G4S Facing Extra £77m Asylum Seeker Bill

Shares (Berlin: DI6.BE - news) in outsourcing giant G4S (Copenhagen: G4S.CO - news) have fallen sharply after it revealed a surge in the number of asylum seekers it is contracted to look after could cost it an extra £77m.

The company is responsible for housing, feeding and transporting asylum seekers under a deal with the Home Office running until September next year.

It (Other OTC: ITGL - news) has already made a provision of around £11m in relation to the contract after updating its estimate of the number of people it would have to deal with in 2014.

But G4S has now increased this by £20m and said that should the contract be extended by the Government for another two years the bill will rise by a further £57m.

It said this was after it experienced "a significant increase in the number of new asylum seekers between November 2015 and January 2016". The number in its care had risen by 9.6% year-on-year.

G4S warned about the additional provision as it published annual results showing that underlying pre-tax profits for 2015 rose 15% to £327m though on a statutory basis they were 39% lower at £78m – after various charges as well as financing costs. Shares fell 12%.

Charges included £65m on "onerous" contracts plus restructuring costs of £44m and losses on businesses being sold of £40m.

G4S is being overhauled by chief executive Ashley Almanza who took over in 2013 following a troubled period including a prisoner tagging overcharging scandal and failing to provide adequate security for the London Olympics.

It expects to sell more businesses, with combined revenues of £400m, in the next 12 to 24 months, as it plans to exit UK children's services and US youth justice services.

Meanwhile, the company said the total value of the contracts it signed rose by more than 14% to £2.4bn in 2015. Revenues grew in all of its global regions – except the UK.

Mr Almanza said: "During 2015 we made substantial progress with the strategic and operational transformation of G4S.

"We continue to actively manage our onerous legacy contracts in the UK which were entered into prior to 2013. We have had to increase the provisions in relation to these contracts. We have also established robust controls governing new major contracts (Other OTC: UBGXF - news) ."