Support services giant G4S has taken the full £50m charge in the first half against its Olympics security contract, which CE Nick Buckles was forced to admit in July had turned into a ‘humiliating shambles’ (see G4S taking up to £50m charge for Olympics fiasco). There is also the prospect of further charges after PwC’s review of the contract is concluded by the second half of September.
As it turned out, security at the Games went without a hitch, no doubt helped by the military being drafted in at the eleventh hour. G4S said that it had 8,000 people on site during peak periods of the Games - still 2,000 short of where it should have been – although it is confident it has enough security workforce for the Paralympic Games which start tomorrow.
G4S operates two business lines – secure solutions (effectively front line security services from security personnel to prison escorts) and cash solutions (collecting and delivering cash for businesses and ATMs). We are more interested in the secure solutions business, where G4S is keen to pursue bundled support services/business process services (BPS) opportunities and compete against established providers like Capita and Serco.
Its landmark win with Lincolnshire Police (see Lincolnshire Police signs £200m deal with G4S) started in April 2012, and G4S said is going ‘extremely smoothly with excellent service delivery and results’. Bedfordshire, Cambridgeshire and Hertfordshire forces are also now evaluating outsourcing support services to G4S.
G4S’ breadth of offerings and scale are helping it continue to grow organically in the UK and Ireland (UK&I). In H1 ended 30 June, UK&I underlying organic growth was 4%, and up 14% if the Olympics are included. The UK & Ireland margin however fell to 7.6% from 8.2% previously due to the Olympics contract.
Demand for bundled support services and IT/BPO continues to drive growth in the public sector, and there is no sign the Olympics debacle has dented confidence in G4S. Apparently UK government outsourcing opportunities remain strong, particularly in prisons, police, probation, health and facilities management. Meanwhile, in the UK commercial sector G4S had strong growth following a number of smart meter installation and data management contracts for major utility providers.
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