G4S issue shares to tackle debt

G4S are still trying to get back on track following the debacle of their 2012 Olympic Games operations.

In an effort to turn the company around, G4S will firstly undertake a plan of asset stripping. With operations in 125 countries the security company aims to sell off existing operations worth around £250 million, in conjunction with a cost-cutting exercise.

The second part of this plan is to sell just over 140 million new shares, representing 9.99% of the company’s shares in issue. G4S has not yet confirmed a price, but presumably it would be at a discount to Tuesday’s closing price.

The driving force behind these decisions is the board’s efforts to reduce the debt/earnings ratio from 3.2 to a more manageable 2-2.5. Currently the company’s debt is £1.95 billion, with a market capitalisation of £3.45 billion. The share price is down 5.75% so far in 2013, representing a capital loss, but there is an income return through dividends of 3.65%.

Today’s announcement represents a very brave move by the board, but following such a disastrous 2012 for both profit and reputation it will take something bold in order to get the company back on track.

G4S plc (DFB) chart

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