17.15: The Olympics staffing fiasco came back to haunt G4S (GFS.L) as the security group missed out on contracts to run prisons.
G4S shares tumbled 8.4p or 3.1% down at 254.5p after the government decided to keep three of five contracts to run seven prisons under public sector management and excluded the company from a short-list of bidders for the remaining two.
The news is a blow for G4S boss Nick Buckles (pictured) who wanted to prove that the group's failure to provide enough guards at the London Olympics would not jeopardise its relationship with the government.
The decision by the Ministry of Justice could test shareholder support for Buckles. Leading investors such as Neil Woodford of Invesco Perpetual stood by the embattled chief executive, although two of his lieutenants resigned, arguing that until this summer he had overseen a well-run expansion of the business.
The contracts to run all the prisons were said to be have been worth up to £2 billion, while the contracts that remain are reportedly worth around £1.1 billion. British rival Serco (SRP.L), French caterer Sodexo and a joint venture between US prisons firm MTC and Spanish group Ferrovial remain in the running for the other two contracts to run a Northumberland prison and three jails in south Yorkshire.
Earlier this week G4S repeated its view that the Olympics blunder would cost it £50 million as it reported a rise in underlying revenues in the third quarter, helped by growth in emerging markets. Today's development shows the eventual price may be higher.
G4S expressed its disappointment at the decision. Before today's announcement the shares had recovered some of the ground lost over the summer. They reached an all-time high of 290.4p 11 July, two weeks before the start of the Games.
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Pound gains as Bank pauses over QE button
Stock markets again struggled to make headway after the US election, despite better than expected US jobs figures and a rise in exports.
The FTSE 100 closed 15.5 points or 0.27% lower at 5,776 while on Wall Street the Dow Jones industrial average traded nearly 40 points down at 12,893. In Europe the Euronext 100 edged down one point to 650.
The euro fell against the pound to 79.71p after the Bank of England and the European Central Bank both held interest rates at 0.5% and 0.75% respectively. The rally in the sterling reflects the expectation in some quarters that the Bank of England would announce a further round of quantitative easing, or money printing, although the recent improvement in economic data had made that unlikely.
Bargain hunters mop up after FTSE sell-off
08.57: European markets regained some momentum on Thursday morning, with investors seeking out bargains after a savage sell-off yesterday sparked by concerns over the ‘fiscal cliff’ in the US and renewed fears over growth in Europe.
In the US, both the Dow Jones and S&P 500 closed at their lowest levels since early August, dropping 2.36% and 2.37% respectively. The panic spread to Asian markets overnight, with the Hong Kong Hang Seng the worst hit, down 2.4%.
In calmer trading on London this morning corporate results dictated the mood, with the FTSE 100 ticking 20 points or 0.3% higher to 5,812.
Aviva (AV.L) was among the top risers, with shares up 1.4% to 333p, after the insurance company announced that it was in talks to sell its US life insurance division; it also highlighted a further eight businesses to be sold during 2013. The company said its efforts to recruit a new chief executive were ‘well advanced’, and reported a 5% decline in global sales for the nine months to the end of September.
‘While there is no “big bang” in this release, it highlights the ongoing progress being made and the sources of the positive newsflow we expect to materialise in the next six months,’ commented Matthew Preston, an analyst at Berenberg bank.
Randgold Resources (RRS.L) moved 1.7% higher to 7,107p, clawing back some of yesterday’s share-price losses after the African gold miner released its third-quarter production figures.
Reed (REL.L) benefited from a results statement that analysts said showed the publishing and events company’s ‘resilience to contend with disruptive change impacting the publishing model’. The company reported underlying sales of 4% for the first nine months of the year, while confirming it was on track to meet full-year growth expectations.
Among the fallers, construction and infrastructure support services company Balfour Beatty (BALF.L) dropped 9% to 278p, the biggest loser on the FTSE 250, after the investors’ dividend favourite issued a profit warning.
In currency markets, the pound rose slightly against the euro, to €1.2519, ahead of the conclusion today of this month’s meeting of the Bank of England’s Monetary Policy Committee. The majority of economists expect the committee to refrain from extending its asset purchase programme for now.
The European Central Bank is not expected to make any changes to monetary policy either, with president Mario Draghi’s comments at a press conference following the central bank’s announcement likely to be closely scrutinised by markets.