G4S Stock Jumps as Investors See Revival After Contract Scandals

  • Company keeps interim dividend unchanged as earnings rise
  • CEO says disposals, reducing debt remain ‘key priorities’

G4S Plc, the world’s biggest security-services provider, rose the most since the merger that created it 12 years ago as investors saw signals of a recovery from scandals that included its handling of a contract for the 2012 Olympic Games in London.

G4S stock surged as much as 19 percent, the steepest intraday jump since July 2004, and was trading up 17 percent at 229.7 pence as of 11:33 a.m. in London. The interim dividend will remain unchanged 3.59 pence a share, London-based G4S said Wednesday in a statement.

The company has been working to stem the cost of resolving a string of controversies, including the loss of an Australian government deal for running an asylum-seeker detention center, as it lets unprofitable contracts expire and reduces debt by cutting spending and selling assets. Credit-reporting company Standard & Poor’s said in March that G4S’s debt rating could be downgraded as early as next month following a review.

First-half earnings show G4S is “traveling in the right direction,” Caroline de La Soujeole, an analyst at Stifel, said in report to clients. “There had been concerns in some quarters” that the dividend wouldn’t be maintained as the S&P review results loomed.

The company sold seven businesses in the first six months of 2016, raising 32 million pounds ($41.8 million) and contributing to a 52 percent jump in cash flow to 293 million pounds. The remaining 32 businesses earmarked for sale over the next 18 months should raise 250 million pounds to 350 million pounds, the company said.

Profit from continuing operations and before interest, tax and amortization rose 8.2 percent to 199 million pounds, G4S said. Earnings as a proportion of revenue increased in developed markets including in Europe, while revenue jumped 10 percent in emerging markets.

“We have much more to do to realize the full potential of our strategy,” Chief Executive Officer Ashley Almanza, who took over at the helm of G4S in mid-2013, said by phone. “Executing these programs and reducing our net debt remain our key priorities.”

Before it's here, it's on the Bloomberg Terminal.