March 9, 2016 / 8:03 AM / 2 years ago

UPDATE 2-G4S to sell more businesses as costs of UK asylum services rise

* No plans to exit loss-making UK asylum contract

* Shares fall to lowest level in seven years

* Aims to sell/exit 42 businesses under restructuring plan (Adds CEO comments, share price)

By Li-mei Hoang

LONDON, March 9 (Reuters) - G4S, the world’s largest security firm, said on Wednesday it would sell more businesses in the next two years after it took an additional 65 million pound ($93 mln) charge on loss-making British government contracts, including services for asylum seekers.

Shares in G4S plunged more than 12 percent to seven-year lows after the company said an increase in the number of asylum seekers between November and January forced it to lift its provision on its contract to provide accommodation for asylum seekers by 20 million pounds.

G4S is one of three companies providing such services in Britain, but Chief Executive Ashley Almanza said it did not plan to exit the contract, which is due to end in August 2017, early.

“We have no intention of getting out of the contract,” Almanza told reporters. “We are there, we are working extremely closely and I think, well with the customer, to deliver this contract in extremely challenging conditions.”

The company, which runs services ranging from moving cash to protecting ships, is selling weak businesses under a restructuring programme as it attempts to recover from contract problems in Britain.

It said it would exit its G4S Israel, UK Utility services, U.S. Youth Justice services and UK Children’s services contracts, which along with 38 other divisions previously announced, would raise 250-350 million pounds.

The company posted a 5.7 percent rise in underlying profit for 2015 to 427 million pounds, helped by stronger demand in emerging markets and North America, where revenues grew by 8.6 percent and 5.8 percent respectively.

Continental Europe returned to growth, posting a rise of 2.6 percent in revenue, but revenue in Britain fell by 3 percent and G4S increased provisions on a number of its other legacy contracts.

“Full-year results are broadly in line with expectations ... although again messy as there are more disposals, onerous contract provisions and exceptionals,” said RBC analysts, who have a ‘underperform’ rating on the stock.

G4S, whose shares have now fallen 41 percent from their peak in May 2013, has so far identified 65 businesses for sale or closure, with a combined revenue of 1.6 billion pounds, since it began its restructuring programme in November 2013.

“In the current economic environment we expect medium-term demand for our services to grow by around 4-6 percent per annum,” said Almanza.

The company posted group revenue for the year ended Dec. 31 of 6.4 billion pounds, up 4 percent from a year earlier. ($1 = 0.7028 pounds) (Editing by Paul Sandle and Susan Fenton)

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