G4S to strengthen balance sheet in ‘year of consolidation’

G4S-LogoG4S reported increased sales and organic growth in its half-year results, but the security giant is moving to raise funds in order to bolster its balance sheet.

The world’s biggest security company by revenues announced that sales were up 7.2 per cent to £3.65 billion in the first half of 2013. G4S saw overall organic growth of 5.4 per cent, rising to 13 per cent in developing markets which generated revenue of £1.3 billion – some 36 per cent of total group revenue. The growth of developed markets was hit by a 1 per cent decline in cash solutions.

New G4S chief executive Ashley Almanza stated the company posted a first half operating profit of £201 million, down from a restated £202 million a year ago. Overall cash generated from operations came in at £218 million.

Almanza said: “There was strong demand for our services across key markets and industry sectors in the first half of the year which resulted in continued revenue growth. Growth was particularly strong in developing markets where we have excellent market positions. There are significant growth opportunities in our key markets and this is reflected in our growing contract pipeline of around £4 billion per annum.

“On a like-for-like basis, half-year profits were in line with the same period in 2012 against a background of challenging trading conditions in Europe and in our cash solutions businesses in the UK and Ireland.”

Ashley Almanza, G4S

Ashley Almanza, G4S

He added G4S’s contract pipeline, strengthened balance sheet, focused investment and improved operational and financial management will all support revenue growth and cash generation. The focus in 2013 is on top line growth, operational capacity and the start of restructuring across the group’s businesses.

G4S has commenced restructuring programmes in the UK, Europe and Ireland, with that expected to cost £30-£35 million over 2013 and 2014. G4S are also searching for further opportunities to save costs across the group.

Almanza said: “2013 will be a year of consolidation for the group with the actions we are now taking starting to deliver tangible benefits during 2014.”

The results also showed that G4S’s net debt position as at 30 June 2013 stood at £1.95 billion. The group announced plans to sell businesses and issue new shares in a bid to strengthen its balance sheet.

G4S is placing almost 141 million new shares – representing almost 10 per cent of its existing shared capital – to raise funds. It has sold its Canadian Cash solutions business and Colombia Data solutions for total proceeds of around £100 million and Almanza admitted they are “well advanced” in selling two other businesses in the US, with total sales to raise in the region of £250 million.

Almanza said: “We need to strengthen our balance sheet to be able to realise the group’s opportunity for substantial value creation. We have announced our intention to raise funds via a 9.99 per cent placing of new ordinary shares.

“This, together with our disposals program and a renewed focus on cash flow management will enable us to invest in sustainable, profitable growth and reduce our debt to a level which supports our goal of maintaining a long term net debt to EBITDA ratio of less than 2.5x.”

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