Refugee crisis: Surge in asylum seeker numbers hits G4S profits

G4S signed the Compass contract to house asylum-seekers in 2012, but the deal has been plagued by cost overruns

G4S security (AFP)

A rapid rise in the number of asylum-seekers reaching the UK landed outsourcer G4S with a potential £77m bill yesterday, as the company’s annual profits were virtually wiped out. G4S signed the Compass contract to house asylum-seekers in 2012, but the deal has been plagued by cost overruns.

Ashley Almanza, the chief executive, said the firm was housing 18,000 people after a “material increase” between November and January. This was up almost 10 per cent on a year earlier and around 50 per cent higher than the original assumptions of the deal. “We are way above what we thought we would be dealing with,” he said. As a result, the company has swelled loss provisions by £20m to £31m under the five-year term of the contract, which runs to August next year. If the Home Office decides to extend the contract by an extra two years, then G4S will make an extra £57m in provisions. That would take total losses on the deal to £107m.

Mr Almanza took over in 2013 in the wake of embarrassing fiascos on deals such as the supply of security guards to the London 2012 Olympics.

“More people make these journeys over the summer months, and they arrive on our shores at the back end of the year. That explains the spike in the number of people arriving,” he said.

G4S’s financial burdens under the Compass deal could increase over the next year as Home Office estimates suggest a 15 per cent rise in asylum-seekers this year.

The City took a dim view of the results as G4S’s bottom-line profits tumbled from £145m to just £8m, following further hits on a Private Finance Initiative contract, restructuring costs, goodwill, and losses on businesses to be sold. Revenues of £6.4bn were lower than expected while net debts of £1.78bn also spooked traders.

The shares tumbled 25.7p to 187p, or 12.08 per cent, wiping around £400m off the market value of the company. Mr Almanza hopes to raise up to £350m by selling off businesses such as the UK utilities arm and its Israeli operations, with up to 61 businesses on the block, as well as clearing up the legacy contracts.