Serco Group PLC (LON:SRP) shares rose today after the outsourcing group secured a £1.5bn deal to run what will be Australia’s biggest prison, the UK firm's largest-ever contract by value.
In a statement, he FTSE 250-listed firm said it has signed the contract and completed financial agreements to operate the New Grafton Correctional Centre (NGCC) in New South Wales (NSW).
Serco announced on March 16 that it had been named Preferred Bidder on the project.
READ: Serco set to secure around £1.6bn contract to operate what will be Australia's largest prison
Serco is part of the NorthernPathways consortium which will design, build and operate NGCC in a Public Private Partnership deal for the NSW Government. When completed, NGCC will be the largest correctional facility in Australia.
Serco's operational contract, which is expected to commence in 2020, has an estimated total value to the group of approximately A$2.6bn (around £1.5bn) over a 20-year term.
The group said the contract draws on its experience of managing correctional facilities in the UK, New Zealand and elsewhere in Australia. It will be the first time that Serco has managed a correctional facility which includes women.
Serco already operates Australia's current largest correctional facility, Acacia Prison.
Serco's largest-ever contract by value
Rupert Soames, Serco’s group chief executive, said: "The contract award for NGCC clearly marks a further important expansion of our international Justice business, and by total contract value it also represents Serco's largest ever contract.”
In a note to clients, Liberum Capital analyst Joe Brent said: “It is one of the elephants that Serco had targeted, and is worth c. £1.5bn over 20 years.
“However, it has been a slow period of contract winning so far this year and the contract only starts in 2020.”
The analyst reiterated a ‘hold’ rating and 120p target price on Serco.
The news was well-received by shareholders, with Serco shares up 3.6%, or 4.2p at 122.20p.
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