Speaking about the first half results at G4S, which were unveiled at the London Stock Exchange an hour ago, CEO Nick Buckles commented: “We were deeply disappointed that we had significant issues with the London 2012 Olympics contract and are very grateful to the military and the police for their support in helping us to deliver a safe and secure Games.”
The company’s leader continued: “The overall business has performed well in achieving a similar underlying profit as the first half of last year despite economic challenges, particularly in Europe, and weakness in the US Government market. Underlying organic growth in the first half has improved to over 5% overall, driven by a strong performance in developing markets which grew by over 10%.”
Buckles stated that the company continues to see good opportunities from outsourcing around the world, and “particularly from Governments looking to improve quality of services and reduce costs.” He stated: “We believe that, with our long-term track record, we will continue to play a major role in this sector.”
In conclusion, the G4S CEO outlined: “The breadth of our portfolio in 125 countries continues to present many new growth opportunities. Our market-leading businesses, broad customer base and GB pound 3.8 billion per annum contract pipeline give us confidence in the outlook for the Group.”
First half results in more detail
Excluding the Olympic Games security contract, sales at G4S are up 5.8% with an improved organic growth of 5.1%.
The adjusted earnings per share has been maintained at 9.8 pence.
There has been an organic growth of 10% in the developing markets with revenues of GB pound 1,191 million (representing 31% of the Group total, with a target for that figure to attain the 50% mark by 2019).
Group margin excluding exceptional items is lower at 6.0% (6.2% excluding the Olympics Games revenue) due to the challenging US Government market and UK contract phasing. Nevertheless, the organisation is on track to achieve its annual cash conversion target of 85%.
The Olympic and Paralympic Games contract loss of GB pound 50 million has been provided for as an exceptional item in the first half results. The contract review is now underway and expected to be completed during the second half of September.
Continued focus on business improvement
Centres of Service Excellence have been established for all core services: security guarding, cash solutions and care andjustice services. This is part of a two-year programme to support gross margins and profit improvement initiatives.
Restructuring in the first half of 2012 has realised “a headcount reduction of 1,100 positions” and GB pound 30 million of annualised savings (of which related costs of GB pound 24 million have been taken as an exceptional item in H1, and a large proportion of which relate to continental Europe). Up to GB pound 10 million of further costs are expected in the second half of the year.
According to the statement released this morning: “Security remains core to global strategy and continues to provide growth opportunities.”
There’s a “strong global contract pipeline” of GB pound 3.8 billion per annum across a diverse range of sectors including “the strongest visible pipeline in US commercial sector on record”.
Access the results and presentation in full
*Download the full half-yearly report from the G4S corporate website
**Also available is the full set of presentation slides as delivered to investors
