Serco to exit UK clinical services market

Serco has announced that it will exit the UK clinical health services market after losing millions of pounds on NHS contracts since January 2013.

The firm’s first year financial results said: “The Group’s intention is to withdraw from the UK clinical health market.”

Serco has exited contracts with Cornwall Out of Hours and Braintree Clinical Services early but will see out a third loss-making contract with Suffolk Community Health due to expire in 2015.

The results document lists an impairment of £17.6 million for 2013 and £3.9 million for the first half of 2014 beside the line ‘UK clinical health onerous contract provisions’.

The £3.9 million is to cover “the costs of delivering improved service levels and meeting performance obligations through to the end of the contracts and the intended withdrawal from this market”, the results document said.

Specifically, it will be used to improve Serco’s performance on the Suffolk Community Health contract after NHS commissioners found it was failing to meet key targets such as response times.

The move away from clinical services is part of wider efforts to restructure the company as it recorded £50.7 million operating profit during the first half of 2014, a 59 percent drop from the same period in 2013.

Serco was banned from bidding for new government work for six months last year and had to repay £69 million after it emerged that the firm had been overcharging the Ministry of Justice for tagging criminals and former convicts.

G4S was also found to have overcharged for tagging offenders and repaid the government £130 million in March.

The Serious Fraud Office (SFO) opened an ongoing criminal investigation into Serco and G4S over the tagging contract in November.

The firm listed a number of ‘major new bid opportunities’ it will consider over the next year in its results, including support work for European agencies, environmental and integrated waste management services for local councils and non-clinical health support services for NHS trusts.

Serco recently won a £3.6 million four-year deal to continue providing ICT support to the European Medicines Agency. In April it also signed a four-year contract extension worth £20 million with Enfield council to continue providing ICT services until 2019.

Providing a summary to the results, Serco group chief executive officer Rupert Soames said: “We have had a poor first half, and we have not won as many new contracts as we would have liked.”

However he said that the company expects its financial performance to improve in the second half of 2014. He added that Serco has made “made good progress in corporate renewal and in re-building trust with the UK government.”

Copyright © 2014 IDG Communications, Inc.

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