Speaking about the company’s latest set of annual financials, G4S CEO Ashley Almanza said: “The group made good progress with its strategic plan, delivering commercial, operational and financial momentum during 2014. This is reflected in a 7.9% increase in underlying PBITA and an 11.7% increase in underlying earnings with a 25% increase in cash flow resulting from the group’s operating businesses.”
Financial highlights on an underlying basis:
*New contract sales achieved a total value of £2.1 billion (annual value £1.14 billion) while contract retention rates remained at approximately 90%. Sales pipeline replenished to stand at £5.5 billion annual contract value
*Revenue from continuing operations of £6,750 million (up 3.9%). Emerging markets revenues up 8.9% to £2,398 million. North America up 6.9%. UK and Europe down 1%
*PBITA increased by 7.9% to £424 million (2013: £393 million). Emerging markets up 10.3% to £192 million. Developed markets up 12.3% to £292 million
*Earnings of £210 million (2013: £188 million), representing a rise of 11.7%
*Cash from the group’s operating businesses was £526 million (2013: £420 million), which is an increase of 25%. Total cash flow from continuing operations was £553 million (2013: £496 million)
*Specific items include: £45 million increase in provisions for legacy UK Government contracts. Restructuring charge of £29 million. Profit on disposal from discontinued operations of £71 million
*Net debt as at 31 December 2014 was £1,578 million (2013: £1,552 million)
*Final dividend recommended to be increased by 5% to 5.82p/share (DKK 0.6041)
Full commentary from the CEO
“Demand for our services was strong in emerging markets (up 8.9%) and North America (up 6.9%),” explained Ashley Almanza. “As expected, revenues contracted by 1% in the UK and Ireland and also in Europe, reflecting the impact of sales contract rationalisation and the previously announced terminations of the electronic monitoring contract in the UK as well as the Dutch Prisons contract.
“Underlying PBITA of £424 million was 7.9% higher than 2013 which reflects revenue growth and improved operational gearing as we begin to capture benefits from the implementation of our restructuring and productivity programmes. With our increased focus on cash management, cash flow from operating businesses was £526 million. This represents a 25% improvement on the same period last year. Total cash generated by continuing operations, including one off corporate items, was £553 million (2013: £496 million).
“The Board is recommending an increase in the final dividend of 5% to 5.82p per share (DKK 0.6041), in turn bringing the total dividend for the full year to 9.24p per share which represents a 3.1% increase.
“The group made good progress with the new strategic plan which we put in place in 2013. In terms of organic growth, we won new work with an annual contract value of over £1.14 billion and total contract value of £2.1 billion while, at the same time, replenishing our pipeline which now stands at an annual value of £5.5 billion. The group’s retention rate for existing contracts remains at around 90% of annual revenues.
“We continue to identify opportunities to sell additional services and products including systems and technology within our key markets and, in line with our previously announced plans, we’ve invested an annualised £20 million to strengthen sales and business development capabilities. We’re progressively embedding a consistent approach to sales operations, sales performance measurement, strategic account management and customer service management.
“In terms of productivity, we’re improving through the successful execution of restructuring and defined Accelerated Best Practice programmes. This progress is reflected in the group’s commercial, operational and financial performance for 2014. These programmes are gathering momentum following the appointment of key management and subject matter experts to focus on the key areas of direct labour efficiency, organisational efficiency, route planning and telematics, IT standardisation, procurement and shared services.
“Our major restructuring programmes designed to strengthen the competitiveness and profitability of a number of key businesses, principally in the UK, Ireland and Europe are being implemented in line with the detailed plans which were developed in 2013.”
Portfolio and performance management
“Portfolio management remains important for strategic focus, capital discipline and performance management. The group now operates in over 110 countries. We’ve divested eight businesses at attractive exit multiples over the past 18 months for £248 million, including our US Government solutions business. A further 20 are being sold or ceased.
“We’ve made very good progress with our plans to strengthen our global management team, establishing and filling numerous new positions and appointing new managers to key existing positions. In our global leadership cadre of 220 we have appointed 114 senior managers to new roles in the past 18 months. We also made good progress with the implementation of our corporate renewal programme which aims to reinforce our group values in everything that we do.
“During 2014, we continued to invest in strengthening our financial management, risk and audit and contract management capability. In relation to contract management, we’ve established processes to ensure that we properly assess the risk-reward balance of new contracts and to ensure that we have the capability and capacity to effectively mobilise and deliver service excellence on new contracts.
“Our strategic plan addresses a positive, long-term demand outlook for our core services and seeks to deliver sustainable and profitable growth. We’re making good progress with the implementation of our strategic plan, and this was clearly reflected in the group’s commercial, operational and financial performance in 2014. There remains much to be done to realise the full potential of our strategy. We expect to make further progress in 2015.”