9th May 2016 08:25
LONDON (Alliance News) - Shares in G4S PLC rose on Monday after the security services and outsourcing provider issued a reassuring trading update showing growth in revenue in the first quarter and no new provisions booked on onerous contracts.
Shares in the group were up 7.5% to 198.10 pence, the best performer in the FTSE 250.
G4S, like outsourcing industry rival Serco Group PLC, has been restructuring its operations and booking provisions on onerous legacy contracts following a series of scandals in recent years.
The most notable of these came in 2013 when G4S and Serco were found to have overcharged the UK Ministry of Justice for the electronic tagging of criminal offenders. This resulted in the pair being banned temporarily from winning new government contracts, limiting their ability to replace onerous contracts with more profitable new ones.
In its full-year results, published in early March, G4S was forced to book more provisions on troublesome UK contracts, in particular on its loss-making agreement to run centres housing asylum seekers for the Home Office. G4S said the sharp rise in the number of asylum seekers the UK had seen between November and January, driven by the influx of refugees fleeing the conflict in Syria, forced it to raise its provision to cover losses from the contract.
Further problems are due to emerge this week when the Ministry of Justice is expected to take over the management of the Medway secure training centre in Kent, which was at the centre of significant controversy earlier this year. A BBC documentary showed G4S staff using excessive force on children detained at the Medway centre earlier this year. G4S is in the process of selling the business as part of the divestment of its wider UK children's services arm.
On Monday, however, G4S Chief Executive Ashley Almanza, who took the helm in 2013 with the mandate to return the company to health, said the company had performed well in the first quarter of 2016 against an uncertain macroeconomic backdrop and has not booked any further provisions against onerous contracts.
Revenue in the first quarter to the end of March grew to GBP1.51 billion from GBP1.44 billion in continuing businesses. Revenue from G4S's Onerous Contracts, which it continues to manage through to conclusion, was GBP55.0 million, up from GBP46.0 million a year earlier, while revenue from its Portfolio Businesses, which it is seeking to sell, was GBP186.0 million, down from GBP218.0 million.
Almanza said G4S is currently in the process of selling or closing 42 businesses, having already exited 24 over the last two years and realising total proceeds of GBP283.0 million from doing so.
Since the start of the year, G4S has won new contracts with an annual value of GBP450.0 million, it said, and with a total contract value of GBP950.0 million. The group is currently one of two shortlisted bidders, alongside France's Sodexo SA, for a GBP225.0 million contract to run a women's prison in Perth, according to the Financial Times.
"We continued to implement our strategy to transform the group's focus and performance and this is reflected in our revenue growth and improving profit and cash generation," Almanza said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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