G4S profits climb 23%, bolstered by new markets

G4S profits climb 23%, bolstered by new markets

London: The world’s second largest security company based in the UK, G4S Plc., said first-half profit rose 23%, buoyed by expansion in Saudi Arabia, India and other emerging markets.

Net income climbed to £61.3 million (Rs506.7 crore) from £49.8 million a year earlier, the Gatwick, southern England-based company, said in a statement on Wednesday.

Revenue advanced 6.5% to £2.26 billion.

G4S expects to spend as much as £200 million this year on purchases as economic growth in developing countries spurs demand for security services, chief executive officer Nick Buckles said.

The company is better positioned than larger Swiss rival Securitas AB, which had a second quarter loss, by having more business in faster-growing markets and higher value state contracts, according to David Hancock, a Morgan Stanley analyst.

“Results were in line with our estimates," said Karl Green, an analyst at Credit Suisse Group in London. The company’s stock has an “outperform" rating.

“This stands in stark contrast to the poor results posted by Securitas three weeks ago and highlights G4S’s superior strategic positioning," Green said.

The company’s shares were little changed, closing at £198.75 on the London Stock Exchange.

G4S, formerly known as Group 4 Securicor Plc., and formed through the July 2004 merger of Group 4 Falck A/S of Denmark and Britain’s Securicor Plc., has gained 6.3% this year, giving a market value of £2.56 billion.

Security services, which provides manned guarding and remote-control electronic security, accounts for more than three-quarters of group sales.

Revenue at the division increased by 4.9%, while sales at its cash services unit, which transports money and refills automated teller machines, grew by 13%.

Sales from emerging markets gained 22% to £462 million, while revenue from North America fell 3.6% to £554 million. G4S, whose biggest clients are the US and UK governments, may do the majority of its business outside Europe and North America within the next five years, Buckles said.

“Emerging markets have high GDP growth and we’re in very strong market positions because there are very few other international security players in those markets," he said.

“There’s also the continuing threat of terrorism and we also follow our UK and US multinationals into these countries," he added.

In addition to guarding state courts and nuclear power stations, the company provides cash transit services to HBOS Plc., a banking and insurance group in the UK, and other private clients.

G4S, which operates in 100 countries and employs more than 500,000 people, in December sold its German cash-handling division, based in Kassel, after four unprofitable years.

That was followed in July by the disposal of its France-based cash services business.

Analysts estimated profit of £62 million on revenue of £2.29 billion, according to a Bloomberg survey.

Profit was equal to 4.8 pence a share, compared with 3.9 pence.

Securitas reported an unexpected second quarter loss after setting aside money to cover breaches of cash-handling laws in Britain.

Margins at Stockholm-based Securitas also narrowed as terror alerts added extra costs to European airport-guarding contracts.

“We had a pretty strong first-half," G4S’s Buckles said in an interview on Wednesday. “We’ve got some good momentum. All the business are performing well and we expect it to continue into next year and beyond." Bloomberg