StockMarketWire.com - Outsourcing services provider Serco Group said it had been awarded contracts by the UK government worth around £1.9bn to accommodate asylum seekers from foreign countries.

The contracts, awarded by the UK Home Office Visas and Immigration department, spanned a 10-year term and covered the North West of England and the Midlands & East of England.

The so-called Asylum Accommodation and Support Services Contract, or AASC, was a successor framework for the current Commercial and Operational Managers Procuring of Asylum Support Services contracts, or COMPASS, which were awarded in 2012.

Of the current COMPASS regions, Serco was already responsible for two: North West of England and Scotland & Northern Ireland, with the company currently looking after some 17,000 asylum seekers.

Under the new AASC, Serco would be responsible for accommodation requirements, transportation and a range of other services to support the welfare of around 20,000 asylum seekers.

In 2020, the first full financial year of Serco's new AASC contracts, the annual revenue generated was anticipated to be around £150m, which compared to revenue in 2018 on its COMPASS contracts of around £70m.

The COMPASS contracts incurred a loss of around £15m in 2018, which had been offset by utilisation of an onerous contract provision.

In 2019, the new AASC contracts were expected to have a 'negligible' effect on profitability, Serco said, as mobilisation and transition costs were expensed.

However, in 2020 and thereafter, Serco said it expected the AASC contracts to be materially positive to both profitability and cash flow.


At 12:57pm: [LON:SRP] Serco Group PLC share price was +7.75p at 109.85p



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