G4S bounces back with strong results that send shares soaring
BRITAIN’S G4S posted strong results yesterday, sending its shares soaring on signs the world’s largest security group had bounced back after scandals, helped by more demand for its services and a shift in focus away from the UK.
G4S, which runs services ranging from manned security in prisons to cash transportation, is selling weaker units in an overhaul after a string of high-profile contract problems in Britain, which now accounts for one fifth of its revenues.
Core profit of £199 million (R4 billion) rose 8 percent helped by booming revenues from emerging markets, accounting for increasingly more than the UK and Ireland where the company had a string of problems and was scaling back.
“Our strategy and our plans are now delivering tangible results,” said Ashley Almanza, the chief executive, adding that the company was concentrating on whittling down debt and delivering its overhaul.
Analysts had predicted that the group could be vulnerable to the backlog in political decision-making in Britain after its vote to leave the EU, a sluggish domestic economy and a fall in the value of the pound making its debt in foreign currencies more expensive to service.
We have seen increasing demand for security… and that has been a steady trend for the last three years.
It was able to whittle down debt to 3.2 times core earnings from 3.3 times at the end of last year thanks to strong cash flow, offsetting the impact of weaker sterling on euro and dollar-denominated debt.
Shares in G4S jumped on relief that the dividend – seen as vulnerable by some analysts – was maintained at 3.59 pence per share and that the company would not seek to raise more funds, as some analysts had expected.
At 11.24am in London, they were up almost 19 percent and on track for their best one-day rise in 15 years to 232p.
Islamist attacks
Demand for security services had been increasing, even before Islamist attacks in France and Germany this summer, which had little direct impact, Almanza said.
“We have seen increased demand for security technology and consulting, but frankly we saw that before recent events in France and that has been a steady trend for the last three years.”
The firm appears to have put behind it a series of scandals, including news in June that a gunman who killed 49 people in a Florida nightclub was an employee who had not been efficiently vetted.
G4S gained notoriety at home in Britain after failing to provide enough guards for the London Olympics in 2012.
It was later investigated by the Serious Fraud Office for overcharging the government to provide electronic tags for offenders, some of whom turned out to have been in jail or dead.
A G4S spokesman said losses on a contract to provide housing for migrants seeking asylum in Britain had not widened.
G4S took a 31 million charge for the contract in March, and said yesterday that it would have to take another charge for 57 million if the contract was extended until August 2019.
Almanza said the company was getting steady interest in the business units it was selling – the four largest of which were worth about £300m, according to analysts.
Group revenues rose 5.1 percent. The results were in line with expectations, with core earnings of £199m landing within a forecast range of £185m to £205m. – Reuters