UPDATE 2-G4S fights back from Olympics fiasco with faster growth

Tue Nov 6, 2012 6:32am EST

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* Nine-month revenues excluding acquisitions up 5.5 pct

* Signals Q3 pick up to 6.3 pct from 5.1 pct in H1 - analyst

* UK prison contracts key to recovery from Olympics fiasco

* Emerging mkts offset tough U.S. government, European mkts

* Shares up 2 percent

By Neil Maidment

LONDON, Nov 6 (Reuters) - Security firm G4S, whose reputation was tarnished earlier this year by its failure to provide enough guards for the London Olympic Games, said it was fighting back thanks to strong emerging markets and new UK contracts.

The world's biggest security firm reported on Tuesday a pick up in underlying revenue growth in the third quarter.

The big test for the Britain-based firm, however, will come in the weeks ahead when the UK government is expected to award a string of contracts to run prisons.

Shares in G4S plunged earlier this year when Britain was forced to draft in troops to guard Olympic venues to cover a shortfall of G4S personnel. The fiasco raised fears among investors that G4S would fail to win future work with the UK government, which accounts for about 13 percent of its revenues.

G4S has started a number of justice contracts in Britain this year and since the Olympic Games has announced three contract wins - a deal in Scotland to manage the electronic tagging of offenders, a contract to lay fibre-optic cables in Brazil and deal to provide security checks at Oslo airport.

"We hope this track record this year of starting new business will hold us in good stead for winning further government business, but clearly that remains to be seen," G4S Chief Executive Nick Buckles told reporters.

According to analysts, six contracts to run nine British prisons are expected to be awarded this week, with G4S's success in the bidding seen as a key indicator of government's long-term appetite to work with the firm.

GROWTH PICKING UP

G4S said revenues excluding acquisitions rose 5.5 percent at constant exchange rates in the first nine months of the year, up from 5.1 percent growth in the first half.

"The main point is the acceleration in organic growth ... implying 6.3 percent growth in Q3," JP Morgan analysts said.

Shares in G4S, which works in over 125 countries and runs operations from immigration and border control to cash transportation and guarding ships from pirates, were up 2 percent at 266 pence by 1125 GMT.

G4S said underlying revenue growth from emerging markets, which account for over a third of group profit, was 9 percent over the nine months, helping to offset slower U.S. government and European markets.

It forecast the United States, where defence work has slowed due to budgetary cuts and delays, and sluggish continental European markets, where the firm has increased cost savings to protect margins, would remain difficult.

Swedish rival Securitas, which posts third-quarter results on Wednesday, has endured seven straight quarterly earnings declines and is to cut costs and merge two divisions due to European markets weakened by a debt crisis.

G4S reiterated its estimate that its Olympic failure would cost it 50 million pounds, though it is still locked in negotiations with Olympic organisers over final payment on the contract and said it hoped to reach a resolution by the financial year end.

Overall revenue for the period grew by 6.3 percent at constant exchange rates, or 9.2 percent including the Olympic contract.

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