G4S takes 70 million pound loss to settle Olympics dispute
LONDON (Reuters) - G4S settled a months-long dispute with the organisers of the London Olympics, having failed to supply enough security guards for the 2012 Games, and said on Tuesday it will take a 70 million pound loss on the contract.
The world's No. 1 security firm said just weeks before the Games began that it could not provide all 10,400 guards needed for the event, forcing the government to call on military and police personnel to cover the shortfall.
G4S, which had to explain its failure to parliament and saw two directors resign after an internal report into the affair, had estimated the loss on the contract, worth about 240 million pounds, to be about 50 million pounds.
The firm, which has incurred penalties and paid for the emergency staff that were drafted in, said the difference was largely due to it waiving a larger chunk of its management fee.
"The UK Government is an important customer for the group and we felt that it was in all of our interests to bring this matter to a close in an equitable and professional manner without the need for lengthy legal proceedings," G4S Chief Executive Nick Buckles said on Tuesday, after months of wrangling with Games organisers LOCOG.
The group said it had also incurred additional costs of 18 million pounds relating to charitable donations, external fees, Games sponsorship and marketing. G4S had already provided for a 50 million pound charge at the half year and said all the costs would be taken in the 2012 accounts as an exceptional charge.
Shares in the FTSE 100-listed firm, which operates in more than 125 countries, rose 0.6 percent to 282 pence by 10:26 a.m.
"In some respects this announcement is positive in that it provides resolution to G4S's discussions with LOCOG and the uncertainty that surrounded the Olympics contract, and whilst the total cost to G4S is worse than they envisaged I think the market and we had assumed a number of around this order," Espirito Santo analyst David Brockton said.
G4S's shares have gained 10 percent over the last three months as the firm has shown signs of recovering from the blow to its reputation. It has won electronic tagging work at home and abroad and been appointed on a contact centre services framework for Britain's Department for Work and Pensions.
Earlier this month its new UK CEO Richard Morris told Reuters it was regaining customers' confidence and had been boosted by assurances across government - including its core Ministry of Justice client - that if it has the best bid, it would win future contracts.
The group, which is targeting British police support work and an electronic tagging contract in England and Wales this year, derives about 10 percent of its expected 8 billion pound 2011/12 turnover from the UK government.
It is aiming to grow its emerging markets revenue from 30 to 50 percent by 2019.
(Editing by Louise Ireland)
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