Serco reaps modest profit from first full-year running Mt Eden jail

Serco New Zealand, the local unit of the UK's Serco Group, reaped a modest profit in the first full year of its $300 million, 10-year contract to run Mt Eden/Auckland Central Remand Prison for the Department of Corrections.

Profit was $368,623 in calendar 2012, from about $1 million in 2011, when it took over full management of the facility mid way through the year. Sales climbed to $32.5 million from $22.5 million. The biggest expense was its wages bill, which rose to $21.8 million last year from $12.8 million in the previous part year.

Two prisoner escapes were recorded in the year, the second of a man who escaped from a health clinic during an eye check, which cost Serco $300,000 in penalty fines.

Serco won the contract in December 2010, beating two rival bidders for the work, after the National government reinstated the right to contract out management of prisons. It is also part of the Fletcher Building-led group that last year won the contract to design, build and operate Auckland's new 960-bed Wiri prison in south Auckland, which is due to open in 2015.

Mt Eden had been run under contract from 2000-05 before the previous Labour government changed the law to prohibit private involvement. Under Serco's contract, it must meet 37 performance measures and 11 key performance indicators set by Corrections. It can be fined for breaches, including prisoner escapes.

The local Serco unit has not paid a dividend to its parent since the contract began. It paid tax of $207,186 last year.

"The parent company, Serco Group, has not been paid a dividend to date," a spokeswoman for the local unit says. "We have focused our resources on supporting our existing and future work in New Zealand. The parent company and other subsidiaries have been reimbursed for services provided."

In the latest performance assessment by Corrections, for the July-September quarter last year, Serco met almost 100 percent of its performance measures. For the full-year, notes to Serco's accounts show a $174,136 Crown asset remediation provision.

The Wiri prison was the first of the government's so-called public-private partnerships, or PPPs, where the private sector is allowed to invest in what has traditionally been a public sector role of providing health, education and other facilities.

Serco is among seven companies recently cleared from the New Zealand Superannuation Fund's $22 million portfolio. Companies with operations in nuculear bases were excluded.

Shares of Serco Group last traded at 592 pence on the London Stock Exchange and have gained about 9 percent in the past year.

(BusinessDesk)