G4S shares tumble

G4S shares slumped on Monday after the British security group warned that its failure to provide enough guards for the London Olympics would cost it up to £50 million ($78 million, 64 million euros). The admission, made over the weekend, prompted downgrades from brokers Jefferies and Seymour Pierce, as well as Royal Bank of Scotland and UBS. It also sparked intense speculation over the future of G4S boss Nick Buckles. In reaction, G4S' share price dived by more than 10 percent in early morning trade. The stock stood at 251.9 pence in late afternoon deals, down 9.62 percent from Friday's closing level. London's FTSE 100 index of top companies, on which G4S is listed, fell 0.19 percent at 5,655.62 points. G4S chief executive Buckles was forced to apologise on Saturday for recruitment blunders that have forced the British government to deploy extra troops to guard the London Olympics at the last minute. Buckles said that he was "very sorry" that 3,500 troops have had to be drafted in just two weeks before the Games, after the company admitted it could not provide the total 10,000 guards it said it would. Speaking publicly for the first time since details of the fiasco emerged last Wednesday, Buckles confirmed that G4S faces losses of between £35 million and £50 million in the current financial year as a result of the blunder. This amount covers the cost of increased military deployment resulting from the shortfall in staff, plus any other costs incurred. "We accept that we underestimated the task of supplying staff for the Olympics. We deeply regret that," Buckles told BBC radio on Saturday. He admitted that he had only realised "eight or nine days ago" that there would be a shortfall. "It's only when you get closer and closer to the Games that you realise that the number isn't as high as you expect," he said. In response, Seymour Pierce stockbrokers removed its "buy" rating on the stock on Monday, and slashed its profit forecasts for the current financial year by £60 million. "It appears certain that Mr Buckles will fall on (his) sword along with other senior UK management," said Seymour Pierce analyst Kevin Lapwood. "This could lead to a period of instability at the company which appointed a new chairman just over a month ago. "Whoever is in charge will have a lot of work to do to repair the company's reputation, especially at home in the UK and with the UK government, its single largest customer. This will be crucial for the company's future." Broker Jefferies meanwhile downgraded G4S shares from "buy" to "hold", adding that this was due partly to reputational damage. "We fear the Olympics reputational negative may impede G4S's ability to fully participate in forthcoming UK public sector outsourcing opportunities," said Jefferies analyst Kean Marden in a note to clients. Lapwood said he remained hopeful that G4S would recover from the crisis. "There will be some short-term repercussions but overall we believe G4S has a good track record with the UK government. "The shortcomings on the Olympics contract should not significantly affect its chances of benefiting from government outsourcing in the longer term."