year to 31 December 2013 will include revenues of approximately £13m and an adjusted operating loss of £2m in relation to this contract. Serco has also agreed with NHS Kernow to bring forward the end of its contract for GP out-of-hours services in Cornwall. Serco's operation of the contract to date has experienced some operational challenges, including the implementation of the NHS Pathways IT system. The anticipated early end of the contract in May 2015 requires a non-cash onerous contract provision covering estimated future losses of approximately £5m to be charged in the 2013 financial year.The contract will include revenues of about £7m and an adjusted operating loss of £2m in fiscal year 2013.The third loss-making contract, which runs until 2015, is in Suffolk where Serco has been commissioned to provide community health services to around 600,000 residents. Serco said demand on the service has increased and it is taking longer than anticipated to bring about productivity gains.The weaker than anticipated profitability of the contract requires a non-cash onerous contract provision covering estimated future losses of approximately £9m to be charged in the 2013 financial year."The global healthcare market remains one of our priorities for the future, where Serco is well-placed to deliver quality services that can be delivered sustainably both for our partners and for patients," said Managing Director Valarie Michie. RD