Serco estimates £18m losses on health contracts

The company has made provisions in its 2013 accounts for substantial future losses on contracts in Suffolk, Cornwall and Braintree – two of which it is terminating early.

A company notice to investors published by the London Stock Exchange said: “Provisions for estimated losses in future years on the Suffolk and Cornwall contracts, together with provisions against the underlying assets of the Braintree contract, led to a non-cash exceptional charge of £17.6m in the year.”

Serco Health, the company’s multinational health division, has revenues of £250m but it does not provide national breakdowns.

Serco told HSJ last May that it expected to make a profit on its £140m three year contract to provide community services in Suffolk, but has since admitted it is heading for a loss.

The notice to the LSE, published last month, said “demand on the service [in Suffolk] has increased and it is taking longer than anticipated to bring about the operational performance levels that are expected”.

It added that “Serco remains committed to the community healthcare market and to the service in Suffolk”.

Serco’s GP out of hours services contract in Cornwall was attacked last July by the Commons public accounts committee, which labelled it “substandard”, amid accusations that performance data had been manipulated and concern staffing levels had been unsafe.

The company announced in December 2013 it would end the contract early and would be withdrawing from out of hours provision.

The March notice to investors said its management of Braintree Community Hospital “has been impacted by lower levels of patient referrals than predicted, with Serco’s ability to improve utilisation of the hospital being limited”.

It announced last month it would hand the management back to Mid Essex Hospital Services Trust.

Valerie Michie, managing director of Serco’s healthcare business, said: “I am very proud of the work that our people do day in, day out and we are committed to providing quality services for patients that can be delivered sustainably, with the kind of fresh thinking that our partners value and rely on.

“Where we have made mistakes we have learned from them, we will continue to learn from them, and we will deliver against our promises.

“We had to take the difficult decision to end these two contracts early, but this does not undermine our commitment to the healthcare market, which is undiminished.”