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UPDATE 1-Serco gets rare boost as set to win Australian immigration deal
September 4, 2014 / 9:57 AM / 3 years ago

UPDATE 1-Serco gets rare boost as set to win Australian immigration deal

* Serco selected as preferred bidder to renew contract

* It was company’s biggest contract last year

* Revenue from it set to fall due to immigration crackdown (Adds details, shares, background)

LONDON, Sept 4 (Reuters) - Serco has been selected as preferred bidder to continue running Australia’s onshore immigration detention services, some rare good news for the British company after a disastrous year.

Serco’s share price is down 40 percent on a year ago after it was hit by a six-month ban on new UK government work in July 2013 for overcharging on a tagging contract, while a raft of other deals have hit problems, forcing the firm to raise cash and begin costly reviews and restructuring.

The loss of the Australian immigration services would have been another major blow for the firm, which posted a 59 percent fall in first-half operating profit last month.

It was its biggest contract in 2013, accounting for almost a tenth of its revenue.

Serco said on Thursday that it had been chosen as the preferred bidder and that a new contract would be signed over the next few months, pending commercial negotiations.

Shares in the firm, which runs services in over 30 countries from prisons and air traffic control centres to healthcare services, were up 4.2 percent to 326 pence at 0835 GMT.

Serco has operated Australia’s network of onshore immigration detention centres - which also includes the Indian Ocean territory of Christmas Island - since 2009.

Revenue from the contract depends on the number of migrants Serco deals with. It was worth about $260 million in its first year, but that figure rose significantly as more asylum seekers arrived in Australia, exceeding $740 million in 2013.

REVENUE SET TO FALL

However Serco has warned the work is likely to be less lucrative in future after the Australian government announced in January it was starting to close down some mainland detention centres as it pushes ahead with tough policies to deter refugees arriving by boat. They include turning back boats and detaining asylum seekers in remote centres offshore.

While still viewed by analysts as a key contract, Serco have said revenues could fall by half in 2014 due to lower volumes.

Immigration remains a polarising political issue in Australia.

Conservative Prime Minister Tony Abbott won an election last September after campaigning heavily on tough immigration policies, which have been criticised internationally but which polls show are popular with voters. The government says such measures are needed to stop dangerous people-smuggling ventures.

About 16,000 asylum seekers came to Australia on 220 boats in the first seven months of 2013, but the government says its policies have proved successful with just one “illegal” boat arrival since December.

The government has been criticised by human rights groups for its immigration policies, including turning back asylum seeker boats and detaining children for long periods of time.

Asylum seekers held on remote Christmas Island are suing the government for failing to provide adequate healthcare, while a public inquiry has heard that children in detention are suffering from widespread mental illness caused by their confinement.

Reporting by Neil Maidment in London and Jane Wardell in Sydney; Editing by Sonya Hepinstall and Pravin Char

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