G4S tumbles as profit and revenue drop on onerous contracts, restructuring

Pre-tax profit fell to £78m from £128m in 2014 as the company took a hit from a £66m impairment charge related to a business in Estonia and a number of businesses held for sale, onerous contract provisions and restructuring costs.

G4S highlighted contract provisions of £65m, restructuring of £44m, losses on businesses being sold or closed of £40m and non-cash charges of £106m relating to the amortisation/impairment of goodwill.

Meanwhile, revenue dropped to £6.86bn from £6.89bn the previous year and the company said it will pay a final dividend of 5.82p per share, unchanged from last year, taking its full dividend for the year up 1.8% to 9.41p.

Chief executive officer Ashley Almanza said: “During 2015 we made substantial progress with the strategic and operational transformation of G4S. Our portfolio management programme combined with our investment in sales, innovation and re-structuring is reflected in the results of our continuing operations where the group's revenues rose by 4% and underlying earnings rose by 14%.

“We continue to actively manage our onerous legacy contracts in the UK which were entered into prior to 2013. We have had to increase the provisions in relation to these contracts. We have also established robust controls governing new major contracts.”

G4S cautioned that it may lose a further £57m if the UK government decides to extend a contract to house asylum seekers in Britain.

Under the UK Compass asylum seeker contract with the Home Office, G4S provides accommodation, transportation and subsistence services for asylum seekers while their claims are being processed.

This contract began in 2012 and runs to 1 September 2017, with a potential extension of a further two years.

The company noted a large increase in the number of new asylum seekers between November 2015 and January 2016, which pushed the number of asylum seekers in its care up by 9.6% year-on-year.

It said it has updated the Compass provision based on its best estimate of the increase in asylum seekers assigned to G4S, the availability of suitable accommodation approved by local authorities and the speed of processing of applications by the immigration authority.

To date, the Compass contract has not been extended and the onerous contract provision has been increased by £20m to £31m for the period to August 2017.

However, if the contract is extended to August 2019, a further provision for £57m would be required, the group said.

At 0925 GMT, G4S shares were down 12% to 186.90p.