2016 Full Year Results

  • 08 Mar 2017 13:02
G4S announces its Full Year Results for the year to 31 December 2016
G4S security checking passengers at Heathrow airport

We made good progress with our transformation strategy in 2016 and our continuing businesses delivered revenue growth of 6.3% and earnings growth of 16.6%. We now have much stronger foundations, growing competitive capabilities and an attractive array of market opportunities. Our transformation strategy is expected to produce further performance improvements and underpins our aim of delivering sustainable, profitable growth.
ashley almanza G4S Chief Executive Officer 
Operational and financial highlights:  

• New contract sales: £2.5 billion total value; £1.3 billion annual value
• Pipeline £6.8 billion annual value
• Developed markets revenues +6.8%a,d; Emerging markets revenues +5.4%a,d 
• Secure Solutions revenues +4.1%a,d; Cash Solutions revenues +18.8%a,d 
• Strong growth in technology, systems and software revenues +36%
• Group’s net debt to EBITDA improved to 2.8x
• Dividend: Final 5.82p per share (2015: 5.82p); Full year 9.41p per share (2015: 9.41p)

Group results 

 

Continuing Businessesa

Constant Rates

Statutory Resultsb

Actual Rates

 

2016

2015

%

2016

2015

%

Revenue

£6,823m

£6,419m

+6.3

£7,590m

£6,863m

+10.6

PBITA

£454m

£414m

+9.7

£461m

£391m

+17.9

Earnings

£246m

£211m

+16.6

£198m

£8m

 

Operating Cash Flowc

£638m

£395m

+61.5

£615m

£359m

+71.3

a Results from continuing businesses, presented at constant exchange rates other than for operating cash flow, exclude results from businesses identified for sale or closure and onerous contracts. The basis of preparation of results of continuing businesses and an explanation of Alternative Performance Measures, is on page 4.  
 b See page 17 for the basis of preparation of statutory results. Statutory earnings represent profit attributable to equity shareholders of G4S plc.
 c Operating cash flow is stated after pension deficit contributions of £39 million (2015: £44 million) and 2015 amounts are presented at actual 2015 exchange rates. Statutory operating cash flow is net cash flow from operating activities of continuing operations.
 d Growth rates on a constant currency basis. 

chief executive statement

G4S Transformation

In November 2013, G4S set out a strategic plan to transform the company. Whilst there remains much to do to realise the full potential of our strategy, the Group has made significant progress over the past three years.

G4S Strategy and Investment Proposition
G4S is the world’s leading, global integrated security company, providing security and related services across six continents. 

Our strategy addresses the positive, global demand outlook for security services and 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 designing innovative solutions, by delivering outstanding service to our customers, by providing engaging and rewarding work for employees and by generating sustainable growth in returns for our shareholders. These aims are underpinned by the key programmes in our strategic plan:
• People and Values
• Growth and Innovation 
• Customer Service Excellence
• Productivity and Operational Excellence 
• Financial and Commercial Discipline

The Group has two business segments: Secure Solutions and Cash Solutions. Security and safety are critical to our success in both segments.

Secure Solutions: we design, market and deliver a wide range of security and related services and our global business provides valuable access to a highly diversified customer base in markets around the world. Our security services range from static manned security to highly sophisticated, integrated solutions. Our scale and focus on productivity supports our cost competitiveness and our sustained investment in professional staff, technology, software and systems enables us to provide valuable and integrated solutions for our customers.

Cash solutions: we transport, process, recycle, securely store and manage cash and we provide secure international logistics for cash and valuables. We invest in technology and know-how and develop and sell proprietary cash management systems which combine skilled professionals with software, hardware and operational support in an integrated managed service. We operate around the globe, focussing on markets where we are able to build and sustain a material market share in our key service offerings.
G4S’s investment proposition is to deliver sustainable growth in earnings, cash flows and dividends.

Financial and Operational Highlights: 

Since 2013, the year in which we commenced the transformation of the Group, we have increased sales by 15%, EPS by 45% and generated operating cash flow of £1.9 billion. In 2016 we made further progress with the on-going key strategic priorities underpinning the transformation: 

Growth and innovation: We won new contracts with an annual value of £1.3 billion (2015: £1.3 billion) and total contract value of £2.5 billion (2015: £2.4 billion) whilst, at the same time, replenishing and growing our pipeline which had an annual value of £6.8 billion as at 31 December 2016.  We sustained contract retention rates of around 90%.

We continued to see the benefit of investing in product and service development. Our technology, software and systems revenues grew strongly and now account for 13% of Group revenues. In our Secure Solutions business, technology enabled services and solutions now contribute over £1.5 billion in annual revenues. In Cash Solutions, we grew revenues by 19% with a particularly strong performance from our Retail Cash Solutions and Deposita businesses. We have a strong and diverse pipeline of growth opportunities in our Retail Cash Solutions and Deposita businesses. 

Customer service excellence: We have established customer satisfaction measurement and monitoring in all regions, including net promoter score surveys and strategic account programmes. 

Productivity and operational excellence:
Our productivity and operational excellence programmes yielded on-going benefits, allowing us to continue to invest in product and service development whilst at the same time improving the Group PBITA margin from 6.4% to 6.7%. Cash Solutions PBITA margin decreased to 12.7% from 12.9% as strong performances in developed markets cash businesses were offset by service and innovation investment and weaker trading in some emerging markets, which are at a much earlier stage in our transformation programme. PBITA margin in Secure Solutions was slightly higher at 6.3% (2015: 6.2%). Over the medium term we expect to extract greater inefficiencies in Secure Solutions through the implementation of automated, lean business processes and we will be piloting these processes in Ireland during 2017.

Financial discipline and Portfolio management: Our portfolio programme has materially improved our strategic focus. Since 2013 we have divested 29 businesses (with annual revenues of c.£1 billion and PBITA of £25 million), realising proceeds of £345 million, and a further 27 businesses (with revenues of c.£445 million) are being sold or exited. In 2016 we closed four businesses and sold a further 12, realising proceeds of £82 million, including £52 million in respect of the UK Utilities business and reached agreement for the sale of G4S Israel for £88 million. A reconciliation showing the impact on our prior year results from continuing businesses of the movements in portfolio businesses is provided on page 31.

People and Values: During 2016, we launched our G4S Values and we are promoting these values with the appropriate communication and training.  

Cash flow, net debt, dividend and pensions: Operating cash flow from continuing businesses, after pension deficit contributions, increased by 61.5% to £638 million helped by our focus on working capital management. Net cash flow after investment in the business, financing costs, taxation and dividends was £222 million and, despite the adverse effect of sterling weakness of £110 million, net debt decreased to £1,670 million (2015: £1,782 million). Net debt/EBITDA reduced to 2.8x (3.4x at December 2015). The Group’s business plan and current performance support a net debt/EBITDA ratio of 2.5x or lower by the end of 2017. In line with our previous guidance that we will maintain the dividend until net debt/EBITDA is below 2.5x, the Board has proposed a final dividend of 5.82p per share.

Following completion of the latest triennial valuation process, the trustees of G4S’s UK pension schemes agreed during the year a reduced annual pension deficit payment of £39 million in 2016 (2015: £44 million), with a 3% per annum increase until the next funding valuation due in 2018.
 
Outlook
During 2016, the Group made good progress with its transformation strategy. We now have much stronger foundations, growing competitive capabilities and an attractive array of market opportunities. We believe that the long-term demand for our core services remains positive and that the Group’s transformation strategy will produce further performance improvements and underpin our aim of delivering sustainable, profitable growth.

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