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G4S profits plunge as it forks out £100mln to settle California lawsuit

More than 13,000 security guards claimed they weren’t provided with meal and rest breaks between 2001-2010
g4s security guard
The £100mln charge is G4S’s “best estimate” of what the California lawsuit bill will be

Profits plunged at G4S PLC (LON:GFS) last year after the security services giant was forced to set aside £100mln to settle a class action lawsuit in California.

Back in January, judges in Los Angeles ruled that thousands of security guards had been underpaid for a nine-year period between 2001 and 2010.

The decision means that G4S will have to shell out between £75-100mln to settle the claim, although it has decided to take a provision of £100mln as its “best estimate” of the total costs.

READ: G4S to pay at least US$100mln to settle class action lawsuit

Revenue fell 4% to £7.51bn in the 12 months ended 31 December (2017: £7.83bn), while earnings plunged 65% to £82mln (2017: £237mln).

The drop-off in profitability reflected the California settlement and a £35mln charge for pension equalisation regulation in the UK.

“Our Secure Solutions business delivered underlying revenue growth of 3% and profit margins rose from 6.2% to 6.5% reflecting the benefits of commercial discipline, growth in the sale of technology-enabled security and productivity gains,” said chief executive Ashley Almanza.

“As expected, this was offset by the effect of challenging trading conditions in a number of Cash Solutions markets and a strong comparative performance in Retail Cash Solutions in 2017. Overall, the group delivered underlying earnings in line with the previous year”.

He added: “Our sales wins in the second half of 2018 have underpinned a good start to the year and this, together with growing technology-enabled services in both our cash and security businesses, supports a positive outlook for 2019.”

G4S shares fell 3.3% to 201.5p at the opening bell on Tuesday.

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