29th Aug 2007 07:00
G4S plc Interim Results Announcement January - June 2007
G4S plc, the international security solutions group, today announces its interim results for the six months to 30 June 2007.
RESULTS HIGHLIGHTS
- Good organic turnover growth of 7.5% (2006: 7.3%)
- Group turnover* up 11.8% to ‚£2,263.9 million (2006: ‚£2,025.3m)
- PBITA* up 15.9% to ‚£139.5 million (2006: ‚£120.4 m)
- Margin* improved to 6.2% (2006: 5.9%)
- Cash flow generation of ‚£97.7 million, 71% of PBITA (2006: 85%)
- Adjusted earnings per share* increased by 11.8% to 5.7p (2006:
5.1p)
- Interim dividend up 24.9% to 2.11 pence per share DKK 0.2319
(2006: 1.69p/DKK 0.1863)
- Strong performance achieved across all regions and service lines
- New Markets PBITA* up 38%
- Good progress made towards growth and margin targets
- Expect positive momentum to continue into the second half
* at constant exchange rates
Nick Buckles, Chief Executive Officer, commented:
"We have had a very good first half with strong performances acrossall regions and service lines, despite the weakening of the US dollar. We havemade a number of small and medium sized acquisitions in the last six months,mainly targeted at adding further capabilities and expertise to the group -this strategy will help us to continue our security solutions approach to themarket.We are pleased to be making good progress towards our publishedmargin and growth targets. As a result of our continuing growth, we have nowbroken the 500,000 employee threshold. We are very proud of our people and thehigh quality security solutions they provide to major organisations andstrategically important locations around the world.
We expect the strong momentum achieved so far this year to continue into the second half."
For further enquiries, please contact:
Nick Buckles - Chief Executive Officer +44 (0) 1293 554400 Trevor Dighton - Chief Financial Officer Debbie McGrath - Group Communications Director
Media enquiries:
Kevin Smith - Citigate Dewe Rogerson +44 (0) 7973 672649
Notes to Editors:
G4S plc is an international security solutions group, operating inover 100 countries throughout the world and employing over 500,000 people. G4Sis a market leader in the provision of security services and cash services inmany of the countries in which it operates. For more information on G4S, visitwww.g4s.com.Presentation of Results:
A presentation to investors and analysts is taking place today at 0900hrs at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. A telephone dial-in facility is available on +44 (0) 20 7162 0125.
FINANCIAL SUMMARY
Results
The results which follow have been prepared under International Financial Reporting Standards (IFRS), as adopted by the European Union.
Group Turnover
Turnover of Continuing Businesses H107 H106 ‚£m ‚£m
Turnover at constant exchange rates 2,263.9 2,025.3 Exchange difference
- 100.2
Total continuing business turnover 2,263.9 2,125.5
Turnover, at constant exchange rates, increased by 11.8% to ‚£2,263.9 million. Organic turnover growth was 7.5%.
Organic Turnover Growth * Europe North America New Markets TotalSecurity Services 4.7% 6.5% 13.0% 6.7%Cash Services 10.4% (4.2%) 21.5% 10.5%Total 6.2% 5.7% 14.4% 7.5%
* Calculated to exclude acquisitions and disposals, and at constant exchange rates
Group ProfitPBITA * of Continuing Businesses H107 H106 ‚£m ‚£mPBITA at constant exchange rates 139.5 120.4Exchange difference - 6.1Total continuing business PBITA 139.5 126.5PBITA margin 6.2% 5.9%
* PBITA is defined as profit before interest, taxation, amortisation of acquisition-related intangible assets and exceptional items
PBITA at constant exchange rates increased by 15.9% to ‚£139.5 million. The PBITA margin was 6.2%.
Cash Flow and FinancingCash Flow H107 H106 ‚£m ‚£mOperating cash flow 97.7 106.5Operating cash flow / PBITA 71% 85%
Operating cash flow was ‚£97.7 million in the period, representing 71% of PBITA. Net debt at the end of the period was ‚£801.5 million (June 2006: ‚£669.7m, December 2006: ‚£672.8m).
Adjusted Earnings Per ShareAdjusted Earnings per share H107 H106 at H106 constant exchange rates ‚£m ‚£m ‚£mPBITA from continuing 139.5 120.4 126.5operationsInterest (before pensions) (27.8) (19.2) (21.2)Tax (31.9) (30.9) (32.1)Minorities (7.1) (5.8) (6.0)Adjusted profit attributable to 72.7 64.5 67.2shareholdersAverage number of shares (m) 1,280.4 1,266.3 1,266.3Adjusted EPS (p) 5.7p 5.1p 5.3pAdjusted earnings per share increased by 7.5%, or by 11.8% atconstant exchange rates.BUSINESS ANALYSISSecurity Services Turnover PBITA Margins Organic ‚£m ‚£m Growth * At constantexchange rates H107 H106 H107 H106 H107 H106 H107Europe * 910.7 855.3 49.4 45.9 5.4% 5.4% 4.7%North America * 515.8 481.5 27.7 25.8 5.4% 5.4% 6.5%New Markets * 371.2 288.6 29.7 22.3 8.0% 7.7% 13.0%Total Security 1,797.7 1,625.4 106.8 94.0 5.9% 5.8% 6.7%Services *Exchange - 88.8 - 5.1differencesAt actual exchange 1,797.7 1,714.2 106.8 99.1rates
The security services division continued its strong performance with good organic growth of 6.7% and margins improving to 5.9%.
Europe Turnover PBITA Margins Organic ‚£m ‚£m Growth* At constant exchangerates H107 H106 H107 H106 H107 H106 H107UK & Ireland* 283.9 261.2 21.8 19.6 7.7% 7.5% 6.2%Continental Europe * 626.8 594.1 27.6 26.3 4.4% 4.4% 4.1%Total Europe * 910.7 855.3 49.4 45.9 5.4% 5.4% 4.7%
Organic growth in Europe was 4.7% compared to 4.5% in the same period last year. Margins were maintained at 5.4%.
There was strong organic growth in the UK & Ireland as the benefitof a single approach to the market across our security services and justiceservices product lines began to show positive results. There were a number ofacquisitions made in the UK in the first half, adding further capabilities tothe business mix. The business became the UK's largest event security companyin the period. Margins also improved to 7.7%.
The Netherlands continued to build on its 2006 success with organic growth of over 6% and two capability-building acquisitions in the fire and safety sectors. Margins also improved significantly over the prior year. Luxembourg had a very strong first half in terms of organic growth and margin improvement.
There was also a solid performance in Belgium, as a result of goodcost control and improved efficiencies. In Denmark, margins were in line withthe prior year and organic growth was solid as the benefits of combining thesecurity systems and security services businesses began to take effect.Restructuring continues in France and Sweden to ensure that webuild a long term sustainable improvement in the business performance. Germanyhas stabilised in the first half and performed well compared to the first halfof 2006.
Whilst the performance in Greece has improved on 2006, challenges remain in the market relating to the impact of local employment legislation.
The Baltic States had another strong half year with double digit organic growth and very good margin improvements. Turkey continued to grow strongly and we commenced operations in Serbia during the period with a small market entry acquisition.
North America Turnover PBITA Margins Organic ‚£m ‚£m Growth* At constant exchangerates H107 H106 H107 H106 H107 H106 H107North America * 515.8 481.5 27.7 25.8 5.4% 5.4% 6.5%
Organic growth in North America was 6.5% overall and margins were maintained at 5.4%.
The United States businesses performed very well overall with anumber of major contract wins in the commercial sector providing strong growthand margin improvements. Growth in the government business was lower than thesame period in the prior year, mainly due to the additional revenues relatingto hurricane support in the first half of 2006, however a number of recentcontract wins and re-bids have secured future growth.In Canada the business performed in line with our expectationsincluding a new business win with IBM and some project work relating to localrail strikes.New Markets Turnover PBITA Margins Organic ‚£m ‚£m Growth* At constant exchangerates H107 H106 H107 H106 H107 H106 H107Asia * 126.1 113.7 10.4 8.2 8.2% 7.2% 10.5%Middle East * 84.7 56.1 7.4 5.4 8.7% 9.6% 15.0%Africa * 84.6 66.9 7.1 5.6 8.4% 8.4% 11.7%Latin America & 75.8 51.9 4.8 3.1 6.3% 6.0% 18.1%Caribbean *Total New Markets * 371.2 288.6 29.7 22.3 8.0% 7.7% 13.0%In New Markets organic growth was 13% and margins improved to 8.0%from 7.7% in the same period last year. A number of acquisitions were madeacross the region during the first half, the most significant of those beingin Saudi Arabia, Africa, Pakistan and Mexico, bringing overall turnover growthto 29%.Organic growth in Asia was 11% and margins improved strongly to8.2%. Macau continues to benefit from a strong local economy and afast-growing tourist industry leading to organic growth of over 20% and strongmargins. Indonesia also experienced growth of over 20% and India continued togrow strongly at 29%.
In Hong Kong the business is much improved on the prior year and we have finalised the integration of a systems acquisition to complete our security solutions capability.
In the Middle East there was organic growth of 15% in the period with the key businesses in Saudi Arabia, Kuwait and the UAE all performing well. Margins were slightly lower than the same period last year at 8.7%, due to the acquisition of a facilities management business in Saudi Arabia changing the service mix.
In Africa organic growth was 12% and margins were maintained at 8.4%. In South Africa the business is much improved on the same period last year now that the industrial unrest appears to have settled. Good growth and margin improvements were also achieved in Kenya and Nigeria. A number of acquisitions are being integrated in many countries across the region, consolidating our position as the leading security solutions provider in Africa.
The Latin America & Caribbean region achieved organic growth of 18%and margins improved on the prior year to 6.3%. Argentina continues to growstrongly as a result of increased business in the oil & gas sector where weprovide specialist services to our customers. In Colombia the businesscontinues to benefit from growth in the provision of infrastructure for tollcollection as tourism continues to grow in the country. Chile has now becomeour second largest business in the region with the acquisition of Segel in thesecond half of 2006.
A strong overall performance was achieved in the security services division, with the solid performances in Europe and North America being amplified by an outstanding performance from New Markets.
Cash Services Turnover PBITA Margins Organic* At constant ‚£m ‚£m Growthexchange rates H107 H106 H107 H106 H107 H106 H107Europe * 337.0 303.6 32.8 29.9 9.7% 9.8% 10.4%North America * 38.4 40.1 0.9 0.5 2.3% 1.2% (4.2%)New Markets * 90.8 56.2 13.7 9.1 15.1% 16.2% 21.5%Total Cash 466.2 399.9 47.4 39.5 10.2% 9.9% 10.5%Services *Exchange - 11.4 - 0.9differencesAt actual exchange 466.2 411.3 47.4 40.4rates
The cash services division continued its very strong performance with excellent overall organic growth of 10.5%. Margins were also strong at 10.2% compared to 9.9% in the same period last year.
Organic growth in Europe was 10.4%. In the UK, whilst attack levelscontinue to be an issue, we maintained our strong margin performance and goodgrowth record in the first half of the year. Our ATM business grew by around25% as a result of customers moving towards a full service ATM proposition -we have recently won a substantial contract to replenish bank branch ATMs forHalifax Bank of Scotland which will commence in the last quarter of 2007. TheUK cash management business continues to perform strongly, based on highquality service and a robust control environment.The business in the Netherlands also performed well in the firsthalf of the year with good margins and a strong contract pipeline developinginto the remainder of 2007. In Sweden the implementation of the Swedbank ATMmanagement contract has been very successful and the business performance hasimproved greatly compared to the same period last year.
Belgium, the Czech Republic, the Baltics and Hungary are all performing well with good organic growth and strong margins. Belgium is benefiting from a growing remote ATM market whilst the Czech Republic is growing well and achieving synergies from integrating a small acquisition.
The business in Romania has grown by almost 100% in the period as a result of a number of new contract wins, including the Romanian post office. We expect further contract wins to follow.
Retail Solutions pilots have commenced successfully in the UK, Netherlands and Finland. Customer reaction continues to be positive and we expect to launch this project fully towards the end of 2007, with our first contracts commencing in 2008.
In North America, there was negative organic growth in Canada in a challenging market, but margin improvement was achieved through good cost control. A new CEO has been appointed recently and we expect the business performance to improve in the second half of the year.
In New Markets organic growth was very strong at 21.5% and margins were also good at over 15%. There were excellent results across the region in the Middle East, Asia, Latin America and Africa.
The acquisition of Fidelity Cash Management in South Africa hasgone extremely well and the business continues to perform strongly, buildingon its market leading position in a growing market place. In Malaysia there issignificant growth in the ATM and bank outsourcing markets.
A very good performance was achieved overall in the cash services division, demonstrating our market expertise in this area and our ability to spread best practice throughout the group.
OTHER FINANCIAL ISSUES
Acquisitions
The group invested ‚£99 million in acquisitions in the first half. The largest of these were Fidelity Cash Management Services PTY in South Africa and Al Majal Service Master LLC, a facilities management business, in Saudi Arabia.
Financing
The group's primary source of finance is a ‚£1.1bn multicurrency revolving credit facility provided by a consortium of lending banks at a margin of 0.225% over Libor. The banks exercised their options to extend the term of this facility to seven years from 28 June 2005. The facility will mature on 28 June 2012.
The group has other short term committed facilities of ‚£40m and uncommitted facilities of ‚£389m.
On the 1 March 2007 the group completed a USD 550m Private Placement of Noteswhich mature at various dates between 2014 and 2022 and bear interest at ratesbetween 5.77% and 6.06%.
As of 30 June 2007, net debt was ‚£801m, representing gearing of 73%. The group has sufficient borrowing capacity to finance organic and acquisitive growth.
Net interest payable on net debt in the six months to 30 June 2007 was ‚£27.8m.This is an increase of 31% over the 2006 cost of ‚£21.2m due principally to therising cost of borrowing and the increase in the group's average gross debt.The payment of the 2006 final dividend (‚£32m) was brought forward to June thisyear from July. This impacted on the total cash flow in the first half.
The group's average cost of gross borrowings in H107 was 5.4% compared to 4.5% in H106. The cost as at 30 June 2007, was 5.6%
Also included within financing is net interest income of ‚£2.8m (2006: cost of ‚£0.6m) in respect of movements in the group's retirement benefit obligations.
Taxation
Tax has been provided for at the estimated effective tax rate for the full year of 28.6%, which is in line with the effective tax rate for the year to 31 December 2006.
PensionsAt 30 June 2007 the group's funding shortfall on defined benefit pensionobligations on the valuation basis specified in IAS19 Employee Benefits was‚£55m before tax or ‚£39m after tax, compared to ‚£226m and ‚£158m respectively at31 December 2006. The value of the assets in the funds increased by ‚£73m inthe six months, including additional cash contributions of ‚£22.5m, and therate at which the liabilities are discounted in the UK increased from 5.2% to5.9%.
Additional cash contributions will amount to ‚£26m in total for 2007. This level of contribution will be reviewed annually and reassessed formally following the completion of the next actuarial valuations which for the Group 4 scheme is in respect of 31 March 2007 and for the Securicor scheme is in respect of 5 April 2009.
Dividend
The Board has declared an interim dividend for 2007 of 2.11p per share (DKK 0.2319) payable on 16 November 2007.
REVIEW AND OUTLOOK
We have made a very strong start to the year across all service lines with good organic growth and with margins moving towards our published target. Cash flow in the first half was slightly behind that of the prior year, but we are confident that we will achieve our target for the full year.
We have made a number of acquisitions this year, adding further capability and expertise to our business, which enhances our ability to deliver complex security solutions to our customers around the world.
We have broken through the 500,000 employee mark and are proud ofthe high quality service our employees provide to our customers at importantlocations around the world. It is their focus and expertise which supports ourstrong business performance.
We are confident that the strong results achieved in the first half will be maintained throughout the year. We will continue to make appropriate acquisitions to enhance our capabilities and build on our strong, existing business platforms across the globe.
Overall we are very satisfied with our performance so far this year and are excited about the further development of the group.
29 August 2007G4S plcUnaudited interim results announcementFor the six months ended 30 June 2007Consolidated income statementFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 Notes ‚£m ‚£m ‚£m Continuing operations Revenue 2 2,263.9 2,125.5 4,301.9 Profit from operations before amortisation ofacquisition-related intangible assets and share of profitfrom associates 138.1 125.0 272.0Share of profit from associates 1.4
1.5 2.8
Profit from operations before amortisation of acquisition-related intangible assets (PBITA) 2 139.5 126.5 274.8
Amortisation of acquisition-related intangible (18.9) (17.3) (36.0)assets Profit from operations before interest and 120.6 109.2 238.8taxation (PBIT) 2, 3 Finance income 6 45.0 38.6 81.0Finance costs 7 (70.0) (60.4) (121.8) Profit from operations before taxation (PBT) 95.6
87.4 198.0
Taxation:
- Before amortisation of acquisition-related (32.7) (31.9) (67.1)intangible assets- On amortisation of acquisition-related 5.5 5.2 10.8intangible assets 8 (27.2) (26.7) (56.3) Profit from continuing operations after taxation 68.4
60.7 141.7
Loss from discontinued operations 4 - (4.9) (31.8) Profit for the period 68.4 55.8 109.9 Attributable to:Equity holders of the parent 61.3 49.8 96.5Minority interests 7.1 6.0 13.4Profit for the period 68.4 55.8 109.9
Earnings per share attributable to ordinary 10 equity shareholders of the parent
Basic 4.8p 3.9p 7.6pDiluted 4.8p 3.9p 7.6p Dividends declared and proposed in respect ofthe period 9Interim dividend of 2.11p per share (2006: 1.69p 27.0 21.4 21.4per share)Final dividend (2006: 2.52p per share) -
- 32.3Total 27.0 21.4 53.7Condensed consolidated balance sheetAs at 30 June 2007 As at As at As at 30.06.07 30.06.06 31.12.06 Notes ‚£m ‚£m ‚£mASSETS Non-current assetsGoodwill 1,264.6 1,175.5 1,170.9
Other acquisition-related intangible assets 222.0 233.2
220.6
Other intangible assets 22.4 26.5
22.2
Property, plant and equipment 365.1 346.3
355.0Investment in associates 9.6 3.9 7.3Trade and other receivables 118.5 154.0 165.6 2,002.2 1,939.4 1,941.6 Current assetsInventories 50.7 37.9 49.9Trading investments 72.8 64.5 73.7Trade and other receivables 856.4 797.4 798.9Cash and cash equivalents 306.9 255.2 307.5
Assets classified as held for sale 11 22.3 -
- 1,309.1 1,155.0 1,230.0 Total assets 3,311.3 3,094.4 3,171.6 LIABILITIES Current liabilitiesBank overdrafts (97.1) (77.9) (97.5)Bank loans (44.3) (69.2) (70.1)Obligations under finance leases (12.5) (10.3) (13.6)Dividends declared - (28.3) -Trade and other payables (745.4) (686.2) (733.9)Provisions (69.6) (73.3) (82.5)
Liabilities associated with assets classified as 11 (13.2) -
-held for sale (982.1) (945.2) (997.6) Non-current liabilitiesBank loans (713.6) (799.7) (830.3)Loan notes (274.1) - -Obligations under finance leases (40.3) (32.3) (42.5)Trade and other payables (30.1) - (1.0)Provisions (174.1) (343.5) (328.7) (1,232.2) (1,175.5) (1,202.5) Total liabilities (2,214.3) (2,120.7) (2,200.1) Net assets 1,097.0 973.7 971.5 EQUITY Share capital 320.2 318.0 320.0Share premium and reserves 748.0 622.3 615.2
Equity attributable to equity holders of the 12 1,068.2 940.3
935.2parentMinority interests 28.8 33.4 36.3Total equity 1,097.0 973.7 971.5Condensed consolidated cash flow statementFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 Notes ‚£m ‚£m ‚£m Profit from continuing operations before taxation 95.6 87.4 198.0Trading loss from discontinued operations before - (7.0)taxation (16.1) Adjustments for:Finance income (45.0) (38.6) (81.0)Finance costs 70.0 60.4 121.8Finance costs attributable to discontinued - 0.6 1.1operationsDepreciation of property, plant and equipment 44.0 41.0 82.8Amortisation of acquisition-related intangible 18.9 17.3 36.0assetsAmortisation of other intangible assets 3.8 3.7 7.4Other operating cash flow movements - (0.3) 3.1Operating cash flow before movements in working 187.3 164.5 353.1capital Net working capital movement (71.6) (70.0) (85.7)Cash generated by operations 115.7 94.5 267.4 Tax paid (29.8) (38.4) (70.3)Net cash flow from operating activities 85.9 56.1 197.1 Investing activitiesInterest received 7.1 5.8 11.5Cash flow (to)/from associates (0.4) 2.4 2.7Net cash flow from capital expenditure (44.2) (32.8) (82.5)Net cash flow from acquisitions and disposals (98.7) (46.4) (83.3)Purchase of trading investments (2.3) (8.5) (21.8)Own shares purchased - - (3.1)Net cash used in investing activities (138.5) (79.5) (176.5) Financing activitiesShare issues 0.9 3.6 9.1Dividends paid to minority interests (0.5) (2.9) (3.0)Dividends paid to equity shareholders of the (32.0)
-parent (49.8)Net increase in borrowings 122.8 28.0 95.1Interest paid (30.6) (28.5) (59.3)Net cash flow from hedging financial instruments (2.2) 7.8 11.8Repayment of obligations under finance leases (5.8) (6.5) (8.4)Net cash flow from financing activities 52.6
1.5 (4.5)
Net (decrease)/increase in cash, cash equivalents 13 and bank overdrafts
- (21.9) 16.1Cash, cash equivalents and bank overdrafts at the 210.0 205.1 205.1beginning of the period Effect of foreign exchange rate fluctuations on - (5.9) (11.2)cash held Cash, cash equivalents and bank overdrafts at the 210.0 177.3 210.0end of the period
Consolidated statement of recognised income and expense For the six months ended 30 June 2007
Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Exchange differences on translation of foreign (2.7) (18.0) (42.6)operationsActuarial gains/(losses) on defined retirement 147.1 (22.7) (33.4)benefit schemesChange in fair value of cash flow hedging 4.0 6.3 1.1financial instrumentsChange in fair value of net investment hedging 0.3 3.7 11.6financial instrumentsTax on items taken directly to equity (47.4) 1.0 (1.4)Net income/(expense) recognised directly in 101.3 (29.7) (64.7)equityProfit for the period 68.4 55.8 109.9Net recognised income 169.7 26.1 45.2 Attributable to:Equity holders of the parent 162.6 20.1 31.8Minority interests 7.1 6.0 13.4Net recognised income 169.7 26.1 45.2
Notes to the interim results announcement
1) Basis of preparation and accounting policies
A resolution was passed at the 2007 Annual General Meeting, held on 31 May 2007, to change the company's name from
Group 4 Securicor plc to G4S plc. These primary statements and selected notescomprise the unaudited interim consolidated results of G4S plc ("the group")for the six months ended 30 June 2007. These interim financial results do notcomprise statutory accounts within the meaning of Section 240 of the CompaniesAct 1985.The comparative figures for the financial year ended 31 December 2006 are notthe company's statutory accounts for that year. Those accounts have beenreported on by the company's auditor and delivered to the registrar ofcompanies. The report of the auditor was (i) unqualified, (ii) did not containa reference to any matters to which the auditor drew attention by emphasis ofmatter without qualifying their report, and (iii) did not contain anystatement under Section 237 of the Companies Act 1985.
The unaudited interim consolidated results of the group presented in this interim announcement have been prepared in accordance with International Financial Reporting Standards as adopted by the EU. As permitted, the group has chosen not to present its results in accordance with IAS 34 Interim Financial Reporting.
Details of the accounting policies applied are the same as those set out in the group's Annual Report and Accounts 2006.
The comparative income statement for the six months ended 30 June 2006 hasbeen re-presented for operations qualifying as discontinued during the sixmonths ended 31 December 2006 and the six months ended 30 June 2007. Thecomparative income statement for the year ended 31 December 2006 has beenre-presented for operations qualifying as discontinued during the six monthsended 30 June 2007. For the six months ended 30 June 2006, revenue has beenreduced by ‚£64.3m and PBT has been increased by ‚£7.0m compared to the figurespublished previously. For the year ended 31 December 2006, revenue has beenreduced by ‚£51.7m and PBT has been reduced by ‚£2.0m compared to the figurespreviously published.The presentation of revenue and PBITA by business segment for the six monthsended 30 June 2006 has been adjusted in respect of the classification asbetween security services and cash services of certain activities in LatinAmerica to be consistent with the classification adopted for the year ended 31December 2006 and the six months ended 30 June 2007.
2) Segmental analysis
The group operates in two core product areas: security services and cashservices. The group operates on a worldwide basis and derives a substantialproportion of its revenue and PBIT from each of the following geographicregions: Europe (comprising the United Kingdom and Ireland, and ContinentalEurope), North America, and New Markets (comprising the Middle East and GulfStates, Latin America and the Caribbean, Africa, and Asia Pacific).The current management structure of the group is a combination of product areaand geography, within which the larger businesses generally report by productarea. The group's primary segmentation is therefore by business segment andits secondary segmentation is by geography.
During 2006 the group integrated its manned security and security systems businesses within Europe into a security services country reporting-line structure, similar to the structure that was already in place within New Markets.
Segment information for continuing operations is presented below:
Segment revenue Six months Six months YearRevenue by business segment ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Security ServicesUK and Ireland 283.9 261.7 539.7Continental Europe 626.8 603.6 1,236.6Europe 910.7 865.3 1,776.3North America 515.8 530.7 1,049.9Middle East and Gulf States 84.7 62.0 125.5Latin America and the Caribbean 75.8 56.1 119.5Africa 84.6 78.3 152.6Asia Pacific 126.1 121.8 236.0New Markets 371.2 318.2 633.6Total Security Services 1,797.7 1,714.2 3,459.8 Cash ServicesEurope 337.0 306.8 630.8North America 38.4 44.0 85.3New Markets 90.8 60.5 126.0Total Cash Services 466.2 411.3 842.1Total revenue 2,263.9 2,125.5 4,301.9
Notes to the interim results announcement (continued)
2) Segmental analysis (continued)
Segment result Six months Six months YearPBITA by business segment ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Security ServicesUK and Ireland 21.8 19.7 44.1Continental Europe 27.6 26.7 59.6Europe 49.4 46.4 103.7North America 27.7 28.6 62.7Middle East and Gulf States 7.4 5.7 10.9
Latin America and the Caribbean 4.8
3.2 6.0Africa 7.1 6.3 12.5Asia Pacific 10.4 8.9 18.5New Markets 29.7 24.1 47.9Total Security Services 106.8 99.1 214.3 Cash ServicesEurope 32.8 30.1 67.8North America 0.9 0.5 1.8New Markets 13.7 9.8 17.4Total Cash Services 47.4 40.4 87.0Total PBITA before head office costs 154.2 139.5 301.3Head office costs (14.7) (13.0) (26.5)Total PBITA 139.5 126.5 274.8 Result by business segment Total PBITA 139.5 126.5 274.8Amortisation of acquisition-related intangible assets (18.9) (17.3) (36.0)Total PBIT 120.6 109.2 238.8 Security Services 98.4 93.4 198.2Cash Services 36.9 28.8 67.1Head office costs (14.7) (13.0) (26.5)Total PBIT 120.6 109.2 238.83) Profit from operations before interest and taxation
The income statement can be analysed as follows:
Six months Six months YearContinuing operations ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Revenue 2,263.9 2,125.5 4,301.9Cost of sales (1,766.9) (1,674.8) (3,378.9)Gross profit 497.0 450.7 923.0Administration expenses (377.8) (343.0) (687.0)
Share of profit from associates 1.4 1.5 2.8Profit from operations before interest and 120.6 109.2 238.8taxation
Included within administration expenses is the amortisation charge for acquisition-related intangible assets.
Notes to the interim results announcement (continued)
4) Discontinued operations
Operations qualifying as discontinued in the current period primarily comprise G4S Cash Services (France) SAS, disposed of on 2 July 2007. Operations qualifying as discontinued in the prior year primarily comprise the German cash services business of G4S Geld-und Wertdienste GmbH, where terms were agreed for divestment on 22 December 2006, and the business and assets of Cognisa Transportation, Inc, disposed of on 28 December 2006.
5) Acquisitions
The group undertook a number of acquisitions in the current period. The totalbook value of net assets acquired amounted to ‚£11.8m, generating goodwill of‚£121.1m, satisfied by a total consideration of ‚£132.9m, of which ‚£85.3m hasbeen paid in the period. The preliminary assessment of the fair value ofassets and liabilities acquired is still in progress.Principal acquisitions in subsidiary undertakings include the purchase ofcontrolling interests in Fidelity Cash Management Services (PTY) Ltd, in SouthAfrica, and in Al Majal Service Master LLC, a facilities management businessin Saudi Arabia.6) Finance income Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Interest receivable 6.2 5.9 13.8
Expected return on defined retirement benefit 38.8 32.7
67.2scheme assetsTotal finance income 45.0 38.6 81.07) Finance costs Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Total group borrowing costs (34.0) (27.1) (55.6)
Finance costs on defined retirement benefit (36.0) (33.3)
(66.2)obligationsTotal finance costs (70.0) (60.4) (121.8)8) Taxation Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m UK taxation (3.1) (2.6) (16.8)Overseas taxation (24.1) (24.1) (39.5)Total taxation expense (27.2) (26.7) (56.3)
Notes to the interim results announcement (continued)
9) Dividends Six months Six months Year ended ended ended Pence DKK 30.06.07 30.06.06 31.12.06 per share per share ‚£m ‚£m ‚£m Amounts recognised as distributionsto equity holders of the parent inthe period
Final dividend for the year ended 31 2.24 0.2435 December 2005
- 28.3 28.3Interim dividend for the six monthsended 30 June 2006 1.69 0.1863 - - 21.5Final dividend for the year ended 31 2.52 0.2766December 2006 32.0 - -Total 32.0 28.3 49.8
An interim dividend of 2.11p (DKK 0.2319) per share, amounting to ‚£27.0m, for the six months ended 30 June 2007 will be paid on 16 November 2007 to shareholders on the register on 12 October 2007.
10) Earnings per share attributable to ordinary shareholders of the parent
Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£mFrom continuing and discontinued operations
Earnings
Profit for the period attributable to equity holders of the parent 61.3 49.8 96.5Effect of dilutive potential ordinary shares (net of tax) 0.1 0.2 0.3Profit for the purposes of diluted earnings per
share 61.4 50.0 96.8 Number of shares (m)Weighted average number of ordinary shares 1,280.4 1,266.3 1,268.3Effect of dilutive potential ordinary shares 1.4 6.5 5.4Weighted average number of ordinary shares forthe purposes of dilutedearnings per share 1,281.8
1,272.8 1,273.7
Earnings per share from continuing anddiscontinuedoperations (pence)Basic 4.8p 3.9p 7.6pDiluted 4.8p 3.9p 7.6p From adjusted earnings Earnings
Profit for the period attributable to equity holders of the parent 61.3 49.8 96.5Adjustment to exclude loss from discontinued operations - 4.9 31.8Adjustment to exclude net retirement benefitfinance costs (net of tax) (2.0) 0.4 (0.7)Adjustment to exclude amortisation ofacquisition-related intangible assets(net of tax) 13.4 12.1 25.2Adjusted profit for the period attributable to equity holders of the parent 72.7
67.2 152.8
Weighted average number of ordinary shares (m) 1,280.4 1,266.3 1,268.3Adjusted earnings per share (pence) 5.7p
5.3p 12.0p
11) Held for sale assets and liabilities
Held for sale assets and liabilities as at 30 June 2007 primarily comprise the assets and liabilities associated with G4S Cash Services (France) SAS, disposed of on 2 July 2007.
Notes to the interim results announcement (continued)
12) Reconciliation of equity attributable to equity holders of the parent
Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m At beginning of period 935.2 942.2 942.2Net recognised income attributable to equityshareholders ofthe parent 162.6 20.1 31.8Shares issued 0.9 3.6 9.1Dividends declared (32.0) (28.3) (49.8)Own shares purchased - - (3.1)Equity settled transactions 1.5 2.7 5.0At end of period 1,068.2 940.3 935.213) Analysis of net debtA reconciliation of net debt to amounts in the condensed consolidated balancesheet is presented below: As at As at As at 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Cash and cash equivalents 306.9 255.2 307.5Trading investments 72.8 64.5 73.7
Net debt included within assets held for sale 0.7 - -Current liabilitiesBank overdrafts and loans (141.4) (147.1) (167.6)Obligations under finance leases (12.5) (10.3) (13.6)Non-current liabilitiesBank loans (713.6) (799.7) (830.3)Loan notes (274.1) - -Obligations under finance leases (40.3) (32.3) (42.5)Total net debt (801.5) (669.7) (672.8)
An analysis of movements in net debt in the period is presented below:
Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m (Decrease)/increase in cash, cash equivalents andbank overdrafts - (21.9) 16.1per condensed consolidated cash flow statement Purchase of trading investments 2.3 8.5 21.8Increase in debt and lease financing (117.0) (21.5) (86.7)Change in net debt resulting from cash flows (114.7)
(34.9) (48.8)
Borrowings acquired with subsidiaries (19.9) (0.8) (2.5)Net additions to finance leases (3.6) (3.5) (19.6)Movement in net debt in the period (138.2)
(39.2) (70.9)
Translation adjustments 9.5 26.8 55.4Net debt at the beginning of the period (672.8) (657.3) (657.3)Net debt at the end of the period (801.5) (669.7) (672.8)Non GAAP measure - cash flowThe directors consider it is of assistance to shareholders to present ananalysis of the group's operating cash flow in accordance with the way inwhich the group is managed, together with a reconciliation of that cash flowto the net cash flow from operating activities as presented in the condensedconsolidated cash flow statement.Operating cash flowFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m PBITA before share of profit from associates (group PBITA) 138.1 125.0
272.0
Depreciation and amortisation of intangibleassets other thanacquisition-related intangible assets 47.6 43.2
91.1
Increase in working capital and provisions (43.8) (28.9) (42.6)Net cash flow from capital expenditure (44.2) (32.8) (82.5)Operating cash flow 97.7 106.5
238.0
Reconciliation of operating cash flows
Six months Six months Year ended ended ended 30.06.07 30.06.06 31.12.06 ‚£m ‚£m ‚£m Net cash flow from operating activities percondensed consolidated cash flow statement 85.9 56.1
197.1
Net cash flow from capital expenditure (44.2) (32.8) (82.5)Add-back cash flow from exceptional items and 1.0 20.6
28.9
discontinued operationsAdd-back additional pension contributions 22.5 24.2
24.2Other items 2.7 - -Add-back tax paid 29.8 38.4 70.3Operating cash flow 97.7 106.5 238.0
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G4S PLCRelated Shares:
GFS.L