Serco is taking a £17m hit on three lossmaking healthcare contracts and quitting a much-criticised deal to provide out-of-hours GP services in Cornwall early.
The outsourcer said it would end the GP contract in Cornwall more than a year earlier than expected in May 2015 and withdraw from the management of the Braintree hospital in Essex next December.
It also announced a £9m loss on a groundbreaking deal to provide community care services in Suffolk. Serco had won the deal by underbidding the incumbent North Essex Partnership NHS Foundation Trust by £10m and agreeing to provide district nursing, physiotherapists and paediatric teams for £140m over three years. There were fears at the time that the bid was too low to be profitable.
Healthcare has been a growing market for Serco, which runs pathology laboratories in a joint venture with two London hospitals, and support services at hospitals in the UK including Derriford hospital in Plymouth. It will also – from October – provide non-clinical services to a new 783-bed hospital in Australia.
But with the company under fire for the mismanagement of a clutch of botched contracts, it is seeking to refocus its healthcare business to non-clinical services and community healthcare.
In July the influential public accounts committee attacked its “substandard” out-of-hours GP service in Cornwall amid concern about staff levels and manipulation of performance data. The company was found to have “fiddled the figures” on 252 occasions in the first half of 2012, including claims that 100 per cent of emergency callers received face-to-face appointments within 60 minutes when only 75 per cent did so.
Serco is also under investigation by the Serious Fraud Office for overcharging on electronic monitoring contracts for offenders, and has been referred to the City of London Police for falsifying figures on the delivery of prisoners to courts.
Ministers have barred the company – along with rival G4S – from winning central government contracts until they have overhauled corporate governance and received a clean bill of health. Both companies are awaiting the outcome of a number of reports into their business from the government, which could come as soon as next week.
Serco is undergoing an overhaul, including a search for a new chief executive. In the past six months, group chief executive Chris Hyman and Jeremy Stafford, head of the UK and Europe division, have both stepped down in an effort to restore government trust in Serco.
Serco posted revenues of £4.9bn last year, more than half of it from UK contracts. Stephen Rawlinson, analyst at Whitman Howard, said: “Our sense is that there is more bad news to come from Serco. When a new permanent chief executive is appointed he will have to leave no stone unturned.
“It cannot be that he will not need to take some provisions and we suspect alter accounting policies and practices so that the accounts are less complex and reflect actual trading. The impact of the adjustments today is positive for future forecasts of course as it eliminates lossmaking work for this year and makes future out-turns from Suffolk look a little better than they should.”
Serco shares were unchanged at 438.7p on Friday.
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