Olympics Fiasco: G4S Profits Fall By A Third

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OLPCL.BO33.60-0.15
GFS.L242.10-1.70

Annual profits fell by a worse than expected 32% at G4S (LSE: GFS.L - news) , the firm at the centre of last year's Olympics security fiasco.

Pre-tax profit for 2012 dropped to £175m from £257m the previous year as a result of a £70m loss on its contract to supply security personnel to the Olympic (BSE: OLPCL.BO - news) and Paralympic Games in London.

The Armed Forces had to be called in to cover staff shortfalls when G4S admitted just ahead of the Games that it had failed to hire enough guards to cover its contract.

It had been obliged to provide 10,400 people but managed to fulfil 83% of its contracted shifts.

The failures led to chief operating officer David Taylor-Smith and Ian Horseman Sewell, who was head of global events, to quit their jobs while chief executive Nick Buckles remained in his post.

Mr Buckles told MPs on the Home Affairs Select Committee in July that the staffing failure was a fiasco and a "humiliating shambles".

A report for G4S by auditors PwC found that monitoring and tracking of the security workforce was inadequate and that management failed to appreciate the scale and exact nature of the project.

The £70m loss on the contract, along with additional related costs of £18m, was taken as an exceptional charge in its 2012 accounts.

Despite the PR disaster over the Olympics, the group has shown signs of recovery in recent months, winning British government and commercial contracts, and has spoken of receiving government assurances that its Olympic failure would not hinder its chances of winning work in future.

Underlying revenue rose 8.1% in 2012 to £7.3bn, with improved organic growth of 7%. The group's emerging markets division performed strongly with revenue up 15%.

Its share price fell by 1.3% in early trading on Wednesday.

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