2019 Half Year Results

G4S today announces its results for the six months ended 30 June 2019

2019 Half Year Results

G4S Chief Executive Officer Ashley Almanza commented:

“In the first half of this year, our improving sales performance in both Secure Solutions and Cash Solutions saw the Group deliver underlying revenue growth of 4.7%. This growth together with new contract wins, supports our medium-term revenue goal of 4-6% per annum.”

“Our revenue mix continued to improve as our technology-enabled revenues in Secure Solutions grew by 14.8% across the globe and our North American cash technology revenues grew by 33%.”

“The Group’s half year performance, sales pipeline, revenue momentum and productivity programmes support a positive outlook.”

“Our separation review is now complete and the Board has approved the separation of Cash Solutions from the Group. As a result, we have set in train plans for the demerger of Cash Solutions in H1 2020. We believe that this will create two strong, focused businesses each with the clear potential to capitalise on market leading positions and to unlock substantial value for customers, shareholders and employees.”

First half highlights (Underlying resultsa unless otherwise noted):

  • Secure Solutions revenue +4.9% Cash Solutions +3.9% 
  • PBITA margin of 6.2% (2018: 6.4%); positive impact of growth offset by new one-off contract mobilisation costs (£4 million in 2019) and one-off bullion contract profit in 2018 of £8 million
  • Operating cash flow conversiona of 88% (2018: 109%); expect FY conversion above 100% 
  • Net debt to EBITDAb 2.85x (30 June 2018: 2.73x); FY 2019 expect c.2.7x 
  • Interim dividend: 3.59p per share (2018: 3.59p per share) 
  • Statutory earnings of £59 million (2018: £101 million) include businesses sold, onerous contracts and exchange rate movements, £36 million restructuring and separation costs and £35 million goodwill impairment relating to Brazilian businesses acquired in 2012 

Group Results

 

Underlying Resultsa

Statutory Resultsd

 

In Constant Currency

Actual Rates

 

2019

2018

%

2019

2018

%

 

 

Restatede

 

 

Restatede

 

Revenue

£3,747m

£3,578m

+4.7

£3,807m

£3,669m

+3.8

Adjusted PBITAb

£234m

£230m

+1.7

£234m

£224m

+4.5

Adjusted PBITAb margin

6.2%

6.4%

 

6.1%

6.1%

 

Earningsc

£119m

£117m

+1.7

£59m

£101m

(41.6)

Earnings Per Sharec

7.7p

7.6p

+1.7

3.8p

6.5p

(41.5)

Operating Cash Flow

£206m

£247m

(16.6)

£189m

£251m

(24.7)

 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 3. The underlying results are presented at constant exchange rates other than operating cash flow which is presented at actual rates in both 2018 and 2019.
 b Adjusted PBITA and net debt to adjusted EBITDA are Alternative Performance Measures as defined and explained on page 37. 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 3.
 d See page 22 for the basis of preparation of statutory results.
 e Restated for the adoption of IFRS16 – Leases, see note 3.

G4S Strategy and Investment Proposition

G4S is the world’s leading global security company, providing security and cash 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. 

Separation Review

On 13 December 2018, the Group announced that it was reviewing options for the separation of its Cash Solutions and Security Solutions businesses. This has been an exhaustive and thorough process covering strategy, legal, tax, commercial, pensions, operational and financial reviews. 

Our separation review is now complete and the Board has approved the separation of Cash Solutions from the business.  As a result, we have set in train plans for a demerger of Cash Solutions in H1 2020.  We believe that this will create two strong, focused businesses each with the clear potential to capitalise on market leading positions and to unlock substantial value for customers, employees and shareholders.  

Since announcing the separation review in December 2018, we have received a number of unsolicited expressions of interest from third parties to acquire parts or all of the Cash Solutions businesses. The company has actively engaged with these parties and the Board will continue to evaluate proposals for all or parts of the business alongside the implementation of our demerger plans, although no assurance can be provided at this stage that any third party proposals will lead to a transaction.
 
In addition to the separation of Cash Solutions, the Group will be managing for value or exiting a number of non-core businesses and implementing programmes to deliver further identified operational efficiencies.  We expect that, over time, these combined actions will provide further financial strength and flexibility to support the attractive growth opportunities in our core businesses.

In summary, the separation and related corporate actions will create two companies - a Global Secure Solutions business and a Global Cash Solutions business – and enable each business to benefit from:

  • Strategic, commercial and operational focus
  • Simplified operating model with resulting execution focus
  • Efficient organisation structure
  • Financial strength and flexibility
  • Increased investment in Technology, Innovation, Sales and Operations

Global Secure Solutions business focused on Security and Security Technology 

G4S is a global market leader in security, providing both established and new technology-enabled security solutions across six continents. 

Security is a growing service industry and we believe that G4S has the expertise and global footprint to grow revenues at 4-6% per annum. As a result of our investment in technology we are deriving an increasing proportion of revenues from technology enabled solutions and at the end of June 2019, around 46% (2018: 42%) of our Secure Solutions revenues included technology in the customer service.

This creates additional security and efficiency benefits for customers and increases our ability to differentiate G4S’s offering in the security market. 

Cash Solutions business focused on Cash Management and Cash Technology 

G4S Cash Solutions operates in 44 markets across the globe and has leading positions in 41 of these markets. G4S has market leading cash technology solutions with Retail Cash Solutions, Cash360 and Deposita.

Our Cash Technology revenues continue to grow strongly and our cash solutions technology is now
installed in over 26,000 locations globally, including for some of the world’s largest retailers. The market leading positions we have built in many markets together with the technology we are deploying is helping to improve the efficiency of conventional cash handling and improve the competitiveness of this business.

Our Cash businesses have established strong credentials in the bank-outsourcing market and we see considerable further potential in this market.

Outlook

G4S Group Chief Executive Officer, Ashley Almanza, commented: 

The Group’s first half performance, sales pipeline, revenue momentum and productivity programmes support a positive outlook. 

“We are now implementing our plans to separate Cash Solutions from the Group and we expect that this separation will deliver material benefits to customers, shareholders and employees.”

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