G4S warns over asylum seekers contract as pre-tax profits rise to £327m
Outsourcing giant G4S has warned that it could lose a further £57 million if the Government extends a key contract to house surging numbers of asylum seekers.
The firm revealed a £31 million provision on the loss-making contract, up £20 million, as the number of asylum seekers it handled lifted by 9.6% 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 £57 million.
Underlying group pre-tax profits rose 14.7% to £327 million in 2015 as the business signed new contracts across the globe and saw revenues lift 4% to £6.4 billion over the same period.
But statutory profits fell to £8 million, from £145 million a year ago, reflecting large writedowns and charges, sending shares down by 12%.
G4S pledged to sell more businesses and booked £255 million 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 3% 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 £65 million 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 £400 million 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 14% to £2.4 billion in 2015, including contract retention rates of over 90%.
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 8.6% in emerging markets, lifted 5.8% in the US and rose by 3% 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."