12th Aug 2015 11:49
LONDON (Alliance News) - FTSE 100-listed outsourcing firm G4S PLC on Wednesday said its pretax profit fell in the first six months of 2015 due to restructuring and impairment charges, but its revenue edged higher despite a decline in the UK and Ireland.
The group, which provides cash collection and security services and which is one of the largest private sector employers in the world, said its pretax profit fell to GBP70 million in the first six months of the year, down from GBP80 million a year earlier as a rise in revenue was offset by restructuring charges and goodwill impairments it booked in the half.
Revenue was up slightly to GBP3.41 billion from GBP3.38 billion as the group won GBP1.4 billion in new contracts in the first half, while keeping its contract retention rate at around 90%. It sales pipeline at the end of the half was GBP6 billion. The group said it saw robust demand for its services in the North American, Latin American, Asian and Middle East markets in the half, while Europe returned to growth, but UK and Ireland revenue declined.
G4S said it will pay an interim dividend of 3.59 pence per share, up 5% year-on-year.
The company said it expects to see further benefits in the second half of the year from its cost-cutting and restructuring programme, resulting from a review the group started in November 2013 to manage its portfolio of contracts. The restructuring costs it booked in the first half came from the review of its business, particularly as it works to shift its operating model in the UK and Ireland.
"We continue to make good progress with our strategic plans, investing in growth and productivity programmes which underpinned strong growth in our pipeline and a 10.5% increase in underlying earnings. We won new contracts with a total value of GBP1.4 billion and sales, new contract mobilisation and on-going productivity programmes provided increasingly good momentum through the first half. This is expected to deliver further improvements in the group's performance in the second half," said Chief Executive Ashley Almanza.
"Investors should see signs of improvement in these results, along with a more confident tone for the future from management. We hope this trend will continue further, as a result of the restructuring that management has undertaken," said Graham Spooner, investment research analyst with The Share Centre.
G4S shares were down 0.1% to 266.90 pence on Wednesday.
UK and Ireland revenue was lower in the half, in line with G4S's expectations, due to the end in the first quarter of 2014 of its contract in the UK for the electronic monitoring of prisoners and the loss of a large retail contract in the fourth quarter. But profitability in the business improved on the back of its restructuring programme in its cash management and security units.
The company returned to revenue growth in its European business in the half, boosted in part by an acquisition made in the Netherlands and by the start of the Geld Service Nederland cash collections contract. The group said its Greek business held up well amid the ongoing economic turmoil in that country, but its Belgian business saw profit fall because of lower volumes in its cash services business.
North American revenue was up by 5.4% in the half, driven by strong growth in commercial security operations, which was partly offset by the loss of a nuclear power contract, while Latin American revenue rose by around 12% as the group managed to win contracts across the region to offset any impact from the economic slowdown in Brazil.
Asia and Middle East revenue rose 4.0% on robust performances in the Middle East, Hong Kong, Taiwan and Thailand, while Africa revenue rose 3.9% as contract wins offset a slowdown in oil and gas customer demand, though the latter did show signs of improvement towards the end of the half.
By Sam Unsted; [email protected]; @SamUAtAlliance
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