G4S’ Share Price Edges up on CEO’s Pledges to Cut Costs

on Jun 7, 2013
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G4S’ share price (LON:G4S) climbed by 0.04 percent to ₤2.4579 on the London opening bell today, June 7, after the new chief executive of the world’s biggest security group said that he would fight to reduce costs and push deeper into fast growing developing markets in a bid to restore investors’ and clients’ trust following the Olympics fiasco.

Ashley Almanza, the former chief financial officer of G4S who succeeded Nick Buckles at the top of the company last month, yesterday faced shareholders’ anger over executive pay and a barrage of tough questions over the company’s business in Israel.
More than 21 percent of shareholders voted against the group’s executive pay awards, including the ₤1.18 million for departed Buckles, ₤746,000 for former CFO Trevor Dighton and ₤920,000 for chief operating officer and regional chief executive for Americas Grahame Gibson. Only thanks to the continued support from major shareholders such as Neil Woodford, Invesco’s Perpetual’s fund manager whose fund owns about 15 percent of G4S, the board managed to get the proposed awards approved.

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Many shareholders also expressed their dissatisfaction with the Olympics debacle and with the way Buckles handled the situation. “Nick Buckles won’t have known a lot of what was going on. He seemed lost for words at the select committee hearing,” one shareholder said, referring to the battering Buckles was dealt at the hands of MPs during a hearing in September last year. “Can you tell us when G4S will start becoming a winner rather than a constant loser?”

Another investor commented that it was “stupid” of the company to accept the huge Olympic contract, adding: “You weren’t going to get those 3,000 extra guards ever.” G4S failed to provide the full 10,400 staff for the London Games and booked a ₤88 million loss on the contract. “One of my principal objectives is to try and put the Olympics and some of the setbacks behind us,” Almanza said at the meeting. He pointed to G4S’ push into emerging markets where it wants to expand revenue from a third to about a half of total by 2019, saying the strategy was “absolutely right” and that the group is well positioned for growth in African, Asian and South American markets.

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Shareholders also criticised the company’s business in Israel with one investor claiming that “children as young as 12 are being held in solitary confinement at G4S prisons”. He asked: “When will [the board] do the right thing and withdraw from providing services to the Israeli prison service.” G4S provides security equipment such as cameras to Israeli prisons, which have been accused of breaking international law over their treatment of Palestinian children. John Hilary, a G4S shareholder and also the executive director of campaigning charity War on Want, said during the meeting that he was “profoundly concerned with G4S’s exposure in Palestine”.

“I hope, I expect, I believe that we have nothing to do with breaches of international law directly. We keep our activities under constant review,” Almanza responded. G4S has said that it will exit contracts involving security equipment servicing at barrier checkpoints, a prison and a police station in the West Bank when they end in 2015. However, the company intends to keep its security work inside Israel after then.
**G4S’ share price was ₤2.4579 as of 07.06.2013, 08.00 BST.**

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