G4S takes £50m hit from Olympics

Soliders walk to their posts at the Olympic Stadium in London on July 24, 2012

STORY HIGHLIGHTS

• G4S reported a £50m contract loss, after it could not provide all the guards for the 2012 games.


• The hit, while expected, contributed to a significant drop in first half pre-tax profit.


• The shortfall in staff meant the government had to plug the gap with military personnel.

(Financial Times) -- The price of failing to fulfil its contract for the London Olympic Games weighed on profits at G4S as the world's biggest security company by sales reported interim results.

G4S reported an exceptional £50m contract loss, following its admission in early July that it would not be able to provide all of the 10,400 guards it was contracted to supply for the 2012 games.

The hit, while expected, contributed to a significant drop in first half pre-tax profit which fell 60 per cent to £61m year-on-year. Total revenue for the six months to June 30 rose 5.9 per cent to £3.9bn.

The shortfall in staff meant the government had to plug the gap with military personnel and left Nick Buckles, chief executive of G4S, fighting for his career after he admitted before a committee of MPs that the affair had been a "humiliating shambles".

"We were deeply disappointed that we had significant issues with the London 2012 Olympics contract and are very grateful to the military and the police for their support in helping us to deliver a safe and secure games," Mr Buckles said on Tuesday. He added that the group does not expect there to be a shortfall for the Paralympic games, which begin this week, for which it will be providing about 5,000 security staff.

Despite the fall-out of the scandal Mr Buckles, who has delivered annualised shareholder returns of 14 per cent since becoming chief executive in 2005, has the backing of shareholders and investors. While diluted earnings per share fell from 7.7p to 2.1p the interim dividend was maintained at 3.42p per share.

Contract wins from private companies outpaced those from the public sector in North America and continental Europe as pressure on government spending remained. But the group, which runs prisons, cash-guarding services and security for events, said there were still many opportunities in the UK, especially in providing police, probation and prison services. It recently won the first contract to build and run a police station in Lincolnshire.

Revenue in emerging markets grew 13 per cent. G4S, which employs more than 650,000 people in more than 125 countries, has set a goal of increasing its developing markets turnover from 30 per cent of total revenues to 50 per cent by 2019.

Shares in G4S were down 1.77 per cent to 261.5p in early London trading.

Source & Image : CNN Business