Emerging hiccup despite G4S slipping handcuffs of its history

Comment Martin Flanagan

There was a shadow over security giant G4S’S strong interim results yesterday, with doubledigit rises in profitsand revenues. The market was unnerved by flat revenues in emerging markets and marked the shares down 5 per cent . It was a shame because otherwise chief executive Ashley Almanza’s overhaul of the company continues to bear much fruit.

G4S is gradually being rehabilitated from its historical lightning rod stock market status, with high-profile reputational own goals such as its inability to provide adequate security at the 2012 London Olympics and a prisoner-tagging scandal.

Each new set of stronger trading numbers shows progress is being made. At the heart of Almanza’s strategy is a blizzard of asset sales to make G4S simpler, reduce debt, draw a line under losses from UK government contracts, and get a greater share of resilient revenues from abroad. The group has sold a score of under-performing assets since 2013 and dozens more have been deemed non-core and will be guided to new owners. G4S, which does everything from aviation screening to watching over the Wimbledon tennis fortnight, now has net debt to earnings of 2.7 times, which makes its target of 2.5 by the end of this year highly feasible. Meanwhile, G4S says it is confident that full-year revenue growth will be in line with its mid-term target of 4 to 6 per cent. This is not just a costcutting recovery. Contracts are being won and consolidated as well as assets being sold.

The group had become sprawling and accident-prone. It is now back in the Footsie given its share price recovery (even with yesterday’s hiccup), and a lot of the heavy lifting is already done. True, emerging markets, primarily India and the Middle East, look problematic. But it could be forecast that sustained low commodity prices would hit G4S’S customers there and there would be a knock-on effect on security spending. Bigger picture, G4S is looking considerably more secure.