G4S looks for cash solution

Cash solutions revenue increased by 3.9 per cent in the six months to 30 June with previously announced ATM and bank branch closures dampening UK sales. Revenue from North American retail cash solutions surged by a third to £63m on the back of mobilisation of new services for existing customers and securing additional clients. Up against an £8m one-off benefit last year from early completion of the UK bullion centre contract, adjusted profits before interest, tax and amortisation (PBITA) dropped by 10 per cent to £60m with a 1.8 percentage point margin contraction to 11.2 per cent.

Divesting this segment would see G4S emerge as a pure-play security business. Currently accounting for 86 per cent of group sales, secure solutions saw revenue growth of 4.9 per cent in the first half, with African and North American revenue increasing by 8.8 per cent and 10.8 per cent, respectively. Increasing the proportion of revenue derived from technology-enabled services offset increased mobilisation costs and one-off charges, holding the adjusted PBITA margin steady at 6.3 per cent. The group believes it can maintain annual revenue growth of 4-6 per cent.

Statutory earnings were weighed down by £36m in restructuring costs (of which £17m relates to the separation of the cash business) and a £35m goodwill impairment on the Brazilian business.

Bloomberg consensus forecasts place adjusted pre-tax profit at £400m and EPS at 18.6p for the full year, rising to £434m and 20.3p in 2020.