G4S PLC G4s Plc: G4s To Resume Dividend For 2021 With Clear Potential For Significant Further Cash Returns To Shareholders
25 November 2020 - 6:00PM
UK Regulatory
TIDMGFS
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN,
INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
FOR IMMEDIATE RELEASE
25 November 2020
G4S TO RESUME DIVID FOR 2021 WITH CLEAR POTENTIAL FOR SIGNIFICANT
FURTHER CASH RETURNS TO SHAREHOLDERS
G4S plc ("G4S" or the "Company") has today published its Second Defence
Circular ("Circular") in relation to the unsolicited Offer for G4S made
by Garda World Security Corporation ("GardaWorld").
Highlights:
-- G4S is a global leader in security services
-- Continued strong trading performance for 2020
-- Momentum for 2021: 73% of revenue growth covered by new contracts already
won
-- Confidence in achieving financial targets, including:
-- Revenue growth of 4-6% per annum
-- Profit(1) margin expansion to 7% in the medium term(2)
-- Free cash flow in excess of GBP1bn from 2021-2025(2)
-- Leverage of 2.0-2.5x
-- Resume dividend for 2021 and beyond
-- Clear potential for significant further cash returns to shareholders
-- Potential for significant re-rating
John Connolly, Chairman of G4S, said:
"G4S has a bright future as an independent company with significant
value upside for shareholders.
The Board believes that G4S has significant potential to re-rate as a
result of its above-market growth outlook, higher margins from
integrated security services and the material value upside in Retail
Cash Solutions.
The Company's resilient performance and positive outlook enables it to
resume the dividend for 2021 and provides clear potential for
significant further cash returns to shareholders.
The GardaWorld Offer does not remotely reflect G4S's fundamental value,
let alone its value to GardaWorld and BC Partners. We urge shareholders
to take no action in relation to GardaWorld's Offer."
Ashley Almanza, Chief Executive Officer of G4S, said:
"G4S has fundamentally refocused and repositioned its business and is
today a global leader in security services with an unmatched market
footprint and industry-leading capabilities. Our sustained focus on
technology and high value integrated security clearly differentiates G4S
in the marketplace and has delivered robust results in the first nine
months of this year with strong cash flow and underlying earnings ahead
of last year. Our momentum remains very good with contracts won and
retained year to date that have an annual value of GBP2.5 billion.
G4S is now well-positioned to accelerate sustainable profitable growth,
and we are confident that we will deliver our financial targets
including free cash flow in excess of GBP1 billion from 2021 to 2025.(2)
That confidence is reflected in our intention to resume dividends for
2021."
The Circular, which is attached, can also be accessed via
https://www.globenewswire.com/Tracker?data=tkNLPz10jdcf-JnYvA24ZwGkaYAh9es3rODm6u4gwXywc56hojEHRtojqJHwjkwsa19MyYuZZmphDEDkL5h6UFtJrpH8EGvChi5giaKqDXnSXBpnl-n15_bgkHgFIAF4
www.g4s.com/seconddefence. A copy of this announcement will be available
at
https://www.globenewswire.com/Tracker?data=tkNLPz10jdcf-JnYvA24Z2PNMKlV3Wdnj_9hzDCmGvGV_AHw7Y--vZje9HHTs5fTA6FW_pIqU-8CX4KGJ02Xf1-Ypwc_DVuvI6HEiBOF0gp9T217khk-yK_MgIVmmVXW
www.g4s.com/gardaresponse.
The letter from the Chairman of the Board of G4S to G4S shareholders,
set out in the Circular, is extracted below.
LETTER TO G4S SHAREHOLDERS FROM THE CHAIRMAN OF G4S
G4S plc
5th Floor
Southside
105 Victoria Street
London
SW1E 6QT
T:+44 (0)207 963 3100
25 November 2020
Dear Shareholder,
I wrote to you on 29 October 2020, setting out the reasons why the Board
of G4S unanimously rejected GardaWorld's wholly inadequate Offer of 190
pence per share on the basis that it significantly undervalues G4S and
is not in the interests of shareholders and other stakeholders. I am
writing to you today to update you on the Company's position,
performance and prospects. We continue to urge you to reject
GardaWorld's Offer.
G4S is an outstanding business with excellent prospects. This document
sets out why we have a high degree of confidence in our ability to
deliver value for our shareholders and our other stakeholders:
-- We are confident in achieving our financial targets, including:
-- Revenue growth of 4-6% per annum
-- Profit(1) margin expansion to 7% in the medium term(2)
-- Free cash flow in excess of GBP1bn from 2021-2025(2)
-- Leverage of 2.0-2.5x
-- Reflecting our confidence in the Company's outlook, we intend to resume
dividends for 2021 and beyond
-- We are committed to disciplined capital allocation. There is clear
potential for significant further cash returns to shareholders, arising
from both strong free cash flow generation and any disposal proceeds.
As the equity market recovers from the pandemic, and as we successfully
execute on our strategic and financial plan, we firmly believe that G4S
is well positioned to re-rate, at least in line with the valuation
multiple of Securitas, our closest peer.
We believe that GardaWorld and BC Partners have a clear understanding of
the strengths of G4S and recognise that G4S is well positioned to
generate substantial free cash flow for you, our shareholders.
GardaWorld is seeking to use G4S's strong balance sheet and healthy cash
flows to finance their purchase of your Company. Furthermore they are
capitalising on the impact of COVID-19 on UK equities to make an
opportunistic and wholly inadequate Offer.
We strongly urge shareholders to take absolutely no action in relation
to GardaWorld's Offer.
G4S is an outstanding business
G4S is a global leader with a clear and compelling strategy. We have an
unmatched global footprint and an excellent position in the growing
market for security. The Group's global blue-chip customers provide a
high quality revenue base and we continue to leverage technology and
software alongside risk consulting and data analytics services to
deliver integrated security solutions for our customers. We also have a
unique, high margin, rapidly growing Retail Cash Solutions business
which offers substantial value upside for shareholders.
We are immensely proud of our global workforce of over half a million
people who work tirelessly to keep our customers and communities safe.
You own an outstanding business with a bright, independent future.
Confidence in achieving our financial targets
As a result of the fundamental repositioning of the Company and the
strength of our competitive capabilities we are confident in our ability
to meet our financial targets. The competitive strength of the Company
is reflected in the excellent performance of the business in 2020 which
has remained robust in the face of the global pandemic. Our underlying
earnings for the 9 months to 30 September 2020 were ahead of the same
period for 2019 and since then the Group has continued to trade well.
This performance together with contracts won and retained, with an
annual value of GBP2.5 billion, and a strong pipeline of additional
opportunities provide us with substantial confidence in the outlook for
2021.
Our highly competitive Integrated Security offering and our Retail Cash
Solutions business provide us with confidence that we can grow revenues
faster than the market, at 4-6% per annum.
We are confident about enhancing our PBITA margin with a clear path to
7% in the medium-term(2) . This is underpinned by an increasing
proportion of revenues coming from our higher margin G4S Integrated
Security offering, which combines technology, consulting and data
analytics; from operational leverage as we grow our business; and from
cost saving programmes.
As a result, we are also confident in our ability to deliver more than
GBP1bn of free cash flow from 2021-2025(2) .
Confidence in our ability to return significant cash to G4S shareholders
The positive outlook for free cash flow generation enables us to resume
dividends for 2021, while targeting leverage in the range of 2.0-2.5x.
Specifically:
-- Dividends to resume for 2021 onwards: the Board intends to resume
dividends from 2021 onwards, in line with its existing dividend policy of
attaining 2.0x cover; and
-- Allocation of surplus capital: we are committed to disciplined capital
allocation. There is clear potential for significant further cash returns
to shareholders, arising from both strong free cash flow generation and
any disposal proceeds.
G4S is well positioned for a significant re-rating
The Board believes that G4S has significant potential to re-rate, in
particular:
-- G4S has been fundamentally repositioned and today is a focused global
leader in security;
-- Our Secure Solutions business (93% of revenues) has a large Integrated
Security business which is driving above market growth;
-- In Retail Cash Solutions we have created a substantial, high-growth
business with material value upside;
-- The Company's performance and prospects already compare very favourably
with its closest peer, Securitas, which has traded at a 3 year average
multiple of 10.5x LTM EBITDA pre COVID-19; and
-- The positive outlook for free cash flow generation supports significant
cash returns to shareholders.
In addition, the recent positive movement in global equity markets,
above all in relation to value stocks, reflects the improving macro-
economic outlook.
GardaWorld's Offer does not remotely reflect G4S's fundamental value,
let alone its value to GardaWorld and BC Partners
In 2019, BC Partners, now the majority shareholder of GardaWorld, paid a
multiple of 11.2x LTM EBITDA for its acquisition of GardaWorld. The 190p
Offer for G4S is very significantly below this value at 7.7x LTM EBITDA,
despite G4S being a far superior business to GardaWorld.
GardaWorld would benefit immeasurably from the global scale that G4S
would provide and from very significant operational and financial
synergies. The Offer captures these benefits for BC Partners and
GardaWorld, without providing you, the owners of G4S, with fair value.
Acquiring G4S at a significant discount to fair value would quite simply
allow BC Partners and GardaWorld to acquire a global leader in security
at your, our shareholders', expense.
TAKE NO ACTION
Your Board believes that G4S has a bright future as an independent
company with significant value upside for G4S shareholders.
Your Board, which has been so advised by Citi, J.P. Morgan Cazenove,
Goldman Sachs and Lazard (the "Financial Advisers") as to the financial
terms of the Offer, believes that GardaWorld's Offer significantly
undervalues G4S. In providing their financial advice to the Board, the
Financial Advisers have taken into account the Board's commercial
assessments. Lazard and Citi are providing independent financial advice
to the Board for the purposes of Rule 3 of the Takeover Code.
Accordingly, the Board unanimously recommends that you should take no
action in relation to the Offer and that you should not sign any
document which GardaWorld or its advisers send to you. Your Directors
will not be accepting GardaWorld's Offer in respect of their own
beneficial shareholdings.
Yours sincerely,
John Connolly
Chairman of the Board of Directors
Unless otherwise stated, the words and phrases used in this announcement
have the meanings given to the appendices of the Circular. For further
details of the sources of information and bases of calculation of the
numbers set out in this announcement please refer to "Bases and Sources"
in the Circular.
(1) PBITA
(2) Aspirational target which should not be construed as a profit
forecast under the Takeover Code or interpreted as such.
For further enquiries, please contact:
Helen Parris Director of Investor Relations +44 (0) 207 9633189
Media enquiries
Sophie McMillan Head of Media +44 (0) 759 5523483
Press office +44 (0) 207 9633333
G4S Joint Lead Financial Advisers
Citigroup Global Markets Limited
J.P. Morgan Cazenove
G4S Financial Advisers
Lazard & Co., Limited
Goldman Sachs International
G4S Legal Advisers
Linklaters LLP
Media Advisers
Brunswick
Notes to Editors:
G4S is the leading global security company, specialising in the
provision of security services and solutions to customers. Our mission
is to create material, sustainable value for our customers and
shareholders by being the supply partner of choice in all our markets.
G4S is quoted on the London Stock Exchange and has a secondary stock
exchange listing in Copenhagen. After taking account of the businesses
being sold in the year, G4S is active in more than 80 countries and has
around 533,000 employees. For more information on G4S, visit
www.g4s.com.
Important Notices
Citigroup Global Markets Limited ("Citi"), which is authorised by the
Prudential Regulation Authority ("PRA") and regulated in the UK by the
Financial Conduct Authority ("FCA") and the PRA, is acting exclusively
for G4S and no one else in connection with the matters set out in this
announcement and will not regard any other person as its client in
relation to the matters in this announcement and will not be responsible
to anyone other than G4S for providing the protections afforded to
clients of Citi nor for providing advice in relation to any matter
referred to herein.
J.P. Morgan Securities plc (which conducts its UK investment banking
business as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") which is
authorised in the United Kingdom by the PRA and regulated in the United
Kingdom by the PRA and the FCA, is acting as financial adviser
exclusively for G4S plc and no one else in connection with the matters
set out in this announcement and will not regard any other person as its
client in relation to the matters set out in this announcement and will
not be responsible to anyone other than G4S plc for providing the
protections afforded to clients of J.P. Morgan Cazenove or its
affiliates, nor for providing advice in relation to any matter referred
to herein.
Lazard & Co., Limited ("Lazard"), which is authorised by the PRA and
regulated in the United Kingdom by the FCA and the PRA, is acting
exclusively as financial adviser to G4S and no one else in connection
with the matters set out in this announcement and will not be
responsible to anyone other than G4S for providing the protections
afforded to clients of Lazard nor for providing advice in relation to
the matters set out in this announcement. Neither Lazard nor any of its
affiliates owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in tort,
under statute or otherwise) to any person who is not a client of Lazard
in connection with this announcement, any statement contained herein or
otherwise.
Goldman Sachs International ("Goldman Sachs"), which is authorised in
the United Kingdom by the PRA and regulated in the United Kingdom by the
PRA and the FCA, is acting exclusively for G4S and no one else in
connection with the matters set out in this announcement. Goldman Sachs
will not be responsible to anyone other than G4S for providing the
protections afforded to clients of Goldman Sachs nor for providing
advice in relation to any matter referred to herein.
Disclosure Requirements
Under Rule 8.3(a) of the Code, any person who is interested in 1% or
more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely
to be, solely in cash) must make an Opening Position Disclosure
following the commencement of the offer period and, if later, following
the announcement in which any securities exchange offeror is first
identified. An Opening Position Disclosure must contain details of the
person's interests and short positions in, and rights to subscribe for,
any relevant securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm
(London time) on the 10th business day following the commencement of the
offer period and, if appropriate, by no later than 3.30 pm (London time)
on the 10th business day following the announcement in which any
securities exchange offeror is first identified. Relevant persons who
deal in the relevant securities of the offeree company or of a
securities exchange offeror prior to the deadline for making an Opening
Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested
in 1% or more of any class of relevant securities of the offeree company
or of any securities exchange offeror must make a Dealing Disclosure if
the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain
details of the dealing concerned and of the person's interests and short
positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously been
disclosed under Rule 8 of the Code. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London
time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a securities
exchange offeror, they will be deemed to be a single person for the
purpose of Rule 8.3 of the Code.
Opening Position Disclosures must also be made by the offeree company
and by any offeror and Dealing Disclosures must also be made by the
offeree company, by any offeror and by any persons acting in concert
with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing Disclosures
must be made can be found in the Disclosure Table on the Takeover
Panel's website at www.thetakeoverpanel.org.uk, including details of the
number of relevant securities in issue, when the offer period commenced
and when any offeror was first identified. You should contact the
Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in
any doubt as to whether you are required to make an Opening Position
Disclosure or a Dealing Disclosure.
Rule 26.1 Disclosure
In accordance with Rule 26.1 of the Code, a copy of this announcement
will be available at www.g4s.com, by no later than 12 noon (London time)
on the business day following this announcement. The content of the
website referred to in this announcement is not incorporated into and
does not form part of this announcement.
Attachment
-- G4S Second defence circular
https://ml-eu.globenewswire.com/Resource/Download/0f93e926-55e4-448f-843d-ae1ab43f74f3
(END) Dow Jones Newswires
November 25, 2020 02:00 ET (07:00 GMT)
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