World’s largest security company loses 11% as it warns on profit margins
Shares in G4S, the company that bungled the security of last year’s Olympics, slumped 11% on Tuesday morning, after it said profit margins would be lower than expected in 2013 because of a difficult first quarter in Europe.
The news will pile further pressure on the firm’s chief executive, Nick Buckles, who was forced to appear before MPs last summer to admit the operation for the 2012 Games was a “humiliating shambles”.
The world’s largest 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% in the three months to the end of March, and would probably stay lower all year.
G4S is still struggling to recover from 2012 when profits collapsed by a third after the security contractor was forced to pay out £88m over its failure to supply enough guards for the London 2012 Olympics.
The company blamed the drop in margins on challenging conditions in continental Europe. It said prices in its cash solutions arm, which transports and stores money for businesses in the UK and Ireland, were under pressure. G4S was also hit by a £6m charge in Africa after some clients did not pay their bills. It said the proposed closure of 30 prisons in the Netherlands would also have an impact on the business.
“For all of these reasons, and despite ongoing business improvement plans, the first quarter margin trends are expected to continue for the full year,” the company said in a statement.
Overall, revenues grew by 7.5% at constant exchange rates in the first quarter. Organic growth, which strips out the impact of acquisitions, rose by 6% in the group as a whole and by 12% in developing markets.
Caroline de La Soujeole of Cantor Research retained a buy recommendation on the stock, despite the “disappointing” news, citing G4S’s attractive operational and geographical profile. The shares tumbled 32.5p to 273p.