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G4S: Credit Suisse cuts target price from 295p to 275p and downgrades from outperform to neutral.
Fund manager Invesco Perpetual, the lair of famed stock picker Neil Woodford, has increased its stake in G4S following the security company's recent share price falls. Invesco previously had an 11.3% stake in G4S, but has revealed that on November 8th it increased its exposure from about 159m to 172m shares, equal to 12.22% of the issued share capital. The security group's share price originally fell following the fall-out from its London Olympics staffing fiasco. Then, after staging a brief recovery, lurched down when it paid the price for embarrassing the British government, missing out on contracts to run prisons. Not only did G4S fail to win any new contracts in the biggest round of prison privatisations in England and Wales, but it has also lost its contract to run Britain's first private prison.
G4S: Morgan Stanley downgrades to equal weight, target cut from 320p to 280p.
The FTSE 100 security group G4S is waiting to hear whether it will be reappointed on a contract to provide electronic tagging of offenders services across England and Wales, worth £50m of annual revenue to the company. G4S and Serco gained an extension to an existing contract in 2009, which is due to expire in March 2013. It is understood that the Ministry of Justice (MoJ) is considering bids for the next phase of the contract with an announcement expected next month. Under the existing contract G4S and Serco manage the entire process including the technology, tagging, and monitoring of offenders, in two regions each. Under the next phase, the contract will not be split into regions but “services”, with one company providing technology across England and Wales and the other providing tagging for example. In September G4S won a contract to provide tagging services in Scotland, The Telegraph writes.
After the Olympics fiasco, it is hardly surprising that G4S was unsuccessful in its bids to win any of the eight new outsourced prisons put to tender by the Government, but is all the gloom now priced in? "The point of maximum pessimism is the best time to buy" is an old investment adage. It's basically a contrarian point of view that says that, when the herd completely loses faith, an analysis of the facts can uncover real value. UK government revenue makes up about 10% of the group's total. This proportion was already shrinking, as the company continues to be acquisitive in new markets. It is now present in 125 countries. At the moment, G4S is the market leader in the provision of security services worldwide, with around 8% of the market. The shares trade at a discount to peers in the business process outsourcing (BPO) sector. The 2013 prospective multiple is 9.9 times, compared with Serco trading on 12.5 times. G4S's yield next year is forecast at 3.7%. Questor last said hold in September when the shares were at 268.6p. Despite the fact that the shares look cheap, there are probably better prospects elsewhere. Hold, says The Sunday Telegraph's Questor team.
Security group G4S has apparently paid the price for the London Olympics staffing fiasco that embarrassed Britain's government, missing out on contracts to run prisons. Not only did it fail to win any new contracts in the biggest round of prison privatisation in England and Wales so far, but it has also lost its contract to run Britain's first private prison The Ministry of Justice (MoJ) said the management of the Wolds prison in east Yorkshire would return to the public sector next July. In addition, it is also out of the running in a further two contracts to run five other jails that are going to be privatised by the government under the direction of new justice secretary, Chris Grayling.
and other contracts not won http://www.bbc.co.uk/news/uk-20252359
Broker commentEd Steele, Analyst at Citigoup, has a 'buy' rating on G4S with a target price of 300p. He commented: "With the shares trading at a 15% valuation discount to the wider Business Services sector (10.7 times 2012 estimated EV/EBITA [enterprise value/earnings before interest, tax and amortisation] verses the sector at 12.6 times)
To September 30th ,overall organic growth was good at 5.5% (8% including the London 2012 contract), with 9% in developing markets and 4% (8% including the London 2012 contract) in developed markets. Breaking this down by divisions: • In secure solutions, organic growth was 6% (9% including the London 2012 contract), despite an 11% decline in the US classified government business. Overall, growth was helped by a continued strong performance in developing markets, UK government and North America commercial businesses. • In cash solutions, organic growth was 3% overall. Developing markets grew 10% and developed markets were broadly flat. Organic growth in developed markets is expected to improve as new contract wins in the UK come onboard fully. During the first nine months of the year, it also invested £8m in deferred consideration in respect of prior year acquisitions and £95m in capability-building acquisitions such as a leading security provider in Braz
Overall the group margin was down 0.3% (excluding the London 2012 contract) on a constant currency basis, due to contract phasing in the UK government businesses and US government budgetary cuts. Cash solutions margins were broadly in line with the same period as last year, with a stronger performance in the cash solutions businesses in most developing markets. The company explained that the US government market and some Continental European markets are still proving to be difficult and it expects these trends to continue. The North American commercial businesses are continuing to perform strongly and the UK has shown an improved performance. Its developing markets businesses, which account for more than a third of group profits, continue to achieve strong results. It also stated that: "Our restructuring measures taken in 2012 to reduce overhead costs and continued focus on business improvement should help margins improve in 2013."
G4S, the security firm, has delivered an upbeat trading statement for the nine months to September 30th, despite reiterating that it will take a 50m-pound hit from the Olympic fiasco and hinting that this figure may be revised. It has stated that its financial position continues to be strong and it "remains on track to meet its cash conversion target of 85% of PBITA [profit before interest, tax and amortisation] for the full year." Regarding its provision for the Olympics it said: "Our current estimate remains that the loss on the London 2012 contract will be in the region of £50m and this amount was provided for at the half year and taken as an exceptional item. This estimate is based on our current expectation of the financial outcome including reasonable estimates of costs where at this date there is still uncertainty." In the first nine months of 2012, overall revenues compared to the same period last year, excluding the London 2012 contract, grew by 6.3% at constant exchange rates and by 4.1% at actual exchange rates. Including the London 2012 contract, revenues grew by 9.2% at constant rates and by 6.9% at actual exchange rates. As expected, the group operating margin was lower compared to the same period in 2011.
Positive Points: Restructuring initiatives taken in 2012 to reduce overhead costs and continued focus on business improvement should help margins improve in 2013, said G4S. In cash solutions, overall organic growth of 3% was recorded. Developing markets saw 10% growth and developed markets were broadly flat. Organic growth in developed markets is expected to improve as new contract wins in the UK come onboard fully, said management. Within its secure solutions division, organic growth was up 6%, flattered by strong performance in developing markets, UK government and US commercial businesses. The group's financial position was reported as strong. G4S is the world’s largest security company measured by revenues, with operations in around 125 countries.
Negative Points: The share price in G4S plummeted earlier this year when authorities were forced to draft in troops to guard Olympic venues to cover a shortfall of G4S personnel. The debacle raised fears among investors that G4S would fail to win future work with the UK government, which accounts for about 13% of overall revenues. The group has taken a £50 million cost in relation to its Olympic contract with the potential for further losses once the matter is finalised. The company is exposed to foreign exchange risk with around 70% of profits generated outside the UK, the US dollar, the Euro and the South African Rand in particular. G4S has historically been active in Merger and Acquisition activity. Overpaying or acquiring a poor business could impact future profitability. The company stated that it expects its US government market, where defence work has been muted due to budgetary delays, and its European markets to remain difficult.
Trading update: G4S delivers an upbeat statement. G4S delivered an upbeat trading statement in the wake of its Olympic contract failings earlier this year. It stated that that its financial position continues to be strong and it "remains on track to meet its cash conversion target of 85% of PBITA (profit before interest, tax and amortisation) for the full year." The company stated previously that its current estimate, with regard to the Olympic contract fiasco is in the region of £50 million and that this was provided for as an exceptional item at the half year stage, however uncertainty remains as to the final figure. In the first nine months of 2012, overall revenues compared to the same period last year, excluding the London 2012 contract, grew by 6.3% at constant exchange rates and by 4.1% at actual exchange rates. Including the London 2012 contract, revenues grew by 9.2% at constant rates and by 6.9% at actual exchange rates. As expected, the group's operating margin was lower compared to the same period in 2011
Company overview Group 4 Securicor (G4S) is an international security solutions group, operating in over 125 countries throughout the world. The company was formed via the July 2004 merger between Securicor plc of the UK and Group 4 Falck of Denmark. Whilst listed on the London Stock Exchange, the group also retains a secondary listing in Denmark. The company continues to be a major employer of staff, with over 650,000 personnel employed on a global basis.
G4S: Seymour Pierce keeps hold rating and 255p target; Panmure Gordon keeps hold rating and 262p target.
Summary The business has continued to achieve good underlying organic growth despite some adverse moves in foreign exchange and challenging macro conditions. The US government market and some Continental European markets are still proving to be difficult and we expect these trends to continue. The North American commercial businesses are continuing to perform strongly and the UK has shown an improved performance. Our developing markets businesses, which account for more than a third of group profits, continue to achieve strong results. Our restructuring measures taken in 2012 to reduce overhead costs and continued focus on business improvement should help margins improve in 2013.
Margins Overall the group margin was down 0.3% (excluding the London 2012 contract) on a constant currency basis, due to contract phasing in the UK government businesses and US government budgetary cuts. Cash solutions margins were broadly in line with the same period as last year, with a stronger performance in the cash solutions businesses in most developing markets. Acquisitions & Divestments During the first nine months of the year, we invested £8m in deferred consideration in respect of prior year acquisitions and £95m in capability-building acquisitions such as a leading security provider in Brazil, and fire and safety consulting businesses in Ireland, Netherlands and Belgium. Olympics contract loss provision As stated previously, our current estimate remains that the loss on the London 2012 contract will be in the region of £50m and this amount was provided for at the half year and taken as an exceptional item. This estimate is based on our current expectation of the financial outcome including reasonable estimates of costs where at this date there is still uncertainty. Financial position Our financial position continues to be strong and we remain on track to meet our cash conversion target of 85% of PBITA for the full year.
INTERIM MANAGEMENT STATEMENT G4S, the world's leading international secure outsourcing solutions group, reports today on trading for the year to date, including an overview of financial performance to 30 September 2012. Overview of the financial performance for the nine months to 30 September 2012 In the first nine months of 2012, overall revenues compared to the same period last year, excluding the London 2012 contract, grew by 6.3% at constant exchange rates and by 4.1% at actual exchange rates. Including the London 2012 contract, revenues grew by 9.2% at constant rates and by 6.9% at actual exchange rates. As expected, the group operating margin was lower compared to the same period in 2011. Organic Growth Overall organic growth was good at 5.5% (8% including the London 2012 contract), with 9% in developing markets and 4% (8% including the London 2012 contract) in developed markets. In secure solutions, organic growth was 6% (9% including the London 2012 contract), despite an 11% decline in the US classified government business. Overall, growth was helped by a continued strong performance in developing markets, UK government and North America commercial businesses. In cash solutions, organic growth was 3% overall. Developing markets grew 10% and developed markets were broadly flat. Organic growth in developed markets is expected to improve as new contract wins in the UK come onboard fully.
G4S: Panmure Gordon keeps hold rating and 262p target.
Security firm G4S, whose boss Nick Buckles survived attempts to oust him following the Olympic Games problems, has bought two Belgian companies for just under three million pounds. It's a small investment for GFS, which has a £3.7bn market cap, intended to enable G4S Belgium to diversify and broaden its reach into the higher margin niche safety market. The company numbers among its institutional shareholders Tweedy Browne, the renowned US value investing firm. Consensus forecasts for the year ending December 31st 2012 are for pre-tax profits of £392m on turnover of £8.1bn. It offers a prospective yield of 3.3%.
ean-Paul Van Avermaet, CEO, G4S Belgium and G4S Luxembourg, said: "The acquisitions support our plans to expand our security offering with the fire, health and safety services, and training solutions sectors and further underlines the Group's vision to become the recognised global leader for security solutions."
G4S strengthens Belgian portfolio with key acquisitions G4S, the world's leading international secure outsourcing group, has today announced the acquisition of two companies from the ASC-Group, an integrated Belgium-based safety solutions business. The companies (ASC NV and ASC Safety Services BVBA) provide services including; expert fire and safety personnel; health and safety training; and the rental, sale and maintenance of safety equipment to Belgian businesses and industry. This acquisition will enable G4S Belgium to diversify and broaden its reach into the higher growth and higher margin niche safety market, supporting the company's growth ambitions. Growth in the traditional security market in Belgium is limited due to mature market conditions. G4S Secure Solutions NV in Belgium is paying approximately £2.975m (€3.7m) in cash to ASC-Group's owners Haann BVBA, Mr Hans Buitendijk and Ms Ann Van Durme for 100% of the two acquired businesses. The ASC-Group was founded in 1994 by its current CEO, Mr Hans Buitendijk and has since become the second largest company in Belgium in the area of fire and safety.
http://www.investegate.co.uk/Article.aspx?id=20121005090016H6847