March 16, 2017 / 8:44 AM / a year ago

Serco named preferred bidder for $2 billion Australian contract

(Reuters) - Serco Plc (SRP.L) has been named preferred bidder for a 20-year contract worth about A$2.6 billion (1.6 billion pounds) to operate what will be Australia’s largest correctional facility, the British outsourcing firm said on Thursday.

Winning preferred bidder status on the deal is a major boost for Serco, which has been restructuring after a string of profit warnings.

The company said it will operate the new Grafton correctional centre in New South Wales beginning 2020 pending the completion of construction and final contract negotiations.

Serco is a part of NorthernPathways consortium which will design, build and operate the facility in a Public Private Partnership for the New South Wales government.

“This is the group’s largest contract win since 2012 and is one of six “elephants” sitting within Serco’s bid pipeline,” said Jefferies analyst Kean Marden, who holds a “buy” rating on the stock.

    Serco has suffered in recent years following problems with government contracts that included overcharging the British government for monitoring criminals and escalating costs on a deal to provide accommodation to UK asylum seekers.

    Sales of Serco, which provides security, traffic, defence and education services for governments across the world, have fallen for the last three years.

    Britain’s outsourcing sector has also been hit in recent months by uncertainty created by the country’s vote to leave the European Union, causing delays to contract decisions.

    Serco reported a 14 percent fall in full-year trading profit last month and said its recovery could take longer than some analysts expected.

    ($1 = 1.2995 Australian dollars)

    Reporting by Abhijith Ganapavaram in Bengaluru; editing by Jason Neely

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