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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| G4s Plc | LSE:GFS | London | Ordinary Share | GB00B01FLG62 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 244.80 | 245.00 | 245.10 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMGFS
28 August 2012
G4S plc
Half yearly results announcement for the six months ended 30 June 2012
Developing markets and outsourcing trends continuing to drive underlying growth
despite challenging economic environment
H1 2012 Underlying* H1 2011
=-------------------------------------------------------------------------------
Turnover GBP3,903m +5.8% GBP3,630m**
=-------------------------------------------------------------------------------
Organic growth +6.8% +5.1% +4.5%
=-------------------------------------------------------------------------------
PBITA*** GBP236m** GBP236m**
=-------------------------------------------------------------------------------
Operating margin 6.0% 6.2% 6.5%**
=-------------------------------------------------------------------------------
Adjusted EPS 9.8p** 9.8p**
=-------------------------------------------------------------------------------
Recommended interim dividend per 3.42p 3.42p
share
=-------------------------------------------------------------------------------
Cash conversion 83% 60%
* excluding Olympic and Paralympic Games contract
**at constant exchange rates and adjusted for discontinued businesses and
exceptional items
***see page 4 for definition of PBITA
Excluding the Olympic Games contract, sales up 5.8% and improved organic growth
of 5.1%. Adjusted EPS maintained at 9.8p
* Organic growth of 10% in developing markets with revenue of GBP1,191m (31% of
group total and targeting 50% by 2019)
* Group margin excluding exceptional items is lower at 6.0% (6.2% excluding
the Olympics Games revenue) due to the challenging US government market and
UK contract phasing
* On track to achieve annual cash conversion target of 85%
Olympic and Paralympic Games contract loss of GBP50m provided for as an
exceptional item in H1
* Contract review underway and expected to be completed during second half of
September
Continued focus on business improvement
* Service excellence centres established for all core services: manned
security, cash solutions and care & justice services - part of a two year
programme to support gross margins and profit improvement initiatives
* Restructuring leading to a headcount reduction of 1,100 positions and GBP30m
annualised savings, of which related costs of GBP24m have been taken as an
exceptional item in H1, a large proportion of which relate to Continental
Europe. Up to GBP10m further costs are expected in H2
Security remains core to global strategy and continues to provide growth
opportunities
* Strong global contract pipeline of GBP3.8bn per annum across a diverse range
of sectors including the strongest visible pipeline in US commercial sector
on record
Nick Buckles, Chief Executive Officer, commented:
"We were deeply disappointed that we had significant issues with the London
2012 Olympics contract and are very grateful to the military and the police for
their support in helping us to deliver a safe and secure Games.
The overall business has performed well in achieving a similar underlying profit
as the first half of last year despite economic challenges, particularly in
Europe, and weakness in the US government market. Underlying organic growth in
the first half has improved to over 5% overall driven by a strong performance in
developing markets which grew by over 10%.
We continue to see good opportunities from outsourcing around the world
particularly from governments looking to improve quality of services and reduce
costs and we believe that, with our long-term track record, we will continue to
play a major role in this sector.
The breadth of our portfolio in 125 countries continues to present many new
growth opportunities. Our market leading businesses, broad customer base and
GBP3.8bn per annum contract pipeline give us confidence in the outlook for the
Group."
For further enquiries, please contact: +44 (0) 1293 554400
Nick Buckles Chief Executive Officer
Trevor Dighton Chief Financial Officer
Helen Parris Director of Investor Relations
Media enquiries:
Adam Mynott Director of Media Relations +44 (0)
1293 554400
David Allchurch Tulchan Group +44 (0)
20 7353 4200
High resolution images are available for the media to view and download free of
charge from www.vismedia.co.uk.
Notes to Editors:
G4S is the world's leading international secure outsourcing solutions group,
which specialises in outsourced business processes and facilities in sectors
where security and safety risks are considered a strategic threat.
G4S is the largest employer quoted on the London Stock Exchange and has a
secondary stock exchange listing in Copenhagen. G4S has operations in more than
125 countries and 657,000 employees. For more information on G4S, visit
www.g4s.com.
Presentation of Results:
A presentation to investors and analysts is taking place today at 0830hrs at the
London Stock Exchange.
Webcast
http://view-w.tv/p/707-803-11617/en
Telephone Dial-in Facility
The details for the telephone dial-in facility are as follows:-
Denmark Toll Free : 8088 8649
Standard International Access : +44 (0) 20 3003 2666
UK Toll Free : 0808 109 0700
USA Toll Free : 1 866 966 5335
Password: G4S
Replay Details
To listen to a replay of the presentation which will be available for 7 days
after the event:
Denmark Toll Free : 8088 7109
Standard International Access : +44 (0) 20 8196 1998
UK Toll Free : 0800 633 8453
USA Toll Free : 1 866 583 1035
Access PIN: 8732477
FINANCIAL SUMMARY
Results
The results which follow have been prepared under International Financial
Reporting Standards, as adopted by the European Union (adopted IFRSs).
Group Turnover
+-----------------------------------+------+------+
|Turnover of Continuing Businesses |H1 12 |H1 11 |
| | | |
| | GBPm| GBPm|
+-----------------------------------+------+------+
|Turnover at constant exchange rates| 3,903| 3,630|
+-----------------------------------+------+------+
|Exchange difference | -| 56|
+-----------------------------------+------+------+
|Total continuing business turnover | 3,903| 3,686|
+-----------------------------------+------+------+
Turnover increased by 5.9% to GBP3,903 million or by 7.5% at constant exchange
rates. Organic turnover growth was 6.8%.
+----------------+------+-------------+----------------+-----------------+-----+
|Organic Turnover|Europe|North America| Developed| Developing|Total|
|Growth incl| | | Markets| Markets| |
|Olympic Games| | | | | |
|contract * | | | | | |
+----------------+------+-------------+----------------+-----------------+-----+
|Secure solutions| 8%| 4%| 7%| 10%| 8%|
+----------------+------+-------------+----------------+-----------------+-----+
|Cash solutions | -1%| 7%| -1%| 11%| 3%|
+----------------+------+-------------+----------------+-----------------+-----+
|Total | 6%| 5%| 6%| 10%| 7%|
+----------------+------+-------------+----------------+-----------------+-----+
* Calculated to exclude acquisitions and disposals, and at constant exchange
rates
+----------------+------+-------------+----------------+-----------------+-----+
|Organic Turnover|Europe|North America| Developed| Developing|Total|
|Growth excl| | | Markets| Markets| |
|Olympic Games| | | | | |
|contract * | | | | | |
+----------------+------+-------------+----------------+-----------------+-----+
|Secure solutions| 3%| 4%| 4%| 10%| 6%|
+----------------+------+-------------+----------------+-----------------+-----+
|Cash solutions | -1%| 7%| -1%| 11%| 3%|
+----------------+------+-------------+----------------+-----------------+-----+
|Total | 2%| 5%| 3%| 10%| 5%|
+----------------+------+-------------+----------------+-----------------+-----+
* Calculated to exclude acquisitions and disposals, and at constant exchange
rates
Group Profit
+---------------------------------------+------+-----+
|PBITA * of Continuing Businesses |H1 12 |H1 11|
| | | |
| | GBPm| GBPm|
+---------------------------------------+------+-----+
|PBITA at constant exchange rates | 236| 236|
+---------------------------------------+------+-----+
|Exchange difference | -| 4|
+---------------------------------------+------+-----+
|Total continuing business PBITA | 236| 240|
+---------------------------------------+------+-----+
|PBITA margin at constant exchange rates| 6.0%| 6.5%|
+---------------------------------------+------+-----+
* PBITA is defined as profit before interest, taxation, amortisation of
acquisition-related intangible assets, acquisition-related costs and exceptional
items
PBITA was maintained at GBP236 million but decreased by 1.7% at actual exchange
rates. The PBITA margin was 6.2% excluding the Olympic Games contract revenue
and 6.0% including the contract.
Cash Flow and Financing
+--------------------------------------------------+------+------+
|Cash Flow |H1 12 |H1 11 |
| | | |
| | GBPm| GBPm|
+--------------------------------------------------+------+------+
|Operating cash flow | 197| 143|
+--------------------------------------------------+------+------+
|Operating cash flow / PBITA (excluding associates)| 83%| 60%|
+--------------------------------------------------+------+------+
Operating cash flow, as analysed on page 26, was GBP197 million in the period,
representing 83% of PBITA. Net cash invested in current year acquistions was GBP6
million. Net debt at the end of the period, as analysed on page 25, was GBP1,683
million (December 2011: GBP1,616m).
Adjusted earnings per share
+-----------------------------------+-----+------------------------------+-----+
|Adjusted earnings per share |H1 12| H1 11 at constant exchange|H1 11|
| | | rates| |
| | | | |
| | | | |
| | GBPm| GBPm| GBPm|
+-----------------------------------+-----+------------------------------+-----+
|PBITA from continuing operations | 236| 236| 240|
+-----------------------------------+-----+------------------------------+-----+
|Interest (before pensions) | (50)| (46)| (46)|
+-----------------------------------+-----+------------------------------+-----+
|Tax (before pensions interest) | (40)| (42)| (43)|
+-----------------------------------+-----+------------------------------+-----+
|Minorities | (9)| (10)| (10)|
+-----------------------------------+-----+------------------------------+-----+
|Adjusted profit attributable to | 137| 138| 141|
|shareholders | | | |
+-----------------------------------+-----+------------------------------+-----+
|Average number of shares (m) |1,404| 1,405|1,405|
+-----------------------------------+-----+------------------------------+-----+
|Adjusted EPS (p) | 9.8| 9.8| 10.0|
+-----------------------------------+-----+------------------------------+-----+
Adjusted earnings per share, reconciled to basic earnings per share on page 24,
was in line with prior year at constant exchange rates and down by 2.0% against
prior year at actual exchange rates.
London 2012 Contract
Contract Update
In December 2011, we signed the contract to provide an enlarged security
workforce for the Olympic and Paralympic Games. The demand profile for
provision of the security workforce built from just a few hundred people at the
start of 2012 to 10,400 during the peak period in early August. All of the
roles required specific classroom and on-the-job training, with a significant
number of the roles being specialist in nature and requiring 40% of the
workforce to be trained in additional skills.
Our primary focus for July and August to date has been to work alongside the
military and police to deliver a safe and secure Games. We are pleased to
report that security has remained one of the highest ranked aspects of the
Olympic Games in daily visitor surveys conducted by the organising committee.
Although the complex recruitment, training, screening, accreditation and
deployment process proved very challenging, more than 14,000 staff were
recruited, trained and deployed. An additional 5,000 people completed Security
Industry Authority (SIA) training and obtained a SIA licence. We had around
8,000 people on the ground at Olympic venues during the peak periods and, in
many cases, military personnel were able to withdraw from specific sites and
reduce the overall number of deployed military personnel across the venues.
We were deeply disappointed that on 11 July we had to advise the customer that
we would not be able to assure the delivery of the workforce against the demand
requirements and the decision was taken by the UK Home Office to deploy
additional military to augment the security workforce numbers. To date, we have
delivered 83% of the contracted shifts since the beginning of the year and
expect to fully resource the contract between now and the end of its term.
In addition to supplying the London 2012 security workforce, we also provided a
range of cash solutions services to LOCOG and its partners and to G4S customers
across London and the South East of England as a result of the Olympic Games.
This included handling an extra 20,100 cash containers through our system and
over 2,100 additional ATM services.
The Paralympic Games begin on 29th August and we continue to work with our
partners to ensure that the Games are safe and secure. We are confident that we
have an assured security workforce for the Paralympic Games and do not
anticipate any workforce shortfall issues to arise.
A Board review of the contract has commenced with the assistance of PwC. The
review will cover all aspects of the contract including the key expected
deliverables of the contract, the actual contract performance, execution issues
and timings and why failures were not identified in a more timely manner. We
expect the review findings to be made available to the Board during the second
half of September.
Contract Loss Provision
Our current estimate is that the loss on the London 2012 Contract will be in the
region of GBP50m and this amount has been provided for at the half year and taken
as an exceptional item. This estimate is based on our current expectation of
the financial outcome including reasonable estimates of costs where at this date
there is still uncertainty. The estimate is based upon the following:
* the additional costs relating to the deployment of the increased military
and police personnel based upon available information - as at the current
date we have not been advised of the actual cost, but confirm that we will
meet the additional costs in line with the commitment we made in July
* our estimates of potential penalties and contractual liabilities
* the additional costs relating to the provision of increased internal
resource to deliver the contract
The final contract loss will be impacted by the actual cost of the military and
police deployment and by the outcome of negotiations in respect of potential
penalties and contractual liabilities.
BUSINESS ANALYSIS
Secure solutions
+---------------------+-------------+-------------+-------------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | GBPm| GBPm| | |
| +------+------+------+------+------+------+--------------+
|* At constant |H1 12 |H1 11 |H1 12 |H1 11 |H1 12 |H1 11 | H1 12 |
|exchange rates | | | | | | | |
+---------------------+------+------+------+------+------+------+--------------+
|Europe * | 1,405| 1,300| 83| 83| 5.9%| 6.4%| 8%|
+---------------------+------+------+------+------+------+------+--------------+
|North America * | 864| 828| 39| 47| 4.5%| 5.7%| 4%|
+---------------------+------+------+------+------+------+------+--------------+
|Developing Markets * | 994| 879| 78| 71| 7.8%| 8.1%| 10%|
+---------------------+------+------+------+------+------+------+--------------+
|Total secure | 3,263| 3,007| 200| 201| 6.1%| 6.7%| 8%|
|solutions * | | | | | | | |
+---------------------+------+------+------+------+------+------+--------------+
|Exchange differences | -| 38| -| 2|
+---------------------+------+------+------+------+
|At actual exchange | 3,263| 3,045| 200| 203|
|rates | | | | |
+---------------------+------+------+------+------+
The secure solutions business continued its strong performance with good organic
growth of 6% (8% including the Olympic Games contract), helped by strong
developing markets growth. Margins were lower at 6.3% (6.1% including the
Olympics contract) due to challenging economic conditions in Continental Europe
and a reduction in US government work.
Europe
+----------------------+------------+-------------+-------------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | GBPm| GBPm| | |
| +-----+------+------+------+------+------+--------------+
|* At constant exchange|H1 12|H1 11 |H1 12 |H1 11 |H1 12 |H1 11 | H1 12 |
|rates | | | | | | | |
+----------------------+-----+------+------+------+------+------+--------------+
|UK & Ireland * | 711| 610| 54| 50| 7.6%| 8.2%| 14%|
+----------------------+-----+------+------+------+------+------+--------------+
|Continental Europe * | 694| 690| 29| 33| 4.2%| 4.8%| 3%|
+----------------------+-----+------+------+------+------+------+--------------+
|Total Europe * |1,405| 1,300| 83| 83| 5.9%| 6.4%| 8%|
+----------------------+-----+------+------+------+------+------+--------------+
Organic growth in Europe excluding the Olympic Games contract was 3% (8%
including the Olympics contract) and margins were 6.3% (5.9% including the
Olympics contract).
There was organic growth of 4% in the UK & Ireland excluding the Olympics
contract (14% including the Olympics contract) with a continued improved
performance in Ireland. The UK & Ireland margin was lower at 7.6% due to the
Olympics contract and was maintained excluding the contract.
Organic growth was impacted by the loss of some government contracts during
2011. Offsetting that was a number of major government contract wins and
extensions such as:
* Total facilities management for the Ministry of Justice at more than 340
court buildings across the Midlands, Wales and the North of England which
was mobilised successfully in February this year.
* The provision of transport and accommodation for asylum applicants for the
UK Border Agency for two regions - the Midlands and the East of England and
the North East, Yorkshire and Humberside which mobilised successfully in
June.
* Outsourcing services for Lincolnshire Police - the first contract of its
kind to be awarded by a British Police Authority. This contract mobilised in
April 2012 and the transition has gone extremely smoothly with excellent
service delivery and results. The Lincolnshire contract includes a
framework agreement for ten other police forces, including Bedfordshire,
Cambridgeshire and Hertfordshire who recently confirmed their commitment to
evaluate outsourcing the forces' organisational support services to G4S.
* Mobilising the successful opening and ongoing management of the newest and
one of the largest prisons in the UK, HMP Oakwood.
The pipeline of UK government outsourcing opportunities remains strong,
particularly in areas such as prisons, police, probation, health and facilities
management.
The UK commercial business continued to grow strongly and contracts won included
a number of significant smart meter installation and data management contracts
for major utility providers.
Trading conditions in Ireland remain challenging in 2012 but underlying trading
has continued to be supported by a cost reduction plan. The bidding pipeline,
especially in the area of security systems, looks encouraging for the remainder
of the year.
The Continental Europe region performed well against an uncertain economic
backdrop. Overall organic growth was 3%. We lost the European parliament
contract in Belgium from May 2012 but won the European parliament contract in
Luxembourg in April 2012. Margins were lower due to even tougher economic
conditions throughout the region and mandatory pay awards in the Netherlands not
being fully recovered. To counteract this, a number of efficiency initiatives
have been implemented which will reduce direct and overhead headcount numbers by
around 250, alongside a number of branch closures throughout Europe. We should
see a steady improvement in margins over the next 18 months as a result of these
measures being taken in 2012.
Revenues for the security systems business, which accounts for around 20% of
Continental European secure solutions revenues, were up around 2%.
There were some notable strong performances in the region - in Sweden, G4S won a
secure solutions contract with AB Volvo from April 2012 for three years. In
addition there were contract wins in Belgium, Norway, Finland, Austria and
Denmark for customers in retail, transportation and telecoms sectors. The
business in Greece has been challenged by the economic crisis but we have
recently started several new contracts in the region such as the US Embassy and
for Hellenic Petroleum.
Organic growth in most Eastern European markets has now stabilised to the low
single digit level. We have won a significant contract with a major steel
manufacturer in Ukraine and we have recently won contracts in Hungary and
Slovakia for companies in sectors such as manufacturing, electronics and retail.
The group divested its businesses in Poland in July.
North America
+----------------------+------------+-------------+-------------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | GBPm| GBPm| | |
| +-----+------+------+------+------+------+--------------+
|* At constant exchange|H1 12|H1 11 |H1 12 |H1 11 |H1 12 |H1 11 | H1 12 |
|rates | | | | | | | |
+----------------------+-----+------+------+------+------+------+--------------+
|North America * | 864| 828| 39| 47| 4.5%| 5.7%| 4%|
+----------------------+-----+------+------+------+------+------+--------------+
Organic growth in North America was 4%. Margins were lower compared to the prior
year due to the performance of the US government business where revenues were
down 14% and operating profits down nearly GBP10m causing margins to decline
significantly from around 5% to less than 2%. The US government business
continues to be impacted by the significant reduction in federal funding levels.
The profit reduction impact is split broadly between budgetary induced pressure
on the domestic US government business and the decline in volumes for
international landmine clearance. We have already instigated overhead cost
saving plans in the US domestic business and will be merging our US and UK mine
clearing businesses in the second half to bring them back into profitability.
In the United States growth in the commercial sector was strong and our
commercial secure solutions business had its strongest first half on record. We
continue to remain optimistic about growth in the commercial sector, with the
largest visible sales pipeline in the history of the company. The security
systems business continues to make good progress, with a record order book
representing more than 12 months work in hand. The outlook for new US federal
government work in the short term continues to be subdued, however we have
recently been awarded a $55m per annum contract for integrated base operations
support services at the US Navy Support Facility, Diego Garcia from November for
up to 10 years. State and local governments remain under financial pressure, but
we continue to see some appetite for outsourcing focused on the more effective
delivery of public services.
In the commercial sector, recent contract awards have been in the healthcare,
distribution, chemical, manufacturing and retail sectors. G4S commenced the
provision of security solutions for a major automotive company from January
2012 valued at $70m per annum for three years. The group's largest commercial
contract with Bank of America has been extended until 2014 and G4S North America
has been awarded a secure solutions contract with Google for its locations in
the United States and data centres in Belgium and Finland. The US security
systems business performed well with a number of systems integration projects
for Tampa Airport, Iberdrola, and the Port of Tacoma.
Additional examples of major contract awards include: world-wide security
services for GE, building on a long-standing service relationship; the Sandia
National Laboratories for the Department of Energy, which represents an
expansion of services provided to this important customer; and compliance and
investigations services for Gallagher Bassett, where we will staff and manage
their Special Investigations Unit responsible for investigating fraudulent
workers compensation claims.
In Canada, the organic growth rate was over 30% driven by the CATSA aviation
security contract which started on 1 November 2011. The contract is for security
at 21 airports in the Pacific region of Canada and has projected revenue of more
than CAD$ 400m over the initial five-year term.
Developing Markets
+---------------------+-------------+-------------+-------------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | GBPm| GBPm| | |
| +------+------+------+------+------+------+--------------+
|* At constant |H1 12 |H1 11 |H1 12 |H1 11 |H1 12 |H1 11 | H1 12 |
|exchange rates | | | | | | | |
+---------------------+------+------+------+------+------+------+--------------+
|Asia * | 339| 313| 23| 20| 6.8%| 6.4%| 8%|
+---------------------+------+------+------+------+------+------+--------------+
|Middle East * | 213| 208| 18| 17| 8.5%| 8.2%| 4%|
+---------------------+------+------+------+------+------+------+--------------+
|Africa * | 179| 163| 15| 17| 8.4%| 10.4%| 10%|
+---------------------+------+------+------+------+------+------+--------------+
|Latin America &| 263| 195| 22| 17| 8.4%| 8.7%| 17%|
|Caribbean * | | | | | | | |
+---------------------+------+------+------+------+------+------+--------------+
|Total Developing| 994| 879| 78| 71| 7.8%| 8.1%| 10%|
|Markets * | | | | | | | |
+---------------------+------+------+------+------+------+------+--------------+
In Developing Markets, revenue growth was 13% and organic growth was excellent
at 10% with margins slightly lower due mainly to Africa.
Organic growth in Asia was 8% and margins were up to 6.8% due to improved
business performance in a number of countries. There was strong organic
revenue growth in Thailand, China, South Korea, Japan and Indonesia. India, the
largest market in the region, achieved a good performance with double-digit
revenue growth.
We recently won a manned security contract with the United Nations in Papua New
Guinea. Revenues declined in Australia as a result of the loss of the Western
Australia Prisoner Transportation contract which ended in July 2011. However,
the pipeline is looking more positive with a concerted effort to target the
Australian commercial market. Recent wins include DP World and Bechtel. The
offender monitoring contract in New Zealand has been extended for 18 months to
the end of 2013.
In the Middle East, organic growth was 4%, due to reductions in activity in
Iraq. Margins improved compared to the prior year due to the one-off bonus
payment made in Saudi Arabia in H1 2011 and recent Qatar contract wins include
Qatar Airways and Qatar National Bank. We are in the process of exiting from the
US Embassy contract in Kabul, Afghanistan.
Africa performed strongly with organic growth of 10%. Margins were lower at
8.4%, due to contract losses in Nigeria. New contracts won or renewed are mainly
in key strategic sectors such as aviation, mining, oil and gas and embassies.
The current bidding pipeline in Africa is the strongest in the company's
history - particularly in financial services, mining and embassies, with
increasing numbers of both multi-country/pan- African and larger scale bids.
The Latin America and Caribbean region has performed well with organic growth of
17% and as a result of strong performances across most countries. We have also
had a number of strategic contract wins, for example in the financial services,
Government and extractives sectors.
We are in the process of extending our presence in Brazil. Legislation was
reviewed recently following which the Brazilian Government has confirmed that
security businesses which were established prior to 1983 may be owned by foreign
companies. This had previously been a critical factor in delaying the group's
strategic plans in Brazil. Now that the legislation has been reviewed, these
plans are expected to come to fruition in the near future.
Cash Solutions
+----------------------+------------+-------------+-------------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | GBPm| GBPm| | |
| +-----+------+------+------+------+------+--------------+
|* At constant exchange|H1 12|H1 11 |H1 12 |H1 11 |H1 12 |H1 11 | H1 12 |
|rates | | | | | | | |
+----------------------+-----+------+------+------+------+------+--------------+
|Europe * | 387| 393| 34| 37| 8.8%| 9.4%| -1%|
+----------------------+-----+------+------+------+------+------+--------------+
|North America * | 56| 52| 1| 0| 1.8%| 0.0%| 7%|
+----------------------+-----+------+------+------+------+------+--------------+
|Developing Markets * | 197| 178| 25| 22| 12.7%| 12.4%| 11%|
+----------------------+-----+------+------+------+------+------+--------------+
|Total Cash Solutions *| 640| 623| 60| 59| 9.4%| 9.5%| 3%|
+----------------------+-----+------+------+------+------+------+--------------+
|Exchange differences | | 18| | 2|
+----------------------+-----+------+------+------+
|At actual exchange| 640| 641| 60| 61|
|rates | | | | |
+----------------------+-----+------+------+------+
The cash solutions business showed a solid performance with organic revenue
growth of 3%. Overall margins were 9.4%, with improvements in North America and
developing markets being offset by lower margins in Europe due to anticipated
contract phasing in the UK.
Organic growth in Europe declined by 1%. In the UK & Ireland, revenues declined
by 6% as a result of the loss of two ATM contracts in mid 2011. This impacted
the first half of 2012 but the outlook is much improved as the business has won
three major contracts for financial institutions providing outsourcing of cash
processing, cash machine replenishment and engineering to both on-bank branches
and remote sites. The engineering will be provided on a full 24/7 basis - an
industry first. The roll-out of these contracts will be completed early in the
second half and should provide double digit revenue and profit growth. The
outlook for 2013 is also positive with a solid pipeline of outsourcing
contracts.
In Sweden, the cash solutions business was sold in February 2012. Elsewhere in
Continental Europe, organic growth was positive helped by product development in
the Netherlands, strong performances in Belgium, as a result of growth in ATM
servicing, CASH360 and cash processing, and productivity improvement in Finland.
G4Si, the international valuables transportation business, achieved another
strong performance, with double digit organic growth supported by an increase in
commodity shipments such as pre-refined and refined metal, bank notes, credit
cards, and pharmaceuticals.
In North America, the performance of the cash solutions business in Canada was
improved through stronger alignment in key sectors following management
integration with the Canadian secure solutions business in the first half of
2012. This has resulted in contract awards and extensions with key customers in
the retail and financial services sectors.
Organic growth in Developing Markets was good at 11%. The cash solutions
business in Saudi Arabia achieved an improved business performance and excellent
growth and strong margins were achieved in Hong Kong, helped by successfully
negotiating price increases with a number of key customers.
STRATEGIC DEVELOPMENT
Our strategy is to differentiate ourselves in our markets by using our expertise
to drive outsourcing and to minimise commoditisation of traditional security
services. We see strong evidence of this strategy delivering enhanced growth
opportunities for the group by:
* Capitalising on the structural growth opportunity of increased demand
for outsourcing by delivering innovative, cost reducing, tailor-made
solutions to customers as they re-shape their businesses in response to
economic pressures, regulation and compliance requirements
* Focusing the group on attractive global markets and sectors where
security is a key consideration
* Increasing global reach - G4S has a broad international presence and
unique developing markets exposure. We can export our government
expertise into new countries, drive outsourcing of cash solutions in
developing markets and develop secure solutions for multi-national
customers across numerous countries
* Building on strong organic growth through security-focused acquisitions
in developing markets where we can extend our market share or enter new
high growth sectors. We expect to spend up to GBP200m each year on
acquisitions out of free cash flow
Service Excellence Centres (SEC)
It is essential that the organisational design is aligned to deliver the
strategy and that we keep costs under control. This year, we created three
product-specific service excellence centres to work with G4S country operations
globally as part of a two year programme to focus on operational efficiency,
service standards, and development of technology to support service delivery and
sharing best practice across our main service lines.
In the cash solutions businesses significant operational improvements have been
made by businesses fully utilising EViper (our cash logistics planning and
reconciliation system) - we have identified four businesses that will benefit
from the implementation of EViper in 2013. There are five countries now
deploying Telematics systems (across 2,900 vehicles) which monitor driver
activity in real time to help manage fuel consumption and improve health and
safety. This is currently helping those businesses to achieve more than GBP1m
consolidated fuel savings per year. Further countries will adopt the system in
due course.
In secure solutions, SEC initiatives include the introduction of Saturn (our
manned security scheduling system) in seven countries with a further roll-out in
8-10 countries in the next twelve months.
Restructuring Costs
We have also undertaken a detailed review of the overhead structure across all
reporting levels and geographies in order to maximise efficiency and eliminate
duplication. Restructuring in the first half of this year has generated a
headcount reduction of over 1,100 positions. This has resulted in an exceptional
cost of GBP24m in the first half of the year and a further cost of up to GBP10m in
the second half. The restructuring expenditure in the first half is analysed by
geography as follows:
+---------------------+-------------------+------------+-----------+-----------+
| |Headcount reduction|People costs|Other Costs|Total Costs|
| | | GBPm| GBPm| GBPm|
+---------------------+-------------------+------------+-----------+-----------+
|UK | 58| 2.0| 0.2| 2.2|
| | | | | |
|Continental Europe | 257| 7.2| 1.0| 8.2|
| | | | | |
|North America | 132| 3.6| 0| 3.6|
| | | | | |
|Developing Markets | 605| 5.1| 2.5| 7.6|
| | | | | |
|Head Office/Cash| 48| 2.6| 0| 2.6|
|Division | | | | |
+---------------------+-------------------+------------+-----------+-----------+
|Total | 1,100| 20.5| 3.7| 24.2|
+---------------------+-------------------+------------+-----------+-----------+
This restructuring will result in annualised cost savings of c GBP30m, with effect
from the second half of this year, and help maintain group margins. We expect
the majority of this benefit to come through in 2013. The group plans to achieve
further cost savings in the medium-term through procurement efficiencies and
business process redesign.
OTHER FINANCIAL ISSUES
Acquisitions and divestments
The group invested a total of GBP6m in the first half of 2012 with a number of
smaller acquisitions. Since the end of June, we have acquired Protekt, a safety
training consultancy in the Netherlands.
Our acquisition strategy will continue to focus on niche opportunities which
will both help to deliver our strategic objectives and meet our financial
performance criteria. We expect to invest up to GBP200m in acquisitions in 2012
and will be more active in our divestment strategy where businesses are not in
line with the group's strategy or where an alternative parent could add or drive
more value from a business.
During the first half of the year we disposed of our Swedish cash solutions
business and also sold a loss making electronic monitoring business in the US.
Risks and uncertainties
A discussion of the group's risk assessment and control processes and the
principal risks and uncertainties that could affect the business activities or
financial results is detailed on pages 42, 43, 58 and 59 of the company's annual
report for the financial year ended 31 December 2011, a copy of which is
available on the group's website at www.g4s.com.
The risks and uncertainties, together with those relating to the Olympic Games
contract discussed elsewhere in this announcement, are expected to remain the
same during the remaining six months of the financial year.
Financing and interest
We have a prudent approach to our balance sheet whilst maintaining the
flexibility to pursue acquisitions when appropriate. G4S has had a long term
credit rating of BBB Stable granted by Standard & Poor's in March 2009, however
following the G4S Olympic contract announcement on 13 July 2012, Standard &
Poor's revised the outlook to CreditWatch negative on 20 July. Our aim is to
regain our credit rating of BBB Stable and to continue to maintain a net debt to
EBITDA ratio of around 2 to 2.5 times. The group is currently well financed, has
a diverse range of finance providers and the maturity profile is long term.
Borrowings are principally in pounds sterling, US dollars and euros reflecting
the geographies of significant operational assets and profits.
Our main sources of finance and their rates are set out below:
(i) A GBP1.1bn multicurrency revolving credit facility provided by a consortium of
lending banks at a margin of 0.80% over Libor and maturing on 10 March 2016. As
at 30 June 2012 the drawings were US$ 230m, Euro 90m and GBP170m.
(ii) A $550m private placement of notes issued on 1 March 2007, which mature at
various dates between 2014 and 2022 and bear interest at rates between 5.77% and
6.06%.
(iii) $514m and GBP69m private placement notes issued on 15 July 2008, which
mature at various dates between 2013 and 2020 and bear interest at rates between
6.09% and 7.56%.
(iv) A GBP350m Public Note issued on 13 May 2009 bearing an interest rate of
7.75%, maturing 13 May 2019.
(v) A Euro 600m Public Note issued on 2 May 2012 bearing an interest rate of
2.875%, maturing 2 May 2017.
As of 30 June 2012, net debt was GBP1,683m and our headroom was GBP713m. We have
sufficient borrowing capacity to finance our current investment plans.
Net interest payable on net debt was GBP50m. This is a net increase of 9% over the
2011 cost of GBP46m, due principally to the increase in the group's net debt.
Our average cost of gross borrowings during the half year, net of interest rate
hedging, was 4.4% compared to 4.7% in 2011.
Taxation
The effective tax rate for the half year on adjusted earnings was 22%,
consistent with 2011. The cash tax rate is 22.9% compared to 18.5% in 2011. Our
target is to maintain the effective tax rate at the current level. This will be
supported by the gradual reduction in UK corporation tax rates, the ongoing
rationalisation of the group legal structure and the elimination of fiscal
inefficiencies.
Retirement benefit obligations
The group's funding shortfall on funded defined retirement benefit schemes, on
the valuation basis specified in IAS19 Employee Benefits, was GBP298m before tax
or GBP226m after tax (31 December 2011: GBP295m and GBP218m respectively). The main
scheme is in the UK. The latest full actuarial valuations were undertaken at 5
April 2009 in respect of all three sections of the UK scheme. However, all
actuarial assumptions were reviewed and updated as at 31 December 2011.
The net pension obligation has increased very slightly since 31 December 2011
due to the additional contributions being offset by the actuarial loss in the
period. The discount rate used to calculate the obligation is consistent with
that used at 31 December 2011 of 4.95%. Additional company contributions of
GBP19m were paid into the schemes.
We believe that, over the very long term in which retirement benefits become
payable, investment returns should eliminate the deficit reported in the schemes
in respect of past service liabilities. However, in recognition of the
regulatory obligations upon pension fund trustees to address reported deficits,
the group's deficit recovery plan will see cash contributions made to the scheme
of approximately GBP35m in 2012 with modest annual increments thereafter.
Dividend
The board has declared an interim dividend of 3.42p per share (DKK 0.3220). This
is consistent with the interim dividend for 2011.
The group expects to continue to increase dividends broadly in line with
normalised adjusted earnings.
REVIEW AND OUTLOOK
Despite ongoing economic uncertainty in the first half of 2012 and the
challenges of delivering the London 2012 security contract, the underlying
business has performed well and the positive trading momentum is expected to
continue.
The organisation design and overhead review programme will deliver significant
costs savings in the next 12 months and investment in service line and sector
expertise is expected to enhance the group's product offer and assist in
maintaining margins and driving through further growth.
Developing markets (which now represent 31% of group revenues and 40% of group
profits) and growing outsourcing trends continue to be key business growth
drivers and we expect to see organic growth continue to improve as a result.
The breadth of the group's portfolio in 125 countries continues to present many
new growth opportunities. Market leading businesses in many countries, a broad
customer base and the current GBP3.8 billion per annum contract pipeline provide
confidence in the outlook for the group.
28 August 2012
G4S plc
Unaudited half-yearly results announcement
For the six months ended 30 June 2012
Directors' responsibility statement in respect of the half-yearly results
announcement
We confirm that to the best of our knowledge:
* this condensed set of financial statements has been prepared in accordance
with International Accounting Standard (IAS) 34 Interim Financial Reporting
as adopted by the EU
* the half-yearly report includes a fair review of the information required
by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for
the remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The responsibility statement is signed by:
Nick Buckles Trevor Dighton
Chief Executive Chief Financial Officer
G4S plc
Unaudited half-yearly results announcement
For the six months ended 30 June 2012
Consolidated income statement
For the six months ended 30 June 2012
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
Notes GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Continuing operations
Revenue 2 3,903 3,686 7,502
=-------------------------------------------------------------------------------
Profit from operations before
amortisation of acquisition-
related intangible assets,
exceptional items and share
of profit from associates 236 239 529
Share of profit from - 1 3
associates
=-------------------------------------------------------------------------------
Profit from operations before
amortisation of acquisition-
related intangible assets and
exceptional items (PBITA) 2 236 240 532
Amortisation of acquisition- (46) (43) (99)
related intangible assets
Acquisition-related expenses (1) (1) (2)
Provision for expected losses (50)
on Olympics contract
Restructuring costs (24) - -
Aborted acquisition and legal - - (55)
settlement costs
=-------------------------------------------------------------------------------
Profit from operations before 115 196 376
interest and taxation (PBIT) 2, 3
Finance income 6 48 54 111
Finance costs 7 (102) (99) (207)
=-------------------------------------------------------------------------------
Profit from operations before 61 151 280
taxation (PBT)
=-------------------------------------------------------------------------------
Taxation:
+------------------------------------------------------------------------------+
| Before amortisation of (39) (43) (95)|
|acquisition-related intangible |
|assets and exceptional items |
| |
| - On amortisation of 12 12 25|
|acquisition-related |
|intangible assets |
| |
| - On acquisition-related - - 1|
|expenses |
| |
| - On provision for expected 10 - -|
|losses on Olympic contract |
| |
| - On restructuring costs 3 - -|
| |
| - On aborted acquisition and - - 13|
|legal settlement costs |
+------------------------------------------------------------------------------+
8 (14) (31) (56)
=-------------------------------------------------------------------------------
Profit from continuing 47 120 224
operations after taxation
Loss from discontinued 4 (9) (2) (26)
operations
=-------------------------------------------------------------------------------
Profit for the period 38 118 198
=-------------------------------------------------------------------------------
Attributable to:
Equity holders of the parent 29 108 181
Non-controlling interests 9 10 17
=-------------------------------------------------------------------------------
Profit for the period 38 118 198
=-------------------------------------------------------------------------------
Earnings per share
attributable to ordinary
equity shareholders 9
of the parent from continuing
and discontinued operations
Basic and diluted 2.1p 7.7p 12.9p
=-------------------------------------------------------------------------------
+------------------------------------------------------------------------------+
|Dividends declared and |
|proposed in respect of the 10 |
|period |
| |
|Interim dividend of 3.42p per 48 48 48|
|share (2011: 3.42p per share) |
| |
|Final dividend (2011: 5.11p - - 72|
|per share) |
+------------------------------------------------------------------------------+
|Total 48 48 120|
+------------------------------------------------------------------------------+
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2012
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Profit for the period 38 118 198
Other comprehensive income
Exchange differences on translation (49) 7 (65)
of foreign operations
Actuarial losses on defined (21) (13) (73)
retirement benefit schemes
Change in fair value of cash flow (11) 2 8
hedging financial instruments
Tax on items taken directly to 4 (2) 9
equity
=-------------------------------------------------------------------------------
Other comprehensive income, net of (77) (6) (121)
tax
=-------------------------------------------------------------------------------
Total comprehensive income for the (39) 112 77
period
=-------------------------------------------------------------------------------
Attributable to:
Equity holders of the parent (48) 102 62
Non-controlling interests 9 10 15
=-------------------------------------------------------------------------------
Total comprehensive income for the (39) 112 77
period
=-------------------------------------------------------------------------------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2012
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
At beginning of period 1,494 1,577 1,577
Total comprehensive income
attributable to equity shareholders
of the parent (48) 102 62
Dividends declared (72) (66) (114)
Own shares purchased (6) (8) (13)
Equity settled transactions (1) 1 1
Transactions with non-controlling - - (19)
interests
=-------------------------------------------------------------------------------
At end of period 1,367 1,606 1,494
=-------------------------------------------------------------------------------
Condensed consolidated statement of financial position
At 30 June 2012
As at As at As at
30.06.12 30.06.11 31.12.11
Notes GBPm GBPm GBPm
=-------------------------------------------------------------------------------
ASSETS
Non-current assets
Goodwill 2,182 2,165 2,209
Other acquisition-related intangible assets 219 263 264
Other intangible assets 80 73 87
Property, plant and equipment 516 559 531
Investment in associates 8 7 9
Trade and other receivables 350 300 319
=-------------------------------------------------------------------------------
3,355 3,367 3,419
=-------------------------------------------------------------------------------
Current assets
Inventories 129 124 123
Investments 64 69 70
Trade and other receivables 1,580 1,543 1,546
Cash and cash equivalents 399 429 433
Assets classified as held for sale 11 28 - 35
=-------------------------------------------------------------------------------
2,200 2,165 2,207
=-------------------------------------------------------------------------------
Total assets 5,555 5,532 5,626
=-------------------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank overdrafts (32) (46) (53)
Bank loans (46) (113) (47)
Obligations under finance leases (16) (13) (16)
Trade and other payables (1,285) (1,240) (1,298)
Provisions (76) (26) (35)
Liabilities associated with assets classified 11 (16) - (29)
as held for sale
=-------------------------------------------------------------------------------
(1,471) (1,438) (1,478)
=-------------------------------------------------------------------------------
Non-current liabilities
Bank loans (465) (803) (885)
Loan notes (1,660) (1,137) (1,180)
Obligations under finance leases (48) (55) (48)
Trade and other payables (29) (11) (19)
Retirement benefit obligations (351) (300) (344)
Provisions (119) (139) (128)
=-------------------------------------------------------------------------------
(2,672) (2,445) (2,604)
=-------------------------------------------------------------------------------
Total liabilities (4,143) (3,883) (4,082)
=-------------------------------------------------------------------------------
Net assets 1,412 1,649 1,544
=-------------------------------------------------------------------------------
EQUITY
Share capital 353 353 353
Share premium and reserves 1,014 1,253 1,141
=-------------------------------------------------------------------------------
Equity attributable to equity holders of the 1,367 1,606 1,494
parent
Non-controlling interests 45 43 50
=-------------------------------------------------------------------------------
Total equity 1,412 1,649 1,544
=-------------------------------------------------------------------------------
Condensed consolidated statement of cash flow
For the six months ended 30 June 2012
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
Notes GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Profit from continuing 61 151 280
operations before
taxation
Adjustments for:
Finance income (48) (54) (111)
Finance costs 102 99 207
Depreciation of property, 63 64 125
plant and equipment
Amortisation of 46 43 99
acquisition-related
intangible assets
Acquisition-related costs 1 1 2
Amortisation of other 12 10 18
intangible assets
Other non-cash items (1) - (2)
Profit on disposal of - - (33)
subsidiaries
Profit on disposal of - - (11)
property, plant and
equipment
=-------------------------------------------------------------------------------
Operating cash flow 236 314 574
before movements in
working capital
Net working capital (19) (141) (113)
movement
=-------------------------------------------------------------------------------
Net cash flow from 217 173 461
operating activities of
continuing operations
Net cash used by (5) - (9)
operating activities of
discontinued operations
=-------------------------------------------------------------------------------
Cash generated by 212 173 452
operations
Tax paid (42) (42) (80)
=-------------------------------------------------------------------------------
Net cash flow from 170 131 372
operating activities
=-------------------------------------------------------------------------------
Investing activities
Interest received 5 3 17
Cash flow from associates - 3 4
Net cash flow from (60) (53) (142)
capital expenditure
Net cash flow from 2 (51) (122)
acquisitions and
disposals
Sale of trading 6 11 10
investments
=-------------------------------------------------------------------------------
Net cash used in (47) (87) (233)
investing activities
=-------------------------------------------------------------------------------
Financing activities
Dividends paid to non- (14) (9) (10)
controlling interests
Dividends paid to equity (72) (66) (114)
shareholders of the
parent
Net movement in 80 203 239
borrowings
Transactions with non- - (6) (18)
controlling interests
Interest paid (70) (67) (119)
Own shares purchased (6) (8) (13)
Repayment of obligations (10) (11) (17)
under finance leases
=-------------------------------------------------------------------------------
Net cash flow from (92) 36 (52)
financing activities
=-------------------------------------------------------------------------------
Net increase in cash, cash
equivalents and bank overdrafts
12 31 80 87
Cash, cash equivalents 370 306 306
and bank overdrafts at
the beginning of the
period
Effect of foreign (31) (3) (23)
exchange rate
fluctuations on cash held
=-------------------------------------------------------------------------------
Cash, cash equivalents 370 383 370
and bank overdrafts at
the end of the period
=-------------------------------------------------------------------------------
Notes to the half-yearly results announcement
1) Basis of preparation and accounting policies
These condensed financial statements comprise the unaudited interim consolidated
results of G4S plc ("the group") for the six months ended 30 June 2012. These
half-yearly financial results do not comprise statutory accounts and should be
read in conjunction with the Annual Report and Accounts 2011.
The comparative figures for the financial year ended 31 December 2011 are not
the company's statutory accounts for that year. Those accounts have been
reported on by the company's auditor and delivered to the Registrar of
Companies. The report of the auditor was (i) unqualified, (ii) did not contain a
reference to any matters to which the auditor drew attention by emphasis of
matter without qualifying their report, and (iii) did not contain any statement
under section 498 (2) or (3) of the Companies Act 2006.
The half-yearly results have been prepared in accordance with the going concern
concept as the group believes it has adequate resources to continue in
operational existence for the foreseeable future.
The condensed financial statements of the group presented in this interim
announcement have been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the European Union, and with the Disclosure and
Transparency Rules of the Financial Services Authority. The accounting policies
applied are the same as those set out in the group's Annual Report and Accounts
2011.
The financial information in these condensed financial statements for the half
years to 30 June 2012 and 30 June 2011 have been neither audited nor reviewed.
The comparative income statement for the six months ended 30 June 2011 has been
re-presented for operations qualifying as discontinued during the six months
ended 31 December 2011 and the six months ended 30 June 2012. The comparative
income statement for the year ended 31 December 2011 has been re-presented for
operations qualifying as discontinued during the six months ended 30 June 2012.
For the six months ended 30 June 2011, revenue has been reduced by GBP75m and PBT
has increased by GBP2m compared to the figures published previously. For the year
ended 31 December 2011, revenue has been reduced by GBP20m and PBT has been
increased by GBP1m compared to the figures published previously.
The comparative consolidated statement of financial position as at 31 December
2011 has been restated to reflect (i) the completion during the six months ended
30 June 2012 of the initial accounting in respect of acquisitions made during
the six months ended 30 June 2011, and (ii) adjustments made in the six months
to 30 June 2012 to the preliminary assessment of the fair values of assets and
liabilities acquired during the six months ended 31 December 2011. Adjustments
made to the provisional calculation of the fair values of assets and liabilities
acquired amount to GBP13m, resulting in an equivalent increase in the reported
value of goodwill.
The comparative consolidated statement of financial position as at 30 June 2011
has been restated to reflect the completion during the six months ended 30 June
2012 of the initial accounting in respect of acquisitions made during the six
months ended 30 June 2011. Adjustments made to the provisional calculation of
the fair values of assets and liabilities acquired amount to GBP2m, resulting in
an equivalent decrease in the reported value of goodwill.
2) Operating segments
The group operates in two core product areas: secure solutions and cash
solutions which represent the group's reportable segments. For each of the
reportable segments, the group's CEO (the chief operating decision maker)
reviews internal management reports on a regular basis. The group operates on a
worldwide basis and derives a substantial proportion of its revenue, PBITA and
PBIT from each of the following geographical regions: Europe (comprising the
United Kingdom and Ireland, and Continental Europe), North America, and
Developing Markets (comprising the Middle East and Gulf States, Latin America
and the Caribbean, Africa, and Asia Pacific).
Notes to the half-yearly results announcement (continued)
Segment information for continuing operations is presented below:
Segment revenue
Six months ended Six months ended Year
Revenue by reportable segment ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Secure Solutions
+------------------------------------------------------------------------------+
| UK and Ireland 711 611 1,252|
| |
| Continental Europe 694 731 1,475|
+------------------------------------------------------------------------------+
Europe 1,405 1,342 2,727
North America 864 811 1,637
+------------------------------------------------------------------------------+
| Middle East and Gulf States 213 204 410|
| |
| Latin America and the |
|Caribbean 263 196 427|
| |
| Africa 179 172 348|
| |
| Asia Pacific 339 320 657|
+------------------------------------------------------------------------------+
Developing Markets 994 892 1,842
=-------------------------------------------------------------------------------
Total Secure Solutions 3,263 3,045 6,206
=-------------------------------------------------------------------------------
Cash Solutions
Europe 387 406 817
North America 56 53 101
Developing Markets 197 182 378
=-------------------------------------------------------------------------------
Total Cash Solutions 640 641 1,296
=-------------------------------------------------------------------------------
Total revenue 3,903 3,686 7,502
=-------------------------------------------------------------------------------
Segment result
Six months ended Six months ended Year
PBITA by reportable segment ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Secure Solutions
+------------------------------------------------------------------------------+
| UK and Ireland 54 50 119|
| |
| Continental Europe 29 35 81|
+------------------------------------------------------------------------------+
Europe 83 85 200
North America 39 46 90
+------------------------------------------------------------------------------+
| Middle East and Gulf States 18 17 43|
| |
| Latin America and the |
|Caribbean 22 17 34|
| |
| Africa 15 18 34|
| |
| Asia Pacific 23 20 37|
+------------------------------------------------------------------------------+
Developing Markets 78 72 148
=-------------------------------------------------------------------------------
Total Secure Solutions 200 203 438
=-------------------------------------------------------------------------------
Cash Solutions
Europe 34 39 87
North America 1 - 2
Developing Markets 25 22 48
=-------------------------------------------------------------------------------
Total Cash Solutions 60 61 137
=-------------------------------------------------------------------------------
Total PBITA before head office
costs 260 264 575
Head office costs (24) (24) (43)
=-------------------------------------------------------------------------------
Total PBITA 236 240 532
=-------------------------------------------------------------------------------
Result by business segment
Total PBITA 236 240 532
Amortisation of acquisition- (46) (43)
related intangible assets (99)
Acquisition-related expenses (1) (1) (2)
Provision for expected losses on (50) -
Olympics contract -
Restructuring costs (24) - -
Aborted acquisition and legal - -
settlement costs (55)
=-------------------------------------------------------------------------------
Total PBIT 115 196 376
=-------------------------------------------------------------------------------
Notes to the half-yearly results announcement (continued)
3) Profit from operations before interest and taxation
The income statement can be analysed as follows:
Six months ended Six months ended Year
Continuing operations ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Revenue 3,903 3,686 7,502
Cost of sales (3,143) (2,924) (5,909)
=-------------------------------------------------------------------------------
Gross profit excluding Olympic 760 762 1,593
costs
Provision for expected losses on (50) - -
Olympic contract
=-------------------------------------------------------------------------------
Gross profit including Olympic 710 762 1,593
costs
Administration expenses (571) (567) (1,220)
Restructuring costs (24) - -
Share of profit from associates - 1 3
=-------------------------------------------------------------------------------
Profit from operations before 115 196
interest and taxation 376
=-------------------------------------------------------------------------------
Included within administration expenses is the amortisation charge for
acquisition-related intangible assets. In the year to 31 December 2011 the
administration expenses included aborted acquisition and legal settlement costs.
The aborted acquisition costs incurred in the prior year included debt finance
underwriting fees, financing and hedging costs that arose on the proposed
acquisition of ISS A/S which was terminated on 1 November 2011.
4) Discontinued operations
Operations qualifying as discontinued in 2011 included the cash solutions
business in Sweden, which was disposed of in February 2012; the secure solutions
and cash solutions businesses in Poland and the UK risk assessment business in
Afghanistan. In 2012, additional operations qualifying as discontinued include
the electronic monitoring business in the United States, which was disposed of
during the period.
5) Acquisitions
Current Period Acquisitions
During the period the group made several minor acquisitions for a total purchase
consideration of GBP6m. These acquisitions resulted in the recognition of GBP4m of
intangible assets and GBP1m of goodwill.
Prior period acquisitions
The purchase consideration and provisional fair values of acquisitions made
during the financial year to 31 December 2011 and their contribution to the
group's results for the year are set out in the group's Annual Report and
Accounts 2011. Adjustments made during the six months to 30 June 2012 to the
provisional calculation of the fair values of assets and liabilities acquired
during the year to 31 December 2011 amount to GBP13m in total, resulting in an
equivalent increase in the reported value of goodwill. Adjustments made during
the six months to 30 June 2012 to the provisional calculation of the fair values
of assets and liabilities acquired during the six months to 30 June 2011 amount
to GBP2m with an equivalent decrease in the reported value of goodwill. In
addition to the GBP6m total consideration above the group has paid an additional
GBP2m relating to acquisitions completed in prior years which had been recognised
previously as deferred consideration.
Notes to the half-yearly results announcement (continued)
6) Finance income
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Interest receivable 7 8 18
Expected return on defined 41 46 93
retirement benefit scheme assets
=-------------------------------------------------------------------------------
Total finance income 48 54 111
=-------------------------------------------------------------------------------
7) Finance costs
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Total group borrowing costs (57) (54) (117)
Finance costs on defined retirement (45) (45) (90)
benefit obligations
=-------------------------------------------------------------------------------
Total finance costs (102) (99) (207)
=-------------------------------------------------------------------------------
8) Taxation
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=------------------------------------------------------------------
UK taxation 18 4 12
Overseas taxation (32) (35) (68)
=------------------------------------------------------------------
Total taxation expense (14) (31) (56)
=------------------------------------------------------------------
Notes to the half-yearly results announcement (continued)
9) Earnings per share attributable to ordinary shareholders of the parent
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
From continuing and
discontinued operations
Earnings
Profit for the period 181
attributable to equity
holders of the parent 29 108
=-------------------------------------------------------------------------------
Number of shares (m)
Weighted average number 1,405
of ordinary shares 1,404 1,405
=-------------------------------------------------------------------------------
Earnings per share from continuing
and discontinued operations (pence)
Basic and diluted 2.1p 7.7p 12.9p
=-------------------------------------------------------------------------------
From adjusted earnings
Earnings
Profit for the period 181
attributable to equity
holders of the parent 29 108
Adjustment to exclude 25
loss from discontinued
operations 9 2
Adjustment to exclude
net retirement benefit
finance income (net of
tax) 3 (1) (2)
Adjustment to exclude amortisation of
acquisition-related intangible assets
(net of tax) 34 31 74
Adjustment to exclude 1
acquisition-related
expenses (net of tax) 1 1
Adjustment to exclude -
expected loss on Olympic
contract (net of tax) 40 -
Adjustment to exclude -
restructuring costs (net
of tax) 21 -
Adjustment to exclude
aborted acquisition and
legal settlement costs
(net of tax) - - 42
=-------------------------------------------------------------------------------
Adjusted profit for the 321
period attributable to
equity holders of the
parent 137 141
=-------------------------------------------------------------------------------
Weighted average number 1,405
of ordinary shares (m) 1,404 1,405
Adjusted earnings per 22.8p
share (pence) 9.8p 10.0p
=-------------------------------------------------------------------------------
10) Dividends
Six months Six months Year
ended ended ended
Pence DKK 30.06.12 30.06.11 31.12.11
per share per share GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Amounts recognised
as distributions to
equity holders of
the parent in the
period
Final dividend for 4.73 0.4082
the year ended 31
December 2010 - 66 66
Interim dividend for
the six months ended
30 June 2011 3.42 0.2928 - - 48
Final dividend for 5.11 0.4544
the year ended 31
December 2011 72 - -
=-------------------------------------------------------------------------------
Total 72 66 114
=-------------------------------------------------------------------------------
An interim dividend of 3.42p (DKK 0.3220) per share, amounting to GBP48m, for the
six months ended 30 June 2012 will be paid on 19 October 2012 to shareholders on
the register on 21 September 2012.
Notes to the half-yearly results announcement (continued)
11) Disposal groups classified as held for sale
At 31 December 2011, disposal groups classified as held for sale primarily
comprised the assets and liabilities associated with the cash solutions business
in Sweden, which was disposed of on 27 February 2012, the cash solutions and
secure solutions businesses in Poland and the UK risk assessment business in
Afghanistan. At 30 June 2012, disposal groups classified as held for sale
primarily comprise the assets and liabilities associated with the UK risk
assessment business in Afghanistan and the cash solutions and secure solutions
businesses in Poland.
12) Analysis of net debt
A reconciliation of net debt to amounts in the condensed consolidated balance
sheet is presented below:
As at As at As at
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Cash and cash equivalents 399 429 433
Investments 64 69 70
Net debt included within assets held for sale 3 - (10)
Current liabilities
Bank overdrafts and loans (78) (159) (100)
Obligations under finance leases (16) (13) (16)
Fair value of loan note derivative financial 14 13 14
instruments
Non-current liabilities
Bank loans (465) (803) (885)
Loan notes (1,660) (1,137) (1,180)
Obligations under finance leases (48) (55) (48)
Fair value of loan note derivative financial 104 80 106
instruments
=-------------------------------------------------------------------------------
Total net debt (1,683) (1,576) (1,616)
=-------------------------------------------------------------------------------
An analysis of movements in net debt in the period is presented below:
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Increase in cash, cash equivalents
and bank overdrafts per condensed 31 80
consolidated cash flow statement 87
Sale of investments (6) (11) (10)
Increase in debt and (70) (192)
lease financing (222)
=-------------------------------------------------------------------------------
Change in net debt (45) (123)
resulting from cash
flows (145)
Borrowings acquired with - -
subsidiaries (5)
Net additions to finance (11) (9)
leases (11)
=-------------------------------------------------------------------------------
Movement in net debt in (56) (132)
the period (161)
Translation adjustments (11) (18) (29)
Net debt at the (1,616) (1,426)
beginning of the period (1,426)
=-------------------------------------------------------------------------------
Net debt at the end of (1,683) (1,576)
the period (1,616)
=-------------------------------------------------------------------------------
13) Related party transactions
No related party transactions have taken place in the first six months of the
current financial year which have materially affected the financial position or
the performance of the group during that period. The nature and amounts of
related party transactions in the first six months of the current financial year
are consistent with those reported in the group's Annual Report and Accounts
2011.
Non GAAP measure - cash flow
The directors consider it is of assistance to shareholders to present an
analysis of the group's operating cash flow in accordance with the way in which
the group is managed, together with a reconciliation of that cash flow to the
net cash flow from operating activities as presented in the condensed
consolidated cash flow statement.
Operating cash flow
For the six months ended 30 June 2012
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
PBITA before share of 236 239
profit from associates
(group PBITA) 529
Depreciation and amortisation of
intangible assets other than
acquisition-related 75 73 132
Movement in working (53) (116)
capital and provisions (74)
Equity settled (1) -
transactions -
Net cash flow from (60) (53)
capital expenditure (138)
=-------------------------------------------------------------------------------
Operating cash flow 197 143 449
=-------------------------------------------------------------------------------
Reconciliation of
operating cash flow
Six months ended Six months ended Year
ended
30.06.12 30.06.11 31.12.11
GBPm GBPm GBPm
=-------------------------------------------------------------------------------
Net cash flow from operating
activities per condensed consolidated
statement of cash flow 170 131 372
Net cash flow from (60) (53) (138)
capital expenditure
Add-back cash flow from 26 4 95
discontinued operations
and other items
Add-back additional 19 19 40
pension contributions
Add-back tax paid 42 42 80
=-------------------------------------------------------------------------------
Operating cash flow 197 143 449
=-------------------------------------------------------------------------------
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: G4S plc UK DK via Thomson Reuters ONE
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