Serco Group PLC (LON:SRP) is in talks for a contract with Bupa Health Services as part of a deal to provide health services to the Australian Defence Force.
Bupa signed a prime contract for health services to the Australian Defence Force on Monday and is now negotiating a deal with Serco to operate as a sub-contractor to provide the human resource managed service on associated defence bases.
Earlier this month, Serco announced that it had been awarded contracts worth £1.9bn from the UK government to manage more than 5,000 properties occupied by asylum seekers.
Under the contracts, which mark Serco’s biggest ever by value to date, the outsourcer will be responsible for the upkeep of the homes located in the North West of England and the Midlands & East of England, for the next 10 years.
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.
READ: Serco wins largest ever contract from UK government worth £1.9bn
Serco expects the AASC contracts to be materially positive to both profitability and cash flow by 2020.
Peel Hunt raised its pre-tax profit estimate for the 2020 financial year to £101.7mln from £92.7mln previously reflect the deal.
“In 2020, the annual revenue is anticipated to be £150mln, which compares to revenue in 2018 on the predecessor COMPASS contracts of £70mln,” Peel Hunt said.
“The COMPASS contracts incurred a loss of £15mln in 2018 (offset by utilisation of an onerous contract provision). In contrast, we anticipate that over its life the AASC contract underlying margin will average 7% (starting initially lower and increasing thereafter).”
Peel Hunt maintained a ‘hold’ rating and target price of 100p on the stock.
In mid-morning trading, shares were changing hands at 114p, down 0.31%.