The contractor Serco has admitted to having to swallow ‘a bitter pill’ and learn ‘hard lessons’ as it makes its review of major contracts and of its balance sheet.
Rupert Soames, Group Chief Executive Officer, said: “The rapid progress we have made in recent weeks on the Strategy Review and the Contract and Balance Sheet Reviews has brought us to the point that we are able to provide an initial estimate of the impairments, write-downs and Onerous Contract Provisions that are likely to be required at year end. Whilst it is a bitter pill, it is better for all concerned that we swallow it now and establish a really solid foundation on which to build Serco’s future.”
In its latest update on its ‘Strategy Review’ Serco admits that it lost some of its focus and diluted its operational expertise. The firm admitted also that it has concentrated too much on winning new business and has failed to manage effectively the fact that over recent years there have been significant advances in public sector contracting, particularly in the UK, with new models that transfer substantially more risk to suppliers. The company statement added: “As a consequence, we now have a number of contracts which are making large losses, and others which are in sectors where we are sub-scale.”
Serco and G4S had to admit to over-charging the UK Ministry of Justice over electronic monitoring of offender contracts. The company admitted that in its UK Central Government Division, a number of contracts are ‘extremely challenging’.
Soames spoke of the firm taking a more cautious view of 2014 and 2015.. He said that the company will concentrate on its core as a supplier of public services – an international business focused on Justice and Immigration, Defence, Transport, Citizen Services and Healthcare. He said: “These are businesses which we are really good at, where we deliver outstanding service, and where our skills, experience and international reach can differentiate us. There are a tough couple of years ahead as we make this transition, but it will be worth it.”
For the statement in full visit the Serco website – http://www.serco.com/media/pressreleases/updateonreviews.asp
