Security firm counting cost of Olympics debacle
G4S, THE world’s biggest security company by sales, has been left counting the price of the Olympics fiasco, as it revealed its pipeline of UK government outsourcing contracts had fallen by nearly £200 million in the past three months.
The FTSE100 company said yesterday it had reduced its estimate of UK government work from £760 million to £565 million in the three months since May 22nd as the reputational damage that stemmed from its failure to provide 10,400 security guards for the London Olympics took its toll.
The army was called in to shore up security after G4S was able to provide only 7,800 of the required 10,400 guards.
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 Olympics crisis.
Three police forces – in Bedfordshire, Cambridgeshire and Hertfordshire police – also delayed outsourcing more than 1,000 police jobs to G4S amid allegations that the private sector could not be relied on to deliver public services.
Chief executive Nick Buckles admitted it was unclear if 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.
The decline in government work came on top of a £50 million loss on the £284 million Olympics contract, which had been expected to deliver a £12 million profit. This, along with a £24 million hit from restructuring costs, dragged pretax profits in the six months to the end of July down, from £151 million to £61 million.
The restructuring includes the loss of 1,110 jobs from the group’s 657,000-strong global workforce, mostly outside of the UK. A contrite Mr Buckles said he was “hopeful” he would retain his job after 28 years with the company.
Asked if 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.” – Copyright The Financial Times Limited 2012