G4S Sales Beat Estimates Helped by Emerging MarketsBenjamin Katz
G4S Plc, the world’s largest private-security company, posted first-half sales that beat analyst estimates on new prison-management contracts in emerging markets and a revamp of its European operations.
Revenue gained 3.8 percent to 3.37 billion pounds ($5.7 billion) from a year earlier, the Crawley, England-based company, which operates in 126 countries, said today. The average estimate of analysts in a Bloomberg survey was for 3.17 billion pounds. Earnings before interest, tax, amortisation and some items rose 6.3 percent to 185 million pounds.
The results are a boost for Chief Executive Officer Ashley Almanza who’s reorganizing the company after earnings last year were hit by a financial settlement with the U.K. government after overcharging authorities for electronic tagging of criminals. To streamline the business, Almanza has been selling unprofitable businesses. Last month, he agreed to dispose of G4S Secure Solutions AB to Sector Alarm Sverige AS for 438 million Swedish krona ($64 million).
“We are seeing the first signs of the benefits of these restructuring programs flowing through our results,” Almanza said on a conference call today. New contracts worth 1.2 billion pounds signal “continuing strong demand for the services that we offer, and this is particularly true in emerging markets” where sales grew by 12 percent, he said.
The stock rose as much as 1.9 percent to 264.70 pence in London trading and was up 1.7 percent as of 10:12 a.m, valuing the company at 4.1 billion pounds. G4S has gained 16 percent since falling to a 2014 low of 228 pence on March 13. The British FTSE 100 benchmark index added 1.4 percent in the same period.
The company’s “turnaround will gather pace,” JPMorgan analysts including Robert Plant, who have an “overweight” recommendation on G4S shares, wrote in a note to clients today. Growth in emerging markets, which make up 36 percent of the company’s revenue, will continue to outperform G4S’s other operations, the analysts said.
Kenya, South Africa and the United Arab Emirates are key countries in the company’s emerging market push, Almanza said today. At the same time, the company will continue selling underperforming businesses, Chief Financial Officer Himanshu Raja said on the call.
The company has identified 15 “barely break-even” businesses that it will sell, he said. The assets represent “less than 1 percent of total 2013 group revenue,” according to the CFO.