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Serco NZ narrows annual loss, budgets $3.2m more for Mt Eden penalty charges

Under the agreement, Serco's involvement was shrunk back to labour supply and other transition services through until the end of the contract in March 2017.

Sophie Boot
Tue, 30 May 2017

Serco New Zealand, which operates Wiri Prison in South Auckland, narrowed its loss in 2016 despite the loss of the Mt Eden prison contract costing it an estimated extra $3.2 million in penalty charges.

The company posted a $10.5 million loss for the year ended Dec. 31, 2016, from $11 million in 2015. Revenue dropped to $52.1 million from $64.1 million a year earlier, while cost of sales narrowed to $55 million from $75 million in 2015.

Serco NZ made a $3.2 million provision for onerous contract charges in 2016, after using up all of the $10.1 million provision it had made in 2015. In April 2016, it agreed to pay $8 million to the Department of Corrections after chief Ray Smith invoked a step-in clause in the Crown's contract, taking back management of the Mt Eden Corrections facility following an investigation into organised fighting at the remand prison.

Under the agreement, Serco's involvement was shrunk back to labour supply and other transition services through until the end of the contract in March 2017. It had taken over the management of the prison in 2011 after winning a $300 million, 10-year contract.

In a statement, Serco Asia Pacific's chief executive Mark Irwin said the company supports the government's goals to reduce reoffending and create better outcomes for Māori.

"Our focus across the prison is to achieve the outcomes that we are contracted to deliver on behalf of New Zealanders," Irwin said. "Our contract sets clear performance standards, expects us to achieve significant savings for government and holds us accountable if we don't deliver."

The company had $2 million in cash and equivalents at the end of 2016, from $4.1 million a year earlier. The local division got a $30 million equity injection in the year from its British parent Serco Holdings, after issuing it 30 million shares in Serco NZ at $1 apiece. That gave it total equity of $7.3 million at balance date, compared to a $12.1 million deficit in 2015.

(BusinessDesk)

Sophie Boot
Tue, 30 May 2017
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Serco NZ narrows annual loss, budgets $3.2m more for Mt Eden penalty charges
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