G4S shares dip on first quarter margin contraction

Shares in FTSE 100-listed secure outsourcing group G4S dipped on Tuesday morning after the group published its first quarter results revealing a 0.6 per cent contraction in group operating margin when compared to one year earlier.

The group said that this reflected four main reasons, including continued challenging economic and trading conditions in Continental Europe, ongoing pricing pressure in the UK and Ireland, the mix effect of new contracts starting in the UK and the impact of a £6.0m charge in the African region. The charge related mainly to the write-off of receivables, the group said.

In spite of the small reduction on operating margin, the group saw an increase in its revenue underpinned by growth in developing markets.

Overall revenues grew by 7.5% at constant exchange rates, when compared to the same period last year, and by 7.7% at actual exchange rates. Organic growth rose 6.0% overall, with 12% in developing markets and 4.0% in developed markets.

Dutch business expected to be hit by prison closuresGoing forwards, the group said that the proposed closure of 30 prisons and other cost reductions by the Netherlands Ministry of Justice would have a "significant negative impact" on the group's Dutch business which provides staff to the prisons.

Acquisitions and divestmentsDuring the first three months of the year, the group said that it had invested £5.0m in "capability-building" acquisitions such as the Deposita cash solutions business in South Africa.

The group further reported that the process for the sale of the US government Solutions business was underway.

G4S' share price was down 11.65% to 270p at 08:33 on Tuesday morning

MF