August 9, 2019 / 6:40 AM / 10 days ago

UPDATE 2-Britain's G4S open to offers for cash business after split approved

* Co says would evaluate third-party proposals for cash unit

* Cash usage continues to grow in emerging markets - CEO

* Shares rise as much as 9% (Adds details, background, share price)

By Justin George Varghese and Yadarisa Shabong

Aug 9 (Reuters) - G4S will look at offers for all or part of its cash transport business after its board approved hiving it off into a separate company in the first half of 2020.

Shares in the British security contractor rose by nearly 9% after Friday’s confirmation of the move to separate its cash operations, which have been hit in Britain by ATM and bank branch closures as digital payments become more common.

The company said would evaluate third-party proposals for all or parts of the cash operation, whose vans and guards transporting boxes of money are a familiar sight in Britain.

G4S, the world’s largest private security firm with more than 570,000 employees in 90 countries, is focusing instead on emerging markets for growth.

“One of the virtues of the separate cash company that we’re creating is that it has a quite exceptional emerging market footprint,” Chief Executive Ashley Almanza said.

“We’re still addressing positive demand for cash services in those markets,” Almanza added on a call with reporters.

The business, which employs about 30,000 staff, had annual revenue of 1.2 billion pounds ($1.45 billion) and accounted for a third of the company’s profit.

Although use of cash is declining, banks and retailers are increasingly outsourcing handling of notes and coins.

VALUE DOUBTS

The move will allow G4S to focus on its core security business, which was hit by a series of high-profile failures, including not providing adequate security staff for the 2012 Olympic Games in London.

It also suffered a setback in April, when the British government said it would take over the running of a prison in Birmingham, central England, from G4S after inmate violence made the site unmanageable.

“The company has not delivered (share price or EPS momentum) over the last 5 years, and we continue to believe debt levels are too high,” analysts at RBC wrote in a client note.

“Whilst a potential Cash Services demerger would focus the group, we are not convinced it will create value,” the RBC analysts added, saying that they continue to prefer a sale of the cash unit over a demerger.

G4S said first-half adjusted profit before interest, tax and amortization rose 1.7%% to 234 million pounds ($284 million).

Revenue was also up 4.7% at 3.75 billion pounds, largely in line with analysts’ average consensus estimates compiled by the company.

The security business reported first-half revenue of 3.21 billion pounds, a 4.9% rise from a year earlier.

Shares of the company, which rose as much as 8.9%, were up 4.4% at 191.8 pence at 0927 GMT. ($1 = 0.8238 pounds) (Reporting by Justin George Varghese and Yadarisa Shabong in Bengaluru; Editing by Anil D’Silva, Bernard Orr and Alexander Smith)

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