The City was relieved today as security firm G4S avoided further pain on loss-making deals and won new contracts despite an “uncertain” trading climate.
The company shocked investors in March when it revealed up to £77 million in extra provisions on its disastrous Compass contract to house asylum seekers.
The huge rise in asylum seekers — a result of their fleeing war-torn Syria — has left the company attempting to cope with claimant numbers which are 50% above what they estimated when the deal was signed in 2012.
Today the shares rose 5% or 8.8p to 193p after the firm, in an unscheduled update, said it was managing several “onerous” public sector contracts to an “effective conclusion”, with no further charges taken in the first quarter of the year.
Chief executive Ashley Almanza has been rebuilding the group’s balance sheet and reputation after pratfalls including a failure to supply enough security staff for London’s 2012 Olympics and a scandal over charging the taxpayer for tagging dead prisoners.
He has sold off 24 of the sprawling business’s divisions so far, racking up proceeds of £286 million.
Since the beginning of the year, G4S has also won £950 million in new contracts, which should generate annual sales of £450 million. That helped the group’s overall sales to £1.5 billion, 4.5% ahead of the same quarter last year.
He told a JPMorgan conference: “Against a backdrop of macroeconomic uncertainty, the group had a positive start to the year. 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.”
The City also homed in on signs of improving margins as profits rose 6.5%, faster than the growth in sales. JPMorgan analyst Robert Plant said the update “reads reassuringly”.
Citi analyst Ed Steele added: “G4S has sustained its organic sales growth momentum into the first quarter of 2016 which, combined with modest margin expansion, suggests the group remains on track for full-year consensus profits of approximately £430 million.”Risk Warning:
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