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Todays news for call for corporate manslaughter charges are a sign for me to sell, and I wont be buying back.
Analysts react Broker Seymour Pierce saw little in the statement to persuade it to change its view on the stock. "When G4S admitted that it would not be able to fulfil its contractual obligations with LOCOG [the London Olympics organising committee], we downgraded our recommendation to a HOLD. In our view, little has changed since. It is still too early to assess the full ramifications of the Olympics affair. Restoring its reputation with the UK government is crucial to G4S: circa 10% of group sales are generated from the UK's public sector government and just under half of the UK's bidding pipeline is for government work (45%). "We leave our FY12E [fiscal 2012] estimates unchanged. expecting adj PBT [adjusted profit before tax] £424.3m. The shares are trading on a prospective P/E [price/earnings ratio] of 11.9x. We reiterate our HOLD recommendation with a target price of 255p."
John Connolly, who joined G4S as Chairman on June 8th, said: "G4S has accepted responsibility for its failure to deliver fully on the Olympic contract. We apologise for this and we thank the military and the police for the vital roles they played in ensuring the delivery of a safe and secure Games. "Our review of the company's performance on this contract has been extremely thorough and, whilst the failures are largely specific to the very special nature of this contract, we will learn from mistakes made. We are taking actions in relation to both the management and governance of G4S to ensure we continue to deliver the highest standards of customer service and contract delivery across the group." Analysts react Broker Seymour Pierce saw little in the statement to persuade it to change its view on the stock.
s for Buckles's culpability - or lack of same - in the whole sorry mess, the report concludes that he should stay at the helm. "Whilst the CEO has ultimate responsibility for the company's performance, the review did not identify significant shortcomings in his performance or serious failings attributable to him in connection with the Olympic contract," the report says. The board has accepted the resignations, however, of Taylor-Smith and Horseman Sewell, and made some changes to the management structure as a result. Richard Morris, currently the Group Managing Director of G4S Care & Justice Services in the UK, has been appointed as the CEO for the UK Region. Kim Challis, who currently runs a portfolio of UK commercial and Government businesses, will take on direct line management responsibility for all government businesses in the UK - assuming the company still has any in the future - as CEO, G4S Government and Outsourcing Solutions; this is a new role created to enhance G4S's focus on "this critically important area of our business". The Group Executive committee will also be strengthened with the appointment of a Group Chief Operating Officer (COO), who will work closely with the CEO, with responsibilities to include a specific focus on operational procedures, risk management and quality customer service and delivery. The Group COO role will be an external appointment. The group is also in the process of interviewing potential non-executive directors, with a view to adding two to the board.
Nick Buckles, Group Chief Executive Officer (CEO) of security firm G4S, is to keep his job after dodging the blame in the group's internal report into the Olympics staffing fiasco. David Taylor-Smith, Chief Operating Officer and Regional Chief Executive Officer of UK and Africa, and Ian Horseman Sewell, Managing Director, G4S Global Events, have been thrown under the bus, however. G4S's report concluded that the firm should have been able to handle a project of the size and complexity of the London Olympic and Paralympic Games security contract, but it screwed up on the delivery. The report implies that there might have been elements of complacency in the firm's approach, as it failed to recognise structures and processes that had served it well in the past needed augmenting for the Olympic contract. The monitoring and tracking of the security workforce, management information and the project management framework and practices were ineffective to address the scale, complexities and dependencies of the Olympic contract, the report concludes. By the time G4S realised there was a massive problem it was too late to do much about it except ask for outside help. That came in the form of additional military and police. G4S attempted to repair some of its battered reputation by highlighting the "substantial contribution from the thousands of G4S employees" who worked alongside military personnel and the police, "which led to a safe and secure games with continuously positive ratings on venue security from games visitors."
On Friday, the Home Affairs Committee released its report on G4S’s Olympics security fiasco. It concluded that the group should forego its £57m management fee after the Army was called in to meet London 2012’s staffing requirements. This was in line with expectations, after G4S guided to a £50m loss. However, the most surprising news on Friday was positive. G4S has won a government contract to manage electronic tagging of offenders in Scotland. The contract will last five years and its shares edged higher on the first piece of upbeat news for some time. G4S also unveiled a new acquisition last week – Brazilian security provider Vanguarda. The focus on developing markets is key to the company’s future – and is likely to be the main driver of the group’s long-term recovery from recent events. By 2019, 50% of the global security market is expected to be in developing nations. Globally, G4S remains the market leader in terms of security services, having 8% of the market compared with closest rival Securitas, with 6%. The shares are trading on a December 2012 earnings multiple of 11.7 times, falling to 10.2 and they look fairly valued, given the increased risk profile. However, even if the worst happens with UK government business, its moves into countries such as Brazil should boost medium-term growth. Hold, says Questor.
I work along side a lot of G4S who were previously reliance staff - things are not going well with numerous G4S managers in the Scottish prisoner escort business been given the sack for huge losses in just several months. There are currently meetings on going with the Scottish Exec and Reliance have been asked to resubmit a tender....I fear this mismanagement may be the tip of the iceberg. When I am convinced that management is capable then I will be back here as I see big worldwide potential but only when the running of the Company is sorted out. GL all
The Home Affairs Committee, the group of MPs investigating G4S's failure to fulfil all of its Olympic Games contractual requirements, has called on the security firm to waive its fee. "G4S should waive its £57m management fee and also compensate its staff and prospective staff who it treated in a cavalier fashion," the damning report says. G4S released a penitent statement following the publication of the report and said its own investigation into "what went wrong with the execution of the contract and specifically why the contract execution issues were not identified on a more timely basis" is close to completion. G4S has already revealed that it expects to swallow a £50m-or-so loss on the contract. This figure includes an estimate for the additional costs incurred for the deployment of the increased military and police and penalties and liabilities due under the terms of the contract. It has also made clear, perhaps with half an eye on the fact that it will be bidding for lots more government contracts in the future, that the British taxpayer will not bear any additional costs. The group did quibble with the notion that the £57m "management fee" cited by the Home Affairs Committee (HAC) is a profit. "It relates substantially to real costs which have been incurred such as wages, property and IT expenditure," the group explained, adding that the final financial settlement is currently under discussion with LOCOG, the body which organised the London Olympic Games.
Nick Buckles yesterday staked his future at G4S on the findings of an independent probe into the firm's Olympic failures. The chief executive could draw his 28-year career with the group to a close if he is found to be accountable for the company's failure to provide 10,000 guards for the Olympics. It came as Games organisers Locog laid out the firm's catalogue of failings before MPs. On its worst day, G4S provided less than two thirds of the required staff numbers, Locog's chief executive Paul Deighton told the Home Affairs Select Committee. During the Games more than 60% of venues were left with a 15% deficit in guard numbers - a level viewed by organisers as critical, he added. Appearing before the same group of MPs yesterday, Buckles admitted the buck stopped with him, The Daily Mail reports.
Olympic whipping boy G4S has bought another Brazilian company, making it one of the biggest security firms in the rapidly growing country. G4S has bought security provider Vanguarda Segurança e Vigilância for an undisclosed sum, although the firm noted the Sao Paulo firm has gross assets of £29m. Vanguarda provides security personnel, security systems and monitoring services and mobile patrols to sectors such as banking, transportation, commercial buildings, education, health and public services. The acquisition follows the purchase of Interativa Service in December 2011. The combined purchases make G4S a leader in both the security and facilities management markets in Brazil, in terms of revenue. G4S' said its strategy was to expand beyond security in selected large developing markets where the market opportunity is large and there is significant growth potential.
Nick Buckles yesterday staked his future at G4S on the findings of an independent probe into the firm’s Olympic failures. The chief executive could draw his 28-year career with the group to a close if he is found to be accountable for the company’s failure to provide 10,000 guards for the Olympics. It came as Games organisers Locog laid out the firm’s catalogue of failings before MPs. On its worst day, G4S provided less than two thirds of the required staff numbers, Locog’s chief executive Paul Deighton told the Home Affairs Select Committee. During the Games more than 60% of venues were left with a 15% deficit in guard numbers – a level viewed by organisers as critical, he added. Appearing before the same group of MPs yesterday, Buckles admitted the buck stopped with him, The Daily Mail reports.
as for the Olympics issues, Jefferies says that "rehabilitation" is likely to take some time and the stock's valuation multiple will be subdued by fears that these problems may impair earnings per share (EPS) growth. "If G4S survives the next few months relatively unscathed and confidence in FY 13E EPS growth can be restored, the [price-to-earnings] multiple could recover to the 11-13x range that was more typical of 2010 and the first half of 2011. Under this scenario, a 300-325p share price could be justified."
jefferies has reiterated its 'hold' rating and 275p target price for security giant G4S ahead of the firm's first reputation test since the contract issues with the Olympics hit the firm. "The award of some UK prison outsourcing contracts next week will be G4S's first litmus test of post-Olympics reputational damage," the broker said on Tuesday morning. Nine prisons are being bid as six lots and with the exception of Wolds (where G4S is incumbent), all are currently operated by the public sector, the broker said. Shortlisted bidders include G4S, Serco, MTC/Amey, MITIE, Sodexo and Interserve. Jefferies reckons that the market will be disappointed with none or just one win, two would be more in line with expectations, while three to four would be "encouraging evidence that Olympics-related reputational issues have not impaired its growth potential." Meanwhile, the broker noted that police outsourcing developments continue to provide a concerns: "We continue to believe that this area is potentially vulnerable as the election process for PCCs [Police and Crime Commisioners] (who need to sign off proposals) this November has become partisan in nature with many Labour/Lib Dem candidates canvassing on a 'no outsourcing' platform"
Jefferies has reiterated its 'hold' rating and 275p target price for security giant G4S ahead of the firm's first reputation test since the contract issues with the Olympics hit the firm. "The award of some UK prison outsourcing contracts next week will be G4S’s first litmus test of post-Olympics reputational damage," the broker said on Tuesday morning.
Security outsourcing group G4S has finally completed the disposal of its Polish businesses, first announced towards the end of April. Polish security firm Konsalnet Holding is buying the operations for a cash consideration of PLN 43m, which at exchange rates prevailing at the beginning of September was about £8.11m. Back when the announcement was first made, the sterling equivalent for the consideration was £8.47m.
Jefferies has reduced its target price for security group G4S from 285p to 275p and maintained its 'hold' rating, saying that reputational repair following the Olympics contract issues could take some time. "Rehabilitation from Olympics issues is likely to take some time and we suspect G4S's valuation multiple will be subdued by fears that the reputational negative may impair trend EPS growth," Jefferies said. "Until uncertainty recedes, the PE [price-to-earnings ratio] multiple is likely to remain rooted in the bottom quartile of its 9-17x through the cycle range.
REVIEW AND OUTLOOK Despite ongoing economic uncertainty in the first half of 2012 and the challenges of delivering the London 2012 security contract, the underlying business has performed well and the positive trading momentum is expected to continue. The organisation design and overhead review programme will deliver significant costs savings in the next 12 months and investment in service line and sector expertise is expected to enhance the group's product offer and assist in maintaining margins and driving through further growth. Developing markets (which now represent 31% of group revenues and 40% of group profits) and growing outsourcing trends continue to be key business growth drivers and we expect to see organic growth continue to improve as a result. The breadth of the group's portfolio in 125 countries continues to present many new growth opportunities. Market leading businesses in many countries, a broad customer base and the current £3.8 billion per annum contract pipeline provide confidence in the outlook for the group.
Excluding the Olympic Games contract, sales up 5.8% and improved organic growth of 5.1%. Adjusted EPS maintained at 9.8p Organic growth of 10% in developing markets with revenue of £1,191m (31% of group total and targeting 50% by 2019) Group margin excluding exceptional items is lower at 6.0% (6.2% excluding the Olympics Games revenue) due to the challenging US government market and UK contract phasing On track to achieve annual cash conversion target of 85% Olympic and Paralympic Games contract loss of £50m provided for as an exceptional item in H1 Contract review underway and expected to be completed during second half of September Continued focus on business improvement Service excellence centres established for all core services: manned security, cash solutions and care & justice services - part of a two year programme to support gross margins and profit improvement initiatives Restructuring leading to a headcount reduction of 1,100 positions and £30m annualised savings, of which related costs of £24m have been taken as an exceptional item in H1, a large proportion of which relate to Continental Europe. Up to £10m further costs are expected in H2 Security remains core to global strategy and continues to provide growth opportunities Strong global contract pipeline of £3.8bn per annum across a diverse range of sectors including the strongest visible pipeline in US commercial sector on record
Nick Buckles, Chief Executive Officer, commented: "We were deeply disappointed that we had significant issues with the London 2012 Olympics contract and are very grateful to the military and the police for their support in helping us to deliver a safe and secure Games. The overall business has performed well in achieving a similar underlying profit as the first half of last year despite economic challenges, particularly in Europe, and weakness in the US government market. Underlying organic growth in the first half has improved to over 5% overall driven by a strong performance in developing markets which grew by over 10%. We continue to see good opportunities from outsourcing around the world particularly from governments looking to improve quality of services and reduce costs and we believe that, with our long-term track record, we will continue to play a major role in this sector. The breadth of our portfolio in 125 countries continues to present many new growth opportunities. Our market leading businesses, broad customer base and £3.8bn per annum contract pipeline give us confidence in the outlook for the Group."
http://www.investegate.co.uk/Article.aspx?id=20120828070017H6539
The embattled chief executive of G4S said he was still unable to provide answers about why the company’s Olympics security contract went so badly wrong as he revealed associated losses could run beyond £50m. Nick Buckles said he was taking “each week at a time” as he battles to save his job and repair the reputation in Britain of the FTSE 100 company after it failed to provide all 10,400 security guards it had agreed to under its contract with the Government. Commenting as G4S booked a £50m loss against the contract, he admitted the debacle could have a major impact on G4S’s ability to win future contracts from the Government. But Mr Buckles claimed he could not comment on what happened – despite the end of the Olympics – until PricewaterhouseCoopers (PwC) has completed a review on behalf of the company’s board, which is due in the second half of September, according to The Telegraph.
Positive Points: Organic growth of 10% was achieved for its Developing or Emerging Markets businesses. Revenue of £1.19 billion proved to be 31% of the group's total. Management is currently targeting 50% by 2019. The company highlighted that it was undertaking a board level review of what went wrong with the Olympic contract. Consultancy group PWC is to assist. A new Chief Executive could be the eventual result. Accompanying management comments noted that "we continue to see good opportunities from outsourcing around the world particularly from governments looking to improve the quality of services and reduce costs and we believe that, with our long-term track record, we will continue to play a major role in this sector." Management announced action in order to assist profitability going forward. The loss of 1,100 jobs was announced, with savings of £30 million per year expected to be achieved. The group's geographical footprint remains diverse. The group operates in over 125 different countries. Following its aborted major acquisition, smaller often bolt-on acquisitions are now being targeted. Acquisition strategy will continue to focus on niche opportunities. Management previously expected to invest around £200 million in acquisitions in 2012. A focus on underperforming businesses was also previously raised, with such businesses potentially being sold. Management previously highlighted the company as a potential beneficiary of any country exiting the Eurozone. If Greece, for example, were to leave, G4S is likely to be involved in the rollout of the new currency.
Negative Points The group has taken a £50 million cost in relation to its Olympic contract. The figure is at the upper end of management's initial estimate – between £35 million and £50 million. The company highlighted the potential for further costs in relation to its Olympic contract to be suffered. The financial impact could worsen when fines and the cost of military cover are eventually finalised. The damage to the group's reputation and its ability to win new contracts remain uncertain. The Chief Executive highlighted that G4S had to withdraw from a bidding process as a result of the Olympic issue. A contract with the U.K.'s Department of Work and Pensions worth approximately £20 million per year was lost. At the group's core Secure Solution business, the profit margin for its major North American business declined. This was due to the performance of its US government business where revenues were down 14% causing margins to decline significantly from around 5% to less than 2%. The US government business continues to be impacted by the significant reduction in federal funding levels. The profit reduction impact was split broadly between budgetary induced pressure on the domestic US government business and the decline in volumes for international landmine clearance. The Olympic contract episode comes in the wake of the company's aborted takeover for Danish support services group ISS. Aborted acquisition and legal settlement fees cost the company around £55 million. Ultra low interest rates in many of the group's markets have previously dampened demand for its Cash Solutions business – customers have less incentive to transfer money to the bank. The half year dividend payment was left unchanged compared to the prior year at 3.42 pence per share.
Financial Highlights: Group turnover increased by 5.9% to £3.9 billion or by 7.5% on a constant currency basis Organic turnover i.e. when excluding acquisitions, grew by 6.8% Profit before tax declined by 59.6% to £61 million, including a £50 million loss from its London 2012 Olympic contract Adjusted profit excluding restructuring charges and the loss from its Olympics contract declined by 1.25% to £236 million The half year dividend payment was left unchanged
Half year results: G4S swallows an Olympic loss. The results continued to see problems with regards to its Olympic contract overshadowing. As previously flagged by the company, an exceptional loss of £50 million was taken, with management also noting that the financial impact could worsen when fines and the cost of military cover are eventually finalised. Group profit before tax, including the loss from the Olympic contract, declined to £61 million from £151 million last year – the share price fell by over 4% in early trading. However, the decline in profit also included a £24 million restructuring charge, a charge taken largely in relation to the cost of announcing the loss of 1,100 jobs. Savings of £30 million a year are expected to be generated. When excluding both the Olympic and restructuring losses, adjusted profit declined marginally to £236 million. In all, uncertainties in relation to both Olympic contract costs and the impact on the group's reputation and ability to win new contracts continue to weigh against hopes for growth in the Developing or Emerging Markets.