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Charges dent G4S profits

G4S busies itself with restructuring its business, as it hopes to turnaround its fortunes.
August 12, 2015

In similar fashion to rival outsourcer Serco (SRP), security services specialist G4S (GFS) is in the process of a strategic shift, albeit further down the road. A restructuring of its UK and Ireland cash-handling businesses is under way, and there are plans to sell or close 46 of its non-core businesses. As a result, the group incurred a number of one-off costs during the first-half, including a £17m charge relating to a review of its assets, liabilities and legacy contracts. This pulled down operating profit by 12 per cent to £124m.

IC TIP: Buy at 264p

The UK and Ireland segment was a weak spot for the group, with revenue falling 3.2 per cent year on year to £760m. Comparatives weren't helped by the cessation of the group's UK electronic monitoring contract during the first quarter of 2014, along with the loss of a large retail contract at the close of the year,. Across the pond, trading was brighter with revenue for North America up 5 per cent to £740m. This business achieved double-digit growth in commercial security, although this was partly offset by the loss of a nuclear power contract. Despite the macroeconomic slowdown in Brazil, revenue increased by 12 per cent in Latin America to £285m, while the group's sales pipeline in the region nearly doubled.

Bloomberg consensus forecast for adjusted EPS this year is 15.2p.

G4S (GFS)

ORD PRICE:264pMARKET VALUE:£4.1bn
TOUCH:263.8-264p12-MONTH HIGH:310pLOW: 240p
DIVIDEND YIELD:3.6%PE RATIO:56
NET ASSET VALUE:48p*NET DEBT:219%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014 (restated)3.3880.03.13.40
20153.4170.02.03.59
% change+1-13-35+6

Ex-div: 3 Sep

Payment: 16 Oct

*Includes intangible assets of £2bn, or 130p a share