* G4S charged for monitoring criminals who were dead or in jail
* 2013 operating profit 442 mln stg vs f'cast 455 mln stg
* Company outlines 386 mln stg in charges
* Top FTSE 100 faller with shares down 7 pct (Recasts with tagging repayment, comments)
LONDON, March 12 (Reuters) - The world's biggest security firm G4S is to repay 108.9 million pounds ($181 million) to the British government after overcharging it on a contract to tag criminals, raising the prospect that a ban on new work could be lifted.
G4S generates almost 10 percent of its 7.4 billion pound annual revenues from the UK government and the breakdown in their relationship has been a key concern for investors alongside wider worries about the group's reputation.
After a disastrous 2012, when the firm failed to provide enough guards for the London Olympics, G4S has overhauled its management, making 28 senior appointments, and is embarking on a restructuring and investment programme to revive its fortunes.
But 2013 brought more scandal with the tagging fiasco - when the firm was found to have charged for monitoring criminals who were dead, in prison or had not been tagged at all - leading to a ban since last July on new UK government work and an ongoing investigation into it by the Serious Fraud Office (SFO).
The government said on Wednesday G4S would repay 108.9 million pounds plus tax. While it did not say a ban on new work had been lifted, analysts said the repayment moved G4S closer to achieving that.
"It removes one of the key uncertainties there is hanging over the stock," said Cantor Fitzgerald analyst Caroline de La Soujeole, adding 2013 results were disappointing. "It brings to an end a long saga for G4S, which can now look ahead."
The repayment figure was much higher than the 24 million pounds G4S had offered in November, and was one of a few hefty expenses outlined on Wednesday in its 2013 annual results, which saw profits miss forecasts.
"We believe that the conclusion of this matter, together with the actions we are developing on corporate renewal, will enable us to maintain our position as a strategic supplier to government," said G4S Chief Executive Ashley Almanza.
Shares in G4S, which runs services from cash transportation and airport security to guarding tennis players at Wimbledon, were down 7 percent at 228.4 pence at 1315 GMT as analysts said they expected 2014 profit forecasts to be cut. The firm was the biggest faller on the FTSE 100, which was down 1.1 percent.
CHARGES HIT PROFIT
The company posted a 2.8 percent rise in 2013 underlying operating profit against restated 2012 figures, to 442 million pounds - missing analyst forecasts of 455 million - as strong emerging markets growth was offset by lower revenues in Europe and squeezed U.S. federal spending.
Including 386 million pounds of charges related to restructuring and reviews of asset and contracts, such as the tagging deal, group operating profit plunged 85 percent to 56 million pounds.
Almanza, CEO since June, has moved to try to revive the firm's credibility, increasing scrutiny on contract risks and strengthening management, while boosting its balance sheet with a share sale, restructuring its UK and Ireland cash security arm and identifying 35 units to improve or sell in favour of investment in high-growth developing markets.
The group - the world's No.1 security firm by revenue, ahead of Securitas - said the figure of 35 units had now come down to 26 after it sold two businesses, closed four loss-making ones and identified three to improve.
But while Almanza has much to fix internally, restoring the group's reputation may be more tricky. The tagging deal is still the focus of an SFO investigation and the firm is part of Australian probe into deadly clashes at a detention centre in Papua New Guinea where it provided security.
Group revenue for 2013 grew 5.8 percent to 7.43 billion pounds, or 4.7 percent excluding the impact of acquisitions. However underlying operating margin fell 10 basis points to 6.0 percent, due to pressures in the UK and Europe.
In December, rival Serco, which also overcharged the UK government on its slightly smaller tagging deal, repaid around 70 million pounds and incurred other significant costs before later receiving clearance to win new government work following an overhaul of its business.
($1 = 0.6014 British Pounds) (Editing by Kate Holton and Pravin Char)