Home News G4S Group wins new contracts worth £1.4 billion in first half of 2016

G4S Group wins new contracts worth £1.4 billion in first half of 2016

by Brian Sims

In the first half of the year, the G4S Group won new contracts worth a total value of £1.4 billion, while revenue from its continuing businesses increased by 5.1%. When combined with the “positive effect” of the company’s productivity programmes, this produced a 13.3% increase in earnings.

Higher operating profits and enhanced working capital management has underpinned a strong operating cash flow of £293 million, representing an impressive increase of 51.8%.

“Our plans are delivering tangible results, with our PBITA margin increasing from 5.1% to 6.45% since June 2013,” explained CEO Ashley Almanza. “We still have much to do to realise the full potential of our strategy which is underpinned by our growth, innovation, productivity and portfolio programmes. Executing these programmes and reducing net debt remain our key priorities.”

G4S has won new contracts with an annual value of £0.7 billion (2015: £0.7 billion) and a total contract value of £1.4 billion (2015: £1.4 billion), while at the same time replenishing its pipeline (which had an annual value of £6.3 billion as of 30 June this year). The business continues to embed a more effective approach towards sales operations and in order to improve the early qualification of opportunities.

Ashley Almanza: CEO at G4S

Ashley Almanza: CEO at G4S

“We have continued to invest in product and service development,” outlined Almanza, “and our sales in systems and technology solutions grew by 8% to £352 million [representing 11% of group revenues]. Over the next 12 months, we expect strong growth from our retail solutions businesses [cash recycling and management]. We currently have expected contract revenues of $0.8 billion which is underpinned by commissioned services, firm contracts and orders in progress. In addition, we have a substantial pipeline and considerable potential to grow this business on a rapid basis.”

Over the medium term, G4S expects demand for its services to burgeon by around 4%-6% per annum. In the current environment of heightened macroeconomic uncertainty and lower global growth, the Group’s continuing businesses posted “very strong revenue growth” in the first half of 2016.

The Board has also moved to declare an interim dividend of 3.59 pence per share.

Productivity and portfolio management

The positive effects of its productivity programmes are reflected in the Group’s financial performance for the first half, with the G4S Group’s PBITA margin increasing from 6.27% to 6.45%. The cash solutions PBITA margin increased to 12.7% from 11.8%, while the secure solutions PBITA margin was slightly lower at 6.1% after 6.2% for the comparative period. It’s expected that further benefits will be extracted going forward.

“The next phase of our productivity programme focuses on lean end-to-end processes in our security guarding business,” asserted Almanza. “Our aim is to provide efficient straight-through processing from order to cash. We’re piloting the development of this system in the Ireland and UK guarding businesses. We firmly believe that this will improve the consistency of operational delivery and materially reduce the Group’s operating costs over time.”

According to Almanza, the portfolio programme is “dramatically improving” the company’s strategic focus. “Since 2013, we’ve divested 25 businesses [with revenues of circa £900 million and PBITA of £14 million], in turn realising proceeds of £288 million. A further 38 businesses [with revenues of circa £610 million] are now being sold or exited. In the first six months of 2016, we sold seven businesses and realised proceeds of £32 million. We have a structured process and active buyer interest in our remaining businesses that are held for sale.”

You may also like