G4S plc
Preliminary Results Announcement
January - December 2008
G4S, the international security solutions group, today announces its
preliminary results for the twelve months to 31 December 2008
RESULTS HIGHLIGHTS
* Strong organic turnover growth* of 9.5% (2007: 9.1%)
* Group turnover* up 22% to £ 5,942.9 million (2007: £4,868.4m)
* PBITA* up 23% to £416.4 million (2007: £338.7m)
* Margin* maintained at 7.0% (2007: 7.0%)
* Cash flow generation up 28% to £353.2 million, 86% of PBITA
(2007: 90%)
* Adjusted earnings per share increased by 26% to 16.7p
(2007:13.3p)
* Recommended final dividend up 29% to 3.68 pence per share DKK
0.3052 (2007: 2.85p/DKK 0.279) Recommended total dividend up 30%
to 6.43 pence per share DKK 0.5624 (2007: 4.96p/DKK 0.511)
* Completed a number of capability-building acquisitions including
GSL, ArmorGroup and RONCO
* Total spend of £599 million on acquisitions less disposals
* Raised £276.8 million of new equity
* Strategy implementation progressing well
* Continued strong all-round performance, particularly in new
markets
* at constant (2008) exchange rates
Nick Buckles, Chief Executive Officer, commented:"The group has delivered another great set of results and made
significant progress in its strategy implementation, supplemented
with some key capability-building acquisitions which have been
integrated successfully. Against the backdrop of ongoing economic
uncertainty in 2009 we continue to focus on building customerrelationships, retaining and growing existing business, winning new
business, improving productivity, controlling costs and
differentiating G4S with new service lines.
Our strong and experienced senior management team across the group
combined with our broad geographic and market sector exposure - with
no over-reliance on a single economy or particular industry group -
allows us to remain confident that we can deliver a strong
performance in 2009."
For further enquiries, please +44 (0) 1293
contact: 554400
Nick Buckles Chief Executive Officer
Trevor Dighton Chief Financial Officer
Helen Parris Director of Investor
Relations
Media enquiries:
Kevin Smith Citigate Dewe +44 (0) 7973
Rogerson 672649
High resolution images are available for the media to view and
download free of charge from www.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 over 110 countries and over 585,000 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 Deutsche Bank Auditorium, London. The event will be
webcast at:
http://www.thomson-webcast.net/uk/dispatching/?
event_id=884abf09c2a86b7eeecaa6a914bf7071&portal_id=3adf8181e9c843ad319a58b9bb471277
A telephone dial-in facility will be available on:-
UK Local/International: +44 203 003 2666
UK Freephone: 0808 1090 700
US Toll Free: 1 866 966 5335
Danish Toll Free: 8088 8649
A replay is available for seven days after the announcement by
dialling:
UK Local/International: +44 208 196 1998
UK Freephone: 0800 633 8453
US Toll Free: 1 866 583 1035
Access code for replay: 1224070#
Danish Toll Free: 8088 7109
Access code: 1224070#
Capital Markets Day
G4S will hold a Capital Markets Day in London on 19 May 2009.
Annual General Meeting
The company's annual general meeting will be held in London on 26 May
2009.
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 | 2008 | 2007 |
| | £m | £m |
|-------------------------------------+---------+---------|
| Turnover at constant exchange rates | 5,942.9 | 4,868.4 |
|-------------------------------------+---------+---------|
| Exchange difference | - | (384.9) |
|-------------------------------------+---------+---------|
| Total continuing business turnover | 5,942.9 | 4,483.5 |
+---------------------------------------------------------+
Turnover increased by 33% to £5,942.9 million or by 22% at constant
exchange rates. Organic turnover growth was 9.5%.
Organic Europe North America Developed New Markets Total
Turnover Growth * Markets
Secure Solutions 8.3% 3.6% 6.5% 16.1% 8.6%
Cash Solutions 12.0% 1.9% 11.0% 18.6% 12.5%
Total 9.4% 3.5% 7.5% 16.6% 9.5%
Excluding North America commercial nuclear security, the organic
growth rate for the group was 10.4%.
* Calculated to exclude acquisitions and disposals, and at constant
exchange rates
Group Profit
+----------------------------------------------------------+
| PBITA * of Continuing Businesses | 2008 | 2007 |
| | £m | £m |
|-----------------------------------------+-------+--------|
| PBITA at constant exchange rates | 416.4 | 338.7 |
|-----------------------------------------+-------+--------|
| Exchange difference | - | (27.3) |
|-----------------------------------------+-------+--------|
| Total continuing business PBITA | 416.4 | 311.4 |
|-----------------------------------------+-------+--------|
| PBITA margin at constant exchange rates | 7.0% | 7.0% |
+----------------------------------------------------------+
* PBITA is defined as profit before interest, taxation and
amortisation of acquisition-related intangible assets
PBITA increased by 34% to £416.4 million or by 23% at constant
exchange rates. The PBITA margin was 7.0%.
Cash Flow and Financing
+---------------------------------------------+
| Cash Flow | 2008 | 2007 |
| | £m | £m |
|-----------------------------+-------+-------|
| Operating cash flow | 353.2 | 276.4 |
|-----------------------------+-------+-------|
| Operating cash flow / PBITA | 86% | 90% |
+---------------------------------------------+
Operating cash flow, as analysed on page 22, was up 28% to £353.2
million in the period, representing 86% of PBITA. Net cash invested
in acquistions was £598.6 million. Net debt at the end of the
period, as analysed on page 21, was £1,347.7 million (December 2007:
£804.9 million).
Adjusted earnings per share
+-------------------------------------------------------------------+
| Adjusted earnings per | 2008 | 2007 at constant | 2007 |
| share | £m | exchange | £m |
| | | rates | |
| | | £m | |
|----------------------------+---------+------------------+---------|
| PBITA from continuing | 416.4 | 338.7 | 311.4 |
| operations | | | |
|----------------------------+---------+------------------+---------|
| Interest (before pensions) | (88.1) | (63.7) | (58.7) |
|----------------------------+---------+------------------+---------|
| Tax | (88.3) | (75.6) | (69.5) |
|----------------------------+---------+------------------+---------|
| Minorities | (13.7) | (13.4) | (13.4) |
|----------------------------+---------+------------------+---------|
| Adjusted profit | 226.3 | 186.0 | 169.8 |
| attributable to | | | |
| shareholders | | | |
|----------------------------+---------+------------------+---------|
| Average number of shares | 1,357.7 | 1,275.2 | 1,275.2 |
| (m) | | | |
|----------------------------+---------+------------------+---------|
| Adjusted EPS (p) | 16.7p | 14.6p | 13.3p |
+-------------------------------------------------------------------+
Adjusted earnings per share, reconciled to basic earnings per share
on page 20, increased by 26%, or by 14% at constant exchange rates.
BUSINESS ANALYSIS
Secure Solutions
Turnover PBITA Margins Organic
£m £m Growth
* At constant exchange
rates 2008 2007 2008 2007 2008 2007 2008
Europe * 2,319.5 1,849.6 151.7 120.2 6.5% 6.5% 8.3%
North America * 1,222.3 1,125.1 70.6 66.3 5.8% 5.9% 3.6%
New Markets * 1,200.1 842.1 96.2 68.0 8.0% 8.1% 16.1%
Total secure solutions 4,741.9 3,816.8 318.5 254.5 6.7% 6.7% 8.6%
*
Exchange differences - (313.0) - (19.7)
At actual exchange 4,741.9 3,503.8 318.5 234.8
rates
The secure solutions business continued its strong performance with
good organic growth of 8.6% and margins maintained at 6.7%.
Europe
Turnover PBITA Margins Organic
£m £m Growth
* At constant exchange
rates 2008 2007 2008 2007 2008 2007 2008
UK & Ireland * 929.9 598.2 76.8 48.7 8.3% 8.1% 7.6%
Continental Europe * 1,389.6 1,251.4 74.9 71.5 5.4% 5.7% 8.6%
Total Europe * 2,319.5 1,849.6 151.7 120.2 6.5% 6.5% 8.3%
Organic growth in Europe was 8.3% compared to 6.5% in 2007. Margins
were unchanged at 6.5%.
There was good organic growth of 7.6% in the UK & Ireland compared to
6.0% in the same period last year. Margins strengthened further to
8.3%. Customer retention rates in the security business were high at
around 95%. The care and justice, events, defence training and secure
facilities management businesses all recorded strong growth and good
margins. A number of new services were launched in the year including
Gurkha services, lone worker protection and a vacant property
protection service.
A number of acquisitions were made in the region aimed at increasing
the expertise of the group in key sectors in line with the group
strategy. The acquisition and integration of GSL, ArmorGroup and Rock
Steady have all progressed well adding additional expertise and
delivering synergies ahead of expectations. Key contract wins include
Brook House immigration detention centre, facilities management
services for South Warwickshire and North West London Primary Care
Trusts, the Olympic Delivery Authority, the Ministry of Defence and
the first offender monitoring contract in Northern Ireland.
In Continental Europe, organic growth was 8.6% and margins were
slightly below the prior year at 5.4% due mainly to a challenging
environment in aviation security as a result of lower passenger
numbers, the start up of the Oslo airport contract and lower
installation growth in the smaller Security Systems businesses. Cost
reduction measures are being implemented in these markets. Security
Systems is a relatively small part of the G4S portfolio and contracts
are concentrated in Continental Europe. Overall contract retention
in the region was high at over 95% with key contracts such as those
for the European Parliament (Belgium and Luxembourg) and Schiphol
airport being renewed in 2008.
Lithuania and Luxembourg had a strong year in all customer segments
and Austria delivered good results assisted by completion of some
systems projects, the Euro 2008 football championships and other
major events. In Greece, the business won four new regional airports
contracts and the Athens Metro contract in 2008, which contributed to
excellent growth and helped improve margins.
In Romania the business achieved excellent growth and margins,
largely as a result of the outsourcing of a wide range of
security-related services by the Romanian post office and the
critical mass that this has created across the country. In the
Baltics, growth slowed but margins were robust.
Norway achieved excellent organic growth of over 40% assisted by the
Oslo airport contract which began early in the year. Finland had a
good year and in Sweden, the business is now trading profitably under
the new management team and following some good contract wins in
2007. There was good growth and solid margins in Denmark, aided by
security systems growth across all segments and strong growth in
manned security.
North America
Turnover PBITA Margins Organic
£m £m Growth
* At constant exchange
rates 2008 2007 2008 2007 2008 2007 2008
North America * 1,222.3 1,125.1 70.6 66.3 5.8% 5.9% 3.6%
Organic growth in North America was 3.6% and excluding the US
commercial nuclear sector which lost a large contract, organic growth
was 7.0%. Margins were slightly lower at 5.8% as expected due to
start up costs on some new contracts and contract renewals.
In the United States the commercial business was broadly flat however
excluding the commercial nuclear business, organic growth was 5%.The
government business achieved organic growth of 11%, with the
immigration and border control contract performing strongly.
New contract awards included those for the Department of Energy at
its Hanford Site and commercial nuclear power sites for companies
such as FPL and an international contract with Agilent. Contract
renewals and extensions included Chrysler and Bank of America.
In Canada there was good organic growth and margins improved as a
result of a programme to exit low yielding contracts and focus on
higher margin businesses.
New Markets
Turnover PBITA Margins Organic
£m £m Growth
* At constant exchange
rates 2008 2007 2008 2007 2008 2007 2008
Asia * 412.0 285.8 32.6 24.1 7.9% 8.4% 15.6%
Middle East * 315.6 191.2 26.4 15.3 8.4% 8.0% 21.6%
Africa * 248.6 191.8 22.4 17.0 9.0% 8.9% 10.8%
Latin America & Caribbean 223.9 173.3 14.8 11.6 6.6% 6.7% 16.5%
*
Total New Markets * 1,200.1 842.1 96.2 68.0 8.0 % 8.1% 16.1%
In New Markets, organic growth was excellent at 16.1% and margins
were maintained at around 8.0%.
Organic growth in Asia was 15.6% and margins were 7.9%. Margins in
Asia were slightly down due to the lower margin Australian prison
contracts which were acquired with GSL. India continued to deliver
excellent growth of over 20% and strong margin improvement.
Thailand also performed well with organic growth of over 20% with
improved margins and won a major contract with SCB at the end of
2008. In Malaysia, organic growth was 10% due to improved operational
performance and a significant increase in the number of ATMs and CDMs
serviced.
In Hong Kong the business grew slightly despite a challenging
competitive environment and margins were maintained. In Macau, growth
slowed but was still above 15% and margins remained strong. The
Papua New Guinea business performed very well in its first year of
operation.
In the Middle East organic growth was impressive at 21.6% and margins
were at 8.4%, driven by good performance in facilities management and
improvement in the margins achieved in Iraq.
In UAE organic growth was 18% and G4S has been granted contracts for
a secure training centre and rehabilitation services in Abu Dhabi.
Qatar achieved organic growth of 80% from mainly the education,
military and energy sectors.
In Africa organic growth was 10.8% and margins improved to 9.0%.
Kenya performed very well with growth of 14% and continued strong
profitability. Morocco reported strong growth assisted by new
contracts in the oil and banking sectors. In South Africa, growth
continued but margins were lower due to a number of underperforming
contracts and new management has been installed.
Elsewhere in Africa, DRC, Malawi, Mozambique, Nigeria, Namibia and
Zambia all performed well with healthy organic growth and a
significant increase in scale from the ArmorGroup acquisition in many
of these markets.
In the Latin America & Caribbean region organic growth was 16.5% and
margins were 6.6%. The region has experienced a slight slow-down in
economic growth and some smaller competitors in countries such as
Peru and Ecuador have exited the market, which is currently providing
an opportunity for the group as the labour market tightness has
reduced.
Argentina continued to perform well with organic growth over 30% and
improved margins helped by an improved business mix.
In Chile improving margins were assisted by the acquisition of the
country's largest marine security solution company and some higher
margin mining contracts. Peru grew more than 20% helped by new
regulation which favours professional security companies and margins
improved due to new technology related contracts
The various businesses within Colombia performed well in comparison
to 2007 but overall results were impacted by the renegotiated tolls
contract which was expected in 2008.
Cash Solutions
Turnover PBITA Margins Organic
* At constant £m £m Growth
exchange rates 2008 2007 2008 2007 2008 2007 2008
Europe * 859.1 759.9 94.0 83.4 10.9% 11.0% 12.0%
North America * 87.0 85.4 0.8 0.6 0.9% 0.7% 1.9%
New Markets * 254.9 206.3 38.6 31.2 15.1% 15.1% 18.6%
Total Cash Solutions 1,201.0 1,051.6 133.4 115.2 11.1% 11.0% 12.5%
*
Exchange differences - (71.9) - (8.2)
At actual exchange 1,201.0 979.7 133.4 107.0
rates
The cash solutions business continued its very strong first half
performance with organic growth of 12.5% and margins of 11.1%.
Organic growth in Europe was excellent at 12% with margins maintained
at around 10.9%, despite investment in Cash Retail 360 retail
solution.
In the UK & Ireland, the cash solutions business performed well with
good organic growth and firm margins. The fifth "super branch" cash
management centre in the UK was opened in London in January 2009.
There was slower growth but solid margins in the Netherlands as a
result of excellent operational controls. The implementation of the
Swedbank ATM management contract contributed to substantial revenue
growth and improved margins in Sweden.
In Belgium there was good growth in ATMs and cash management, largely
from expanding existing customer contracts. In Hungary and the
Baltics there was high revenue growth and excellent margins.
The implementation of the post office outsourcing contract in Romania
has continued to drive extremely high growth and margin improvements
as expected.
In North America the business in Canada stabilised under the new
management team and experienced positive growth for the first time
since 2006. We expect continued improvement in 2009.
Organic growth in New Markets was excellent at 18.6% with margins
remaining at 15.1%. There were very good results across Asia, Middle
East and Africa. In Latin America, results were affected by the
renegotiated Colombia tolls contract as expected. Margins in
Colombia remain strong and the other cash solutions businesses in the
region performed well.
Cash outsourcing opportunities are beginning to develop in Malaysia,
Indonesia and the Philippines as financial institutions and central
banks are focusing on their core services and seeking to drive
efficiencies in the cash cycle. At the end of 2008, a banking
hardware, maintenance and software interface business was acquired to
support services in the Hong Kong and China markets.
In the UAE, the business has extended its cash management offer into
credit card management and distribution services. India was awarded
the pilot distribution contract for the new national ID cards. In
Thailand, new state-of-the-art cash centres have allowed the business
to expand rapidly.
In South Africa the business is performing well with good growth,
particularly in the ATM sector, and very strong margins.
There was high organic growth in Kenya as a result of further
outsourcing in the financial services sector. The introduction of
new technology has provided the business with a unique competitive
advantage in the market.
STRATEGIC DEVELOPMENT
G4S has developed greatly over the last five years from a well
respected security company into a secure outsourcing partner to
customers in key segments.
The implementation of the group strategy has continued well in 2008
with a number of capability-building acquisitions which have added
significant expertise to the business:-
- cash cycle management and consultancy
- care and justice services
- government outsourcing
- risk management consultancy
- mine clearance
- compliance and investigations
- secure event management
- security and IT convergence technology
This has enabled the business to increase customer partnerships,
lengthen the average contract term and deliver significant benefits
to customers. It also means that we have been able to attract high
quality experts in particular customer segments or service lines to
join the organisation.
This strategy will continue throughout 2009 and in the future. We
will seek further capability-building acquisitions and customer
segment experts to assist in driving the strategy forward.
OTHER FINANCIAL ISSUES
Acquisitions and divestments
The group completed a number of acquisitions during 2008 which have
added new capabilities to the group and supported the implementation
of the group's strategy. Acquisitions included ArmorGroup, one of
the world's leading protective security companies, on 7 May and GSL,
an international leader in the provision of government support
services, on 12 May. The group has been running detailed worldwide
integration programmes since completion of the acquisitions and we
expect them to be fully integrated by the end of March 2009, ensuring
a strong business performance.
The GSL businesses have been integrated into the G4S UK & Ireland
region to create a significantly stronger UK Care and Justice
business as well as providing additional secure outsourcing
capability in the UK government sector. At the time of the GSL
acquisition we announced that we expected to achieve cost synergies
of around £7m and we expect the full effect of these benefits to come
through in 2009.
The majority of ArmorGroup's 27 country operations have now been
merged into the relevant G4S regions. The UK elements of ArmorGroup
have been merged with G4S Risk Management Solutions to create a
business which focuses on government contracts in Afghanistan, Iraq
and Kosovo as well as the provision of mine clearance, training and
risk management consultancy.
The group's acquisition strategy going forward will be to focus on
niche opportunities which will both help to deliver its strategic
objectives and meet its financial performance criteria. Areas of
particular interest could include risk consulting, complementary
technologies and segmental specialists and G4S expects to invest
between £50m to £100m in acquisitions in 2009.
At the end of 2007, we signalled our intention to divest of our
remaining businesses in France and Germany. The majority of these
businesses were divested during 2008 and the final one in February
2009.
Share capital
On 13 May 2008 the group completed a placing of 127 million ordinary
shares of 25p at a price of 222p per share. Gross proceeds were
£281.9 million and issue costs £5.1 million.
Financing & Interest
The group has a prudent approach to its balance sheet whilst
maintaining the flexibility to pursue acquisitions when appropriate.
The group is currently well capitalised with no significant
maturities until 2012. Borrowings are at attractive rates and
liabilities broadly match the business mix by currency.
The group's primary sources of finance are:
(i) A £1.1bn multicurrency revolving credit facility provided by a
consortium of lending banks at a margin of 0.225% over LIBOR and
maturing on 28 June 2012.
(ii) A $550m private placement of notes on 1 March 2007, which mature
at various dates between 2014 and 2022 and bear interest at rates
between 5.77% and 6.06%.
(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%.
At 31 December 2008 the group had other short-term committed
facilities of £45m and uncommitted facilities of £578m.
As of 31 December 2008, net debt was £1,347.7m representing a gearing
of 92%. The group headroom was £350m at the year end. The group has
sufficient borrowing capacity to finance its current investment
plans.
Net interest payable on net debt was £81.2m. This is an increase of
53% over the 2007 cost of £57.4m, due principally to the increase in
the group's average gross debt.
The group's average cost of gross borrowings during 2008 was 5.5%
compared to 5.7% in 2007.
Also included within financing is other interest costs of £6.9m
(2007: £1.3m) and net income of £3.7m (2007: £5.0m) in respect of
movements in the group's retirement benefit obligations.
Taxation
The effective tax rate for the year on adjusted earnings was 26.9%,
compared to 27.5% for 2007. The group believes that the rate is
sustainable going forward as a result of the ongoing rationalisation
of the post-merger group legal structure and the elimination of
fiscal inefficiencies.
Retirement benefit obligations
The group's funding shortfall on funded defined retirement benefit
schemes, on the valuation basis specified in IAS19 Employee Benefits,
was £288m before tax or £207m after tax (31 December 2007: £138m and
£99m respectively). The main schemes are in the UK. The latest full
actuarial valuations were undertaken at 5 April 2006 in respect of
the Securicor scheme, 31 March 2007 in respect of the Group 4 scheme
and 31 March 2005 in respect of the GSL scheme acquired in May 2008.
However, all actuarial assumptions were reviewed as at 31 December
2008.
The valuation of gross liabilities has decreased since 31 December
2007 due to an increase in the appropriate AA corporate bond rate
from 5.8% to 6.3%, offset to a degree by changes in longevity
assumptions. However, the value of the assets held in the funds
(adjusted for acquired pension funds and additional contributions)
decreased by £247m during the period. Additional company
contributions were £26m.
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
anticipates that, in the medium term, additional cash contributions
will continue to be made at least at a level similar to that in 2008.
Dividend
The board recommends a final dividend of 3.68p per share (DKK
0.3052). This represents an increase of 29% on the final dividend
for 2007. The interim dividend was 2.75p per share (DKK 0.2572) and
the total dividend, if approved, will be 6.43p per share (DKK
0.5624), representing an increase of 30% on the total dividend for
2007.
The proposed dividend cover is 2.5 times on adjusted earnings in line
with the group's previously declared intention. In the future, the
group expects to increase dividends broadly in line with normalised
adjusted earnings.
REVIEW AND OUTLOOK
The business performed very well in 2008 across all markets, service
lines and customer segments.
Whilst G4S and its customers are not immune to a severe economic
slowdown, the business is resilient to economic pressure for a number
of reasons:-
* large proportion of complex long term outsourcing contracts,
particularly in the government sector and cash management
contracts
* increased need for outsourced solutions to enable customers to
improve efficiencies and manage costs in difficult times
* expertise in the cash management cycle to cater for increased
demand from consumers for access to their funds and efficient
management of cash for the financial institutions
* broad geographic and market sector exposure with no over-reliance
on a single economy or particular industry group and a good
proportion of revenue in developing markets which have inherent
structural growth
* customer demand for continuity and sustainability of the supply
chain and the backing of a global organisation with strong track
record of delivery
* easing of global employment markets enabling recruitment of good
quality staff and increased retention rates of existing employees
* strong, very experienced senior management across the group
Whilst there are some challenges for the business in recessionary
times, our history and current experience suggest that our business
model, international presence and the nature of our contract base
means that we are more resilient than most and therefore we expect to
perform strongly in 2009.
10 March 2009
G4S plc
Unaudited preliminary results announcement
For the year ended 31 December 2008
Consolidated income statement
For the year ended 31 December 2008
2008 2007
Notes £m £m
Continuing operations
Revenue 2 5,942.9 4,483.5
Profit from operations before amortisation of
acquisition-related intangible assets and share
of
profit from associates 413.0 308.4
Share of profit from associates 3.4 3.0
Profit from operations before amortisation of 416.4 311.4
acquisition-related intangible assets (PBITA) 2
Amortisation of acquisition-related intangible (67.8) (41.6)
assets
Profit from operations before interest and 348.6 269.8
taxation (PBIT) 2, 3
Finance income 6 104.9 92.6
Finance costs 7 (189.3) (146.3)
Profit before taxation (PBT) 264.2 216.1
Taxation:
- Before amortisation of acquisition-related (89.3) (70.9)
intangible assets
- On amortisation of acquisition-related 19.1 14.9
intangible assets
8 (70.2) (56.0)
194.0 160.1
Profit after taxation
(Loss)/profit from discontinued operations 4 (29.1) 0.5
Profit for the year 164.9 160.6
Attributable to:
Equity holders of the parent 151.2 147.2
Minority interests 13.7 13.4
Profit for the year 164.9 160.6
Earnings per share attributable to equity
shareholders of the parent 10
For profit from continuing operations:
Basic 13.3p 11.5p
Diluted 13.3p 11.5p
For profit from continuing and discontinued
operations:
Basic 11.1p 11.5p
Diluted 11.1p 11.5p
Dividends declared and proposed in respect of
the year 9
Interim dividend of 2.75p per 38.7 27.3
share (2007: 2.11p)
Final dividend of 3.68p per share 51.8 36.3
(2007: 2.85p)
Total dividend of 6.43p per share 90.5 63.6
(2007: 4.96p)
Consolidated balance sheet
At 31 December 2008
2008 2007
Notes £m £m
ASSETS
Non-current assets
Goodwill 2,098.1 1,331.3
Other acquisition-related intangible assets 339.9 224.2
Other intangible assets 61.0 31.3
Property, plant and equipment 528.6 403.2
Investment in associates 7.4 10.2
Trade and other receivables 198.0 69.4
Deferred tax assets 155.0 84.5
3,388.0 2,154.1
Current assets
Inventories 85.5 58.2
Investments 92.7 73.2
Trade and other receivables 1,362.8 887.1
Cash and cash equivalents 562.1 382.1
Assets classified as held for sale 11 71.0 130.9
2,174.1 1,531.5
Total assets 5,562.1 3,685.6
LIABILITIES
Current liabilities
Bank overdrafts (195.1) (110.7)
Bank loans (87.9) (80.6)
Obligations under finance leases (22.1) (16.2)
Trade and other payables (1,216.1) (852.1)
Current tax liabilities (16.2) (18.4)
Retirement benefit obligations (48.9) (47.3)
Provisions (33.9) (23.6)
Liabilities associated with assets (74.1) (78.3)
classified as held for sale 11
(1,694.3) (1,227.2)
Non-current liabilities
Bank loans (877.8) (729.1)
Loan notes (901.9) (290.4)
Obligations under finance leases (63.6) (46.0)
Trade and other payables (63.5) (38.7)
Retirement benefit obligations (278.6) (120.1)
Provisions (91.3) (38.2)
Deferred tax liabilities (120.4) (75.9)
(2,397.1) (1,338.4)
Total liabilities (4,091.4) (2,565.6)
Net assets 1,470.7 1,120.0
EQUITY
Share capital 352.1 320.2
Share premium and reserves 1,074.9 766.9
Equity attributable to equity holders of 1,427.0 1,087.1
the parent 12
Minority interests 43.7 32.9
Total equity 1,470.7 1,120.0
Consolidated cash flow statement
For the year ended 31 December 2008
2008 2007
Notes £m £m
Profit before taxation 264.2 216.1
(Loss)/profit before taxation from discontinued (29.1) 0.4
operations
Adjustments for:
Finance income (104.9) (92.6)
Finance costs 189.3 146.3
Finance costs attributable to discontinued 1.4 3.3
operations
Depreciation of property, plant and equipment 105.0 91.1
Amortisation of acquisition-related intangible 67.8 41.6
assets
Amortisation of other intangible assets 11.1 8.5
Loss/(profit) on disposal of property, plant
and equipment and intangible assets other than
acquisition-related 2.1 (14.4)
Loss/(profit) on disposal of discontinued 10.5 (12.0)
operations
Share of profit from associates (3.4) (3.0)
Equity-settled transactions 5.0 4.1
Operating cash flow before movements in working 519.0 389.4
capital
Decrease/(increase) in inventories (7.4) (9.6)
Increase in receivables (38.0) (69.7)
Increase in payables 32.3 84.1
Decrease in provisions (50.9) (36.7)
Cash generated by operations 455.0 357.5
Tax paid (82.0) (66.2)
Net cash flow from operating activities 373.0 291.3
Investing activities
Interest received 17.2 24.9
Cash flow from associates 12.2 1.0
Purchases of property, plant and equipment and
intangible assets other than (174.5) (134.5)
acquisition-related
Proceeds on disposal of property, plant and
equipment and intangible assets other than 13.2 25.5
acquisition-related
Acquisition of subsidiaries (419.4) (151.6)
Net cash balances acquired 19.7 11.6
Disposal of subsidiaries 31.1 7.9
Sale/(purchase) of investments 5.6 (0.3)
Own shares purchased (8.8) (3.1)
Net cash used in investing activities (503.7) (218.6)
Financing activities
Share issues 276.8 0.9
Dividends paid to minority interests (11.9) (3.8)
Loan to minority interests - (13.3)
Dividends paid to equity shareholders of the (75.0) (59.3)
parent
Proceeds on issue of loan notes 327.0 280.6
Repayment of revolving credit facilities with (327.0) (280.6)
proceeds from issue of loan notes
Other net movement in borrowings 173.7 140.4
Interest paid (97.2) (79.9)
Net cash flow from hedging financial (65.9) (4.3)
instruments
Repayment of obligations under finance leases (13.5) (4.6)
Net cash flow from financing activities 187.0 (23.9)
Net increase in cash, cash equivalents and bank 56.3 48.8
overdrafts 13
Cash, cash equivalents and bank overdrafts at 270.7 210.0
the beginning of the year
Effect of foreign exchange rate fluctuations on 33.7 11.9
cash held
Cash, cash equivalents and bank overdrafts at 360.7 270.7
the end of the year
Consolidated statement of recognised income and expense
For the year ended 31 December 2008
2008 2007
£m £m
Exchange differences on translation of foreign 182.0 37.4
operations
Change in fair value of net investment hedging (81.1) (19.0)
financial instruments
Change in fair value of cash flow hedging financial 36.4 (7.0)
instruments
Actuarial (losses)/gains on defined retirement (196.9) 64.7
benefit schemes
Tax on items taken directly to equity 50.3 (14.0)
Net (expense)/income recognised directly in equity (9.3) 62.1
Profit for the year 164.9 160.6
Net recognised income 155.6 222.7
Attributable to:
Equity holders of the parent 141.9 209.3
Minority interests 13.7 13.4
Net recognised income 155.6 222.7
Notes to the preliminary results announcement
1) Basis of preparation and accounting policies
The primary statements and selected notes in this preliminary results
announcement do not constitute the company's financial statements
within the meaning of Section 240 of the Companies Act 1985 for the
years ending 31 December 2008 or 2007. The notes included in this
announcement are in some cases summaries of those included in the
statutory accounts. Statutory accounts for the year ended 31 December
2007 have been filed with the Registrar of Companies. The auditor's
report on those accounts was unqualified and did not contain any
statement under Section 237 of the Companies Act 1985.
The preliminary results announcement for the year ended 31 December
2008 has been prepared by the directors, based upon the result and
position which they expect will be reflected in the statutory
accounts. The statutory accounts will be prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("Adopted IFRS"). Details of the accounting policies
that will be applied in the statutory accounts are set out in the
2007 Annual Report and Accounts. The statutory accounts, once
finalised, will be delivered to the Registrar of Companies in due
course. IFRIC 14 IAS19 - The limit on a defined benefit asset,
minimum funding requirements and their interaction has been endorsed
during the year and is effective for accounting periods commencing 1
January 2009. This has not resulted in a material impact to the
financial statements.
The comparative income statement for the year ended 31 December 2007
has been re-presented for operations qualifying as discontinued
during the current year. Revenue from continuing operations has been
reduced by £6.9m and PBT has been reduced by £0.9m compared to the
figures published previously. In addition, the comparative balance
sheet as at 31 December 2007 has been restated to reflect the
completion during 2008 of the initial accounting in respect of
acquisitions made during 2007. Adjustments made to the provisional
calculation of the fair values of assets and liabilities acquired
amount to £1.1m, with an equivalent increase in the reported value of
goodwill.
2) Segmental analysis
The group operates in two core product areas: secure solutions and
cash solutions. The group operates on a worldwide basis and derives
a substantial proportion of its revenue and PBIT from each of the
following geographical regions: 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).
The current management structure of the group is a combination of
product area and geography, within which the larger businesses
generally report by product area. The group's primary segmentation is
therefore by business segment and its secondary segmentation is by
geography.
Segment information for continuing operations is presented below:
Segment revenue
Revenue by business segment 2008 2007
£m £m
Secure Solutions
UK and Ireland 929.9 593.0
Continental Europe 1,389.6 1,078.3
Europe 2,319.5 1,671.3
North America 1,222.3 1,043.8
Middle East and Gulf States 315.6 177.9
Latin America and the Caribbean 223.9 158.0
Africa 248.6 183.9
Asia Pacific 412.0 268.9
New Markets 1,200.1 788.7
Total Secure Solutions 4,741.9 3,503.8
Cash Solutions
Europe 859.1 706.3
North America 87.0 78.0
New Markets 254.9 195.4
Total Cash Solutions 1,201.0 979.7
Total revenue 5,942.9 4,483.5
Notes to the preliminary results announcement (continued)
2) Segmental analysis (continued)
Revenue by geographical market 2008 2007
£m £m
Europe 3,178.6 2,377.6
North America 1,309.3 1,121.8
New Markets 1,455.0 984.1
Total revenue 5,942.9 4,483.5
PBITA by business segment 2008 2007
£m £m
Secure Solutions
UK and Ireland 76.8 48.4
Continental Europe 74.9 61.5
Europe 151.7 109.9
North America 70.6 61.5
Middle East and Gulf States 26.4 14.2
Latin America and the Caribbean 14.8 10.3
Africa 22.4 16.0
Asia Pacific 32.6 22.9
New Markets 96.2 63.4
Total Secure Solutions 318.5 234.8
Cash Solutions
Europe 94.0 77.4
North America 0.8 0.6
New Markets 38.6 29.0
Total Cash Solutions 133.4 107.0
Total PBITA before head office costs 451.9 341.8
Head office costs (35.5) (30.4)
Total PBITA 416.4 311.4
PBITA by geographical market
Europe 245.7 187.3
North America 71.4 62.1
New Markets 134.8 92.4
Total PBITA before head office costs 451.9 341.8
Head office costs (35.5) (30.4)
Total PBITA 416.4 311.4
Result by business segment 2008 2007
£m £m
Total PBITA 416.4 311.4
Amortisation of acquisition-related intangible (67.8) (41.6)
assets
Total PBIT 348.6 269.8
Secure Solutions 271.5 215.4
Cash Solutions 112.6 84.8
Head office costs (35.5) (30.4)
Total PBIT 348.6 269.8
Notes to the preliminary results announcement (continued)
3) Profit from operations before interest and taxation (PBIT)
The income statement can be analysed as follows:
Continuing operations 2008 2007
£m £m
Revenue 5,942.9 4,483.5
Cost of sales (4,627.9) (3,479.2)
Gross profit 1,315.0 1,004.3
Administration expenses (969.8) (737.5)
Share of profit from associates 3.4 3.0
PBIT 348.6 269.8
Included within administration expenses is the amortisation charge
for acquisition-related intangible assets.
4) Discontinued operations
Operations qualifying as discontinued in the current year primarily
comprise the secure solutions businesses in France, which principally
includes Group 4 Securicor SAS, disposed of on 28 February 2009; and
the secure solutions businesses in Germany, which principally include
G4S Sicherheitsdienste GmbH and G4S Sicherheitssysteme GmbH, Berlin,
disposed of on 15 May 2008.
Operations qualifying as discontinued in the prior year primarily
comprise: G4S Cash Services (France) SAS, disposed of on 2 July 2007;
as well as the secure solutions businesses in France, which
principally include Group 4 Securicor SAS; and the secure solutions
businesses in Germany, which principally include G4S
Sicherheitsdienste GmbH and G4S Sicherheitssysteme GmbH, Berlin,
which were in the process of being disposed of as at 31 December
2007.
5) Acquisitions
The group undertook a number of acquisitions in the year. The total
fair value of net liabilities acquired amounted to £76.4m which
included the recognition of £151.6m of acquisition-related intangible
assets, generating goodwill of £446.2m, satisfied by a total
consideration of £369.8m, of which £358.2m has been paid in the
year.
Principal acquisitions in subsidiary undertakings include the
purchase of controlling interests in: Defacto 1119 Limited, the
holding company of the Global Solutions group (GSL), an international
leader in the provision of support services for governments,
companies and public authorities; ArmorGroup International plc, an
international provider of defensive, protective secure solutions,
head-quartered in the UK; RONCO Consulting Corporation, an
international provider of humanitarian mine action and ordnance
services, specialised security and training head-quartered in the US;
MJM Investigations, Inc., a provider of insurance fraud mitigation
and claims services in the US; the Rock Steady group of companies,
providing event security in the UK; Touchcom, Inc., a security
consultant and design business in the US; and Travel Logistics
Limited, a provider of passport and visa services in the UK.
In addition the group increased its interests in Macau and the
Baltics.
6) Finance income
2008 2007
£m £m
Interest income on cash, cash equivalents and investments 17.8 12.4
Other interest income 0.6 2.9
Expected return on defined retirement benefit scheme 86.5 77.3
assets
Total finance income 104.9 92.6
Notes to the preliminary results announcement (continued)
7) Finance costs
2008 2007
£m £m
Interest on bank overdrafts, loans and loan notes 95.1 66.5
Interest on obligations under finance leases 3.9 3.3
Other interest charges 7.5 4.2
Total group borrowing costs 106.5 74.0
Finance costs on defined retirement benefit obligations 82.8 72.3
Total finance costs 189.3 146.3
8) Taxation
2008 2007
£m £m
Current taxation expense (75.6) (59.8)
Deferred taxation credit 5.4 3.8
Total income tax expense for the year (70.2) (56.0)
The total income tax expense for the year includes amounts
attributable to the UK of £7.6m (2007: £8.4m).
9) Dividends
Pence DKK 2008 2007
per share per share £m £m
Amounts recognised as distributions to
equity holders of the parent
in the year
Final dividend for the year ended 31 2.52 0.2766 - 32.0
December 2006
Interim dividend for the six months 2.11 0.2319 - 27.3
ended 30 June 2007
Final dividend for the year ended 31 2.85 0.2786 36.4 -
December 2007
Interim dividend for the six months 2.75 0.2572 38.6 -
ended 30 June 2008
75.0 59.3
Proposed final dividend for the year 3.68 0.3052 51.8
ended 31 December 2008
The proposed final dividend is subject to approval by shareholders at
the Annual General Meeting. If so approved, it will be paid on 5 June
2009 to shareholders who are on the register on 1 May 2009. The
exchange rate used to translate it into Danish kroner is that at 9
March 2009.
Notes to the preliminary results announcement (continued)
10) Earnings/(loss) per share attributable to equity shareholders of
the parent
2008 2007
£m £m
From continuing and discontinued operations
Earnings
Profit for the year attributable to equity holders of 151.2 147.2
the parent
Effect of dilutive potential ordinary shares (net of 0.2 0.2
tax)
Profit for the purposes of diluted earnings per share 151.4 147.4
Number of shares (m)
Weighted average number of ordinary shares 1,357.7 1,275.2
Effect of dilutive potential ordinary shares 1.3 1.5
Weighted average number of ordinary shares for the 1,359.0 1,276.7
purposes of diluted earnings per share
Earnings per share from continuing and discontinued
operations (pence)
Basic 11.1p 11.5p
Diluted 11.1p 11.5p
From continuing operations
Earnings
Profit for the year attributable to equity holders of 151.2 147.2
the parent
Adjustment to exclude loss/(profit) for the year from 29.1 (0.5)
discontinued operations (net of tax)
Profit from continuing operations 180.3 146.7
Effect of dilutive potential ordinary shares (net of 0.2 0.2
tax)
Profit from continuing operations for the purpose of 180.5 146.9
diluted earnings per share
Earnings per share from continuing operations (pence)
Basic 13.3p 11.5p
Diluted 13.3p 11.5p
From discontinued operations
Loss per share from discontinued operations (pence)
Basic (2.2)p -
Diluted (2.2)p -
From adjusted earnings
Earnings
Profit from continuing operations 180.3 146.7
Adjustment to exclude net retirement benefit finance (2.7) (3.6)
income (net of tax)
Adjustment to exclude amortisation of 48.7 26.7
acquisition-related intangible assets (net of tax)
Adjusted profit for the year attributable to equity 226.3 169.8
holders of the parent
Weighted average number of ordinary shares (m) 1,357.7 1,275.2
Adjusted earnings per share (pence) 16.7p 13.3p
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
Disposal groups classified as held for sale as at 31 December 2008
primarily comprise the assets and liabilities associated with the
manned guarding business in France, which principally includes Group
4 Securicor SAS. This sale was completed on 28 February 2009.
Notes to the preliminary results announcement (continued)
12) Summary reconciliation of equity attributable to equity holders
of the parent
Share Share
Capital Reserves Total capital Reserves Total
2008 2008 2008 2007 2007 2007
£m £m £m £m £m £m
At beginning of 320.2 766.9 1,087.1 320.0 615.2 935.2
year
Net recognised
income attributable
to equity
shareholders of the - 141.9 141.9 - 209.3 209.3
parent
Shares issued 31.9 244.9 276.8 0.2 0.7 0.9
Dividends declared - (75.0) (75.0) - (59.3) (59.3)
Own shares - (8.8) (8.8) - (3.1) (3.1)
purchased
Equity-settled - 5.0 5.0 - 4.1 4.1
transactions
At end of year 352.1 1,074.9 1,427.0 320.2 766.9 1,087.1
13) Analysis of net debt
A reconciliation of net debt to amounts in the consolidated balance
sheet is presented below:
2008 2007
£m £m
Cash and cash equivalents 562.1 382.1
Investments 92.7 73.2
Net cash and overdrafts included within disposal (6.4) (0.7)
groups classified as held for sale
Net debt (excluding cash and overdrafts) included (0.9) (0.8)
within disposal groups classified as held for sale
Bank overdrafts (195.1) (110.7)
Bank loans (965.7) (809.7)
Loan notes (901.9) (290.4)
Fair value of loan note derivative financial 153.2 14.3
instruments
Obligations under finance leases (85.7) (62.2)
Total net debt (1,347.7) (804.9)
An analysis of movements in net debt in the year is presented below:
2008 2007
£m £m
Increase in cash, cash equivalents and bank 56.3 48.8
overdrafts per consolidated cash flow statement
Sale/(purchase) of investments (5.6) 0.3
Increase in debt and lease financing (160.2) (135.8)
Change in net debt resulting from cash flows (109.5) (86.7)
Borrowings acquired with subsidiaries (230.0) (22.9)
Net additions to finance leases (17.1) (10.3)
Movement in net debt in the year (356.6) (119.9)
Translation adjustments (186.2) (12.2)
Net debt at the beginning of the year (804.9) (672.8)
Net debt at the end of the year (1,347.7) (804.9)
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 2008
2008 2007
£m £m
PBITA before share of profit from associates (group 413.0 308.4
PBITA)
Depreciation and amortisation of intangible assets 116.1 99.6
other than acquisition-related
Profit on disposal of property, plant and equipment 2.1 (14.4)
and intangible assets other than acquisition-related
Movement in working capital and provisions (16.7) (8.2)
Net cash flow from capital expenditure (161.3) (109.0)
Operating cash flow 353.2 276.4
Reconciliation of operating cash flows 2008 2007
£m £m
Net cash flow from operating activities per 373.0 291.3
consolidated cash flow statement
Net cash flow from capital expenditure (161.3) (109.0)
Add-back cash flow from exceptional items and 27.2 1.8
discontinued operations
Add-back additional pension contributions 32.3 26.1
Add-back tax paid 82.0 66.2
Operating cash flow 353.2 276.4
---END OF MESSAGE---
Final Results - Preliminary Announcement
| Source: G4S plc
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