G4S shares tumble despite security giant's profit growth

Global security giant G4S took a further step towards shaking off its troubled history yesterday, with a robust interim trading performance that further suggested its recovery strategy remains on track.

G4S shares dropped 7.5% on concerns over growth in emerging markets. Picture: Oli Scarff/Getty Images

Chief executive Ashley Almanza, who has masterminded the group’s return to health and taken it out of the glare of previous adverse publicity, reported a near-17 per cent jump in pre-tax profits to £237 million in the first six months of 2017.

• READ MORE: Safe pair of hands again for G4S in the Footsie index

Revenues rose 12 per cent to £3.97 billion. The group also has a sales pipeline with an annual contract value of £7bn.

It was not unmitigatedly good news, however, as the market marked the shares down 7.5 per cent on the news that while G4S’s developed markets saw business growth of 10 per cent emerging markets were flat due to a near-8 per cent fall in business in the Middle East and India.

One analyst said: “There may have also been some profit‑taking as the shares are at a ten-year high. It remains a strong narrative.”

Almanza said: “We continue to invest in strengthening our sales operations and in new products and services for our customers and these investments have materially improved our sales pipeline which supports our medium term aim of growing revenues by an average of around 4-6 per cent per annum.

“Our well-established productivity programme provides increased confidence in the group’s ability to deliver recurring operating and financing efficiencies of £90m to £100m by 2020.”

The G4S boss has been overseeing an overhaul following a series of historical blunders at the company, including a prisoner-tagging scandal and failure to supply adequate security for the London Olympics in 2012.

• READ MORE: G4S axes 1,100 jobs following Olympics fiasco

He said: “We continued to make substantial progress with G4S’s transformation and this provides increased confidence in the group’s prospects.

“The scale and quality of our pipeline is materially improved and this, together with our ongoing investment in sales operations and new products and services, provides stronger support for our organic growth plans.

“During the second half of 2017, our growth programme will focus on consolidating contract wins made over the past year and on converting attractive opportunities in our pipeline.”

In the UK and Ireland, revenue grew a shade under 2 per cent as G4S was boosted by new electronic monitoring, facilities management and integrated security contracts.

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A key part of Almanza’s strategy has been a mass selloff of under-performing assets, with 20 being offloaded since 2013. Analysts believe dozens more of these operations deemed surplus to requirements will go over the next few years.

This has also brought down group debt. G4S, which provides services such as guarding, aviation screening and mobile patrols, said net debt to earnings had now come down to 2.7 times, and that it was targeting 2.5 by the end of this year.

Even with yesterday’s setback to the shares, the stock has jumped 40 per cent in the year to date and has been promoted back to the FTSE 100. Investors were also pleased to see the interim dividend held at 3.59p.

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