Shares in security firm G4S (GFS) climbed 6.8% to a three-month high of 146p after it came good on its promise earlier this month that first half earnings would be ‘significantly above market forecasts’.
Underlying pre-tax profits for the six months to 30 June were £187 million, down 4.6% on last year but well ahead of the market consensus of £159 million.
Earnings per share (EPS) on an underlying basis were also considerably better than the market was forecasting at 6.3p rather than 4.3p.
INFLECTION POINT
‘G4S is at an important inflection point as we accelerate our transition to a highly focused global integrated security business’, said chief executive Ashley Almanza.
‘The benefits of our strategy, focused execution and timely response to Covid-19 are reflected in the group’s results with resilient revenue, earnings and cash flows reported for the first six months.’
Revenues from secure solutions were £3.1 billion, flat on 2019, while adjusted pre-tax earnings rose slightly to £202 million in spite of the impact of Covid-19 thanks to strong demand in the US and Asia.
Revenues from cash solutions were £220 million, down over 18% on last year, while pre-tax earnings were also lower.
Following the sale of the majority of the traditional cash handling business to Brink’s, the rump of the cash solutions division is being streamlined.
CASH & DIVIDENDS
The sale to Brink’s is expected to net G4S a further £135 million in the second half, which will go towards reducing its already much-improved gearing ratio of 2.6 times compared with 2.9 times a year ago.
Almanza sounded an upbeat note on the outlook: ‘G4S has an unrivalled market footprint, a well-diversified revenue base and pipeline, and growing capability in the delivery of integrated technology-enabled solutions.
‘The group is very well positioned to emerge from the pandemic as a leaner and more focused market leader in the global security market and to create material value for all stakeholders.’
Although there is no interim dividend for 2020 there is the prospect of a resumption of dividends once the uncertainty over the pandemic has reduced and once dividend cover is back to two times.
