The security giant has signed a £200m outsourcing deal with Lincolnshire Police Authority.
Outsourcing specialists often benefit in times of austerity, as their business model enables public sector organisations to unload capital expenditure and underlying costs onto private companies in exchange for more affordable annual fees.
That's the theory, anyway, and security giant G4S (LSE: GFS) has taken it one step further with a new £200m deal to provide "middle and back office functions" to Lincolnshire Police Authority.
Lincolnshire Police Authority expects to save around £28m over the 10-year life of this contract, which includes an option for a five-year extension.
Outsourcing custody services
Although G4S is no stranger to providing outsourced services to police forces -- it already operates custody suites for three other forces -- this contract includes a wider range of services than any previous such deal.
G4S will build and operate new custody facilities for Lincolnshire Police, enabling them to close outdated old facilities and meaning that private employees will deal with suspects in custody.
Uniformed sergeants with the power to arrest people will be on hand, but G4S staff will carry out almost most other tasks, such as accompanying suspects to cells and administering drug tests.
According to the Financial Times, around half the force's 900 civilian staff will transfer to G4S, which will also provide back-office services such as HR, finance and fleet management. All 1,100 police officers will stay on, freeing up additional resources for frontline policing.
Crime pays
Until today, I didn't realise quite how many services G4S already provides to the UK's police forces. A visit to the G4S Policing Solutions website reveals job vacancies for custody officers, intelligence analysts, police trainers and even "covert policing tactical advisors" -- all jobs I had assumed were still done by police officers.
It's clearly a profitable line of business for G4S and one that looks set to expand, as police forces around the UK seek cost savings.
From a G4S perspective, the attractions are clear: your customer has a gilt-edged credit rating, income streams are secured for a decade in advance and there are few realistic competitors.
A secure investment?
G4S is due to publish its final results for 2011 on 13 March. A strong increase in profits is expected, as is an increase in the total dividend to 8.51p, a yield of 3% at today's prices.
The company has shown steady growth over the last five years and is a reliable dividend payer. G4S currently trades on a modest price-to-earnings ratio of around 12 and should make a good defensive choice for investors looking for a balance between income and growth.
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