Profits and reputation fall for G4S who grew rich by imprisoning people

May 18, 2013
Sarah Benton
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Nick Buckles, CEO of G4S; his future is in jeopardy after ‘humiliating shambles’ of failure to fulful Olympics contract and questions about acquisitions. Questions about his company’s role in the oPt also need to be asked.

From the Stop G4S campaign

Stop G4S is calling for a Europe-wide demonstration of outrage as G4S congratulate themselves on another year of profiteering at the expense of human dignity.
Bring banners, flags and drums; bring yourself and your friends. Refuse to be taken in by their whitewashing of abuses, join us at the AGM to hold G4S to account. The AGM will be held at Salters’ Hall, 4 Fore Street, London EC2Y 5DE, Thursday 6 June 2013, 1pm

G4S launches landmark human rights policy

Media release, G4S
April 22, 2013

G4S, the world’s leading international security solutions group, has today launched a landmark global human rights policy, designed to safeguard the rights of its employees, support the communities in which it operates, and to ensure that its operational practices enable it to identify and mitigate against human rights risks

Co-authored by Dr Hugo Slim, an internationally recognised human rights expert, and senior G4S executives, the policy will be communicated to G4S staff in 125 countries across the world.

The policy and its related guidance aims to align the company’s human rights practices with the ‘UN Guiding Principles on Business and Human Rights (2011)’ and to introduce additional global guidelines for areas not currently covered by existing standards.

The policy is also designed to support the continued development of an ethical and sustainable business model that encourages the improvement of standards, job creation, community support and broader beneficial impacts on societies throughout the world. G4S recognises the leadership position it holds as one of the world’s largest private employers.

Work on the human rights policy started in the summer of 2011 after official recognition of the new UN guiding principles.*

The first phase involved identifying key human rights relevant to the vast array of services that G4S supplies. Phase two moved onto working out how to integrate G4S’ human rights risks and challenges with recognised international human rights standards and to identify the Group’s strengths and areas for improvement.

The final phase will be to implement and embed the policy. This will be supported by company-wide communications, awareness and training programmes during 2013 and beyond. Overall accountability for the policy will rest with the executive management of G4S and the Group’s CSR Committee.

G4S has previously undertaken extensive activities as part of its drive to improve human rights standards in the regions it operates in. For example, in 2011, the company became a signatory to theUN Global Compact, an international standard to promote socially responsible business behaviour involving human rights, employment, the environment and anti-corruption measures.

The company is also a founding signatory of the International Code of Conduct for Private Security Service Providers (ICoC), a Swiss government convened, multi-stakeholder initiative that aims to both clarify international standards for the private security industry operating in complex environments, as well as to improve oversight and accountability of these companies.

Debbie Walker, group communications director, G4S plc, said: “As an employer of such a vast and diverse workforce in some very challenging environments, we can play a positive role in maintaining and supporting human rights across the globe.

“John Ruggie’s UN guidelines have laid the foundation for a new wave of activity by responsible multinational businesses. The UN guidelines outline the role that every state should be playing to protect human rights and the duty that businesses have to respect human rights. We want to take it a step further and do what we can to implement best practice amongst our people and the communities we touch.”

Hugo Slim added: “In 2012, G4S has continued to work on integrating the UN Guidelines on business and human rights into its many businesses around the world and this policy puts human rights due diligence at the centre of the company’s approach to responsible business.

“It will encourage: greater awareness of human rights across all G4S businesses; improve human rights due diligence, and begin the process of specific reporting on the company’s impact on human rights.

“The people I have worked with at G4S have shown real intent to produce a meaningful policy that will reduce the risk of any form of company involvement in human rights violations.”

The launch of the human rights policy coincides with the publishing of G4S’ fifth global Corporate Social Responsibility report. The latest reporthighlights significant achievements in key areas such as health & safety, anti-corruption, audit and compliance, employee engagement and carbon intensity.

G4S shares suffer over warnings of lower 2013 profit margins

By Gill Plimmer, Financial Times
May 07, 2013

G4S blamed prison closures in the Netherlands and problem clients in Africa for an unexpected warning that profit margins in 2013 would be lower than expected.
Shares tumbled 14 per cent as the FTSE 100 company, which employs 675,000 people in 125 countries, brought forward its trading update to say that operating margins would be down 0.6 per cent in the three months to the end of March and would probably stay lower all year.

The news will add to pressure on Nick Buckles, chief executive, who is still trying to restore the company’s reputation in the wake of the Olympics fiasco.
Profits collapsed by a third and the security contractor was forced to pay out £88m after Mr Buckles was forced to admit that the company’s failure to provide enough security guards for the London 2012 Olympics was a “humiliating shambles”.

As chief executive since 2004, Mr Buckles had already survived a shareholder revolt in 2011 for his failed £5.2bn bid to buy ISS, the Danish cleaning services group.

Stephen Rawlinson, analyst at Whitman Howard, said: “Leadership change may be seen as essential now which will cause further hiatus with the stock, three strikes [ISS, Olympics, profit warning] is usually enough for any chief executive.”

Keith Bowman, analyst at Hargreaves Lansdown Stockbroker, said: “In the wake of a bad 2012, the current year is looking equally challenging. G4S appears to be suffering a dose of its own medicine, with both government and corporate desire to save costs now impacting at the group itself. A change of chief executive could now be a step nearer.”

Half of the fall in margin in the three months to end-March came from a £6m charge in Djibouti, after some clients did not pay their bills. But G4S also cited challenging conditions in continental Europe as reasons. It said the proposed closure of 30 prisons in the Netherlands as a result of a change of minister would have an impact on the business as contracts were phased out and 700 staff made redundant.

Prices in its cash solutions arm, which moves money between banks and retailers and to and from ATMs in the UK and Ireland, were also under pressure, it added.
“For all of these reasons, and despite ongoing business improvement plans, the first quarter margin trends are expected to continue for the full year,” the company said.

Robert Plant at JPMorgan said the news was disappointing “especially as the shares [had] been recovering since the Olympic news”.
David Brockton at Espirito Santo added: “We expect margin pressure to be sustained across the remainder of the business, particularly in manned security. In our view, this will continue to weigh on group performance and require further divestments and acquisitions to sustain the trajectory of growth.”
Shares in G4S closed down 45.5p, or 14.9 per cent, to 260p.

Security group G4S hit by Dutch prisons shake-up

By Christine Murray. Reuters
May 7, 2013

LONDON – G4S (GFS.L), the world’s largest security services firm, warned on Tuesday 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.

The firm, which provides services ranging from security guards to cash transportation and the running of prisons, said in an unexpected trading statement its profit margin fell 0.6 percent in the first quarter and was expected to remain at a similar level for the full year.

Before the statement analysts were on average forecasting a pre-tax profit of 457 million pounds in 2013, according to Thomson Reuters I/B/E/S Estimates.

Shares in the firm had risen 19.1 percent so far this year, ahead of the near 11 percent rise in the FTSE 100 .FTSE, but were trading down 14 percent at 262.7 pence by 1050 GMT on Tuesday, giving the firm a market value of 3.7 billion pounds.

Coming on top of last year’s major embarrassment over the last-minute failure to provide thousands of security guards promised for the London Olympics, the profit warning also raised renewed questions about Buckles’ own position.

In late 2011 Buckles had to abandon an $8 billion deal to acquire Danish cleaning services group

Notes and links

Dutch prisons
As part of the Europe-wide austerity measures, the Dutch government has decided to cut their prison population by 13.3 percent and use electronic tagging instead.

*The UN’s report: Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, is well worth reading for anyone seeking to hold a company to account.  It was produced in 2011 because of ‘the dramatic worldwide expansion of the private sector’ and accompanying abuses of human rights.

Although the document  lacks legal force, the principles have moral and poliical weight in any dispute, and are certainly a useful standard by which to judge the actions of G4S.

Point 6 in the document is:
The Framework rests on three pillars. The first is the State duty to protect against human rights abuses by third parties, including business enterprises, through appropriate policies, regulation, and adjudication. The second is the corporate responsibility to respect uman rights, which means that business enterprises should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved. The third is the need for greater access by victims to effective remedy, both judicial and non-judicial. Each pillar is an essential component in an inter-related and dynamic system of preventative and remedial measures: the State duty to protect because it lies at the very core of the international human rights regime; the corporate responsibility to respect because it is the basic expectation society has of business in relation to human rights; and access to remedy because even the most concerted efforts cannot prevent all abuse.

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