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Serco wins largest ever contract from UK government worth £1.9bn

The government is paying big bucks to Serco to manage 5,000 properties occupied by asylum seekers who are waiting for their claims to be processed

uk home office
Serco will be responsible for the houses of 20,000 asylum seekers

Outsourcer Serco Group PLC (LON:SRP) has been awarded contracts worth £1.9bn from the UK government to manage more than 5,000 properties occupied by asylum seekers.

Under the terms of the deal, the FTSE 250 group will be responsible for the upkeep of the homes, which are located in the North West of England and the Midlands & East of England, for the next ten years.

“We are very pleased to have been awarded contracts for two large regions by the Home Office; together these will be the largest contracts by value ever awarded to Serco,” said chief executive Rupert Soames.

“This award vindicates our decision to continue to invest in building our capability and expertise in what is an extremely sensitive, complex and nationally important area of public service delivery.”

READ: Serco upgraded by Peel Hunt as it ups EPS forecasts

The new Asylum Accommodation and Support Services Contracts (AASCs) are replacing the current COMPASS contracts, which were awarded back in 2012 but have proved costly for Serco. Last year, the COMPASS contracts cost the Hampshire-based firm £15mln.

The contracts aren’t expected to have much impact in the current year, but in 2020, their first full year, Serco expects the AASCs to bring in £150mln in revenue, while they should also be “materially positive” to both profitability and cash flow.

Fellow outsourcer Mears Group PLC (LON:MER) has been awarded AASCs worth £1bn, which will see it look after asylum housing in Scotland, Northern Ireland and the North East, Yorkshire and the Humber.

Serco shares rose 7.6% to 109.9p.

Quick facts: Serco Group

Price: 117 GBX

Market: LSE
Market Cap: £1.44 billion

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