9th Nov 2015 07:42
LONDON (Alliance News) - Outsourcer Serco Group PLC on Monday said it has reached a deal with the Australian government to amend the terms of its existing contract providing in-service support for Armidale Class Patrol Boats, which will result in the group booking significantly smaller provisions against losses from the contract in the future.
FTSE 250-listed Serco said the amendments made to the contract mean the deal will now end in 2017 rather than in 2022. Serco will provide maintenance and remediation work on an agreed cost recovery basis, which will be subject to strict cost caps and audit processes, it said.
The contract had been subject to an onerous contract provision of GBP136.0 million that Serco booked in its 2014 results, reflecting expected further losses on the contract through to 2022. It also took another GBP66.0 million charge on the contract related to receivables impairments.
The amendment agreed on the contract should result in a significantly lower volume of provisions being booked by Serco against future contract losses, though will not impact its trading profit guidance for the full year.
"We are pleased to have reached a mutually beneficial agreement with our customer on this matter. Today's amendments represent an equitable solution for both parties," said Rupert Soames, Serco's chief executive.
By Sam Unsted; [email protected]; @SamUAtAlliance
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