11th Sep 2006 07:00
Group 4 Securicor plcInterim Results AnnouncementJanuary - June 2006Group 4 Securicor, the international security solutions group, today announcesits interim results for the six months to 30 June 2006.RESULTS HIGHLIGHTSGood organic turnover growth of 7.3% (2005: 6.9%)Group turnover* up 8.5% to ‚£2,189.8 million (2005: ‚£2,019.0 m)PBITA* up 4.7% to ‚£120.1 million (2005: ‚£114.7 m)Margin of 5.5% (2005: 5.7%)(excluding Germany cash services, margins improved to 5.9% from 5.8%)Cash flow generation of ‚£95.7 million, 81% of PBITA (2005: 63%)Adjusted earnings per share increased to 4.9p (2005: 4.8p)(excluding Germany cash services, adjusted earnings per share is 5.3p)Interim dividend up 30% to 1.69 pence per share (DKK 0.186) (2005: 1.30p/DKK0.143)Margin pressure continues in some European security services marketsStrong performances elsewhere, particularly in New Markets and the USSubstantive discussions underway for the divestment of Germany cash services* at constant exchange ratesNick Buckles, Chief Executive Officer, commented:"As we indicated at the time of our trading update in June, we have delivered asolid set of results for the first half of the year. However, the performanceof our cash services business in Germany has deteriorated further, and we haverecently entered into substantive discussions for the divestment of thebusiness."Elsewhere, we have seen strong performances from our US and New Marketsbusinesses, demonstrating, once again, the benefits of our unrivalledinternational reach. Despite the poor performance in Germany cash services andmargin pressure in some European security services markets, we have deliveredon our expectations for the first half and we are confident of achieving astrong underlying 2006 and future performance."For further enquiries, please contact:Nick Buckles - Chief ExecutiveOfficer +44 (0) 1293 554400Trevor Dighton - Chief Financial OfficerDebbie McGrath - Director of CommunicationsRob Gurner - Investor Relations ManagerMedia enquiries:Kevin Smith - Citigate Dewe Rogerson +44 (0) 7973 672649Notes to Editors:Group 4 Securicor is an international security solutions group, operating inover 100 countries throughout the world and employing around 400,000 people. Group 4 Securicor is a market leader in the provision of security services,cash services and justice services in many of the countries in which itoperates. For more information on Group 4 Securicor, visit www.g4s.com.Presentation of Results:A presentation to investors and analysts is taking place today at 0900 at theLondon Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. A telephonedial-in facility is available on +44 (0) 20 7162 0125. FINANCIAL SUMMARYResultsThe results which follow have been prepared under International FinancialReporting Standards (IFRS), as adopted by the European Union. Group TurnoverTurnover of Continuing Businesses H106 H105 ‚£m ‚£m Turnover at constant 2,189.8 2,019.0exchange rates Exchange difference (47.7) Total continuing business 2,189.8 1,971.3turnover Turnover, at constant exchange rates, increased by 8.5% in the period to ‚£2,190million. Organic turnover growth was 7.3% (7.7% excluding Germany cashservices).Organic Turnover Growth Europe North New Total America Markets Manned Security 4.5% 7.8% 17.4% 7.8% Security Systems 4.1% (17.6%) 25.9% 6.5% Cash Services 4.9% 3.6% 16.6% 6.2% Total 4.6% 7.4% 17.8% 7.3% Group ProfitPBITA of Continuing Businesses H106 H105 ‚£m ‚£m PBITA at constant 120.1 114.7exchange rates Exchange difference (2.5) Total continuing business 120.1 112.2PBITA PBITA at constant exchange rates increased by 4.7% to ‚£120.1 million. ThePBITA margin was 5.5%(5.9% excluding Germany cash services).Cash Flow and FinancingCash Flow H106 H105 ‚£m ‚£m Operating cash flow 95.7 70.0(non GAAP measure) Operating cash flow / PBITA 81% 63% Operating cash flow was ‚£95.7 million in the period, representing 81% of PBITA.Net borrowings at the end of the period were ‚£670 million (June 2005: ‚£653million, December 2005: ‚£657 million).DIVISIONAL ANALYSISManned Security Division* At constant exchange rates Turnover PBITA Margins ‚£m ‚£m H106 H105 H106 H105 H106 H105 Europe * 703.7 673.5 33.5 35.3 4.8% 5.2% North America * 535.9 497.3 28.9 26.5 5.4% 5.3% New Markets * 295.2 237.1 22.6 18.2 7.7% 7.7% Total * 1,534.8 1,407.9 85.0 80.0 5.5% 5.7% Exchange differences (37.0) (1.8) At actual exchange rates 1534.8 1,370.9 85.0 78.2 The manned security division achieved overall organic growth of 7.8% and themargin was 5.5%.Overall organic growth in Europe was good at 4.5%, compared to 3.1% for thesame period last year. In the UK, growth remained negative for the six months but the business isexpected to return to positive organic growth in the second half. Profitimproved on 2005 due to excellent control of costs and flow through of synergybenefits. Customer retention improved to levels of over 90% for the period. The security officer licensing project was completed on schedule and we areoperating in full compliance with SIA regulations.In the Netherlands, the market continues to improve. We have achieveddouble-digit organic growth in the period, with margins slightly down due tothe renegotiation of our Justice Services contract in the prior year. Growth inFrance has been positive through new contract wins, but margins continue to beimpacted negatively through labour cost pressures together with the cost ofexiting terminated aviation security contracts.Elsewhere in Europe, there were good improvements in Luxembourg, Finland,Ireland, Austria, Slovakia, Hungary and Denmark whilst Greece, Sweden, andIsrael had a difficult start to the year. Greece has been affected by materialcontract reductions without a proportionate reduction in direct labour cost,due to local legislative restrictions. Sweden has been adversely affected bycontract losses and contract price renegotiations during the latter half of2005. Israel has faced unexpected mandatory increases in labour costs yet to berecovered in increased prices. The results in these three countries, togetherwith France, affected the European security services margin negatively byaround 0.5%.In Justice Services, overall growth continued to be strong but margins wereslightly weaker due to the effect of the changes to electronic monitoringcontracts which were redefined and rebid in 2004. We have recently won a threeyear Immigration Removal Centre contract in Scotland and are bidding forjustice opportunities in the Middle East along with further immigration andother government projects in the UK.Organic growth in North America was 7.8%. In the US, Wackenhut achieved strongorganic growth overall with the Government and Nuclear sectors performingparticularly well. We expect a number of new opportunities in the governmentsector to develop further and Wackenhut is well placed to participate given itsstrong reputation and extensive experience of working with the US Government.In New Markets, organic growth overall continued strongly at 17.4%, withmargins maintained at 7.7%. All New Markets business performed well, with UAE,India, Kazakhstan, Macau and Argentina achieving excellent organic growth ofover 20%. Africa has returned to growth after a difficult 2005. Extensivestrike action throughout the security industry in South Africa has now beenresolved and the business is back on track following a very difficult period ofoperation.Security Systems Division* At constant exchange rates Turnover PBITA Margins ‚£m ‚£m H106 H105 H106 H105 H106 H105 Europe * 170.9 164.1 12.7 11.8 7.4% 7.2% North America * 1.4 1.7 0.0 0.0 0.0% 0.0% New Markets * 29.3 21.6 3.6 2.0 12.3% 9.3% Total * 201.6 187.4 16.3 13.8 8.1% 7.4% Exchange differences (1.6) (0.1) At actual exchange rates 201.6 185.8 16.3 13.7 The security systems division achieved overall organic growth of 6.5% andmargins improved on the same period last year to 8.1%. In Europe organic growth in the systems division was 4.1% with improved marginsof 7.4%. Denmark, Israel and UK systems continued to perform very well due totheir impressive technical competencies and strong market positions, whilstNetherlands, France, Belgium and Germany have all suffered from a lack ofspecialisation or critical mass.In New Markets organic growth was strong at 26% as we continue to add thisservice capability into our strong existing businesses. Security systemsdevelopment was particularly impressive in Africa and the Middle East.As we mentioned in our trading update earlier in the year, we believe there isreal benefit to having a security systems capability alongside our mannedsecurity businesses, and we have commenced the integration of these businessesin Europe into a security services country reporting-line structure. Our NewMarkets line management structure was always organised on this basis. Thisintegration should be completed by December 2006 and we expect to see animproved performance in 2007 as a result.Cash Services Division* At constant exchange rates Turnover PBITA Margins ‚£m ‚£m H106 H105 H106 H105 H106 H105 Europe * 352.8 335.0 23.5 24.0 6.7% 7.2% North America * 44.0 39.2 0.5 2.6 1.1% 6.6% New Markets * 56.6 49.5 7.8 6.4 13.8% 12.9% Total * 453.4 423.7 31.8 33.0 7.0% 7.8% Exchange differences (9.1) (0.8) At actual exchange rates 453.4 414.6 31.8 32.2 The cash services division achieved overall organic growth of 6.2% and marginswere 7.0%.Overall organic growth in Europe was 4.9% (7.1% excluding Germany).The cash services business market in Germany has still not improved followingthe sale of the Heros business earlier this year. The pricing environmentcontinues to be difficult and, unless and until this changes, the business willcontinue to perform poorly. We have won some new business at increased prices,but have lost a major contract to a competitor at prices we believe to beuneconomic. The business continues to operate at a significant loss, affectingour overall cash services divisional results. We have entered into substantivediscussions for the divestment of the business, which we expect to be concludedin the second half. It is too early to conclude on the impact of this disposalbut it is likely that there will be a write-down of the holding value.In the UK, we maintained our strong margin performance and good growth record. There are a number of new business opportunities in the UK coming from bothtraditional cash services and new product areas. We have been successful inwinning business from the Post Office as they downsize their in-houseoperations. Service levels remain high and customer satisfaction is good. Attack levels remain high, but support from the police in certain regions isbeginning to pay dividends.In the Netherlands we achieved strong margins in the first half. In Swedencriminal attacks on the industry continue to be an issue. Our business isperforming well and recently won a competitive tender for a major Swedishfinancial institution at good margins. Elsewhere in Europe, we have had goodgrowth and margin improvements in France and solid performances in Hungary,Ireland and Belgium.In North America,although organic growth in Canada has slightly improved,profit continues to be negatively affected by increased operating costsfollowing a major robbery in 2005. We have appointed new senior operationalmanagement and the business is already benefiting from a focus on direct labourcosts and increased pricing of new and rebid contracts. In New Markets there was strong overall organic growth of around 17%, with allbusinesses performing well across the region, and excellent results in theMiddle East, Africa and Latin America.STRATEGIC REVIEWGrowth & Margin TargetsGrowth is expected to continue across all product areas towards the group'smedium-term targets, with several businesses already hitting their growthtargets. New Markets continue to grow strongly overall and, as our cashservices businesses in different countries move through the phases ofdevelopment, there are further opportunities for the businesses to grow. Our ability to service international accounts is a strong point ofdifferentiation for the group, made possible through our global coverage. Inaddition, we expect to see further opportunities for our consulting andspecialist security business, Global Risks, and we anticipate the on-goingdevelopment of justice services in existing and new markets.We have significant product development expertise within the organisation andare constantly developing initiatives in a number of areas such as retail cashsolutions, integrated security and a whole range of other security-relatedoutsourcing projects which will contribute to the future growth of theorganisation.Margin progression will be achieved through driving growth in our traditionalsectors, through organic growth opportunities and as a result of our usualtight control of costs and effective management of resources. There are anumber of businesses which are currently operating below our margin targets andfocus will continue to be on bringing these businesses in line with the group'smargin targets. We continue to strive towards our growth and margin targets and are confidentthat they will be achieved in the medium term.Acquisitions & DivestmentsThe group's acquisition strategy remains unchanged and focused on a few keyareas. Our businesses are constantly seeking and evaluating bolt-onacquisitions across all services which will add scale or additional expertiseto our businesses or continue to consolidate fragmented markets. We have made a number of small bolt-on acquisitions across a broad range ofmarkets in the first half of 2006 and this is likely to continue. We have alsobought out several minority holdings.Whilst the organisation already operates in more than 100 countries, we willseek to fill any appropriate geographic gaps in the security servicesbusinesses, focusing on markets such as Brazil, Spain, Portugal and South Koreaas well as carefully selected acquisitions in cash services. We will make certain that any acquisition opportunities meet our internalcriteria, ensuring that they are the right businesses, in the right markets andwith the opportunity to deliver the appropriate level of return on investment.OTHER FINANCIAL ISSUESFinancingThe group's lending banks have exercised their option to extend the term of the‚£1 billion multicurrency revolving credit facility at a margin of 0.225% to sixyears from 28 June 2005 and they retain the option to extend maturity for afurther year. The group has other available facilities of ‚£320 million.As of 30 June 2006, net debt was ‚£670 million, representing gearing of 68%.TaxationTax has been provided for at the estimated effective tax rate for the full yearof 30.5%. This represents a reduction from 31.4% in 2005. We believe that thislevel is sustainable into the future.PensionsThe group's funding shortfall on the valuation basis specified in IAS19Employee Benefits was ‚£217million before tax or ‚£152 million after tax. This isunchanged from the position at December 2005 as increases in asset values andin the rate at which liabilities are discounted have been offset by increasedinflation assumptions.DividendThe Board has declared an increased interim dividend for 2006 of 1.69 pence pershare (DKK 0.186), payable on 15 December 2006.REVIEW AND OUTLOOKDuring the first half of 2006 we have continued to build on the platformcreated by the merger and achieved a solid set of results.Whilst we face challenges in some markets, the businesses are performing welloverall and we expect to achieve a strong underlying performance in 2006 andgood earnings growth into the future.11 September 2006Group 4 Securicor plcUnaudited interim results announcementFor the six months ended 30 June 2006Consolidated income statementFor the six months ended 30 June 2006 Six Six Year months months ended ended ended 30.06.06 30.06.05 31.12.05 Notes ‚£m ‚£m ‚£m Continuing operations Revenue 2 2,189.8 1,971.3 4,129.9 Profit from operations before amortisation of acquisition-related intangible assets, exceptional items and share of profit from associates 118.6 110.7 248.7 Share of profit from associates 1.5 1.5 5.3 Profit from operations before amortisation of acquisition-related intangible assets and exceptional items (PBITA) 2 120.1 112.2 254.0 Amortisation of acquisition-related intangible assets (17.3) (15.4) (33.8) Exceptional items: Restructuring costs consequential - (19.3) (22.2)upon acquisitions 5 Profit from operations before interest and taxation 2, 3 102.8 77.5 198.0 Investment income 7 38.6 37.2 72.8 Finance costs 8 (61.0) (56.6) (113.3) Profit from operations before taxation 80.4 58.1 157.5 Taxation - Before amortisation and exceptional items (29.8) (30.0) (67.1) - On amortisation of acquisition-related intangible 5.2 4.6 10.0assets - On exceptional items - 3.2 (0.9) 9 (24.6) (22.2) (58.0) Profit from continuing operations after taxation 55.8 35.9 99.5 Loss from discontinued operations 4 - (4.3) (8.8) Profit for the period 55.8 31.6 90.7 Attributable to: Equity holders of the parent 49.8 27.5 80.8 Minority interests 6.0 4.1 9.9 Profit for the period 55.8 31.6 90.7 Earnings per share attributable to ordinary equity 11 shareholders of the parent Basic 3.9p 2.2p 6.4p Diluted 3.9p 2.2p 6.4p Dividends declared and proposed in respect of the period 10 Interim dividend of 1.69p per share (2005: 1.30p per 21.4 16.4 16.4share) Final dividend (2005: 2.24p per share) - - 28.3 Total 21.4 16.4 44.7 Consolidated balance sheetAs at 30 June 2006 As at As at As at 30.06.06 30.06.05 31.12.05 Notes ‚£m ‚£m ‚£m ASSETS Non-current assets Goodwill 1,175.5 1,116.1 1,172.7 Other acquisition-related intangible assets 233.2 247.0 241.4 Other intangible assets 26.5 27.9 27.3 Property, plant and equipment 346.3 342.4 355.4 Investment in associates 3.9 6.7 3.9 Trade and other receivables 154.0 137.4 163.2 1,939.4 1,877.5 1,963.9 Current assets Inventories 37.9 35.5 35.3 Trading investments 64.5 70.8 61.4 Trade and other receivables 797.4 763.7 830.7 Cash and cash equivalents 255.2 198.2 263.8 Non-current assets classified as held for sale - 9.0 - 1,155.0 1,077.2 1,191.2 Total assets 3,094.4 2,954.7 3,155.1 LIABILITIES Current liabilities Bank overdrafts (77.9) (20.2) (58.7) Bank loans (69.2) (82.4) (87.7) Obligations under finance leases (10.3) (18.9) (12.1) Dividends declared (28.3) (23.5) - Trade and other payables (686.2) (674.9) (784.1) Provisions (73.3) (50.9) (74.5) (945.2) (870.8) (1,017.1) Non-current liabilities Bank loans (799.7) (784.2) (790.1) Obligations under finance leases (32.3) (16.6) (33.9) Trade and other payables - (2.3) (1.0) Provisions (343.5) (366.1) (343.1) (1,175.5) (1,169.2) (1,168.1) Total liabilities (2,120.7) (2,040.0) (2,185.2) Net assets 973.7 914.7 969.9 EQUITY Share capital 318.0 316.6 317.2 Share premium and reserves 622.3 566.5 625.0 Equity attributable to equity holders of the parent 12 940.3 883.1 942.2 Minority interests 33.4 31.6 27.7 Total equity 973.7 914.7 969.9 Consolidated cash flow statementFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Profit from continuing operations before taxation 80.4 58.1 157.5 Loss from discontinued operations before taxation - (1.3) (1.7) Adjustments for: Investment income (38.6) (37.2) (72.8) Finance costs 61.0 56.6 113.3 Depreciation of property, plant and equipment 41.0 42.2 75.4 Amortisation of acquisition-related intangible assets 17.3 15.4 33.8 Amortisation of other intangible assets 3.7 2.6 6.8 Other operating cash flow movements (0.3) (1.0) 0.2 Operating cash flow before movements in working 164.5 135.4 312.5capital Net working capital movement (70.0) (64.6) (85.0) Cash generated by operations 94.5 70.8 227.5 Tax paid (38.4) (26.9) (53.0) Net cash flow from operating activities 56.1 43.9 174.5 Investing activities Interest received 5.8 6.7 9.8 Cash flow from associates 2.4 4.9 12.3 Net cash flow from capital expenditure (32.8) (42.8) (89.8) Net cash flow from acquisitions and disposals (46.4) (21.4) (24.6) (Purchase)/disposal of trading investments (8.5) (6.6) 4.8 Purchase of own shares - - (6.1) Acquisition of minority shareholders of the former - (7.5) Group 4 Falck A/S (9.5) Net cash used in investing activities (79.5) (66.7) (103.1) Financing activities Share issues 3.6 2.5 4.9 Dividends paid to minority interests (2.9) (2.5) (5.1) Dividends paid to equity shareholders of the parent - - (39.9) Net increase in borrowings 28.0 55.2 47.3 Interest paid (28.5) (30.5) (47.9) Net cash inflow from foreign exchange hedging 7.8 - financial instruments - Repayment of obligations under finance leases (6.5) (4.8) (7.6) Net cash from financing activities 1.5 19.9 (48.3) Net (decrease)/increase in cash and cash equivalents and bank overdrafts (21.9) (2.9) 23.1 Cash, cash equivalents and bank overdrafts at the 205.1 177.7 beginning of the period 177.7 Effect of foreign exchange rate fluctuations on cash (5.9) 3.2 held 4.3 Cash, cash equivalents and bank overdrafts at the end 177.3 178.0 of the period 205.1 Reconciliation of net cash flow to movement in net debt - non GAAP measureFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Notes ‚£m ‚£m ‚£m (Decrease)/increase in cash, cash equivalents (21.9) (2.9) and bank overdrafts 23.1 Increase/(decrease) in liquid resources 8.5 6.6 (4.8) Increase in debt and lease financing (21.5) (50.4) (39.7) Change in net debt resulting from cash flows (34.9) (46.7) (21.4) Borrowings acquired with subsidiaries (0.8) (1.2) (1.3) New finance leases (3.5) (3.4) (20.7) Revaluation of securities - (1.0) - Movement in net debt in the period (39.2) (52.3) (43.4) Translation adjustments 26.8 (14.6) (27.5) Net debt at the beginning of the period (657.3) (586.4) (586.4) Net debt at the end of the period 13 (669.7) (653.3) (657.3) Consolidated statement of recognised income and expenseFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Exchange differences on translation of foreign (18.0) 1.7 36.5operations Actuarial losses on defined benefit pension schemes (22.7) (12.3) (22.6) Change in fair value of interest rate hedging 6.3 - 0.4financial instruments Change in fair value of foreign exchange hedging 3.7 (0.6) (6.2)financial instruments Tax on items taken directly to equity 1.0 7.4 12.3 Net (expense)/income recognised directly in equity (29.7) (3.8) 20.4 Profit for the period 55.8 31.6 90.7 Total recognised income 26.1 27.8 111.1 Attributable to: Equity holders of the parent 20.1 23.7 101.2 Minority interests 6.0 4.1 9.9 Total recognised income 26.1 27.8 111.1 Notes to the interim results announcement1) Basis of preparation and accounting policiesThese primary statements and selected notes comprise the unaudited interimconsolidated results of Group 4 Securicor plc ("the group") for the six monthsended 30 June 2006. These interim financial results do not comprise statutoryaccounts within the meaning of Section 240 of the Companies Act 1985.The comparative figures for the financial year ended 31 December 2005 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 any statementunder Section 237 of the Companies Act 1985.The unaudited interim consolidated results of the group presented in thisinterim announcement have been prepared in accordance with InternationalFinancial Reporting Standards as adopted by the EU. As permitted, the group haschosen not to adopt IAS 34 Interim Financial Reporting.Details of the accounting policies applied are the same as those set out in thegroup's Annual Report and Accounts 2005.The presentation of a number of items in the financial statements for the fullyear to 31 December 2005 differed from that given in the interim resultsannouncement for the six months to 30 June 2005, due to the evolvinginterpretation of IFRS and the development of best practice. The comparativeresults for the six months to 30 June 2005 included within this announcementhave therefore been represented in accordance with the full year presentation.The adjustments are (i) to reclassify ‚£29.0m of provisions from non-current tocurrent liabilities, (ii) to represent the reconciliation of net cash flow fromoperating activities, (iii) to reclassify ‚£4.9m cash flow from associates as aninvesting activity rather than an operating activity and, (iv) to reclassify ‚£4.2m of foreign exchange related gains and losses and associated taxation fromthe reconciliation of equity attributable to equity holders of the parent tothe statement of recognisedincome and expense.2) Segmental analysisThe group operates in three core product areas: manned security, securitysystems and cash services. The group operates on a worldwide basis and derivesa substantial proportion of its revenue and operating profit from each of thefollowing geographic regions: Europe, North America, and New Markets(comprising Latin America and the Caribbean, Africa, the Middle East and GulfStates, 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. Segment information is presentedbelow. Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 Segment revenue ‚£m ‚£m ‚£m Revenue by business segment Manned Security Europe 703.7 671.2 1,364.5 North America 535.9 471.2 1,014.6 New Markets 295.2 228.5 495.2 Total Manned Security 1,534.8 1,370.9 2,874.3 Security Systems Europe 170.9 163.3 342.0 North America 1.4 1.5 3.1 New Markets 29.3 21.0 44.5 Total Security Systems 201.6 185.8 389.6 Cash Services Europe 352.8 333.3 688.6 North America 44.0 34.3 76.9 New Markets 56.6 47.0 100.5 Total Cash Services 453.4 414.6 866.0 Total revenue 2,189.8 1,971.3 4,129.9 Revenue by geographical market Europe 1,227.4 1,167.8 2,395.1 North America 581.3 507.0 1,094.6 New Markets 381.1 296.5 640.2 Total revenue 2,189.8 1,971.3 4,129.9 Notes to the interim results announcement (continued)2) Segmental analysis (continued) Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 Segment result ‚£m ‚£m ‚£m PBITA by business segment Manned Security Europe 33.5 35.2 73.3 North America 28.9 25.3 61.0 New Markets 22.6 17.7 35.6 Total Manned Security 85.0 78.2 169.9 Security Systems Europe 12.7 11.7 27.7 North America - - 0.4 New Markets 3.6 2.0 4.0 Total Security Systems 16.3 13.7 32.1 Cash Services Europe 23.5 23.9 58.4 North America 0.5 2.5 2.8 New Markets 7.8 5.8 15.5 Total Cash Services 31.8 32.2 76.7 PBITA before head office costs 133.1 124.1 278.7 Head office costs (13.0) (11.9) (24.7) Total PBITA 120.1 112.2 254.0 PBITA by geographical market Europe 69.7 70.8 159.4 North America 29.4 27.8 64.2 New Markets 34.0 25.5 55.1 PBITA before head office costs 133.1 124.1 278.7 Head office costs (13.0) (11.9) (24.7) Total PBITA 120.1 112.2 254.0 Total PBITA 120.1 112.2 254.0 Amortisation of acquisition- (17.3) (15.4) related intangible assets (33.8) Exceptional items - (19.3) (22.2) Profit from operations before 102.8 77.5 interest and taxation (PBIT) 198.0 Result by business segment Manned Security 78.3 64.0 145.9 Security Systems 15.8 10.1 27.7 Cash Services 21.7 16.7 50.5 Head office costs (13.0) (13.3) (26.1) Total PBIT 102.8 77.5 198.0 3) Profit from operations before interest and taxationThe income statement can be analysed as follows: Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 Continuing operations ‚£m ‚£m ‚£m Revenue 2,189.8 1,971.3 4,129.9 Cost of sales (1,732.6) (1,546.7) (3,232.4) Gross profit 457.2 424.6 897.5 Administration expenses (355.9) (348.6) (704.8) Share of profit from associates 1.5 1.5 5.3 Profit from operations before interest and 102.8 77.5 taxation 198.0 Included within administration expenses are charges for the amortisation ofacquisition-related intangible assets and exceptional items.Notes to the interim results announcement (continued)4) Discontinued operationsDiscontinued operations in the prior year primarily comprise the mannedsecurity business of Falck Security Nederland and its subsidiaries (with theexception of aviation security activities), sold on 2 November 2005, Group 4Falck Cash Services UK, sold on 7 March 2005, and the security operations ofCognisa Security in the US, sold on 31 August 2005.5) Exceptional itemsThe exceptional item in 2005 relates to post-acquisition restructuring costsincluding ‚£4.0m incurred in the reorganisation of the cash services business inGermany.6) Acquisitions and disposalsThe group undertook a number of acquisitions in the period, none of which wereindividually material. The total fair value of net assets acquired amounted to‚£14.0m, generating goodwill of ‚£34.2m, satisfied by a total consideration of ‚£48.2m. Principal acquisitions in subsidiary undertakings include the purchase of acontrolling interest in Al Majal Security Services, a security services andcash services business in Saudi Arabia, and an increase in our interests inUAE.7) Investment income Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Interest receivable 5.9 6.7 12.0 Expected return on pension 32.7 30.5 60.8plan assets Total investment income 38.6 37.2 72.8 8) Finance costs Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Total group borrowing costs (27.7) (24.0) (47.1) Finance costs on pension (33.3) (31.6) (65.7)liabilities Decrease in fair value of - (0.9) (0.5) trading investments Decrease in fair value of - (0.1) -hedging financial instruments Total finance costs (61.0) (56.6) (113.3) 9) Taxation Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Total taxation charge before taxation on amortisation and exceptional items (29.8) (30.0) (67.1) Deferred taxation credit on 5.2 4.6 10.0amortisation of acquisition- related intangible assets Taxation credit/(charge) on - 3.2 (0.9)exceptional items Total taxation charge (24.6) (22.2) (58.0) The total taxation charge includes amounts attributable to the UK of ‚£2.6m (30June 2005: ‚£1.7m, 31 December 2005: ‚£5.5m)Notes to the interim results announcement (continued)10) Dividends Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Amounts recognised as distributions to equity holders of the parent in the period Final dividend for the year ended 31 December 2004 of 1.85p (DKK 0.1981) per share - 23.5 23.5 Interim dividend for the six months ended 30 June 2005 of 1.30p (DKK 0.143) per share - - 16.4 Final dividend for the year ended 31 December 2005 of 2.24p (DKK 0.2435) per share 28.3 - - Total 28.3 23.5 39.9 An interim dividend of 1.69p (DKK 0.1863) per share, amounting to ‚£21.4m, forthe six months ended 30 June 2006 will be paid on 15 December 2006 toshareholders on the register on 17 November 2006.11) Earnings per share attributable to ordinary shareholders of the parent Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m From continuing and discontinued operations Profit for the period attributable to equity holders of the parent 49.8 27.5 80.8 Basic Weighted average number of ordinary shares (m) 1,266.3 1,265.1 1,265.0 Earnings per share (pence) 3.9p 2.2p 6.4p Diluted Weighted average number of ordinary shares (m) 1,272.8 1,272.1 1,271.0 Earnings per share (pence) 3.9p 2.2p 6.4p From adjusted earnings Earnings Profit for the period attributable to equity holders of the parent 49.8 27.5 80.8 Adjustment to exclude loss from discontinued operations - 4.3 8.8 Adjustment to exclude net pension finance costs and fair value adjustments to hedging financial instruments (net of tax) 0.4 1.5 3.8 Adjustment to exclude amortisation of acquisition-related intangible assets (net of tax) 12.1 10.8 23.8 Adjustment to exclude exceptional 23.1 items (net of tax) - 16.1 Adjusted profit for the period attributable to equity holders of the parent 62.3 60.2 140.3 Weighted average number of ordinary shares (m) 1,266.3 1,265.1 1,265.0 Adjusted earnings per share (pence) 4.9p 4.8p 11.1p Notes to the interim results announcement (continued)12) Reconciliation of equity attributable to equity holders of the parent Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m At beginning of period 942.2 879.4 879.4 Total recognised income attributable to equity shareholders of the parent 20.1 23.7 101.2 Shares issued 3.6 2.6 4.9 Dividends declared (28.3) (23.5) (39.9) Own shares purchased - - (6.1) Equity settled transactions Performance share plan 1.3 0.5 1.2 Share options 0.6 0.4 1.5 Deferred share awards 0.8 - - At end of period 940.3 883.1 942.2 13) Analysis of net debtA reconciliation of net debt to amounts in the balance sheet is presentedbelow: As at As at As at 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Cash and cash equivalents 255.2 198.2 263.8 Trading investments 64.5 70.8 61.4 Current liabilities Bank overdrafts and loans (147.1) (102.6) (146.4) Obligations under finance leases (10.3) (18.9) (12.1) Non-current liabilities Bank loans (799.7) (784.2) (790.1) Obligations under finance leases (32.3) (16.6) (33.9) Total net debt (669.7) (653.3) (657.3) 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 in whichthe group is managed, together with a reconciliation of that cash flow to thenet cash flow from operating activities as presented in the consolidated cashflow statement.Operating cash flowFor the six months ended 30 June 2006 Six months Six months Year ended ended ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Group PBITA 118.6 110.7 248.7 Depreciation and amortisation of assets 43.2 44.8 81.4 other than acquisition-related intangible assets Increase in working capital and provisions (33.3) (42.7) before exceptional items (42.3) Net cash flow from capital expenditure (32.8) (42.8) (89.8) Operating cash flow 95.7 70.0 198.0 Reconciliation of operating cash flows Six months ended Six months ended Year ended 30.06.06 30.06.05 31.12.05 ‚£m ‚£m ‚£m Net cash flow from operating activities (per consolidated cash flow statement) 56.1 43.9 174.5 Net cash flow from capital expenditure (32.8) (42.8) (89.8) Cash outflow on exceptional items and 9.8 37.5 39.7discontinued operations Additional pension contributions 24.2 4.5 15.0 Other - - 5.6 Tax paid 38.4 26.9 53.0 Operating cash flow 95.7 70.0 198.0 ENDGROUP 4 SECURICOR PLCRelated Shares:
GFS.L