Things are looking up for Serco (SRP) after management announced onerous contract provisions for its Armidale Class Patrol Boats (ACPB) contract will now be significantly lower than previously expected. The outsourcer has now agreed with the Australian government to end its contract providing in-service support to the fleet of ACPB in June 2017, rather than 2022 as originally agreed. It is likely the amendment will result in a significant decrease in the level of provisions against future contract losses.
In 2014 Serco incurred a £136m provision for the contract, reflecting anticipated future losses through to 2022, together with a further charge of £66m relating principally to the impairment of receivables. This represented almost a third of the group's total onerous contract provisions in 2014.
