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Pin to quick picksBarclays Share News (BARC)

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Share Price: 183.92
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Change: 2.40 (1.32%)
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UPDATE 5-New G4S boss starts turnaround with $541 mln share sale

Wed, 28th Aug 2013 16:43

* Aims to raise initial 600 mln stg including via share sale

* Places 140.9 mln shares at 247p

* Plans asset sales that could raise around 250 mln stg

* Aims to cut debt, lift margins, target emerging markets

* Shares close up 2.9 pct (Recasts with result of placing, adds details)

By Neil Maidment

LONDON, Aug 28 (Reuters) - G4S, the world's largestsecurity services firm, raised 348 million pounds ($541 million)through a share sale with more to come from asset disposals asits new boss seeks to cut debt and focus on emerging marketsgrowth.

Chief Executive Ashley Almanza, a former executive at oiland gas firm BG Group, was promoted from finance chief inJune after a string of blunders by his predecessor Nick Buckles,including a failed takeover bid in 2011, a botched contract tostaff the 2012 Olympics and a profit warning in May.

Almanza said he would give a detailed plan in November butinitial measures to raise about 600 million pounds, includingvia the share placing, should help it avoid a costlycredit-rating downgrade and improve profit margins.

G4S later said it had sold 140.9 million shares to new andexisting investors at 247 pence each. Joint bookrunnersCitigroup, JPMorgan and Barclays achieveda premium to Tuesday's closing share price of 245.3p, a rarefeat in share placings showing investor backing for theturnaround plan.

The company, which also plans to sell some lower-marginbusinesses to help fund expansion in faster-growing markets,said the placing had the support of its largest shareholder,Invesco, which had a 15.1 percent stake prior to the placingaccording to Thomson Reuters data.

No-one at Invesco could be reached for comment.

"There was strong support from existing investors, but asubstantial amount also went to new people," said a source closeto the deal, adding that most of it went to UK-based investors.

Analyst Mike Allen at brokerage Panmure Gordon welcomedAlmanza's debut announcement as chief executive. "We applaud thequick work undertaken by management to restructure the group andshore up the balance sheet," he said.

G4S shares closed 2.9 percent up at 252p. Shares often fallon the announcement of equity fundraisings, as these cutearnings per share for investors.

G4S, which runs services from managing prisons to guardingtennis players at Wimbledon, aims to benefit from a trend amonggovernments and businesses to outsource security work.

But it has come under pressure as governments in developedmarkets cut services. Also the British government is refusing toaward G4S new work pending a review of contracts, after an auditfound it and rival Serco charged for tagging criminalswho were either dead, in prison or never tagged in the firstplace.

SALES PIPELINE

G4S said its first-half operating profit margin slipped to5.5 percent from 5.9 percent in the same period last year,reflecting a lost prison contract in the Netherlands andsqueezed pricing in Britain and elsewhere in Europe.

Net debt rose to 1.95 billion pounds as of June 30, some 3.2times core earnings (EBITDA) compared with a target of between 2and 2.5 times.

But G4S, which wants to grow revenue in developing marketsin Asia, Africa and Latin America from a third to half of itstotal, said it had a global sales pipeline of 4 billion pounds.

"G4S has excellent market positions, particularly indeveloping markets, and as a result of which we have verymaterial growth opportunities," Almanza said, ruling out moreradical suggestions like spinning off G4S's cash security unit.

G4S, which leads rival Sweden's Securitas bysales, also said the sale of businesses, likely to be indeveloped markets, could raise up to 250 million pounds in thenext year and that it would restructure other units in a groupwhich spans 125 countries in order to improve margins.

On Wednesday - and included in the asset sale total - G4Ssaid it had agreed to sell its Canadian cash security andColombia Data solutions businesses for 100 million pounds. Thesale of its U.S. businesses was ongoing, it added.

G4S said it had taken a one-off charge of 180 million poundsfollowing a review of its assets and that it had startedrestructuring programmes - including cutting staff numbers andending some lower-margin services - in Britain, Ireland andEurope at a cost of 30 to 35 million pounds over 2013 and 2014.

It declined to give an operating margin target.

Almanza's arrival is part of a major management overhaulsince the furore over the Olympics contract, when G4S failed toprovide enough security staff, with a chief operating officerappointed to assess risk, UK bosses replaced, and Himanshu Rajarecruited as finance chief from software firm Misys.

G4S, whose shareholder roster also includes activistinvestor Cevian Capital and Microsoft co-founder Bill Gates,said it made a first-half operating profit of 201 millionpounds, little changed from a restated 202 million the same timelast year, with turnover up 7.2 percent to 3.65 billion.

($1 = 0.6435 British pounds) (Additional reporting by Rhys Jones and Kylie MacLellan;editing by Mark Potter and Louise Heavens)

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