Serco Group PLC Extension of COMPASS contract (3461R)
December 08 2016 - 6:15AM
UK Regulatory
TIDMSRP
RNS Number : 3461R
Serco Group PLC
08 December 2016
Extension of COMPASS contract for UK asylum seeker support
services
8 December 2016
Serco Group plc ('Serco' or 'the Group'), the international
service company, confirms that the UK Home Office has exercised an
option to extend Serco's COMPASS contracts for asylum seeker
support services until 30 September 2019. The contracts originally
started in December 2012 and were awarded for five years with an
option for the Home Office to extend them for up to a further two
years.
Under the COMPASS contracts, Serco is responsible for the
provision of accommodation, transport and related support services
for asylum seekers in the North West of England and Scotland &
Northern Ireland, being two of the six the COMPASS regions. Serco
is currently caring for over 15,000 asylum seekers across these two
regions.
At the time of our 2014 Contract & Balance Sheet Review,
Serco took an Onerous Contract Provision (OCP) against the COMPASS
contracts of GBP112m within its results for that year, reflecting
the estimate at that time of future operating losses on the
contracts. This charge included the expectation that the contracts
would be extended, and this assumption has now proved correct. In
2015 and the first half of 2016, utilisation of the OCP was broadly
in line with our original expectations.
As part of our normal year-end accounting procedures, we will in
the next few weeks be carrying out a re- estimation of future
losses based on the latest information, including: updated
forecasts of the number of asylum seekers through to the end of the
contract; accommodation costs; benefits from improved operational
efficiency and the terms of the contract extension. Based on our
initial estimates, it is likely that this will result in a
reduction in the OCP on the COMPASS contracts, although they will
continue to be heavily loss-making.
The reduction in OCP is likely to be offset in part by the
liabilities we have assumed as a result of the recent acquisition
of our sub-contractor responsible for delivering COMPASS services
in Scotland & Northern Ireland, Orchard & Shipman (Glasgow)
Ltd. The final value of estimated future losses and assumed
liabilities will be calculated and audited over the coming weeks as
part of the year-end process, but at this early stage, we estimate
that the net reduction in future liabilities will be around GBP20m.
The final out-turn will, as always, be highly sensitive to
differences between the actual number of asylum seekers in our care
and our estimates, together with the cost and availability of
suitable accommodation through to the end of the contract.
As we have previously said, we consider and manage the
provisions and charges made in 2014 as a portfolio of liabilities,
and the actual amounts incurred on individual contracts will
increase or decrease as the hundreds of judgements and estimates we
made in 2014 are tested against unfolding events. The possible
release of OCPs on one particular contract should not therefore be
considered as indicative of the overall judgement we will reach
across the whole portfolio of liabilities at year-end.
Commenting on the contract extension Julia Rogers, Managing
Director of Serco's Immigration Business, said: "Managing the
COMPASS contract is challenging, particularly as the number of
asylum seekers in our care has doubled since the contract started
in 2012. However, we are absolutely committed to providing decent,
safe and secure accommodation for all the people in our care and
meeting our obligations under this contract."
This announcement contains inside information.
Ends
For further information please contact Serco:
Stuart Ford, Head of Investor Relations: T +44 (0) 1256 386
227
Marcus De Ville, Head of Media Relations: T +44 (0) 1256 386
226
About Serco
Serco is a leading provider of public services. Our customers
are governments or others operating in the public sector. We gain
scale, expertise and diversification by operating internationally
across five sectors and four geographies: Defence, Justice &
Immigration, Transport, Health and Citizen Services, delivered in
UK & Europe, North America, Asia Pacific and the Middle
East.
More information can be found at www.serco.com
Forward looking statements
This announcement contains statements which are, or may be
deemed to be, "forward looking statements" which are prospective in
nature. All statements other than statements of historical fact are
forward looking statements. Generally, words such as "expect",
"anticipate", "may", "should", "will", "aspire", "aim", "plan",
"target", "goal", "ambition" and similar expressions identify
forward looking statements. By their nature, these forward looking
statements are subject to a number of known and unknown risks,
uncertainties and contingencies, and actual results and events
could differ materially from those currently being anticipated as
reflected in such statements. Factors which may cause future
outcomes to differ from those foreseen or implied in forward
looking statements include, but are not limited to: general
economic conditions and business conditions in Serco's markets;
contracts awarded to Serco; customers' acceptance of Serco's
products and services; operational problems; the actions of
competitors, trading partners, creditors, rating agencies and
others; the success or otherwise of partnering; changes in laws and
governmental regulations; regulatory or legal actions, including
the types of enforcement action pursued and the nature of remedies
sought or imposed; the receipt of relevant third party and/or
regulatory approvals; exchange rate fluctuations; the development
and use of new technology; changes in public expectations and other
changes to business conditions; wars and acts of terrorism; and
cyber-attacks. Many of these factors are beyond Serco's control or
influence. These forward looking statements speak only as of the
date of this announcement and have not been audited or otherwise
independently verified. Past performance should not be taken as an
indication or guarantee of future results and no representation or
warranty, express or implied, is made regarding future performance.
Except as required by any applicable law or regulation, Serco
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward looking statements
contained in this announcement to reflect any change in Serco's
expectations or any change in events, conditions or circumstances
on which any such statement is based after the date of this
announcement, or to keep current any other information contained in
this announcement. Accordingly, undue reliance should not be placed
on the forward looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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