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The multi-national security company G4S in its latest half-yearly results points to a 1pc decline in its cash solutions (cash and valuables in transit) arm in developed markets such as Europe. While organic growth in UK and Ireland was put at five per cent, on the Continent it was minus two per cent.
The firm says that what it terms ‘restructuring programmes’ have begun in the UK, Europe and Ireland at an expected cost of £30 to £35m over 2013 and 2014. The firm says that it will continue to look for further opportunities to save costs across the group.
In the first half of 2013, underlying sales were up 7.2pc on the prior period. Organic growth was 5.4pc overall and much higher, 13pc, in developing markets which generated revenue of £1.3 billion, or more than one third, 36pc of group revenue which compared with 33pc last year.
Ashley Almanza, Group Chief Executive, said: “There was strong demand for our services across key markets and industry sectors in the first half of the year which resulted in continued revenue growth. Growth was particularly strong in developing markets where we have excellent market positions. There are significant growth opportunities in our key markets and this is reflected in our growing contract pipeline of around £4 billion per annum.
“On a like-for-like basis, half-year profits were in line with the same period in 2012 against a background of challenging trading conditions in Europe and in our cash solutions businesses in the UK and Ireland. We are divesting a number of non-core businesses, which will improve our strategic focus and realise substantial cash proceeds.
“We have announced two disposals [Canadian cash and Colombian data arms] with combined cash proceeds of around £100m and we have a well advanced process to sell two other businesses in the US. We are also considering other disposals and these together with those already announced have the potential to raise up to £250m. We need to strengthen our balance sheet to be able to realise the group’s opportunity for substantial value creation. Today we have announced our intention to raise funds via a 9.99 pc placing of new ordinary shares. This, together with our disposals program and a renewed focus on cash flow management will enable us to invest in sustainable, profitable growth and reduce our debt to a level which supports our goal of maintaining a long term net debt to EBITDA ratio of less than 2.5x.
“On the operational front, we plan to introduce systems and processes to improve efficiency and risk management and we will be restructuring a number of businesses to ensure that they are more competitive and able to deliver improved margins. Our unique geographic footprint, strong market positions and the skills and capabilities embodied in our employees, coupled with our diverse and global customer base provide us with a solid foundation from which we can continue to build the business.
“Our strong contract pipeline, strengthened balance sheet, focused investment programme and improved operational and financial management all support the delivery of revenue growth, operational efficiencies and improved cash generation. In the near term, 2013 will be a year of consolidation for the group with the actions we are now taking starting to deliver tangible benefits during 2014.”
As for the outlook, the firm said that demand for the group‟s services and products remaineds robust as reflected in 7.2 per cent revenue growth and the potential in the global sales pipeline of £4 billion. “Our focus in 2013 is to invest in topline growth and operational capacity and to begin restructuring a number of our businesses. We expect 2013 to be a year of consolidation and the actions we are taking to deliver benefits from 2014 onwards. In the medium term we expect the group to start to deliver attractive revenue growth and we expect that operational actions across a wide range of areas will provide the opportunity to improve margins over time.”
Photo courtesy of G4S