Serco Loses Major Australian Immigration Contract

Serco Group has faced a significant setback after failing to renew its immigration detention services contract with the Australian government, resulting in an 11% drop in share value. The contract, which has been a staple of Serco’s operations since 2009, is set to expire on December 10, 2024, and its loss is expected to impact the company's revenue by £165 million and underlying operating profit by £18 million in 2025. Additionally, UK government tax changes will increase Serco's labor costs by approximately £20 million annually, further straining its financial outlook. Analysts have noted that the competition for the contract was fierce, likely leading to lower bids from rivals. Despite these challenges, Serco plans to implement a change program to navigate the transition and remain competitive in the Asia Pacific market. The combination of losing this high-margin contract and rising operational costs could pose significant risks to Serco's profitability.