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.