G4S Half Year Results: New contract sales total £1.2 billion

Group CEO Ashley Almanza states that G4S has made “good progress” and delivered a “satisfactory financial performance” in the first six months of 2014, winning new contracts worth £1.2 billion and producing a 6.3% increase in PBITA in addition to a 13.2% rise in earnings. However, Almanza highlights that “there remains much to be done” to capture the full potential of the company’s strategy and strengthen the group’s performance.

Top line financial highlights for the first six months of 2014 are as follows:

• New contract sales with a total value of £1.2 billion (+26%)

• Organic revenue growth: 4.1%, Emerging markets: +12.1%, Developed markets: in line with the prior year

• Underlying PBITA1 6.3% higher at £185 million (2013: £174 million), Emerging markets PBITA up 14.7%, Developed markets PBITA up 6.7%

• Corporate costs: £28 million (an increase of £8 million, including £6 million non-cash pension and LTIP costs)

• Underlying earnings1 of £86 million (2013: £76 million) (up 13.2%), EPS up 3.7%

• Total cash generated by continuing operations: £212 million (2013: £224 million). This included cash flow of £185 million (2013: £148 million) from operating businesses and one-off corporate items of £27 million (2013: £76 million)

• Net debt position as at 30 June 2014: £1,680 million (reflecting the normal seasonal effect of lower cash flows in the first half – which is expected to reverse in the second half of 2014 – and the £109 million electronic monitoring settlement)

• Portfolio management: proceeds of £89 million in six months. A further £37 million is due to be received in the second half of 2014 from the sale of the business in Sweden

• Interim dividend maintained at 3.42 pence/share (DKK 0.3198)

G4S realised good progress and delivered a satisfactory financial performance in the first six months of 2014

G4S realised good progress and delivered a satisfactory financial performance in the first six months of 2014

Underlying results1,2 for the six-month period ending 30 June 2014

Revenue
2014: £3,371 million. 2013: £3,239 million. Change: 4.1%

PBITA
2014: £185 million. 2013: £174 million. Change: 6.3%

Earnings4
2014: £86 million. 2013: £76 million. Change: 13.2%

EPS5
2014: 5.6 p. 2013: 5.4 p. Change: 3.7%

Total results3 for the six-month period ending 30 June 2014

Revenue
2014: £3,371 million. 2013: £3,249 million. Change: 3.8%

PBITA
2014: £179 million. 2013: £47 million. Change: 280.9%

Earnings
2014: £78 million. 2013: £(196) million

EPS
2014: 5.0 p. 2013: (14.0) p

References
1At constant exchange rates. The results at actual exchange rates are set out on pages 15 to 31 of the full report (see below for download link). To clearly present underlying performance, specific items have been excluded and disclosed separately (see page 3 of the final report)
22013 results are presented at constant exchange rates and have been restated for the adoption of IFRS10 and IFRS11. 2013 PBITA has been re-presented for businesses subsequently classified as discontinued (see page 4 of the final report for details)
3At constant exchange rates and including specific items. 2013 results have been restated for the adoption of IFRS10 and IFRS11 and have been re-presented for businesses subsequently classified as discontinued (see page 4 of the final report)
4Earnings is equal to profit/(loss) for the period attributable to equity holders of the parent (see page 3 of the final report)
5Earnings per share is based on the average number of shares in issue of 1,545 million (2013: 1,403 million) (see pages 5 and 6 of the final report)

Commentary from the Group CEO

Speaking about this latest set of financials, Ashley Almanza (Group CEO at G4S) commented: “The group made good progress and delivered a satisfactory financial performance in the first six months, winning new contracts with a total value of £1.2 billion and producing a 13.2% increase in earnings. That said, there remains much to be done to capture the full potential of our strategy and to strengthen the group’s performance.”

“Demand for our services was robust, particularly in emerging markets. We’re restructuring and rebuilding our businesses in the UK and Ireland and, indeed, in Europe. We have seen growth return to the North American market.”

Ashley Almanza: Group CEO at G4S

Ashley Almanza: Group CEO at G4S

“Profit before interest, tax and amortisation of £1,851 million was 6% higher than the same period in 2013. This reflects revenue growth and improved operational gearing as we begin to capture benefits from restructuring and the implementation of our ‘Accelerated Best Practice’ Programmes.”

“With our increased focus on cash management, cash flow from operating businesses was £185 million – a 25% improvement on the same period last year. Total cash generated by continuing operations, including one-off corporate items, was £212 million. In 2013 that figure stood at £224 million.”

Following on from a review of the group’s strategy and business conducted last year, the management team duly identified a number of strategic priorities and, in each area, has subsequently made progress in moving from planning towards execution.

Portfolio and performance management
“Over the past year,” said Almanza, “we have divested six businesses at attractive exit multiples for aggregate proceeds of £160 million. This includes our business in Sweden which we sold in July this year. In addition, we have taken the decision to discontinue a further 15 smaller businesses and have an ongoing sale process for our US Government Solutions business. Portfolio management remains important for strategic focus, capital discipline and performance management.”

Organic growth
“We won new work with an annual contract value of over £600 million and a total contract value of £1.2 billion while at the same time replenishing our pipeline which now stands at an annual value of £4.9 billion.”

“We continue to see further opportunities to sell additional services in our key markets and, in line with previously announced plans, we have invested an annualised £15 million to strengthen sales and business development capability. We’re progressively embedding a consistent approach to sales operations and sales performance measurement.”

Accelerated Best Practice and Cost Leadership Programme
Almanza continued: “Our Accelerated Best Practice and Cost Leadership Programme gathered momentum with the appointment of key management and subject matter experts to focus on direct labour efficiency, organisational efficiency, route planning and telematics, IT standardisation, procurement and shared services. Our major restructuring programmes to strengthen the competitiveness and profitability of a number of key businesses, principally in the UK, Ireland and Europe, are being implemented in line with the detailed plans which were developed last year. These programmes and cost initiatives are beginning to deliver improved operational leverage.”

People and values
“We made good progress with the implementation of our corporate transformation programme. We have enhanced our risk management controls and practices and strengthened contract management, and we’re adopting a more systematic approach to measuring customer service. A group-wide internal communications programme is also underway to reinforce our group values and, in line with the ‘Safety First’ value, there has been concerted focus on Health and Safety policy and practice.”

The overall outlook

“We have achieved a satisfactory financial performance and we’re making good strategic progress,” stated Almanza. “Demand for our services continues to be strong in emerging markets. We are restructuring and rebuilding our UK and Ireland and European businesses, and we have seen good growth return to our North American markets.”

In conclusion, Almanza explained: “The group is making encouraging progress but, as stated earlier, there remains much work to be done to capture the full potential of our strategy and to strengthen the group’s overall performance.”

*Download the full Half Year Results announcement
**Download the full presentation slides

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