UK security group G4S sees no Brexit clarity until deal done

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UK security group G4S sees no Brexit clarity until deal done

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By Elisabeth O’Leary EDINBURGH (Reuters) – Companies seeking clarity on details of Britain’s exit from the European Union are likely to be disappointed until a departure deal is done, G4S <GFS.L>, the world’s largest security group, said on Wednesday. “Unquestionably there is elevated uncertainty in the UK regarding the near-term outlook,” Chief Executive Ashley Almanza told reporters. “(Everyone) is waiting for clarity on how Brexit is going to affect the outlook and I think basically that we’re going to know when we get there.” He saw no specific risks to its UK business beyond that. Political infighting over what Britain wants from Brexit has left businesses in the dark and helped undermine consumer sentiment, a trend that has intensified since Theresa May’s Conservatives lost their outright majority in a June election. G4S, which provides services such as guarding, aviation screening and mobile patrols, reported first-half underlying profit up 5.9 percent and a strong new business pipeline. However its shares, which set a record high in recent weeks, fell more than 5 percent to their lowest in three months as some analysts saw signs of growth slowing. While revenue growth was strong overall, particularly in the United States which accounts for the lion’s share, revenue in the Middle East and India shrank 7.8 percent. Almanza said the region, along with Asia Pacific, was one area of potential risk to its growth goal. Jefferies analysts calculated the company had achieved around 3.5 pct in underlying or organic revenue growth in the second quarter, well below what it said were consensus expectations of around 7 percent and down from 8.9 percent in the first quarter. G4S has been overhauling its business for the past four years, reducing its dependency on Britain after it overstretched on sensitive loss-making government contracts. Britain and Ireland now provide 15 percent of G4S’s revenue versus 22 percent in 2013.

TURNAROUND SUSTAINED Almanza, who took over in 2013, has turned the company around and its shares have outperformed a group of peers including outsourcer Capita <CPI.L>, mired in problems similar to those of G4S four years ago, by 16 percent over two years. “The shares have rallied strongly over the last year as the market became more comfortable with the debt position and also the operational comparables have toughened. However, we believe that G4S’s turnaround will be sustained,” said JP Morgan Cazenove in a note to clients. Net debt to earnings before interest, taxes, depreciation and amortisation stood at 2.7 times, setting it up to reach its target of 2.5 times or lower by the year end. The company said its turnaround was on track and forecast better contract potential, adding it was confident that full-year revenue growth would be in line with a medium-term aim of between 4 and 6 percent and saw further expansion in 2018. G4S said several initiatives would see it deliver recurring operating and financing efficiencies of between 90 million pounds and 100 million by 2020. Attributable profit on continuing activities at constant exchange rates increased 7.6 percent to 128 million pounds in the six months to end-June on revenue up 6 percent to 3.7 billion pounds, meeting analyst expectations. The interim dividend was maintained at 3.59 pence per share. “During the second half of 2017, our growth programme will focus on consolidating contract wins made over the past year and on converting attractive opportunities in our pipeline,” Almanza said in a statement. An employer of 600,000 staff, G4S also installs and monitors alarms, closed-circuit television, gateway control and biometric systems. (Editing by Paul Sandle and David Holmes)
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