Serco loses millions after losing Mt Eden contract in wake of 'fight clubs'

Serco lost the contract to run Mt Eden Prison in 2015. Photo / Chris Skelton

Serco lost $10.5 million last year as a result of losing the Mt Eden Prison contract when evidence of "fight clubs" emerged.

The company's Annual Financial Report for 2016 that was filed with the Companies Office showed Serco New Zealand's revenue for 2016 was $52m, down 19 per cent from $64m in 2015.

Its finances were hit with the loss of the Mt Eden contract, lower revenues and higher staff costs.

Serco is a British outsourcing company that is contracted to manage Auckland South Corrections Facility.

It lost the right to run Mt Eden Correctional Facility in 2015 after controversial management was revealed.

A 2016 report revealed weekly "fight clubs", "freely available" drugs and cellphones smuggled in by prison staff, and negligent guards who may have missed violent behaviour because they were playing table tennis and pool within the jail.

It said inmates at the remand prison went unsupervised in unlocked cells for up to two and a half hours, partly because of a rostering system which wrongly said people were on duty when they were sometimes on leave or had resigned.

With no CCTV in prison cells, chief inspector Andy Fitzharris concluded that there was "ample opportunity" for organised fighting in the privately managed prison.

Corrections stepped in to manage Mt Eden Prison.

Over 2016 Serco's staff costs increased 9 per cent to $43.8m.

A $30m loan from its British parent Serco Group, by way of two separate equity raisings during 2016, "strengthened" the company's finances, Serco New Zealand said in a statement to RadioNZ.

Serco Group also guaranteed financial support for its New Zealand arm until at least the end of 2017.

"Payments to suppliers, employees and others" was up $11m to $77.6m.

Three years of losses were worrying, Labour corrections spokesperson Kelvin Davis told RadioNZ.

"It means they're probably going to cut costs and corners when it comes to running the prison... I've concerns then for staff safety, I've concerns for prisoner safety and the safety of the community."