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MarketScreener Homepage  >  Equities  >  Nyse  >  Citigroup Inc.    C

CITIGROUP INC.

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New G4S boss starts turnaround with 348 million pounds share sale

08/28/2013 | 01:15pm EST
Members of G4S security and a police officer open a gate at the Alexander Stadium in Birmingham

LONDON (Reuters) - G4S (>> G4S plc), the world's largest security services firm, raised 348 million pounds ($541 million) through a share sale with more to come from asset disposals as its new boss seeks to cut debt and focus on emerging markets growth.

LONDON (Reuters) - G4S (>> G4S plc), the world's largest security services firm, raised 348 million pounds ($541 million) through a share sale with more to come from asset disposals as its new boss seeks to cut debt and focus on emerging markets growth.

Chief Executive Ashley Almanza, a former executive at oil and gas firm BG Group (>> BG Group plc), was promoted from finance chief in June after a string of blunders by his predecessor Nick Buckles, including a failed takeover bid in 2011, a botched contract to staff the 2012 Olympics and a profit warning in May.

Almanza said he would give a detailed plan in November but initial measures to raise about 600 million pounds, including via the share placing, should help it avoid a costly credit-rating downgrade and improve profit margins.

G4S later said it had sold 140.9 million shares to new and existing investors at 247 pence each. Joint bookrunners Citigroup (>> Citigroup Inc), JPMorgan (>> JPMorgan Chase & Co) and Barclays (>> Barclays PLC) achieved a premium to Tuesday's closing share price of 245.3p, a rare feat in share placings showing investor backing for the turnaround plan.

The company, which also plans to sell some lower-margin businesses 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 placing according to Thomson Reuters data.

No-one at Invesco could be reached for comment.

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

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

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

G4S, which runs services from managing prisons to guarding tennis players at Wimbledon, aims to benefit from a trend among governments and businesses to outsource security work.

But it has come under pressure as governments in developed markets cut services. Also the British government is refusing to award G4S new work pending a review of contracts, after an audit found it and rival Serco (>> Serco Group plc) charged for tagging criminals who were either dead, in prison or never tagged in the first place.

SALES PIPELINE

G4S 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 core earnings (EBITDA) compared with a target of between 2 and 2.5 times.

But G4S, 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.

"G4S has excellent market positions, particularly in developing markets, and as a result of which we have very material growth opportunities," Almanza said, ruling out more radical suggestions like spinning off G4S's cash security unit.

G4S, which leads rival Sweden's Securitas (>> Securitas AB) by sales, also said the sale of businesses, likely to be in developed markets, could raise up to 250 million pounds in the next year and that it 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. businesses 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 programmes - including cutting staff numbers and ending some lower-margin services - in Britain, Ireland and Europe 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 overhaul since the furore over the Olympics contract, when G4S failed to provide enough security staff, with a chief operating officer appointed to assess risk, UK bosses replaced, and Himanshu Raja recruited as finance chief from software firm Misys.

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

(Additional reporting by Rhys Jones and Kylie MacLellan; editing by Mark Potter and Louise Heavens)

By Neil Maidment


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
BARCLAYS PLC -2.66% 148.8 Delayed Quote.1.45%
CITIGROUP INC. -6.93% 64.23 Delayed Quote.4.17%
DOW JONES AFRICA TITANS 50 INDEX -1.16% 532.29 Delayed Quote.1.74%
G4S PLC 0.08% 260.4 Delayed Quote.2.64%
MICROSOFT CORPORATION -0.17% 212.65 Delayed Quote.-4.23%
S&P AFRICA 40 INDEX -1.63% 173.09 Delayed Quote.1.71%
SECURITAS AB -2.16% 133.7 Delayed Quote.0.72%
SERCO GROUP PLC -1.92% 122.7 Delayed Quote.2.68%
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Financials (USD)
Sales 2020 74 348 M - -
Net income 2020 8 905 M - -
Net Debt 2020 - - -
P/E ratio 2020 15,0x
Yield 2020 3,17%
Capitalization 134 B 134 B -
Capi. / Sales 2020 1,80x
Capi. / Sales 2021 1,91x
Nbr of Employees 210 000
Free-Float 67,0%
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Technical analysis trends CITIGROUP INC.
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Mean consensus OUTPERFORM
Number of Analysts 28
Average target price 75,42 $
Last Close Price 64,23 $
Spread / Highest target 72,8%
Spread / Average Target 17,4%
Spread / Lowest Target -14,4%
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Managers and Directors
NameTitle
Michael Louis Corbat Chief Executive Officer & Director
Jane Nind Fraser President, Director & CEO-Global Consumer Banking
John C. Dugan Chairman
Mike Whitaker Head-Operations & Technology
Mark A. L. Mason Chief Financial Officer
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