Shares in G4S (LSE: GFS) were little moved in early trade this morning, following the release of its half-time report for the six months ending 30 June 2013.
Sales rose by 7.2%, while organic growth increased by 5.4% (up 13% in developing markets) as its contract pipeline continues to grow, currently standing around £4bn a year.
But today’s real news came as the security services firm proposed the placement of around 140.9 million new ordinary shares on the market at 25p in order to raise additional equity capital and reduce the company’s debt. This would represent up to 9.99 per cent of G4S’s existing issued share capital.
Management believes that the company competes in “strong market positions with material growth opportunities”, that the capital gained from new shares would repair the balance sheet and “reduce the current high level of gearing (Net Debt/EBITDA of 3.2x at 30 June 2013)”, while putting G4S on a surer foot to invest in the company’s future.
Group chief executive Ashley Almanza commented:
“On a like-for-like basis, half-year profits were in line with the same period in 2012 against a background of challenging trading conditions in Europe and in our cash solutions businesses in the UK and Ireland.
“Our strong contract pipeline, strengthened balance sheet, focused investment programme and improved operational and financial management all support the delivery of revenue growth, operational efficiencies and improved cash generation. In the near term, 2013 will be a year of consolidation for the group with the actions we are now taking starting to deliver tangible benefits during 2014.”
In addition to the share issue plan, management also announced the sale of its Canadian cash security and Colombia Data solutions businesses for around £100m, while there are further plans to sell the US Government Solutions business and the regulated secure solutions business, which are expected to raise approximately a further £150m.
The share issue plan has been approved by G4S’s largest shareholder, Invesco, which says that it intends to participate in the placing. Head of UK Equities at Invesco Perpetual, revered fund manager Neil Woodford has long been a vocal supporter of the business despite its public failings, and has pumped close to £150m into G4S for his Income fund during the year.
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> Sam does not own shares in G4S.