That's gratitude, eh? Big shareholders in G4S rose up to defend Nick Buckles after the Olympics bungle and his mauling in parliament. How does he repay their loyalty? With no increase in the interim dividend for the first time since G4S was created in 2004 via the merger of Group 4 Falck and Securicor.
There is an explanation of sorts. G4S's earnings per share, even when nasties such as the £50m Olympics hit are ignored, were static in the first half of this year. And, since the company's policy is to increase dividends "broadly in line" with earnings, there is logic in taking the literal-minded approach that shareholders should live on the same rations as a year ago.
On the other hand, Buckles painted a picture of a business that, apart from its Olympic calamity, is bristling with confidence. G4S says "organic" growth in revenue was 5% last year and 10% outside Europe and the US; it sees "many growth opportunities" ahead. Such bold statements usually encourage managements to "borrow" a little from the future to keep the dividend moving forward. Not in this case.
The truth may be that G4S understands anything could happen. It will be six months – at least – before management knows whether its ability to win contracts, especially in the UK, is damaged. Even then, G4S will have to live with the reality that the firm's reputation is one more cock-up away from meltdown.
For the time being, Buckles will probably survive. It's a fair bet the board will conclude next month that mistakes were made with the Olympics contract but lessons have been learned. But shareholders should be nervous. A year ago, the chief executive wanted to bet the balance sheet on a £5.2bn bid for ISS, a big Danish rival. It was an absurdly ambitious deal that was shot down by shareholders. The idea looked – then and now – like an attempt to escape slowing markets in the west. Now, to compound the problem, cash must be thrown at any contract that threatens further reputational damage.
City analysts still see G4S resuming 10%-plus dividend growth in a year's time. That seems optimistic. G4S feels instead like a company running out of steam.
