Shares in global security firm G4S (GFS) crashed nearly 18% to 109.3p, their lowest since 2004, after it reported flat earnings for the year to 31 December 2019.
Revenues for the year were up 4.7% to £7.67bn, thanks to healthy organic growth of 4.2%, but a high level of investment in ‘integrated technology-enabled solutions’ kept pre-tax profits flat at £501m.
In fairness, the results look fairly respectable. The core security business increased revenues by 4.7%, retail technology solutions grew 18%, although conventional cash handling rose just 1%. The lack of growth in the latter was the rationale for selling the majority of the business last month.
STRONG CASH
Operating cash flow was up 8.8% to £633m, representing cash conversion of 126% against 118% the previous year, while the sale of the cash handling business generated proceeds of £670m of which £300m was pure profit.
Not so impressive was a £291m charge for goodwill impairment, against zero the previous year, which mainly related to UK cash solutions, a £19m restructuring charge and £38m in costs for separating the bulk of the cash-handling business.
Following the sale, secure solutions will account for roughly 80% of revenues, risk consulting and technology solutions 11%, retail technology solutions 4% and a small cash-handling operation the remaining 4%.
The firm forecasts an annual revenue growth rate of 4% to 6% for the core security business and double-digit growth rates for risk consulting, security technology solutions and retail technology solutions.
PLANS FOR THE FUTURE
Chief executive Ashley Almanza was upbeat about the outlook following the sale of the cash-handling business: ‘Our clear aim is to capitalise on this focus to strengthen our position as the industry leading global security company.
‘Our investment in technology solutions is delivering clear benefits to our customers and has driven growth in key markets. We plan to deepen and extend these capabilities in order to support our goal of accelerating profitable growth.’
So far G4S has seen no material impact on its business from the coronavirus and therefore it is sticking to its guidance for 2020 unlike many other businesses with worldwide operations.
READ MORE ABOUT G4S HERE
