Security giant G4S to separate cash business, shares jump
G4S plans to separate its £1.2 billion a year cash business, it said on Thursday, sending shares in the world's biggest security company 8 percent higher.
The cash business includes Cash 360 machines operated by retailers as well as a cash transport business and employs roughly 30,000 staff.
"This is a review of separation options, to create two strong independent businesses that can concentrate on their customers and markets," CEO Ashley Almanza told reporters.
"The sort of things we will look at will be demerger or IPO (initial public offering)," Almanza said.
G4S's cash business achieved a gross profit of £160 million last year.
While cash usage is declining in developed economies, cash services are still lucrative: earlier this year UBS estimated that profit margins in G4S's cash solutions business are around the mid-teens versus around 10 percent for cash-in-transit activities and around 5 percent for manned guarding operations.
G4S's United States cash business is its fastest growing business in the world, Almanza told Reuters earlier this year.
The British company provides security, cash and some sensitive government services. It has been increasing its non-UK operations to help offset weakness in British outsourcing, a sector with which it has some overlap.
G4S shares, down by a fifth this year, were up 8.6 percent at 1407 GMT. Analysts at Royal Bank of Canada estimated the business could be worth about £1.6 billion while Stifel valued it at up to £1.8 billion, assuming debt was retained by the parent company.
"A separation of the two (security and cash) businesses would lead to a clearer investment proposition," analysts at brokerage Stifel said.
"It is clear that five years into its turnaround, investors have been losing patience with G4S, with legacy issues, more-volatile-than-expected growth, and poor communication along the way not helping."
G4S overall reported a profit of £252 million for 2017 on revenue of more than 7.8 billion.