G4S predicts continued growth as it moves on from Olympic fiasco

G4S-LogoG4S has reported a rise in revenues in 2012 despite the Olympics debacle and remains confident of pushing on with organic growth over the next 12 months.

The global security provider reported last week that total revenues in 2012 rose 10.4% to £7.5 billion and, excluding the Olympics, turnover was up 8.1% and organic growth up 6.9%. However, pre-tax profit fell to £175 million from £257 million in 2011 as a result of the Games contract.

Nick Buckles, CEO of G4S Corporate Services, told CNBC in Europe the firm enjoyed a “good performance overall” in 2012 and is looking to put the Olympics behind them. After months of negotiations with the Games’ organisers, LOCOG, G4S agreed terms that meant a £70 million loss on the contract in February.

“Aside from the Olympics we had good organic growth, the best we’ve had for a number of years, around seven per cent. And that was really driven by actually a very good performance in UK Government that grew about 13 per cent,” he added.

“North America commercial business grew about 11 per cent. And actually our developing markets platform, which is now 35 per cent of profits of the group, that grew ten per cent and we expect that to continue.”

He admitted that margins in the UK and Continental Europe are being squeezed. However, the firm has got “a lot of momentum” in the UK and was recently boosted by a new contract with British Airways.

G4S hopes to win more Government opportunities during 2013 as austerity budgets drive governments to outsource more services. However, in the US the conditions were identified as “quite tough” due to the lack of any real outsourcing trends and Europe also experienced minimal levels of outsourcing.

“So basically what you’ve got stays there but really there’s not a lot of new business coming out and margins are being squeezed,” added Buckles. “We did quite a lot of work on continental Europe government outsourcing and, despite the problems in Europe, there’s really no appetite for European governments to outsource in a big way, which is a huge surprise.”

Looking to further global growth opportunities, he highlighted India as a stimulating market as G4S holds a lot of contracts with local indigenous Indian business and has experienced double-digit growth year-on-year.

He said: “It’s a huge organisation, huge market position, we’re about six times bigger than the next biggest company in security. So structuring’s taking place and we do expect that growth to really pick up in the next couple of years.”

Buckles also predicted G4S is to spend around £200 million on small-to-medium-sized acquisitions and divest some developed markets over the next few years. He outlined plans to build the G4S brand over the coming months, stating: “We’ve got to focus on rebuilding the organic growth, the brand, the margins and that’s really our clear focus in the next six months.”

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