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OVERALL, THE OUTLOOK FOR THE BUSINESS IS GOOD AND WE ARE NOT EXPECTING THE RECENT ECONOMIC UNCERTAINTIES TO IMPACT OUR ABILITY TO DELIVER STRONG RESULTS IN THE FUTURE. |
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2007 Performance In 2006, we raised the group targets in a number of areas following a strong business performance in that year and to demonstrate our confidence about the future. We set a target for organic growth of 7%, a PBITA margin target of 7% within two years and a cash generation target of 85% of PBITA.
In 2007, we have demonstrated our ability to deliver on our promises, with organic growth of 9.1% (more than 2% ahead of target), PBITA margins at 7% (18 months ahead of schedule) and cash generation ahead of target at 89%.
2007 Performance Highlights When we presented our full year results for 2007, we were pleased to report that: |
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We had very strong organic turnover growth* of 9.1% (2006: 7.1%)
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Group turnover* was up 14.5% to £4,490.4 million (2006: £3,923.2m)
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PBITA* was up 16.8% to £312.1 million (2006: £267.1 m)
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The group PBITA margin* had improved to 7.0% (2006: 6.8%)
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We had achieved cash flow generation of £276.4 million, representing 89% of PBITA (2006: 86%)
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Adjusted earnings per share had increased by 10.7% to 13.4p (2006: 12.1p)
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We would recommend a final dividend of 2.85 pence per share (DKK 0.279), up 13.1% on the prior year (2006: 2.52p/DKK 0.277), giving a recommended total dividend of 4.96 pence per share (DKK 0.511) (2006: 4.21p/DKK 0.463) |
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at constant (2007) exchange rates |
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In developed markets we have achieved a solid result with organic growth of around 7% and margins in line with the previous year. The increased organic growth of 17% and improved margins in new markets have driven an overall margin improvement of 0.2% across the group.
We have introduced the investment community to the next phase of our strategy which we believe will drive accelerated growth and development for the group and we have already announced a number of acquisitions which will help us steer the strategy forward.
I would like to take this opportunity to thank everyone across the organisation for contributing to this strong performance. It is their commitment and enthusiasm which drives the success of the business and I am proud to be a part of that winning team.
Strategic Development
2007 Review – In 2007, we set about reviewing the group strategy with a focus on driving accelerated growth and development for the future.
Our review confirmed a growing trend of pricing pressure in core basic services and a demand from customers for G4S to take a broader role in managing their risks. |
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WE ACHIEVED ORGANIC GROWTH OF 9.1%
– 2% ahead of target. |
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PBITA MARGINS REACHED 7% – 18 months ahead of schedule. |
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CASH FLOW GENERATION WAS 89% OF PBITA
against a target of 85%. |
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We HAVE INTRODUCED A NEW STRATEGY
to drive accelerated growth and development. |
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INCREASED ORGANIC GROWTH OF 17%
and improved margins in new markets have driven an overall margin improvement of 0.2% across the group. |
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OUR BUSINESS MODEL IS ROBUST AND DEFENDABLE
and our future strategy will build upon our key strengths to deliver enhanced performance. |
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The basic elements of the strategy which resulted from this review include a need to add value to the core services that we already provide by taking a greater role not just in specialist security areas, but in total outsourcing of the management of environments where security and safety is key.
By doing this G4S becomes a partner with its customers and takes greater responsibility for managing entire aspects of their business which are not core to them, and where G4S can add value through its security and segment expertise.
For example: |
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High security facility outsourcing in key sectors |
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Cash cycle management |
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ATM network management and servicing |
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Risk management and consultancy |
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Prison design and management |
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Offender management programmes |
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Business of this type is usually based on long term contracts with recurring revenues, which require commitment from both sides to deliver on promises set out at the negotiation stage. |
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Strategy Implementation Principles – Security remains at the core of our offer – it is an area in which we have an extensive amount of expertise across the group and is fundamental to our service proposition. However, in order to drive growth forward at an accelerated level, we will build on the solid foundation that we have created in this area. |
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We will add “intelligence” to our businesses in key areas such as risk assessment and consulting and we will add bid capability and project management skills to our core competencies.
We will focus on creating customer propositions tailored for specific industry sectors which demonstrate G4S expertise in these areas.
At the same time, we will build relationships at a senior level within our customer organisations and ultimately gain a larger share of customer commitment and spend on secure outsourcing solutions.
Current Capability – A number of our businesses already provide complete outsourced security solutions to our customers where they take total responsibility for managing risk and increasing efficiency – it is important to spread this experience more widely across the group. We estimate that this type of contract represents around 30% of group revenues and we will seek to extend this over time.
In cases where we do not have the appropriate expertise within the group, we will seek to obtain it either by acquiring businesses or by attracting key experts to the group.
Whilst we will seek to develop all businesses in line with the strategy, we will focus initially on a few key markets – US, UK, Benelux, South Africa and India. |
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IN DEVELOPED MARKETS WE HAVE ACHIEVED A SOLID RESULT WITH ORGANIC GROWTH OF 7.3% AND MARGINS IN LINE WITH THE PREVIOUS YEAR AT 7.1% - DEMONSTRATING THAT EVEN IN TOUGHER ECONOMIC ENVIRONMENTS, THE UNDERLYING PERFORMANCE ACROSS OUR DEVELOPED MARKETS BUSINESSES IS ROBUST AND RELIABLE. |
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Summary & Outlook We are extremely pleased with the performance of the business in 2007 and feel confident about the further development of the group this year.
In developed markets we have achieved a solid result with organic growth of 7.3% and margins in line with the previous year at 7.1% – demonstrating that even in tougher economic environments, the underlying performance across our developed markets businesses is robust and reliable.
The increased organic growth of 17% and improved margins in new markets have driven an overall margin improvement of 0.2% across the group. New markets continue to grow at significant rates and with our unique position and experience of operating in these markets we are well-placed to continue to drive forward the performance of our businesses in these countries.
We have introduced the investment community to the next phase of our strategy which we believe will drive accelerated growth and development for the group. The strategy focuses on taking greater responsibility for managing risk on behalf of our customers – extending from our core capabilities to develop total risk management and secure outsourcing solutions across our service range and geographies.
In order to achieve this, we need to invest in building our own capabilities and expertise by continuing to share best practice, by developing our senior management population and by acquiring businesses and individuals who bring expertise to the organisation. We have already announced a number of acquisitions which help us drive the strategy forward, the most significant being Global Solutions Ltd (GSL).
Overall, the outlook for the business is good and we are not expecting the recent economic uncertainties to impact our ability to continue to deliver strong results in the future. Our business model is robust and defendable and our future strategy will build upon our key strengths to deliver enhanced performance. |
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