G4S Hurt by Margin Squeeze


LONDON -- The shares of G4S plummeted 12% to 269 pence during early London trade this morning after the security firm revealed a disappointing 0.6% squeeze in first-quarter margins.

G4S, the world's leading security outsourcing group, said that pressure on the group's margins was "expected to continue for the full year." The company blamed pricing pressure in the U.K. and challenging trading conditions in Europe for the margin decline.

The security firm's first-quarter revenues jumped 8%, driven by a 12% surge in developing market sales, which now represent more than a third of G4S' business.

Developed markets grew 4%, despite a 1% decline in the region's cash transportation business.

G4S chief executive Nick Buckles commented:

The business has continued to achieve good underlying organic growth despite continuing challenging macro-economic conditions in Europe. The group's developing markets businesses continue to achieve strong results and their organic growth rates are expected to continue for 2013.

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 affected adversely in the short term.

G4S also confirmed it would now include its U.S. regulated security business as part of the sale of the company's U.S. government security division.

With a market cap of 3.8 billion pounds, G4S shares trade at 12 times expected earnings and offer a prospective dividend yield of 3.7%.

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