Serco reaches 68.5m pounds deal with UK over tagging

19th Dec 2013 13:30

Support services group Serco has reached a 68.5m pounds deal with the UK government over its troubled electronic tagging contract, lifting its shares.Serco, which has faced a probe into allegations of over-charging for tagging criminals, has agreed a full and final settlement with the Ministry of Justice linked to issues with the electronic monitoring deal.The government has also told Serco that reviews of its Ministry of Justice contracts and other government work had concluded satisfactorily.A Serco spokesperson confirmed to Sharecast the group was still awaiting the outcomes of a separate Serious Fraud Office (SFO) probe into the tagging contract and police investigations into individual members of Serco staff related to suspected misreporting of data on a prison escort deal.Serco said in a statement: "These audits and reviews have now concluded within the intended timeframe and, beyond the EM and Prisoner Escort & Custody Services (PECS) contracts described in previous disclosures, no further material issues have been raised."Serco runs the Docklands Light Railway in London and other transport as well as defence, health and school facilities.The company lost its chief executive and launched a restructuring of its operations following the controversy over the tagging contract, which has also involved rival G4S. The government has given the tagging work to another rival, Capita, on an interim basis while the issues have been investigated.Serco said the Cabinet Office had described the Corporate Renewal restructuring programme, an assessment of which is expected in January, as well advanced."Serco's board believes its proposals are sufficient to restore the confidence of its government customer, allowing Serco's inclusion for all new and future work with government," Serco said in its statement.In a separate statement earlier on Thursday, Serco said the problems may contribute to a fall in this year's free cash flow relative to 2012, but said 2013 results were likely to meet market hopes.The group estimated one-off charges linked to the reviews and audits and an internal restructuring would total about £36m, on top of the settlement reached with the government on tagging.Shares recovered earlier losses to stand 22.4p up at 471.2p by 13:13 in London.PW