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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
9 August 2018
G4S plc
Results for the six months ended 30 June 2018
G4S Chief Executive Officer Ashley Almanza commented:
"As anticipated, the Group delivered a marked improvement in revenue
generation in the second quarter, with organic growth of 2.8% resulting
in half year organic growth of 0.2% against demanding comparatives".
"Our contract wins and strong retention rate in the first half of 2018
provide revenue momentum into the second half of the year. This,
together with growing technology-enabled services in both our cash and
security businesses, a favourable sales mix and planned productivity
benefits, underpins the Group's positive outlook for the full year".
First half highlights (Underlying results(a) unless otherwise noted):
-- Step change in revenue growth in second quarter
-- New contract wins of GBP0.7 billion (annual contract value)
-- Secure Solutions margin 5.9% (2017: 5.9%); service mix and productivity
offset wage inflation
-- Cash Solutions margin 10.7% (2017: 11.0%); reflecting increased business
development and operating costs
-- Operating cash flow conversion 84% (2017: 80%), in line with seasonal
norm
-- Net debt to EBITDAb 2.7x (30 June 2017: 2.7x)
-- EPSa,c 7.4p (2017: 7.4p); Interim dividend: 3.59p per share (2017:
3.59p)
-- Statutory results reflect businesses sold and exchange rate movements -
see page 9
Full year outlook
-- First half contract wins and strong retention rate provide second half
momentum
-- Technology-enabled services, favourable sales mix and productivity
benefits underpin full year outlook
-- Expect net debt to EBITDAb=<2.5x FY18
Group results - first half
Underlying Results(a) Statutory Results(d)
In Constant Currency Actual Rates
2018 2017 % 2018 2017 %
Restated(e) Restated(e)
Revenue GBP3,599m GBP3,591m +0.2 GBP3,672m GBP3,971m (7.5)
Adjusted
PBITA(b) GBP212m GBP219m (3.2) GBP213m GBP238m (10.5)
Adjusted
PBITA(b)
margin 5.9% 6.1% 5.8% 6.0%
Earnings(c) GBP115m GBP115m - GBP103m GBP151m (31.8)
Earnings Per
Share(c) 7.4p 7.4p - 6.7p 9.8p (31.6)
Operating Cash
Flow GBP179m GBP183m (2.2) GBP165m GBP170m (2.9)
(a) Underlying results are Alternative Performance Measures as defined
and explained on page 36. They are reconciled to the Group's statutory
results on page 4. The underlying results are presented at constant
exchange rates other than for operating cash flow where operating cash
flow for 2017 is presented at 2017 actual rates.
(b) Adjusted PBITA and net debt to adjusted EBITDA are Alternative
Performance Measures as defined and explained on page 36. The Net debt
to adjusted EBITDA ratio is calculated as set out on page 39.
(c) Earnings is defined as profit attributable to equity shareholders of
G4S plc. Underlying earnings and underlying earnings per share ("EPS")
are adjusted to exclude specific and other separately disclosed items,
as described on page 37, and are reconciled to statutory earnings and
EPS on page 4.
(d) See page 21 for the basis of preparation of statutory results.
(e) Restated for the adoption of IFRS15 - Revenue from Contracts with
Customers, see note 3.
This announcement contains inside information.
G4S STRATEGY AND INVESTMENT PROPOSITION
G4S is the world's leading, global integrated security company,
providing security and related services across six continents.
Our strategy addresses the positive, long-term demand for security
services. Our enduring strategic aim is to demonstrate the values and
performance that make G4S the company of choice for customers, employees
and shareholders. We aim to do this by delivering industry-leading
innovative solutions and outstanding service to our customers, by
providing engaging and rewarding work for employees and by generating
sustainable growth and returns for our shareholders.
Organisation
Our portfolio programme is substantially complete and we now have a much
more focused business. Over the past four and a half years we have
invested in sales, business development, technology and support and
control functions. With sufficient strength and depth in these areas, we
re-organised the Group on 1 January 2018 to:
-- Consolidate our Secure Solutions businesses into four regions: Africa,
Americas, Asia and Europe & Middle East
-- Create a global Cash Solutions division
Our new organisation enables us to strengthen further our strategic,
commercial and operational focus in each of our core service lines. We
will continue to build and utilise shared services for the provision of
efficient and fit-for-purpose support functions to all businesses and
this element of our organisational development has significant
unrealised potential.
We are implementing a productivity programme which is designed to
deliver GBP90 million - GBP100 million of recurring cost savings by
2020. A portion of these gains will be re-invested in growth, with the
majority expected to benefit the bottom line:
-- The financing efficiency component of around GBP20 million has been
secured through refinancings completed this year and the benefits will
begin to flow through to profits in 2019.
-- The operational and overhead components which are expected to deliver
GBP70 million to GBP80 million of savings by 2020 have, to date, been
largely re-invested in sales, business development and enhanced support
and control systems. From the second half of this year the savings will
begin to make a net contribution to profits.
Business Segments, Service Lines and Regions
The Group has two business segments, Secure Solutions and Cash Solutions,
each with a number of key service lines.
Secure Solutions
-- Security Solutions incorporating risk consulting, manned security,
facilities management services, software and systems and integrated
security solutions
-- Care & Justice services including custody, detention and transportation
Security Solutions (77% of group revenues(a) ): G4S delivers
industry-leading security services and facilities management in around
90 countries around the world. Building on our established security
services, we have invested in developing the capabilities to design and
deliver security technology, security systems and integrated security
solutions that combine people and technology to offer our customers more
efficient and valuable security solutions. We believe that the ability
to design and deliver technology-enabled security solutions strengthens
our customer-value proposition and provides G4S with the opportunity to
increase the longevity and grow the value of existing customer
relationships, win new business and earn higher margins.
In the first half of 2018, 42% (FY 2017: 39%) of our Secure Solutions
revenues(a) were derived from technology-enabled security services which
combine our people with technology. We have established a substantial
business selling technology-enabled solutions to larger customers. With
success in that segment, we are extending our offering into the medium
sized customer market.
Care & Justice services (7% of group revenues(a) ): G4S's Care & Justice
services are concentrated in the UK and Australia where we have built
significant knowledge and expertise in delivering complex public
services. Our strategic focus is on selective, profitable growth and
operational delivery and achieving positive outcomes for those using the
services. We expect significantly-improved cash generation from our Care
& Justice services over the next 12-18 months as we continue to be
highly selective in bidding and negotiating for new business and as
certain legacy contracts expire or otherwise improve.
Cash Solutions
-- Cash in transit, cash processing and ATM services
-- Cash Technology services, comprising:
-- Cash and non-cash management software and services
-- Smart safes and cash-recycling technology
In our Cash Solutions business (16% of group revenues(a) ), we provide
software, hardware, systems and services that improve the security,
control and efficiency of our customers' cash handling. Whilst cash
usage is expected to continue to grow in emerging markets, in developed
markets cash volumes are expected to gradually decline. To ensure
critical mass and economies of scale, we focus on markets where we have,
or can build a number one or number two position in the market. We aim
to grow volumes in traditional cash services of cash-in-transit and ATMs
organically through cost leadership which enables us to win market share
and encourages banks to outsource more services.
We believe that the Group is well positioned to address a substantial
and valuable opportunity to extend and grow our new products and
services that are being adopted by banks and some of the world's leading
retailers. We expect this market to continue to grow strongly and we
have market-leading innovative products combining software and service.
We are making significant progress with large retailers with what we
refer to as our "big box" solution and we are also seeing increasing
interest in our mid-
G4S STRATEGY AND INVESTMENT PROPOSITION
size and small box offerings. We believe that our Cash Technology
services have the potential to produce profits greater than the global
profits from our traditional cash business in the medium term.
At 30 June 2018, we had over 21,500 (December 2017: 19,500) cash
automation locations, a 10% increase since the year end, across North
America, Europe, Asia Pacific and Africa. Industry research data
indicates that the total addressable market for smart safes and
recycling solutions is around GBP20-25 billion per annum(b) .
Financial Outlook
G4S Group Chief Executive Officer, Ashley Almanza, commented:
"Our contract wins and strong retention rate in the first half of 2018
provide good revenue momentum and this, together with an improving sales
mix and planned productivity benefits in the second half of the year,
underpins the Group's positive outlook for the full year".
"Since 1 January, the creation of a global cash division and
consolidation of our Secure Solutions regions are providing us with the
strategic, commercial and operational focus needed for the next stage of
the Group's development. Combining technology with our established
security offering is strengthening our sales mix and contract retention,
whilst the rapid development of our cash technology business has the
clear potential to deliver profits greater than the global profits of
our traditional cash business in the medium term".
"We intend to remain soundly financed with operating cash conversion of
more than 100% of Adjusted PBITA and a net debt to Adjusted EBITDA ratio
of 2.5x or less. Priorities for excess cash will be investment,
dividends and, in the near term, further leverage reduction".
(a) Underlying results are reconciled to statutory results on page 4,
and an explanation of Alternative Performance Measures ("APMs") is
provided on page 36.
(b) Source: Company research and 3rd party data including RBR, Panteia,
Euromonitor International, World Retail Data and Statistics.
GROUP RESULTS FOR THE PERIODED 30 JUNE 2018
Six months ended 30 June 2018 (at 2018 average exchange
rates)
Acquisition-
related
Underlying Onerous Disposed amortisation
GBPm results(a) contracts businesses(c) Restructuring and other(d) Statutory
Revenue 3,599 63 10 3,672
Adjusted
PBITA(b) 212 - 1 213
Profit before
tax 158 - 1 (14) (6) 139
Tax (38) - - 3 4 (31)
Profit after
tax 120 - 1 (11) (2) 108
Earnings(e) 115 - 1 (11) (2) 103
EPS(e) 7.4p - 0.1p (0.7)p (0.1)p 6.7p
Operating
cash
flow(f) 179 (6) 2 (10) - 165
Six months ended 30 June 2017 (at 2018 average exchange
rates) - restated(g)
Acquisition-
related
Underlying Onerous Disposed amortisation Constant
GBPm results(a) contracts businesses(c) Restructuring and other(d) currency(h)
Revenue 3,591 58 149 3,798
Adjusted
PBITA(b) 219 - 9 228
Profit before
tax 163 (5) 9 (14) 53 206
Tax (39) 1 (3) 3 (12) (50)
Profit after
tax 124 (4) 6 (11) 41 156
Earnings(e) 115 (4) 5 (11) 37 142
EPS(e) 7.4p (0.3)p 0.3p (0.7)p 2.4p 9.2p
Operating
cash
flow(f) 183 (6) 6 (13) - 170
Six months ended 30 June 2017 (at 2017 average exchange
rates) - restated(g)
Acquisition-
Underlying Onerous Disposed related
GBPm results(a) contracts businesses(c) Restructuring amortisationand other(d) Statutory
Revenue 3,758 57 156 3,971
Adjusted
PBITA(b) 228 - 10 238
Profit before
tax 173 (5) 9 (14) 56 219
Tax (42) 1 (2) 3 (14) (54)
Profit after
tax 131 (4) 7 (11) 42 165
Earnings(e) 122 (4) 6 (11) 38 151
EPS(e) 7.9p (0.3)p 0.4p (0.7)p 2.5p 9.8p
Operating
cash
flow(f) 183 (6) 6 (13) - 170
(a) Underlying results are Alternative Performance Measures as defined
and explained on page 36 and exclude the results from businesses
disposed of during the current or prior period, the effect of onerous
contracts and specific and separately disclosed items.
(b) Adjusted PBITA is an Alternative Performance Measure as defined and
explained on page 36 and excludes specific and separately disclosed
items.
(c) Disposed businesses include the results of all businesses that have
been sold or closed by the Group between 1 January 2017 and 30 June 2018
and are excluded from underlying results to present current period and
comparative underlying results on a like-for-like basis.
(d) Other includes net specific items, net profit on disposal/closure of
subsidiaries/businesses and the results of discontinued operations. The
associated tax impact is included in the tax charge within "other". In
addition, tax-specific charges or credits, such as those arising from
changes in tax legislation which have a material impact, and which are
unrelated to net specific items, are included within the tax charge
within "other". The accounting policy for specific and other separately
disclosed items is provided on page 36.
(e) Earnings is defined as profit attributable to equity shareholders of
G4S plc. Underlying Earnings and Underlying EPS exclude specific and
other separately disclosed items as described on page 37 and are
reconciled to statutory earnings and statutory EPS above.
(f) Operating cash flow is defined on page 37 as net cash
flow from operating activities of continuing operations and is stated
after pension deficit contributions of
GBP21 million (2017: GBP20 million). For the period ended 30 June 2017
it is presented at 2017 average exchange rates. Operating cash flow is
reconciled to the Group's movements in net debt on page 38.
(g) Restated for the adoption of IFRS 15 - see note 3.
(h) Constant currency amounts represent the comparative 2017 statutory
results translated at 2018 average exchange rates as defined on page 36.
Constant currency amounts should not be considered as or used in place
of the Group's statutory results. Constant currency operating cash flow
is translated at 2017 exchange rates.
BUSINESS REVIEW: UNDERLYING RESULTS
ALTERNATIVE PERFORMANCE MEASURES
As indicated in the 2017 Integrated Report and Accounts ('IRA'), with
effect from 1 January 2018 we have reorganised the group-wide management
of our businesses to create a global Cash Solutions division and to
consolidate our Secure Solutions business into four regions: Africa,
Americas, Asia and Europe & Middle East. The prior period comparatives
have been restated accordingly to report segmental results on a
consistent basis. Reconciliations between the previously-reported
results of core businesses and the underlying results reported under the
new structure are provided on pages 40 and 41. The prior period results
have also been restated to reflect the adoption of IFRS 15 - Revenue
from Contracts with Customers as set out in note 3.
The narrative in this Business Review discusses the Group's underlying
results, which are an alternative performance measure (as described on
page 36) and are reconciled to statutory results on page 4. Commentary
on the Group's statutory results is provided on pages 9 to 13.
Throughout the Business Review, to aid comparability, 2017 prior period
results are presented on a constant currency basis by applying 2018
average exchange rates, unless otherwise stated.
Adjusted Adjusted
At 2018 Adjusted Adjusted PBITA PBITA
average Revenue Revenue(a) Organic PBITA PBITA(a) margin margin(a)
exchange 2018 2017 HoH growth(b) 2018 2017 HoH 2018 2017
rates GBPm GBPm % % GBPm GBPm % % %
Africa 197 189 4.2% 4.2% 15 14 7.1% 7.6% 7.4%
Americas 1,177 1,131 4.1% 4.1% 54 47 14.9% 4.6% 4.2%
Asia 434 403 7.7% 7.7% 28 26 7.7% 6.5% 6.5%
Europe &
Middle
East 1,231 1,221 0.8% 0.8% 83 87 (4.6%) 6.7% 7.1%
Secure
Solutions 3,039 2,944 3.2% 3.2% 180 174 3.4% 5.9% 5.9%
Cash
Solutions 560 647 (13.4%) (13.4%) 60 71 (15.5%) 10.7% 11.0%
Total
Group
before
corporate
costs 3,599 3,591 0.2% 0.2% 240 245 (2.0%) 6.7% 6.8%
Corporate
costs - - - - (28) (26) 7.7%
Total
Group 3,599 3,591 0.2% 0.2% 212 219 (3.2%) 5.9% 6.1%
(a) As described in the basis of preparation of the Alternative
Performance Measures on page 36, the underlying results for 2017 have
been restated to be consistent with the structure of the business in
2018 and, as explained in note 3, have also been restated for the
adoption of IFRS 15. A reconciliation of the results as previously
reported and the restated results above is included on page 40.
(b) Organic growth is calculated based on revenue growth at 2018 average
exchange rates, adjusted to exclude the impact of any acquisitions
during the current or prior periods.
SECURE SOLUTIONS
During the first half of 2018, our Secure Solutions business delivered
organic revenue growth of 3.2%. Despite tightening labour markets in
some regions, our commercial discipline and changing service mix towards
technology-enabled security meant that, overall, we maintained our above
industry-average PBITA margin.
Africa
Revenue growth across our Africa region was 4.2%. Adjusted PBITA
increased 7.1% and our new contract wins in the first half provide good
momentum into the second half with major wins in the telecoms,
automotive and mining sectors.
We made good progress in our security systems business, with integrated
security offerings and monitoring and response services. Our remote
monitoring and response services for infrastructure is generating good
demand and differentiates us from our major competitors in the region.
Our sales and business development opportunities in Africa include key
sectors such as embassies, municipalities, mining, banking, transport
and telecoms.
Americas
Revenues in our Americas region grew by 4.1% and Adjusted PBITA
increased by 14.9% driven by an improving revenue mix, and efficiency
gains.
Our Secure Solutions revenues in North America grew by 4.0% as our
integrated security solutions continue to gain traction in the market
for large enterprise customers. We saw strong demand for our Corporate
Risk business which provides security consulting services and security
professionals for security operations centre analytics, executive
protection and investigative services.
Our rate of revenue growth in North America was self-constrained as we
continued to apply commercial discipline in those market locations
facing tight labour conditions. We had contract wins across a broad
range of sectors including IT, steel manufacturing, chemicals, property,
insurance, power and healthcare. Our pipeline in these markets is
substantial.
In Latin America our revenues increased by 4.3%.
BUSINESS REVIEW: UNDERLYING RESULTS
ALTERNATIVE PERFORMANCE MEASURES
Asia
Revenue growth in Asia was 7.7% with growth across all major security
markets including India. Adjusted PBITA also increased 7.7%.
We secured new and renewed contracts across a broad range of sectors
including multinationals, property services, technology and transport
and logistics. Across the region we have a diverse set of new business
opportunities in embassies, telecoms, power, IT services and
infrastructure.
Europe & Middle East
Revenue in our Europe & Middle East region was up 0.8% on the prior
period, with good growth in the UK & Ireland and stabilisation in the
Middle East. Our Risk Management business which operates in high risk
environments grew strongly, winning new ordnance clearance contracts
during the second quarter.
The Adjusted PBITA margin was 6.7% (2017: 7.1%) reflecting the impact of
lower profitability in the Middle East which we expect to improve in the
second half as revenues recover. Our productivity programme is also
being applied across the region, along with the implementation of lean
processes in our UK manned security business in H2 2018.
Our Europe & Middle East pipeline has a large number of opportunities
across a diversified range of customer segments including manned
security and security systems contracts for the banking, FMCG,
government, multi-lateral agencies and airlines sectors.
CASH SOLUTIONS
In the first half of 2017, we posted very strong revenue growth as we
mobilised a large cash technology and services contract in North
America. Whilst we had a number of significant contract wins in the
first half of 2018, we did not have a similar mobilisation to H1 2017,
resulting in global revenues in Cash Solutions declining 13.4%.
Adjusted PBITA fell by 15.5% reflecting the decline in revenues,
investment in product and business development (GBP1m) and higher
operating costs, which were principally attack related (Africa: GBP3m),
partially offset by a GBP6 million benefit from the early completion of
a bullion centre contract in the UK. The effect of the large cash
technology and services contract in North America has now annualised.
G4S's cash technology and managed services are now delivered to over
21,500 locations around the world, a 10% increase since the year end.
This includes 7,800 retail locations across North America, including
over 5,700 in large-store formats where G4S has established a market
leading position. We believe that the strong value proposition delivered
by our unique cash management technology will continue to drive customer
interest in North America where we currently have 23 pilot programmes in
our pipeline.
CORPORATE COSTS
Corporate costs comprise the costs of the G4S plc Board and the central
costs of running the Group including executive, governance and central
support functions, and are GBP2 million higher than the prior period.
BUSINESS REVIEW - GROUP COMMENTARY: UNDERLYING RESULTS
ALTERNATIVE PERFORMANCE MEASURES
Summary underlying results
June June
2018 2017 HoH
Restated(c)
At June 2018 average exchange rates GBPm GBPm %
Revenue(a) 3,599 3,591 0.2%
Adjusted PBITA(a) 212 219 (3.2%)
Adjusted PBITA(a) margin 5.9% 6.1%
Interest (54) (56) (3.6%)
Profit before tax(a) 158 163 (3.1%)
Tax(a) (38) (39) (2.6%)
Profit after tax(a) 120 124 (3.2%)
Non-controlling interests (5) (9) (44.4%)
Earnings(a) (profit attributable to equity holders
of the parent) 115 115 -
EPS(a) 7.4p 7.4p -
Operating cash flow(a,b) 179 183 (2.2%)
(a) Underlying results are Alternative Performance Measures as defined
and explained on page 36. They exclude the effect of specific and
separately disclosed items, the results of onerous contracts and the
results of businesses sold or closed since 1 January 2017. They are
reconciled to the Group's statutory results on page 4.
(b) 2017 comparatives for underlying operating cash flow are presented
at 2017 average exchange rates.
(c) The June 2017 results have been restated for the effect of adopting
IFRS 15 (see note 3).
Revenue
The Group's revenue increased by 0.2% on the prior period. Secure
Solutions revenues were 3.2% higher than the prior period, with 4.2%
growth in Africa, 4.1% growth in Americas, 7.7% growth in Asia and 0.8%
growth in Europe & Middle East. Cash Solutions revenue decreased by
13.4% reflecting the mobilisation of a large Retail Cash Solutions
contract in North America in 2017.
Adjusted PBITA
Adjusted PBITA of GBP212 million (2017: GBP219 million) was down 3.2%.
This reflects weaker trading in the Europe & Middle East Secure
Solutions region and lower revenue, increased business development and
operating costs (mainly attack-related in Africa) in the Cash Solutions
division. As a result, the Adjusted PBITA margin decreased to 5.9%
(2017: 6.1%).
Interest
Net interest payable on net debt was GBP46 million (2017: GBP46
million). Net other finance costs were GBP3 million (2017: GBP4 million)
and the pension interest charge, related to the unwinding of the
discount in relation to long-term pension liabilities, was GBP5 million
(2017: GBP6 million), resulting in a total net interest cost of GBP54
million (2017: GBP56 million).
Tax
A tax charge of GBP38 million (2017: GBP39 million) was incurred on
profit before tax of GBP158 million (2017: GBP163 million) which
represents an effective tax rate of 24% (2017: 24%). The effective tax
rate is a function of a variety of factors, with the most significant
being (i) the geographic mix of the Group's taxable profits and the
respective country tax rates, (ii) the recognition of, and changes in
the value of, deferred tax assets and liabilities, (iii) permanent
differences such as expenses disallowable for tax purposes, (iv)
irrecoverable withholding taxes, and (v) benefit of one-off items
including tax claims.
Non-controlling interests
Profit attributable to non-controlling interests was GBP5 million in
2018, a decrease from GBP9 million for 2017, reflecting the
non-controlling partners' share of profit of certain businesses in the
Europe & Middle East region.
Earnings
The Group generated profit attributable to equity holders ('earnings')
of GBP115 million (2017: GBP115 million) for the period ended 30 June
2018.
Underlying earnings per share
2017 at 2017 at
constant actual
exchange exchange
2018 rates rates
GBPm GBPm GBPm
Underlying profit for the period 120 124 131
Non-controlling interests (5) (9) (9)
Underlying profit attributable to equity holders of
the parent (earnings) 115 115 122
Average number of shares (m) 1,548 1,548 1,548
Underlying earnings per share 7.4p 7.4p 7.9p
BUSINESS REVIEW - GROUP COMMENTARY: UNDERLYING RESULTS
ALTERNATIVE PERFORMANCE MEASURES
Onerous contracts
The Group's onerous contracts generated revenues of GBP63 million (2017:
GBP58 million) for the period ended 30 June 2018. There were no
increases in onerous contract provisions during the six months ended 30
June 2018. In the six months ended 30 June 2017 the Group recognised
additional provisions of GBP5 million, classified as specific items,
related to the anticipated increase of delivery costs in respect of one
of its contracts. It is expected that around 60% of the Group's total
provision for onerous customer contracts of GBP54 million will be
utilised by the end of 2020.
Disposed businesses
Businesses disposed of during the six months ended 30 June 2018,
including the Group's businesses in Hungary and the Philippines and the
secure data solutions business in Kenya, generated revenue of GBP10
million and Adjusted PBITA of GBP1m in the six months ended 30 June 2018
(six months ended 30 June 2017: revenue GBP35 million and Adjusted PBITA
GBP3 million). Businesses sold during the year ended 31 December 2017
included the Group's businesses in Israel and Bulgaria and its Youth
Services business in North America, and in total generated revenue of
GBP114 million and Adjusted PBITA of GBP6 million for the six months
ended 30 June 2017.
Restructuring
The Group invested GBP14 million (2017: GBP14 million) in restructuring
programmes during the six months ended 30 June 2018, relating to the
2018-2020 strategic productivity programme announced in 2017 which is
being implemented across the Group, mainly in the Europe & Middle East
and Americas regions and the Cash Solutions division. In addition, the
Group incurred non-strategic reorganisation costs of GBP4 million (2017:
GBP4 million) which are included within Adjusted PBITA. We expect to
invest a total GBP25-GBP30 million in restructuring for the full year
2018 and expect a payback period of less than three years.
Acquisition-related amortisation, specific and other separately
disclosed items
2018 2017 at constant exchange rates 2017 at actual exchange rates
GBPm GBPm GBPm
Specific items (8) (6) (6)
Net profit on disposal/closure of
subsidiaries/businesses 4 65 68
Acquisition-related amortisation (2) (6) (6)
Acquisition-related amortisation, specific and other
separately disclosed items before tax (6) 53 56
Tax credits/(charges) arising on acquisition-related
amortisation and other separately disclosed items 4 (12) (14)
Acquisition-related amortisation and other separately
disclosed items after tax (2) 41 42
Loss from discontinued operations - (4) (4)
Total acquisition-related amortisation, specific and
other separately disclosed items - (charge)/credit
to earnings (2) 37 38
Specific items
The specific items charge of GBP8 million (2017: GBP6 million) related
to additional provisions required in the Asia region in respect of
historical employee gratuities. Specific items in 2017 included a GBP6
million charge related to the estimated cost of settlement of
subcontractor claims from commercial disputes in relation to prior years
which was settled in 2018.
Profit on disposal/closure of subsidiaries/businesses
During the period, the Group realised a net profit of GBP4 million
(2017: GBP65 million) relating to the disposal of a number of its
operations including its businesses in Hungary and the Philippines and
its secure data solutions business in Kenya. Disposals in 2017 included
the Group's businesses in Israel and Bulgaria and the Group's youth
services business in North America.
Acquisition-related amortisation
Acquisition-related amortisation of GBP2 million (2017: GBP6 million) is
lower than the prior period as certain intangible assets recognised on a
number of legacy acquisitions became fully amortised in 2017.
Tax credits/(charges) arising on acquisition-related amortisation,
specific and other separately disclosed items
Tax credits arising on acquisition-related amortisation, specific and
other separately disclosed items were GBP4 million
(2017: GBP12 million tax charge which related primarily to the disposal
of subsidiaries in the Americas region).
Cash flow, capital expenditure and portfolio management
The Group generated operating cash flow of GBP179 million (2017: GBP183
million), which represents 84% (2017: 80%) of Adjusted PBITA. This was
after the pension deficit-repair contributions of GBP21 million (2017:
GBP20 million) during the period. The Group invested GBP48 million
(2017: GBP43 million) in net capital expenditure and received net
proceeds of GBP32 million (2017: GBP151 million) from the disposal of
businesses. The Group made no significant acquisitions in the period.
Net cash inflow after investing in the business was GBP145 million
(2017: GBP266 million). The Group's net increase in net debt before
foreign exchange movements was GBP78 million (2017: decrease of GBP58
million).
BUSINESS REVIEW - GROUP COMMENTARY
STATUTORY RESULTS
The basis of preparation of the Group's statutory results is set out on
page 21. Comparative figures for statutory results are presented at
actual historical exchange rates (i.e. the results for the six months
ended 30 June 2017 are presented at year to date average exchange rates
for the six months ended 30 June 2017). Prior period results have been
restated for the impact of adopting IFRS 15 - Revenue from Contracts
with Customers, please see note 3 for details.
Statutory results
June
June 2017
Statutory results at actual exchange rates 2018 Restated(a) HoH
GBPm GBPm %
Revenue 3,672 3,971 (7.5%)
Adjusted profit before interest, tax and amortisation
(Adjusted PBITA) 213 238 (10.5%)
Specific items (8) (11) (27.3%)
Restructuring costs (14) (14) -
Profit on disposal/closure of subsidiaries/businesses 4 68 (94.1%)
Acquisition-related amortisation (2) (6) (66.7%)
Operating profit 193 275 (29.8%)
Interest costs (net) (54) (56) (3.6%)
Profit before tax 139 219 (36.5%)
Tax (31) (54) (42.6%)
Profit after tax 108 165 (34.5%)
Loss from discontinued operations - (4) (100.0%)
Profit for the period 108 161 (32.9%)
Non-controlling interests (5) (10) (50.0%)
Profit attributable to equity holders of the parent
("statutory earnings") 103 151 (31.8%)
EPS 6.7p 9.8p (31.6%)
Operating cash flow 165 170 (2.9%)
(a) 2017 results have been restated for the effect of adopting IFRS 15 -
see note 3.
Revenue
Revenue decreased by 7.5% compared with the prior period statutory
results. Of the decrease, 4.4% (GBP173 million) was due to movements in
exchange rates caused by the relative strengthening of the average
sterling exchange rates affecting the Group. Excluding the effects of
movements in exchange rates, revenue decreased by 3.3% mainly reflecting
a GBP139 million reduction in revenue in respect of businesses disposed
during the current period and prior year including the Group's
businesses in Hungary and Israel and its Youth Services business in
North America. Revenue from onerous contracts is slightly higher than
the prior period at GBP63 million (2017: GBP57 million). Excluding the
effects of movements in exchange rates, revenue from disposed businesses
and onerous contracts, revenue grew by 0.2% at constant exchange rates.
Business performance is discussed in more detail by service line and
region on pages 5 to 6.
Adjusted PBITA
Adjusted PBITA of GBP213 million (2017: GBP238 million) was down 10.5%.
Of the decrease, 4.2% (GBP10 million) was due to movements in exchange
rates. Excluding the effect of movements in exchange rates, Adjusted
PBITA decreased by 6.6%, reflecting weaker trading in the Europe &
Middle East Secure Solutions region and lower revenue, increased
business development and operating costs (mainly attack-related in
Africa) in the Cash Solutions division, as well as a reduction in
Adjusted PBITA from disposed businesses of GBP8 million. Excluding the
effect of movements in exchange rates and Adjusted PBITA from disposed
businesses, the Group's Adjusted PBITA decreased by 3.2% at constant
exchange rates.
Specific items
The specific items charge of GBP8 million (2017: GBP11 million), related
to additional provisions required in the Asia region in respect of
historical employee gratuities. Specific items in 2017 of GBP11 million
included GBP6 million related to the estimated cost of settlement of
subcontractor claims from commercial disputes in relation to prior years
which were settled in 2018 and GBP5 million related to the anticipated
increase of delivery costs in respect of one of the Group's onerous
contracts.
Restructuring costs
The Group invested GBP14 million (2017: GBP14 million) in restructuring
programmes during the six months ended 30 June 2018, relating to the
2018-2020 strategic productivity programme announced in 2017 which is
being implemented across the Group, mainly in the Europe & Middle East
and Americas regions and the Cash Solutions division. In addition, the
Group incurred non-strategic reorganisation costs of GBP4 million (2017:
GBP4 million) which are included within Adjusted PBITA.
BUSINESS REVIEW - GROUP COMMENTARY
STATUTORY RESULTS
Profit on disposal and closure of subsidiaries/businesses
The Group generated net profit on disposal and closure of
subsidiaries/businesses of GBP4 million (2017: GBP68 million) relating
to the disposal of a number of the Group's operations including its
businesses in Hungary and the Philippines and its secure data solutions
business in Kenya. Disposals in 2017 included the Group's businesses in
Israel and Bulgaria and the Group's Youth Services business in North
America.
Acquisition-related amortisation
Acquisition-related amortisation of GBP2 million (2017: GBP6 million) is
lower than the prior period as certain intangible assets recognised on a
number of legacy acquisitions became fully amortised in 2017.
Net interest costs
Net interest payable on net debt was GBP46 million (2017: GBP46
million). Net other finance costs were GBP3 million (2017: GBP4 million)
and the pension interest charge, related to the unwinding of the
discount in relation to long-term pension liabilities, was GBP5 million
(2017: GBP6 million), resulting in a total net interest cost of GBP54
million (2017: GBP56 million).
Tax
The statutory tax charge of GBP31 million (2017: GBP54 million) for 2018
included a tax charge of GBP38 million (2017: GBP42 million) on the
Group's underlying profits, as explained on page 7, tax on onerous
contracts of GBPnil (2017: tax credit of GBP1 million), tax of GBPnil in
respect of disposed businesses (2017: tax charge of GBP2 million), a tax
credit of GBP3 million (2017: GBP3 million) in respect of restructuring
costs and a net tax credit of GBP4 million (2017: tax charge of GBP14
million) in respect of acquisition-related amortisation and other
separately disclosed items.
The Group's statutory tax charge represented an effective rate of 22%
(2017: 25%) on profit before tax of GBP139 million
(2017: GBP219 million). The effective tax rate is a function of a
variety of factors, with the most significant being (i) the geographic
mix of the Group's taxable profits and the respective country tax rates,
(ii) profits arising on the disposal of subsidiaries in the period being
exempt from tax, (iii) the recognition of, and changes in the value of,
deferred tax assets and liabilities,
(iv) permanent differences such as expenses disallowable for tax
purposes, (v) irrecoverable withholding taxes, and (vi) benefit of
one-off items including tax claims.
The lower effective tax rate compared with the prior period is primarily
driven by profits arising on the disposal of subsidiaries being taxed at
a higher tax rate in the prior period.
Non-controlling interests
Profit attributable to non-controlling interests was GBP5 million in
2018, a decrease from GBP10 million from 2017, reflecting the
non-controlling partners' share of profit of certain businesses in the
Europe & Middle East region.
Profit attributable to equity holders of the parent ("statutory
earnings")
The Group reported profit for the period attributable to equity holders
of the parent ("statutory earnings") of GBP103 million (2017: GBP151
million) which primarily reflects the lower profit on disposal of
subsidiaries in the current period compared with the prior period.
Earnings per share
Statutory earnings per share(a) decreased to 6.7p (2017: 9.8p), based on
the weighted average number of shares in issue of 1,548 million (2017:
1,548 million). A reconciliation of the Group's statutory profit for the
period to EPS is provided below:
Earnings per share
2017 at 2017 at
constant actual
exchange exchange
2018 rates rates
GBPm GBPm GBPm
Profit for the period 108 152 161
Non-controlling interests (5) (10) (10)
Profit attributable to equity holders of the parent
(earnings) 103 142 151
Average number of shares (m) 1,548 1,548 1,548
Statutory earnings per share(a) 6.7p 9.2p 9.8p
(a) Basis of preparation of statutory results is shown on page 21.
BUSINESS REVIEW - GROUP COMMENTARY
STATUTORY RESULTS
REVIEW OF THE GROUP'S CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Significant movements in the consolidated statement of financial
position
Current loan notes have increased to GBP1,118 million (31 December 2017:
GBP655 million), reflecting the re-classification of certain US Private
Placement notes repayable in March 2019 and GBP public notes repayable
in May 2019 as current liabilities.
The following movements in the Group's consolidated statement of
financial position are set out elsewhere in this report, as follows:
-- Cash, cash equivalents and overdrafts are explained below;
-- Net debt is analysed in note 16;
-- Provisions are analysed in note 15; and
-- Retirement benefit obligations are explained on page 13.
Total equity
Total equity at 30 June 2018 was GBP833 million (31 December 2017:
GBP843 million). The main movements during the period were: profit for
the period of GBP108 million (six months ended 30 June 2017: GBP161
million), other comprehensive losses of GBP9 million (six months ended
30 June 2017: GBP100 million) (which included a re-measurement loss on
deferred retirement benefit schemes of GBP5 million (six months ended 30
June 2017: GBP67 million) as explained on page 12 and an exchange loss
on translation of foreign operations and changes in fair value of cash
flow hedging financial instruments of GBP5 million (six months ended 30
June 2017: GBP44 million)), and dividends paid in the period of GBP105
million (six months ended 30 June 2017: GBP103 million).
REVIEW OF THE GROUP'S CASH FLOW AND FINANCING
Consolidated statement of cash flow
Net cash flow from operating activities before tax was GBP165 million
(2017: GBP170 million). Net cash inflow from operating activities was
GBP117 million (2017: GBP129 million). Net cash used in investing
activities was GBP10 million (2017: cash generated GBP94 million),
including GBP32 million (2017: GBP151 million) of net business disposal
proceeds. Net cash inflow from financing activities was GBP291 million
(2017: outflow of GBP349 million) with the difference being mainly the
repayment of borrowings of GBP598 million in the first half of 2017.
Cash, cash equivalents and overdrafts at 30 June 2018 were GBP967
million (2017: GBP549 million), a net increase compared with 31 December
2017 including the impact of exchange rate movements of GBP396 million
(2017: decrease of GBP123 million). The Group's statutory cash flow is
presented in full on page 20.
Net debt
Net debt as at 30 June 2018 was GBP1,566 million (2017: GBP1,607
million). The Group's net debt to Adjusted EBITDA ratio was 2.7x (2017:
2.7x). The detailed reconciliation of movements in net debt is provided
on page 38 and is reconciled to the statutory cash flow on page 39.
Net debt maturity
In April 2018, the Group's credit rating was affirmed by Standard &
Poor's as BBB-, however the outlook was revised from negative to stable.
As at 30 June 2018 the Group had liquidity of GBP1,967 million (2017:
GBP1,549 million) comprising cash, cash equivalents and bank overdrafts
of GBP967 million (2017: GBP549 million) and unutilised but committed
facilities of GBP1 billion (2017: GBP1 billion). The Group issued a
EUR550 million Public Bond in May 2018 which matures in May 2025 and
pays an annual coupon of 1.875%.
The next debt maturities are GBP44 million and $224 million US Private
Placement notes due in July 2018 and a EUR500 million Eurobond in
December 2018. The recent refinancings have secured around GBP20 million
of annualised interest cost savings per annum by the end of 2019. The
Group has good access to capital markets and a diverse range of finance
providers. Borrowings are principally in pounds sterling, US dollars and
euros, reflecting the geographies of significant operational assets and
earnings.
BUSINESS REVIEW - GROUP COMMENTARY
STATUTORY RESULTS
The Group's main sources of finance and their applicable rates as at 30
June 2018 are set out below:
Post
hedging Year of redemption and amounts (GBPm)(b)
Issued avg
Debt instrument/ Nominal interest interest
Year of issue amount(a) rate rate 2018 2019 2020 2021 2022 2023 2024 2025 Total
US PP 2007 US$145m 5.96% 2.85% 110 110
US PP 2007 US$105m 6.06% 2.91% 80 80
US PP 2008 GBP44m 7.56% 7.56% 44 44
US PP 2008 US$224m 6.78% 6.91% 157 157
US PP 2008 US$74.5m 6.88% 6.88% 56 56
Public Bond 2009 GBP350m 7.75% 7.75% 350 350
Public Bond 2012 EUR500m 2.63% 2.62% 417 417
Public Bond 2016 EUR500m 1.50% 2.24% 447 447
Public Bond 2017 EUR500m 1.50% 3.21% 429 429
Public Bond 2018 EUR550m 1.88% 2.78% 482 482
Revolving Credit GBP1bn (multi
Facility 2015(c) currency) Undrawn - -
618 460 56 - 80 447 429 482 2,572
(a) Nominal debt amount, for fair value carrying amount see note 18.
(b) Translated at exchange rates prevailing at 30 June 2018, or hedged
exchange rates where applicable.
(c) GBP964 million of the original GBP1 billion multi-currency revolving
credit facility matures in January 2022, with the remainder maturing in
January 2021. As at 30 June 2018 there were no drawings from the
facility.
The Group's average cost of gross borrowings, net of interest hedging,
was 4.0% (2017: 3.7%).
OTHER INFORMATION
Significant exchange rates applicable to the Group
The Group derives a significant proportion of its revenue and profits in
the following currencies. Closing and average rates for these currencies
are shown below:
Six months to Year to
30 June 2018 30 June 2018 31 December 2017
Closing rates Average rates Average rates
GBP/US$ 1.3194 1.3737 1.2964
GBP/EUR 1.1299 1.1357 1.1453
GBP/South Africa Rand 18.1519 16.8604 17.3187
GBP/India Rupee 90.3452 90.3128 84.3570
GBP/Brazil Real 5.0971 4.6943 4.1506
Applying June 2018 closing rates to underlying results for the six
months ending 30 June 2018 would result in an increase in revenue of
0.9% to GBP3,633 million (for the period ended 30 June 2017: increase of
1.1% to GBP3,630 million) and an increase in Adjusted PBITA of 0.9% to
GBP214 million (for the period ended 30 June 2017: increase of 1.4% to
GBP222 million).
Applying June 2018 closing rates to the Group's statutory results for
the six months ending 30 June 2018 would result in an increase in
revenue of 0.9% to GBP3,706 million (for the period ended 30 June 2017:
decrease of 3.4% to GBP3,837 million) and an increase in Adjusted PBITA
of 0.5% to GBP214 million (for the period ended 30 June 2017: decrease
of 2.5% to GBP232 million).
The strengthening of the average Sterling exchange rates compared with
the prior period led to a decrease in statutory revenue of 4.4% and a
decrease in Adjusted PBITA of 4.2%. The impact of exchange rate
movements increased the Group's net debt by
GBP1 million compared with the prior period.
Dividend
The Board has declared an interim dividend of 3.59p (2017: 3.59p) per
share (DKK 0.2969).
BUSINESS REVIEW - GROUP COMMENTARY
STATUTORY RESULTS
Pensions
The Group's IAS 19 Revised (2011) Employee Benefits net pension deficit
at 30 June 2018 recognised in the consolidated statement of financial
position was GBP382 million (31 December 2017: GBP381 million) or GBP321
million (31 December 2017: GBP318 million) net of applicable tax in the
relevant jurisdictions. The Group's net pension deficit has increased
marginally compared with the position as at 31 December 2017 reflecting
an increase in the deficits in the Group's unfunded pension schemes
offset by a decrease in the net deficit of the UK pension scheme. The
decrease in the UK scheme's net deficit reflects the payment of
scheduled deficit-repair contributions of GBP21 million (2017: GBP20
million) during the period, together with a slightly higher discount
rate assumption applied to the valuation of scheme obligations. The next
triennial valuation of the Group's main UK pension schemes is underway,
as a result of which future deficit-repair contributions will be subject
to review and potential renegotiation.
Risk 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 60 to 65 of the
company's Integrated Report and Accounts for the financial year ended 31
December 2017, a copy of which is available on the Group's website at
www.g4s.com.
These risks and uncertainties include, but are not limited to, culture
and values, health and safety, people, major contracts, laws and
regulations, growth strategy, geo-political, cash losses and information
security. The business risks and uncertainties are expected to remain
materially the same as outlined in the 2017 Integrated Report and
Accounts during the remaining six months of the financial year although
the risks associated with the terms of the UK's exit from the EU
continue to evolve.
Brexit
The Group operates mainly within national boundaries and is typically
subject to security-licensing regulations in each territory, and is
relatively well positioned with around 80% of revenues outside the UK
and minimal cross-border trading.
Depending on the nature of the terms to be agreed with the EU around the
free movement of capital and labour, the UK's exit from the EU could
result in a shortage of skills or workforce availability in the UK
market. In addition, it is not yet clear if or how key employment laws
would change once the UK is no longer a member of the EU. The terms of
the UK's exit from the EU remain uncertain and could also affect a range
of business factors and conditions including regulation and taxation.
It is also possible that the continuing period of uncertainty lowers
economic growth in both the UK and Europe which could affect both our
customers and our competitors. The Group will continue to monitor
closely developments on the decision to exit the EU as part of its risk
management and governance framework.
G4S plc
Results for the six months ended 30 June 2018
Directors' responsibility statement in respect of the results for the
six months ended
30 June 2018
We confirm that to the best of our knowledge:
-- the condensed consolidated set of interim financial statements have been
prepared in accordance with International Accounting Standard (IAS) 34
Interim Financial Reporting as adopted by the European Union;
-- the half-yearly report includes a fair review of the information required
by:
1. 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
consolidated set of interim financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
2. 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.
A list of the directors is available on the company's website
www.g4s.com.
The responsibility statement is signed on behalf of the Board by:
Tim Weller
Group Chief Financial Officer
9 August 2018
Independent review report to G4S plc
For the six months ended 30 June 2018
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed G4S plc's condensed consolidated interim financial
statements (the "interim financial statements") in the 2018 half-yearly
results of G4S plc for the 6 month period ended 30 June 2018. Based on
our review, nothing has come to our attention that causes us to believe
that the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated statement of financial position at 30 June 2018;
-- the consolidated income statement for the period then ended;
-- the consolidated statement of comprehensive income for the period then
ended;
-- the consolidated statement of changes in equity for the period then
ended;
-- the consolidated statement of cash flows for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the 2018 half-yearly
results have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European
Union and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the preparation
of the full annual financial statements of the Group is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The 2018 half-yearly results, including the interim financial statements,
are the responsibility of, and have been approved by, the directors.
The directors are responsible for preparing the 2018 half-yearly results
in accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the 2018 half-yearly results based on our review. This
report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board for use in the United Kingdom. A review
of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the 2018 half-yearly
results and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 August 2018
G4S plc
Consolidated financial statements
For the six months ended 30 June 2018
Consolidated income statement (unaudited)
Year
ended
Six months ended Six months ended 31 Dec
30 June 2018 30 June 2017 Restated(1) 2017 Restated(1)
Continuing operations Notes GBPm GBPm GBPm
Revenue 5 3,672 3,971 7,826
Operating profit before joint ventures, specific items
and other separately disclosed items 209 234 483
Share of post-tax profit from joint ventures 4 4 9
Adjusted profit before interest, tax and amortisation
(Adjusted PBITA) 5 213 238 492
Specific items 6 (8) (11) (34)
Restructuring costs 6 (14) (14) (20)
Profit on disposal/closure of subsidiaries/businesses 6,7 4 68 74
Amortisation of acquisition-related intangible assets 6 (2) (6) (10)
Operating profit 5,6 193 275 502
Finance income(2) 8 8 6 12
Finance expense(2) 8 (62) (62) (127)
Profit before tax 139 219 387
Tax 9 (31) (54) (128)
Profit from continuing operations after tax 108 165 259
Loss from discontinued operations - (4) (6)
Profit for the period 108 161 253
Attributable to:
Equity holders of the parent 103 151 237
Non-controlling interests 5 10 16
Profit for the period 108 161 253
Earnings per share attributable to equity shareholders
of the parent 11
Basic and diluted - from continuing operations 6.7p 10.0p 15.7p
Basic and diluted - from continuing and discontinued
operations 6.7p 9.8p 15.3p
Dividends declared and proposed in respect of the
period
Interim dividend 55 55 55
Final dividend - - 95
Total dividend 10 55 55 150
(1) Comparative results have been restated for the adoption of IFRS 15 -
Revenue from Contracts with Customers, see note 3.
(2) The results for the year ended 31 December 2017 and the six months
ended 30 June 2017 have been re-presented to decrease both finance
income and finance expense by GBP4m with no effect on profit before tax,
see note 8 for details.
G4S plc
Consolidated financial statements
For the six months ended 30 June 2018
Consolidated statement of comprehensive income (unaudited)
Year
ended
Six months ended Six months ended 31 Dec
30 June 30 June 2017 2017
2018 Restated(1) Restated(1)
GBPm GBPm GBPm
Profit for the period 108 161 253
Other comprehensive income
Items that will not be re-classified to profit or
loss:
Re-measurements on defined retirement benefit schemes (5) (67) 26
Tax on items that will not be re-classified to profit
or loss 1 11 (4)
(4) (56) 22
Items that are or may be re-classified subsequently
to profit or loss:
Exchange differences on translation of foreign operations
and changes in fair value of cash flow hedging financial
instruments (5) (44) (69)
Other comprehensive (loss)/income, net of tax (9) (100) (47)
Total comprehensive income for the period 99 61 206
Attributable to:
Equity holders of the parent 94 52 192
Non-controlling interests 5 9 14
Total comprehensive income for the period 99 61 206
(1) Comparative results have been restated for the adoption of IFRS 15 -
Revenue from Contracts with Customers, see note 3.
G4S plc
Consolidated financial statements
For the six months ended 30 June 2018
Consolidated statement of changes in equity (unaudited)
Attributable to equity holders of the parent
Share Share Retained Other NCI Total
capital premium earnings reserves Total reserve Equity
2018 2018 2018 2018 2018 2018 2018
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2018 388 258 (177) 370 839 4 843
Total
comprehensive
income/(loss) - - 99 (5) 94 5 99
Dividends paid - - (95) - (95) (10) (105)
Recycling of
cumulative
translation
adjustments - - - (1) (1) - (1)
Own shares
awarded - - (9) 9 - - -
Own shares
purchased - - - (7) (7) - (7)
Share-based
payments - - 4 - 4 - 4
At 30 June 2018 388 258 (178) 366 834 (1) 833
Attributable to equity holders of the parent
Share Share Retained Other NCI Total
capital premium earnings reserves Total reserve Equity
2017 2017 2017 2017 2017 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2017 -
restated(1) 388 258 (272) 456 830 21 851
Total
comprehensive
income/(loss) -
restated(1) - - 96 (44) 52 9 61
Dividends paid - - (90) - (90) (13) (103)
Transactions
with
non-controlling
interests - - (15) - (15) 2 (13)
Recycling of net
investment
hedge - - - 24 24 - 24
Recycling of
cumulative
translation
adjustments - - - (42) (42) - (42)
Own shares
awarded - - (11) 11 - - -
Own shares
purchased - - - (7) (7) - (7)
Share-based
payments - - 4 - 4 - 4
At 30 June 2017
- restated(1) 388 258 (288) 398 756 19 775
Attributable to equity holders of the parent
Share Share Retained Other NCI Total
capital premium earnings reserves Total reserve Equity
2017 2017 2017 2017 2017 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2017 -
restated(1) 388 258 (272) 456 830 21 851
Total
comprehensive
income/(loss) -
restated(1) - - 261 (69) 192 14 206
Dividends paid - - (145) - (145) (34) (179)
Transactions
with
non-controlling
interests - - (19) - (19) 3 (16)
Recycling of net
investment
hedge - - - 24 24 - 24
Recycling of
cumulative
translation
adjustments - - - (42) (42) - (42)
Own shares
awarded - - (11) 11 - - -
Own shares
purchased - - - (10) (10) - (10)
Share-based
payments - - 9 - 9 - 9
At 31 December
2017 -
restated(1) 388 258 (177) 370 839 4 843
(1) Comparative results have been restated for the adoption of IFRS 15 -
Revenue from Contracts with Customers, see note 3.
G4S plc
Consolidated financial statements
As at 30 June 2018
Consolidated statement of financial position (unaudited)
As at As at
As at 30 June 2017 31 Dec
30 June 2018 Restated(1) 2017 Restated(1)
Notes GBPm GBPm GBPm
ASSETS
Non-current assets
Goodwill 1,918 1,952 1,914
Other acquisition-related intangible assets 7 12 9
Non-acquisition-related intangible assets 96 84 88
Property, plant and equipment 381 412 395
Trade and other receivables 77 121 82
Investment in joint ventures 22 22 20
Investments 16 22 13 20
Retirement benefit surplus 14 73 60 80
Deferred tax assets 9 241 276 242
2,837 2,952 2,850
Current assets
Inventories 107 102 104
Investments 16 43 65 42
Trade and other receivables 1,432 1,362 1,417
Current tax assets 9 54 67 55
Cash and cash equivalents 16 1,302 827 902
Assets of disposal groups classified as held for
sale 12 - 15 53
2,938 2,438 2,573
Total assets 5,775 5,390 5,423
LIABILITIES
Current liabilities
Bank overdrafts 16 (292) (216) (284)
Bank loans 16 (7) (14) (8)
Loan notes 16 (1,118) - (655)
Obligations under finance leases 16 (12) (15) (15)
Trade and other payables (1,194) (1,204) (1,263)
Current tax liabilities 9 (61) (73) (79)
Provisions 15 (83) (91) (104)
Liabilities of disposal groups classified as held
for sale 12 (1) (11) (19)
(2,768) (1,624) (2,427)
Non-current liabilities
Bank loans 16 (5) (74) (5)
Loan notes 16 (1,506) (2,144) (1,486)
Obligations under finance leases 16 (22) (33) (20)
Trade and other payables (32) (41) (35)
Retirement benefit obligations 14 (455) (546) (461)
Provisions 15 (146) (143) (138)
Deferred tax liabilities 9 (8) (10) (8)
(2,174) (2,991) (2,153)
Total liabilities (4,942) (4,615) (4,580)
Net assets 833 775 843
EQUITY
Share capital 388 388 388
Share premium 258 258 258
Reserves 188 110 193
Equity attributable to equity holders of the
parent 834 756 839
Non-controlling interests (1) 19 4
Total equity 833 775 843
(1) The consolidated statements of financial position
as at 30 June 2017 and 31 December 2017 have been
restated for the effect of IFRS 15. The consolidated
statement of financial position as at 30 June 2017
has also been re-presented to re-classify certain
investments from current to non-current assets and
to present separately current tax liabilities - see
note 3.
G4S plc
Consolidated financial statements
For the six months ended 30 June 2018
Consolidated statement of cash flows (unaudited)
Six Six
months months Year
ended ended ended
30 30 31
June June Dec
2018 2017 2017
GBPm GBPm GBPm
Operating profit - restated(1) 193 275 502
Adjustments for non-cash and other items (see note
17) 27 (21) 40
(Increase)/decrease in inventory (5) 7 1
Increase in accounts receivable - restated(1) (20) (51) (94)
(Decrease)/increase in accounts payable - restated(1) (30) (40) 39
Net cash flow from operating activities before tax
(see note 17) 165 170 488
Tax paid (48) (41) (86)
Net cash flow from operating activities 117 129 402
Investing activities
Purchases of non-current assets (52) (44) (109)
Proceeds on disposal of property, plant and equipment 4 1 5
Disposal of subsidiaries 32 151 156
Cash, cash equivalents and bank overdrafts in disposed
entities (2) (8) (8)
Acquisition of subsidiaries (1) - (1)
Interest received 10 7 29
(Purchase)/sale of investments (3) (17) 3
Cash flow from equity accounted investments 2 4 6
Net cash (used in)/generated by investing activities (10) 94 81
Financing activities
Dividends paid to equity shareholders of the parent (95) (90) (145)
Dividends paid to non-controlling interests (9) (13) (34)
Purchase of own shares (7) (7) (10)
Proceeds from new borrowings 482 437 437
Repayment of borrowings (1) (598) (672)
Net interest (paid)/received relating to derivative
financial instruments (7) 22 29
Interest paid (69) (77) (136)
Repayment of obligations under finance leases (3) (10) (23)
Transactions with non-controlling interests - (13) (16)
Net cash inflow/(outflow) from financing activities 291 (349) (570)
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts 398 (126) (87)
Cash, cash equivalents and bank overdrafts at the
beginning of the period 571 672 672
Effect of foreign exchange rate fluctuations on net
cash held (2) 3 (14)
Cash, cash equivalents and bank overdrafts at the
end of the period 967 549 571
(1) Comparative results have been restated for the
adoption of IFRS 15 - Revenue from Contracts with
Customers, see note 3.
Notes to the interim financial statements
1) Basis of preparation and accounting policies
These condensed consolidated interim financial statements ("the interim
financial statements") comprise the unaudited consolidated results of
G4S plc ("the Group") for the six months ended 30 June 2018. These
results and the comparatives for the six months ended 30 June 2017 and
for the year ended 31 December 2017 do not comprise statutory accounts
and should be read in conjunction with the Integrated Report and
Accounts 2017, which is available at www.g4s.com. The Integrated Report
and Accounts 2017 was 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 interim financial statements
have been prepared applying accounting policies consistent with those
applied by the Group in the Integrated Report and Accounts 2017, except
for the adoption of IFRS 15 - Revenue from Contracts with Customers and
IFRS 9 - Financial Instruments as described below in note 3.
The financial information in these interim financial statements for the
half year to 30 June 2018 has been reviewed but not audited by
PricewaterhouseCoopers LLP, the company's auditor.
The interim financial statements of the Group presented in this
half-yearly results 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 consolidated statement of financial position as at 30 June 2017 has
been re-presented to re-classify investments with a book value of GBP13m
from current to non-current assets and to present separately tax
receivables of GBP67m, previously presented within trade and other
receivables, as a separate line item on the face of the statement of
financial position - see page 23. As described in note 8, the results
for the year ended 31 December 2017 and the six months ended 30 June
2017 have been re-presented to decrease both finance income and finance
expense by GBP4m with no effect on profit before tax.
The Group has prepared the interim financial statements on a going
concern basis.
2) Specific items and other separately disclosed items
The Group's consolidated income statement and segmental analysis note
separately identify results before specific items. Specific items are
those that in management's judgment need to be disclosed separately in
arriving at operating profit by virtue of their size, nature or
incidence. In determining whether an event or transaction is specific,
management considers quantitative as well as qualitative factors such as
the frequency or predictability of occurrence.
All items that are reported as specific items are evaluated and approved
by the Group's Audit Committee prior to being separately disclosed. The
Group seeks to be balanced when reporting specific items for both debits
and credits, and any reversals of excess provisions previously created
as specific items are classified consistently as specific items.
Specific items may not be comparable with similarly-titled measures used
by other companies.
In general, provisions recognised for future losses on onerous contracts
are charged to the consolidated income statement within Adjusted PBITA.
However, where onerous contract charges are significant by virtue of
their size, they are separately charged within specific items. Such
losses are distinct from "in-year" losses, which are utilised against
provisions for onerous contract losses. Releases of onerous contract
provisions originally charged as specific items are separately credited
within specific items.
In order to provide further clarity in the consolidated income statement,
the Group also discloses separately certain restructuring costs, profits
or losses on disposal or closure of subsidiaries, acquisition-related
amortisation and expenses and goodwill impairments. Restructuring costs
that are separately disclosed reflect the Group's multi-year
productivity programme. This programme is of a strategic nature and, as
such, is monitored and approved by the Group's Executive Committee.
Activities under the programme in 2018 focused primarily on the
previously announced three-year plan to implement efficient
organisational design and leaner processes. During 2016 and 2017
activities under the programme focused primarily on transforming the
operating model in the Europe & Middle East region. Restructuring costs
that are incurred in the normal course of business are recorded within
Adjusted PBITA.
Notes to the interim financial statements (continued)
3) Adoption of new and revised accounting standards and interpretations
The group has applied IFRS 15 - Revenue from Contracts with Customers
and IFRS 9 - Financial Instruments for the first time in the period.
IFRS 15 - Revenue from Contracts with Customers
The Group has adopted IFRS 15 - Revenue from Contracts with Customers
with effect from 1 January 2018 and has prepared the 2018 interim
financial statements in accordance with the requirements of this new
standard. The Group has chosen to apply the standard fully
retrospectively and has restated comparatives where appropriate.
The Group derives its revenue principally from providing manned security
and cash security services; technology installation; the provision of
security equipment (particularly security alarms, smart safes and cash
recycling equipment); and facilities management (including care &
justice services). For the majority of the Group's services, including
the provision of manned security and cash security services, the Group's
right to consideration from its customers equates to the value of
services supplied to the customer. Where that is the case, the
practical expedient has been applied under IFRS 15 to recognise revenue
as the customer is billed.
Technology installations represent long-term technology or other
installation projects that span one or more reporting periods. Under
IFRS 15, such installations are considered to comprise one performance
obligation consisting of a group of inseparable services. Revenue in
respect of such installations is recognised as the services are
delivered based on costs incurred as a proportion of the total expected
costs of the installation.
Contracts for the provision of security alarms, smart safes and cash
recycling equipment are assessed to identify distinct performance
obligations which will typically include one or more of: the outright
sale of equipment; the provision of installation and / or maintenance
services; equipment rental and ongoing monitoring. In contracts that
include the outright sale of equipment, revenue in respect of the sale
and installation is recognised when the equipment is installed. In
countries in which equipment cannot be sold without the provision of
ongoing maintenance or other services and in contracts for the rental of
equipment, revenue is recognised over the period of the contract.
Ongoing maintenance and monitoring services represent a series of
services with a constant pattern of transfer to the customer over time.
Revenue in respect of such services is recognised over the period of the
contract.
Contracts for facilities management and care & justice services
typically require the provision of a group of interrelated goods and
services to the customer over a period of time. Such goods and services
are typically considered to represent a single performance obligation as
each promise is satisfied over the same period. Consideration received
in respect of such services typically equates to the value of services
supplied to the customer to date and the practical expedient has been
applied under IFRS 15 to recognise revenue as the customer is billed.
The impact of adopting IFRS 15 on the Group's consolidated income
statement for the year ended 31 December 2017 was an immaterial change
to the presentation of penalties incurred and an immaterial reduction in
the amount capitalised with respect to the costs of bidding for and
winning contracts with the effect of reducing revenue by GBP2m (six
months ended 30 June 2017: GBP1m) and increasing each of PBITA,
operating profit, profit before tax, profit after tax, profit for the
period and profit for the period attributable to equity holders of the
parent by GBP1m (six months ended 30 June 2017: GBP1m). The adoption of
IFRS 15 had no impact on the Group's net cash flow from operating
activities for the year ended 31 December 2017 or for the period ended
30 June 2017.
IFRS 9 - Financial Instruments
The Group has adopted IFRS 9 - Financial Instruments with effect from 1
January 2018, and has prepared the interim financial statements in
accordance with the requirements of this new standard.
The new standard is applicable to the classification, measurement,
impairment and re-categorisation of financial assets and liabilities. It
also introduces a new hedge accounting model.
There has been no change to the Group's consolidated income statement,
statement of other comprehensive income, statement of changes in equity
or statement of financial position on adoption. The Group has no
financial liabilities held at fair value other than derivatives. The
introduction of an expected-loss impairment model has had no material
effect given the general quality and short-term nature of the Group's
trade receivables. There has been no re-categorisation of assets on
adoption of the new standard and the Group's existing hedging
relationships have been assessed as compliant with the new requirements
following a review of the existing hedging arrangements. No voluntary
elections been made on adoption.
Notes to the interim financial statements (continued)
As described in note 1, the consolidated statement of financial position
at 30 June 2017 has been restated to re-classify certain investments
from current to non-current assets and to disclose separately current
tax receivable. The effect of the adoption of IFRS 15, along with the
re-classification of investments and tax amounts on the Group's
consolidated statement of financial position as at 30 June 2017 is set
out below:
Re-classifications
Consolidated statement of financial position as at As Restatement
30 June 2017 published Investments Tax for IFRS15 Restated
GBPm GBPm GBPm GBPm GBPm
ASSETS
Non-current assets
Trade and other receivables 122 - - (1) 121
Investments - 13 - - 13
Deferred tax asset 274 - - 2 276
Other non-current assets 2,542 - - - 2,542
2,938 13 - 1 2,952
Current assets
Investments 78 (13) - - 65
Trade and other receivables 1,428 - (67) 1 1,362
Current tax receivable - - 67 - 67
Other current assets 944 - - - 944
2,450 (13) - 1 2,438
Total assets 5,388 - - 2 5,390
LIABILITIES
Current liabilities
Trade and other payables (1,203) - - (1) (1,204)
Other current liabilities (420) - - - (420)
(1,623) - - (1) (1,624)
Non-current liabilities
Trade and other payables (29) - - (12) (41)
Other non-current liabilities (2,950) - - - (2,950)
(2,979) - - (12) (2,991)
Total liabilities (4,602) - - (13) (4,615)
Net assets 786 - - (11) 775
EQUITY
Share capital 388 - - - 388
Share premium 258 - - - 258
Reserves 121 - - (11) 110
Equity attributable to equity holders of the parent 767 - - (11) 756
Non-controlling interests 19 - - - 19
Total Equity 786 - - (11) 775
Notes to the interim financial statements (continued)
The impact of the adoption of IFRS 15 on the Group's consolidated
statement of financial position as at 31 December 2017 is presented
below:
Consolidated statement of financial position as at As Restatement
31 December 2017 published for IFRS15 Restated
GBPm GBPm GBPm
ASSETS
Non-current assets
Trade and other receivables 83 (1) 82
Deferred tax asset 240 2 242
Other non-current assets 2,526 - 2,526
2,849 1 2,850
Current assets
Trade and other receivables 1,416 1 1,417
Other current assets 1,156 - 1,156
2,572 1 2,573
Total assets 5,421 2 5,423
LIABILITIES
Current liabilities
Trade and other payables (1,262) (1) (1,263)
Other current liabilities (1,164) - (1,164)
(2,426) (1) (2,427)
Non-current liabilities
Trade and other payables (23) (12) (35)
Other non-current liabilities (2,118) - (2,118)
(2,141) (12) (2,153)
Total liabilities (4,567) (13) (4,580)
Net assets 854 (11) 843
EQUITY
Share capital 388 - 388
Share premium 258 - 258
Reserves 204 (11) 193
Equity attributable to equity holders of the parent 850 (11) 839
Non-controlling interests 4 - 4
Total Equity 854 (11) 843
New standards not yet effective
The Group has not early-adopted any standard, amendment or
interpretation. A number of new standards, amendments to standards and
interpretations are not yet effective for the period ended 30 June 2018.
The directors are currently evaluating the impact of these new standards
on the Group accounts:
-- Annual Improvements to IFRS Standards 2015-2017 Cycle
-- IFRS 9 amendments - Prepayment features with negative compensation
-- IAS 19 amendments - Plan amendment, curtailment or settlement
-- IAS 28 amendments - Long term interests in associates and joint ventures
-- IFRIC 23 - Uncertainty over income tax treatments
IFRS 16 - Leases
The Group continues to assess the impact of adopting IFRS 16 - Leases,
which will be effective for the Group's financial year ending 31
December 2019.
The principal effect of adopting IFRS 16 will be to gross up the Group's
balance sheet to recognise additional right of use assets within
property, plant and equipment and additional lease liabilities in
respect of leases that are currently treated as operating leases. The
associated operating lease charge that is currently recorded within
operating costs will be removed and replaced with a depreciation charge
in respect of the additional assets recognised and an interest charge in
respect of the additional lease creditors recognised.
As interest is charged at the effective rate on the reducing balance of
the liability over the lease term, the effect on profit before tax will
be variable over the term of a lease. However, the cumulative impact on
pre-tax profit over the lease term will be neutral. Any difference
between the opening adjustment to the lease liability and to property,
plant and equipment due to the straight-line
Notes to the interim financial statements (continued)
depreciation of property, plant and equipment compared with the reducing
balance of leases over their respective terms will be reflected as an
opening reserves adjustment on implementation of the new standard.
The impact on the consolidated income statement is currently expected to
be a decrease in operating lease charges included in operating costs and
an increase in both the depreciation expense and interest charge.
Adjusted PBITA is expected to increase due to the re-classification of
the interest element of operating lease rentals as finance costs.
The impact on the consolidated statement of cash flows will be an
increase in net cash flow from operating activities, equivalent to the
increase in Adjusted PBITA, matched by an increase in cash outflow from
financing activities due to the re-classification of finance lease
interest, with no impact on net cash flow.
Further details of the Group's commitments under operating leases at 31
December 2017 can be found in note 38 of the 2017 Integrated Report and
Accounts.
4) Accounting estimates, judgments and assumptions
The preparation of financial statements in conformity with adopted IFRSs
requires management to make judgments, estimates and assumptions that
affect the application of the Group's accounting policies with respect
to the carrying amounts of assets and liabilities at the date of the
financial statements, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. These
judgments, estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable
under the circumstances, including current and expected economic
conditions, and, in some cases, actuarial techniques. Although these
judgments, estimates and associated assumptions are based on
management's best knowledge of current events and circumstances, the
actual results may differ.
Estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which
the estimate is revised and in any future periods affected. The
judgments, estimates and assumptions which are of most significance in
preparing the Group's interim financial statements are the same as those
that applied to the consolidated financial statements for the year ended
31 December 2017.
Notes to the interim financial statements (continued)
5) Operating segments and revenue
As indicated in the 2017 Integrated Report and Accounts, from 1 January
2018 the Group has reorganised the group-wide management of its
businesses to create a Global Cash Solutions division and to consolidate
its Secure Solutions business into four regions:
-- Africa;
-- Americas (combining the previous North America and Latin America
regions);
-- Asia (including India and Bangladesh that formerly reported under the
Middle East & India region); and
-- Europe & Middle East (combining the previous Europe, UK & Ireland and
Middle East & India regions except for India and Bangladesh that now
report under the Asia region).
Prior period and prior year comparatives have been restated accordingly
to present segmental results on a consistent basis. For each of the
reportable segments, the Group Executive Committee (the chief operating
decision maker) reviews internal management reports on a regular basis.
Segment information for continuing operations is presented below:
6 months ended Year ended
6 months ended 30 June 2017 31 Dec 2017
30 June 2018 Restated(1) Restated(1)
Revenue by reportable segment GBPm GBPm GBPm
Africa 198 200 399
Americas 1,177 1,260 2,489
Asia 434 444 896
Europe & Middle East 1,299 1,387 2,747
Total Secure Solutions 3,108 3,291 6,531
Total Cash Solutions(2) 564 680 1,295
Total Revenue 3,672 3,971 7,826
6 months ended Year ended
6 months ended 30 June 2017 31 Dec 2017
30 June 2018 Restated(1) Restated(1)
Operating profit by reportable segment GBPm GBPm GBPm
Africa 15 16 29
Americas 54 52 120
Asia 28 29 60
Europe & Middle East 83 92 182
Total Secure Solutions 180 189 391
Total Cash Solutions(2) 61 75 150
Operating profit before corporate costs 241 264 541
Corporate costs (28) (26) (49)
Adjusted profit before interest, tax and amortisation
(Adjusted PBITA) 213 238 492
Specific items (8) (11) (34)
Restructuring costs (14) (14) (20)
Profit on disposal/closure of subsidiaries/businesses 4 68 74
Amortisation of acquisition-related intangible assets (2) (6) (10)
Operating profit 193 275 502
(1) The revenue and operating profit for the six months ended 30 June
2017 and for the year ended 31 December 2017 have been restated to
reflect the Group's reorganisation as described above and for the
effects of IFRS 15 - see note 3.
(2) Includes a benefit of around GBP8m from the early completion of a
bullion centre contract in the UK Cash Solutions business (2017: GBP2m
from the same contract).
Notes to the interim financial statements (continued)
The Group's revenue by customer type can be analysed as follows:
Year
ended
6 months ended 31 Dec
6 months ended 30 June 2017 2017
30 June 2018 Restated(1) Restated(1)
Revenue by customer type GBPm GBPm GBPm
Major corporates 1,249 1,317 2,575
Government 776 825 1,587
Financial institutions 622 642 1,391
Retail, leisure and consumers 613 744 1,412
Energy and utilities 213 245 458
Transport, ports and aviation 199 198 403
Total Revenue 3,672 3,971 7,826
(1) Revenue for the six months ended 30 June 2017 and for the year ended
31 December 2017 has been restated for the effects of IFRS 15 - see note
3.
6) Operating profit
The income statement can be analysed as follows:
Year
Six months ended Six months ended ended
30 June 30 June 31 Dec
2018 2017 Restated(1) 2017 Restated(1)
Continuing operations GBPm GBPm GBPm
Revenue 3,672 3,971 7,826
Cost of sales (3,037) (3,269) (6,429)
Gross profit 635 702 1,397
Administration
expenses (446) (431) (904)
Share of profit after
tax from joint
ventures 4 4 9
Operating profit 193 275 502
(1) Restated for the effect of IFRS 15 - see note 3.
Operating profit includes items that are separately disclosed for the
six months ended 30 June 2018 related to:
-- Specific items charge of GBP8m (six months ended 30 June 2017: GBP11m;
year ended 31 December 2017: GBP34m), relating to additional provisions
required in the Asia region in respect of historical employee gratuities.
Specific items of GBP11m incurred during the six months ended 30 June
2017 included a GBP6m charge related to the estimated cost of settlement
of subcontractor claims from commercial disputes in relation to prior
years, which were settled in 2018, and a GBP5m charge related to an
increase in expected delivery costs in respect of a contract. Specific
items incurred during the year ended 31 December 2017 of GBP34m included
GBP19m primarily relating to the anticipated total losses over the next
15 to 20 years in respect of certain UK contracts, GBP6m related to the
estimated cost of settlement of subcontractor claims from commercial
disputes in respect of prior years, and GBP9m related mainly to the
settlement of labour disputes in respect of prior years in the Americas
region;
-- Investment in restructuring programmes of GBP14m (six months ended 30
June 2017: GBP14m; year ended 31 December 2017: GBP20m) relating to the
2018-2020 strategic productivity programme announced in 2017 which is
being implemented across the Group, mainly in the Europe & Middle East
and Americas regions and the Cash Solutions division. In addition, the
Group incurred non-strategic severance costs of GBP4m (six months ended
30 June 2017: GBP4m; year ended 31 December 2017: GBP10m) which are
included within cost of sales and administration expenses as
appropriate;
-- Disposal profit of GBP4m (six months ended 30 June 2017: GBP68m; year
ended 31 December 2017: GBP74m) relating to the disposal of a number of
the Group's operations including its businesses in Hungary and its secure
data storage business in Kenya. In the first six months of 2017 the Group
disposed of a number of operations including the businesses in Israel and
its Youth Services business in North America. The Group also disposed of
a small number of minor operations in the second half of 2017; and
-- Amortisation of acquisition-related intangible assets of GBP2m (six
months ended 30 June 2017: GBP6m; year ended 31 December 2017: GBP10m),
which is lower than the prior period as certain intangible assets
recognised on legacy acquisitions became fully amortised in 2017.
Notes to the interim financial statements (continued)
7) Disposals and closures
In the first six months of 2018 the Group sold four businesses,
including the Group's businesses in Hungary and the Philippines and the
secure data storage business in Kenya realising net cash consideration
of GBP32m. These businesses generated Adjusted PBITA of GBP1m to the
date of disposal (six months ended 30 June 2017: GBP3m).
In the first six months of 2017 the Group sold six businesses, including
the Youth Services business in North America, the children's homes
business in the UK, the Group's cash business in Peru and the Group's
businesses in Israel and Bulgaria, realising net cash consideration of
GBP151m. A further four businesses were closed during the period.
In the second half of 2017 the Group sold a further three businesses,
including the Group's cash business in Paraguay, realising additional
net cash consideration of GBP5m.
The net assets and net profit on disposal/closure of operations disposed
of or closed were as follows:
Six months ended Six months ended Year ended
30 June 30 June 31 Dec
2018 2017 2017
GBPm GBPm GBPm
Goodwill 8 50 52
Other acquisition-related intangible assets - 1 1
Property, plant and equipment 14 13 13
Other non-current assets 3 17 17
Current assets 22 78 78
Liabilities (16) (58) (61)
Net assets of operations disposed 31 101 100
Less: recycling from currency translation reserve (1) (17) (18)
Net impact on consolidated statement of financial
position due to disposals 30 84 82
Fair value of retained investment in former joint
venture - (3) (3)
Profit on disposal/closure of
subsidiaries/businesses 4 68 74
Total consideration 34 149 153
Satisfied by:
Cash received 33 158 166
Disposal costs paid (3) (5) (10)
Additional net consideration received/(costs paid)
relating to disposals completed in prior years 2 (2) -
Net cash consideration received in the period 32 151 156
Deferred consideration receivable 3 4 4
Accrued disposal and other costs (1) (6) (7)
Total consideration 34 149 153
Notes to the interim financial statements (continued)
8) Net finance expense
Year
ended
Six months ended Six months ended 31 Dec
30 June 2018 30 June 2017(1) 2017(1)
GBPm GBPm GBPm
Interest and other income on cash, cash equivalents
and investments 6 6 12
Gain arising from fair value adjustment to the hedged
loan note items 5 9 14
Loss arising from change in fair value of derivative
financial instruments hedging loan notes (5) (9) (14)
Other finance income 2 - -
Finance income 8 6 12
Interest on bank overdrafts and loans (8) (10) (18)
Interest on loan notes (41) (45) (87)
Net interest (payable)/receivable on loan-note related
derivatives(1) (2) 4 4
Interest on obligations under finance leases (1) (1) (3)
Other interest charges(2) (5) (4) (12)
Total Group borrowing costs (57) (56) (116)
Finance costs on defined retirement benefit obligations (5) (6) (11)
Finance expense (62) (62) (127)
Net finance expense (54) (56) (115)
(1) In the prior periods, the net interest receivable on loan note
related derivatives was presented within finance income. In the current
period it has been included within
finance expense, and the prior period comparatives re-presented
accordingly.
(2) Other interest charges include GBPnil (six months ended 30 June
2017: GBPnil; year ended 31 December 2017: GBP2m) relating to discounts
unwound on provisions.
9) Tax
Year
Six months ended Six months ended ended
30 June 30 June 31 Dec
2018 2017 2017
GBPm GBPm GBPm
Current taxation expense (33) (44) (97)
Deferred taxation
credit/(expense) 2 (10) (31)
Total income tax expense for the
period (31) (54) (128)
The effective tax rate on continuing operations was 22% (2017: 25%).
The effective tax rate is a function of a variety of factors, with the
most significant being (i) the geographic mix of the Group's taxable
profits and the respective country tax rates, (ii) profits arising on
the disposal of subsidiaries in the period being exempt from tax, (iii)
the recognition of, and changes in the value of, deferred tax assets and
liabilities, (iv) permanent differences such as expenses disallowable
for tax purposes, (v) irrecoverable withholding taxes, and (vi) benefit
of one-off items including tax claims.
The lower effective tax rate compared with the period to June 2017 is
primarily driven by profits arising on the disposal of subsidiaries
being taxed at a higher tax rate in the prior period.
At 30 June 2018, the Group had recognised deferred tax assets of GBP241m
(31 December 2017: GBP242m) based upon the latest view of expected
future profitability of businesses in which these assets have been
recognised. Deferred tax liabilities of GBP8m (31 December 2017: GBP8m),
current tax liabilities of GBP61m (31 December 2017: GBP79m) and current
tax assets of GBP54m (31 December 2017: GBP55m) were also recognised.
Deferred tax assets arise predominantly on tax losses and on deficits in
defined benefit pension schemes. At 30 June 2018, the Group had
estimated tax losses of GBP296m (31 December 2017; GBP272m) which were
not recognised as deferred tax assets. Recognition of deferred tax
assets is dependent upon the availability of future taxable profits
based on business plans of the relevant legal entities.
Notes to the interim financial statements (continued)
As at 30 June 2018, the Group had capital losses available to carry
forward of approximately GBP2.6bn (31 December 2017: GBP2.6bn). These
losses have no expiry date and have not been agreed with the relevant
tax authorities. No deferred tax assets have been recognised in respect
of these losses on the basis that the likelihood of their future
utilisation is considered to be remote.
At 30 June 2018, the Group had adequate provision for liabilities likely
to arise in accounting periods which remain open to enquiry by tax
authorities. The global nature of the Group's operations means that the
most significant tax risk is in relation to challenges from tax
authorities in relation to the pricing of cross-border transactions and
the Group's interpretation of the OECD's arm's-length principle. This
risk is largely driven by the inherently subjective nature of transfer
pricing and the divergent views taken by tax authorities.
In determining the appropriate level of provisions in respect of such
challenges, the Group applies a risk-based approach which considers
factors such as the quantum of the charge, the countries party to the
transaction and the relevant statutes of limitation. An assessment is
also made of the likelihood that compensating adjustments will be
obtained under the relevant tax treaties to mitigate the level of double
taxation which could arise. As the Group operates in a significant
number of countries, determining the appropriate level of provisions
inevitably involves a significant level of judgment which is typically
influenced by the Group's constantly evolving experience of tax
controversy in different countries. The Group has open tax periods in a
number of countries involving a number of issues, with the most material
disputes typically being in respect of cross-border transactions.
As at 30 June 2018, the Group had total tax exposures of approximately
GBP155m (31 December 2017: GBP146m) of which GBP42m
(31 December 2017: GBP42m) is provided against. The Group believes that
it has made appropriate provision for open tax periods which have not
yet been agreed by tax authorities. The final agreed liabilities may
vary from the amounts provided, as these are dependent upon the outcomes
of the domestic and international dispute resolution processes in the
relevant countries. The Group typically has limited control over the
timing of resolution of uncertain tax positions with tax authorities.
Acknowledging this inherent unpredictability, and on the basis of
currently available information, the Group does not expect material
changes to occur in the level of provisions against existing uncertain
tax positions during the next twelve month period.
At any point in time, the Group is typically subject to tax audits in a
number of different countries. In situations where a difference of
opinion arises between the Group and a local tax authority in respect of
its tax filings, the Group will debate the contentious areas and, where
necessary, resolve them through negotiation or litigation. The Group
relies upon advice and opinions from the Group tax department, local
finance teams and external advisors, to ensure that the appropriate
judgments are arrived at in establishing appropriate accounting
provisions in relation to such disputes.
10) Dividends
Pence DKK 2018 2017
per per
share share GBPm GBPm
Amounts recognised as distributions to equity holders
of the parent in the period
Final dividend for the year ended 31 December 2016 5.82 0.5029 - 90
Interim dividend for the six months ended 30 June
2017 3.59 0.2948 - 55
Final dividend for the year ended 31 December 2017 6.11 0.5097 95 -
95 145
Proposed interim dividend for the six months ended
30 June 2018 3.59 0.2969 55
An interim dividend of 3.59p (DKK 0.2969) per share for the six months
ended 30 June 2018 will be paid on 12 October 2018 to shareholders on
the register on 7 September 2018.
Notes to the interim financial statements (continued)
11) Earnings per share attributable to equity shareholders of the parent
Year
ended
Six months ended 31 Dec
Six months ended 30 June 2017 2017
30 June 2018 Restated(1) Restated(1)
GBPm GBPm GBPm
(a) From continuing and discontinued operations
Earnings
Profit for the period attributable to equity shareholders
of the parent 103 151 237
Weighted average number of ordinary shares (m) 1,548 1,548 1,548
Earnings per share from continuing and discontinued
operations (pence)
Basic and diluted 6.7p 9.8p 15.3p
(b) From continuing operations
Earnings
Profit for the period attributable to equity shareholders
of the parent 103 151 237
Adjustment to exclude loss for the period from discontinued
operations (net of tax) - 4 6
Profit from continuing operations 103 155 243
Earnings per share from continuing operations (pence)
Basic and diluted 6.7p 10.0p 15.7p
(c) From discontinued operations
Loss for the period from discontinued operations (net
of tax) - (4) (6)
Loss per share from discontinued operations (pence)
Basic and diluted - (0.3)p (0.4)p
(1) Restated for the effect of IFRS 15 - see note 3.
12) Disposal groups classified as held for sale
As at 30 June 2018, disposal groups classified as held for sale included
the assets and liabilities associated with a minor operation in the
Group's Asia region.
At 30 June 2017, disposal groups classified as held for sale included
the assets and liabilities associated with operations in the Group's
Europe & Middle East and Americas regions.
At 31 December 2017, disposal groups classified as held for sale
included the assets and liabilities associated with operations in the
Group's Europe & Middle East, Africa, Asia and Americas regions.
Notes to the interim financial statements (continued)
13) Cash and cash equivalents, overdrafts and customer cash processing
balances
The Group's Cash Solutions businesses provide a range of cash handling
and processing services on behalf of customers. Certain of those
services comprise collection, segregated storage and delivery of
customer cash, with title to the cash handled remaining with the
customer throughout the process. Such cash is never recorded in the
Group's balance sheet.
A number of other cash processing services are provided to customers,
such as the sale and purchase of physical cash balances, and the
replenishment of ATMs and similar machines from customer funds held in
Group bank accounts. Such funds, which are generally settled within two
working days, are classified as "funds within cash processing
operations", along with the related balances due to and from customers
in respect of unsettled transactions, and are included gross within the
relevant balance sheet classifications.
As at As at
30 June As at 31 Dec
2018 30 June 2017 2017
Funds within cash processing operations GBPm GBPm GBPm
Stocks of money, included within cash and cash equivalents 51 70 74
Overdraft facilities related to cash processing operations,
included within bank overdrafts (8) (7) (19)
Liabilities to customers in respect of cash processing
operations, included within trade and other payables (48) (66) (62)
Receivables from customers in respect of cash processing
operations, included within trade and other receivables 5 3 7
Funds within cash processing operations (net) - - -
Whilst such cash and bank balances are not formally restricted by legal
title, they are restricted by the Group's own internal policies such
that they cannot be used for the purposes of the Group's own operations.
For the purposes of the Group's consolidated statement of cash flow,
funds within cash processing operations are therefore recorded net of
the related balances due to and from customers in respect of unsettled
transactions, within cash, cash equivalents and bank overdrafts, and
hence have no impact on the Group's statutory cash flow.
A reconciliation of cash, cash equivalents and bank overdrafts at the
end of the period per the consolidated statement of financial position
to the corresponding balances included within the consolidated statement
of cash flow is included in note 16.
14) Retirement benefit obligations
The Group's main defined benefit scheme is in the UK which accounts for
approximately 62% (31 December 2017: 66%) of the total net deficit of
all of the defined benefit schemes operated by the Group. The majority
of the scheme was closed to future accrual in 2011. The Group's IAS 19
Revised (2011) Employee Benefits net pension deficit at 30 June 2018
recognised in the consolidated statement of financial position was
GBP382m (31 December 2017: GBP381m) or GBP321m (31 December 2017:
GBP318m) net of applicable tax in the relevant jurisdictions. The
Group's net pension deficit has increased marginally compared with the
position as at 31 December 2017 reflecting an increase in the deficits
in the Group's unfunded pension schemes offset by a decrease in the net
deficit of the UK pension scheme. The decrease in the UK scheme's net
deficit reflects the payment of scheduled deficit-repair contributions
of GBP21m (2017: GBP20m) during the period, together with a slightly
higher discount rate assumption applied to the valuation of scheme
obligations. The next triennial valuation of the Group's main UK pension
schemes is underway, as a result of which future deficit-repair
contributions will be subject to review and potential renegotiation.
Notes to the interim financial statements (continued)
15) Provisions and contingent liabilities
Onerous Property
Employee customer and
benefits Restructuring Claims contracts other(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2018 20 4 104 62 52 242
Additional
provisions in the
period 3 14 14 - 4 35
Utilisation of
provisions (2) (10) (18) (8) (9) (47)
Transfers and
reclassifications - (1) (1) - 5 3
Unused amounts
reversed - - (2) - (2) (4)
Exchange
differences (1) (1) 1 - 1 -
At 30 June 2018 20 6 98 54 51 229
Included in
current
liabilities 83
Included in
non-current
liabilities 146
229
(1) Property and other includes GBP20m (31 December
2017: GBP17m) of onerous property lease provisions
and dilapidations.
The Group recognised additional claims provisions of GBP14m mainly
related to the estimated cost of settlement of claims from commercial
disputes managed through the internal captive insurance companies in
relation to prior years.
Additional provisions of GBP14m were recorded in relation to
restructuring costs, mainly related to the 2018-2020 strategic
productivity programme announced in 2017 (see note 6).
There were no increases to onerous customer contract provisions during
the period. The provision at the end of June 2018 represents the
anticipated total losses in respect of certain UK contracts. These
additional expected losses are mainly related to the Compass contract
and two PFI contracts that are expected to run for the next 15 to 20
years. It is expected that around 60% of the Group's total provision for
onerous contracts will be utilised by the end of 2020. A number of
profit improvement plans that were designed but have not yet been
embedded successfully in contract delivery were not considered when
estimating future expected losses. This is consistent with the Group's
policy which requires evidence that profit improvement plans will be
successfully implemented before they are reflected in anticipated future
cash flow projections for onerous contract provisioning purposes.
The Group is involved in disputes in a number of countries, mainly
related to activities incidental to its operations. Currently there are
a number of disputes open in relation to the application of local labour
law, commercial agreements with customers and subcontractors and claims
and compliance matters, in some cases in the course of litigation. In
addition, the interpretation of labour laws and regulations in a number
of countries where the Group operates is complex and there is inherent
judgement made when applying those laws and regulations that are open to
interpretation. As such, there is risk that further disputes and claims
from employees could arise in the future. Where there is a dispute or
where there is a risk of a dispute or claims in the future and where,
based on legal counsel advice, the Group estimates that it is probable
that the dispute will result in an outflow of economic resources,
provision is made based on the Group's best estimate of the likely
financial outcome. Where a reliable estimate cannot be made, or where
the Group, based on legal counsel advice, considers that it is not
probable that there will be an outflow of economic resources, no
provision is recognised.
In this regard, the Group is party to a number of on-going litigation
processes in relation to interpretation of local labour law and
regulations in a number of countries, where it is expected that these
matters will not be resolved in the near future. At this stage, the
Group's view is that these cases will either be resolved in a manner
favourable to the interests of the Group or, due to the nature and
complexity of the cases, it is not possible to estimate the potential
economic exposure. In addition, in the ordinary course of business,
other contingent liabilities exist where the Group is subject to
commercial claims and litigation from a range of parties in respect of
contracts, agreements, regulatory and compliance matters, none of which
are expected to have a material impact on the Group.
The investigation opened by the Serious Fraud Office in 2013 in respect
of the Group's Electronic Monitoring contract remains
on-going. The Group continues to co-operate fully with the investigation
but, based on currently available information, is unable to make a
reliable estimate of the outcome of that review.
Judgement is required in quantifying the Group's provisions, especially
in connection with claims and onerous contracts, which are based on a
number of assumptions and estimates where the ultimate outcome may be
different from the amount provided. Each of these provisions reflects
the Group's best estimate of the probable exposure at 30 June 2018 and
this assessment has been made having considered the sensitivity of each
provision to reasonably possible changes in key assumptions. The Group
is satisfied that it is unlikely that changes in these key assumptions
will have a material impact on the Group's overall provisioning position
in the next 12 months.
Notes to the interim financial statements (continued)
16) Analysis of net debt
A reconciliation of net debt to amounts in the consolidated statement of
financial position is presented below:
As at As at
30 June As at 31 Dec
2018 30 June 2017 2017
GBPm GBPm GBPm
Cash and cash equivalents 1,302 827 902
Receivables from customers in respect of cash processing
operations(1) 5 3 7
Net cash and overdrafts included within disposal groups
held for sale - 1 8
Bank overdrafts (292) (216) (284)
Liabilities to customers in respect of cash processing
operations(2) (48) (66) (62)
Total Group cash, cash equivalents and bank overdrafts 967 549 571
Investments 65 78 62
Net debt (excluding cash and overdrafts) included
within disposal groups held for sale - (1) (3)
Bank loans (12) (88) (13)
Loan notes (2,624) (2,144) (2,141)
Obligations under finance leases (34) (48) (35)
Fair value of loan note derivative financial instruments 72 47 72
Total net debt (1,566) (1,607) (1,487)
(1) Included within trade and other receivables
(2) Included within trade and other payables
17) Reconciliation of operating profit to net cash flow from operating
activities of continuing operations
Year
ended
Six months ended Six months ended 31 Dec
30 June 30 June 2017 2017
2018 Restated(1) Restated(1)
GBPm GBPm GBPm
Operating profit 193 275 502
Adjustments for non-cash and other items:
Amortisation of acquisition-related intangible
assets 2 6 10
Net profit on disposal/closure of
subsidiaries/businesses (4) (68) (74)
Depreciation of property, plant and equipment 45 52 104
Amortisation of non-acquisition-related intangible
assets 10 11 22
Share of profit from joint ventures (4) (4) (9)
Equity-settled share-based payments 4 4 9
(Increase)/decrease in provisions (5) (2) 18
Additional pension contributions (21) (20) (40)
Operating cash flow before movements in working
capital 220 254 542
(Increase)/decrease in inventories (5) 7 1
Increase in receivables (20) (51) (94)
(Decrease)/increase in payables (30) (40) 39
Net cash flow from operating activities before tax 165 170 488
(1) Restated for the effect of IFRS 15 - see note 3
Notes to the interim financial statements (continued)
18) Fair value of financial instruments
The carrying amounts and fair values of the Group's financial
instruments for which fair value is different from carrying amount are
shown below:
31 Dec 31 Dec
30 June 30 June 30 June 30 June
2018 2018 2017 2017 2017 2017
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
Level* GBPm GBPm GBPm GBPm GBPm GBPm
Loan notes
carried at
amortised
cost
Public
loan
notes 1 2,155 2,205 1,659 1,727 1,678 1,742
Private
loan
notes 2 469 476 485 493 463 467
The carrying amounts and fair values of the Group's derivative financial
instruments indicating those which are designated as hedging instruments
are shown below:
31 Dec
30
30 June June
2018 2017 2017
Hedge relationship Level* GBPm GBPm GBPm
Derivative assets carried at fair value
Interest-rate swaps Fair value hedge 2 9 20 15
Cross-currency swaps Cash flow hedge 2 59 47 54
Cross-currency swaps Net investment hedge 2 9 - 16
Derivative liabilities carried at fair value
Interest-rate swaps Fair value hedge 2 - (1) (1)
Not in a hedging
Interest-rate swaps relationship 2 (1) (1) (1)
Cross-currency swaps Cash flow hedge 2 (5) (12) (9)
Cross-currency swaps Net investment hedge 2 - (6) (2)
The Group's investments of GBP65m (30 June 2017: GBP78m,
31 December 2017: GBP62m) are stated at fair value
determined using Level 1* inputs (i.e. using unadjusted
quoted prices in active markets for identical financial
instruments). The fair values of financial instruments
that are measured using techniques consistent with
Level 2* of the valuation hierarchy (i.e. using inputs
other than quoted prices in active markets that are
observable for the asset and liability, either directly
or indirectly) are calculated using discounted cash
flow models. The relevant currency-yield curve is
used to forecast the floating-rate cash flows anticipated
under the instrument, which are discounted back to
the balance sheet date.
* Fair value hierarchy level, as defined by IFRS 13
- Fair value measurements.
Alternative Performance Measures
BASIS OF PREPARATION
The Group applies the basis of preparation for its statutory results
shown on page 21. To provide additional information and analysis which
enables a fuller understanding of the Group's results and to identify
easily the performance of the Group's ongoing businesses, the Group also
makes use of a number of Alternative Performance Measures (APMs) in the
management of its operations and as a key component of its internal and
external reporting. Those APMs are prepared and presented in accordance
with the following basis of preparation.
Whilst broadly consistent with the treatment adopted by both the Group's
business sector peers and by other businesses outside of the Group's
business sector, these APMs are not necessarily directly comparable with
those used by other companies.
Adjusted results
In order to allow a fuller understanding of its results, the Group
separately discloses the effects on profit of strategic restructuring
activities, acquisition related amortisation, goodwill impairments and
profits or losses arising on the acquisition or disposal of businesses
(together, "separately disclosed items"). The Group also discloses
separately those items that the Group believes need to be shown
separately to allow a fuller understanding of the results for the period
because of their size, nature or incidence ("specific items").
Adjusted measures of profit and earnings are stated before the effects
of separately disclosed and specific items; the related tax effects; and
tax-specific charges or credits which have a material impact such as
those arising from changes in tax legislation.
Adjusted measures of profit are provided to allow the trading results of
the Group to be assessed separately from the effects of corporate
actions (such as acquisitions, disposals and strategic restructuring)
and the effects of significant or unusual items.
A reconciliation of Adjusted PBITA to operating profit is provided on
page 16.
Underlying results
To provide a better indication of the performance of the Group's ongoing
business at the period end, the Group separately presents its underlying
results. Underlying results are defined as the adjusted results of the
Group (i.e. stated before the effect of specific and separately
disclosed items) excluding the results of onerous contracts and
businesses that have been sold or closed in the current and comparative
periods. Underlying results for the comparative period are re-presented
to remove the effect of businesses disposed of or closed in the current
period to enable a like-for-like comparison of the results of the
Group's on-going activities at the end of the most recent reporting
period.
A reconciliation of the underlying results to the statutory results is
included on page 4
Constant currency results
In order to allow readers to assess the performance of the Group's
business separate to the effect of foreign exchange movements, the Group
also presents its comparative results (excluding cash flows)
retranslated to sterling using the average rates for the current period.
Cash flows are not retranslated but are presented at historical exchange
rates.
A reconciliation of the constant currency results for the period to the
statutory results is included on page 42.
Business reporting structure
In line with its strategy for managing the business, the Group reports
separately the underlying results of its Cash Solutions and Secure
Solutions businesses. The results for the Secure Solutions business are
further divided geographically into the following regions:
-- Africa;
-- Americas (combining the Secure Solutions business of the previously
reported Latin America and North America regions).
-- Asia (combining the Secure Solutions business of the previously reported
Asia Pacific region with that of India and Bangladesh);
-- Europe & Middle East (combining the Secure Solutions businesses of the
previously reported Middle East & India, Europe, and UK & Ireland
businesses but excluding that of India and Bangladesh); and
The Group reports separately the results of onerous contracts and the
results of its disposed businesses, being those that have been sold in
the current or prior periods.
In prior periods, the Group reported its APMs on a largely geographical
basis, split into the following seven geographical regions: Africa, Asia,
Middle East & India, Europe, United Kingdom & Ireland, Latin America,
and North America. A reconciliation of the results from core businesses
(excluding onerous contracts and the portfolio businesses) in the
previous structure to the results from core businesses in the new
structure is included in note D.
These components, together with the impact of restructuring costs,
specific items and other separately disclosed items constitute
"continuing operations" under IFRS. Discontinued operations, in
accordance with IFRS 5, represent areas of the business which are being
managed for sale or closure but which represent material business
segments or entities. The Group has not classified any operations as
discontinued in any of the periods presented. All amounts recorded as
discontinued relate to businesses sold prior to 1 January 2017.
Alternative Performance Measures
Revised presentation of APMs
In prior periods, the Group separately reported the results of its core
businesses. The core businesses were defined as the underlying business
excluding portfolio businesses (being the parts of the business that had
been identified for exit) and certain legacy onerous contracts. The
results of the portfolio businesses and onerous contracts were reported
separately. After the completion of some minor disposals in the current
period, the portfolio programme is considered to be substantially
complete. Going forward, the Group will therefore manage the former
portfolio businesses as part of its underlying business. Accordingly
the Group has revised the presentation of its prior year comparative
APMs to include portfolio businesses within the underlying results to
enable the presentation of underlying results on a like-for-like basis
as described above.
A reconciliation of the results from core businesses as previously
stated to the underlying results in included in note D.
Financial performance indicators
The key financial measures used by the Group in measuring progress
against strategic objectives are set out below, and are reconciled for
the current and prior period to the Group's statutory results on page 4:
-- Revenue
Statutory revenue arising in each of the underlying, onerous contracts
and disposed business components. Underlying revenue is a Key
Performance Indicator ("KPI").
-- Organic Growth
Organic growth is calculated based on revenue growth at constant
currency, adjusted to exclude the impact of any acquisitions during the
current or prior periods.
-- Adjusted profit before interest, tax and amortisation
("Adjusted PBITA")
The Group uses Adjusted PBITA as a consistent internal and external
reporting measure of its performance, as management views it as being
more representative of financial performance from the normal course of
business and more comparable period to period. Adjusted PBITA excludes
the effect of separately disclosed items (being restructuring costs,
goodwill impairment, amortisation of acquisition-related intangible
assets and profits or losses on disposal or closure of businesses) and
specific items, which the Group believes should be disclosed separately
by virtue of their size, nature or incidence, as explained on page 36.
Further details explaining the reasons for excluding these items are
provided on pages 35 and 36 of the Group's 2017 Integrated Report and
Accounts. Underlying Adjusted PBITA is a KPI.
-- Operating cash flow
Net cash flow from operating activities before tax. Underlying operating
cash flow excludes restructuring spend and is a KPI.
-- Earnings
Profit attributable to equity shareholders of G4S plc. Underlying
earnings is a KPI.
-- Earnings per share ("EPS")
Profit attributable to equity shareholders of G4S plc, per share, from
continuing operations. Underlying EPS is a KPI.
-- Net debt to adjusted EBITDA
The ratio of total net debt, including investments, finance lease
liabilities and cash and overdrafts within net assets of disposal groups
held for sale, to adjusted earnings attributable to equity shareholders
before interest, tax, depreciation and amortisation ('Adjusted EBITDA').
This ratio is a factor in the board's assessment of the financial
strength of the Group, and is a key measure of compliance with covenants
in respect of the Group's borrowing facilities.
Certain of these financial performance indicators in respect of
underlying results also form a significant element of performance
measurement used in the determination of performance-related
remuneration and incentives, as described on page 36 of the Group's 2017
Integrated Report and Accounts.
Alternative Performance Measures
1. Reconciliation of operating profit to movements in net debt
Year
ended
Six months ended 31 Dec
Six months ended 30 June 2017 2017
30 June 2018 Restated(1) Restated(1)
GBPm GBPm GBPm
Operating profit 193 275 502
Adjustments for non-cash and other items (see note
17) 27 (21) 40
Net working capital movement (see note 17) (55) (84) (54)
Net cash flow from operating activities before tax
(see note 17) 165 170 488
Adjustments for:
Restructuring spend 10 13 19
Cash flow from continuing operations 175 183 507
Analysed between:
Underlying operating cash flow 179 183 511
Disposed businesses 2 6 9
Onerous contracts (6) (6) (13)
Investment in the business
Purchase of fixed assets, net of disposals (48) (43) (104)
Restructuring spend (10) (13) (19)
Disposal of subsidiaries (see note 7) 32 151 156
Acquisition of subsidiaries (1) - (1)
Net debt in disposed entities (1) (11) (11)
New finance leases (2) (1) (3)
Net investment in the business (30) 83 18
Net cash flow after investing in the business 145 266 525
Other uses of funds
Net interest paid (66) (48) (78)
Tax paid (48) (41) (86)
Dividends paid (104) (103) (179)
Purchase of own shares (7) (7) (10)
Transactions with non-controlling interests - (13) (16)
Other 2 4 6
Net other uses of funds (223) (208) (363)
Net (increase)/decrease in net debt before foreign
exchange movements (78) 58 162
Net debt at the beginning of the period (1,487) (1,670) (1,670)
Effect of foreign exchange rate fluctuations (1) 5 21
Net debt at the end of the period (1,566) (1,607) (1,487)
(1) Restated for the adoption of IFRS15 - see note 3.
Alternative Performance Measures
B. Reconciliation of changes in cash and cash equivalents to
movement in net debt
Year
Six months ended ended
30 June Six months ended 31 Dec
2018 30 June 2017 2017
GBPm GBPm GBPm
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts (page 20) 398 (126) (87)
Adjustments for items included in cash flow excluded
from net debt:
Purchase/(sale) of investments 3 17 (3)
Net movement in borrowings (481) 161 235
Repayment of obligations under finance leases 3 10 23
Items included in net debt but excluded from cash
flow:
Net debt (excluding cash, cash equivalents and bank
overdrafts) of disposed entities 1 (3) (3)
New finance leases (2) (1) (3)
Net decrease in net debt before foreign exchange
movements (78) 58 162
C. Group net debt: Adjusted EBITDA ratio
Year
Six months ended ended Rolling
30 June 31 Dec Six months ended Rolling 12 months
2017 2017 30 June 12 months to 30 June 2017
Restated(1) Restated(1) 2018 to 30 June 2018 Restated(1)
GBPm GBPm GBPm GBPm GBPm
Adjusted PBITA (page 16) 238 492 213 467 497
Add back:
Depreciation 52 104 45 97 104
Amortisation of non-acquisition-related intangible
assets 11 22 10 21 23
Adjusted EBITDA 301 618 268 585 624
Exclude EBITDA relating to businesses sold in the
period/year (13) (19) (1) (7) (22)
Adjusted EBITDA excluding businesses sold in the
period/year 288 599 267 578 602
Net debt per note 16 1,566 1,607
Net debt: Adjusted EBITDA ratio 2.7 2.7
(1) Restated for the adoption of IFRS15 - see note 3.
Alternative Performance Measures
D. Reconciliation of prior period results from core businesses by
segment to prior period underlying results by new segments - for the six
months ended 30 June 2017
Revenue Adjusted PBITA(i)
Core Core
businesses businesses
Six months as Core as Core
ended 30 previously Secure Solutions businesses previously Secure Solutions businesses
June 2017 reported Cash Solutions re-classification in new reported Cash Solutions re-classification in new
(GBPm) (a) (b) (c) structure (a) (b) (c) structure
Africa 228 (34) - 194 24 (9) - 15
Latin
America 350 (22) - 328 15 (3) - 12
North
America 1,040 (149) - 891 57 (17) - 40
Americas 1,390 (171) - 1,219 72 (20) - 52
Asia
Pacific 367 (115) 179 431 30 (16) 14 28
Middle
East &
India 427 (27) (179) 221 34 (1) (14) 19
Europe 654 (146) - 508 48 (20) - 28
United
Kingdom &
Ireland 649 (144) - 505 53 (14) - 39
Europe &
Middle
East 1,730 (317) (179) 1,234 135 (35) (14) 86
Cash
Solutions - 637 - 637 - 80 - 80
Total
before
corporate
costs 3,715 - - 3,715 261 - - 261
Corporate
costs - - - (26) - - (26)
Total 3,715 - - 3,715 235 - - 234
Underlying Underlying
Core results at results at
businesses IFRS actual constant
Six months ended 30 in new Portfolio businesses Disposed businesses 15 exchange Exchange differences exchange
June 2017 (GBPm) structure (d) (e) (f) rates (g) rates (h)
Africa 194 6 (1) - 199 (10) 189
Americas 1,219 41 (23) - 1,237 (106) 1,131
Asia Pacific 431 13 (13) - 431 (28) 403
Europe & Middle East 1,234 97 (103) (1) 1,227 (6) 1,221
Cash Solutions 637 43 (16) - 664 (17) 647
Total revenue 3,715 200 (156) (1) 3,758 (167) 3,591
Africa 15 1 (1) - 15 (1) 14
Americas 52 - (2) - 50 (3) 47
Asia Pacific 28 1 (1) - 28 (2) 26
Europe & Middle East 86 5 (5) 1 87 - 87
Cash Solutions 80 (5) (1) - 74 (3) 71
Total before
corporate costs 261 2 (10) 1 254 (9) 245
Corporate costs (26) - - - (26) - (26)
Adjusted PBITA 235 2 (10) 1 228 (9) 219
Other financial KPIs (GBPm)
Profit before tax 181 1 (10) 1 173 (10) 163
Profit after tax 138 (1) (7) 1 131 (7) 124
Earnings 128 (1) (6) 1 122 (7) 115
Earnings per share -
p 8.3 (0.1) (0.4) 0.1 7.9 (0.5) 7.4
Operating cash flow 192 (3) (6) - 183 - 183
(a.) Results from core businesses as previously reported in the Group's
results for periods ended 30 June 2017 or 31 December 2017 as
appropriate. Segment results were presented geographically with segments
combining both Secure Solutions and Cash Solutions.
(b.) As reported in the 2017 Integrated Report and Accounts, in January
2018 the Group created a new 'Cash Solutions' division. This column
presents the re-classification of the results from the Cash Solutions
businesses that were previously reported in the geographical segments
into the new Cash Solutions division.
(c.) With effect from 1 January 2018, the Secure Solutions division was
consolidated into four regions: Africa, Americas, Asia and Europe &
Middle East. Following this reorganisation, the results of certain
businesses previously reported in the Middle East & India region
(primarily India and Bangladesh) are now reported in the Asia region.
(d.) As reported in the 2017 Integrated Report and Accounts, the Group's
portfolio business divestment and closure programme is now materially
complete. The financial impact of portfolio businesses is no longer
material and to simplify reporting moving forwards, the Group has ceased
separate columnar disclosure of these items.
(e.) To present results on a consistent and comparable basis, the
results from any businesses sold in either the current or prior periods
are excluded from the underlying results in both the current and prior
periods. These include the Youth Services business in North America, the
children's homes business in the UK and Group businesses in Israel and
Bulgaria in 2017 and the document storage business in Kenya and the
Group's businesses in Hungary in 2018.
(f.) With effect from 1 January 2018 the Group has adopted IFRS 15 -
Revenue from contracts with customers, as explained in note 3 which has
resulted in certain 2017 income statement line items being restated.
(g.) The 30 June 2017 results were presented at average exchange rates
for the six months ended 30 June 2017 and those for the year ended
31 December 2017 were presented at average exchange rates for the year
ended 31 December 2017. The comparative results have been re-presented
at average exchange rates for the six months ended 30 June 2018.
(h.) Underlying results are an APM and are explained on page 36 and
reconciled to the Group's statutory results on page 4.
Alternative Performance Measures
E. Reconciliation of prior period results from core businesses by
segment to prior period underlying results by new segments - for the
year ended 31 December 2017
Revenue Adjusted PBITA(i)
Core
Year ended businesses
31 as Core Core
December previously Secure Solutions businesses Secure Solutions businesses
2017 reported Cash Solutions re-classification in new Core businesses as previously reported Cash Solutions re-classification in new
(GBPm) (a) (b) (c) structure (a) (b) (c) structure
Africa 457 (70) - 387 46 (18) - 28
Latin
America 693 (41) - 652 29 (7) - 22
North
America 2,006 (225) - 1,781 123 (25) - 98
Americas 2,699 (266) - 2,433 152 (32) - 120
Asia
Pacific 736 (223) 358 871 65 (32) 27 60
Middle
East &
India 845 (54) (358) 433 58 - (27) 31
Europe 1,356 (303) - 1,053 104 (43) - 61
United
Kingdom &
Ireland 1,334 (293) - 1,041 120 (35) - 85
Europe &
Middle
East 3,535 (650) (358) 2,527 282 (78) (27) 177
Cash
Solutions - 1,209 - 1,209 - 160 - 160
Total
before
corporate
costs 7,427 - - 7,427 545 - - 545
Corporate
costs - - - - (49) - - (49
Total 7,427 - - 7,427 496 - - 496
Year ended Underlying Underlying
31 Core results at results at
December businesses IFRS actual constant
2017 in new Portfolio businesses Disposed businesses 15 exchange Exchange differences exchange
(GBPm) structure (d) (e) (f) rates (g) rates (h)
Africa 387 12 (3) - 396 (12) 384
Americas 2,433 56 (23) - 2,466 (160) 2,306
Asia
Pacific 871 25 (25) - 871 (45) 826
Europe &
Middle
East 2,527 102 (115) (1) 2,513 (20) 2,493
Cash
Solutions 1,209 87 (31) (1) 1,264 (19) 1,245
Total
revenue 7,427 282 (197) (2) 7,510 (256) 7,254
Africa 28 1 (1) - 28 (1) 27
Americas 120 - (2) - 118 (7) 111
Asia
Pacific 60 - - - 60 (3) 57
Europe &
Middle
East 177 4 (8) 1 174 (1) 173
Cash
Solutions 160 (10) (3) - 147 (2) 145
Total
before
corporate
costs 545 (5) (14) 1 527 (14) 513
Corporate
costs (49) - - - (49) - (49)
Adjusted
PBITA 496 (5) (14) 1 478 (14) 464
Other financial KPIs
(GBPm)
Profit
before
tax 383 (7) (14) 1 363 (11) 352
Profit
after
tax 291 (14) (7) 1 271 (8) 263
Earnings 277 (15) (6) 1 257 (7) 250
Earnings
per share
- p 17.9 (1.0) (0.4) 0.1 16.6 (0.5) 16.1
Operating
cash
flow 527 (7) (9) - 511 - 511
For a description of (a) to (h) see page 40.
Alternative Performance Measures
E. Reconciliation of statutory results by segment to underlying results
by segment
Underlying Underlying
results at results at
Statutory Onerous Disposed actual Exchange constant
results contracts businesses rates differences rates
Revenue by
reportable
segment
(GBPm)
Six months
ended 30
June 2018
Africa 198 - (1) 197 - 197
Americas 1,177 - - 1,177 - 1,177
Asia 434 - - 434 - 434
Europe &
Middle
East 1,299 (63) (5) 1,231 - 1,231
Cash
Solutions 564 - (4) 560 - 560
Total Group
revenue 3,672 (63) (10) 3,599 - 3,599
Six months
ended 30
June 2017
Africa 200 - (1) 199 (10) 189
Americas 1,260 - (23) 1,237 (106) 1,131
Asia 444 - (13) 431 (28) 403
Europe &
Middle
East 1,387 (57) (103) 1,227 (6) 1,221
Cash
Solutions 680 - (16) 664 (17) 647
Total Group
revenue 3,971 (57) (156) 3,758 (167) 3,591
Year ended
31 December
2017
Africa 399 - (3) 396 (12) 384
Americas 2,489 - (23) 2,466 (160) 2,306
Asia 896 - (25) 871 (45) 826
Europe &
Middle
East 2,747 (119) (115) 2,513 (20) 2,493
Cash
Solutions 1,295 - (31) 1,264 (19) 1,245
Total Group
revenue 7,826 (119) (197) 7,510 (256) 7,254
Adjusted PBITA by
reportable segment
(GBPm)
Six months ended 30
June 2018
Africa 15 - - 15 - 15
Americas 54 - - 54 - 54
Asia 28 - - 28 - 28
Europe &
Middle
East 83 - - 83 - 83
Cash
Solutions 61 - (1) 60 - 60
Adjusted
PBITA
before
corporate
costs 241 - (1) 240 - 240
Corporate
costs (28) - - (28) - (28)
Total Group
Adjusted
PBITA 213 - (1) 212 - 212
Six months
ended 30
June 2017
Africa 16 - (1) 15 (1) 14
Americas 52 - (2) 50 (3) 47
Asia 29 - (1) 28 (2) 26
Europe &
Middle
East 92 - (5) 87 - 87
Cash
Solutions 75 - (1) 74 (3) 71
Adjusted
PBITA
before
corporate
costs 264 - (10) 254 (9) 245
Corporate
costs (26) - - (26) - (26)
Total Group
Adjusted
PBITA 238 - (10) 228 (9) 219
Year ended
31 December
2017
Africa 29 - (1) 28 (1) 27
Americas 120 - (2) 118 (7) 111
Asia 60 - - 60 (3) 57
Europe &
Middle
East 182 - (8) 174 (1) 173
Cash
Solutions 150 - (3) 147 (2) 145
Adjusted
PBITA
before
corporate
costs 541 - (14) 527 (14) 513
Corporate
costs (49) - - (49) - (49)
Total Group
Adjusted
PBITA 492 - (14) 478 (14) 464
Supplementary information
This announcement contains inside information and the person responsible
for making this announcement is Celine Barroche, company secretary
For further enquiries, please contact:
Helen Parris Director of Investor Relations +44 (0) 208 7222125
Media enquiries:
Sophie McMillan Head of Media +44 (0) 759 5523483
Press office +44 (0) 207 9633333
High resolution images and b-roll are available to download from the G4S
media library, available through the results centre at www.g4s.com.
Notes to Editors:
G4S is the leading global, integrated security company, specialising in
the provision of security services and solutions to customers. Our
mission is to create material, sustainable value for our customers and
shareholders by being the supply partner of choice in all our markets.
G4S is quoted on the London Stock Exchange and has a secondary stock
exchange listing in Copenhagen. G4S is active in around 90 countries and
has over 560,000 employees. For more information on G4S, visit
www.g4s.com.
Presentation of Results:
A presentation to investors and analysts is taking place today at 09.00
hrs at the London Stock Exchange.
The presentation can also be viewed by webcast using the following link:
http://view-w.tv/707-803-18618/en
Please note there will be a telephone dial-in facility for this event,
the call details are below:
Standard International Access: +44 (0) 20 3003 2666
UK Toll Free: 0808 109 0700
Copenhagen: +45 3272 9273
Denmark Toll Free: 8088 8649
New York: +1 646 843 4608
USA Toll Free: 1 866 966 5335
Password: G4S
Dividend payment information
2018 interim dividend:
Ex-dividend date - 6 September 2018
Last day to elect for DKK - 6 September 2018
Record date - 7 September 2018
Last day for DRIP elections - 21 September 2018
Pay date - 12 October 2018
Financial Calendar
November 2018 - Q3 2018 Trading update
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: G4S plc UK via Globenewswire
http://www.g4s.com/
(END) Dow Jones Newswires
August 09, 2018 02:00 ET (06:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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