LONDON (Reuters) - Shares in G4S (GFS.L) fell to the lowest level in more than six months on Monday on fears that the fallout from the botched Olympics contract could hit the group’s ability to win new work in Britain and abroad.
The company’s Chief Executive Nick Buckles is fighting for his job after it admitted last week it would not be able to deliver the number of security staff required for the 2012 Games as part of a 284 million pounds ($441.52 million) contract.
GFS shares were down 8.7 percent at 254.35 pence by 3.46 a.m. EDT, valuing the company at around 3.6 billion pounds. The stock hit a 2012 low of 250.60 pence in early trade on Monday, its lowest level since December 2011.
“G4S has evidently over-stretched itself with a high profile contract, which could have wider implications for the group’s ability to win work,” said Espirito Santo analyst David Brockton.
“Given the high profile nature of this contract there is now a high level of reputational damage, which could result in either senior management change or loss of future prospects.”
G4S, the world’s second-largest private sector employer, said it would cover any additional costs related to the contract, estimated to be at least 50 million pounds.
Buckles, who has been with G4S for 27 years, will appear before an influential parliamentary select committee this week to explain why his company has failed to deliver the 10,400 security guards it was contracted to do, forcing the government to call up 3,500 extra military personnel as protection.
Speaking to Britain’s Financial Times newspaper, G4S’s newly appointed chairman John Connolly warned against “knee-jerk reactions” but failed to express outright support for his chief executive.
Buckles’ credibility with shareholders spared him a revolt late last year following a failed rights issue to fund a multi-billion pound deal to buy Danish cleaning firm ISS.
“We believe the shares could test the low of 232 pence reached following the ISS rights issue failure in 2011 - that too resulted in a 50 million pounds shortfall in profits,” said Seymour Pierce analyst Kevin Lapwood.
“It appears certain that CEO Nick Buckles, who is due to appear before MPs on Tuesday, will fall on the sword along with other senior UK management.”
($1 = 0.6432 British pounds)
Reporting by Rhys Jones