The US government market and some Continental European markets are still proving to be difficult according to the security contractor G4S in its latest trading estimate for the first nine months of 2012.
The company confirmed its estimate that the loss on the London 2012 Olympics contract will be in the region of £50m and this amount was provided for at the half year and taken as an exceptional item. The update summed up that business has continued to achieve good underlying organic growth despite some adverse moves in foreign exchange and challenging macro conditions.
The contractor said that the UK has shown an improved performance. As with other multi-nationals in security and other markets, the western world countries are relatively weak – in the case of G4S, its developing markets businesses, which account for more than a third of group profits, continue to achieve ‘strong results’ according to the update.
The firm says that overall revenues compared to the same period last year, excluding the London 2012 contract, grew by 6.3 per cent at constant exchange rates and by 4.1pc at actual exchange rates. Including the London 2012 contract, revenues grew more, by 9.2pc at constant rates and by 6.9 per cent at actual exchange rates. As expected, the group operating margin was lower compared to the same period in 2011.
Organic growth
Overall organic growth was described as good at 5.5 per cent (8 per cent including the London 2012 contract), with 9 per cent in developing markets and 4 per cent (8 per cent including the London 2012 contract) in developed markets.
In the company’s ‘secure solutions’ arm, organic growth was 6 per cent (9 per cent including the London 2012 contract), despite an 11 per cent decline in the US classified government business. Overall, growth was helped by a continued strong performance in developing markets, UK government and North America commercial businesses.
In ‘cash solutions’, namely cash in transit and cash and valuables management, organic growth was 3 per cent overall. Developing markets grew 10 per cent and developed markets were broadly flat. Organic growth in developed markets is expected by the firm to improve as new contract wins in the UK come on board fully.
Margins
Overall the group margin was down 0.3 per cent (excluding the London 2012 contract) on a constant currency basis, due to contract phasing in the UK government businesses and US government budgetary cuts. Cash solutions margins were broadly in line with the same period as last year, with a stronger performance in the cash solutions businesses in most developing markets.
The firm said that restructuring measures taken in 2012 to reduce overhead costs and continued focus on business improvement should help margins improve in 2013.
Meanwhile the contractor recently announced its £250m contract to provide security services at Oslo Airport in Norway for the next six years
G4S will be responsible for securing the terminal and providing services inside its perimeter.
The company will provide services such as security checks for all crew, goods, cargo and for the airport’s 21.1 million passengers a year until 2019.
The company has been working in partnership with OSL since 2008, providing more than 750 staff for a variety of security roles.
David Stockton, director, G4S Global Aviation solutions, said: “We are delighted to have won this contract, it shows how successful we have been in delivering security and a wide variety of additional support services to Oslo Airport. Our business model is based on the understanding that we must deliver a service that complements the work of our partners at Oslo airport. We have a strong relationship with our partners at OSL and we’re looking forward to improving our services to the customer in the coming six years.”
