Security firm G4S (LON:GFS) has reported a hit of £50 million from its debacle at the Olympic Games, contributing to a 60 per cent collapse in its pre-tax profit.
The group recorded a profit from continuing operations before taxation of £61 million for the six months to 30 June, a fall of nearly two-thirds from the £151 million delivered for the same period in 2011.
Nick Buckles, the G4S chief executive, remarked that he was ‘deeply disappointed that we had significant issues with the London 2012 Olympics contract’.
However, he was keen to point to other financial metrics. ‘Underlying organic growth in the first half has improved to over 5 per cent overall’, Buckles noted, ‘driven by a strong performance in developing markets which grew by over 10 per cent.’
Indeed, the group’s underlying turnover climbed 5.8 per cent to £3.9 billion. The firm additionally cited a global contract pipeline worth £3.8 billion a year, including what it termed ‘the strongest visible pipeline in US commercial sector on record’.
Despite this, the company has felt compelled to slash costs. It has cut 1,100 jobs, incurring a charge of £24 million in the first half. Together with the Olympic loss, this accounted for the majority of the profit drop.
G4S expects ‘up to £10 million further costs’ from restructuring before the end of the year. It hopes to save £30 million a year as a result.
The stock market responded adversely to the performance, as the G4S share price slipped nearly 2.5 per cent to 259.7p.
But at least one person other than Buckles rushed to defend G4S. Neil Woodford, a fund manager at Invesco Perpetual, likened the treatment of the group to a ‘medieval persecution'.
As manager of an income fund, Woodford will be relieved that G4S has committed to maintain its interim dividend level at 3.42p.