There’s a children’s story about a king who used to come out of his palace every day before dawn and command the sun to rise. And the sun, obedient hellish star that it is, never refused. That story came to mind this week, when G4S, a British multinational security services company headquartered in London with operations in some 125 countries, announced the closing of its Israeli subsidiary. According to an Arab media source, G4S Israel does $142 million in business annually, providing security equipment, control rooms and surveillance technology to Israeli prisons, checkpoints, and police training facilities.
G4S has been the focus of Boycott, Divestment, Sanctions (BDS) campaigns, including a recent afternoon campaign of pasting illegal posters on the London tube condemning the international giant. And so, much like the king from the story, when G4S divested its Israel business, BDS announced victory.
Alas, the reality of financial stories is never quite as exciting as news readers would like it to be.
Until a few years ago, G4S used to be the world’s largest security company, measured by revenues. But it is currently trending down, getting rid of many assets to stay trim and raise cash. The company’s briefing for its investors last Wednesday regarding its earnings in 2015 included this bit:
“Under the UK Compass asylum seeker contract with the Home Office, G4S provides accommodation, transportation and subsistence services for asylum seekers whilst their claims are being processed. This contract commenced in 2012 and runs to September 1, 2017, with a potential extension of a further two years,” G4S wrote.
“…We experienced a significant increase in the number of new asylum seekers between November 2015 and January 2016 and as a result the number of asylum seekers in our care increased by 9.6% year-on-year. We have updated the Compass provision based upon our best estimate of the increase in asylum seekers assigned to G4S, the availability of suitable accommodation approved by local authorities and the speed of processing of applications by the immigration authority,” the explanation continued.
“To date, the Compass contract has not been extended and the onerous contract provision has been increased by $28.61 million to $44.33 million covering the period to August 2017. Should the contract be extended for the period to August 2019 then, based on the same assumptions as the current provision, a further provision for $81.54 million would be required,” the company concluded.
G4S is not having a good time with its government contract, it has tried to renegotiate when the wave of humanity was starting to pour down in torrents, but the government refused, which means they’ll have to eat the losses.
Likewise, according to the same briefing, G4S is getting rid of many of its assets, which they call “Portfolio management” and “capital discipline and performance management.” According to the briefing, since 2013 G4S has divested 23 businesses, realizing proceeds of $401.58 million, and another 38 businesses are being sold or closed down. Overall, the businesses G4S is giving up had revenues of $1.71 billion.
Next comes the company’s reference to its Israeli venture: “Through our continuing portfolio management program, we also expect to exit a number of other businesses with combined revenues of $571.66 million in the next 12 to 24 months including G4S Israel, UK Utility services, US Youth Justice services and UK children’s services. We expect the sale of these businesses and the 38 businesses previously identified, to materially improve our strategic focus and to realize further sales proceeds of between $357.29 — $500.39 million.”
And that part, the mention of G4S Israel in the stream of more than 50 businesses G4S is divesting — that, according to BDS, was because of BDS’s relentless pressure, including those 500 poster ads that were pasted on the London tube for an entire afternoon.