Security services company G4S (GFS) announced full year 2017 results on Thursday. Investors will be hoping that they represent a brighter future.
The company delivered a 3.2% increase in revenue on 2016 to £7.4bn, albeit light of consensus £7.8bn expectations. Pre-tax profits jumped 30% to £386m.
Chief executive Ashley Almanza continues to say that the outlook is positive, telling shareholders to anticipate a ‘strong performance over the next three years.’
But the share price is down more than 4% on Thursday at 253p.
It might be argued that the market reaction may be due to general negativity that continues to swirl around the outsourcing industry since the collapse of Carilion.
But G4S itself has had plenty of self-inflicted problems to deal with, with a series of contracts poorly run. It recently fell under the uncomfortable glare of a BBC Panorama investigation. The documentary film showed G4S staff abusing detainees at one of the immigration detention centres it runs.
There are some positives, not least an 11% cut to net debt, although debt still stands at £1.5bn. But borrowings are clearly still a big concern for investors with memories of Carillion still fresh in the memory.
A steep decline in operating cash flow, from £633m in 2016 to £527m last year, hardly helps.
AJ Bell’s Investment Director Russ Mould argues that the company's positive medium-term comments may not ‘hold a lot of credibility given the patchy track record in recent years’.
Mould points to recent headwinds including stalling growth in India and the Middle East. This was first signalled in August last year.
Investment bank UBS is forecasting 19.7p of earnings per share in 2018, suggesting a price to earnings multiple of 12.8. A 3.7% dividend yield is also implied.
