G4S plc (LON:GFS) is the world’s leading global integrated security company, with operations in 40 countries around the world. As you might have heard, G4S has fallen on hard times recently. Firstly, the company failed to provide enough security personnel for the London 2012 Olympics, forcing the Army to step in and meet demands.


Secondly, an aggressive acquisition strategy over the past few years left the company heavily indebted, forcing management to undertake a rights issue and thirdly, the company has recently been hit by allegations that it has defrauded the British government. These allegations are pretty serious as G4S stands accused, along with another UK based outsourcing company, of charging the government for electronically tagging criminals who did not exist. The UK’s Serious Fraud Office, or SFO is currently investigating the company following these claims.

G4S is unlikely to ever be out of business

All in all, this avalanche of bad news has hit G4S’s stock price hard. However, the company still has plenty going for it. Indeed, a world leader in security services like G4S is unlikely to ever be out of business.

According to research firm Freedonia, the global security services market will be worth around $244 billion by 2016. 7.4% annual growth is expected until then. To put this into some perspective, G4S’s total revenue for 2012 was only £7 billion, or $11.2 billion. What’s more, within markets where security services are relatively underdeveloped, such as Russia, China, India and South Africa, the market is expected to grow at a double-digit rate until 2016.

G4S is facing a tough time within the UK market

According to G4S’ first half results, the company generated 36% of total revenue within developing markets; according to the company’s own predictions this is expected to expand to 40% by 2016. 25% of the company’s first-half 2013 revenue was generated within the U.K. and 27% was generated within the U.S. Now, G4S plc (LON:GFS) is facing a tough time within the U.K. market, its home nation. If the company is found guilty of defrauding the British tax payer, the reputational damage to G4S could force the company to leave the U.K. security market altogether.

However, although the U.K. market currently contributes a quarter of G4S’s annual revenue, in the grand scheme of things, the U.K. security service is worth peanuts. For example, according to Freedonia, the Western Europe security market will be worth $46 billion by 2016. The North American market on the other hand will be worth $78 billion, so G4S plc (LON:GFS) could easily afford to rebrand and move out of the U.K. There is also a huge untapped demand for security services within China and India – these two multi-billion dollar markets are expected to account for 13% of the growth within the security services market through 2016.

G4S is getting swept along in the market’s wake

So all in all, many of G4S plc (LON:GFS)’s woes are home grown but over the longer term and internationally, the company would have to actually try hard not to grow. The global demand for security and related services is ever-increasing and G4S plc (LON:GFS) is getting swept along in the market’s wake. Troubles in the U.K. can be easily forgotten if the company moves away from that market, acquiring well-established competitors in rapidly growing markets, a strategy that it has actually been pursuing for some time.