G4S sales unexpectedly slow in third quarter
Outsourcer G4S warned that profits were likely to be flat this year after growth unexpectedly slowed in the third quarter.
Organic growth slowed to 2.5% for the three months ended 30 September from the 2.8% in the second quarter, which was surprising as the comparative period last year was weak and analysts had pencilled in growth of 3.4%.
The Secure Solutions arm grew organic sales 2.5%, as strong organic growth rates in North America and Asia led to security revenues of 3.4% but this was partially offset by lower revenues in care and justice services.
The Cash Solutions unit enjoyed 2.9% growth as "strong interest" was reported for technology and outsourcing solutions from both banks and retailers, though growth was held back by lower revenues in Benelux and conventional cash services.
On the plus side, a Cash360 contract win in the US was announced covering 600 retail stores and the company believes the strong pipeline will provide good revenue momentum into 2019.
Chief executive Ashley Almanza said: "We continue to exercise commercial discipline in markets where labour supply is tight and whilst this is expected to constrain revenue growth in 2018, our new contract wins and substantial, high quality pipeline provide good momentum into 2019”.
With revenues up 1.1% in the first nine months of 2018, he said the mix of sales and productivity programmes underway led him to expect full-year underlying profits, after investment in new products and services, to be "in line with 2017" on a constant currency basis.
G4S shares fell more than 9% to 196.35p on Wednesday morning, including hitting a new two-year low of 193.4p in early trading.
The disappointing growth appears to reflect commercial discipline, a tough Care & Justice market and a weak traditional cash services business, said analysts at RBC Capital Markets.
Guidance for profits, "is slightly ambiguous", the analysts said, suggesting it could means EBITA of circa £468m vs current consensus of £480m, "so a 2.5% miss".