.
9 August 2017
G4S
plc
Results for the six months ended 30 June
2017
G4S Chief Executive Officer
Ashley Almanza said,
"In the first half of 2017 our
continuing businessesa delivered
revenue growth of 6.2% and earnings growth of 7.6%. We continue to
invest in strengthening our sales operations and in new products
and services for our customers and these investments have
materially improved our sales pipeline which supports our medium
term aim of growing revenues by an average of around 4-6% per
annum. Our well established productivity programme provides
increased confidence in the Group's ability to deliver recurring
operating and financing efficiencies of £90 million to £100 million
by 2020. We believe that this combination of investment, growth and
productivity will deliver strong growth in the Group's
earningsa and operating
cash flow."
Operational and financial
highlights:
-
Sales pipeline: £7.0 billion annual contract
value
-
Revenue +6.2%a with growth
across all regions except Middle East & India
-
Operating cash flowa,c £192
million (2016: £277 million); weighted to H2 2017 in line with
guidance
-
Net debt to EBITDA improved to 2.7x (30 June
2016: 3.3x); expect 2.5x or lower by year end
-
Continuing EPS 8.3p +7.8% (2016: 7.7p);
statutory EPS 9.7p +115.6% (2016: 4.5p)
-
Interim dividend 3.59p (2016: 3.59p)
Group
results
|
Continuing Businessesa
Constant Rates |
Statutory Resultsb
Actual Rates |
|
2017 |
2016 |
% |
2017 |
2016 |
% |
Revenue |
£3,715m |
£3,497m |
+6.2 |
£3,972m |
£3,532m |
+12.5 |
PBITA |
£235m |
£222m |
+5.9 |
£237m |
£203m |
+16.7 |
Earnings |
£128m |
£119m |
+7.6 |
£150m |
£69m |
+117.4 |
Earnings Per Share |
8.3p |
7.7p |
+7.8 |
9.7p |
4.5p |
+115.6 |
Operating Cash Flowc |
£192m |
£277m |
-30.7 |
£170m |
£273m |
-37.7 |
a Results from
continuing businesses, presented at constant exchange rates other
than for operating cash flow, exclude results from businesses
identified for sale or closure and onerous contracts. The basis of
preparation of results of continuing businesses and an explanation
of Alternative Performance Measures is on page 3.
b See
page 19 for the basis of preparation of statutory results.
Statutory earnings represent profit attributable to equity
shareholders of G4S plc. Statutory operating cash flow is net cash
flow from operating activities of continuing operations.
c
Operating cash flow is stated after pension deficit contributions
of £20 million (2016: £24 million) and 2016 amounts are presented
at actual 2016 exchange rates. Operating cash flow from continuing
businesses is reconciled to the Group movements in net debt on page
30.
G4S STRATEGY AND
INVESTMENT PROPOSITION
G4S is the world's leading, global
integrated security company, providing security and related
services across six continents.
Our strategy addresses the
positive, global demand outlook for security services and our
enduring strategic aim is to demonstrate the values and performance
that make G4S the company of choice for customers, employees and
shareholders. We aim to do this by designing innovative solutions,
by delivering outstanding service to our customers, by providing
engaging and rewarding work for employees and by generating
sustainable growth in returns for our shareholders. These aims are
underpinned by the key programmes in our strategic plan:
-
People and Values
-
Growth and Innovation
-
Customer Service Excellence
-
Productivity and Operational Excellence
-
Financial and Commercial Discipline
The Group has two business
segments: Secure Solutions and Cash Solutions. Security and safety
are critical to our success in both segments.
Secure
Solutions: we design, market and deliver a wide range of
security and related services and our global business provides
valuable access to a highly diversified customer base in markets
around the world. Our security services range from static manned
security to highly sophisticated, integrated solutions. Our scale
and focus on productivity supports our cost competitiveness and our
sustained investment in professional staff, technology, software
and systems enables us to provide valuable and integrated solutions
for our customers.
Cash
Solutions: we transport, process, recycle, securely store and
manage cash and we provide secure international logistics for cash
and valuables. We invest in technology and know-how and develop and
sell proprietary cash management systems which combine skilled
professionals with software, hardware and operational support in an
integrated managed service. We operate around the globe, focussing
on markets where we are able to build and sustain a material market
share in our key service offerings.
G4S's investment proposition is to
deliver sustainable growth in earnings, cash flows and
dividends.
OUTLOOK
G4S Group Chief
Executive Officer, Ashley Almanza, commented:
"We continued to make substantial
progress with G4S's transformation and this provides increased
confidence in the Group's prospects.
The scale and quality of our
pipeline is materially improved and this, together with our
on-going investment in sales operations and new products and
services, provides stronger support for our organic growth plans.
During the second half of 2017, our growth programme will focus on
consolidating contract wins made over the past year and on
converting attractive opportunities in our pipeline. We expect full
year revenue growth in 2017 to be broadly in line with our medium
term aim of 4-6% and we anticipate continued growth in 2018.
We have a well-established
productivity programme which we believe will deliver recurring
operating and financing efficiencies of £90 million to £100 million
by 2020. Depending on the scale and quality of new organic growth
opportunities, a portion of the productivity gains will be
re-invested in growth.
We have a stronger balance sheet
and with a continued focus on cash flow we are on track to reach
net debt/EBITDA of 2.5x or lower by the year end.
We believe that the combination of
investment, growth and productivity that underpins our plans will
deliver strong growth in the Group's earningsa and
operating cash flow."
BASIS OF PREPARATION
The
Group applies the basis of preparation for its statutory results
shown on page 19. As explained below, the Group makes use of
Alternative Performance Measures (APMs) in the management of its
operations and as a key component of its internal and external
reporting.
G4S
uses profit before interest, tax and amortisation ("PBITA") as a
consistent measure of the Group's performance, excluding
amortisation of acquisition-related intangible assets and specific
and other separately disclosed items which the company believes
should be disclosed separately by virtue of their size, nature or
incidence. Further details regarding these items can be found in
note 6 on page 22. Revenue, PBITA, operating cash flowd, EPS for
continuing (core) businesses and net debt to EBITDA are the
financial Key Performance Indicators used by the Group in measuring
progress against strategic objectives. PBITA, operating cash flow
and EPS also form a significant element of performance measurement
used in the determination of performance-related employee
incentives. These APMs are not necessarily comparable with those
used by other companies.
Since 2016, the Group has reported
its results across three distinct components, in line with its
strategy for managing the business:
-
Continuing (core) businesses, which comprise the
Group's on-going activities "Continuing businesses";
-
Onerous contracts, which are being managed
effectively to completion; and
-
Portfolio businesses, which are being managed
for sale or closure, as part of the portfolio rationalisation
programme announced by the Group in November 2013.
Taken together, these three components constitute "continuing
operations" under IFRS, as distinct from discontinued operations
which, in accordance with IFRS 5, represent areas of the business
which are being managed for sale or closure but which represent
material business segments or entities. The Group now has minimal
operations that meet the IFRS 5 definition of discontinued
operations. The main APMs used by the Group for each component are
reconciled with the Group's statutory results below.
Six months ended 30 June 2017 (at 2017
average exchange rates) |
£m |
Conti-
nuing
busin-
esses |
Onerous
contracts |
Portfolio
businessesa |
|
Acquisition-
related |
Statutory |
Restr-
ucturing |
amortisation |
and othere |
Revenue |
3,715 |
57 |
200 |
|
|
3,972 |
PBITA |
235 |
- |
2 |
- |
- |
237 |
Earnings |
128 |
(4) |
(1) |
(11) |
38 |
150 |
Operating
cash flowd |
192 |
(6) |
(3) |
(13) |
- |
170 |
|
Six months ended 30 June 2016 (at 2017
average exchange rates) |
|
|
|
£m |
Conti-
nuing
busin-
esses |
Onerous
contracts |
Portfolio
businessesa |
Restr-
ucturing |
Acquisition-
related
amortisation
and othere |
Adjusted
statutoryc |
Revenue |
3,497 |
55 |
338 |
|
|
3,890 |
PBITA |
222 |
- |
2 |
- |
- |
224 |
Earnings |
119 |
1 |
(6) |
(2) |
(35) |
77 |
Operating
cash flowb,d |
277 |
(3) |
8 |
(9) |
- |
273 |
Six months ended 30 June 2016 (at 2016
average exchange rates) |
|
|
£m |
Conti-
nuing busin-
esses |
Onerous
contracts |
Portfolio
businesses |
Restr-
ucturing |
Acquisition-related
amortisation
and othere |
Statutory |
Revenue |
3,177 |
53 |
302 |
|
|
3,532 |
PBITA |
201 |
- |
2 |
- |
- |
203 |
Earnings |
104 |
- |
(4) |
(2) |
(29) |
69 |
Operating
cash flowb,d |
277 |
(3) |
8 |
(9) |
- |
273 |
a Portfolio
businesses that remain part of the Group and have not yet been sold
or closed contributed £85 million revenue (2016: £93 million) and
£(4) million PBITA (2016: £(12) million).
b Operating
cash flow for the six months ended 30 June 2016 is presented at
2016 actual exchange rates.
c The 'adjusted
statutory' figures represent the comparative 2016 half year
statutory results translated at 2017 average exchange rates (other
than for operating cash flow) but should not be considered as or
used in place of the Group's statutory results.
d Operating
cash flow is stated after pension deficit contributions of £20
million (2016: £24 million). Operating cash flow from continuing
businesses is reconciled to the Group movements in net debt on page
30.
e Other
includes net specific items (excluding those presented within
onerous contracts), net profit on disposal/closure of subsidiaries,
the results of discontinued operations and, for June 2016, includes
goodwill impairment. These amounts are presented net of any
associated tax impacts, see page 8 for details.
BUSINESS
REVIEW
RESULTS OF CONTINUING BUSINESSES BY REGION AND
BUSINESS SERVICE
The following Business Review
focuses primarily on the Group's continuing businesses, as these
represent the Group's long-term operations, whereas onerous
contracts and portfolio businesses do not form part of the Group's
long-term plans. In addition, throughout the Business Review,
to aid comparability, 2016 prior period results are presented on a
constant currency basis by applying 2017 average exchange rates,
unless otherwise stated.
|
|
|
|
|
|
|
Six months ended 30 June |
Revenue
2017
£m |
Revenue
2016
£m |
HoH
% |
Organic
growtha
% |
PBITA
2017
£m |
PBITA
2016
£m |
HoH
% |
|
At 2017
average exchange rates |
Africa |
228 |
215 |
6.0% |
6.0% |
24 |
22 |
9.1% |
Asia Pacific |
367 |
357 |
2.8% |
2.8% |
30 |
26 |
15.4% |
Latin America |
350 |
335 |
4.5% |
4.5% |
15 |
13 |
15.4% |
Middle East
& India |
427 |
463 |
(7.8)% |
(7.8)% |
34 |
45 |
(24.4)% |
Emerging markets |
1,372 |
1,370 |
0.1% |
0.1% |
103 |
106 |
(2.8)% |
|
|
|
|
|
|
|
|
Europe |
654 |
628 |
4.1% |
4.1% |
48 |
38 |
26.3% |
North America |
1,040 |
862 |
20.6% |
20.5% |
57 |
48 |
18.8% |
UK &
Ireland |
649 |
637 |
1.9% |
1.9% |
53 |
51 |
3.9% |
Developed markets |
2,343 |
2,127 |
10.2% |
10.1% |
158 |
137 |
15.3% |
|
|
|
|
|
|
|
|
Total
Group before corporate costs |
3,715 |
3,497 |
6.2% |
6.2% |
261 |
243 |
7.4% |
Corporate
costs |
|
|
|
|
(26) |
(21) |
23.8% |
Total Group |
3,715 |
3,497 |
6.2% |
6.2% |
235 |
222 |
5.9% |
aOrganic growth
is calculated based on revenue growth at 2017 average exchange
rates, adjusted to exclude the impact of any acquisitions or
disposals during the current or prior period.
AFRICA
Revenue
growth across the Africa region was 6.0%, with growth in both
secure solutions and cash solutions. Cash solutions revenue
growth benefited from strong growth in retail solutions (Deposita,
which uses technology and software to service the retail and
banking sectors) and growth in cash volumes across the region.
PBITA
increased by 9.1% reflecting the benefit of our service innovation
and operational productivity programmes and our focus on turning
around unprofitable and low margin contracts. New and renewed
contracts won across the region include security, systems, manned
security and risk management services work for multi-lateral
agencies, financial institutions, technology companies and
multinational customers.
The
sales pipeline in Africa has diverse contract opportunities in
sectors such as aviation, banking, government and oil and gas.
ASIA PACIFIC
Revenue
growth in Asia Pacific was 2.8% and PBITA increased 15.4%,
reflecting the benefits of our productivity programmes and a
favourable revenue mix.
We
secured new and renewed contracts across a broad range of sectors
including financial services, retail cash solutions, consumer
products and government services.
Our Asia Pacific sales pipeline is
diversified by geographic market and customer segment focussed on
cash management and care and justice services.
BUSINESS REVIEW
RESULTS OF CONTINUING BUSINESSES BY REGION
continued
LATIN
AMERICA
Our
revenue growth across Latin America markets was 4.5%, with good
revenue growth in Brazil, Argentina and Colombia.
We
improved productivity across the region and increased the
proportion of commercial market revenue (relative to government
based revenue) and PBITA increased by 15.4%.
During
the first six months, we won new contracts in manned security and
cash solutions for the banking, retail, embassy and mining
sectors.
Our
sales pipeline for the Latin America region continues to develop
well, with a number of multi-year manned security and facilities
management opportunities for mining, aviation and financial
services sectors.
MIDDLE
EAST & INDIA
Revenue in the Middle East and
India region was 7.8% down on the prior period as sustained lower
oil prices weighed on the trading environment in the Gulf, whilst
our business in India was adversely impacted by demonetisation and
changes to regulatory institutions and processes. During the first
six months the region renewed contracts for facilities management,
manned security and cash solutions in the banking, commercial and
government sectors.
PBITA was 24.4% lower across the
region reflecting the decline in revenue. We expect market
conditions to remain challenging through 2017 and we have
accelerated our productivity programme whilst continuing to invest
in sales and business development to convert our pipeline of
attractive opportunities across a diverse range of sectors.
EUROPE
In
Europe, our sustained investment in sales and business development
and new solutions continued to produce results and revenues rose by
4.1% supported by growth in cash solutions, manned security,
security systems and integrated solutions. PBITA rose by 26.3%,
reflecting the compound benefits of revenue growth and productivity
programmes.
We
succeeded in winning new security contracts for aviation and retail
customers, electronic monitoring equipment in France, systems
security for infrastructure and cash management.
Our
European pipeline has a large number of opportunities across a
diversified range of customer segments.
NORTH AMERICA
In
North America, our revenues grew by 20.6%, with both our cash
solutions and secure solutions businesses producing good
growth.
In cash
solutions, our customer value proposition for retail and banking
continues to attract strong interest and our pipeline provides an
exciting opportunity for further growth. We have therefore
continued to invest in solutions development and commercial and
operational capacity to support this growth.
Our
secure solutions business produced revenue growth of around 5% as
our integrated security solutions continued to find traction in the
market place. This rate of revenue growth was constrained as we
continued to apply commercial discipline in those market locations
facing tight labour conditions.
PBITA
increased by 18.8%, helped by a favourable revenue mix and
efficiency gains, partially offset by the cost of investing in
capacity to support our growing integrated secure solutions and
retail solutions businesses.
Key
contract wins include a new retail cash solutions contract for over
640 stores for a major US retailer, the renewal of an aviation
contract in Canada for a further five years, renewal of a major
utility contract and a new contract for a large social media
network.
We have
a strong contract pipeline with opportunities across diverse
sectors including energy, retail, finance, healthcare and data
centres.
BUSINESS REVIEW
RESULTS OF CONTINUING BUSINESSES BY REGION
continued
UK & IRELAND
Revenue
in the UK & Ireland grew by 1.9% with growth in security
systems and new cash solutions contracts. PBITA was 3.9%
higher reflecting the benefit of our on-going productivity
programmes and growth in our facilities management, security and
secure transportation services.
New
contracts won include electronic monitoring equipment, facilities
management and integrated security solutions contracts in
healthcare and the utilities sector. We renewed the Group's largest
cash solutions contract with a major financial institution. The UK
& Ireland bidding pipeline is broad-based and has been growing
in specific Government segments, manned security and security
systems.
CORPORATE COSTS
Corporate costs comprise the costs of the G4S plc Board and the
central costs of running the Group including executive, governance
and central support functions and have increased compared with the
prior period primarily due to increased insurance costs and a
higher charge for share-based payments as a result of the increase
in the Group's share price.
RESULTS OF CONTINUING BUSINESSES BY SERVICE LINE
Secure Solutions |
Revenue
2017
£m |
Revenue
2016
£m |
HoH
% |
PBITA
2017
£m |
PBITA
2016
£m |
HoH
% |
|
At 2017 average exchange rates |
Emerging markets |
1,174 |
1,156 |
1.6% |
74 |
77 |
(3.9)% |
Developed markets |
1,904 |
1,834 |
3.8% |
107 |
101 |
5.9% |
Total |
3,078 |
2,990 |
2.9% |
181 |
178 |
1.7% |
Our services range from entry
level offerings to highly sophisticated, integrated systems and
solutions. We have increased our investment in resources which
enable us to innovate and apply technology in the design and
delivery of integrated solutions for our customers and this is
reflected in the increasing share of revenue from these
solutions.
Overall, the secure solutions businesses delivered 2.9% growth in
revenue and 1.7% growth in PBITA.
PBITA
growth in developed markets reflected on-going delivery of the
benefits of earlier restructuring programmes. These productivity
initiatives are at a later stage of implementation than in our
emerging markets.
Cash Solutions |
Revenue |
Revenue |
|
PBITA |
PBITA |
|
|
2017 |
2016 |
HoH |
2017 |
2016 |
HoH |
At 2017 average exchange rates |
£m |
£m |
% |
£m |
£m |
% |
Emerging markets |
198 |
214 |
(7.5)% |
29 |
29 |
0.0% |
Developed markets |
439 |
293 |
49.8% |
51 |
36 |
41.7% |
Total |
637 |
507 |
25.6% |
80 |
65 |
23.1% |
Overall
cash solutions grew 25.6% in revenues and PBITA rose by 23.1%.
The
overall growth in revenue and profit was driven by increased volume
particularly in North America with a strong performance from retail
solutions and solid growth across the other developed cash
solutions markets. The strong growth in PBITA in our developed
markets reflects improvements in productivity and the systematic
restructuring and productivity programmes which have been
implemented over the past three years, partially offset by
investment in sales and business development for retail
solutions.
In our
emerging markets, revenues decreased by 7.5% as a result of the
impact of adverse macro-economic, market and trading conditions in
the Middle East and India. The new services and productivity
programmes which are delivering positive results in developed
markets are now being rolled out in our emerging markets and we
have started to see the benefit of them in Africa and Latin
America.
BUSINESS REVIEW
GROUP COMMENTARY
Summary results of continuing
businesses
|
|
|
|
June |
June |
|
|
|
2017 |
2016 |
At June
2017 average exchange rates |
|
|
£m |
£m |
HoH |
Revenue |
|
|
3,715 |
3,497 |
6.2% |
Profit before interest, tax and amortisation
(PBITA) |
|
|
|
235 |
222 |
5.9% |
Interest |
|
|
(54) |
(49) |
10.2% |
Profit before taxa |
|
|
181 |
173 |
4.6% |
Tax |
|
|
(43) |
(42) |
2.4% |
Profit after
taxa |
|
|
138 |
131 |
5.3% |
Non-controlling interests |
|
|
(10) |
(12) |
(16.7)% |
Earnings (profit attributable to equity holders of the
parent) |
128 |
119 |
7.6% |
EPS |
8.3p |
7.7p |
7.8% |
Operating cash flowb |
192 |
277 |
(30.7)% |
a A
reconciliation of profit before tax, profit after tax and the main
APMs for continuing businesses with the Group's statutory results
is included on page 3.
b Operating
cash flow for 2016 is shown at actual 2016 exchange rates.
Revenue
At £1.4 billion, emerging markets revenue was in line with the same
period last year, with growth in Africa, Asia Pacific and Latin
America offset by declines in the Middle East and India. Emerging
markets represent 37% of Group revenue
(2016: 39%). Developed markets revenues were 10.2% higher than the
prior period with 20.6% growth in North America, 4.1% in Europe and
1.9% in UK & Ireland.
PBITA
PBITA of continuing businesses of £235 million (2016: £222 million)
was up 5.9%. This growth reflects the strong performance of the
Group in developed markets, improved product mix and the results of
our on-going productivity programmes, partially offset by the
weakness in the Middle East and India.
Interest
Net interest payable on net debt from continuing businesses was £48
million (2016: £44 million). The increase in costs was primarily
due to a temporary increase in gross borrowings (matched by an
increase in cash balances) following the issuance of a €500m bond
in November 2016 that was mainly used to re-finance the March and
May 2017 debt maturities. The pension interest charge was £6
million (2016: £5 million), resulting in a total interest cost of
£54 million (2016: £49 million).
Tax
A tax charge of £43 million (2016: £42 million) was incurred on the
profits of continuing businesses of £181 million
(2016: £173 million) which represents an effective tax rate of 24%
(2016: 24%). The Group recognised a statutory tax charge of
£54 million (2016: £34 million) on the Group's statutory profit
before tax of £218 million (2016: £115 million) which represents an
effective rate of 25% (2016: 30%).
The difference between the effective rate on the Group's statutory
profit and on the profits of continuing businesses is due primarily
to profits on business disposals being taxed at rates higher than
in the UK and relief for losses on businesses which are in the
process of being sold or wound down.
The Group's effective tax rate
relating to continuing businesses is a function of the geographic
mix of its taxable profits and the respective country tax
rates. The geographic mix of profits can, in turn, be
impacted by fluctuations in foreign exchange rates.
In
December 2016, as part of its response to the OECD's Base Erosion
and Profit Shifting recommendations, the UK Government released
draft legislation in respect of new rules to: (i) restrict the
deductibility of net interest costs to a percentage of EBITDA and
(ii) restrict the amount of taxable profits available to offset
against carried forward tax losses to 50% of the available profits.
As at
30 June 2017, these legislative changes have not been substantively
enacted. Management is monitoring the progress of this legislation
and assessing its possible impact on the Group, which may result in
a modest increase in the future effective tax rate on profits of
continuing businesses.
BUSINESS REVIEW
GROUP COMMENTARY continued
Profit for the period - continuing
businesses
The Group generated profit from continuing businesses attributable
to equity holders ('continuing earnings') of £128 million (2016:
£119 million), an increase of 7.6% for the six months ended 30 June
2017.
Earnings per share - continuing
businesses
Earnings per share from continuing businesses increased to 8.3p
(2016: 7.7p), based on the weighted average of 1,548 million (2016:
1,545 million) shares in issue. A reconciliation of profit for the
period from continuing businesses to EPS is provided below:
Earnings per share - continuing
businesses |
|
|
2017 |
2016 at constant exchange rates |
2016 at actual exchange rates |
|
£m |
£m |
£m |
Profit
for the period |
138 |
131 |
115 |
Non-controlling interests |
(10) |
(12) |
(11) |
Profit
attributable to shareholders (earnings) |
128 |
119 |
104 |
Average number of shares (m) |
1,548 |
1,545 |
1,545 |
Earnings per share - continuing businesses |
8.3p |
7.7p |
6.7p |
Onerous
contracts
The Group's onerous contracts generated revenues of £57 million
(2016: £55 million) for the six months ended 30 June 2017. The
Group recognised additional provisions of £5 million related to the
anticipated increase of delivery costs in respect of one of its
contracts.
Portfolio
businesses
The Group made further progress with its portfolio management
programme. This programme has greatly improved the Group's
strategic focus and has also realised £503 million in
disposal proceeds in relation to the 35 businesses sold to date.
This includes the disposal of the Group's businesses in Israel and
Bulgaria, the Group's cash business in Peru, the US Youth Services
business and the UK children's homes business since January 2017,
generating gross proceeds of £158 million.
Restructuring
The Group invested £14 million (2016: £3 million) in restructuring
programmes in the first six months of the year, as part of the
multi-year strategic productivity programme which is being
implemented across the Group. In addition, the Group incurred
non-strategic severance costs of £4 million (2016: £3 million)
which are included within PBITA of continuing businesses.
Acquisition-related amortisation and other items
|
|
2016 at
constant exchange rates
£m |
2016 at actual exchange rates
£m |
|
2017
£m |
Acquisition-related amortisation |
6 |
19 |
18 |
Goodwill impairment |
- |
9 |
9 |
Net
specific items |
6 |
4 |
2 |
Net
(profit)/loss on disposal/closure of subsidiaries |
(68) |
4 |
3 |
Tax
effect of above |
14 |
(3) |
(4) |
Loss
from discontinued operations |
4 |
2 |
1 |
Total
acquisition-related amortisation and other items |
(38) |
35 |
29 |
Acquisition-related amortisation
Acquisition-related amortisation of £6 million (2016: £19 million)
is lower than the prior period as certain intangible assets
recognised on a number of legacy acquisitions became fully
amortised in 2016.
Net specific
items
Specific items charge of £6 million (2016: net charge of £4
million), related to the estimated cost of settlement of
subcontractor claims from commercial disputes in relation to prior
years.
Profit on
disposal/closure of subsidiaries
As part of the on-going portfolio programme, the Group realised a
net profit on disposal of subsidiaries of £68 million
(2016: £4 million loss) relating to the disposal of a number of the
Group's operations including the Group's businesses in Israel and
Bulgaria, the US Youth Services business, the UK children's homes
business and the Group's cash business in Peru.
BUSINESS REVIEW
GROUP COMMENTARY continued
Profit for the period - statutory at actual
historical exchange rates
The Group reported statutory earnings of £150 million (2016: £69
million) which includes the benefits of improved operating profit
and the profit on disposal of subsidiaries.
Earnings per share - statutory at actual
historical exchange rates
Statutory earnings per sharea increased to
9.7p (2016: 4.5p), based on the weighted average number of shares
in issue of
1,548 million (2016: 1,545 million). A reconciliation of the
Group's statutory profit for the period to EPS is provided
below:
|
Earnings per share |
|
2017 |
2016 at constant exchange rates |
2016 at actual exchange rates |
|
£m |
£m |
£m |
Profit
for the period |
160 |
89 |
80 |
Non-controlling interests |
(10) |
(12) |
(11) |
Profit
attributable to shareholders (earnings) |
150 |
77 |
69 |
Average number of shares (m) |
1,548 |
1,545 |
1,545 |
Statutory earnings per share |
9.7p |
5.0p |
4.5p |
a Basis of
preparation of statutory results is shown on page 19.
Cash flow, capital expenditure and portfolio
management
Operating cash flow from continuing businesses decreased to £192
million (2016: £277 million). Operating cash flow in the first half
of 2016 was particularly strong reflecting the beneficial impact of
better terms and conditions negotiated with a large number of
suppliers and the recovery of weak cash flow performance at the end
of 2015. In line with previous guidance, the Group has now reverted
to its customary cash flow seasonality with an anticipated
weighting of operating cash generation to the second half of the
year.
The
Group invested a net £43 million (2016: £46 million) in capital
expenditure and received net proceeds of £151 million
(2016: £32 million) from the disposal of businesses. The
Group made no significant acquisitions in the period.
Net
cash inflow after investing in the business and proceeds from
portfolio rationalisation was £266 million (2016: £246 million).
The Group's net cash flow after investing in the business,
financing, tax, dividends and pensions was £58 million (2016: £59
million).
Net debt
Net debt as at 30 June 2017 was £1,607 million (30 June 2016:
£1,782 million). The Group's net debt to EBITDA ratio was
2.7x
(30 June 2016: 3.3x).
The
detailed reconciliation of movements in net debt is provided on
page 30 and is reconciled to the statutory cash flow on
page 31. The Group continues to be strongly focussed on cash
generation and expects the full year cash conversion rate to be
within the normal range of 100-125%. The Group's current business
plan and performance supports a net debt/EBITDA, as calculated on
page 31, of 2.5x or lower by the end of 2017.
Pension
deficit
The Group's net defined benefit pension deficit for accounting
purposes at 30 June 2017 recognised in the consolidated statement
of financial position was £486 million (31 December 2016: £437
million), or £410 million (2016: £368 million) net of applicable
tax in the relevant jurisdictions. The increase in the net deficit
is predominantly a result of the decrease in the scheme's asset
values only being partially offset by a decrease in scheme
obligations arising from a reduction in the inflation rate
assumptions.
BUSINESS REVIEW
GROUP COMMENTARY continued
Credit
facilities
In May 2017, the Group's credit
rating was re-affirmed by Standard & Poor's as BBB- (negative).
As at 30 June 2017 the Group had liquidity of £1,479 million
including cash, cash equivalents and bank overdrafts of £549
million and unutilised but committed facilities of £930 million.
The Group issued a €500 million Eurobond in June 2017 which matures
in June 2024 and pays an annual coupon of 1.5%.
The
next debt maturities are £44 million and $224 million US Private
Placement notes due in July 2018 and a €500 million Eurobond due in
December 2018. The Group has good access to capital markets and a
diverse range of finance providers. Borrowings are principally in
pounds sterling, US dollars and euros reflecting the geographies of
significant operational assets and earnings.
The Group's main sources of
finance and their applicable rates as of 30 June 2017 are set out
below:
Debt instrument/ Year of issue |
Nominal
amounta |
Issued
interest rate |
Post hedging
avg interest rate |
|
|
Year of
redemption and amounts (£m)b |
|
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
US PP 2008 |
£44m |
7.56% |
6.49% |
44 |
|
|
|
|
|
|
44 |
US PP 2007 |
US$250m |
5.96% -
6.06% |
2.02% |
|
111 |
|
|
81 |
|
|
192 |
US PP 2008 |
US$298.5m |
6.78% -
6.88% |
6.90% |
159 |
|
57 |
|
|
|
|
216 |
Public Bond 2012 |
€500m |
2.63% |
2.63% |
415 |
|
|
|
|
|
|
415 |
Public Bond 2009 |
£350m |
7.75% |
7.75% |
|
350 |
|
|
|
|
|
350 |
Public Bond 2016 |
€500m |
1.5% |
2.24% |
|
|
|
|
|
445 |
|
445 |
Public Bond 2017 |
€500m |
1.5% |
3.23% |
|
|
|
|
|
|
433 |
433 |
Revolving
Credit
Facility 2015 |
£1bn (multi- currency) |
0.95% |
0.95% |
|
|
|
3 |
67 |
|
|
70 |
|
|
|
|
618 |
461 |
57 |
3 |
148 |
445 |
433 |
2,165 |
a Nominal debt
amount, for fair value carrying amount see note 19.
b Exchange
rates at 30 June 2017 or hedged exchange rates where
applicable.
£964 million of the original £1
billion multi-currency revolving credit facility matures in January
2022 with the remainder maturing in January 2021. As at 30 June
2017 there were £70 million of drawings from the facility.
The Group's average cost of gross
borrowings in the first six months of 2017, net of interest
hedging, was 3.7% (2016: 4.1%).
Significant
exchange rates applicable to the Group
The Group derives a significant proportion of its revenue and
profits in the following currencies. Closing and average rates for
these currencies are shown below:
|
30 June 2017
Closing rates |
Six months to
30 June 2017
Average rates |
Year to
31 December 2016 Average rates |
£/US$ |
1.3008 |
1.2674 |
1.3558 |
£/€ |
1.1397 |
1.1664 |
1.2265 |
£/South Africa Rand |
16.9832 |
16.8856 |
19.8742 |
£/India Rupee |
84.0547 |
83.2264 |
91.0371 |
£/Israel Shekel |
4.5379 |
4.6181 |
5.1912 |
£/Brazil Real |
4.3010 |
4.0370 |
4.7252 |
If June 2017 closing rates were
applied to the results for the six months to 30 June 2017, revenue
from continuing businesses would have decreased by 1.1% to £3,675
million (for six months ended 30 June 2016: increased by 9.0% to
£3,462 million) and PBITA from continuing businesses would have
decreased by 0.9% to £233 million (for six months ended 30 June
2016: increased by 9.5% to £220 million).
Dividend
The Board has declared an interim dividend of 3.59p per share (DKK
0.2948) in line with the prior period.
BUSINESS REVIEW
GROUP COMMENTARY continued
Risk and uncertainties
A discussion of the Group's risk assessment and control processes
and the principal risks and uncertainties that could affect the
business activities or financial results is detailed on pages 50 to
55 of the company's Integrated Report and Accounts for the
financial year ended 31 December 2016, a copy of which is available
on the Group's website at www.g4s.com.
These
risks and uncertainties include, but are not limited to, culture
and values, health and safety, people, major contracts, laws and
regulations, growth strategy, geo-political, cash losses and
information security. The business risks and uncertainties are
expected to remain materially the same as outlined in the 2016
Integrated Report and Accounts during the remaining six months of
the financial year.
The
Group operates mainly within national boundaries and is typically
subject to security-licensing regulations in each territory, and is
relatively well positioned with around 80% of revenues outside
the UK and minimal cross-border trading.
Depending on the nature of the terms of the UK's exit from the EU
around the free movement of capital and labour, this could result
in a shortage of skills or workforce availability in the UK market.
In addition, it is not yet clear if or how key employment laws
would change once the UK is no longer a member of the EU. The terms
of the UK's exit from the EU remain uncertain and could also affect
a range of business factors and conditions including regulation and
taxation.
It is
also possible that the continuing period of uncertainty lowers
economic growth in both the UK and Europe which could affect both
our customers and our competitors. The Group will continue to
monitor closely developments on the decision to exit the EU as part
of its risk management and governance
framework.
G4S plc
Results for the six
months ended 30 June 2017
Directors' responsibility
statement in respect of the results for the six months
ended
30 June 2017
We confirm that to the best of our
knowledge:
-
the condensed consolidated set of interim
financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34 Interim
Financial Reporting as adopted by the European Union;
-
the half-yearly report includes a fair review of
the information required by:
-
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of
interim financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
-
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the entity during that period;
and any changes in the related party transactions described in the
last annual report that could do so.
A list of the directors is available on the
company's website www.g4s.com.
The responsibility statement is signed on behalf
of the Board by:
Tim
Weller
Group Chief Financial Officer
9 August 2017
Independent review report to G4S plc
For the six months
ended 30 June 2017
Report on the condensed
consolidated interim financial statements
Our
conclusion
We have reviewed G4S plc's condensed consolidated interim financial
statements for the six month period ended 30 June 2017 (the
"interim financial statements") in the results for the six months
ended 30 June 2017 ("2017 half-yearly results") of G4S plc.
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
as adopted by the European Union and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
What we have
reviewed
The interim financial statements comprise:
-
the consolidated statement of financial position
at 30 June 2017;
-
the consolidated income statement for the period
then ended;
-
the consolidated statement of comprehensive
income for the period then ended;
-
the consolidated statement of changes in equity
for the period then ended;
-
the consolidated statement of cash flows for the
period then ended; and
-
the explanatory notes to the interim financial
statements.
The interim financial statements included in the 2017 half-yearly
results have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1 to the
interim financial statements, the financial reporting framework
that has been applied in the preparation of the full annual
financial statements of the Group is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
Responsibilities for the
condensed consolidated interim financial statements and the
review
Our responsibilities and those of
the directors
The 2017 half-yearly results, including the interim financial
statements, are the responsibility of, and have been approved by,
the directors. The directors are responsible for preparing
the 2017 half-yearly results in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a
conclusion on the interim financial statements in the 2017
half-yearly results based on our review. This report,
including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
What a review of
condensed consolidated financial statements involves
We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in
scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
We have read the other information
contained in the 2017 half-yearly results and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the interim financial statements.
PricewaterhouseCoopers
LLP
Chartered Accountants
London
9 August 2017
G4S plc
Consolidated financial statements
For the six months
ended 30 June 2017
Consolidated income
statement (unaudited)
|
|
|
Six months ended
30 June 2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
Continuing operations |
Notes |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Revenue |
5 |
3,972 |
3,532 |
7,590 |
|
|
Operating profit before
joint ventures, specific items and other separately disclosed
items |
|
233 |
198 |
452 |
|
|
|
|
|
Share of post-tax profit from joint
ventures |
|
4 |
5 |
9 |
|
|
Profit before interest, tax and
amortisation (PBITA) |
5 |
237 |
203 |
461 |
|
|
Specific items - charges |
6 |
(11) |
(5) |
(21) |
|
|
Specific items - credits |
6 |
- |
3 |
8 |
|
|
Restructuring costs |
6 |
(14) |
(3) |
(12) |
|
|
Profit/(loss) on disposal/closure of
subsidiaries |
6 |
68 |
(3) |
7 |
|
|
Goodwill impairment |
6 |
- |
(9) |
(9) |
|
|
Acquisition-related amortisation |
6 |
(6) |
(18) |
(32) |
|
|
Operating profit |
6 |
274 |
168 |
402 |
|
|
Finance income |
9 |
10 |
13 |
33 |
|
|
Finance expense |
9 |
(66) |
(66) |
(139) |
|
|
Profit before tax |
|
218 |
115 |
296 |
|
|
Tax |
10 |
(54) |
(34) |
(76) |
|
|
Profit from continuing operations after
tax |
|
164 |
81 |
220 |
|
|
Loss from discontinued operations |
|
(4) |
(1) |
(3) |
|
|
Profit for the period |
|
160 |
80 |
217 |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
Equity
holders of the parent |
|
150 |
69 |
198 |
|
|
Non-controlling interests |
|
10 |
11 |
19 |
|
|
Profit for the period |
|
160 |
80 |
217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to equity
shareholders of the parent |
12 |
|
|
|
|
|
Basic
and diluted - from continuing operations |
|
9.9p |
4.5p |
13.0p |
|
|
Basic and diluted - from continuing and discontinued
operations |
|
9.7p |
4.5p |
12.8p |
|
|
|
|
|
|
|
|
|
Dividends declared and proposed in
respect of the period |
|
|
|
|
|
Interim dividend |
|
55 |
55 |
55 |
|
|
Final dividend |
|
- |
- |
90 |
|
|
Total dividend |
11 |
55 |
55 |
145 |
|
|
|
|
|
|
G4S plc
Consolidated financial statements continued
For the six months
ended 30 June 2017
Consolidated statement
of comprehensive income (unaudited)
|
Six months ended
30 June
2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
|
|
£m |
£m |
£m |
|
|
|
|
|
|
Profit for the period |
160 |
80 |
217 |
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Items that will not be re-classified to profit or
loss: |
|
|
|
|
Re-measurements on defined retirement benefit schemes |
(67) |
(98) |
(169) |
|
Tax on items that will not be re-classified to profit or
loss |
11 |
17 |
28 |
|
|
(56) |
(81) |
(141) |
|
Items that are or may be re-classified
subsequently to profit or loss: |
|
|
|
|
Exchange differences on translation of foreign operations and
changes in fair value of cash flow hedging financial
instruments |
(44) |
160 |
228 |
|
|
Tax on items that are or may be re-classified subsequently
to profit or loss |
- |
(4) |
22 |
|
|
(44) |
156 |
250 |
|
Other comprehensive (loss)/income, net of tax |
(100) |
75 |
109 |
|
|
|
|
|
|
Total comprehensive income for the
period |
60 |
155 |
326 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity
holders of the parent |
51 |
141 |
305 |
|
Non-controlling interests |
9 |
14 |
21 |
|
Total comprehensive income for the
period |
60 |
155 |
326 |
|
G4S plc
Consolidated financial statements continued
For the six months
ended 30 June 2017
Consolidated statement
of changes in equity (unaudited)
|
Attributable to equity holders of
the parent |
|
|
|
Share |
Share |
Retained |
Other |
|
NCI |
Total |
|
capital |
premium |
earnings |
reserves |
Total |
reserve |
Equity |
|
2017 |
2017 |
2017 |
2017 |
2017 |
2017 |
2017 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
At 1 January 2017 |
388 |
258 |
(260) |
456 |
842 |
21 |
863 |
Total
comprehensive income/(loss) |
- |
- |
95 |
(44) |
51 |
9 |
60 |
Dividends paid |
- |
- |
(90) |
- |
(90) |
(13) |
(103) |
Transactions with non-controlling interests |
- |
- |
(15) |
- |
(15) |
2 |
(13) |
Recycling of net investment hedge |
- |
- |
- |
24 |
24 |
- |
24 |
Recycling of cumulative translation adjustments |
- |
- |
- |
(42) |
(42) |
- |
(42) |
Own
shares awarded |
- |
- |
(11) |
11 |
- |
- |
- |
Own
shares purchased |
- |
- |
- |
(7) |
(7) |
- |
(7) |
Share-based payments |
- |
- |
4 |
- |
4 |
- |
4 |
At 30 June 2017 |
388 |
258 |
(277) |
398 |
767 |
19 |
786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent |
|
|
|
Share |
Share |
Retained |
Other |
|
NCI |
Total |
|
capital |
premium |
earnings |
reserves |
Total |
reserve |
Equity |
|
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
At 1 January 2016 |
388 |
258 |
(174) |
201 |
673 |
18 |
691 |
Total
comprehensive (loss)/income |
- |
- |
(15) |
156 |
141 |
14 |
155 |
Dividends paid |
- |
- |
(90) |
- |
(90) |
(9) |
(99) |
Transactions with non-controlling interests |
- |
- |
1 |
- |
1 |
(2) |
(1) |
Share-based payments |
- |
- |
4 |
- |
4 |
- |
4 |
At 30 June 2016 |
388 |
258 |
(274) |
357 |
729 |
21 |
750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the parent |
|
|
|
Share |
Share |
Retained |
Other |
|
NCI |
Total |
|
capital |
premium |
earnings |
reserves |
Total |
reserve |
Equity |
|
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
At 1 January 2016 |
388 |
258 |
(174) |
201 |
673 |
18 |
691 |
Total
comprehensive income |
- |
- |
55 |
250 |
305 |
21 |
326 |
Dividends paid |
- |
- |
(145) |
- |
(145) |
(17) |
(162) |
Transactions with non-controlling interests |
- |
- |
(1) |
- |
(1) |
(1) |
(2) |
Own
shares awarded |
- |
- |
(5) |
5 |
- |
- |
- |
Share-based payments |
- |
- |
10 |
- |
10 |
- |
10 |
At 31 December 2016 |
388 |
258 |
(260) |
456 |
842 |
21 |
863 |
|
|
|
|
|
|
|
|
G4S plc
Consolidated financial statements continued
Consolidated statement
of financial position (unaudited)
|
|
As at
30 June 2017 |
As at
30 June 2016* |
As at
31 Dec
2016* |
|
Notes |
£m |
£m |
£m |
|
|
|
|
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
|
1,952 |
1,913 |
1,990 |
Other
acquisition-related intangible assets |
|
12 |
32 |
18 |
Other
intangible assets |
|
84 |
80 |
86 |
Property, plant and equipment |
|
412 |
432 |
437 |
Trade
and other receivables |
|
122 |
86 |
101 |
Investment in joint ventures and other investments |
|
22 |
19 |
19 |
Retirement benefit surplus |
15 |
60 |
87 |
75 |
Deferred tax assets |
10 |
274 |
201 |
285 |
|
|
2,938 |
2,850 |
3,011 |
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
|
102 |
97 |
112 |
Investments |
17 |
78 |
59 |
64 |
Trade
and other receivables |
|
1,428 |
1,408 |
1,442 |
Cash
and cash equivalents |
14,17 |
827 |
893 |
831 |
Assets of disposal groups classified as held for sale |
13 |
15 |
206 |
151 |
|
|
2,450 |
2,663 |
2,600 |
Total assets |
|
5,388 |
5,513 |
5,611 |
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Bank
overdrafts |
14,17 |
(216) |
(62) |
(93) |
Bank
loans |
17 |
(14) |
(15) |
(16) |
Loan
notes |
17 |
- |
(677) |
(677) |
Obligations under finance leases |
17 |
(15) |
(16) |
(20) |
Trade
and other payables |
|
(1,203) |
(1,155) |
(1,260) |
Current tax liabilities |
10 |
(73) |
(35) |
(64) |
Provisions |
16 |
(91) |
(90) |
(116) |
Liabilities of disposal groups classified as held for
sale |
13 |
(11) |
(95) |
(58) |
|
|
(1,623) |
(2,145) |
(2,304) |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Bank
loans |
17 |
(74) |
(666) |
(4) |
Loan
notes |
17 |
(2,144) |
(1,256) |
(1,715) |
Obligations under finance leases |
17 |
(33) |
(43) |
(37) |
Trade
and other payables |
|
(29) |
(58) |
(30) |
Retirement benefit obligations |
15 |
(546) |
(459) |
(512) |
Provisions |
16 |
(143) |
(128) |
(132) |
Deferred tax liabilities |
10 |
(10) |
(8) |
(14) |
|
|
(2,979) |
(2,618) |
(2,444) |
Total liabilities |
|
(4,602) |
(4,763) |
(4,748) |
|
|
|
|
|
Net assets |
|
786 |
750 |
863 |
|
|
|
|
|
EQUITY |
|
|
|
|
Share
capital |
|
388 |
388 |
388 |
Share
premium |
|
258 |
258 |
258 |
Reserves |
|
121 |
83 |
196 |
Equity
attributable to equity holders of the parent |
|
767 |
729 |
842 |
Non-controlling interests |
|
19 |
21 |
21 |
Total equity |
|
786 |
750 |
863 |
*The consolidated statements of
financial position as at 30 June 2016 and 31 December 2016 have
been re-presented - see note 1. |
G4S plc
Consolidated financial statements continued
For the six months
ended 30 June 2017
Consolidated statement
of cash flows (unaudited)
|
|
|
|
|
|
|
Six months
ended
30 June
2017 |
Six months ended
30 June
2016 |
Year
ended
31 Dec
2016 |
|
|
£m |
£m |
£m |
|
|
|
|
|
Operating profit |
|
274 |
168 |
402 |
Adjustments for non-cash and other items (see note 18) |
|
(21) |
52 |
126 |
Decrease/(increase) in inventory |
|
7 |
2 |
(5) |
Increase in accounts receivable |
|
(52) |
(5) |
(9) |
(Decrease)/increase in accounts payable |
|
(38) |
56 |
101 |
Net cash flow from operating activities of
continuing operations (see note 18) |
|
170 |
273 |
615 |
Net cash flow from operating activities
of discontinued operations |
|
- |
(6) |
(9) |
Cash generated by operations |
|
170 |
267 |
606 |
Tax paid |
|
(41) |
(36) |
(84) |
Net cash flow from operating
activities |
|
129 |
231 |
522 |
|
|
|
|
|
Investing activities |
|
|
|
|
Purchases of non-current assets |
|
(44) |
(47) |
(116) |
Proceeds on disposal of property, plant and equipment |
|
1 |
1 |
9 |
Disposal of subsidiaries |
|
151 |
32 |
82 |
Cash,
cash equivalents and bank overdrafts in disposed entities |
|
(8) |
(13) |
(20) |
Acquisition of subsidiaries |
|
- |
- |
(1) |
Interest received |
|
7 |
4 |
14 |
(Purchase)/sale of investments |
|
(17) |
13 |
6 |
Cash flow from equity accounted investments |
|
4 |
4 |
8 |
Net cash generated by/(used in) investing
activities |
|
94 |
(6) |
(18) |
|
|
|
|
|
Financing activities |
|
|
|
|
Dividends paid to equity shareholders of the parent |
|
(90) |
(90) |
(145) |
Dividends paid to non-controlling interests |
|
(13) |
(9) |
(17) |
Purchase of own shares |
|
(7) |
- |
- |
Net
(decrease)/increase in borrowings |
|
(161) |
327 |
(11) |
Net
interest received relating to derivative financial instruments |
|
22 |
21 |
22 |
Interest paid |
|
(77) |
(73) |
(132) |
Repayment of obligations under finance leases |
|
(10) |
(13) |
(22) |
Transactions with non-controlling interests |
|
(13) |
(2) |
(2) |
Net cash flow from financing
activities |
|
(349) |
161 |
(307) |
|
|
|
|
|
Net (decrease)/increase in cash, cash equivalents
and bank overdrafts |
|
(126) |
386 |
197 |
Cash,
cash equivalents and bank overdrafts at the beginning of the
period |
|
672 |
388 |
388 |
Effect of foreign exchange rate fluctuations on net cash
held |
|
3 |
(12) |
87 |
Cash, cash equivalents and bank
overdrafts at the end of the period |
|
549 |
762 |
672 |
1) Basis of
preparation and accounting policies
These condensed interim financial
statements comprise the unaudited consolidated results of G4S plc
("the Group") for the six months ended 30 June 2017. These results
and the comparatives for the six months ended 30 June 2016 and for
the year ended 31 December 2016 do not comprise statutory accounts
and should be read in conjunction with the Integrated Report and
Accounts 2016, which is available at www.g4s.com. The Integrated
Report and Accounts 2016 was reported on by the company's auditor
and delivered to the Registrar of Companies. The report of the
auditor was (i) unqualified, (ii) did not contain a reference to
any matters to which the auditor drew attention by emphasis of
matter without qualifying their report, and (iii) did not contain
any statement under section 498 (2) or (3) of the Companies Act
2006.
The financial information in these
condensed financial statements for the half year to 30 June 2017
has been reviewed but not audited by PricewaterhouseCoopers LLP,
the company's auditor.
The condensed consolidated
financial statements of the Group presented in this half-yearly
results announcement have been prepared in accordance with IAS 34 -
Interim Financial Reporting, as adopted by the European Union, and
with the Disclosure and Transparency Rules of the Financial
Services Authority.
The accounting policies applied
are the same as those set out in the Group's Integrated Report and
Accounts 2016.
The consolidated statement of
financial position at 30 June 2016 has been re-presented to show
(i) the impact of the inclusion of cash and cash equivalents and
overdrafts, of £94m and £12m respectively, in respect of customer
cash processing (see note 14) and (ii) the re-classification of
certain items within cash and cash equivalents of £19m as trading
investments. As a consequence of the above changes in presentation,
cash and cash equivalents at 30 June 2016 have increased from
£818m to £893m, overdrafts have increased from £50m to
£62m and trading investments have increased from £40m to £59m.
The consolidated statement of
financial position at 30 June 2016 has also been re-presented to
show the re-classification of £652m of loan notes from non-current
to current liabilities to reflect more appropriately the maturity
of those liabilities.
The consolidated statement of
financial position at 31 December 2016 has been re-presented to
show the re-classification of certain items within cash and cash
equivalents of £20m as trading investments. As a consequence of
this change in presentation, cash and cash equivalents at 31
December 2016 have decreased from £851m to £831m, and trading
investments have increased from £44m to £64m.
The Group has prepared the
half-yearly financial statements on a going concern basis.
2) Specific items
and other separately disclosed items
The Group's consolidated income
statement and segmental analysis note separately identify results
before specific items. Specific items are those that in
management's judgement need to be disclosed separately in arriving
at operating profit by virtue of their size, nature or incidence.
The associated tax impact of specific items is recorded within the
tax charge. In determining whether an event or transaction is
specific, management considers quantitative as well as qualitative
factors such as the frequency or predictability of occurrence.
Contract losses included within
specific items arise from the recognition of material future
losses, net of the release of any surplus provisions. In general,
provisions recognised for future losses are charged to the
consolidated income statement within PBITA. Where onerous contract
provisions are material by virtue of their size, they are
separately charged within specific items. Such losses are distinct
from "in-year" losses, which are utilised against provisions for
onerous contract losses.
Specific items may not be
comparable to similarly-titled measures used by other
companies.
In order to provide further
clarity in the consolidated income statement, the Group also
discloses separately restructuring costs, profits or losses on
disposal or closure of subsidiaries, acquisition-related
amortisation and expenses and goodwill impairment.
Restructuring costs that are
separately disclosed reflect the multi-year efficiency programme
which is being implemented by the Group. This programme is of a
strategic nature and, as such, is monitored and approved by the
Group's executive committee. During 2016 and 2017 activities under
the programme have focused primarily on transforming the operating
model in the regions of UK & Ireland and Europe. Restructuring
costs that are incurred in the normal course of business are
recorded within PBITA.
3) Adoption of
new and revised accounting standards and interpretations
The Group has not early-adopted
any standard, amendment or interpretation. A number of new
standards, amendments to standards and interpretations have been
announced but are subject to EU endorsement and are not yet
effective for the six months ended 30 June 2017. The directors are
currently evaluating the impact of these new standards on the Group
accounts:
-
Amendments to IFRS10, IFRS 12 and IAS 28 - Sale
or Contribution of Assets between an Investor and its Associate or
Joint Venture
-
Amendments to IFRS10 and IAS 28 - Investment
entities applying the consolidation exemption
-
IFRS 2 amendments - Clarifying share-based
payment transactions
-
IAS 7 amendments - Disclosure
initiative
-
IAS 12 amendments - Recognition of deferred tax
assets for unrealised losses
-
IFRS 9 - Financial Instruments
The Group continues to assess the
potential impact of IFRS 15 - Revenue from Contracts with Customers
on its consolidated financial statements and will adopt the
standard from its effective date for the year ended 31 December
2018. IFRS 15 is likely to impact the timing of recognition of
income in respect of certain long-term Facilities Management
contracts and likewise in respect of certain large, complex
alarm and other technology-related contracts.
In addition, the Group continues
to assess the impact of adopting IFRS 16 - Leases, which will be
effective for the Group's financial year ended 31 December 2019.
IFRS 16 is expected to increase property, plant and equipment
capitalised in the consolidated statement of financial position by
approximately £400m, together with a broadly similar increase in
obligations under finance leases. Whilst IFRS 16 is not expected to
change materially the Group's profit before tax, it will increase
PBITA due to re-classification of the interest element of lease
payments as finance costs.
4) Accounting
estimates, judgements and assumptions
The preparation of interim
financial statements in conformity with adopted IFRSs requires
management to make judgements, estimates and assumptions that
affect the application of the Group's accounting policies with
respect to the carrying amounts of assets and liabilities at the
date of the financial statements, the disclosure of contingent
assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting
period. These judgements, estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, including
current and expected economic conditions, and, in some cases,
actuarial techniques. Although these judgements, estimates and
associated assumptions are based on management's best knowledge of
current events and circumstances, the actual results may
differ.
Estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected. The
judgements, estimates and assumptions which are of most
significance in preparing the Group's 2017 interim financial
statements were the same as those that applied to the consolidated
financial statements for the year ended 31 December 2016.
5) Operating
segments
The
Group operates on a worldwide basis and derives a substantial
proportion of its revenue and operating profit from each of the
following seven geographic regions: Africa, Asia Pacific, Latin
America, Middle East and India, Europe, North America and UK &
Ireland. For each of the reportable segments, the Group
executive committee (the chief operating decision maker) reviews
internal management reports on a regular basis.
Segment
information for continuing operations is presented below:
|
|
Six months ended
30 June 2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
Revenue by reportable segment |
£m |
£m |
£m |
|
|
|
|
|
|
Africa |
274 |
235 |
501 |
|
Asia
Pacific |
380 |
335 |
714 |
|
Latin
America |
370 |
307 |
660 |
|
Middle East and India |
431 |
420 |
859 |
|
Emerging markets |
1,455 |
1,297 |
2,734 |
|
Europe |
764 |
681 |
1,441 |
|
North
America |
1,063 |
808 |
1,904 |
|
UK & Ireland |
690 |
746 |
1,511 |
|
Developed markets |
2,517 |
2,235 |
4,856 |
|
Total revenue |
3,972 |
3,532 |
7,590 |
|
|
|
|
|
|
|
Six months
ended
30 June
2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
Operating profit by reportable
segment |
£m |
£m |
£m |
|
|
|
|
|
|
Africa |
21 |
17 |
35 |
|
Asia
Pacific |
31 |
22 |
56 |
|
Latin
America |
14 |
7 |
15 |
|
Middle East and India |
33 |
41 |
76 |
|
Emerging markets |
99 |
87 |
182 |
|
Europe |
55 |
39 |
95 |
|
North
America |
58 |
44 |
115 |
|
UK & Ireland |
51 |
54 |
119 |
|
Developed markets |
164 |
137 |
329 |
|
Operating profit before corporate costs |
263 |
224 |
511 |
|
Corporate costs |
(26) |
(21) |
(50) |
|
Profit before interest, tax and
amortisation (PBITA) |
237 |
203 |
461 |
|
Net
specific items |
(11) |
(2) |
(13) |
|
Restructuring costs |
(14) |
(3) |
(12) |
|
Net
profit/(loss) on disposal/closure of subsidiaries |
68 |
(3) |
7 |
|
Goodwill impairment |
- |
(9) |
(9) |
|
Acquisition-related amortisation and expenses |
(6) |
(18) |
(32) |
|
Operating profit |
274 |
168 |
402 |
6)
Operating profit
The
income statement can be analysed as follows:
|
Six months ended
30 June
2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
Continuing operations |
£m |
£m |
£m |
|
|
|
|
Revenue |
3,972 |
3,532 |
7,590 |
Cost of sales |
(3,271) |
(2,892) |
(6,212) |
Gross
profit |
701 |
640 |
1,378 |
Administration expenses |
(431) |
(468) |
(976) |
Goodwill impairment |
- |
(9) |
(9) |
Share of profit after tax from joint ventures |
4 |
5 |
9 |
Operating profit |
274 |
168 |
402 |
Operating profit includes items
that are separately disclosed for the six months ended 30 June 2017
related to:
-
Specific items charge of £11m (2016: net charge
of £2m), of which £5m relates to an increase in expected delivery
costs in respect of a contract and £6m relates to the estimated
cost of settlement of subcontractor claims from commercial disputes
in relation to prior years;
-
Costs of £14m (2016: £3m) arising from
restructuring activities during the period, relating mainly to the
multi-year strategic efficiency programme across the Group,
primarily in respect of the UK&I and Europe regions. In
addition, the Group incurred non-strategic severance costs of £4m
(2016: £3m) which are included within cost of sales and
administration expenses as appropriate;
-
Acquisition-related amortisation costs of £6m
(2016: £18m) relating to legacy acquisitions; and
-
A net profit on disposal of £68m (2016: loss of
£3m) mainly relating to the disposal of six businesses in the six
months ended 30 June 2017, including the Group's Youth Services
businesses in North America, its children's homes business in the
UK, its cash business in Peru and its businesses in Israel and
Bulgaria.
7) Acquisitions
The
Group has not made any material acquisitions in the
period.
8) Disposals and closures
As part of the on-going portfolio
programme, in the first six months of 2017 the Group sold six
businesses, including the Youth Services business in North America,
the children's homes business in the UK, the Group's cash business
in Peru and the Group's businesses in Israel and Bulgaria,
realising net cash consideration of £151m. A further five
businesses were closed during the period.
In the first six months of 2016
the Group sold a number of businesses, including the Cash Solutions
business in Thailand and the businesses in Finland, Brunei and
Kazakhstan, realising net cash consideration of £32m.
In the year ended 31 December 2016
the Group sold 12 businesses, including the Cash Solutions business
in Thailand, the businesses in Finland, Brunei and Kazakhstan, and
the Utilities Services and ATM engineering businesses in the UK,
realising net cash consideration of £82m. A further four businesses
were closed during that year, and in addition the Group recognised
a loss of £16m in relation to a systems business in Latin America
which was in the process of being closed down.
The net assets and net
profit on disposal/closure of operations disposed of or closed were
as follows:
|
Six months ended
30 June
2017 |
Six months ended
30 June
2016 |
Year ended
31 Dec
2016 |
|
£m |
£m |
£m |
Goodwill |
50 |
7 |
9 |
Other
acquisition-related intangible assets |
1 |
- |
1 |
Other
intangible assets |
- |
1 |
3 |
Property, plant and equipment |
13 |
12 |
18 |
Other
non-current assets |
17 |
5 |
2 |
Current assets |
78 |
32 |
86 |
Liabilities |
(58) |
(22) |
(44) |
Net
assets of operations disposed |
101 |
35 |
75 |
Less: recycling from currency translation reserve and
related net investment hedge reserve |
(17) |
- |
- |
Net
impact on consolidated statement of financial position due to
disposals |
84 |
35 |
75 |
Fair
value of retained investment in former joint venture |
(3) |
- |
- |
Profit/(loss) on disposal/closure of businesses |
68 |
(4) |
7 |
Total consideration |
149 |
31 |
82 |
|
|
|
|
Satisfied by: |
|
|
|
Cash
received |
158 |
35 |
90 |
Disposal costs paid |
(5) |
(2) |
(8) |
Additional net consideration paid relating to disposals
completed in prior years |
(2) |
(1) |
- |
Net
cash consideration received in the period |
151 |
32 |
82 |
Deferred consideration receivable |
4 |
- |
- |
Accrued disposal and other costs |
(6) |
(1) |
- |
Total consideration |
149 |
31 |
82 |
|
|
|
|
9) Net
finance expense
|
Six months ended
30 June 2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
|
|
£m |
£m |
£m |
|
|
|
|
|
|
Interest and other
income on cash, cash equivalents and investments |
6 |
4 |
15 |
|
Interest receivable on
loan note related derivatives |
4 |
9 |
18 |
|
Gain/(loss) arising
from fair value adjustment to the hedged loan note items |
9 |
(4) |
11 |
|
(Loss)/gain arising from change in fair value of derivative
financial instruments hedging loan notes |
(9) |
4 |
(11) |
|
Finance
income |
10 |
13 |
33 |
|
|
|
|
|
|
Interest on bank
overdrafts and loans |
(10) |
(10) |
(21) |
|
Interest on loan
notes |
(45) |
(47) |
(97) |
|
Interest on
obligations under finance leases |
(1) |
(2) |
(5) |
|
Other
interest charges |
(4) |
(2) |
(6) |
|
Total Group borrowing
costs |
(60) |
(61) |
(129) |
|
Finance
costs on defined retirement benefit obligations |
(6) |
(5) |
(10) |
|
Finance
expense |
(66) |
(66) |
(139) |
|
|
|
|
|
|
Net finance
expense |
(56) |
(53) |
(106) |
|
10)
Tax
|
Six months ended
30 June
2017 |
Six months ended
30 June
2016 |
Year
ended
31 Dec
2016 |
|
£m |
£m |
£m |
|
|
|
|
Current taxation expense |
(44) |
(30) |
(110) |
Deferred taxation (expense)/credit |
(10) |
(4) |
34 |
Total income tax expense for the period |
(54) |
(34) |
(76) |
The
effective tax rate is 25% (2016: 30%) which is driven primarily by
the impact of tax rates on non-UK operations being in excess of the
UK corporation tax rate and losses for which deferred tax assets
cannot be recognised in full. The income tax expense is based upon
management's estimate of the effective rate derived from the
weighted average annual income tax rate expected for the full year,
incorporating non-recurring items as required.
The
Group operates in a complex global tax environment and is subject
to a broad range of tax issues during the normal course of
business, including transactional and transfer pricing
matters. Where the amount of tax payable is uncertain, the
Group establishes provisions based on management's judgement of the
probable amount of the future liability.
The
Group has recognised substantial deferred tax assets, predominantly
on UK tax losses and deficits on defined benefit pension
schemes. Recognition of deferred tax assets is dependent upon
the availability of future taxable profits in the relevant legal
entities based upon future business plans. As at 30 June
2017, the Group had recognised deferred tax assets of £274m (30
June 2016: £205m including £4m in disposal groups classified as
held for sale).
11)
Dividends
|
Pence |
DKK |
2017 |
2016 |
|
per share |
per share |
£m |
£m |
|
|
|
|
|
Amounts recognised as distributions to equity
holders of the parent in the period |
|
|
|
|
Final
dividend for the year ended 31 December 2015 |
5.82 |
0.5615 |
- |
90 |
Interim dividend for the six months ended 30 June 2016 |
3.59 |
0.3143 |
- |
55 |
Final dividend for the year ended 31 December 2016 |
5.82 |
0.5029 |
90 |
- |
|
|
|
90 |
145 |
|
|
|
|
|
Proposed interim dividend for the six months ended 30 June
2017 |
3.59 |
0.2948 |
55 |
|
An
interim dividend of 3.59p (DKK 0.2948) per share for the six months
ended 30 June 2017 will be paid on 13 October 2017 to shareholders
on the register on 1 September 2017.
12) Earnings per
share attributable to equity shareholders of the parent
|
Six months ended
30 June 2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
£m |
£m |
£m |
(a) From continuing and discontinued
operations |
|
|
|
|
|
|
|
Earnings |
|
|
|
Profit
for the period attributable to equity shareholders of the
parent |
150 |
69 |
198 |
Weighted average number of ordinary shares (m) |
1,548 |
1,545 |
1,546 |
Earnings per share from continuing and
discontinued operations (pence) |
|
|
|
Basic and diluted |
9.7p |
4.5p |
12.8p |
|
|
|
|
(b) From continuing operations |
|
|
|
|
|
|
|
Earnings |
|
|
|
Profit
for the period attributable to equity shareholders of the
parent |
150 |
69 |
198 |
Adjustment to exclude loss for the period from
discontinued operations (net of tax) |
4 |
1 |
3 |
Profit from continuing
operations |
154 |
70 |
201 |
|
|
|
|
Earnings per share from continuing operations
(pence) |
|
|
|
Basic and diluted |
9.9p |
4.5p |
13.0p |
|
|
|
|
(c) From discontinued operations |
|
|
|
|
|
|
|
Loss
for the period from discontinued operations (net of tax) |
(4) |
(1) |
(3) |
Loss per share from discontinued operations
(pence) |
|
|
|
Basic and diluted |
(0.3)p |
(0.1)p |
(0.2)p |
13) Disposal groups classified as held for
sale
As at
30 June 2017, disposal groups classified as held for sale included
the assets and liabilities associated with minor operations in the
Group's Middle East and India and Latin America regions.
At 30
June 2016 and 31 December 2016, disposal groups held for sale
mainly comprised the assets and liabilities associated with the
Group's business in Israel, its Youth Service business in North
America and the children's homes businesses in the UK. These three
businesses were sold during the six months ended 30 June 2017.
14) Cash and cash equivalents, overdrafts and
customer cash processing balances
The
Group's Cash Solutions businesses provide a range of cash handling
and processing services on behalf of customers. Certain of those
services comprise collection, segregated storage and delivery of
customer cash, with title to the cash handled remaining with the
customer throughout the process. Such cash is never recorded in the
Group's balance sheet.
A
number of other cash processing services are provided to customers,
such as the sale and purchase of physical cash balances, and the
replenishment of ATMs and similar machines from customer funds held
in Group bank accounts. Such funds, which are generally settled
within two working days, are classified as "funds within cash
processing operations", along with the related balances due to and
from customers in respect of unsettled transactions, and are
included gross within the relevant balance sheet
classifications.
Consistent with the treatment adopted at 30 June 2017 and at 31
December 2016, the consolidated statement of financial position as
at 30 June 2016 has been re-presented in respect of such "funds
within cash processing operations" (see note 1), as follows:
|
As at
30 June
2017 |
As at
30 June 2016 |
As at
31 Dec
2016 |
Funds within cash processing
operations |
£m |
£m |
£m |
Stocks of money,
included within cash and cash equivalents |
70 |
94 |
95 |
Overdraft facilities
related to cash processing operations, included within bank
overdrafts |
(7) |
(12) |
(22) |
Liabilities to
customers in respect of cash processing operations, included within
trade and other payables |
(66) |
(93) |
(83) |
Receivables from customers in respect of cash processing
operations, included within trade and other receivables |
3 |
11 |
10 |
Funds within cash processing operations (net) |
- |
- |
- |
Whilst
such cash and bank balances are not formally restricted by legal
title, they are restricted by the Group's own internal policies
such that they cannot be used for the purposes of the Group's own
operations. For the purposes of the Group's consolidated statement
of cash flow, funds within cash processing operations are therefore
recorded net of the related balances due to and from customers in
respect of unsettled transactions, within cash, cash equivalents
and bank overdrafts, and hence have no impact on the Group's
statutory cash flow.
A
reconciliation of cash, cash equivalents and bank overdrafts at the
end of the period per the consolidated statement of financial
position to the corresponding balances included within the
consolidated statement of cash flow is as follows:
|
As at
30 June
2017 |
As at
30 June 2016 |
As at
31 Dec
2016 |
|
£m |
£m |
£m |
Cash and cash
equivalents in the consolidated statement of financial
position |
827 |
893 |
831 |
Bank
overdrafts in the consolidated statement of financial position |
(216) |
(62) |
(93) |
Cash,
cash equivalents and bank overdrafts included within disposal
groups classified as held for sale |
1 |
13 |
7 |
Total cash, cash equivalents and bank overdrafts |
612 |
844 |
745 |
Add: |
|
|
|
Liabilities to
customers in respect of cash processing operations, included within
trade and other payables |
(66) |
(93) |
(83) |
Receivables from customers in respect of cash processing
operations, included within trade and other receivables |
3 |
11 |
10 |
Cash, cash equivalents and bank overdrafts at the end of
the period in the consolidated statement of cash flow |
549 |
762 |
672 |
15) Retirement benefit obligations
The
Group's main defined benefit scheme is in the UK which accounts for
over 80% (31 December 2016: over 70%) of the total defined benefit
schemes operated by the Group. The majority of the scheme was
closed to future accrual in 2011. The Group's IAS 19 Revised (2011)
Employee Benefits net pension deficit at 30 June 2017 recognised in
the consolidated statement of financial position was £486m (31
December 2016: £437m) or £410m (31 December 2016: £368m) net of
applicable tax in the relevant jurisdictions. The Group has made
additional pension contributions of £20m (six months ended 30 June
2016: £24m) in respect of the deficit in the UK schemes during the
period. The increase in the pension deficit is predominantly a
result of the decrease in the scheme's asset values only being
partially offset by a decrease in scheme obligations arising from a
reduction in the inflation rate assumptions.
16) Provisions and contingent liabilities
|
Employee benefits |
Restructuring |
Claims |
Onerous customer contracts |
Property and other* |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
At 1
January 2017 |
19 |
5 |
96 |
69 |
59 |
248 |
Additional provisions in the period |
2 |
14 |
25 |
5 |
3 |
49 |
Utilisation of provisions |
(2) |
(13) |
(20) |
(9) |
(11) |
(55) |
Transfers and reclassifications |
- |
- |
2 |
(4) |
1 |
(1) |
Unused
amounts reversed |
- |
- |
- |
(1) |
(1) |
(2) |
Exchange differences |
- |
- |
(4) |
- |
(1) |
(5) |
At 30 June 2017 |
19 |
6 |
99 |
60 |
50 |
234 |
|
|
|
|
|
|
|
Included in current liabilities |
|
|
|
|
|
91 |
Included in non-current liabilities |
|
|
|
|
|
143 |
|
|
|
|
|
|
234 |
*Property and other includes £14m (31 December 2016: £16m) of
onerous property lease
provisions.
|
The
Group recognised additional onerous contract provisions of £5m
primarily related to an increase in expected delivery costs in
respect of one of its contracts. In addition, the Group recognised
additional claims provisions of £6m related to the estimated cost
of settlement of subcontractor claims from commercial disputes in
relation to prior years. Both of these amounts have been presented
within specific items in the consolidated income statement.
The
Group is involved in disputes in a number of countries, mainly
related to activities incidental to its operations. Currently there
are a number of such disputes open in relation to the application
of local labour law, commercial agreements with customers and
subcontractors and claims and compliance matters, in some cases in
the course of litigation. Where, based on the advice of legal
counsel, the Group estimates that it is probable that the dispute
will result in an outflow of economic resources, provision is made
based on the best estimate of the likely financial outcome. Where a
reliable estimate cannot be made, or where the Group, based on the
advice of legal counsel, considers that it is not probable that
there will be an outflow of economic resources, no provision is
recognised.
In this
regard, the Group is party to a number of on-going litigation
processes in relation to interpretation of local labour law
and regulations in a number of countries, where it is expected that
these matters will not be resolved in the near future. At this
stage, the Group's view is that these cases will either be resolved
in a manner favourable to the interests of the Group or, due to the
nature and complexity of the cases, it is not possible to estimate
the potential economic exposure. In addition, in the ordinary
course of business, other contingent liabilities exist where the
Group is subject to commercial claims and litigation from a range
of parties in respect of contracts, agreements, regulatory and
compliance matters, none of which are expected to have a material
impact on the Group.
Judgement is required in quantifying the Group's provisions,
especially in connection with claims and onerous contracts, which
are based on a number of assumptions and estimates where the
ultimate outcome may be different from the amount provided.
Each of these provisions reflects the Group's best estimate of the
probable exposure at 30 June 2017 and this assessment has been made
having considered the sensitivity of each provision to reasonably
possible changes in key assumptions. The Group is satisfied
that it is unlikely that changes in these key assumptions will have
a material impact on the Group's overall provisioning position in
the next 12 months.
17) Analysis of net debt
A reconciliation of net
debt to amounts in the consolidated statement of financial position
is presented below:
|
|
As at
30 June
2017 |
As at
30 June 2016 |
As at
31 Dec
2016 |
|
|
£m |
£m |
£m |
Cash and cash
equivalentsa |
|
827 |
893 |
831 |
Receivables from
customers in respect of cash processing operationsb |
|
3 |
11 |
10 |
Net cash and
overdrafts included within assets held for sale |
|
1 |
13 |
7 |
Bank overdrafts |
|
(216) |
(62) |
(93) |
Liabilities
to customers in respect of cash processing operationsc |
|
(66) |
(93) |
(83) |
Total
Group cash, cash equivalents and bank overdrafts |
|
549 |
762 |
672 |
Investmentsa |
|
78 |
59 |
64 |
Net debt (excluding
cash and overdrafts) included within assets held for sale |
|
(1) |
(4) |
6 |
Bank loans |
|
(88) |
(681) |
(20) |
Loan notes |
|
(2,144) |
(1,933) |
(2,392) |
Obligations under
finance leases |
|
(48) |
(59) |
(57) |
Fair value of loan
note derivative financial instruments |
|
47 |
74 |
57 |
Total net debt |
|
(1,607) |
(1,782) |
(1,670) |
a Cash
and cash equivalents and investments as at 30 June 2016 have been
re-presented - see note 1.
b Included
within trade and other receivables
c Included
within trade and other payables
18)
Reconciliation of operating profit to net cash flow from operating
activities of continuing operations
|
Six months ended
30 June
2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
£m |
£m |
£m |
Operating profit |
274 |
168 |
402 |
Adjustments for non-cash and other items: |
|
|
|
Goodwill impairment |
- |
9 |
9 |
Amortisation of acquisition-related intangible
assets |
6 |
18 |
32 |
Net
(profit)/loss on disposal/closure of subsidiaries |
(68) |
3 |
(7) |
Depreciation of
property, plant and equipment |
52 |
54 |
106 |
Amortisation of other
intangible assets |
11 |
13 |
25 |
Share
of profit from joint ventures |
(4) |
(5) |
(9) |
Equity-settled transactions |
4 |
4 |
10 |
Decrease in provisions |
(2) |
(20) |
(1) |
Additional pension contributions |
(20) |
(24) |
(39) |
Operating cash flow before movements in
working capital |
253 |
220 |
528 |
Decrease/(increase) in inventories |
7 |
2 |
(5) |
Increase in receivables |
(52) |
(5) |
(9) |
(Decrease)/increase in payables |
(38) |
56 |
101 |
Net cash flow from operating activities
of continuing operations |
170 |
273 |
615 |
19)
Fair value of financial instruments
The
carrying amounts, fair value and fair-value hierarchy relating to
those financial instruments, including those that have been
recorded at amortised cost, where the carrying amount differs from
fair value, based on expectations at the reporting date, are shown
below:
|
|
|
30 June
2017 |
30 June 2017 |
30 June 2016 |
30 June 2016 |
31 Dec |
31 Dec |
|
|
|
|
2016 |
2016 |
|
|
|
|
Carrying
amount |
Fair
value |
Carrying amount |
Fair value |
Carrying amount |
Fair value |
|
|
Category |
Level |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current investments |
FVTPL |
3 |
3 |
3 |
- |
- |
- |
- |
|
Current investments |
FVTPL |
1 |
78 |
78 |
59 |
59 |
64 |
64 |
|
Interest-rate swaps |
FVH |
2 |
20 |
20 |
43 |
43 |
27 |
27 |
|
Foreign-exchange forwards |
FVTPL |
2 |
- |
- |
- |
- |
1 |
1 |
|
Cross-currency swaps |
CFH |
2 |
47 |
47 |
31 |
31 |
48 |
48 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan notes* |
FVH |
2 |
(211) |
(205) |
(725) |
(764) |
(740) |
(779) |
|
Interest-rate swaps |
CFH |
2 |
- |
- |
(2) |
(2) |
(1) |
(1) |
|
Interest-rate swaps |
FVH |
2 |
(1) |
(1) |
- |
- |
- |
- |
|
Interest-rate swaps |
FVTPL |
2 |
(1) |
(1) |
- |
- |
- |
- |
|
Foreign-exchange forwards |
CFH/FVTPL |
2 |
- |
- |
(1) |
(1) |
(1) |
(1) |
|
Commodity swaps |
CFH |
2 |
- |
- |
(1) |
(1) |
- |
- |
|
Cross-currency swaps |
CFH/NIH |
2 |
(18) |
(18) |
- |
- |
(17) |
(17) |
|
Loan notes* |
AC |
2 |
(1,933) |
(2,015) |
(1,208) |
(1,266) |
(1,652) |
(1,699) |
|
*Of the loan note liabilities shown, £44m of July 2008 loan notes,
€120m (£105m) of December 2012 loan notes and €100m (£88m) of June
2017 loan notes are designated in fair-value hedge
relationships. |
|
|
|
|
|
|
|
|
|
|
|
Category key: |
|
|
|
|
|
|
|
|
|
FVTPL |
Fair value through profit or loss |
|
|
|
|
|
|
|
CFH |
Cash-flow hedge |
|
|
|
|
|
|
|
NIH |
Net-investment hedge |
|
|
|
|
|
|
|
FVH |
Fair-value hedge |
|
|
|
|
|
|
|
AC |
Amortised cost |
|
|
|
|
|
|
|
-
Reconciliation of operating
profit to movements in net debt
The definition of cash flow from
continuing operations, as presented below, was revised in December
2016 to include the Group's pension deficit repair payments, which
were previously added back and treated as other uses of funds, in
order to align more closely the reconciliation with the
consolidated statement of cash flows presented within the statutory
accounts.
|
Six months ended
30 June 2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
£m |
£m |
£m |
|
|
|
|
Operating profit |
274 |
168 |
402 |
Adjustments for non-cash and other items (see note 18) |
(21) |
52 |
126 |
Net working capital movement (see note 18) |
(83) |
53 |
87 |
Net
cash flow from operating activities of continuing operations (page
28) |
170 |
273 |
615 |
Adjustments for: |
|
|
|
Restructuring spend |
13 |
9 |
18 |
Cash flow from continuing
operations |
183 |
282 |
633 |
Analysed between: |
|
|
|
Continuing businesses |
192 |
277 |
634 |
Portfolio businesses |
(3) |
8 |
9 |
Onerous contracts |
(6) |
(3) |
(10) |
|
|
|
|
Investment in the business |
|
|
|
Purchase of fixed assets, net of disposals |
(43) |
(46) |
(107) |
Restructuring spend |
(13) |
(9) |
(18) |
Disposal of subsidiaries |
151 |
32 |
82 |
Acquisition of subsidiaries |
- |
- |
(1) |
Net
debt in disposed/acquired entities |
(11) |
(9) |
(15) |
New finance leases |
(1) |
(4) |
(7) |
Net investment in the business |
83 |
(36) |
(66) |
|
|
|
|
Net cash flow after investing in the
business |
266 |
246 |
567 |
|
|
|
|
Other (uses)/sources of funds |
|
|
|
Net
interest paid |
(48) |
(48) |
(96) |
Tax
paid |
(41) |
(36) |
(84) |
Dividends paid |
(103) |
(99) |
(162) |
Purchase of own shares |
(7) |
- |
- |
Cash
used by discontinued operations |
- |
(6) |
(9) |
Transactions with non-controlling interests |
(13) |
(2) |
(2) |
Other |
4 |
4 |
8 |
Net other uses of funds |
(208) |
(187) |
(345) |
|
|
|
|
Net cash flow after investment,
financing, tax and dividends |
58 |
59 |
222 |
|
|
|
|
Net
debt at the beginning of the period |
(1,670) |
(1,782) |
(1,782) |
Effect of foreign exchange rate fluctuations |
5 |
(59) |
(110) |
Net debt at the end of the
period |
(1,607) |
(1,782) |
(1,670) |
|
|
|
|
|
|
|
B. Reconciliation of changes
in cash and cash equivalents to movement in net debt
|
Six months ended
30 June
2017 |
Six months ended
30 June 2016 |
Year
ended
31 Dec
2016 |
|
|
£m |
£m |
£m |
Net (decrease)/increase in cash, cash equivalents
and bank overdrafts (page 18) |
(126) |
386 |
197 |
Adjustments for items included in cash flow excluded from net
debt: |
|
|
|
Purchase/(sale) of investments |
17 |
(13) |
(6) |
Net
movement in borrowings |
161 |
(327) |
11 |
Repayment of finance leases |
10 |
13 |
22 |
Items
included in net debt but excluded from cash flow: |
|
|
|
Net
debt (excluding cash, cash equivalents and bank overdrafts) of
disposed entities |
(3) |
4 |
5 |
New finance leases |
(1) |
(4) |
(7) |
Net decrease in net debt before foreign
exchange movements |
58 |
59 |
222 |
|
|
|
|
C. Group net
debt: EBITDA ratio
|
Six months ended
30 June
2016 |
Year
ended
31 Dec
2016 |
Six months ended
30 June
2017 |
Rolling
12 months
to
30 June 2017 |
Rolling
12 months
to
30 June 2016 |
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
Profit
before interest, tax and amortisation (PBITA - page 14) |
203 |
461 |
237 |
495 |
409 |
|
|
|
|
|
|
Add
back: |
|
|
|
|
|
Depreciation |
54 |
106 |
52 |
104 |
109 |
Amortisation of non-acquisition related intangible
assets |
13 |
25 |
11 |
23 |
26 |
EBITDA |
270 |
592 |
300 |
622 |
544 |
Exclude
EBITDA relating to businesses sold in the period/year* |
(14) |
(28) |
(8) |
(22) |
(1) |
EBITDA
excluding businesses sold in the period/year |
256 |
564 |
292 |
600 |
543 |
|
|
|
|
|
|
Net debt per note 17 |
|
|
|
1,607 |
1,782 |
|
|
|
|
|
|
Group's definition of Net debt:EBITDA ratio |
|
|
|
2.7 |
3.3 |
* For the purposes of the rolling 12 months to 30 June 2017
calculation only, the prior period and prior year results have been
re-presented to exclude EBITDA in respect of operations sold in
2017. |
The basis of calculation of the
Net debt:EBITDA ratio was changed in December 2016 compared with
that used in prior periods, in order to better align with the
statutory accounts. EBITDA can now be derived from the consolidated
income statement, after adjustment to exclude depreciation and the
amortisation of non-acquisition related intangible assets, and the
EBITDA of businesses sold during the period.
D. Reconciliation between
results from continuing businesses and statutory results
Six months ended 30 June 2017 (at 2017
average exchange rates) |
£m |
Conti-
nuing
busin-
esses |
Onerous
contracts |
Portfolio
businesses |
|
Acquisition-
related |
Statutory |
Restr-
ucturing |
amortisation |
and otherd |
Revenue |
3,715 |
57 |
200 |
- |
- |
3,972 |
PBITA |
235 |
- |
2 |
- |
- |
237 |
Profit before tax |
181 |
(5) |
1 |
(14) |
55 |
218 |
Profit after tax |
138 |
(4) |
(1) |
(11) |
42 |
164 |
Earnings |
128 |
(4) |
(1) |
(11) |
38 |
150 |
Operating cash flowc |
192 |
(6) |
(3) |
(13) |
- |
170 |
|
Six months ended 30 June 2016 (at 2017
average exchange rates) |
|
|
|
£m |
Conti-
nuing
busin-
esses |
Onerous contracts |
Portfolio
businesses |
Restr-
ucturing |
Acquisition-
related
amortisation
and otherd |
Adjusted statutoryb |
Revenue |
3,497 |
55 |
338 |
- |
- |
3,890 |
PBITA |
222 |
- |
2 |
- |
- |
224 |
Profit before tax |
173 |
- |
(2) |
(3) |
(36) |
132 |
Profit after tax |
131 |
1 |
(6) |
(2) |
(33) |
91 |
Earnings |
119 |
1 |
(6) |
(2) |
(35) |
77 |
Operating cash flowa,c |
277 |
(3) |
8 |
(9) |
- |
273 |
Six months ended 30 June 2016 (at 2016
average exchange rates) |
|
|
£m |
Conti-
nuing busin-
esses |
Onerous
contracts |
Portfolio
businesses |
Restr-
ucturing |
Acquisition-related
amortisation
and otherd |
Statutory |
Revenue |
3,177 |
53 |
302 |
- |
- |
3,532 |
PBITA |
201 |
- |
2 |
- |
- |
203 |
Profit before tax |
151 |
- |
(1) |
(3) |
(32) |
115 |
Profit after tax |
115 |
- |
(4) |
(2) |
(28) |
81 |
Earnings |
104 |
- |
(4) |
(2) |
(29) |
69 |
Operating cash flowa,c |
277 |
(3) |
8 |
(9) |
- |
273 |
a Operating
cash flow for the six months ended 30 June 2016 is presented at
2016 actual exchange rates.
b The 'adjusted
statutory' figures represent the comparative 2016 half year
statutory amounts had they been translated at 2017 average rates
(other than for operating cash flow) but should not be considered
as or used in place of the Group's statutory results.
c Operating
cash flow is stated after pension deficit contributions of £20m
(2016: £24m).
d Other
includes net specific items (excluding those presented within
onerous contracts), net profit on disposal/closure of subsidiaries,
the results of discontinued operations and, for June 2016, includes
goodwill impairment. These amounts are presented net of any
associated tax impacts, see page 8 for details.
E. Re-presentation of prior
period results from continuing businesses(a)
The table below reconciles revenue and PBITA from continuing
businesses as previously reported to the re-presented prior period
revenue and PBITA from continuing businesses.
For the six months ended 30 June
2016 |
|
|
|
|
|
|
Continuing businesses as previously
reported |
Re-
classified
from
onerous contractsb |
Businesses re-classified to portfolio c |
Businesse
s
re-classified from portfolio
(d) |
Contin-
uing
busin-
esses at 2016 exchange rates |
Exch
ange rate move
ments |
Contin-uing busin-esses at 2017 exchange
rates |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Revenue |
|
|
|
|
|
|
|
Africa |
203 |
- |
(4) |
- |
199 |
16 |
215 |
Asia
Pacific |
307 |
- |
- |
9 |
316 |
41 |
357 |
Latin
America |
278 |
- |
(3) |
9 |
284 |
51 |
335 |
Middle East & India |
405 |
- |
- |
3 |
408 |
55 |
463 |
Emerging markets |
1,193 |
- |
(7) |
21 |
1,207 |
163 |
1,370 |
|
|
|
|
|
|
|
|
Europe |
563 |
- |
- |
9 |
572 |
56 |
628 |
North
America |
767 |
- |
- |
- |
767 |
95 |
862 |
UK & Ireland |
563 |
61 |
- |
7 |
631 |
6 |
637 |
Developed markets |
1,893 |
61 |
- |
16 |
1,970 |
157 |
2,127 |
|
|
|
|
|
|
|
|
Total revenue |
3,086 |
61 |
(7) |
37 |
3,177 |
320 |
3,497 |
|
|
|
|
|
|
|
|
PBITA |
|
|
|
|
|
|
|
Africa |
20 |
- |
- |
- |
20 |
2 |
22 |
Asia
Pacific |
23 |
- |
- |
- |
23 |
3 |
26 |
Latin
America |
11 |
- |
- |
- |
11 |
2 |
13 |
Middle East & India |
40 |
- |
- |
- |
40 |
5 |
45 |
Emerging markets |
94 |
- |
- |
- |
94 |
12 |
106 |
|
|
|
|
|
|
|
|
Europe |
35 |
- |
- |
- |
35 |
3 |
38 |
North
America |
43 |
- |
- |
- |
43 |
5 |
48 |
UK & Ireland |
48 |
- |
- |
2 |
50 |
1 |
51 |
Developed markets |
126 |
- |
- |
2 |
128 |
9 |
137 |
|
|
|
|
|
|
|
|
Total PBITA before corporate costs |
220 |
- |
- |
2 |
222 |
21 |
243 |
Corporate costs |
(21) |
- |
- |
- |
(21) |
- |
(21) |
Total PBITA |
199 |
- |
- |
2 |
201 |
21 |
222 |
|
|
|
|
|
|
|
|
Earnings |
102 |
1 |
|
1 |
104 |
15 |
119 |
|
|
|
|
|
|
|
|
Operating cash flowe |
269 |
7 |
- |
1 |
277 |
- |
277 |
a See basis of
preparation on page 3.
b Since 30 June
2016 the performance of five UK & Ireland contracts previously
categorised as onerous has improved such that they are no longer
onerous. We have therefore reported the results of these contracts
in continuing businesses in 2017 and have restated the 2016 results
accordingly.
c Since 30 June
2016 we determined that we would exit two minor operations in
Africa and Latin America and we have therefore reported the results
of these businesses in portfolio businesses in 2017 and have
restated the 2016 results accordingly.
d Since 30 June
2016, for seven of the businesses previously reported as portfolio
businesses, management focus and changing market conditions have
resulted in improved performance and we have formally concluded
that we will retain these businesses. We have therefore
reported the results of these businesses in continuing businesses
in 2017 and have restated the 2016 results accordingly.
e
Operating cash flow is stated after pension deficit contributions
of £24m and is shown at actual 2016 exchange rates.
For further enquiries, please
contact:
Helen Parris
Director of Investor Relations
+44 (0) 208 7222125
Sophie
McMillan
Business Media
Manager
+44 (0) 7595523483
High resolution images and b-roll are available to download from
the G4S media library, available through the results centre
at www.g4s.com.
Notes to
Editors:
G4S is the leading global, integrated security company,
specialising in the provision of security services and solutions to
customers. Our mission is to create material, sustainable value for
our customers and shareholders by being the supply partner of
choice in all our markets.
G4S is quoted on the London Stock
Exchange and has a secondary stock exchange listing in Copenhagen.
G4S is active in around 100 countries and has over 570,000
employees. For more information on G4S, visit www.g4s.com.
Presentation of
Results:
A presentation to investors and analysts is taking
place today at 09.00 hrs at the London Stock Exchange.
The presentation can also be viewed by webcast
using the following link:
http://view-w.tv/707-803-18618/en
Please note there will be a telephone dial-in
facility for this event, the call details are below:
Standard International Access: +44 (0) 20 3003
2666
UK Toll Free: 0808 109 0700
Copenhagen: +45 3272 9273
Denmark Toll Free: 8088 8649
New York: +1 212 999 6659
USA Toll Free: 1 866 966
5335
Password: G4S
Dividend payment
information
2017 interim dividend:
Ex-dividend date - 31 August
2017
Last day to elect for DKK - 31 August 2017
Record date - 1 September 2017
Last day for DRIP elections - 18 September 2017
Pay date - 13 October 2017
Financial Calendar
November 2017
-
Q3 2017 Trading update
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: G4S plc UK DK via Globenewswire
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