Shares in security services firm G4S (GFS) have rallied 9% to 200p after saying it could separate its cash solutions division from the rest of the business.

Chief executive Ashley Almanza describes the decision to look at options for the unit as a way to ‘enhance (G4S’s) focus for the benefit of customers, shareholders and employees’.

The firm expects to update the market on its progress when it releases full year results next March.

Cash handling is a reasonably profitable business and typically has higher margins than manned guarding.

Although cash usage is declining in most developed economies it is actually rising in parts of Europe and G4S’s US cash handling business is growing faster than any other region.

Separate listing is an option

One option for the board to consider is a separate listing for the cash solutions business following the example of Spanish rival Prosegur.

Prosegur Cash was floated a year and a half ago and has a market capitalisation of €2.8bn or £2.5bn. The shares trade on a multiple of one and half times estimated 2019 sales.

Analysts estimate that G4S’s cash solutions arm could achieve a market value of £1.6bn to £1.8bn against estimated sales this year of £1.2bn which would put it on a similar rating to the Spanish firm.

Issues beyond cash solutions

The separation of the cash-handling business could be good news but it doesn’t address the bigger issues that have dogged G4S this year.

The nine-month trading update in November was a big disappointment with like-for-like sales up just 1.1% against the company’s internal target of 4% to 6%.

Revenue from its security solutions arm is rising in the US but flat year-to-date in Europe while the UK care and justice business has seen falling revenue.

This year’s profit is expected to be flat on last year, which contrasts with the hoopla in the middle of the year about a ‘step-change’ in the business, and until today the shares have been bumping along at 12-month lows of 175p to 180p.


Issue Date: 13 Dec 2018