G4S Drops as Military Called-In to Plug Olympic Security Gap

G4S Plc (GFS), the world’s largest security-guard supplier, fell the most in eight months in London trading after Britain called in the military to beef up the company’s efforts to staff London’s Olympic Games in two week’s time.

G4S is experiencing “some delays” in vetting and accrediting the thousands of extra security guards needed for the Olympics, the Crawley, England-based company said. Shares of G4S dropped as much as 4.5 percent to 277.3 pence, the biggest drop since Nov. 17.

The shortfall threatens the British security company’s earnings from the contract. G4S is in the final throes of training, vetting and accrediting 9,000 applicants in preparation for the “unprecedented and very complex” sporting event, it said. The company will work with the military and understands the government’s decision, it said.

“Taking on a contract like this is potentially a double- edged sword because it is so big and high profile,” said Numis Securities analyst Steve Woolf. “If the games come off without a hitch, G4S’s reputation will be enhanced so it won’t matter if they incur a small financial penalty.”

An extra 3,500 soldiers will be drafted in to provide security, Defence Secretary Philip Hammond said in a written statement to Parliament today.

Terrorist Threat

The issue with G4S first came to light about two weeks ago and G4S had until now been “very robust” about delivering on the contract, Home Office Minister James Brokenshire told BBC Radio 4 today.

“The government is being cautious, but we have to remember security at the games is the most important thing,” Numis’s Woolf said.

Although unlikely, a terrorist attack targeting the games cannot be ruled out, and would likely be a “major mass casualty incident,” according to Will Hartley, head of the IHS Jane’s Terrorism and Insurgency Centre. The new head of al-Qaeda, Ayman al-Zawahiri, would welcome an opportunity to assert his leadership with such a move, though he is unlikely to “devote the attention and resources required to successfully execute such a plan,” Hartley said in an e-mail.

Assessing the different groups who could pose a security risk, JTIC, who gather and analyze intelligence about terrorism worldwide, rated al-Qaeda as very low. “Lone wolves” pose the biggest risk, according to the report.

To contact the reporters on this story: Eleanor Lawrie in London at elawrie@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: Andrew Noel at anoel@bloomberg.net

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