G4S warns over asylum seekers contract as pre-tax profits rise to £327m
10:19 09 March 2016
Outsourcing giant G4S has warned that it could lose a further £57m if the government extends a key contract to house surging numbers of asylum seekers.
The firm revealed a £31m provision on the loss-making contract, up £20m, as the number of asylum seekers it handled lifted by 9.6pc year on year.
But it estimates that, if this five-year contract, due to end in 2017, is extended for two more years it would cost a further £57m.
Underlying group pre-tax profits rose 14.7pc to £327m in 2015 as the business signed new contracts across the globe and saw revenues lift 4pc to £6.4bnn over the same period.
But statutory profits fell to £8m, from £145m a year ago, reflecting large writedowns and charges, sending shares down by 12pc.
G4S pledged to sell more businesses and booked £255m of costs as the group continues an overhaul to move away from its scandal-ridden past.
It booked the charges on a mixture of restructuring costs, onerous contracts, losses on sold businesses and non-cash writedowns.
G4S has been leading a turnaround to put behind it a prisoner tagging scandal in 2013 and its failure to supply adequate security for the London Olympics in 2012.
The firm said sales in the UK fell by 3pc last year and it increased charges on the number of loss-making contracts in manages in Britain, such as its care of asylum seekers.
It booked a £65m charge on these contracts across the group last year, reflecting losses it expects to make on UK Government work.
The business said it expects to sell businesses with combined revenues of around £400m in the next 12 to 24 months, with the areas it plans to leave including UK children’s services and US youth justice services.
The group is being overhauled by chief executive Ashley Almanza, who took the helm in 2013 following a spate of scandals.
It said the total value of the contracts it signed across the group jumped more than 14pc to £2.4bn in 2015, including contract retention rates of more than 90pc.
Mr Almanza said: “Against a background of economic uncertainty, demand for our services has remained resilient and revenues grew in all regions apart from the UK.”
The firm said sales grew 8.6pc in emerging markets, lifted 5.8pc in the US and rose by 3pc in the rest of Europe.
It added that sales growth accelerated in the second half of last year, and the business expected to make “good progress” in 2016.
AJ Bell investment director Russ Mould said: “The group’s results have been hit by writedowns on onerous contracts which includes the loss-making one with the Home Office over asylum seekers.”