Serco share price: Outsourcer to repay government ₤68.5 million

on Dec 22, 2013
Updated: Oct 21, 2019
Listen Sunday, December 22: Outsourcing firm Serco (LON:SRP) has agreed to repay the Ministry of Justice ₤68.5 million plus VAT after overcharging on its contract to provide electronic tagging for offenders.

The sum covers the reimbursement of the ministry as well as the costs incurred by the government for investigating the matter. Alastair Lyons, non-executive chairman of Serco, said: “The contract issues that were identified should never have happened and we apologise unreservedly for them.”
The scale of overcharging – which included billing for tagging of offenders who were not being monitored, some of whom were back in prison or had passed away – is several times larger than previously thought. The original sum was believed to be about ₤15 million to ₤20 million for the contracts held by Serco and its rival G4S.

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In addition to the fine, Serco will have to repay any future profits it makes on its contract to escort inmates to and from London courts, after revelations that the company’s staff had been altering records on the transport of prisoners.
**Serco to develop new block at Thameside jail**
Serco has signed a deal to expand one of its prisons yesterday just 24 hours after agreeing on the ₤68 million repayment. The company will build and operate a new house block on the grounds of Thameside jail, southeast London.

The added structure will allow some of the 6,000 London prisoners held outside the city to be moved nearer their families. Prisoners will have access to showers and lavatories in their cells, telephones and flat-screen terminal to order their meals and book activities. Serco said the expansion has a value of ₤120 million over the next 22 years, including the ₤36 million building phase.

James Thorburn, managing director of home affairs at Serco, said: “We are delighted to have been awarded this contract expansion to extend the size of the prison at Thameside, which will support the Ministry of Justice in its programme to modernise the UK prison estate.”

Thameside prison has been plagued by problems since it opened last year. In its annual review of jails in England and Wales, the Ministry of Justice said it was seriously concerned about the prison. The facility had been in effective lock-down for most of its first year due to violence and disruption. Inspectors said that about 60 percent of prisoners were locked up during the day and some spent 23 hours a day in their cell.
**Analysts on Serco**
Panmure Gordon reiterated its ‘buy’ rating and 535.00p price target on Serco’s shares in a note sent to investors on Thursday.
Seven equity analysts rate Serco as a ‘sell’, nine give it a ‘hold’ rating and eight call it a ‘buy’. The stock has a consensus rating of ‘hold’ and an average price target of 536.20p.
**As of Friday, December 20 buy Serco shares at 472.32p.**
**As of Friday, December 20 sell Serco shares at 472.30p.**
Trade stocks with Hargreaves Lansdown from £5.95 per deal.
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