8 November 2024

Serco unsuccessful in Australian immigration rebid

The Australian Government's Department of Home Affairs has informed Serco that it has been unsuccessful in rebidding the contract for the provision of onshore immigration detention facilities and detainee services.

Serco is proud to have provided immigration services as a partner to the Australian Government since October 2009.  Our performance levels have been high on the current contract, and we submitted what we believed to be a compelling bid that would have delivered continued strong performance to the Australian government as well as meeting our framework for achieving margins appropriate for the services we deliver.  We will now work to ensure a smooth transition of these critical services to the new provider.

The end date of our contract is 10 December 2024, after which there is a transition out period of up to 180 days.  If the contract had been retained, we would have expected it to contribute around £165m of revenue in 2025 and £18m of underlying operating profit, which is approximately 6% of analysts' consensus*.  We anticipate one-off end of contract cash costs of around £20m, which have already been provided for, in accordance with our normal accounting policy.

As part of general business, we planned for all scenarios related to this rebid.  As a result of the outcome, we will now proceed with a change programme during the transition period.  The programme will reduce the cost base, so it is appropriate for the remaining operations and ensure the business is well-positioned for opportunities in the coming years.  Asia Pacific remains an important market for Serco.

UK national insurance

Tax changes announced by the UK Government in the budget on 30 October will impact our business.  We estimate the combination 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 £20m per year.  The changes will be effective from April 2025 and we are actively exploring ways to offset these costs.

Guidance for 2024 remains unchanged.

*Serco-compiled consensus for 2025 is £4.9bn of revenue and £282m of underlying operating profit.  Bloomberg consensus is £4.9bn of revenue and £276m of underlying operating profit as at 6 November 2024.

This announcement contains inside information.

Ends.

For further information, please contact:

Paul Checketts, Head of Investor Relations | +44 (0) 7718 195 074 | paul.checketts@serco.com

Scot Marchbank, Group Communications and Marketing Director | +44 (0) 7958 675 706 | scot.marchbank@serco.com

About Serco

Serco brings together the right people, the right technology and the right partners to create innovative solutions that make a positive impact and address some of the most urgent and complex challenges facing the modern world. 

With a primary focus on serving governments globally, Serco's services are powered by more than 50,000 people working across defence, space, migration, justice, healthcare, mobility and customer services.

Serco's core capabilities include service design and advisory, resourcing, complex programme management, systems integration, case management, engineering, and asset & facilities management.

Underpinned by Serco's unique operating model, Serco drives innovation and supports customers from service discovery through to delivery.

More information can be found at www.serco.com

Forward looking statements

This announcement contains statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature.  All statements other than statements of historical fact are forward looking statements.  Generally, words such as "expect", "anticipate", "may", "could", "should", "will", "aspire", "aim", "plan", "target", "goal", "ambition", "intend" or, in each case, their negative or other variations or comparable terminology identify forward looking statements.  By their nature, these forward looking statements are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as reflected in such statements.  Factors which may cause future outcomes to differ from those foreseen or implied in forward looking statements include, but are not limited to: general economic conditions and business conditions in Serco's markets; contracts awarded to Serco; customers' acceptance of Serco's products and services; operational problems; the actions of competitors, trading partners, creditors, rating agencies and others; the success or otherwise of partnering; changes in laws and governmental regulations; regulatory or legal actions, including the types of enforcement action pursued and the nature of remedies sought or imposed; the receipt of relevant third party and/or regulatory approvals; exchange rate fluctuations; the development and use of new technology; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks; and pandemics, epidemics or natural disasters.  Many of these factors are beyond Serco's control or influence.  These forward looking statements speak only as of the date of this announcement and have not been audited or otherwise independently verified.  Past performance should not be taken as an indication or guarantee of future results and no representation or warranty, express or implied, is made regarding future performance.  Except as required by any applicable law or regulation (including under the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Serco expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in Serco's expectations or any change in events, conditions or circumstances on which any such statement is based after the date of this announcement, or to keep current any other information contained in this announcement.  Accordingly, undue reliance should not be placed on the forward looking statements.

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