G4S faces more hurdles in the coming year

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SECURITY group G4S dashed hopes of a speedy recovery from its Olympics troubles yesterday. The company warned that this year will be just as challenging as 2012.

The continued strain from weak European markets and pricing pressure on its cash transportation arm in the UK and Ireland have squeezed margins. The warning, which caused G4S shares to slump, came as another blow to the outsourcing company after it was left nursing losses of £88m on the bungled contract relating to last year’s London Olympics.

It will also increase the pressure on chief executive Nick Buckles, who survived the Games fiasco in a year he was paid £1.2m. In yesterday’s update, G4S said revenues were 7.7 per cent higher than a year ago in the first three months of 2013, but its operating margin was around 0.6 per cent lower. While the group’s developing markets business, which accounts for more than a third of profits, is expected to continue growing, the company painted a more uncertain picture in established markets.

It said: “The macro-economic environment has affected developed markets margins and, despite active business improvement plans which are being implemented, group margins are expected to continue to be impacted adversely in the short term.”

Start-up costs associated with new UK Government contracts and slower growth in North America have also affected the company. G4S is the largest employer on the London Stock Exchange with more than 620,000 staff worldwide.

Its reputation took a hamm-ering after the botched Olympics contract, when the group only fulfilled 83 per cent of contracted shifts. Army personnel were called in to help with security. The fiasco led to the resignation of two senior directors. Recent contract deals have included facilities management agreement for the Ministry of Justice.