G4S Shares Tumble

Posted on 12 May, 2013 by MOVEHUT

Shares in G4S, the company that made such a mess of providing the security for last year’s Olympics, dropped 11 per cent on Tuesday morning, after it said profit margins would be lower than anticipated in 2013 because of a difficult first quarter in Europe.

The news will pile more pressure on the company’s chief executive, Nick Buckles, who was hauled before MPs last summer to admit the operation for the 2012 Games was a “humiliating shambles”.

The world’s leading security company, which provides services ranging from manned security guards, to cash transportation and running prisons, pulled forward its trading update to say that group margins would be down 0.6 per cent in the three months to the end of March, and most likely stay lower all year.

G4S is still struggling to recover from 2012 when profits fell by a third after the security contractor was forced to pay out £88m over its failure to supply sufficient guards for the London 2012 Olympics.

The group blamed the drop in margins on challenging conditions in mainland Europe. It said prices in its cash solutions division, which transports and stores money for companies in Ireland and the UK were under intense pressure. The security company was also hit by a £6m charge in Africa after some clients did not pay their bills. It said the planned closure of 30 prisons in the Netherlands would also have an impact on the business.

The company said in a statement: “For all of these reasons, and despite ongoing business improvement plans, the first quarter margin trends are expected to continue for the full year.”

On the whole, profits grew 7.5 per cent at fixed exchange rates in the first quarter. Organic growth, which strips out the impact of procurement, rose by 6 per cent in the group as a whole and by 12 per cent in developing markets.

Caroline de La Soujeole of Cantor Research maintained a buy recommendation on the stock, despite the “disappointing” news, citing G4S’s attractive operational and geographical profile. The shares plummeted 32.5p to 273p.



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