G4S trading in line but FY organic revenue guidance scaled back

Security services firm G4S, which won its spot on the FTSE 100 back in the summer, said on Tuesday that trading in the nine months to the end of September was in line with expectations, but its guidance for full-year organic revenue growth was scaled back.

Organic revenue growth was 4.4%, with all regions apart from the Middle East and India showing growth. Excluding those two regions, organic growth was 6.1%.

G4S said the quality of the group's bid pipeline and its win momentum remain encouraging. In the secure solutions business, systems and technology enabled security continues to gain traction in key markets and now accounts for over £1.7bn annualised revenue versus £1.5bn at 31 December 2016.

Meanwhile, Retail Cash Solutions, Deposita and CASH360 solutions continue to receive a positive market response as the company extends its sales and marketing across North America, Europe, Africa, Middle East and Asia. It now has around 6,500 CASH360 recycler units deployed compared to 5,200 at 31 December last year, and over 12,000 CASH360/Deposita smart safes, versus 9,400 previously.

G4S said its sees “significant revenue potential” in its Retail Cash Solutions, Deposita and CASH360 businesses.

With very strong growth in the fourth quarter of 2016, it expects full year 2017 organic revenue growth of between 3-4% and “good” profit growth. However, back in August, the company had said it expected full-year revenue growth for the year to be broadly in line with its medium-term aim of 4 to 6%.

“We remain focused on cash flow and are on track for the group's net debt to EBITDA ratio to be 2.5x or lower by the end of 2017.”

RBC Capital Markets said that while growth has slowed a touch more than expected, it remains positive on the stock.

"Comparatives get easier through 2018 and we expect organic growth to pick up back to the 4-5% range, with margin and cashflow progress adding to the equity story." It added that the stock's the valuation remains attractive versus peer Securitas and the sector as a whole.

At 1205 GMT, the shares were down 6.7% to 261p.