G4S shares hit fresh 20-month high after 14% jump in profits
Shares in outsourcing major G4S jumped to touch a new 20-month high yesterday as it reported a strong advance in annual profits following an overhaul of the business.
The group posted a near-14 per cent increase in underlying pre-tax profits to £352 million in 2016 on revenues, up 6.3 per cent.
G4S, which operates in more than 100 countries and employs in excess of 600,000 people, has been selling businesses to pay off debts.
The company has also been working to cut losses from UK government contracts that include providing asylumseekers with accommodation.
G4S said there was still further mileage in the turnaround, which was launched three years ago in the wake of a prisoner-tagging scandal in 2013 and its failure to supply adequate security for the London Olympics in 2012.
Together with outsourcing peer Serco, G4S was investigated by the Serious Fraud Office after it charged the government for putting monitoring tags on criminals who were either dead or in prison.
Ashley Almanza, group executive, said: “Whilst there remains much to do to realise the full potential of our strategy, the group has made significant progress over the past three years.”
G4S said it won £2.5 billion of new contracts in 2016, and that it had a pipeline of new business worth £6.8bn a year.
The group has offloaded 29 businesses since 2013, including four closed and 12 sold last year, with another 27 slated for sale or closure.
In December, G4S reached a deal to sell its controversial Israeli operations to a local private equity fund for £88m.
The group said revenues across the UK & Ireland grew by 1.5 per cent, thanks largely to a new global security contract for a major bank.
But the results confirmed another hit of up to £4m after a loss-making Home Office contract to house surging numbers of asylum seekers was extended by another two years in December.
The five-year contract has already cost the group a £31m writedown in 2015. G4S maintained its fullyear dividend at 9.41p, allaying analysts’ concerns that it might be cut.
Shares in G4S have been rising steadily in recent months as its recovery plan has been bearing fruit, while it is also seen as a likely beneficiary of the new US administration’s pledge to boost military spending.
US President Donald Trump has said he plans to increase defence spending by a record $54bn, while analysts say that G4S could also pick up new contracts to help with America’s immigration policy changes. G4S’S shares jumped to 292p yesterday, before paring their gains to close at 288.8p, up 8 per cent.