G4S takes £88m hit on Olympics
G4S has taken an £88 million hit for its failure to provide enough security guards for the London 2012 Olympics after striking a deal with the government in its long-running dispute over the management fee.
The world’s biggest security company had expected to make a £10 million profit on the £284 million trophy contract. However chief executive Nick Buckles said this had turned to a £88 million loss yesterday after it agreed to cut the management fee from £57 million to £31 million in the wake of pressure from MPs and the public.
Although the loss was higher than the £50 million estimated, G4S will be hoping the deal with the London Organising Committee of the Olympic and Paralympic Games will draw a line under the high-profile contract failure. G4S’s shares rose on news of the settlement, compounding a 10 per cent gain over the past three months.
In December, the Financial Times revealed that the company had been shortlisted to run call centres for Britain’s department for work and pensions, eradicating concerns that the Olympics failure would hurt the group’s ability to win government contracts.
Chief financial officer Neil Wood said the overall agreement reduced the payment due to G4S by £85 million, comprising £48 million to cover step-in costs by police and military and £37 million primarily for project management failures.
G4S said it also would take a £11 million charge for charitable donations and external fees and a further £7 million relating to the cost of sponsorship and marketing. These costs will be taken in the 2012 accounts as an exceptional charge.
The fiasco has claimed the scalps of two directors, although Mr Buckles remains after winning shareholder support.
G4S, which operates in more than 125 countries, earns about 10 per cent of revenues from government work in Britain, where it runs welfare-to-work services, electronic tagging services and prisons. – Copyright The Financial Times Limited 2013