UK's private security firm G4S Plc (GFS.L, GFSZY.PK) reported that its first-quarter overall revenues grew by 7.5% year-on-year at constant exchange rates and by 7.7% at actual exchange rates. The group operating margin was nearly 0.6% lower compared with last year.
The company said its overall organic growth was encouraging at 6%, with 12% in developing markets and 4% in developed markets. In secure solutions, organic growth was 6%, helped by a continued strong performance in developing markets and UK government; while organic growth, in cash solutions, was 3% overall. Developed markets declined 1%, but developing markets grew 14%.
Overall, the group margin slid around 0.6%, due mainly to continued challenging economic and trading conditions in Continental Europe, ongoing pricing pressure in the UK and Ireland cash solutions businesses, the mix effect of new contracts starting up in UK Government and the impact of a 6 million pounds charge in the African region relating mainly to the write-off of receivables. The firm believes that the proposed closure of 30 prisons and other cost reductions by the Netherlands Ministry of Justice would have a significant adverse impact on the group's Dutch business which provides staff to the prisons.
For all of these reasons, and inspite of ongoing business improvement plans, the first quarter margin trends are likely to continue for the full year.
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