G4S gaining more security with rise in government outsourcing

The group is looking forward to increasing government security work

after its 2009 profits beat market expectations.

"With the fiscal constraints imposed on the British government the opportunity is there for us to help them reduce their costs," said chief executive Nick Buckles. "We grew our government business by 16 per cent last year. It normally grows by around 10 per cent and there's no reason why 2010 cannot be similar and 2011 even better."

The company – the largest employer quoted on the London Stock Exchange with 595,000 staff in more than 110 countries – yesterday posted a 20 per cent rise in 2009 pre-tax profits to 417.1m. Market expectations for pre-tax profits had ranged from 293m to 416m.

Turnover lifted 7.4 per cent to 7bn with the figure up 3.7 per cent on a like-for-like basis. This was lower than the 9.5 per cent growth reported in 2008 as low inflation limited the company's ability to increase prices. But the group's expectation that 2010 organic growth will be "broadly similar" to 2009 disappointed analysts.

G4S provides services ranging from cash transportation to running prisons.

In Yorkshire its operations include running HMP Wolds in East Yorkshire, and providing security services for all of the region's Crown and Magistrates' courts.

Contracts won during 2009 included the renewal of a national meter-reading contract for a major utility provider, running of two immigration detention centres for the UK Border Agency, at Brook House and Tinsley House near Gatwick.

It also won facilities management for the Olympic Delivery Authority and the Ministry of Defence, an extension to HMP Parc in South Wales, and the first contract to monitor offenders in Northern Ireland.

These contract wins helped it to 7.4 per cent organic revenue growth in the UK and Ireland, delivering profits of 97.4m and hiking margins by 8.5 per cent.

The company delivered "excellent" organic growth of 8.6 per cent in its new markets, driven by strong performance in Africa and the Middle East, where it is focusing on oil and gas, events and aviation. Contracts won during the year included Baghdad and Qatar airports, the FIFA World Club Cup in the United Arab Emirates and the Abu Dhabi and Macau Grand Prix. It is also currently working on several large oil and gas contracts in Papua New Guinea.

The business, formerly known as Group 4 Securicor, also hopes to benefit from new rules allowing foreign ownership of manned security firms in China, with licences expected to be issued in the second half of this year.

Over the year G4S spent 153.2m on acquisitions and Mr Buckles said he plans to spend another 100m to 150m on acquisitions this year, with a particular focus on Brazil.

G4S said it would pay a final dividend of 4.16p, making a total dividend of 7.18p, up 11.7 per cent on a year ago.

"G4S is likely to be a winner of more UK government outsourcing and we continue to see a strong showing from that region," said Seymour Pierce analyst Caroline de La Soujeole. "We believe there is still enough momentum to push the shares higher and raise our target price to 320p from 295p." But analysts also pointed to shrinking organic growth and said investors are unconvinced by the company's outlook.

"Organic growth was 2.2 per cent in the fourth quarter compared to 4.2 per cent in the first nine months," said Graham Brown, analyst at Evolution Securities.

"With growth shrinking, to say that growth in 2010 will be the same as in 2009, there's an impression that the risk might be on the low side rather than the high side."

The choice for yorkshire county cricket

G4S was recently awarded a three-year contract to provide stewarding and security services for Yorkshire County Cricket Club.

The contract will see G4S provide services on match days and year round for the club, which is based at Headingley Carnegie Cricket Ground. Services will include site security, pedestrian and vehicle searching, ticket checking and stewarding.

G4S Events managing director Mark Hamilton said: "This is an exciting contract for us and we are looking forward to working at such a prestigious cricket ground.

"We are confident that our wide range of event and security services offers Yorkshire County Cricket Club added value and will ensure a high level of service to the ground's visitors."

Under the deal, G4S will be responsible for the safety and security of around a quarter of one million cricket fans a year, including up to 17,000 thousand cricket fans on major match days.

Yorkshire CCC chief executive Stewart Regan said: "We were keen to employ a provider that could offer an all-round solution, one that went beyond traditional stewarding services, but also one with a local presence so that we can offer the highest standard of service to anyone visiting Headingley Carnegie Cricket Ground."