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G4S to sell businesses, issue shares to reduce debt

Chris Ratcliffe | Bloomberg | Getty Images

G4S said it would sell businesses and issue new shares to strengthen its balance sheet, allowing its new boss to focus on overhauling the security company and improve its battered reputation.

G4S, which has endured an aborted takeover of Danish cleaning firm ISS, a botched contract to staff the 2012 Olympics and a profit warning in May, said it would place 140.9 million new ordinary shares representing up to 9.99 percent of its existing share capital.

G4S said its largest shareholder Invesco supported the placing and intended to participate in it. It said the shares would be issued in an accelerated bookbuild on Wednesday. Citigroup, JP Morgan and Barclays are joint bookrunners for the sale.

(Read more: A setback too far: G4S chief departs)

Shares in the company opened 2.6 percent down and were trading 1.26 percent lower at 242.6 pence.

Net debt stood at 1.95 billion pounds ($3 billion) as of June 30, 3.2 times its earnings before interest, tax, depreciation and amortisation. The firm targets between 2 to 2.5 times.

The move came as new Chief Executive Ashley Almanza reported a first half operating profit of 201 million pounds on Wednesday, down from a restated 202 million a year earlier.

Turnover grew 7.2 percent to 3.65 billion pounds but its operating margin mslipped to 5.5 percent from 5.9 percent a year earlier reflecting a lost prison contract in the Netherlands and squeezed pricing in Britain and Europe.

The interim update from Almanza, his first since replacing embattled boss Nick Buckles in June, had been much anticipated by investors keen to know how he plans to stabilise and improve margins, and push for greater emerging markets exposure.

(Read More: G4S Fights Back After 'Very Tough' Olympics Fiasco)

On Wednesday he said it would sell a number of businesses which could raise up to 250 million pounds, and would restructure other units across the group which spans some 125 countries.

G4S said it had agreed to sell its Canadian cash security and Colombia Data solutions businesses for 100 million pounds and that the sale of its U.S. business was ongoing.

"In the near term, 2013 will be a year of consolidation for the group with the actions we are now taking starting to deliver tangible benefits during 2014," Almanza said.

Restructuring programmes have started in the UK, Europe and Ireland at an expected cost of 30-35 million pounds over 2013 and 2014, the firm said.

G4S named Misys's Himanshu Raja as its new chief financial officer on Tuesday.

Shares in G4S, which runs services from prison management and cash transportation to guarding the Wimbledon tennis championships, closed at 245.3 pence on Tuesday, down 8 percent on a year ago, valuing the firm at around 3.5 billion pounds.

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