LONDON (Reuters) - G4S (GFS.L) plans to shake up the weakest parts of its business and lay off up to 400 UK staff as the new boss of the world’s largest security firm by revenue battles to restore its reputation tarnished by a series of high-profile blunders.
Chief Executive Ashley Almanza said on Tuesday he would sell or restructure 35 poorly performing businesses, accounting for about one twentieth of group turnover, with any disposal proceeds earmarked for higher-growth emerging markets.
G4S, which along with rival Serco (SRP.L) is being investigated by Britain’s Serious Fraud Office over electronic tagging contracts, acknowledged that it has suffered “significant reputational damage.”
The company, whose mistakes include its failure to properly staff the 2012 London Olympics, last week denied an allegation that its employees had abused inmates at a prison it ran in South Africa.
G4S also said on Tuesday that trading in its fourth quarter was expected to remain challenging in Europe and the United States, sending its shares down 2.2 percent in a slightly lower market .FTSE.
Almanza, a former executive at oil and gas firm BG Group BG.L who was promoted from finance chief in June, said G4S had been damaged by its short-term focus and would now manage the business for the long term, reviewing its regions monthly, and improving customer services and technology.
“G4S has strong fundamentals and these will be improved by changes to the way we manage the business,” he said. There were significant opportunities to grow in emerging markets, which already make up over 40 percent of profit, he said.
The 35 underperforming businesses to be reviewed in the next year made around 400 million pounds of G4S’s 7.3 billion pound revenue last year and have an average operating profit margin of 3 percent, below the 5.5 percent for the group at the half year ended June. Almanza would not comment on where they were located.
The firm, which runs services from immigration centers to guarding tennis players at Wimbledon, also said it would invest 15-20 million pounds in its operations to help achieve an annual organic growth target of 5-8 percent.
G4S, which issued a profit warning in May, said organic revenue rose by 4.8 percent in the nine months to September 30, although margin pressure kept adjusted pretax profit in line with the same period a year ago.
In August, just a few months into his new role, Almanza raised 348 million pounds through a share sale and earmarked more cash to come from disposals to help avoid a costly credit-rating downgrade, improve profit margins and fund expansion.
He also announced a 30-35 million pound restructuring of some European businesses and its UK and Ireland cash security arm.
On Tuesday he said the program was progressing well with price rises agreed with major clients, and branch closures and the removal of 250-400 UK posts to come in the next 18 months.
The firm, whose business spans some 120 countries, has around 45,000 staff in the UK.
Speculation that Almanza’s overhaul might lead to a break-up of G4S cooled last week when the firm rejected a $2.5 billion offer for its cash security business, saying the unit was integral to its strategic plans.
G4S said it had brought six new directors on the board since June last year and made five changes to its executive team in an effort to give clients more confidence in its ability to manage the business.
($1 = 0.6269 British pounds)
Additional reporting by Brenda Goh; Editing by Erica Billingham