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Tagging scandal hits Serco profits
Updated 12:25pm Wednesday 12th March 2014 in Business
SECURITY group G4S has slumped to a £170m pre-tax loss as it took a major hit from the cost of settling a scandal in which it overcharged taxpayers for the electronic tagging of offenders.
The FTSE 100 group fell into the red after an extremely challenging period as earnings dropped for a second year in a row following the Olympics fiasco of 2012, which saw them reduced to £158m.
It said it was still in constructive discussions with the Government over the tagging affair - four months after ministers rejected a £24.1m settlement offer. Rival Serco has since agreed a £68.5m settlement.
A review by G4S of 163 global contracts, which included a provision for the UK tagging contract, calculated a £136m hit to the balance sheet.
The charge was part of £386m in one-off costs the company said it faced, including the result of a review of its assets and liabilities and the costs of restructuring.
There had been speculation that the company would announce a £100m deal with ministers over the tagging scandal - covering repayments to the Treasury and the costs of investigations - as it published annual results today.
But the release of the figures was delayed, and the company cancelled a scheduled conference call for journalists to ask executives about the results. Shares were down 5 per cent.
Chief executive Ashley Almanza said in a statement: "This has been an extremely challenging year for G4S. We have taken clear action to address long-standing issues and have introduced wide-ranging changes to strengthen our business.
"We can now look to the future with increasing confidence, focusing on the growing demand for G4S services that underpins our plans to deliver sustainable, profitable growth."
Mr Almanza said demand for the groups services remained strong - particularly in emerging markets where revenues rose 16 per cent. But underlying profits were dented by falling revenue in Europe and lower US federal government spending.
"The company had also updated and reinforced awareness of our group values to ensure that we conduct our business to the highest standards," he added.
Meanwhile, G4S, disposed of a series of businesses around the world for £124m. Total group revenues rose 5.8 per cent to £7.43bn and in the UK and Ireland by 2.2 per cent to £1.65bn.
The company has been mired in scandal since the 2012 Olympics fiasco when it failed to provide all of its 10,400 contracted guards.
It had barely had time to recover before it emerged that, together with Serco, it had overcharged the Ministry of Justice for electronically monitoring offenders, some of whom were found to be dead, back in prison or overseas.
The Government has since announced that the tagging contract will be handed to outsourcing competitor Capita at the end of the financial year.
Mr Almanza took over from former boss Nick Buckles in June after his predecessor came under fire for the botched handling of the Olympics contract.
He has pledged a shake-up including the sell-off of underperforming businesses and hundreds of job losses.