Group KPIs are organic growth, cash conversion and PBITA margin
The key financial performance indicators (KPIs) for the group and G4S operational management across both the secure solutions and cash solutions businesses are organic growth, cash conversion (operating cash flow as a percentage of PBITA) and PBITA margin.
Organic turnover growth
Organic growth is used as the best measurement of growth inherent within a business, and it is widely accepted as such.
G4S revenues grew 6.9% organically excluding the Olympics contract in 2012, up from 5.1% in 2011.
Organic growth was assisted by strong growth across most regions, particularly in developing markets.
Our long-term aim is to achieve organic growth above GDP. Depending on contract phasing and the economic environment, we target to grow between 6% and 8% per annum in the long term.
For 2013, a new KPI of gross margin has been introduced for operational management. Gross margin is used to measure the proportion of revenue the business retains after incurring the direct costs associated with providing services to customers.
Cash conversion is used to measure the cash generation of the group and how successful the business is at managing its operating capital.
Through continual analysis of all aspects of the operating cash cycle to improve cash collections, we exceeded our cash conversion target of 85% of PBITA in 2012.
PBITA margin is used as a measure of success in controlling the cost base relative to sales.
The operating margin for secure solutions (82% of revenues) was slightly lower at 7.0% in 2012 from 7.2% in 2011 due to UK Government contract phasing, whilst the cash solutions margin was maintained at 10.5%, resulting in the overall margin performance for the year of 7.1%.
Managers across the group are also targeted to achieve additional objectives which are agreed on an individual basis and will usually be linked to business plan milestones.
Some examples of non-financial KPIs achieved in 2012 include:
- acquisition of a manned security business and a security licence in Brazil
- formation of a joint venture in China and security licence approval
- development of a group human rights policy
All objectives and targets are focused on driving the business performance forward and delivering the group’s solutions strategy over the longer term.
HR standards and KPIs
We believe strong employee relationships help deliver excellent customer service. To ensure that G4S delivers on its commitments to its employees, businesses are required to report monthly on key metrics relating to:
- Health and safety
- Employee turnover and stability
- Industrial relations
- Recruitment rates
See our Social Responsibility section for some of our key CSR KPIs and our progress against them in 2012. More detail can also be found in the 2012 G4S CSR report.