Shares in downtrodden security and cash-handling firm G4S (GFS) rallied 6% from recent lows to 195p after reporting positive half-year earnings and unveiling plans to split the business in two.
G4S is one of the world’s biggest employers with security and cash handling operations around the globe but its reputation has taken several knocks in recent years.
Today’s update shows an increase in sales at both the security and cash divisions and a small improvement in pre-tax profits up despite higher start-up costs for new contracts.
Turnover in the first half of the year grew by 4.7% to £3.75bn on a constant-currency basis, supporting the firm’s medium-term goal of 4% to 6% annual growth.
The Secure Solutions security services business grew 4.9% while the Cash Solutions business increased revenue by 3.9%. Both units shows improved revenue mix with more higher-margin income driven by technology-enabled services.
SPIN-OFF OR SALE
Five years in to a turnaround attempt G4S has decided that splitting the business in two is in everyone's best interest. That decision is likely to mean either a trade sale or a separate stock market listing for the company's Cash Solutions business, first hinted at back in December.
Since then G4S has received ‘a number of unsolicited expressions of interest’ to buy part or all of the cash-handling unit and it has ‘actively engaged’ with the potential buyers, Canada’s Garda World taking a look back in April.
Another option or the business is to float it separately on the stock market using the template set by Spanish rival Prosegur which listed its cash-handling division in early 2017.
READ MORE ABOUT G4S HERE
Prosegur Cash trades on 14-times this year’s earnings, giving it a market value of €2.7bn, or £2.4bn. Parent company, which offers security services, trades on 17-times earnings and is valued at €2.4bn, or £2.15bn.
G4S’s cash handling unit is much smaller than its security business but its margins are almost twice as large and if it were separately listed it could well command a valuation of as much as £1bn.
G4S’s current market valuation is £2.8bn.
