G4S boss readies for more Parliament grilling

Embattled security firm G4S will be forced to relive its embarrassing London Olympics staffing failure when its boss returns for a second showdown with lawmakers demanding to know how the debacle was allowed to happen.

G4S boss readies for more Parliament grilling

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A visitor to the Olympic Park reads a 4GS notice stuck to a window at the Aquatics centre, in the Olympic Park (Reuters)

Group Chief Executive Nick Buckles and David Taylor-Smith, who is the group's UK and Africa CEO, will be pressed for further explanation of the recruitment failure which has hit shares and raised questions about its prospects on future deals.

"Everyone now accepts that G4S let the country down before the Olympics began. We need to ascertain the reasons why this happened and who else was responsible for the pre-Olympics shambles," Keith Vaz, chairman of the Home Affairs Committee and a member of Parliament for the opposition Labour party, told Reuters.

Vaz said the committee had quizzed Home Secretary Theresa May, who is in charge of domestic security, on Thursday, and had received a detailed letter outlining the department's oversight of the contract and the minister's meetings with Buckle and the Olympics organizers during the run-up to the Games.

G4S, the world's largest security firm, which in Britain runs services for airports, prisons, immigration and the police, admitted just 16 days before the Games began that it could not supply a promised 10,400 venue guards.

It eventually raised 7,800 at peak times, leaving the military to make up the shortfall.

The failure embarrassed the government, one of G4S's core clients which accounts for more than half of its £1.8 billion British revenue. More than 20 per cent of its pipeline of potential UK work also stems from that market.

Those numbers mean the UK public sector is one of the biggest global clients for the group, whose revenue for 2012 is forecast at just over £8 billion according to a Reuters poll of 21 analysts.

G4S has said it expects to take a £50 million loss over the contract failure, but the potential for a longer-lasting reputational blow goes beyond the UK market.

A week before it conceded recruitment problems, the company told Reuters it expected its work at the 2012 Games would help it win a bigger share of a four-year cycle of global events whose safety and security budget has been estimated at more than $10 billion.

Buckles' return to Parliament also comes at a time when his tenure as chief executive hangs on the soon-expected result of an internal management review into the failure.

The board's decision could be swayed by whether the group wins any of nine imminent British prison deals, that will indicate the government's appetite to work with G4S at a time when its Olympic woes have put its plans for increased private sector involvement under scrutiny.

G4S's first attempt to repair the damage came in July when Buckles was hauled before the Home Affairs Committee to explain why the army had to be asked so late to fill his firm's shortfall.

But his nervy appearance begged more questions than answers and ended with him admitting the company's reputation was in tatters.

Buckles, a 27-year company veteran, has nevertheless been backed to stay in his post by major shareholders, many of whom stood by him in November despite an earlier debacle when he had to pull a £5.2 billion bid for Danish cleaning firm ISS.

The group has largely prospered under Buckles, who has presided over a share price rise of some 70 per cent and an increase in its market value to £3.5 billion since being elevated to CEO in July 2005, a year after a transformational merger between Group 4 Falck and Securicor.

Last month Buckles, who put his uncertain first appearance in Parliament down to a lack of preparation time, said G4S had not lost any customers in the Olympic fallout and had received "a lot" of supportive letters from clients around the world.

Yet shares in the FTSE 100 member have yet to fully recover from the Olympic crisis and remain around 11 per cent lower than before the company's shock admission of failure.

Analyst Kean Marden at brokerage Jefferies said institutional shareholders' support would likely result in Buckles keeping his job, but the biggest threat would come when G4S seeks further UK public sector business.

"The prison contracts are the more appropriate litmus test (for Buckles)," Marden said. "It'll be the degree to which G4S participates in the next wave of prison outsourcing, but also how the police outsourcing momentum develops over the next six months as well."

Tuesday's committee meeting will also hear testimony from Olympic organising chiefs Paul Deighton and Seb Coe.

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