Global security business G4S has just issued its Annual Report for 2014, wherein the company outlines that emerging market businesses have accounted for 36% of Group revenues and 40% of profits across the last 12-month period. The company has posted total revenues of £6.8 billion for 2014, which is up from £6.6 billion last year, as well as a total PBITA (Profit Before Interest, Tax and Amortisation) of £329 million.
In 2013, G4S established a new Strategic Plan designed to “transform the business” and deliver sustainable, profitable growth. In 2014, the Group has made what it calls “good progress” in terms of executing the Strategic Plan, with a reported 12% increase in underlying earnings (to £210 million) and a 25% increase in cash flow from operating businesses (to £526 million).
Indeed, the G4S Group’s overall performance and prospects are reflected in the directors’ recommendation to increase the final dividend by 5% to 5.82 pence per share.
Organic growth for 2014 was 3.9% overall and 9% in emerging markets. That growth, combined with the ongoing success of restructuring and efficiency programmes, has witnessed underlying profit increase by 8%, underlying earnings rise by 12% and cash generated by operating businesses ascend from £420 million to £526 million.
Drilling down into specific market segments, revenues within the security and FM sectors totalled £4,004 million (up from £3,898 in 2013) while security systems and technology generated revenues of £566 million (in turn representing 8% of total G4S Group revenues for 2014).
Care and justice services realised revenues of £605 million last year and, as such, a rise of £19 million on the 2013 figures. Meanwhile, specialist outsourced services – including support for front line policing work and projects with the utilities sector – generated a substantial £504 million.
For its part, the cash solutions business brought in revenues of £1,071 million, duly accounting for around 16% of Group revenue in 2014.
In 2014, the business took determined action to strengthen its sales capability, customer relationships and customer service, making substantial investments in strategic account management and also implementing a systematic approach to measuring and monitoring customer satisfaction. Such investments have begun to improve pipeline management and, in 2014, the business won new contracts worth a combined total value of £2.1 billion.
G4S achieved revenue growth of 8.9% in its emerging market businesses and 6.9% across its North American operations. As expected, revenues in the UK and Ireland and Europe regions declined by 1%, directly reflecting the end of the Electronic Monitoring contract in the UK and the cessation of the prison service contract in the Netherlands.
No less than 56 under-performing or ‘immaterial’ businesses were reviewed in 2014 and eight of them (including US Government Solutions) subsequently sold. The sell-offs raised gross proceeds of £177 million in 2014 and have generated gross proceeds of £248 million since 2013.
20 businesses have now been discontinued and 22 are presently under review while 14 will be retained with performance improvement plans to be put in place.
Businesses sold had revenues of more than £700 million and an average net margin of 2.8%.
G4S Group making “excellent progress”
Speaking about the Annual Report’s contents, G4S Group chairman John Connolly commented: “I’m delighted to report that, over the course of 2014, the Group has moved forward across a broad front while management has made excellent progress, executing the Strategic Plan with great skill and energy. The Board has been particularly pleased with the progress made in strengthening the global leadership team, reinforcing the G4S Group’s values and investing in organic growth, customer service and operational efficiencies. Management also successfully supplemented the Group’s portfolio management programme and strengthened overall risk management.”
Connolly added: “In March, the company reached a settlement with the UK Government in relation to historical billing issues, and management developed – and then began implementing – a fundamental programme of corporate renewal. This focused on strengthening the culture and control processes in our UK Government business. The Group’s transformation programme extends well beyond that business, though, and is being implemented on a group-wide basis. The Board has been pleased with the progress made to date, and will continue to monitor management’s implementation of the programme during the remainder of 2015.”
Group CEO Ashley Almanza outlined: “Over the past 18 months, we’ve established a number of important programmes to improve the productivity of G4S. Given the scale and current stage of organisational maturity within the business, these programmes address a material opportunity to improve our performance and create shareholder value. Our restructuring and organisational efficiency programmes made good progress in 2014, and we believe there are further opportunities to implement lean processes and more efficient organisation structures as we progress. Any new programmes will be subject to stringent financial, economic and operational criteria.”
As one of the world’s leading global integrated security companies, G4S’ prime mission is to create sustainable value for customers and shareholders alike by being the ‘supply partner of choice’ in all of its operational markets.
Independent studies suggest that global demand for security is expected to grow at a compound average rate of 7% per annum between 2013 and 2023, reaching circa £210 billion in annual revenues by 2023. G4S states that the main drivers of industry growth are diverse. They include the economic environment and GDP growth, infrastructure investment, levels of conflict and crime, customer attitudes to risk and focus on security, customer efficiency and outsourcing objectives, regulation and the regulatory environment, technological change and innovation, interest rates and the role and policies of central banks influence the cash handling industry.