G4S surges as it posts jump in H1 earnings, maintains dividend

Shares in G4S surged on Wednesday after the security company reported a jump in earnings and revenue for the first half as it said it has made substantial progress with the ongoing transformation of the group and maintained its dividend.

In the six months to the end of June, earnings were up 43.8% to £69m as revenue grew 3.2% to £3.5bn. In the UK and Ireland, however, revenue dropped 1.9% to £563m.

G4S had restructuring costs of £3m in the period, down substantially from £16m the year before and the company declared an interim dividend of 3.59p per share, in line with 2015.

The group said it won new contracts with an annual value of £0.7bn, flat compared to the year before, while total contract value was also flat at £1.4bn.

Chief executive officer Ashley Almanza said: “Over the medium term we expect demand for our services to grow by around 4-6% per annum. In the current environment of heightened macro-economic uncertainty and lower global growth, our continuing businesses posted very strong revenue growth in the first half of 2016.

“Demand for G4S's services has remained positive and our strategy is delivering tangible results with growing revenues, improving profitability and strong cash generation. We have much to do to realise the full potential of our strategy which is underpinned by our growth, innovation, productivity and portfolio programmes. Executing these programmes and reducing debt remain our key priorities.”

Helal Miah, investment research analyst at The Share Centre, said: “This update reiterates our view that the company’s recovery plans are gaining momentum and should give investors some comfort ahead, as strong cash generation, productivity and innovation remain a priority.

“We see G4S as a medium to high risk long-term recovery buy idea for a contrarian investor. In the current climate investors are advised to drip feed into the stock.”

At 0920 BST, G4S shares were up 15% to 224.50p.