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August 28, 2012 9:47 am
G4S, the world’s biggest security company by sales, was left counting the price of the Olympics fiasco as it revealed its pipeline of UK government outsourcing contracts had fallen by nearly £200m in the past three months.
The FTSE 100 company said it had reduced its estimate of UK government work from £760m to £565m in the three months since May 22 as the reputational damage that stemmed from its failure to provide 10,400 security guards for the Olympics took its toll.
The army was called in to shore up security after the company was able to provide only 7,800 personnel.
In July, G4S withdrew from the competition to provide millions of pounds of contracts for assessing state benefits claimants because it would have needed to mobilise staff at the same time as it grappled with the Games crisis.
Three police forces – Bedfordshire, Cambridgeshire and Hertfordshire – also delayed outsourcing more than 1,000 jobs to the company amid allegations that the private sector could not be relied on to deliver public services.
Nick Buckles, chief executive, admitted it was unclear whether the government would be able to face down public concern over the group’s performance at the Olympics and award the company any of nine prison contracts due to be announced in the autumn. “That is the question,” he said.
But he was optimistic the successful delivery of 5,000 staff to the Paralympics, starting on Wednesday, would ameliorate any concerns.
“Clearly the reputation is down in the UK, but if we deliver a good Paralympics we are quite confident the underlying business won’t be affected,” he said.
The decline in the pipeline of government work came on top of a £50m loss on the £284m Olympics contract, which had been expected to deliver a £12m profit.
This, along with a £24m hit from restructuring costs, dragged pre-tax profits in the six months to July 31 down from £151m to £61m.
The restructuring includes the loss of 1,110 jobs from the group’s 657,000-strong global workforce, mostly outside the UK.
Mr Buckles said he was “hopeful” he would retain his job after 28 years with the company.
Asked whether he was confident of shareholder support, he said: “I don’t know; we’ll wait and see. It’s not my style to be arrogant, but the company has grown seven-fold in the past 10 years.”
An independent report into G4S’s handling of the Olympics contract by PwC, commissioned by the board and scheduled to be published by the end of September, could prove critical to Mr Buckles’ future, as could a second grilling by a parliamentary committee on September 11.
The company said it had delivered 83 per cent of the security shifts demanded under the Olympics contract and gave reassurances over the Paralympics.
G4S shares fell as much as 4.4 per cent on Tuesday in London but closed 1.9 per cent lower at 261p. The stock has declined 4.9 per cent this year.
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