Serco to exit leisure and environmental services as share price plummets
0Outsourcing firm Serco has announced that it will seek to exit local authority leisure and environmental partnerships following financial problems which led this week to a steep fall in its share price.
Shares in the firm fell as much as 35% after it announced on Monday that it was writing down the value of its business by £1.5bn.
The write-downs related to problems with a small number of contracts including some for health services in the UK.
In response, a strategic review means that the business will now look to refocus its operations, and is looking to dispose of its environmental and leisure businesses in the UK.
A spokesman for Serco told Room151: “We have highlighted the future strategic direction of the business and will focus on being a business to government provider in the fields of defence, justice, healthcare, transport and back office services.
“We will be in discussions with our local authority partners about the future of the contracts, but we will fulfil our obligations until such time as we can divest ourselves of them.”
Serco currently holds 14 environmental contracts with councils and the majority of its 22 leisure contracts are held with local authorities.
Two years ago, Shropshire Council signed a 10 year contract with Serco to run five leisure centres in the county.
Gwilym Butler, the authority’s cabinet member for leisure services, said: “We are aware that Serco is looking to sell its environmental and leisure businesses and we will be discussing this with them in more detail.
“In the meantime, we will continue to work closely with Serco Leisure, as the managing agent, and Shropshire Community Leisure Trust, as the operator of the five sites, to deliver the high quality leisure services.”
Serco remains committed to its contracts providing back office services for councils, according to the company’s spokesman.
“We have identified there is a viable future for our business and that includes the operational services we provide to local authorities.
“The announcement does not have any effect on the operational delivery of service and local authority relationships remain a key source of our planned future growth.”
He was unwilling to give details of the value or the number of back office contracts the firm currently holds with local authorities.
As part of the firm’s corporate renewal process, it announced earlier this year that it would be splitting its government division in two – one for UK central government and one covering local government in the UK and Europe.
The company decided to review its operations after it was found, along with rival G4S, to have been overcharging for a contract with the Ministry of Justice to tag prisoners.
