This time last year, G4S (GFS) unveiled full-year figures that reflected a series of high-profile operational setbacks - or managerial blunders, depending on your standpoint. The prisoner-tagging scandal, plus £136m in provisions for onerous contracts, meant the security outsourcing specialist booked a pre-tax loss for the year. The group didn't escape completely unscathed in 2014, either, incurring a £45m charge on legacy UK government contracts. However, these full-year figures indicate the group's recovery is now on track. Adjusted profits were up 8 per cent to £424m and cash from the group's operations was up by a quarter to £526m.
G4S spent much of last year restructuring its operations, including the sale of eight of its non-core businesses for £248m in total. Many of the changes centred on its UK businesses, but G4S also rationalised its global portfolio in 2014, selling both its Canadian cash solutions and US government solutions businesses. Management's attempts to improve the group's strategic focus seem to be paying off. By the end of 2014, G4S had secured new contracts worth £2.1bn, while bringing its bid pipeline to an annual contract value of £5.5bn - a £500m increase on the previous year.
Chief executive Ashley Almanza said a key point of the group is that it is "not dependent on a particular sector or country" for growth. Nevertheless, there were some standout regions during the year, which helped to drive overall performance. Profit growth within the group's North American business easily outstripped other developed markets - operating profits were up by a third to £75m. Meanwhile, the performance of the group's developing regions gives cause for confidence. The African business bumped up revenues by 10 per cent to £485m, while underlying profits grew by 28 per cent. As well as improved overhead efficiency, the segment benefited from new contracts wins, including embassy security in Tanzania and Sierra Leone, together with mine clearance work in South Sudan.
Unsurprisingly, revenue for its UK and Ireland business fell marginally, driven by the termination of the group's prisoner-tagging contract. The business also lost a large ATM retail contract during the fourth quarter of the year, which may bite into regional turnover next year.
Broker JPMorgan Cazenove expects adjusted EPS of 16.14p this year, up from 13.6p in 2014.
G4S (GFS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 299p | MARKET VALUE: | £4.6bn | |
| TOUCH: | 299-300p | 12-MONTH HIGH: | 302p | LOW: 225p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 61p* | NET DEBT: | 163% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 7.3 | 335 | 16.9 | 7.90 |
| 2011 | 7.0 | 257 | 13.3 | 8.53 |
| 2012 | 7.2 | 158 | 6.8 | 8.96 |
| 2013 (restated) | 7.1 | -190 | -17.3 | 8.96 |
| 2014 | 6.8 | 148 | 5.8 | 9.24 |
| % change | -3 | - | - | +3 |
Ex-div: 7 May Payment: 12 Jun *Includes intangible assets of £2.1bn, or 136p a share | ||||
