G4S makes 'positive' start to year, no new impairments

Security firm G4S said on Monday that it has made a positive start to the year despite a challenging backdrop, with no new impairments.

In a trading update for the three months to the end of March ahead of a speech to be given at the JP Morgan Cazenove European Business Services conference, the company said continuing business revenues rose 4.5% from the same period in 2015 to £1.51bn.

Meanwhile, revenues from onerous contracts rose to £55m from £46m and profit before interest, tax and amortisation increased 6.5% excluding restructuring charges of £1m during the period.

Since the start of the year, G4S has won new contracts with annual revenues of £450m and total contract value of £950m.

There were no new onerous contract charges or impairments in the quarter and onerous contract costs were within the group’s provisions for losses on these contracts.

Chief executive officer Ashley Almanza said “Against a backdrop of macro-economic 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.”

Back in March, shares in the company tumbled after it posted a fall in full-year profit and revenue on the back of restructuring costs and write-downs on onerous contracts relating to asylum seekers.

At 0834 BST, shares were up 4.8% to 193.10p.

RBC Capital Markets said: “There are few details in the statement, but the bottom line is that underlying trading is broadly in line with expectations and we wouldn't expect any material changes to consensus forecasts today.

“The stock has clearly been weak (-18% year-to-date underperformance versus FTSE 100) and headline valuations appear undemanding (16E PE 13x, div yield 5.1%) and so there may be some relief today. However, we continue to believe the group has challenges in its higher margin areas and that the balance sheet/pension remains an issue.”