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We had some very strong performances in 2005, particularly from the cash services division, the US security services business and New Markets overall.
2005 Performance Having announced a substantial merger in 2004, the next eighteen months were bound to be challenging for the organisation as we focused on bringing two large international companies together, achieving the cost savings that we had promised to our investors and maintaining our focus on the day-to-day business. We were extremely pleased with the business performance achieved in 2005 and it was a credit to everyone in the organisation who worked so hard to ensure that the integration went smoothly and that the focus on the business did not waiver through an incredible time of change. When we presented our full year results to the market in March 2006 we were pleased to report that: |
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We exited 2005 with some challenges remaining in a number of European manned security markets and in the German cash services market which was experiencing a certain amount of turmoil following the difficulties caused by a major competitor. We had some very strong performances in 2005, particularly from the cash services division, the US security services business and New Markets overall. 2005 Organic Growth |
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Our strong growth record continued in 2005 with overall organic growth of 7%, significantly stronger than the 6.2% achieved in 2004. The highlights in growth terms were North America manned security which grew 8.5%, the cash services division which achieved 6.2% and New Markets overall which continue to grow strongly at more than 20%. Future Growth Opportunities We expect future growth to continue across all product areas towards our medium-term targets. New Markets continue to grow strongly overall and, as our cash services businesses in different countries move through the phases of development from pure cash-in-transit to cash management and ATM outsourcing, there are further opportunities for the businesses to grow. We have a great deal of expertise in the cash services sector within the group and will focus on spreading this further throughout the organisation. Our ability to service international accounts is a strong point of differentiation for the organisation, made possible through our global coverage. We expect demand for quality security services across international boundaries to increase in the future as blue chip organisations become more global and require high quality, consistent services across their operations. G4S Global Risks, our consulting and specialist security business, has opportunities for future growth across a wide range of services, from risk consultancy to investigative and government security support services. By using the international footprint of the group, the business is able to provide these specialist services across a wide range of countries. Opportunities for the development of Justice Services exist in exporting our expertise into new markets as well as growing our current contract base, particularly in electronic monitoring of offenders. We do not believe that there will be substantial opportunities for combined security systems and manned security in the short term, but we are confident that, by having a systems capability closely aligned to our manned security businesses,we will be able to take advantage of opportunities to provide complete security solutions to our customers. We have recently brought our manned security and security systems businesses closer together as a single division, focused on providing security solutions to our customers. Our systems businesses remain key to our strategy, but we do not intend to build up a large systems division to compete with global systems competitors. Our focus will be on a few niche areas which add value to our manned security business. |
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2005 Margin Development
PBITA Margin by Business Line (%) |
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Future Margin Progression
We will achieve future margin progression through driving growth in our traditional sectors, through product development and market development, and as a result of our usual tight control of costs and effective management of resources. There are also a number of businesses which were operating below our margin targets in 2005 and our focus in 2006 will be on bringing these businesses back up to the expectations of the group as quickly as possible. |
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Mergers & Acquisitions
Our acquisition strategy remains unchanged and focused on a few key areas. We are constantly seeking bolt-on acquisitions across all services which add scale or additional expertise to our businesses or continue to consolidate fragmented markets. Whilst the organisation currently operates in more than 100 countries, we will seek to fill any appropriate geographic gaps in the security services businesses. This will enable further development of our Global Risks customer base and increase the opportunities for expanding international accounts. In cash services, it is not essential to have wide international coverage, but it is important to be the market leader in each market and to choose markets carefully depending on the role of the central bank, the sophistication of the cash cycle and the competitive landscape. Therefore, we will be selective about new country entries and target specific key markets. Our acquisition strategy will remain focused on these key areas and we will ensure that any acquisition opportunities meet our internal criteria – the right businesses, in the right markets and with the opportunity to deliver the appropriate level of return on investment.
Strategic Development
Summary & Outlook
Nick Buckles
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