G4S - Investment Case
We have been investing in technology, software and systems. The Group’s technology-related security revenues were £2.8 billion* in 2018 (2017: £2.45 billion).
We believe that G4S has considerable competitive advantage in our increasingly connected world. G4S possesses the scale, resources and capabilities necessary to develop and deliver the innovative solutions needed by our customers, and our unique global market positions enable us to offer this to customers on a consistent basis across the globe.
Customers and Service Excellence
We build long-term customer relationships based upon trust and understanding of our customers’ businesses and objectives. Through those customer relationships and connections we look to deliver sustainable long-term growth in revenues, earnings and cash flow.
Positive demand for security services
We believe that the long-term demand trends for our services remain positive, and we expect to grow revenues on average by around 4% to 6% per annum over the medium term. We continue to sustain contract retention rates of around 90%, have won substantial new business, and have more than replenished our sales pipeline with an improved quality of opportunities over the next two years.
Cash Seperation Options
The Group is reviewing separation options for the Global Cash Division. We believe that a separation has the clear potential to enhance the focus and success of both the Secure Solutions and the Cash Solutions businesses and to unlock substantial shareholder value.”
As per the 2019 Preliminary Results announcement, 11 March 2020, The Group’s main sources of finance and their applicable rates as at 31 December 2019 are set out below:
|Debt instrument/ Year of issue||Nominal amounta||Issued interest rate||Post hedging average interest rate||Year of redemption and amounts (£m)b|
|US PP 2007||US$105m||6.06%||2.73%||79||79|
|US PP 2008||US$74.5m||6.88%||6.88%||56||56|
|US PP 2019||US$162m||4.90%||3.83%||124||124|
|US PP 2019||US$188m||5.12%||4.32%||144||144|
|Public Bond 2016||€500m||1.50%||2.25%||438||438|
|Public Bond 2017||€500m||1.50%||3.24%||423||423|
|Public Bond 2018||€550m||1.88%||2.80%||476||476|
|Term Loan Facility 2018||US$350m||3.13%||3.13%||264||264|
|Revolving Credit Facility 2018c||£750m (multi-currency)||1.71%||1.71%||11||229||240|
a Nominal debt amount, for fair value and carrying amount see note 19 of the release.
b Translated at exchange rates prevailing at 31 December 2019, or hedged exchange rates where applicable.
c Of the £750 million revolving credit facility, £34 million matures in August 2023 with the remaining £716 million maturing in August 2024. As at 31 December 2019 the Group had drawn down £240 million from the facility.
The average cost of the Group’s borrowings, net of lease liabilities, was 3.6% (2018: 3.9%).
Net debt maturity
On 31 March 2020, the Group’s credit rating was re-affirmed by Standard & Poor’s as BBB-, with a stable outlook. As at 31 December 2019 the Group had liquidity of £1,279 million (2018: £1,423 million) comprising cash, cash equivalents and bank overdrafts of £519 million (2018: £673 million) and unutilised but committed facilities of £760 million (2018: £750 million).
During the year, the Group issued $162 million of US private loan notes maturing in May 2026, and $188 million of US private loan notes maturing in May 2029. The Group also repaid £350 million of GBP public bonds bearing interest rates of 7.75%, and US$145 million of US private loan notes bearing interest rates of 5.96%. As at 31 December 2019 the Group had drawn down £240 million from the RCF facility (2018: undrawn). In June 2019 the Group exercised an option to extend the term of £716 million of the £750 million RCF by a further year, taking it to 2024. In July 2019 the Group entered into a £300 million bridge facility for 12 months with an option to extend for a further six months, amended in December 2019 to £250 million with a 3 month extension so that final maturity is October 2020. This was undrawn as at 31 December 2019.
The next debt maturities are the $74.5 million US private loan note due in July 2020 and the $350 million term loan facility due in 2021. The Group has good access to the capital markets and a diverse range of finance providers. Borrowings are principally in pounds sterling, US dollars and euros, reflecting the geographies of significant operational assets and earnings.