G4S Shares Drop after Olympics Security Mishap

July 16, 2012

G4S problems have continued to mount following the Olympics security provider revealing its share price had rapidly dropped.

The FTSE 100 Index firm admitted on Friday night that it will incur a loss of up to £50 million ($78m) on the high-profile contract.

Investors fear the group’s reputation has been tarnished by its failure to provide enough staff for the Games, erectile with G4S also facing a period of uncertainty if chief executive Nick Buckles loses his job in the fiasco

The company’s shares dived by as much as 10%, discount wiping £400 million ($488m) off its stock market valuation, click and adding to heavy losses seen at the end of last week.

Seymour Pierce stockbrokers removed its buy rating on the stock and cut its profit forecasts for the current financial year by £60 million ($73m).

Analyst Kevin Lapwood said: “It appears certain that Mr Buckles will fall on the sword along with other senior UK management.

“This could lead to a period of instability at the company, which appointed a new chairman just over a month ago. Whoever is in charge will have a lot of work to do to repair the company’s reputation, especially at home in the UK and with the UK Government, its single largest customer. This will be crucial for the company’s future.

“There will be some short-term repercussions but overall we believe G4S has a good track record with the UK Government. The shortcomings on the Olympics contract should not significantly affect its chances of benefiting from government outsourcing in the longer term.”

G4S said on Friday that it accepted responsibility for the additional cost of the increased military deployment and that it was incurring other significant costs as it endeavours to meet the contract challenges.

G4S’s revenues hit £7.5 billion last year, while underlying profits grew 2% to £531 million.