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17th April 2024 Issue no. 701

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Security group G4S hit by Dutch prisons shake-up

G4S the world's largest security services firm, warned that its profits in 2013 would be lower than expected after a shake-up of the prison system in the Netherlands and problem clients in Africa hit first-quarter results.

CEO Nick Buckles, who had to defend his job after the Olympics staffing fiasco and in March had said the company planned to drive growth in 2013 by increasing its presence in emerging markets, attributed the fall in margin to a catalogue of problems stretching from the tough economy in Europe to cash issues in Africa.

Half of the fall in margin in the three months to end-March came from a 6 million pound write-down on client bills in Africa, where the firm makes 7 percent of its revenue, mostly on a large security contract in the Republic of Djibouti.
For the rest of the year the biggest factor in pushing down profits will be the closing of 30 prisons in the Netherlands due to an unexpected restructuring of the justice service by a new minister.

The firm had previously expected its prisons business there to grow from 35 million euros a year to around 55 million with further outsourcing. But Buckles said that G4S's current contract in the sector will now be phased out in the next six months.

Other problems include tough trading conditions in Romania, Hungary and the Czech Republic, where the firm offers its full range of security services, and lower volumes in its offender tagging and prison service contracts in Britain.
Buckles said that the firm would also push in the next few months to stem declining margins in its cash transportation businesses in the UK and Ireland where it has been in a price war for the last couple of years.

22nd May 2013