New G4S boss seeks over $900 million for turnaround drive
G4S , the world's largest security services firm, plans to raise about 600 million pounds ($932 million) by selling shares and assets as its new boss seeks to restore its battered reputation by cutting debt and focusing on emerging markets.
Chief Executive Ashley Almanza, a former executive at oil and gas firm BG Group , was promoted from finance chief in June after a string of blunders by his predecessor, including a failed takeover bid in 2011, a botched contract to staff the 2012 Olympic Games and a profit warning in May.
He said on Wednesday he would give a detailed plan in November, but that the initial measures he was putting in place should help to avoid a costly credit-rating downgrade, improve profit margins and start to deliver tangible benefits in 2014.
Panmure Gordon analyst Mike Allen welcomed Almanza's debut announcement as chief executive. "We applaud the quick work undertaken by management to re-structure the group and shore up the balance sheet," he said.
At 0905 GMT, G4S shares were up 3.7 percent at 255.14 pence, the biggest rise by a UK blue-chip company and reversing early losses. Shares often fall following the announcement of equity fundraisings, as these cut earnings per share for investors.
G4S, which runs services from managing prisons and transporting cash to guarding the Wimbledon tennis championships, aims to benefit from a trend among cash-strapped governments and businesses to outsource security work.
However, it has come under pressure as governments in developed markets in particular have cut back services.
The company said its first-half operating profit margin slipped to 5.5 percent from 5.9 percent in the same period last year, reflecting a lost prison contract in the Netherlands and squeezed pricing in Britain and elsewhere in Europe.
Net debt rose to 1.95 billion pounds as of June 30, some 3.2 times earnings before interest, tax, depreciation and amortization compared with a target of 2-2.5 times.
However the group, which wants to grow revenue in developing markets in Asia, Africa and Latin America from a third to half of its total, said it had a global sales pipeline of 4 billion pounds. It did not provide details, but noted strong demand from financial services, mining and government sectors in Africa.
"G4S has excellent market positions, particularly in developing markets and as a result of which we have very material growth opportunities," Almanza said.
RAISING MONEY
G4S, which leads rival Sweden's Securitas by sales, said it would place 140.9 million new ordinary shares representing up to 9.99 percent of its existing share capital with new and existing investors via an accelerated bookbuild.
That equates to around 350 million pounds at current prices.
The company said its largest shareholder, Invesco, supported the placing and intended to participate in it. Citigroup , JP Morgan and Barclays are joint bookrunners for the share sale.
G4S also said it would sell a number of businesses, likely to be in developed markets, which could raise up to 250 million pounds in the next year, and would restructure other units in a group which spans 125 countries in order to improve margins.
On Wednesday - and included in the asset sale total - G4S said it had agreed to sell its Canadian cash security and Colombia Data solutions businesses for 100 million pounds. The sale of its U.S. business was ongoing, it added.
G4S said it had taken a one-off charge of 180 million pounds following a review of its assets and that it had started restructuring programs - including cutting staff numbers and ending some lower-margin services - in Britain, Ireland and Europe at a cost of 30-35 million pounds over 2013 and 2014
Almanza declined to give an operating margin target.
First-half operating profit came in at 201 million pounds, little changed from a restated 202 million a year earlier, with turnover up 7.2 percent to 3.65 billion pounds.
The firm also named Misys's Himanshu Raja as its new chief financial officer on Tuesday.
($1 = 0.6435 British pounds)
(Editing by Mark Potter)