Serco Group PLC (LSE:SRP) tumbled almost 12% as the outsourcing specialist revealed it has lost a contract with Australian immigration while warning it faces £20 million of additional costs due to the Budget.
In a statement, Serco said it has been told by Australia’s Home Affairs department that it had been unsuccessful with its rebid for onshore immigration detention facilities and detainee services, a contract it has run since 2009.
Serco added it thought it had submitted a compelling bid but would now work to ensure a smooth transition in the 180-day handover period after the contract ends on 10 December 2024,
If the contract had been retained, Serco added it would have expected it to contribute around £165m of revenue in 2025 and £18m of underlying operating profit.
One-off end-of-contract cash costs of around £20m have already been provided for, it added.
In addition, in the UK, Serco said it expects that Budget measures of lowering the earnings threshold at which employers start paying national insurance contributions from £9,100 to £5,000 and increasing the rate from 13.8% to 15.0% “will increase our direct labour costs by around £20 million per year”.
The changes will be effective from April 2025 and “We are actively exploring ways to offset these costs,” said the statement.
Shares in Serco dropped 20p to 157p.