5th Nov 2013 09:49
LONDON (Alliance News) - Security company G4S PLC, which is later facing investors looking for reassurance after a series of high-profile contract issues, Tuesday reported flat profits for the first nine months of the year despite an increase in revenues and reiterated that it will restructure underperforming businesses.
In a trading update, the company didn't explain why profits had failed to rise in line with revenues. It said it had faced continuing challenging trading in the US and Europe, but strong growth in emerging markets, which account for over 40% of total profits. It said it expects the challenging conditions in its developed markets to continue in the fourth quarter.
It said profit before interest, tax and amortisation was in line with the first nine months of 2012, while revenues were up 6.4% at constant exchange rates. Organic revenue growth was 4.8%, as 14% growth in emerging markets offset flat revenues in developed markets.
The company's secure solutions and systems business is being hit in the US by lower federal government spending.
G4S has endured a difficult year, ever since it had to pay the army to come in and help it secure the London Olympic games after failing to recruit enough of its own staff. Monday, the UK's Serious Fraud Office said it has opened a criminal investigation into electronic monitoring contracts run by G4S and Serco PLC after the government in July placed all the criminal tagging contracts held by the two companies under review following an audit that showed they had been over-charging, claiming for people who were dead, who had never been to prison, or never tagged in the first place.
It replaced its chief executive last month in an attempt to repair its relationship with the UK government following the tagging allegations, but has also been hit by problems in South Africa, where the government stepped in to take control of a prison G4S runs following allegations of abuse which the company denies.
The company, which operates in over 120 countries and employs about 620,000, is expected to face tough questioning from investors later, some of whom are expected to ask whether the company is just too big to control and needs to be broken up.
"At our Capital Markets presentation today, we will be outlining how the proven expertise and capabilities of our people, coupled with our leading market positions and diverse customer base provide us with the foundation from which to deliver sustainable, profitable growth," the company said in its statement.
"We will sharpen our strategic focus and strengthen our investment in customer service, organic growth, and technology and innovation. We will share best practice across the group and there will be a clear focus on capital discipline, cost leadership and cash flow management to ensure we deliver sustainable profitable growth," Chief Executive Ashley Almanza said in a separate statement for the Capital Markets Day.
It said it had identified opportunities across its portfolio to support organic growth of between 5% and 8% a year. It said its contract pipeline stood at GBP5 billion at the end of September.
The company said it will sell or restructure about 35 units, and lay off up to 400 staff, according to media reports.
G4S shares were down 2.8% at 247 pence Tuesday morning, one of the biggest fallers on the FTSE 100.
By Steve McGrath; [email protected]; @stevemcgrath1
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