Skip Links

Strategy for accelerated growth

Print

Nick Buckles, G4S chief executive, explains the thinking behind the next phase of the Group’s development.

In the four years since G4S was created by the merger of Group 4 and Securicor, we have achieved all of our targets. The integration process has gone so well, in fact, that last year we were able to announce to the investor community some new targets.

These included an increase in our organic growth rate from a minimum of six per cent to seven per cent and the goal to achieve a seven per cent profit margin across the Group by 2009.

We also announced our intention of generating at least 85 per cent of our profit as cash flow and spending between £100m and £150m a year on acquisitions.

Having delivered on our promises, it was then time to begin the second phase of G4S’s development. Last year, the Board began formulating a new strategy for accelerated growth.

In doing so, it sought to take advantage of G4S’s resources and core competences, such as our presence in over 100 countries, our ability to manage large workforces and, of course, our considerable security expertise on which all of our operations are based.

The Board was also mindful of the fact that there were pressures on our profit margins in some elements of our business in developed markets, such as traditional manned security and cash transport.

This is not a new situation: it has been a fact of life for the past 20 years – as long as I have been in the industry – but we have to recognise that it is a continuing trend and one that could constrain our performance. We can’t change it. What we can do, however, is change the type of services we provide in a way that is beneficial to us and adds value to our customers.

First, we worked with London-based strategy consultants to set up processes for reviewing the different options. Eight business opportunities were shortlisted by the Executive management and presented to the G4S Board. We then graded them according to their attractiveness, in their own right, and their fit with us as an organisation, as well as how quickly we could adapt to each opportunity.

As a result, we made the decision to expand our core businesses into three complementary areas, which ticked all the boxes by fulfilling our criteria for financial returns, improving the mix of the business and building on the core capabilities of the Group.

None of these is totally new to G4S. We are already providing these services in a limited way in some regions. Now, with the new strategy in place, we are starting to roll them out to every region.

They are:

Security Consultancy

Risk assessment and consultancy services have always been a key part of our strategy but we had not pushed them hard enough within the organisation. There is already an element of consultancy in most of our services, as part of our response in drawing up solutions for our customers.

What our new strategy does is to take this service to a higher level: into the boardrooms of the customers who seek our help. What we are talking about is designing long-term outsourced security solutions for large parts of their organisations, across many countries. Much of this will happen at a local level. But where we have exceptional opportunities in specific market sectors, such as Justice Services or Aviation Security, it could be we will send in a consultancy team of experts and specialist risk consultants from another country who already have extensive experience and understanding of what needs to be done. Achieving a closer working relationship with customers demands trust and openness in order for us to fully understand their needs.

Secure Documentation

Storage and retrieval of data and documentation under secure conditions is a service that G4S is already providing very successfully in South America and elsewhere. Indeed, it was a core business of Securicor in the 1980s and 1990s but one we sold because we felt we weren’t big enough to have a real presence in the market. Now, with G4S’s far larger footprint and the success of existing operations, we are confident of making an important contribution globally.

Secure Facilties

The third expansion in our activities takes us into secure facilities management, one of the biggest markets in the world. Our interest in that market, however, is very specific. We are not looking to compete with those businesses providing general facilities services. Instead, we are offering services and management linked to security.

In other words, we will be looking to enter into long-term facility management contracts, based on a partnership approach, where security is a major underlying requirement from the customer and is therefore key to determining who they get to run their buildings from an end-to-end perspective. We already have a proven track record through our running of prisons and youth custody establishments where we are providing, under long-term contracts with security at their core, everything from education to healthcare. Also, we are trusted with all of the facilities management at the Kennedy Space Centre in the US, where our security services are fundamental.

In this area we are going to focus on 10 countries at the outset. The UK is well under way and our acquisition of support services group Global Solutions (GSL) [see application/pdf G4S International, March 08, page 43], which was finalised on 9 May, provides a perfect example of what we can offer. It was a former Group 4 company and it fits extremely well with the new strategy.

We will also be introducing Secure Facilities into three Benelux countries, which is also well under way, and we’ll pick one country from each of our other operational regions in which to launch.

The demands of our rapidly changing world are redefining the meaning of “security” and as the leading global security solutions provider it is essential that we meet those needs in partnership with our customers.

With our new strategy in place, I am confident we will satisfy those we serve, those we employ and those who invest in us, and that we have the determination and professional competence to meet the challenges of the 21st century.
..
This page is an edited version of the article featured in the June 2008 edition of International.
Download the full article: application/pdf Strategy for accelerated growth
Accelerated strategy graphic

Two acquisitions this year have an important bearing on the new strategy: ArmorGroup and Ronco

There were a number of reasons for buying ArmorGroup. Firstly, it takes us into four or five new countries in Africa and Asia. We have some significant overlaps in terms of synergies in about 30 territories. Their biggest customer relationships are with the US and UK governments, where we also have strong relationships, but with different departments, so it broadens our portfolio.

ArmorGroup has a strong security consultancy arm, so that ties in neatly with our new strategy, too. They are specialists, for example, in dealing with kidnap, ransom and extortion demands.

This acquisition takes us into new territory because ArmorGroup has also earned an enviable reputation for mine clearance – also referred to as “demining” and “environmental remediation”. It accounts for 10 per cent of their business.

Shortly afterwards we bought another US company, Ronco, which is also a demining specialist earning around £35m a year from its clearing operations. Between them, these two acquisitions will give G4S over half of the global mine clearance market.

ArmorGroup, incidentally, employs over 800 people in Iraq, most of whom are local Iraqis, to provide protection services. This number, together with existing G4S paramedic and fire-fighting crews, brings the number of Group employees in Iraq to 1,500.