Greek Drachma Specter Puts G4S In the Money 10 Years After Euro
G4S Plc (GFS), the British security company that helped European nations adopt the euro a decade ago, said it’s monitoring the potential for cash-handling contracts in Greece should the nation revert to the drachma.
Greece was the fastest-growing market at G4S’s European cash-services business last year as instability boosted the use of notes and coins, Chief Executive Officer Nick Buckles said.
“Our biggest contingency issue would arise if the country were to leave the euro and go back on to the drachma because basically we would be involved in the whole swap-out of the currency,” Buckles said. “That would be the biggest challenge for us. But we’re not talking to anyone about that.”
G4S’s division providing security to government institutions in Greece shrank by 20 percent last year amid spending cutbacks. President Karolos Papoulias is struggling to secure agreement on a unity government and avert new elections with the country heading toward a possible exit from the euro area. Greece joined the single currency in 2001.
Leaving the euro would be a “catastrophe” for Greece, with the risk of a run on banks, former Greek Prime Minister Costas Simitis said today in Beijing. Banks would have to close for at least three months while preparations, including printing a new currency, are made, Simitis said, citing the views of “experts.” A Greek withdrawal from the euro could be “technically” managed, Patrick Honohan, a member of the European Central Bank Governing Council, said on May 12.
Formed about eight years ago through the merger of Group 4 Falck A/S and Securicor Plc, the Crawley-based company won a contract to guard the U.S. embassy in Athens as well as the consulate in Thessaloniki.
“What’s going on currently wasn’t completely expected when we did the budget, but we’re expecting slightly positive growth in Greece this year,” Buckles said on a call today. “We did a lot of the euro implementation so we have experience of that. We’ll wait and see.”
G4S is a “very responsive company,” though management isn’t spending any time considering a Greek withdrawal from the euro at the moment, according to Buckles. Demand for its services in the mining and oil and gas industries, as well as growth in emerging markets such as Peru is helping offset weakness in eastern Europe.
The security company reported internal revenue growth of 7 percent in the first quarter. bolstered by a contract to provide security and more than 10,000 guards at London’s Olympic Games. The tournament, which takes place in July, already boosted revenue by 30 million pounds ($48 million) in the January to March period.
Buckles has embarked on the gradual transformation of G4S into an integrated services company offering additional catering and cleaning work. Shareholder pressure led G4S to abandon an $8 billion bid for ISS last year. The company could acquire a small engineering company to bolster its offering of maintenance and repair services, Buckles said.
G4S may also sell 100 million pounds of assets that are struggling with margin targets and no longer central to the company’s strategy, he said.
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