Case Studies

G4S chief reports ‘challenging’ 2013

by Mark Rowe

The year 2013 was ‘extremely challenging’, G4S Chief Executive Officer Ashley Almanza admitted in the multi-national security contractor’s results for 2013. For the results in full visit the G4S website.

Almanza recalled that in May 2013, the UK Ministry of Justice announced an investigation into billings made by G4S under electronic monitoring contracts since 2004. “The company continues to engage in constructive discussions with the UK Government and we remain committed to resolving all matters relating to the electronic monitoring contracts.

“This has been an extremely challenging year for G4S. We have taken clear action to deal with longstanding issues, provided for all of our potential liabilities and have introduced wide ranging changes that will transform our business. We can now look to the future with confidence, focusing on the growing demand for G4S’s services that underpins our plans to deliver sustainable, profitable growth. That confidence is reflected in the Board’s recommendation to maintain the dividend.”

Almanza spoke of a detailed business review in 2013 ‘which confirmed the strength of our global market positions and identified a number of strategic priorities to drive sustainable, profitable growth. We also strengthened our balance sheet through improved cash flow, a successful share placing and asset sales.

“We conducted a comprehensive financial review of our assets and liabilities and major contracts including an assessment of our potential liability for the UK Electronic Monitoring contracts. These reviews, together with our restructuring programme, resulted in a £386m charge to profits during 2013.

“Good progress has been made on our strategic priorities, including significant strengthening of our senior management with 28 new appointments to the global leadership team. We have also invested in sales and business development capacity and in extending our technology capability – both important catalysts for future growth.

“We have established major restructuring programmes to strengthen our competitive position in a number of our key markets and we are actively managing our business portfolio, divesting a number of businesses which generated proceeds of £124m to date. A number of cost leadership programmes are underway applying systematic benchmarking with an early focus on direct labour efficiency, organisational efficiency, route planning, telematics, IT standardisation, procurement and shared services.

“We have updated and reinforced awareness and understanding of our group values to ensure that we conduct our business to the highest standards and we are raising the profile and standards of health and safety across the group by standardising safety management systems and embedding health and safety in individual performance contracts. We have also revised our performance measures and incentives so that they are more closely aligned with customer service and sustainable shareholder value creation.”

While revenue rose in 2013, to £7,428m from £7,236m, operating margin fell, from 5pc to 0.8 per cent. The firm like other security multi-nationals pointed to strong growth in emerging markets, where its revenues were up 16pc. Organic growth likewise sees a contrast between developed and developing parts of the world – the emerging markets of Asia, Africa, Middle East and Latin America bringing organic growth of 14pc, but the developed world (North America, Europe) reporting zero organic growth.

The company reported organic growth of 1pc in the UK and Ireland; growth was unchanged in North America; and down 2pc in Europe.

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