G4S plc
Preliminary Results Announcement
January - December 2010
G4S, the international security solutions group, today announces its preliminary
results for the twelve months to 31 December 2010.
RESULTS HIGHLIGHTS
* Organic turnover growth* of 2.1% (2009: 3.7%)
* Group turnover* up 4.1% to £7,397 million (2009: £7,105m)
* PBITA* up 4.2% to £527 million (2009: £506m)
* Margin* maintained at 7.1% (2009: 7.1%) through tight cost control
* Strong cash flow generation of £442 million, 85% of PBITA (2009: 90%)
* Adjusted earnings per share increased by 7% to 21.6p (2009: 20.2p) and by
6% at constant exchange rates
* Recommended final dividend up 14% to 4.73 pence per share DKK 0.4082 (2009:
4.16p/DKK 0.3408)
Recommended total dividend up 10% to 7.90 pence per share DKK 0.6959 (2009:
7.18p/DKK 0.5624)
* Invested £65 million in a number of acquisitions to consolidate our
positions in Latin America, primarily entering the thriving Brazilian market
* at constant (2010) exchange rates
Nick Buckles, Chief Executive Officer, commented:
"Today we have announced our sixth consecutive year of underlying revenue,
profit and dividend growth since G4S was formed in 2004.
The excellent performance in 2010 has been achieved despite continued
uncertainties with the global economic downturn, which is testament to the
efforts of our global workforce of 625,000 employees. We have delivered further
strong organic growth of 6.6% in New Markets, which now account for 29% of
revenue and 33% of profits, and we are encouraged by signs of economic recovery
in our larger developed markets of the US and the UK. In addition, our
differentiated "integrated solutions" strategy is helping us to build market
share with global customers.
We will continue to build on our successes and remain confident about the
outlook for 2011 when we expect to deliver an improved organic revenue growth
performance whilst continuing to maintain our discipline on margins and cash
generation."
For further enquiries, please +44 (0) 1293 554400
contact:
Nick Buckles Chief Executive Officer
Trevor Dighton Chief Financial Officer
Helen Parris Director of Investor
Relations
Media enquiries:
Kevin Smith Citigate Dewe Rogerson +44 (0) 207 282 1054
High resolution images are available for the media to view and download free of
charge fromwww.vismedia.co.uk.
Notes to Editors:
G4S is the world's leading international security solutions group, which
specialises in outsourced business processes in sectors where security and
safety risks are considered a strategic threat.
G4S is the largest employer quoted on the London Stock Exchange and has a
secondary stock exchange listing in Copenhagen. G4S has operations in more than
125 countries and 625,000 employees. For more information on G4S, visit
www.g4s.com.
Presentation of Results:
A presentation to investors and analysts is taking place today at 0900hrs at the
London Stock Exchange.
Webcast
http://streamstudio.world-television.com/CCUIv3/login.aspx?ticket=707-
803-9369&target=en
Dial-in facility
UK Access Number: +44 (0)20 3140 0668
UK Toll Free: 0800 368 1950
US Toll Free: 1866 928 6049
Danish Toll Free: 8088 5557
Participant PIN Code: 285100#
Replay Details (for seven days)
UK Toll Access Number: +44 (0)20 3140 0698
UK Toll Free Number: 0800 368 1890
US Toll Free Number: 1877 846 3918
Denmark Toll Playback: 70142885
Conference Reference: 375922#
Annual General Meeting
The company's annual general meeting will be held in London on 19 May 2011
Capital Markets Day
G4S will hold a Capital Markets Day in London on 25 May 2011
FINANCIAL SUMMARY
Results
The results which follow have been prepared under International Financial
Reporting Standards, as adopted by the European Union (adopted IFRSs).
Group Turnover
+-----------------------------------+------+------+
|Turnover of Continuing Businesses | 2010 | 2009 |
| | | |
| | £m| £m|
+-----------------------------------+------+------+
|Turnover at constant exchange rates|7,397 |7,105 |
+-----------------------------------+------+------+
|Exchange difference | -| (96)|
+-----------------------------------+------+------+
|Total continuing business turnover |7,397 |7,009 |
+-----------------------------------+------+------+
Turnover increased by 5.5% to £7,397 million or by 4.1% at constant exchange
rates. Organic turnover growth was 2.1%.
+---------------------+------+-------------+-----------------+-----------+-----+
|Organic Turnover|Europe|North America|Developed Markets|New Markets|Total|
|Growth * | | | | | |
+---------------------+------+-------------+-----------------+-----------+-----+
|Secure Solutions | 0.6%| 2.2%| 1.2%| 7.1%| 2.8%|
+---------------------+------+-------------+-----------------+-----------+-----+
|Cash Solutions | -2.8%| -3.6%| -2.9%| 4.4%|-1.1%|
+---------------------+------+-------------+-----------------+-----------+-----+
|Total | -0.3%| 1.8%| 0.4%| 6.6%| 2.1%|
+---------------------+------+-------------+-----------------+-----------+-----+
* Calculated to exclude acquisitions and disposals, and at constant exchange
rates
Group Profit
+---------------------------------------+-----+-----+
|PBITA * of Continuing Businesses |2010 |2009 |
| | | |
| | £m| £m|
+---------------------------------------+-----+-----+
|PBITA at constant exchange rates | 527 | 506 |
+---------------------------------------+-----+-----+
|Exchange difference | -| (6)|
+---------------------------------------+-----+-----+
|Total continuing business PBITA | 527 | 500 |
+---------------------------------------+-----+-----+
|PBITA margin at constant exchange rates| 7.1%| 7.1%|
+---------------------------------------+-----+-----+
* PBITA is defined as profit before interest, taxation, amortisation of
acquisition-related intangible assets and acquisition-related costs
PBITA increased by 5.4% to £527 million or by 4.2% at constant exchange rates.
The PBITA margin was 7.1%.
Cash Flow and Financing
+--------------------------------------------------+-----+-----+
|Cash Flow |2010 |2009 |
| | | |
| | £m| £m|
+--------------------------------------------------+-----+-----+
|Operating cash flow | 442 | 450 |
+--------------------------------------------------+-----+-----+
|Operating cash flow / PBITA (excluding associates)| 85%| 90%|
+--------------------------------------------------+-----+-----+
Operating cash flow, as analysed on page 23, was £442 million in the period,
representing 85% of PBITA. Net cash invested in acquistions was £65 million.
Net debt at the end of the period, as analysed on page 22, was £1,426 million
(December 2009: £1,433m).
Adjusted earnings per share
+-----------------------------------+-----+------------------------------+-----+
|Adjusted earnings per share | 2010| 2009 at constant exchange| 2009|
| | | rates| |
| | | | |
| | £m| £m| £m|
+-----------------------------------+-----+------------------------------+-----+
|PBITA from continuing operations | 527| 506| 500|
+-----------------------------------+-----+------------------------------+-----+
|Interest (before pensions) | (99)| (95)| (95)|
+-----------------------------------+-----+------------------------------+-----+
|Tax |(103)| (107)|(105)|
+-----------------------------------+-----+------------------------------+-----+
|Minorities | (22)| (17)| (17)|
+-----------------------------------+-----+------------------------------+-----+
|Adjusted profit attributable to | 303| 287| 283|
|shareholders | | | |
+-----------------------------------+-----+------------------------------+-----+
|Average number of shares (m) |1,406| 1,404|1,404|
+-----------------------------------+-----+------------------------------+-----+
|Adjusted EPS (p) |21.6p| 20.4p|20.2p|
+-----------------------------------+-----+------------------------------+-----+
Adjusted earnings per share, reconciled to basic earnings per share on page 21,
increased by 7%, or by 6% at constant exchange rates.
BUSINESS ANALYSIS
Secure Solutions
+-------------------------+-------------+-----------+-----------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | £m| £m| | |
| +------+------+-----+-----+-----+-----+--------------+
|* At constant exchange | 2010 | 2009 |2010 |2009 |2010 |2009 | 2010 |
|rates | | | | | | | |
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Europe * |2,617 |2,612 | 180 | 175 | 6.9%| 6.7%| 0.6%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|North America * |1,676 |1,524 | 96 | 86 | 5.7%| 5.6%| 2.2%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|New Markets * |1,754 |1,602 | 143 | 131 | 8.2%| 8.2%| 7.1%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Total secure solutions * |6,047 |5,738 | 419 | 392 | 6.9%| 6.8%| 2.8%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Exchange differences | -| (70)| -| (4)|
+-------------------------+------+------+-----+-----+
|At actual exchange rates |6,047 |5,668 | 419 | 388 |
+-------------------------+------+------+-----+-----+
The secure solutions business continued its robust performance with good organic
growth of 2.8%. Margins were higher at 6.9% with improvements across most
regions.
Europe
+-------------------------+-------------+-----------+-----------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | £m| £m| | |
| +------+------+-----+-----+-----+-----+--------------+
|* At constant exchange | 2010 | 2009 |2010 |2009 |2010 |2009 | 2010 |
|rates | | | | | | | |
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|UK & Ireland * |1,179 |1,136 | 103 | 97 | 8.7%| 8.5%| 3.8%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Continental Europe * |1,438 |1,476 | 77 | 78 | 5.4%| 5.3%| -1.9%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Total Europe * |2,617 |2,612 | 180 | 175 | 6.9%| 6.7%| 0.6%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
Organic growth in Europe was 0.6% and margins were slightly higher due to
excellent cost control across the region.
There was good organic growth of 3.8% in the UK & Ireland and margins
strengthened further to 8.7% helped by continued strong performance of the
commercial and government businesses, and despite revenue and margin reductions
in Ireland.
Key UK government contract wins in 2010 included a number of major contract
extensions such as:
* taking over the national security contract for the Department for Work and
Pensions which was mobilised on 1 January 2011
* a further extension of the Electronic Monitoring contact into 2013
* strong growth in the services we deliver to the Olympic Delivery Authority
* opening a new large prison wing at HMP Parc
G4S is bidding for a number of UK government contracts and has been shortlisted
by the Department for Work & Pensions to bid to deliver welfare-to-work services
in seven out of the eleven UK regions. We expect the result of all these bids in
2011. G4S signed a memorandum of understanding with the UK government which will
deliver savings to the government largely delivered through re-designing service
provision.
The secure solutions business consolidated its position as the leading manned
security provider in the UK with organic growth of 6%. Commercial contracts won
include smart meter installation contracts for four major utility providers, re-
winning a three year contract with Northern Rail, the UK's largest train
operating company, a three year contract to provide security services at Belfast
City Airport and G4S continues to roll out global security contracts for
international clients such as GSK and Shell.
Trading conditions in Ireland remained challenging in 2010 but our underlying
trading was helped by prompt management action to address these issues. G4S was
part of the consortium that delivered the new Dublin Central Criminal Courts PFI
project ahead of schedule.
The Continental Europe region performed well against an extremely difficult
economic backdrop in Eastern Europe and we believe we have continued to gain
market share with our solutions strategy outperforming single service providers.
Overall organic growth declined by -1.9% but margins were slightly above the
prior year at 5.4% due to excellent cost control. Revenues for the security
systems business, which accounts for around 30% of Continental European secure
solutions, declined by 4%. Strong performers included Norway, helped by the
Oslo airport contract, and Netherlands where G4S recently won the ProRail
contract. In Belgium, G4S was successful in winning the Brussels airport
security contract for up to five years from February 2011 and security for the
European Commission building from April 2011. In Sweden, G4S has won the
contract for the Swedish Parliament Administration from March 2011.
In Israel, G4S is the preferred bidder for a PFI police training academy which
has a 25 year contract term and G4S has won two immigration accommodation
contracts in Cyprus.
In Eastern Europe, we expect a return to revenue growth in 2011, especially in
markets such as Kazakhstan and the Baltics and increased profitability after
some re-structuring in the region.
North America
+-------------------------+-------------+-----------+-----------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | £m| £m| | |
| +------+------+-----+-----+-----+-----+--------------+
|* At constant exchange | 2010 | 2009 |2010 |2009 |2010 |2009 | 2010 |
|rates | | | | | | | |
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|North America * |1,676 |1,524 | 96 | 86 | 5.7%| 5.6%| 2.2%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
Organic growth in North America was 2.2% and margins were slightly higher due to
a greater proportion of solutions based contracts, rigorous cost control with
reduced overtime levels and lower employee turnover.
In the United States there was higher growth in the commercial sector during the
second half of the year and the business is entering 2011 with greater organic
growth momentum than twelve months ago. Whilst the outlook for new US federal
government outsourcing contracts in the short term is quite muted, federal
government stimulus funding continues to drive the G4S Technology business with
the opening 2011 order book well above 2010 levels. Government at a state and
local level will present more opportunities as the pressure to look for more
effective public services increases and leads to greater use of the private
sector over the medium term.
Recent contract awards include work in the chemical, federal and retail sectors
and additional locations for Shell and Cargill. Contracts re-won include work
for a nuclear power station and county sheriffs' offices. Overall customer
ratings were excellent and further growth opportunities exist both domestically
and internationally with the existing customer base as well as with new
prospects.
All our recent acquisitions in the US performed extremely well during 2010 and
recorded growth and financial performance either in line with or ahead of
expectations.
In Canada, the organic growth rate was over 6% with a number of large contracts
starting during the second half including Shell, GSK, the Canadian Border
Authority, a large financial institution and Kingston Hospital in Ontario. In
addition, with support from around the group, the Canadian business is bidding
on the opportunity to provide security solutions across airports in Canada.
New Markets
+-------------------------+-------------+-----------+-----------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
| | £m| £m| | |
| +------+------+-----+-----+-----+-----+--------------+
|* At constant exchange | 2010 | 2009 |2010 |2009 |2010 |2009 | 2010 |
|rates | | | | | | | |
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Asia * | 600 | 565 | 40 | 44 | 6.7%| 7.8%| 3.5%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Middle East * | 465 | 429 | 44 | 39 | 9.5%| 9.1%| 8.2%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Africa * | 333 | 313 | 33 | 29 | 9.9%| 9.3%| 5.8%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Latin America & Caribbean| 356 | 295 | 26 | 19 | 7.3%| 6.4%| 14.2%|
|* | | | | | | | |
+-------------------------+------+------+-----+-----+-----+-----+--------------+
|Total New Markets * |1,754 |1,602 | 143 | 131 | 8.2%| 8.2%| 7.1%|
+-------------------------+------+------+-----+-----+-----+-----+--------------+
In New Markets, organic growth was excellent at 7.1% with strong improvements in
margins in most regions.
Organic growth in Asia was 3.5% and margins were lower due to the loss of the
DIAC contract in Australia, as previously announced. Excluding Australia,
revenues were up 14.5% and margins were 7.1%, with strong revenue increases in
Papua New Guinea, Pakistan and the Philippines. India, the largest market in the
region, achieved double-digit revenue growth. Our risk consulting business Hill
& Associates delivered a very strong performance and will be leveraging its
expertise into the Middle East in 2011.
In the Middle East, growth continued to be excellent across the region with
improved margins of 9.5%. Qatar and UAE performed particularly strongly, mainly
as a result of the new airport contract in Qatar and federal wage legislation in
UAE. In Iraq, as expected, the work for the US forces contract has come to an
end. The US Embassy contract in Kabul, Afghanistan will continue beyond January
1st as a result of the new incumbent failing to realise the contract transition.
The work will continue for at least the first four months of 2011 at an improved
profit contribution.
Africa performed well with organic growth of 5.8% and margins of 9.9%, helped by
strong performances in Morocco, Uganda, Botswana and Djibouti and in our Care
and Justice services business in South Africa. G4S has a unique network of
operations in Africa which provides an excellent platform to support our global
clients working in key sectors such as oil and gas, ports and mining.
The Latin America & Caribbean region has performed well as a result of a number
of large contract wins in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico
and Puerto Rico. Overall for the region, organic growth was 14.2% and margins
were 7.3%.
Cash Solutions
+-----------------------+---------------+-----------+-----------+--------------+
| | Turnover| PBITA| Margins|Organic Growth|
| | | | | |
|* At constant exchange | £m| £m| | |
|rates | | | | |
| +-------+-------+-----+-----+-----+-----+--------------+
| | 2010 | 2009 |2010 |2009 |2010 |2009 | 2010 |
+-----------------------+-------+-------+-----+-----+-----+-----+--------------+
|Europe * | 891 | 919 | 101 | 100 |11.3%|10.9%| -2.8%|
+-----------------------+-------+-------+-----+-----+-----+-----+--------------+
|North America * | 106 | 110 | 4 | 5 | 3.8%| 4.5%| -3.6%|
+-----------------------+-------+-------+-----+-----+-----+-----+--------------+
|New Markets * | 353 | 338 | 44 | 49 |12.5%|14.5%| 4.4%|
+-----------------------+-------+-------+-----+-----+-----+-----+--------------+
|Total Cash Solutions * | 1,350 | 1,367 | 149 | 154 |11.0%|11.3%| -1.1%|
+-----------------------+-------+-------+-----+-----+-----+-----+--------------+
|Exchange differences | -| ( 26)| -| ( 2)|
+-----------------------+-------+-------+-----+-----+
|At actual exchange| 1,350 | 1,341 | 149 | 152 |
|rates | | | | |
+-----------------------+-------+-------+-----+-----+
The cash solutions business performed satisfactorily in a sustained period of
low interest rates which has led to some service reductions. Overall organic
growth was -1.1% but margins only declined slightly due to excellent cost
control.
Organic growth in Europe was -2.8% and was impacted by lower interest rates,
lower inflation and a reduction in some services by customers, but cost control
measures ensured margins improved to 11.3%.
In the UK & Ireland, the cash solutions business performed very robustly despite
a 3% revenue decline. The first CASH360 sales have been achieved in the UK with
companies such as CenterParcs and Burger King and there is a strong pipeline of
pilots. The cash consulting business, SMI, acquired in 2009, continues to
perform well, giving us increased exposure to central banks around the world.
The travel logistics company TLCS was divested as part of a portfolio review,
resulting in a profit on disposal of £8m. This was more than offset by
restructuring costs in the UK, Ireland, and Sweden cash solutions businesses and
a significant restructuring in Romania as a result of a major downsizing of the
contract with the state post office.
Ireland continued to face a particularly challenging economic environment but
the business recently won the provision of cash outsourcing for An Post (post
office) pension payments which will benefit 2011.
G4Si, the international valuables transportation business, achieved a
particularly strong performance, with organic growth of 9% and improved margins
helped by higher commodity prices.
Elsewhere in Continental Europe, organic growth was affected by a reduction in
cash transportation and ATM services but continued strong growth was achieved in
Greece and in Belgium, where G4S has won a number of banking contracts.
In North America, the business in Canada declined due to the loss of the Bank of
Montreal contract.
Organic growth in New Markets was good at 4.4% but margins were lower at 12.5%
with both numbers impacted by the previously announced lost contracts in South
Africa. Excellent growth and strong margins were achieved in UAE, Qatar and
Malaysia.
STRATEGIC DEVELOPMENT
Our strategy is to differentiate ourselves in our markets by using our expertise
to drive outsourcing and to minimise commoditisation of traditional security
services. We see strong evidence of this strategy delivering enhanced growth
opportunities for the group by:
* Capitalising on the structural growth opportunity of increased demand
for outsourcing by delivering innovative, cost reducing, tailor-made
solutions to customers as they re-shape their businesses in response to
economic pressures, regulation and compliance requirements
* Focusing the group on attractive global markets and sectors and
enhancing its ability to meet increasingly sophisticated customer needs
through capability-building acquisitions, new technology and creating
new markets
* Increasing global diversification - G4S has a broad international
presence and unique developing markets exposure. We can export our
government expertise into other countries, drive development of cash
solutions in New Markets and develop secure solutions for multi-national
customers across numerous countries
OTHER FINANCIAL ISSUES
Acquisitions and divestments
The group invested a total of £65m in 2010 on acquisitions which have added new
capabilities to the group and will support the implementation of the group's
strategy. Acquisitions included:
* Instalarme - an electronic software and hardware integration company in
Brazil
* Plantech - the leading systems integration business in Brazil
* Skycom - a market leader in mining access control systems in South Africa
The group's acquisition strategy will continue to focus on niche opportunities
which will both help to deliver its strategic objectives and meet its financial
performance criteria. Areas of particular interest include risk consulting,
systems integration and sector specialists and G4S expects to invest around
£200m in further capability-building acquisitions and an accelerated acquisition
focus on developing markets in 2011.
Financing and interest
The group has a prudent approach to its balance sheet whilst maintaining the
flexibility to pursue acquisitions when appropriate. It has a long term stable
credit rating of BBB granted by Standard & Poor's in March 2009 and has a
diverse range of finance providers. The group is currently well financed with no
significant maturities until 2016. Borrowings are principally in pounds
sterling, US dollars and euros reflecting the geographies of significant
operational assets and profits.
On 10 March 2011 the group completed its refinance of its multicurrency
revolving credit facility.
The group's main sources of finance and their rates are set out below:
(i) A £1.1bn multicurrency revolving credit facility provided by a consortium of
lending banks at a margin of 0.80% over Libor and maturing on 10 March 2016.
(ii ) A $550m private placement of notes on 1 March 2007, maturing at various
dates between 2014 and 2022 and bear interest at rates between 5.77% and 6.06%.
At the time of issue the interest rate on these notes was swapped from the fixed
original rates to the floating 6 month USD libor rate plus 0.60%.
(iii) A $514m and £69m private placement of notes on 15 July 2008, which mature
at various dates between 2013 and 2020 and bear interest at rates between 6.09%
and 7.56%.
(iv) A £350m Public Note issued on 13 May 2009 bearing an interest rate of
7.75%, maturing 13 May 2019.
At 31 December 2010 the group had uncommitted facilities of £575m.
As of 31 December 2010, net debt was £1,426m representing a gearing of 90%. The
group headroom was £552m at the year end. The group has sufficient borrowing
capacity to finance its current investment plans.
Net interest payable on net debt was £96m. This is a net increase of 8% over the
2009 cost of £89m, due principally to the impact of exchange differences.
The group's average cost of gross borrowings during 2010 was 4.8% compared to
4.7% in 2009. The group expects that the average cost of gross borrowings for
2011 will be slightly higher than for 2010.
Also included within financing is other interest costs of £3m (2009: £6m) and
net expense of £6m (2009: £19m) in respect of movements in the group's
retirement benefit obligations.
Taxation
The effective tax rate for the year on adjusted earnings was 24%, compared to
26% for 2009. The cash tax rate is 20% compared to 17% in 2009. The group's
target is to further reduce the effective tax rate in the short term. This will
be driven by the gradual reduction in UK corporation tax rates, the ongoing
rationalisation of the group legal structure and the elimination of fiscal
inefficiencies.
Retirement benefit obligations
The group's funding shortfall on material funded defined retirement benefit
schemes, on the valuation basis specified in IAS19 Employee Benefits, was £265m
before tax or £191m after tax (31 December 2009: £328m and £236m respectively).
The main scheme is in the UK. The latest full actuarial valuations were
undertaken at 5 April 2009 in respect of all three sections of the UK scheme.
However, all actuarial assumptions were reviewed and updated as at 31 December
2010.
The valuation of gross liabilities has barely changed during 2010, with a £32m
reduction in liabilities arising from the announcement by the government that
pension increases will be in line with CPI rather than RPI, accounted for as a
credit to the statement of comprehensive income, offset by the impact of the
unwinding of the discount on the liabilities. The net impact of actuarial
changes is very small. The lower discount rate of 5.5% (2009: 5.7%) and an
updating of the mortality assumptions following the full actuarial valuation
have increased liabilities. But the lower inflation assumption and lower than
previously assumed pay increases during 2010 have decreased liabilities. Assets
have increased in value during the year, in line with the previous assumption,
and additional company contributions of £33m were paid into the schemes.
The group believes that, over the very long term in which retirement benefits
become payable, investment returns should eliminate the deficit reported in the
schemes in respect of past service liabilities. However, in recognition of the
regulatory obligations upon pension fund trustees to address reported deficits,
the group has agreed a new deficit recovery plan with the trustees during the
year. The new plan will see cash contributions made to the scheme of
approximately £35m in 2011 with modest annual increments thereafter.
Since the year end the group has entered into a consultation period with members
of the UK scheme with a view to closing the scheme to future accrual during
2011 which would limit the future growth in liabilities. Existing members would
retain their benefits accrued to date and would be transferred to a new defined
contribution scheme for future pension benefits.
Dividend
The board recommends a final dividend of 4.73p per share (DKK0.4082). This
represents an increase of 14% on the final dividend for 2009. The interim
dividend was 3.17p per share (DKK 0.2877) and the total dividend, if approved,
will be 7.90p per share (DKK 0.6959), representing an increase of 10% on the
total dividend for 2009.
The group expects to continue to increase dividends broadly in line with
normalised adjusted earnings.
REVIEW AND OUTLOOK
The group achieved a strong performance in 2010, with businesses performing well
across all markets, service lines and customer segments. We are confident that
our strategic plan, which enhances our ability to meet increasingly
sophisticated customer needs by adding new capabilities and technologies to our
offer, has put the group in a strong position. It allows us to maintain our
longer term growth momentum as we pursue attractive global opportunities in our
key target sectors.
We will continue to build on our successes and remain confident about the
outlook for 2011 when we expect to deliver an improved organic revenue growth
performance whilst continuing to maintain our discipline on margins and cash
generation.
15 March 2011
G4S plc
Preliminary results announcement
For the year ended 31 December 2010
Consolidated income statement
For the year ended 31 December 2010
2010 2009
Notes £m £m
--------------------------------------------------------------------------------
Continuing operations
Revenue 2 7,397 7,009
--------------------------------------------------------------------------------
Profit from operations before amortisation of acquisition-
related intangible assets and share of profit from
associates 522 499
Share of profit from associates 5 1
--------------------------------------------------------------------------------
Profit from operations before amortisation of acquisition-
related intangible assets (PBITA) 1 527 500
Amortisation of acquisition-related intangible assets (88) (83)
Acquisition-related costs (4) -
--------------------------------------------------------------------------------
Profit from operations before interest and taxation (PBIT) 1, 2 435 417
Finance income 6 98 82
Finance costs 7 (203) (196)
--------------------------------------------------------------------------------
Profit before taxation (PBT) 330 303
Taxation:
+------------------------------------------------------------------------------+
|- Before amortisation of acquisition-related intangible |
|assets (102) (100)|
| |
|- On amortisation of acquisition-related intangible assets 25 23 |
| |
|- On acquisition-related costs 1 - |
+------------------------------------------------------------------------------+
(76) (77)
--------------------------------------------------------------------------------
Profit after taxation 254 226
Loss from discontinued operations 4 (9) (7)
--------------------------------------------------------------------------------
Profit for the year 245 219
--------------------------------------------------------------------------------
Attributable to:
Equity holders of the parent 223 202
Non-controlling interests 22 17
--------------------------------------------------------------------------------
Profit for the year 245 219
--------------------------------------------------------------------------------
Earnings per share attributable to equity shareholders of
the parent 10
For profit from continuing operations:
Basic 16.5p 14.9p
Diluted 16.5p 14.9p
For profit from continuing and discontinued operations:
Basic 15.9p 14.4p
Diluted 15.9p 14.4p
--------------------------------------------------------------------------------
+------------------------------------------------------------------------------+
|Dividends declared and proposed in respect of the year 9 |
| |
| |
| |
|Interim dividend of 3.17p per share (2009:3.02p) 45 42 |
| |
|Final dividend of 4.73p per share (2009: 4.16p) 66 58 |
+------------------------------------------------------------------------------+
|Total dividend of 7.90p per share (2009: 7.18p) 111 100 |
+------------------------------------------------------------------------------+
Consolidated statement of comprehensive income
For the year ended 31 December 2010
2010 2009
£m £m
--------------------------------------------------------------------------------
Profit for the year 245 219
Other comprehensive income
Exchange differences on translation of foreign operations 41 (93)
Change in fair value of net investment hedging financial
instruments - 29
Change in fair value of cash flow hedging financial
instruments 15 (23)
Actuarial losses on defined retirement benefit schemes 15 (63)
Tax on items taken directly to equity (11) 22
--------------------------------------------------------------------------------
Other comprehensive income, net of tax 60 (128)
--------------------------------------------------------------------------------
Total comprehensive income for the year 305 91
--------------------------------------------------------------------------------
Attributable to:
Equity holders of the parent 283 74
Non-controlling interests 22 17
--------------------------------------------------------------------------------
Total comprehensive income for the year 305 91
--------------------------------------------------------------------------------
Consolidated statement of financial position
At 31 December 2010
2010 2009
Notes £m £m
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Goodwill 2,147 2,049
Other acquisition-related intangible assets 286 359
Other intangible assets 71 69
Property, plant and equipment 580 546
Investment in associates 10 7
Trade and other receivables 138 111
Deferred tax assets 161 178
--------------------------------------------------------------------------------
3,393 3,319
--------------------------------------------------------------------------------
Current assets
Inventories 84 78
Investments 82 84
Trade and other receivables 1,463 1,351
Cash and cash equivalents 351 309
Assets classified as held for sale 11 - 29
--------------------------------------------------------------------------------
1,980 1,851
--------------------------------------------------------------------------------
Total assets 5,373 5,170
--------------------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank overdrafts (45) (38)
Bank loans (113) (146)
Obligations under finance leases (21) (23)
Trade and other payables (1,208) (1,106)
Current tax liabilities (58) (54)
Retirement benefit obligations (61) (55)
Provisions (33) (30)
Liabilities associated with assets classified as held for
sale 11 - (31)
--------------------------------------------------------------------------------
(1,539) (1,483)
--------------------------------------------------------------------------------
Non-current liabilities
Bank loans (574) (516)
Loan notes (1,153) (1,117)
Obligations under finance leases (49) (63)
Trade and other payables (48) (43)
Retirement benefit obligations (245) (313)
Provisions (44) (73)
Deferred tax liabilities (98) (122)
--------------------------------------------------------------------------------
(2,211) (2,247)
--------------------------------------------------------------------------------
Total liabilities (3,750) (3,730)
--------------------------------------------------------------------------------
Net assets 1,623 1,440
--------------------------------------------------------------------------------
EQUITY
Share capital 353 353
Share premium and reserves 1,224 1,054
--------------------------------------------------------------------------------
Equity attributable to equity holders of the parent 1,577 1,407
Non-controlling interests 46 33
--------------------------------------------------------------------------------
Total equity 1,623 1,440
--------------------------------------------------------------------------------
Consolidated statement of cash flows
For the year ended 31 December 2010
2010 2009
Notes £m £m
--------------------------------------------------------------------------------
Profit before taxation 330 303
Adjustments for:
Finance income (98) (82)
Finance costs 203 196
Depreciation of property, plant and equipment 131 121
Amortisation of acquisition-related intangible assets 88 83
Amortisation of other intangible assets 17 15
Acquisition-related expenses 4 -
Profit on disposal of property, plant and equipment and
intangible assets other than acquisition-related (16) -
Profit on disposal of subsidiaries (8) -
Share of profit from associates (5) (1)
Equity-settled transactions 7 7
--------------------------------------------------------------------------------
Operating cash flow before movements in working capital 653 642
(Increase)/decrease in inventories (2) 2
(Increase)/decrease in receivables (83) 1
Increase in payables 43 5
Decrease in provisions (32) (26)
Decrease in retirement benefit obligations (40) (33)
--------------------------------------------------------------------------------
Net cash flow from operating activities of continuing
operations 539 591
Net cash used by operating activities of discontinued
operations (5) (14)
--------------------------------------------------------------------------------
Cash generated by operations 534 577
Tax paid (86) (68)
--------------------------------------------------------------------------------
Net cash flow from operating activities 448 509
--------------------------------------------------------------------------------
Investing activities
Interest received 11 12
Cash flow from associates 3 2
Purchases of property, plant and equipment and intangible
assets other than acquisition-related (179) (187)
Proceeds on disposal of property, plant and equipment and
intangible assets other than acquisition-related 40 17
Acquisition of subsidiaries (59) (128)
Net cash balances acquired/(disposed of) 7 (12)
Disposal of subsidiaries 9 8
Sale/(purchase) of investments 5 (1)
Own shares purchased (10) (10)
--------------------------------------------------------------------------------
Net cash used in investing activities (173) (299)
--------------------------------------------------------------------------------
Financing activities
Share issues - 3
Dividends paid to non-controlling interests (12) (18)
Dividends paid to equity shareholders of the parent (103) (94)
Proceeds on issue of loan notes - 347
Repayment of revolving credit facilities with proceeds from
issue of loan notes - (347)
Other net movement in borrowings (18) 24
Transactions with non-controlling interests (3) (30)
Interest paid (105) (99)
Net cash flow from hedging financial instruments - (10)
Repayment of obligations under finance leases (20) (24)
--------------------------------------------------------------------------------
Net cash flow from financing activities (261) (248)
--------------------------------------------------------------------------------
Net increase/(decrease) in cash, cash equivalents and bank
overdrafts 12 14 (38)
Cash, cash equivalents and bank overdrafts at the beginning of
the year 291 361
Effect of foreign exchange rate fluctuations on cash held 1 (32)
--------------------------------------------------------------------------------
Cash, cash equivalents and bank overdrafts at the end of the
year 306 291
--------------------------------------------------------------------------------
Consolidated statement of changes in equity
For the year ended 31 December 2010
Share Share
capital Reserves Total capital Reserves Total
2010 2010 2010 2009 2009 2009
£m £m £m £m £m £m
--------------------------------------------------------------------------------
At beginning of year 353 1,054 1,407 352 1,075 1,427
Total comprehensive
income attributable
to equity shareholders
of the parent - 283 283 - 74 74
Shares issued - - - 1 2 3
Dividends declared - (103) (103) - (94) (94)
Own shares purchased - (10) (10) - (10) (10)
Transactions with non-
controlling interests - (7) (7) - - -
Equity-settled
transactions - 7 7 - 7 7
--------------------------------------------------------------------------------
At end of year 353 1,224 1,577 353 1,054 1,407
--------------------------------------------------------------------------------
1) Basis of preparation and accounting policies
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2010 or 2009. Statutory
accounts for 2009 have been delivered to the registrar of companies, and those
for 2010 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include references to
any matters to which the auditor drew attention by way of emphasis without
qualifying their reports and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The comparative balance sheet as at 31 December 2009 has been restated to
reflect the completion during 2010 of the initial accounting in respect of
acquisitions made during 2009. Adjustments made to the provisional calculation
of the fair values of assets and liabilities acquired amount to £5m, with an
equivalent increase in the reported value of goodwill.
2) Operating segments
The group operates in two core product areas: secure solutions and cash
solutions which represent the group's reportable segments. For each of the
reportable segments, the group's CEO (the chief operating decision maker)
reviews internal management reports on a regular basis. The group operates on a
worldwide basis and derives a substantial proportion of its revenue, PBITA and
PBIT from each of the following geographical areas: Europe (comprising the
United Kingdom and Ireland and Continental Europe), North America, and New
Markets (comprising the Middle East and Gulf States, Latin America and the
Caribbean, Africa and Asia Pacific).
Segment information for continuing operations is presented below:
Segment revenue
2010 2009
Revenue by reportable segment £m £m
-------------------------------------------------------
Secure Solutions
+-----------------------------------------------------+
| UK and Ireland 1,179 1,139 |
| |
| Continental Europe 1,438 1,498 |
+-----------------------------------------------------+
Europe 2,617 2,637
North America 1,676 1,495
+-----------------------------------------------------+
| Middle East and Gulf States 465 425 |
| |
| Latin America and the Caribbean 356 283 |
| |
| Africa 333 306 |
| |
| Asia Pacific 600 522 |
+-----------------------------------------------------+
New Markets 1,754 1,536
-------------------------------------------------------
Total Secure Solutions 6,047 5,668
-------------------------------------------------------
Cash Solutions
Europe 891 929
North America 106 99
New Markets 353 313
-------------------------------------------------------
Total Cash Solutions 1,350 1,341
-------------------------------------------------------
Total revenue 7,397 7,009
-------------------------------------------------------
2) Operating segments (continued)
Revenue by geographical area 2010 2009
£m £m
-----------------------------------------------------
Europe 3,508 3,566
North America 1,782 1,594
New Markets 2,107 1,849
-----------------------------------------------------
Total revenue 7,397 7,009
-----------------------------------------------------
PBITA by reportable segment 2010 2009
£m £m
-----------------------------------------------------
Secure Solutions
+---------------------------------------------------+
| UK and Ireland 103 97 |
| |
| Continental Europe 77 80 |
+---------------------------------------------------+
Europe 180 177
North America 96 85
+---------------------------------------------------+
| Middle East and Gulf States 44 38 |
| |
| Latin America and the Caribbean 26 18 |
| |
| Africa 33 29 |
| |
| Asia Pacific 40 41 |
+---------------------------------------------------+
New Markets 143 126
-----------------------------------------------------
Total Secure Solutions 419 388
-----------------------------------------------------
Cash Solutions
Europe 101 102
North America 4 4
New Markets 44 46
-----------------------------------------------------
Total Cash Solutions 149 152
-----------------------------------------------------
Total PBITA before head office costs 568 540
Head office costs (41) (40)
-----------------------------------------------------
Total PBITA 527 500
-----------------------------------------------------
PBITA by geographical area
Europe 281 279
North America 100 89
New Markets 187 172
-----------------------------------------------------
Total PBITA before head office costs 568 540
Head office costs (41) (40)
-----------------------------------------------------
Total PBITA 527 500
-----------------------------------------------------
Result by reportable segment 2010 2009
£m £m
-----------------------------------------------------------------
Total PBITA 527 500
Acquisition-related costs (4) -
Amortisation of acquisition-related intangible assets (88) (83)
-----------------------------------------------------------------
Total PBIT 435 417
-----------------------------------------------------------------
Secure Solutions 351 330
Cash Solutions 125 127
Head office costs (41) (40)
-----------------------------------------------------------------
Total PBIT 435 417
-----------------------------------------------------------------
3) Profit from operations before interest and taxation (PBIT)
The income statement can be analysed as follows:
Continuing operations 2010 2009
£m £m
-----------------------------------------------
Revenue 7,397 7,009
Cost of sales (5,811) (5,473)
-----------------------------------------------
Gross profit 1,586 1,536
Administration expenses (1,156) (1,120)
Share of profit from associates 5 1
-----------------------------------------------
PBIT 435 417
-----------------------------------------------
Included within administration expenses is the amortisation charge for
acquisition-related intangible assets and acquisition-related expenses.
4) Discontinued operations
Operations qualifying as discontinued in 2009 comprised the security services
business in France, which principally comprised Group 4 Securicor SAS; the
systems installation business in Slovakia; the security services business in
Germany, which principally comprised G4S Sicherheitsdienste GmbH and G4S
Sicherheitssysteme GmbH; and the cash solutions business in Taiwan, which was
disposed of on 15 July 2010. No further businesses qualified as discontinued in
2010.
5) Acquisitions
The group undertook a number of acquisitions in the year. The total fair value
of net assets acquired amounted to £19m which included the recognition of £14m
of acquisition-related intangible assets, generating goodwill of £46m, satisfied
by a total consideration of £65m, of which £42m has been paid in the year.
Related costs of £4m were incurred and charged to the income statement.
Principal acquisitions in subsidiary undertakings include the purchase of the
controlling interest in SSE Do Brasil Ltda, the parent company of Instalarme
Soluções Eletrônica Ltda ("Instalarme"), an electronic software and hardware
integration company in Brazil; Plantech Engenharia e Sistemas Ltda ("Plantech"),
a leading integrator in the Brazilian security systems market; and the entire
share capital of Skycom (Pty) Ltd ("Skycom"), a market leader in the South
African security systems market.
In addition, the group increased its holding in an Argentine business.
6) Finance income
2010 2009
£m £m
-----------------------------------------------------------------------
Interest income on cash, cash equivalents and investments 8 12
Other interest income 3 2
Expected return on defined retirement benefit scheme assets 87 68
-----------------------------------------------------------------------
Total finance income 98 82
-----------------------------------------------------------------------
7) Finance costs
2010 2009
£m £m
-------------------------------------------------------------------
Interest on bank overdrafts, loans and loan notes 98 94
Interest on obligations under finance leases 6 7
Other interest charges 6 8
-------------------------------------------------------------------
Total group borrowing costs 110 109
Finance costs on defined retirement benefit obligations 93 87
-------------------------------------------------------------------
Total finance costs 203 196
-------------------------------------------------------------------
8) Taxation
2010 2009
£m £m
-------------------------------------------------
Current taxation expense (86) (98)
Deferred taxation credit 10 21
-------------------------------------------------
Total income tax expense for the year (76) (77)
-------------------------------------------------
The total income tax expense for the year includes amounts attributable to the
UK of £12m (2009: £nil).
9) Dividends
Pence DKK 2010 2009
per share per share £m £m
--------------------------------------------------------------------------------
Amounts recognized as distributions to equity
holders of the parent in the year
Final dividend for the year ended 31 December 3.68 0.3052
2008 - 52
Interim dividend for the six months ended 30 3.02 0.2599
June 2009 - 42
Final dividend for the year ended 31 December 4.16 0.3408
2009 58 -
Interim dividend for the six months ended 30 3.17 0.2877
June 2010 45 -
--------------------------------------------------------------------------------
103 94
--------------------------------------------------------------------------------
Proposed final dividend for the year ended 31
December2010 4.73 0.6959 66 94
--------------------------------------------------------------------------------
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting. If so approved, it will be paid on 3 June 2011* to shareholders
who are on the UK register on 6 May 2011. The exchange rate used to translate it
into Danish kroner is that at 14 March 2011.
*Shareholders on the VP Services register will be paid on 6 June, as 3 June is a
public holiday in Denmark.
10) Earnings/(loss) per share attributable to equity shareholders of the parent
2010 2009
£m £m
--------------------------------------------------------------------------------
From continuing and discontinued operations
Earnings
Profit for the year attributable to equity holders of the parent 223 202
--------------------------------------------------------------------------------
Number of shares (m)
Weighted average number of ordinary shares 1,406 1,404
--------------------------------------------------------------------------------
Earnings per share from continuing and discontinued operations
(pence)
Basic and diluted 15.9p 14.4p
--------------------------------------------------------------------------------
From continuing operations
Earnings
Profit for the year attributable to equity holders of the parent 223 202
Adjustment to exclude loss for the year from discontinued
operations (net of tax) 9 7
--------------------------------------------------------------------------------
Profit from continuing operations 232 209
--------------------------------------------------------------------------------
Earnings per share from continuing operations (pence)
Basic and diluted 16.5p 14.9p
--------------------------------------------------------------------------------
From discontinued operations
Loss per share from discontinued operations (pence)
Basic and diluted (0.6)p (0.5)p
--------------------------------------------------------------------------------
From adjusted earnings
Earnings
Profit from continuing operations 232 209
Adjustment to exclude net retirement benefit finance income (net
of tax) 4 14
Adjustment to exclude amortisation of acquisition-related
intangible assets (net of tax) 64 60
Adjustment to exclude acquisition-related expenses (net of tax) 3 -
--------------------------------------------------------------------------------
Adjusted profit for the year attributable to equity holders of the
parent 303 283
--------------------------------------------------------------------------------
Weighted average number of ordinary shares (m) 1,406 1,404
Adjusted earnings per share (pence) 21.6p 20.2p
--------------------------------------------------------------------------------
In the opinion of the directors the earnings per share figure of most use to
shareholders is that which is adjusted. This figure better allows the assessment
of operational performance, the analysis of trends over time, the comparison of
different businesses and the projection of future earnings.
11) Disposal groups classified as held for sale
At 31 December 2009, disposal groups classified as held for sale primarily
comprised the assets and liabilities associated with the cash solutions business
in Taiwan which was sold on 15 July 2010. At 31 December 2010 there are no
disposal groups classified as held for sale.
12) Analysis of net debt
A reconciliation of net debt to amounts in the consolidated balance sheet is
presented below:
2010 2009
£m £m
--------------------------------------------------------------------------------
Cash and cash equivalents 351 309
Investments 82 84
Net cash and overdrafts included within disposal groups
classified as held for sale - 20
Net debt (excluding cash and overdrafts) included within
disposal groups classified as held for sale - (13)
Bank overdrafts (45) (38)
Bank loans (687) (662)
Loan notes (1,153) (1,117)
Fair value of loan note derivative financial instruments 96 70
Obligations under finance leases (70) (86)
--------------------------------------------------------------------------------
Total net debt (1,426) (1,433)
--------------------------------------------------------------------------------
An analysis of movements in net debt in the year is presented below:
2010 2009
£m £m
--------------------------------------------------------------------------------
Increase in cash, cash equivalents and bank overdrafts per
consolidated cash flow statement 14 (38)
(Sale)/purchase of investments (5) 1
Increase in debt and lease financing 38 1
--------------------------------------------------------------------------------
Change in net debt resulting from cash flows 47 (36)
Borrowings acquired with subsidiaries (4) -
Net additions to finance leases (9) (20)
--------------------------------------------------------------------------------
Movement in net debt in the year 34 (56)
Translation adjustments (27) (29)
Net debt at the beginning of the year (1,433) (1,348)
--------------------------------------------------------------------------------
Net debt at the end of the year (1,426) (1,433)
--------------------------------------------------------------------------------
Non GAAP measure - cash flow
The directors consider it is of assistance to shareholders to present an
analysis of the group's operating cash flow in accordance with the way in which
the group is managed, together with a reconciliation of that cash flow to the
net cash flow from operating activities as presented in the consolidated cash
flow statement.
Operating cash flow
For the year ended 31 December 2010
2010 2009
£m £m
--------------------------------------------------------------------------------
PBITA before share of profit from associates (group PBITA) 522 499
Depreciation, amortisation and profit on disposal of fixed assets 132 136
Movement in working capital and provisions (73) (15)
Net cash flow from capital expenditure (139) (170)
--------------------------------------------------------------------------------
Operating cash flow 442 450
--------------------------------------------------------------------------------
Reconciliation of operating cash flows 2010 2009
£m £m
--------------------------------------------------------------------------------
Net cash flow from operating activities per consolidated cash flow 448 509
statement
Net cash flow from capital expenditure (139) (170)
Add-back cash flow from discontinued operations and other items 14 13
Add-back additional pension contributions 33 30
Add-back tax paid 86 68
--------------------------------------------------------------------------------
Operating cash flow 442 450
--------------------------------------------------------------------------------
[HUG#1496809]
Annual Financial Report
| Source: G4S plc