British outsourcing company Xchanging said on Tuesday it had lost a lucrative contract with BAE Systems .

BAE Systems has informed Xchanging HR Services that they do not intend to renew the existing HR outsourcing contract when it expires at the end of 2012, Xchanging said.

The firm's current contract with BAE Systems contributes revenue of about 18 million pounds ($28 million) per year at a 5 percent profit margin.

Shares in Xchanging, which runs back-office activities such as invoice processing, paying staff and procuring office supplies, have lost 43 percent of their value over the last year.

The stock closed on Monday at 70.25 pence, valuing the business at 168 million pounds.

Earlier this month the firm said operating cashflow was running ahead of its expectations.

(Reporting by James Davey, Editing by Mark Potter)