G4S stays in profit despite £70m Olympic hit
SECURITY firm G4S, which supplies the private sector management of Birmingham’s Winson Green prison, has announced increased turnover and profits despite taking a £70m hit due to its fiasco over the Olympic Games contract.
The group said full year turnover rose 10.4% to £7,5011m (2011: £6,797m), with profits excluding the impact of the Olympics contract rising 6% to £516m (2011: £487m). Adjusted earnings per share rose 3.4% to 21.2p and the group dividend was up 5% to 8.96p.
In February 2013, the group announced that it had agreed a financial settlement with the London Organising Committee for the Olympic and Paralympic Games in respect of the security contract debacle.
“The terms of the settlement meant that the group incurred an overall loss on the contract of approximately £70m, additional costs mainly relating to charitable donations and external fees of £11m, and further sponsorship and marketing costs of £7m, all of which were taken as an exceptional charge in 2012,” said the group in its results statement.
The group’s restructuring programme saw headcount reduced by 1,500, resulting in an exceptional cost of £45m. It said the restructuring would result in annualised cost savings of around £35m, while an additional £10m has been invested in Service Excellence Centres and in sales and marketing.
The group said it planned to achieve further cost savings in the medium-term through procurement efficiencies and business process redesign.
Nick Buckles, Chief Executive Officer, said: “Our 2012 financial results reflect the significant exceptional costs associated with the Olympic contract and our overhead reduction programme together with the large impairment charge related to the discontinued US Government Solutions business.
“Despite these issues, the underlying business has performed well in 2012 with an acceleration in organic turnover growth to 7% and with margins holding at over 7%. The acceleration in organic growth was due largely to a number of new North American commercial and UK government contracts and continued strong growth in developing markets and was achieved despite continued economic challenges in Europe.”
He said the group would continue to focus on emerging economies such as Brazil where there were growth opportunities.
“The breadth of our portfolio in over 125 countries continues to present many new growth opportunities and we continue to see good opportunities for outsourcing in key sectors such as government, financial institutions, aviation, oil and gas, mining and ports. Our market leading businesses, broad customer base and £3.5bn per annum contract pipeline give us confidence in the outlook for the group,” he added.
