Review of UK clinical health operations
13 December 2013
Serco Group plc (Serco), the international service company, today announces it has completed a review of its clinical health operations in the UK having established a comprehensive global healthcare strategy earlier in 2013. Healthcare is a global growth area for Serco, with recent wins and operational start-ups in the UK, US, Middle East and Australia. In the UK, Serco remains committed to its strategy of providing healthcare organisations with integrated facilities management, business process management and the coordination of community healthcare services. As a result of our proactive portfolio management which assesses the strategic fit of operations and expected future levels of performance, Serco will end two contracts early. These contracts, together with a third loss-making contract, require onerous contract provisions for estimated losses in future years which in total amount to a non-cash exceptional charge of £17m.
Since taking over the management of Braintree Hospital in 2011, the predicted level of patient referrals has not materialised and Serco's opportunities to improve the utilisation of the hospital are limited. Serco has therefore issued notice to end early its contract. The financial results for the year to 31 December 2013 will include revenues of approximately £13m and an Adjusted operating loss of £2m in relation to this contract. The anticipated early termination of the contract in December 2014 requires a non-cash onerous contract provision covering estimated future losses of approximately £3m to be charged in the 2013 financial year.
Serco has also agreed with NHS Kernow to bring forward the end of its contract for GP out-of-hours services in Cornwall. This will enable NHS Kernow to transition earlier to a new model of integrated unscheduled care. Serco's operation of the contract to date has experienced some operational challenges, including the implementation of the NHS Pathways IT system. The financial results for the year to 31 December 2013 will include revenues of approximately £7m and an Adjusted operating loss of £2m in relation to this contract. The anticipated early end of the contract in May 2015 requires a non-cash onerous contract provision covering estimated future losses of approximately £5m to be charged in the 2013 financial year.
In Suffolk, Serco is commissioned to provide a wide range of community health services to a population of around 600,000 residents. The contract is one of the first of its kind in the UK and runs until October 2015. Serco has delivered some early benefits such as reducing the length of stay in community hospitals by around a week and improving access to the service by establishing a 24-hour care coordination centre. However, demand on the service has increased and it is taking longer than anticipated to bring about productivity gains. At all times Serco has ensured that the service is properly resourced to deliver a safe, quality service and will continue to do so. Serco remains committed to the community healthcare market and to the service in Suffolk. The financial results for the year to 31 December 2013 will include revenues of approximately £60m and an Adjusted operating loss of £3m in relation to this contract. The weaker than anticipated profitability of the contract requires a non-cash onerous contract provision covering estimated future losses of approximately £9m to be charged in the 2013 financial year.
Valerie Michie, Managing Director of Serco's healthcare business, said: "The global healthcare market remains one of our priorities for the future, where Serco is well-placed to deliver quality services that can be delivered sustainably both for our partners and for patients. The services we deliver in Cornwall and Braintree are no longer core to the future delivery of our healthcare strategy. We remain committed to serving the community healthcare market, and Serco has already demonstrated that our strong position and leading capabilities in providing integrated facilities management and business process management services to healthcare organisations can be transferred to new regions as we continue to develop the portfolio."
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 an international service company, which combines commercial know-how with a deep public service ethos.
Around the world, we improve essential services by managing people, processes, technology and assets more effectively. We advise policy makers, design innovative solutions, integrate systems and - most of all - deliver to the public.
Serco supports governments, agencies and companies who seek a trusted partner with a solid track record of providing assured service excellence. Our people offer operational, management and consulting expertise in the aviation, BPO, defence, education, environmental services, facilities management, health, home affairs, information and communications technology, knowledge services, local government, science and nuclear, transport, welfare to work and the commercial sectors.
More information can be found at www.serco.com
