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International security solutions group G4S (LSE:GFS) profits in 2011 took a hit with the failed bid to merge with the Danish company ISS that cost the British firm about £55 million, as mentioned in the annual report.
The group that will provide security services in the upcoming 2012 London Olympics posted financial figures, which can be interpreted as mixed results to both the investors and the regulators who monitor the financial health of the company.
Profits from operation, not counting interest and taxes were down 14.3% from £438 million to £375 million, with the £55 million takeover costs factored in, even as the company posted 4.7% increase in revenues of £7.5 billion.
No Stopping
Despite suffering these setbacks, plans were revealed to spend £200 million in acquisitions for 2012, with a focus on developing markets where it hopes to receive half of its total revenues by 2019.
G4S made some benchmark contracts in 2011, particularly in its UK operations, when it landed outsourcing services for the Lincolnshire Police to commence in May this year, which will form basis for 10 more police forces of the British Police Authority.
The contract, valued at £200 million over 10 years, awarded G4S with the back office work for the agency, with the “uniformed element” still wielded by the authority.
The group acknowledged the company’s future profitability may well be coming from outsourcing.
“More generally, we won and mobilised a number of significant contracts in 2011 and expect outsourcing trends to continue,” Chief Executive Nick Buckles said in the 2011 annual report.
“The pipeline of UK government outsourcing opportunities remains strong particularly in areas such as prisons, police, health, and the Department for Work and Pensions.”
A £1.5 billion contract is also underway to provide administrative and operational services for the West Midlands and Surrey police forces, a deal being criticised by other bidders.
Putting Up a Strong Front
G4S is putting up a strong front by securing an additional final dividend of 5.11 pence a share to bring the total amount to 8.5 pence per share, or an increase of 8% even as the diluted earnings per share fell from 15.9 pence to 12.9 pence.
Net debt has reached £1.6 billion from £1.4 billion but the company said the credit standing is still good at triple B by Standard and Poor’s.
The group expects to benefit from the London Olympics, which will give them the edge in winning complex contracts in the coming months.
“2012 will be a year of mobilisation across a broad range of complex contracts and delivery of the security requirements of the London 2012 Olympic and Paralympic Games – a unique opportunity for us to showcase our large scale security capabilities.” CEO Buckles presented concluded in his report.
Company Spotlight
G4S operates in more than 125 countries providing security services to governments and industries including, oil and gas, energy and utilities, travel and leisure, financial, and retail industries.
G4S shares fell 2% to £2.84 a share in London trading today, following the announcement.
References
↑ Company history
↑ Cash Solutions slows G4S’s progress
↑ G4S Net Profit Sinks But Says Outlook Is Positive
↑ G4S Pushing Police Contracts as U.K. Farms Off More Services
↑ G4S Operations
↑ G4S Services and Sectors Served
