Investment Column: G4S remains a secure bet after strong results

Our view: Buy

Share price: 258.6p (+1.7p)

The global appetite for security services shows little sign of dimming. G4S – which provides security staff for everything from nightclubs to embassies, as well as offering police-training services – is a case in point.

G4S reported turnover up by 4.1 per cent to £7397m while profits rose by 4.2 per cent to £527m over the year to the end of December. Margins were maintained at 7.1 per cent with strong cashflow generation of £422m. Add in the company's confident outlook for 2011, and it is flush enough to increase its dividend by 14 per cent.

It has been a busy year. The group has invested £65m in a series of acquisitions in Latin America, particularly Brazil, helping to boost revenues from its "new markets" division to a third of total profits, from 29 per cent in 2009. Thanks to the boost, G4S managed to offset the ongoing recessionary hit in its core US and UK markets.

The company's chief executive, Nick Buckles, was yesterday trumpeting the results as the "sixth consecutive year of underlying revenue, profit and dividend growth since G4S was formed in 2004". "The excellent performance in 2010 has been achieved despite continued uncertainties with the global economic downturn, which is testament to the efforts of our global workforce," he said.

But he was also bullish on the outlook for the year ahead, thanks to signs of recovery in the group's larger developed markets in the US and UK. "We remain confident about the outlook for 2011 when we expect to deliver an improved organic revenue-growth performance whilst continuing to maintain our discipline on margins and cash generation," he said.

Mike Allen, an analyst at Panmure Gordon, is less effusive, but still positive on the stock. "Overall results do not look spectacular but the valuation remains undemanding, and the company looks better positioned for growth this year," he said, noting the particularly cautious expectations for UK Government spending.

Perhaps crucially, G4S shares are trading at around 11.9 times forward earnings, making the stock attractively valued in comparison with peers.


Our view: Hold

Share price: 11.75p (-1.25p)

There was little singing and dancing when Luminar issued its year-end trading up yesterday, although the figures were better than feared, according to analysts. Same-outlet sales for the year to 26 February were down by 18.6 per cent, with the decline being driven by a "reduction in admissions". Still, Luminar said that while trading during the last seven weeks of the year had remained challenging, "the rate of decline has improved, with same outlet sales down 12.3 per cent on the previous year".

Looking ahead, the company said it had successfully launched Jongleurs comedy nights at four clubs and planned to extend the offering to a further eight clubs in coming months. It was also looking to open "a number of bars at its clubs during the day and early evening", in places where there it saw scope for extra profits.

So, a fair bit of negative news, but also some scope for improvement. From an investment point of view, the market already appears to be discounting much of the bad news, with Luminar trading on around 3 times enterprise value to earnings before interest, tax, deprecation and amortisation, according to Altium.

That means this is not a sell. But as Panmure Gordon points out, Luminar is not so cheap when considered in terms of enterprise value to earnings before interest and tax. On that metric, it ends up on a multiple of nearly 16 times. Add in the fact that, while the rate of decline in sales may be easing, the wider economic picture remains cloudy at best, and we find it hard to justify too bullish a stance. We would wait a while for some concrete signs of recovery before wading in.

Life and Style
“What is it like being a girl?” was the question on the lips of one inquisitive Reddit user this week
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
Life and Style
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Swimsuit, £245, by Agent Provocateur

Midsummer swimwear season is well and truly upon us – but diving in at the deep end is no excuse for shirking the style stakes

German supporters (left) and Argentina fans
world cup 2014Final gives England fans a choice between to old enemies
Arts and Entertainment
A still from the worldwide Dawn of the Planet of the Apes trailer debut
peopleMario Balotelli poses with 'shotgun' in controversial Instagram pic
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
ebookA unique anthology of reporting and analysis of a crucial period of history
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business


£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Programme Support, Coms, Bristol, £300-350p/d

£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

(Junior) IT Systems Administrator / Infrastructure Analyst

£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

Finance Officer

Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice