G4S showed it’s suffering from the Government’s struggles with border control yesterday as spiralling numbers of asylum seekers contributed to the scandal-struck security giant being forced to set aside £45m to pay for state contracts.
G4S signed a deal to organise transport and accommodation for asylum applicants back in 2012 but surging numbers of people coming to the UK mean it is having to spend an extra £5m a year for the remaining five years of the Compass contract.
It and rival Serco, which is also involved in Compass, have had to put asylum seekers up in hotels because dedicated housing and hostels are oversubscribed. The National Audit Office has also found both companies were taking on housing stock without inspecting it and failed to provide the vulnerable with adequate accommodation.
Last year the UK’s immigration stood at 298,000 – some 54,000 higher than when the Coalition government took charge – and asylum numbers were also up. G4S is now writing off £45m “in provisions for legacy UK Government contracts” including Compass. Its chief executive Ashley Almanza has admitted the company is having to pay out for “contracts we have entered historically [that] we would not enter into today”.
The latest writedown comes on top of the £136m provision the outsourcer had to make in 2013, mostly for the tagging scandal, when G4S had to repay the Government £110m for charging the taxpayer for claiming to tag criminals who were actually dead or in prison.
Setting aside that extra £45m yesterday overshadowed G4S’s return to the black, as it posted a pre-tax profit of £148m for 2014, compared with a £190m loss a year earlier. It enjoyed strong growth in North America and new deals in emerging markets, which helped revenues there rise 7.7 per cent, but UK and Ireland earnings fell 1.3 per cent as the outsourcer’s troubles at home continue.
G4S was keen to emphasise 80 per cent of its business now comes from outside of the UK. Mr Almanza has sold eight different G4S businesses in his 18 months at the helm, and hoisted a “for sale” sign over another 20. Lewis Sturdy, at London Capital Group, said: “The security group will have to increase provisions for UK contracts by £45m but at least G4S has returned to a profit and ahead of expectations. Having survived a very public dragging through the mud around the 2012 Olympics, the share price has quietly returned to near the £3 level and multi-year highs.”
Keith Bowman, at Hargreaves Lansdown Stockbrokers, added: “In all, G4S is back on firmer ground… while a full recovery is not yet in sight, the new management team is making its mark.”
Its shares were down 4.9p to 286.1p.Reuse content