Results for the six months ended
G4S Chief Executive Officer
“G4S is at an important inflection point as we accelerate our transition to a highly focused global integrated security business. The benefits of our strategy, focused execution and timely response to Covid-19 are reflected in the Group’s results with resilient revenue, earnings and cash flows reported for the first six months.
Underlying revenuea was £3.35 billion (2019: £3.40 billion), underlying EPS was 6.3p per share (2019: 6.3p per share) and underlying operating cash flow was £364 million (2019: £164 million). The Group’s strategic focus and financial position were further strengthened by the sale of conventional cash businesses, now 76% complete, and financial leverage was significantly improved at 2.58x (2019: 2.90x). Further proceeds of approximately £135 million, from this disposal, are expected in the second half of this year.
Our investment in integrated, technology-enabled security solutions is providing our customers with valuable solutions to their security needs and this, together with the implementation of our productivity programme, has been instrumental in strengthening our competitive position and reinforcing the resilience of our Secure Solutions business. Our success in key markets and continued growth in technology-enabled revenues (up 5%) provides increasing confidence in the Group’s performance and prospects.
The path of the Covid-19 pandemic and its economic impact remain uncertain. In these circumstances, and notwithstanding the resilient performance of the Group in the first half of this year, the board has decided to prioritise the financial strength of the company in the near term whilst recognising the importance of resuming dividend payments in the future. The board has therefore concluded that the company will not pay an interim dividend for 2020. The board intends to resume dividend payments once the uncertainty surrounding the pandemic has reduced to an acceptable level.”
First half highlights (Underlying resultsa unless otherwise noted):
- Secure Solutions: Revenue £3.1 billion (2019: £3.1 billion); Adjusted PBITA £202 million (2019: £199 million), growth in
Americas andAsia offset the impact of Covid-19 in ourEurope &Middle East markets and Adjusted PBITA margin rose +20bp to 6.5% - Cash Solutions: Revenue £0.22 billion (2019: £0.27 billion); Adjusted PBITA £16 million (2019: £24 million) reflecting the impact of Covid-19 in the
UK . Restructuring being implemented - Adjusted PBITA of £187 million (2019: £196 million)
- EPSd 6.3p per share (2019: 6.3p per share)
- Operating cash flowe £364 million (2019: £164 million) including £152 million tax deferrals
- Free cash flowf of £178 million (2019: free cash outflow of £51 million)
- Net debt to Adjusted EBITDAc 2.58x (2019: 2.90x)
- Productivity and restructuring: Direct and indirect cost savings of £100 million in 2020
- Statutory earningsd of £167 million (2019: £59 million) includes gain on sale of conventional cash businesses and cost of Deferred Prosecution Agreement with
UK Serious Fraud Office - Cash business disposal proceeds of £522 million and gain on sale of £171 million recognised to
30 June 2020
Group results
Underlying Resultsa | Statutory Resultsb | |||||
In Constant Currency | Actual Rates | |||||
2020 | 2019 | % | 2020 | 2019 | % | |
Revenue | £3,353m | £3,403m | (1.5) | £3,525m | £3,807m | (7.4) |
Adjusted PBITAc | £187m | £196m | (4.6) | £199m | £234m | (15.0) |
Adjusted PBITAc margin | 5.6% | 5.8% | 5.6% | 6.1% | ||
Earningsd | £97m | £97m | - | £167m | £59m | +183.1 |
Earnings Per Shared | 6.3p | 6.3p | - | 10.8p | 3.8p | +184.2 |
Operating Cash Flowe | £364m | £164m | +122.0 | £350m | £192m | +82.3 |
Free Cash Flowf | £178m | £(51)m | +449.0 |
a Underlying results are Alternative Performance Measures (“APMs”) as defined and explained on page 39 and, for both 2019 and 2020, exclude the results of businesses sold as part of the conventional cash disposal, the effect of onerous contracts and specific and other separately disclosed items. Underlying results are reconciled to statutory results on pages 4 and 44 and are presented at constant exchange rates other than operating cash flow, which is presented at actual rates in both 2019 and 2020. A reconciliation between the results as previously reported and the restated results above is included on page 45.
b Statutory results reflect the entire Group including the results of the businesses subject to the conventional cash disposal up to the date of completion. See page 26 for the basis of preparation of statutory results.
c Adjusted PBITA and net debt to Adjusted EBITDA are APMs as defined and explained on pages 40 and 42.
d Earnings is defined as profit attributable to equity shareholders of
e Operating cash flow is defined on page 40 as net cash flow from operating activities of continuing operations and is stated after pension deficit contributions of £28 million (2019: £26 million). For the six months ended
f Free cash flow (“FCF”) is an APM as defined and explained on page 40.
Page 1
Focus on growth of integrated security solutions
The sale of the majority of the Group’s conventional cash businesses to Brink’s enables G4S to focus on the growth of its core integrated security solutions business and the further development of the rapidly growing Retail Technology Solutions business, whilst also streamlining the Group to enhance agility and efficiency.
G4S is a global market leader in security, providing both established and new technology-enabled security solutions to customers around the world.
The shape of the Group, post the sale of the majority of the conventional cash businesses, is summarised in the table below, which sets out the proportion of Group revenue and PBITA margin achieved in H1 2020, along with the revenue growth potential in the medium term.
H1 2020 % of Group Revenue | H1 2020 PBITA Marginc | Revenue Growth Potential p.a. | |
Secure Solutions (excl. | 83% | 6% | 4-6% |
Risk Consulting and Security Technology Solutionsa | 10% | 12% | 10-12% |
Total Secure Solutions | 93%a | ||
Retail Technology Solutionsb | 3% | 13% | 14-16% |
Conventional Cash | 4% | 2% | - |
a Integrated technology-enabled solutions combines two or more of: security officers, risk consulting, security technology, data analytics and intelligence elements of
b Includes Retail Cash Solutions, SA-Deposita.
c Adjusted PBITA margin before corporate cost allocations.
Revenue growth during the first half of 2020 was adversely impacted by the Covid-19 pandemic, particularly in our
Over the course of the economic cycle we expect security to continue to be a growth industry and we believe that G4S has the expertise and global footprint to grow Secure Solutions revenues in line with the growth rates indicated above. As at
As a result of our investment in risk consulting and the integration of technology and data analytics into our security solutions, we are generating an increasing proportion of revenues from integrated, technology-enabled solutions. In H1 2020 these integrated technology-enabled revenues grew by 5% and at the end of
Of the retained cash businesses (7% of Group revenues), H1 performance in our industry-leading Retail Technology Solutions businesses was impacted by new contract win mobilisations being postponed from the second quarter of 2020 into the last six months of the year, driven by Covid-19. However margins were resilient, reflecting a greater proportion of recurring revenue. We have a substantial backlog of confirmed orders and are now working with customers to resume the installation of our technology solution. Over the medium term, we aim to grow our Retail Technology Solutions business at 14-16% per annum and would look to achieve margins of 10-15%. G4S has also retained a number of conventional cash businesses, including the
Covid-19
In response to the Covid-19 pandemic, we continue to reinforce health and safety measures for employees and customers, assure service delivery and protect the company’s financial performance, cash flow and financial position. In the midst of the pandemic, G4S staff all over the world have responded with extraordinary courage and resilience to keep vital services and workplaces safe, clean and secure.
In addition, in the short-run, we are assisting customers around the world with their Covid-19 return to work assurance programmes with an increased demand for thermal cameras, security systems integrated with healthcare applications, access control and screening personnel. Markets such as technology, healthcare, distribution centres and utilities are expected to maintain positive underlying demand.
We believe that the resilient performance of the Group reflects the essential nature of our services, the growing value to customers of our integrated security solutions, increasingly focused execution and the benefit of a diversified revenue base, by market and customer type. The net financial cost of the pandemic in those countries where we received Covid-19 related government employment support is estimated to be around £20 million to £25 million arising from lost revenue, incremental safety and operating costs and the cost of continuous employment for staff whose roles would have otherwise been at risk, partially offset by government employment support. This impact is reflected, in particular, in the lower profits in the
Page 2
Covid-19 (continued)
We have also taken proactive steps to restructure and reduce costs in a number of areas to address the sale of the conventional cash businesses and to respond to the impact of Covid-19, and expect to deliver total direct and indirect cost savings of £100 million in 2020, including the acceleration of previously announced programmes.
SFO DPA
A charge of £50 million has been recognised in relation to the Deferred Prosecution Agreement entered into with the UK’s Serious Fraud Office (“SFO”) which was announced on
Resolving this long-standing matter brings certainty to G4S and allows us to focus on delivering innovative and valuable services to our customers in order to grow our business.
Dividend policy
The path of the pandemic and its economic impact remain uncertain. In these circumstances, and notwithstanding the resilient performance of the Group in the first half of this year, the board has decided to prioritise the financial strength of the company in the near term whilst recognising the importance of resuming dividend payments in the future. The board has therefore concluded that the company will not pay an interim dividend for 2020.
The company’s dividend policy remains unchanged. The board intends to resume dividend payments once the uncertainty surrounding the pandemic has reduced to an acceptable level and in line with its stated policy objectives of attaining dividend cover of 2.0x and a progressive dividend thereafter.
Outlook
“The Group’s transition to a focused, global leader, delivering integrated security solutions, is accelerating. The benefits of G4S’s strategy and focused execution are beginning to be realised and in the first six months of this year the Group produced substantial revenues, profits and cash flows strengthening further our financial position. G4S has an unrivalled market footprint, a well-diversified revenue base and pipeline, and growing capability in the delivery of integrated technology-enabled solutions. We believe that the Group is very well positioned to emerge from the pandemic as a leaner and more focused market leader in the global security market and to create material value for all stakeholders.”
Page 3
Group results for the period ended Six months ended | |||||||
£m | Underlying resultsa | Onerous contracts | Disposed businessesc | Restructuring and separation | Specific and other separately disclosed itemsd | Statutory | |
Revenue | 3,353 | 12 | 160 | 3,525 | |||
Adjusted PBITAb | 187 | - | 12 | 199 | |||
Net specific and other itemsd | - | (4) | - | (25) | 101 | 72 | |
Profit before tax | 137 | (4) | 8 | (25) | 101 | 217 | |
Tax | (37) | 1 | (5) | 2 | (8) | (47) | |
Profit after tax | 100 | (3) | 3 | (23) | 93 | 170 | |
Earningse | 97 | (3) | 3 | (23) | 93 | 167 | |
EPSe | 6.3p | (0.2)p | 0.2p | (1.5)p | 6.0p | 10.8p | |
Operating cash flowf | 364 | (4) | 14 | (24) | - | 350 | |
Six months ended | |||||||
£m | Underlying resultsa | Onerous contracts | Disposed businessesc | Restructuring and separation | Specific and other separately disclosed itemsd | Constant currencyh | |
Revenue | 3,403 | 60 | 304 | 3,767 | |||
Adjusted PBITAb | 196 | - | 38 | 234 | |||
Net specific and other itemsd | - | 9 | - | (36) | (32) | (59) | |
Profit before tax | 141 | 9 | 35 | (36) | (32) | 117 | |
Tax | (37) | (2) | (9) | 7 | 2 | (39) | |
Profit after tax | 104 | 7 | 26 | (29) | (30) | 78 | |
Earningse | 97 | 7 | 23 | (29) | (30) | 68 | |
EPSe | 6.3p | 0.5p | 1.5p | (1.9)p | (1.9)p | 4.4p | |
Operating cash flowf | 164 | (1) | 47 | (18) | - | 192 | |
Six months ended | |||||||
£m | Underlying resultsa | Onerous contracts | Disposed businessesc | Restructuring and separation | Specific and other separately disclosed itemsd | Statutory | |
Revenue | 3,442 | 60 | 305 | 3,807 | |||
Adjusted PBITAb | 196 | - | 38 | 234 | |||
Net specific and other itemsd | - | 9 | - | (36) | (40) | (67) | |
Profit before tax | 141 | 9 | 34 | (36) | (40) | 108 | |
Tax | (37) | (2) | (9) | 7 | 2 | (39) | |
Profit after tax | 104 | 7 | 25 | (29) | (38) | 69 | |
Earningse | 97 | 7 | 22 | (29) | (38) | 59 | |
EPSe | 6.3p | 0.5p | 1.4p | (1.9)p | (2.5)p | 3.8p | |
Operating cash flowf | 164 | (1) | 47 | (18) | - | 192 |
a Underlying results are APMs as defined and explained on page 39 and, for both 2019 and 2020, exclude the results of businesses sold as part of the conventional cash disposal, the effect of onerous contracts and specific and other separately disclosed items. Underlying results are reconciled to statutory results on pages 4 and 44 and are presented at constant exchange rates other than operating cash flow, which is presented at actual rates in both 2019 and 2020. A reconciliation between the results as previously reported and the restated results above is included on page 45.
b Adjusted PBITA is an APM as defined and explained on page 40.
c Disposed businesses include the results of all businesses that have been sold or closed by the Group between
d Other separately disclosed items include goodwill impairment, net profit/(loss) on disposal/closure of subsidiaries/businesses, the Serious Fraud Office Deferred Prosecution Agreement and acquisition-related amortisation. The associated tax impact is included in the tax charge within other separately disclosed items. In addition, tax-specific charges or credits, such as those arising from significant changes in tax legislation which have a material impact, and which are unrelated to net specific items, are included within the tax charge within other separately disclosed items. The accounting policy for specific and other separately disclosed items is provided on page 26.
e Earnings is defined as profit attributable to equity shareholders of
f Operating cash flow is defined on page 40 as net cash flow from operating activities of continuing operations and is stated after pension deficit contributions of £28 million (2019: £26 million). For the six months ended
g Results for the six months ended
h Constant currency amounts show the 2019 statutory results retranslated at 2020 average exchange rates as described on page 44. Constant currency amounts should not be considered as or used in place of the Group’s statutory results. Constant currency operating cash flow is translated at 2019 average exchange rates.
Page 4
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
The commentary in this Business Review discusses the Group’s underlying results, which are Alternative Performance Measures (“APMs”) as described on page 39 and are reconciled to statutory results on pages 4 and 44. Commentary on the Group’s statutory results is provided on pages 12 to 17. Throughout this Business Review, to aid comparability, 2019 comparative results are presented on a constant currency basis by applying 2020 average exchange rates as described on page 39.
Underlying results At constant exchange rates | Revenue 2020 £m | Revenuea 2019 £m | YoY % | Organic growthb % | Adjusted PBITA 2020 £m | Adjusted PBITAa 2019 £m | YoY % | Adjusted PBITA margin 2020 % | Adjusted PBITA margina 2019 % |
Africa | 197 | 200 | (1.5) | (1.5) | 15 | 15 | - | 7.7 | 7.5 |
1,355 | 1,285 | 5.4 | 5.4 | 82 | 62 | 32.3 | 6.0 | 4.8 | |
443 | 437 | 1.4 | 1.4 | 36 | 30 | 20.0 | 8.1 | 6.9 | |
1,136 | 1,215 | (6.5) | (6.5) | 69 | 92 | (25.0) | 6.1 | 7.6 | |
Secure Solutions | 3,131 | 3,137 | (0.2) | (0.2) | 202 | 199 | 1.5 | 6.5 | 6.3 |
Cash Solutions | 222 | 266 | (16.5) | (16.5) | 16 | 24 | (33.3) | 7.2 | 9.0 |
3,353 | 3,403 | (1.5) | (1.5) | 218 | 223 | (2.2) | 6.5 | 6.6 | |
Corporate costs | (31) | (27) | 14.8 | ||||||
3,353 | 3,403 | (1.5) | (1.5) | 187 | 196 | (4.6) | 5.6 | 5.8 |
a Underlying results are APMs as defined and explained on page 39 and, for both 2019 and 2020, these exclude the results of businesses sold as part of the conventional cash disposal, the effect of onerous contracts and specific and other separately disclosed items. Underlying results are reconciled to statutory results on pages 4 and 44 and are presented at constant exchange rates. A reconciliation between the results as previously reported and the restated results above is included on page 45.
b Organic revenue growth is an APM as defined and explained on page 40. Quarterly organic revenue growth for current and prior periods is set out in note D on page 43.
DIVISONAL PERFORMANCE
All commentary and figures refer to underlying results in constant currency, unless otherwise stated.
SECURE SOLUTIONS (93% of Group revenues in H1 2020)
Overview
·Security Solutions (86% of Group revenues) incorporating manned security and technology-enabled security (49% of Secure Solutions revenues) which includes integration of world class proprietary and partner software and hardware and risk consulting (10% of Group revenues).
Our Security Solutions business delivers industry-leading security services in 85 countries around the world. Building on our established security services, we have invested in developing the capabilities to design and deliver security technology, security systems and integrated security solutions that combine people and technology to offer our customers more efficient and valuable security solutions.
We believe that our growing ability to design and deliver technology-enabled security solutions strengthens our customer-value proposition and provides G4S with the opportunity to increase the longevity and value of existing customer relationships, to win new business and to earn higher margins. We have achieved demonstrable success with these solutions in markets such as
·Care & Justice Services (7% of Group revenues) including custody, detention, education, rehabilitation and transportation concentrated in the
Performance and Outlook
In our Secure Solutions business, revenues and profits were broadly unchanged overall. The impact of Covid-19 has started to reduce in June as some of our key markets emerge from lockdown and revenues in June were 1.6% lower than
We delivered good organic revenue growth in the
Page 5
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
SECURE SOLUTIONS (continued)
Performance and Outlook (continued)
The growth in some of our key markets, combined with our actions to reduce costs, mitigated the impact of Covid-19 and Adjusted PBITA was 1.5% higher at £202 million (2019: £199 million). As a result the Adjusted PBITA margin improved to 6.5% from 6.3%.
Africa
Revenue in
In the telecoms and mining sectors we have won a number of new contracts to deliver integrated security solutions using G4S Risk360. Some of these contracts have begun mobilisation, with the rest expected to do so in the second half of the year.
Revenues in our
Our Secure Solutions revenues in
In
Our on-going investment in sales, business development and customer service has enabled G4S to sustain a substantial pipeline in the
Revenue growth in
Across our
Revenue in our
Adjusted PBITA for the region was £23 million lower at £69 million (2019: £92 million) and Adjusted PBITA margin was 6.1% (2019: 7.6%) as governmental financial support was more than offset by the impact of the reduction in revenues due to Covid-19, incremental safety and operating costs and the cost of continuous employment for staff whose roles would have been at risk.
Our
Page 6
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
CASH SOLUTIONS (7% of group revenues in H1 2020)
Overview
- Retail Technology Solutions comprising:
- Cash technology services focused on the efficient management of cash, including Retail Cash Solutions (“RCS”), the leading software and service solution for large retail formats in
North America - Deposita, Cash360 and G4S Pay solutions for medium and small retail formats
- Cash technology services focused on the efficient management of cash, including Retail Cash Solutions (“RCS”), the leading software and service solution for large retail formats in
- Conventional cash services including cash-in-transit (“CIT”), cash-processing and automated teller machine (“ATM”) services
In our Cash Solutions business we provide software, hardware, systems and services that improve the security, control and efficiency of our customers’ cash handling. We aim to grow volumes in traditional cash services of CIT and ATMs organically through cost leadership, which enables us to win market share and encourages banks to outsource more services. We are advancing commercial discussions for additional bank outsourcing in the
We believe that the Group is well positioned to address a substantial and valuable opportunity to extend and grow our new products and services that are currently being adopted by banks and some of the world’s leading retailers. We expect this market to continue to grow strongly and we have market-leading innovative products combining software and services to help us achieve this. We are making significant progress both with large retailers, with what we refer to as our “big box” solution, and in our mid-size and small box offerings. We are also seeing increased interest from banks looking to automate more in-branch cash handling. We believe that our Retail Technology Solutions service has the potential to grow rapidly and to enhance the overall Group margins over the medium term.
Performance and Outlook
Cash Solutions revenues declined by 16.5% for the six months to
The severe impact of Covid-19 upon our customers meant that conventional cash revenues declined by 22.1%. Adjusted PBITA for Cash Solutions overall was £8 million lower at £16 million as the impact of the volume reductions in the
In Retail Technology Solutions, the large H2 2019 win in the small-box market, which had been scheduled for mobilisation in the first half of 2020, was delayed to the second half of the year and mobilisation preparations are now underway. Our North America Retail Technology Solutions business grew revenue by 6.0% in June. As expected the Covid-19 related delays to mobilisation meant that Retail Technology Solutions revenues declined by 10.0% but margins were resilient due to the higher proportion of recurring revenue.
We believe growth opportunities exist in our Cash Solutions markets, as we possess the infrastructure, technology, licences and a strong track record of reliable and efficient delivery, for banks and retailers to outsource more of their cash management activities to G4S. In addition, we expect our network and operational restructuring and efficiency programmes, particularly in the
CORPORATE COSTS
Corporate costs comprise the costs of the
Page 7
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
UNDERLYING RESULTS
Summary underlying resultsa
2020 | 2019 | YoY | |
At constant exchange rates | £m | £m | % |
Revenue | 3,353 | 3,403 | (1.5) |
Adjusted PBITAa | 187 | 196 | (4.6) |
Adjusted PBITAa margin | 5.6% | 5.8% | |
Interest | (50) | (55) | |
Profit before tax | 137 | 141 | (2.8) |
Tax | (37) | (37) | |
Profit after tax | 100 | 104 | (3.8) |
Non-controlling interests | (3) | (7) | |
Earningsa (profit attributable to equity holders of the parent) | 97 | 97 | - |
EPSa (p) | 6.3 | 6.3 | - |
Operating cash flowa | 364 | 164 | 122.0 |
a Underlying results are APMs as defined and explained on page 39 and, for both 2019 and 2020, these exclude the results of businesses sold as part of the conventional cash disposal, the effect of onerous contracts and specific and other separately disclosed items. Underlying results are reconciled to statutory results on pages 4 and 44 and are presented at constant exchange rates other than operating cash flow, which is presented at actual rates in both 2019 and 2020. A reconciliation between the results as previously reported and the restated results above is included on page 45.
Revenue
The Group’s revenue decreased by 1.5% compared with
Adjusted PBITA
Adjusted PBITA of £187 million (HY 2019: £196 million) was lower than the prior period. This reflects an increase in Adjusted PBITA of £3 million in Secure Solutions, a reduction of £8 million in Cash Solutions and a £4 million increase in corporate costs (see pages 5 to 7).
Interest
Net interest payable on net debt decreased to £47 million (HY 2019: £50 million). This primarily reflects the benefit of Group’s refinancing programme which has been implemented over the last few years with the replacement of loan notes bearing high interest rates with new loan notes issued at lower interest rates (see pages 15 and 16 for details) and a reduction in interest on lease liabilities to £8 million (HY 2019: £9 million). Net other finance income was £2 million (HY 2019: net other finance costs of £1 million) and the pension interest charge, related to the unwinding of the discount in relation to long-term pension liabilities, was £5 million (HY 2019: £4 million), resulting in a total net interest cost of £50 million (HY 2019: £55 million).
Tax
A tax charge of £37 million (HY 2019: £37 million) was incurred on profit before tax of £137 million (HY 2019: £141 million) which represents an effective tax rate of 27% (HY 2019: 26%). In general, the effective tax rate is a function of a variety of factors, with the most significant being (i) the geographic mix of the Group’s taxable profits and the respective country tax rates, (ii) changes in the value and recognition of deferred tax assets and liabilities, (iii) permanent differences such as expenses disallowable for tax purposes, (iv) irrecoverable withholding taxes, (v) the level of provision required for potential tax liabilities not agreed with tax authorities, (vi) the impact of one-off items, and (vii) the overall level of profit against which the preceding items are measured.
The effective tax rate is similar to that of the prior period which is a consequence of the impact of the upwards revaluation of deferred tax assets following the reversal of the previously enacted decrease of the
Non-controlling interests
Profit attributable to non-controlling interests was £3 million in 2020, a decrease from £7 million in 2019, primarily reflecting the impact of Covid-19 on the profits of certain businesses in the
Earnings
The Group generated profit attributable to equity holders (“earnings”) of £97 million for the six months ended
Page 8
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
UNDERLYING RESULTS (continued)
Earnings per share
Earnings per share was in line with the prior period at 6.3p (HY 2019: 6.3p), based on the weighted average of 1,547 million (HY 2019: 1,547 million) shares in issuea. A reconciliation of profit for the period to earnings per share is provided below:
Underlying earnings per share | |||
2020 | 2019 at constant exchange ratesb | 2019 at actual exchange rates | |
£m | £m | £m | |
Underlying profit for the period | 100 | 104 | 104 |
Non-controlling interests | (3) | (7) | (7) |
Underlying profit attributable to equity holders of the parent (earnings) | 97 | 97 | 97 |
Average number of sharesa (m) | 1,547 | 1,547 | 1,547 |
Underlying earnings per share (p) | 6.3 | 6.3 | 6.3 |
a Stated net of the average number of shares held in the
b Refer to page 39 for a definition of constant currency results.
ONEROUS CONTRACTS
The Group’s onerous contracts generated revenues of £12 million for the six months ended
During the first half of the period the Group recognised a £4 million additional onerous contract provision recorded as a specific item relating to estimated higher expected losses than initially forecast in a facilities management contract in the
Operating cash outflow in respect of onerous contracts was £4 million for the six months ended
DISPOSED BUSINESSES
In the first six months of 2020, the Group completed the sale to Brink’s of its international logistics business, as well as its traditional Cash Solutions businesses in
The Group also sold a documentation business in
In early 2019, the Group sold a parking management business in
RESTRUCTURING AND SEPARATION
Charges of £25 million (HY 2019: £36 million) were recorded for restructuring and separation during the six months ended
Page 9
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
SPECIFIC AND OTHER SEPARATELY DISCLOSED ITEMS
2020 £m | 2019 at constant exchange ratesa £m | 2019 at actual exchange rates £m | |
Specific items – charges | (5) | (4) | (5) |
Specific items – credits | - | 3 | 3 |
Serious Fraud Office Deferred Prosecution Agreement | (50) | - | - |
Net gain/(loss) on disposal/closure of subsidiaries/businesses | 171 | (1) | (1) |
- | (28) | (35) | |
Asset impairment | (13) | - | - |
Acquisition-related amortisation | (2) | (2) | (2) |
Specific and other separately disclosed items before tax | 101 | (32) | (40) |
Tax (charges)/credits arising on specific and other separately disclosed items | (8) | 2 | 2 |
Total specific and other separately disclosed items – credit/(charge) to earnings | 93 | (30) | (38) |
a Refer to page 39 for a definition of constant currency results.
Specific items
The specific item charge for the period was £5 million (HY 2019: £4 million) which was incurred in relation to a commercial settlement in respect of a legacy dispute in a business closed in 2015 in
There were specific item credits of £nil for the six months ended
Serious Fraud Office Deferred Prosecution Agreement
On
The DPA received final approval at a Court hearing on
Net gain/(loss) on disposal/closure of subsidiaries/businesses
During the period, the Group recognised a net gain of £171 million (HY 2019: loss of £1 million) primarily reflecting the gain on disposal of those conventional cash businesses sold to Brink’s which completed in the first half of the year (see page 9). Disposals during the six months ended
In 2019 the Group recognised a goodwill impairment of £35 million in respect of its Brazil Secure Solutions business that was acquired in 2012. The impairment charge reflects the adverse macro-economic environment affecting the business that is expected to subsist for a prolonged period.
Asset impairment
During the first half of 2020 the Group recognised an impairment charge of £13 million in respect of the carrying value of certain branches in the
Tax charges/credits arising on specific and other separately disclosed items
The net tax charges arising on specific and other separately disclosed items were £8 million (HY 2019: credits of £2 million). The net tax charge primarily relates to the gains arising on the sale of the majority of the Group’s conventional cash businesses to Brink’s.
Page 10
Business Review – Group Commentary:
Underlying Results & Alternative Performance Measures
CASH FLOW, CAPITAL EXPENDITURE AND PORTFOLIO MANAGEMENT
The Group generated underlying operating cash flow of £364 million (HY 2019: £164 million) after pension deficit repair contributions of £28 million (HY 2019: £26 million) during the period. This included £152 million (HY 2019: £nil) of payroll and indirect tax deferrals to the second half of 2020 and beyond under Covid-19 related government financial support schemes in certain countries. Underlying operating cash flow represents 195% (HY 2019: 84%) of Adjusted PBITA. The Group invested £76 million (HY 2019: £94 million) in net capital expenditure including £36 million (HY 2019: £30 million) in leased assets that are capitalised in accordance with IFRS 16. The Group received net proceeds of £522 million (HY 2019: £15 million) from the disposal of businesses.
Net cash flow after investing in the business was £707 million (HY 2019: £113 million) and free cash flow excluding acquisitions and disposals was £178 million (HY 2019: free cash outflow of £51 million).
The Group’s net decrease in net debt before foreign exchange movements was £611 million (HY 2019: increase of £131 million) after net interest of £60 million (HY 2019: £81 million), tax paid of £30 million (HY 2019: £47 million) and dividends paid to non-controlling interests of £5 million (HY 2019: £106 million paid to equity shareholders of the parent and non-controlling interests).
Page 11
Business Review – Group Commentary:
Statutory Results
The basis of preparation of the Group’s statutory results is set out on page 26. Comparative figures for statutory results are presented at actual historical exchange rates (i.e. the results for the six months ended
REVIEW OF STATUTORY RESULTS
Statutory results at actual exchange ratesa | 2020 | 2019 | YoY | |
£m | £m | % | ||
Revenue | 3,525 | 3,807 | (7.4) | |
Adjusted profit before interest, tax and amortisation (“Adjusted PBITA”) | 199 | 234 | (15.0) | |
Specific items – charges | (9) | (5) | ||
Specific items – credits | - | 12 | ||
Serious Fraud Office Deferred Prosecution Agreement | (50) | - | ||
Restructuring and separation costs | (25) | (36) | ||
Gain/(loss) on disposal/closure of subsidiaries/businesses | 171 | (1) | ||
- | (35) | |||
Asset impairment | (13) | - | ||
Acquisition-related amortisation | (2) | (2) | ||
Operating profit | 271 | 167 | 62.3 | |
Net interest costs | (54) | (59) | ||
Profit before tax | 217 | 108 | 100.9 | |
Tax | (47) | (39) | ||
Profit for the period | 170 | 69 | 146.4 | |
Non-controlling interests | (3) | (10) | ||
Profit attributable to equity holders of the parent (“statutory earnings”) | 167 | 59 | 183.1 | |
EPS | 10.8p | 3.8p | 184.2 | |
Operating cash flowb | 350 | 192 | 82.3 |
a The basis of preparation of statutory results is shown on page 26.
b Operating cash flow for 2019, originally stated as £189 million, has increased by £3 million to reflect an IFRS 16 adjustment identified when finalising the 2019 Integrated Report and Accounts.
Revenue
Revenue decreased by 7.4% compared with the prior period’s statutory results. Of the decrease, 1.0% (£40 million) was due to movements in average exchange rates. At constant exchange rates, revenue decreased by 6.4% which included decreases in revenue from businesses disposed of during the period (£144 million reduction) and from onerous contracts (£48 million reduction). Excluding the effects of movements in exchange rates, disposed businesses and onerous contracts, revenue reduced by 1.5% at constant exchange rates, as explained on pages 5 to 7.
Adjusted PBITA
Adjusted PBITA of £199 million (HY 2019: £234 million) was down 15.0% reflecting a £26 million decrease in Adjusted PBITA from disposed businesses. Excluding disposed businesses and onerous contracts, the Group’s Adjusted PBITA decreased by 4.6% compared with the prior period. Business performance is discussed in more detail by service line and region on pages 5 to 7.
Specific items - charges
The specific items charge was £9 million (HY 2019: £5 million), including a £5m charge for a commercial settlement in relation to a legacy dispute in a business closed in 2015 in
Specific items charges incurred during the six months ended
Specific items - credits
There were no specific item credits during the first half of 2020. Specific item credits recorded during the six months ended
Serious Fraud Office Deferred Prosecution Agreement
A charge of £50 million has been recognised in relation to the Deferred Prosecution Agreement entered into with the UK’s Serious Fraud Office (“SFO”) which was announced on
Page 12
Business Review – Group Commentary:
Statutory Results
REVIEW OF STATUTORY RESULTS (continued)
Restructuring and separation costs
Restructuring and separation costs of £25 million (HY 2019: £36 million) were recorded during the six months ended
Gain/(loss) on disposal/closure of subsidiaries/businesses
During the period, the Group recognised a net gain of £171 million (HY 2019: loss of £1 million) primarily reflecting the profit on disposal of those conventional cash businesses sold to Brink’s which were completed in the first half of the year. Disposals during the six months ended
In 2019 the Group recognised a goodwill impairment of £35 million in respect of its Brazil Secure Solutions business that was acquired in 2012.
Asset impairment
During the first half of 2020 the Group recognised an impairment charge of £13 million in respect of the carrying value of certain branches in the
Operating profit
Operating profit for the period of £271 million (HY 2019: £167 million) increased by 62.3%, primarily reflecting the profit on disposal of those conventional cash businesses sold to Brink’s which were completed in the first half of the year, offset by the charge recognised in respect of the Deferred Prosecution Agreement entered into with the SFO.
Net interest costs
Net interest payable on net debt decreased to £47 million (HY 2019: £52 million). This primarily reflects the benefit of Group’s refinancing programme which has been implemented over the last few years with the replacement of loan notes bearing high interest rates with new loan notes issued at lower interest rates (see pages 15 and 16 for details) and a reduction in interest on lease liabilities to £10 million (HY 2019: £12 million). Net other finance costs were £1 million (HY 2019: £2 million) and the pension interest charge, related to the unwinding of the discount in relation to long-term pension liabilities, was £6 million (HY 2019: £5 million), resulting in a total net interest cost of £54 million (HY 2019: £59 million).
Tax
The statutory tax charge of £47 million (HY 2019: £39 million) for the first half of 2020 included a tax charge of £37 million (HY 2019: £37 million) on the Group’s underlying profits, as explained on page 8, a tax credit on onerous contracts of £1 million (HY 2019: charge of £2 million), a tax charge of £5 million in respect of disposed businesses (HY 2019: £9 million), a tax credit of £2 million (HY 2019: £7 million) in respect of restructuring costs and a net tax charge of £8 million (HY 2019: credit of £2 million) in respect of tax-specific items and tax charges and credits relating to specific and other separately disclosed items (as explained on page 10).
The Group’s statutory tax charge represents an effective rate of 22% (HY 2019: 36%) on profit before tax of £217 million (HY 2019: £108 million).
In general, the effective tax rate is a function of a variety of factors, with the most significant being (i) the geographic mix of the Group’s taxable profits and the respective country tax rates, (ii) changes in the value, and recognition of, deferred tax assets and liabilities, (iii) permanent differences such as expenses disallowable for tax purposes, (iv) irrecoverable withholding taxes, (v) the level of provision required for potential tax liabilities not agreed with tax authorities, (vi) the impact of one-off items, and (vii) the overall level of profit against which the preceding items are measured.
The Group’s lower 2020 effective tax rate is mainly a consequence of the tax exempt status of most of the gains arising on the disposal of the majority of the Group’s conventional cash businesses to Brink’s, the impact of the upwards revaluation of deferred tax assets following the reversal of the previously enacted decrease of the
The Group’s 2019 effective tax rate was mainly a consequence of goodwill impairments for which no tax benefit was available, the level of provision required for potential liabilities not agreed with tax authorities, changes in the recognition of deferred tax assets and the geographic mix of profits.
Page 13
Business Review – Group Commentary:
Statutory Results
REVIEW OF STATUTORY RESULTS (continued)
Non-controlling interests
Profit attributable to non-controlling interests was £3 million in 2020 (HY 2019: £10 million). The decrease primarily reflects the impact of Covid-19 on certain businesses in the
Profit attributable to equity holders of the parent (“statutory earnings”)
The Group’s profit for the period attributable to equity holders of the parent (“statutory earnings”) was £167 million (HY 2019: £59 million) reflecting, inter alia, the profit on disposal of those conventional cash businesses sold to Brink’s which were completed in the first half of the year.
Earnings per share
Statutory earnings per sharea was 10.8p (HY 2019: 3.8p), based on the weighted average number of shares in issuec of 1,547 million (HY 2019: 1,547 million). A reconciliation of the Group’s statutory profit for the period to EPS is provided below:
Earnings per share | 2020 | 2019 at constant exchange ratesb | 2019 at actual exchange rates |
£m | £m | £m | |
Profit for the period | 170 | 78 | 69 |
Non-controlling interests | (3) | (10) | (10) |
Profit attributable to equity holders of the parent (“statutory earnings”) | 167 | 68 | 59 |
Average number of sharesc (m) | 1,547 | 1,547 | 1,547 |
Statutory earnings per sharea (p) | 10.8 | 4.4 | 3.8 |
a The basis of preparation of statutory results is shown on page 26.
b Refer to page 39 for a definition of constant currency results.
c Stated net of the average number of shares held in the
Page 14
Business Review – Group Commentary:
Statutory Results
REVIEW OF THE GROUP’S CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Significant movements in the consolidated statement of financial position
Current loan notes increased to £358 million (
The following movements in the Group’s consolidated statement of financial position are set out elsewhere in this report, as follows:
- Cash, cash equivalents and overdrafts are explained below;
- Retirement benefit obligations are explained in note 15;
- Provisions are analysed in note 16; and
- Net debt is analysed in note 17.
Total equity
Total equity at
REVIEW OF THE GROUP’S CASH FLOW AND FINANCING
Consolidated statement of cash flows
Net cash flow from operating activities before tax was £350 million (HY 2019: £192 million). Net cash flow from operating activities was £320 million (HY 2019: £145 million) including £152 million (HY 2019: £nil) of payroll and indirect tax deferrals to the second half of 2020 and beyond under various Covid-19 related government financial support schemes in certain countries. Net cash generated from investing activities was £368 million (HY 2019: net cash used in investing activities was £54 million), including £522 million (HY 2019: £15 million) of net business disposal proceeds and an outflow of £148 million relating to net cash previously held in disposed entities (HY 2019: £1 million). Net cash outflow from financing activities was £101 million (HY 2019: £159 million) with the difference compared with the prior period being mainly lower net borrowings of £41 million (HY 2019: £134 million), lower interest paid of £71 million (HY 2019: £89 million), lower repayment of lease obligations of £61 million (HY2019: £86 million), offset by no dividends being paid to equity shareholders of the parent during the period (HY 2019: £95 million). Cash, cash equivalents and overdrafts at
Net debt
Net debt as at
Net debt maturity
In
During the period, the Group issued £300 million of commercial paper maturing
The next debt maturities are the
Page 15
Business Review – Group Commentary:
Statutory Results
REVIEW OF THE GROUP’S CASH FLOW AND FINANCING (continued)
The Group’s main sources of finance and their applicable rates as at
Post hedging | Year of redemption and amounts (£m)b | |||||||||||
Debt instrument/ Year of issue | Nominal amounta | Issued interest rate | average interest rate | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2029 | Total |
US PP 2007 | 6.06% | 2.23% | 85 | 85 | ||||||||
US PP 2008 | 6.88% | 6.88% | 60 | 60 | ||||||||
US PP 2019 | 4.90% | 3.83% | 124 | 124 | ||||||||
US PP 2019 | 5.12% | 4.32% | 146 | 146 | ||||||||
Public Bond 2016 | €500m | 1.50% | 2.23% | 452 | 452 | |||||||
Public Bond 2017 | €500m | 1.50% | 3.25% | 454 | 454 | |||||||
Public Bond 2018 | €550m | 1.88% | 2.78% | 486 | 486 | |||||||
Term Loan Facility 2018 | 3.13% | 3.13% | 283 | 283 | ||||||||
Commercial Paperc | £300m | 300 | 300 | |||||||||
Revolving Credit Facility 2018d | £650m (multi- currency) | Undrawn | - | - | ||||||||
60 | 583 | 85 | 452 | 454 | 486 | 124 | 146 | 2,390 |
a Nominal debt amount, for fair value and carrying amounts see note 19.
b Translated at exchange rates prevailing at
c The interest rate on the commercial paper is calculated in line with the
d Of the £650 million revolving credit facility, £136 million matures in
The average cost of the Group’s borrowings, net of lease liabilities, was 3.1% (HY 2019: 4.0%).
OTHER INFORMATION
Significant exchange rates applicable to the Group
The Group derives a significant proportion of its revenue and profits in the following currencies. Closing and average rates for these currencies are shown below:
Closing rates | Six months to Average rates | Closing rates | Year to Average rates | |
£/US$ | 1.2379 | 1.2679 | 1.3263 | 1.2774 |
£/€ | 1.1010 | 1.1470 | 1.1813 | 1.1412 |
£/South | 21.5141 | 21.1417 | 18.5415 | 18.4364 |
£/India Rupee | 93.5253 | 93.7175 | 94.4900 | 89.8276 |
£/Brazil Real | 6.758 | 6.2317 | 5.3336 | 5.0283 |
£/Saudi Riyal | 4.6439 | 4.7637 | 4.9759 | 4.7978 |
£/Canada Dollar | 1.6855 | 1.7293 | 1.7213 | 1.6939 |
Applying
Applying
The movements in average exchange rates led to a decrease in statutory revenue of 1.0% and no change in Adjusted PBITA. The impact of exchange rate movements increased the Group’s net debt by £79 million compared with the prior period.
Page 16
Business Review – Group Commentary:
Statutory Results
OTHER INFORMATION (continued)
Dividend
The path of the pandemic and its economic impact remain uncertain. In these circumstances, and notwithstanding the resilient performance of the Group in the first half of this year, the board has decided to prioritise the financial strength of the company in the near term whilst recognising the importance of resuming dividend payments in the future. The board has therefore concluded that the company will not pay an interim dividend for 2020.
The company’s dividend policy remains unchanged. The board intends to resume dividend payments once the uncertainty surrounding the pandemic has reduced to an acceptable level and in line with its stated policy objectives of attaining dividend cover of 2.0x and a progressive dividend thereafter.
Pensions
The Group’s IAS 19 Revised (2011) Employee Benefits net pension deficit at
The
The most recent triennial valuation in respect of the
Risk and uncertainties
A discussion of the Group’s risk assessment and control processes, and the emerging and principal risks and uncertainties that could affect the business activities or financial results, is detailed on pages 78 to 87 of the company’s Integrated Report and Accounts for the financial year ended
These risks and uncertainties include, but are not limited to, Covid-19, culture and values, health and safety, laws and regulations, geopolitical, people, growth strategy, information security, major contracts, business separation and cash losses. The business risks and uncertainties are expected to remain materially the same as outlined in the 2019 Integrated Report and Accounts during the remaining six months of the financial year. The risks associated with the SFO investigation have now been resolved and the risks associated with the terms of the UK’s exit from the EU and Covid-19 continue to evolve.
Brexit
The
The Group will continue to monitor developments relating to the future relationship between the
Page 17
Directors’ responsibility statement
Results for the six months ended
Directors’ responsibility statement in respect of the results for the six months ended
We confirm that to the best of our knowledge:
- the condensed consolidated set of interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the
European Union ; - the half-yearly report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
A list of the directors is available on the company’s website www.g4s.com.
The responsibility statement is signed on behalf of the board by:
Group Chief Financial Officer
22 July 2020
Page 18
Auditor’s independent review report
For the six months ended
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed
What we have reviewed
The interim financial statements comprise:
- the consolidated statement of financial position at
30 June 2020 ; - the consolidated income statement for the period then ended;
- the consolidated statement of comprehensive income for the period then ended;
- the consolidated statement of changes in equity for the period then ended;
- the consolidated statement of cash flows for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the 2020 half-year report have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The 2020 half-year report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the 2020 half-year report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s
Our responsibility is to express a conclusion on the interim financial statements in the 2020 half-year report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (
We have read the other information contained in the 2020 half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
Chartered Accountants
Page 19
Consolidated financial statements
For the six months ended
Consolidated income statement (unaudited)
Six months ended 30 June 2020 | Six months ended 30 June 2019 | Year ended 31 December 2019 | ||
Continuing operations | Notes | £m | £m | £m |
Revenue | 5 | 3,525 | 3,807 | 7,758 |
Operating profit before impairment losses on financial and contract assets, joint ventures, specific items and other separately disclosed items | 205 | 239 | 507 | |
Net impairment losses on financial and contract assets | (8) | (7) | (11) | |
Share of post-tax profit from joint ventures | 2 | 2 | 5 | |
Adjusted profit before interest, tax and amortisation (“Adjusted PBITA”) | 5 | 199 | 234 | 501 |
Specific items – charges | 6 | (9) | (5) | (38) |
Specific items – credits | 6 | - | 12 | 25 |
Serious Fraud Office Deferred Prosecution Agreement | 6 | (50) | - | - |
Restructuring and separation costs | 6 | (25) | (36) | (57) |
6 | - | - | 18 | |
Gain/(loss) on disposal/closure of subsidiaries/businesses | 6,8 | 171 | (1) | (7) |
6 | - | (35) | (291) | |
Asset impairment | 6 | (13) | - | - |
Amortisation of acquisition-related intangible assets | 6 | (2) | (2) | (6) |
Operating profit | 5,6 | 271 | 167 | 145 |
Finance income | 9 | 6 | 10 | 21 |
Finance expense | 9 | (60) | (69) | (139) |
Profit before tax | 217 | 108 | 27 | |
Tax | 10 | (47) | (39) | (107) |
Profit/(loss) for the period | 170 | 69 | (80) | |
Attributable to: | ||||
Equity holders of the parent | 167 | 59 | (91) | |
Non-controlling interests | 3 | 10 | 11 | |
Profit/(loss) for the period | 170 | 69 | (80) | |
Earnings/(loss) per share attributable to equity shareholders of the parent | 12 | |||
Basic and diluted – from continuing operations | 10.8p | 3.8p | (5.9)p | |
Basic and diluted – from continuing and discontinued operations | 10.8p | 3.8p | (5.9)p | |
Dividends declared and proposed in respect of the period | ||||
Interim dividend | - | 55 | 55 | |
Final dividend | - | - | - | |
Total dividend | 11 | - | 55 | 55 |
Page 20
Consolidated financial statements
For the six months ended
Consolidated statement of comprehensive income (unaudited)
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Profit/(loss) for the period | 170 | 69 | (80) |
Other comprehensive income | |||
Items that will not be re-classified to profit or loss: | |||
Re-measurements relating to defined benefit retirement schemes | 121 | (114) | (148) |
Tax on items that will not be re-classified to profit or loss | (17) | 18 | 22 |
104 | (96) | (126) | |
Items that may be re-classified subsequently to profit or loss: | |||
Exchange differences on translation of foreign operations | 41 | 9 | (99) |
Change in fair value of net investment hedging financial instruments | (31) | 1 | 46 |
Change in cash flow hedging financial instruments | (14) | (1) | (13) |
Tax on items that may be re-classified subsequently to profit or loss | 3 | - | 7 |
(1) | 9 | (59) | |
Other comprehensive income/(loss), net of tax | 103 | (87) | (185) |
Total comprehensive income/(loss) for the period | 273 | (18) | (265) |
Attributable to: | |||
Equity holders of the parent | 269 | (28) | (275) |
Non-controlling interests | 4 | 10 | 10 |
Total comprehensive income/(loss) for the period | 273 | (18) | (265) |
Page 21
Consolidated financial statements
For the six months ended
Consolidated statement of changes in equity (unaudited)
Attributable to equity holders of the parent | |||||||
Share | Share | Retained | Other | NCI | Total | ||
capital | premium | earnings | reserves | Total | reserve | equity | |
£m | £m | £m | £m | £m | £m | £m | |
At | 388 | 258 | (696) | 321 | 271 | 31 | 302 |
Total comprehensive income | - | - | 269 | - | 269 | 4 | 273 |
Dividends paid | - | - | - | - | - | (3) | (3) |
Transactions with non-controlling interests | - | - | (5) | - | (5) | (22) | (27) |
Own shares awarded | - | - | (7) | 7 | - | - | - |
Own shares purchased | - | - | - | (3) | (3) | - | (3) |
Share-based payments | - | - | 1 | - | 1 | - | 1 |
At | 388 | 258 | (438) | 325 | 533 | 10 | 543 |
Attributable to equity holders of the parent | |||||||
Share | Share | Retained | Other | NCI | Total | ||
capital | premium | earnings | reserves | Total | reserve | equity | |
£m | £m | £m | £m | £m | £m | £m | |
At | 388 | 258 | (303) | 379 | 722 | 18 | 740 |
Total comprehensive loss | - | - | (37) | 9 | (28) | 10 | (18) |
Dividends paid | - | - | (95) | - | (95) | (13) | (108) |
Transactions with non-controlling interests | - | - | (8) | - | (8) | 24 | 16 |
Own shares awarded | - | - | (12) | 12 | - | - | - |
Own shares purchased | - | - | - | (8) | (8) | - | (8) |
Share-based payments | - | - | 3 | - | 3 | - | 3 |
At | 388 | 258 | (452) | 392 | 586 | 39 | 625 |
Attributable to equity holders of the parent | |||||||
Share | Share | Retained | Other | NCI | Total | ||
capital | premium | earnings | reserves | Total | reserve | equity | |
£m | £m | £m | £m | £m | £m | £m | |
At | 388 | 258 | (303) | 379 | 722 | 18 | 740 |
Total comprehensive loss | - | - | (216) | (59) | (275) | 10 | (265) |
Dividends paid | - | - | (150) | - | (150) | (24) | (174) |
Transactions with non-controlling interests | - | - | (19) | - | (19) | 27 | 8 |
Own shares awarded | - | - | (12) | 12 | - | - | - |
Own shares purchased | - | - | - | (11) | (11) | - | (11) |
Share-based payments | - | - | 4 | - | 4 | - | 4 |
At | 388 | 258 | (696) | 321 | 271 | 31 | 302 |
1 The consolidated statement of changes in equity as at
Page 22
Consolidated financial statements
As at
Consolidated statement of financial position (unaudited)
As at 30 June 2020 | As at 30 June 2019 | As at | ||
Restated1 | ||||
Notes | £m | £m | £m | |
ASSETS | ||||
Non-current assets | ||||
1,420 | 1,911 | 1,374 | ||
Other acquisition-related intangible assets | 5 | 10 | 6 | |
Non-acquisition-related intangible assets | 122 | 112 | 106 | |
Property, plant and equipment | 466 | 694 | 501 | |
Trade and other receivables | 101 | 131 | 57 | |
Investment in joint ventures | 5 | 8 | 8 | |
Investments | 17 | 30 | 26 | 26 |
Retirement benefit surplus | 15 | 91 | 69 | 64 |
Deferred tax assets | 10 | 238 | 276 | 237 |
2,478 | 3,237 | 2,379 | ||
Current assets | ||||
Inventories | 113 | 123 | 109 | |
Investments | 17 | 22 | 50 | 43 |
Trade and other receivables | 1,401 | 1,488 | 1,287 | |
Current tax assets | 10 | 82 | 70 | 66 |
Cash and cash equivalents | 17 | 1,329 | 955 | 745 |
Assets of disposal groups classified as held for sale | 13 | 87 | 9 | 734 |
3,034 | 2,695 | 2,984 | ||
Total assets | 5,512 | 5,932 | 5,363 | |
LIABILITIES | ||||
Current liabilities | ||||
Bank overdrafts | 17 | (204) | (310) | (367) |
Bank loans | 17 | (8) | (17) | (22) |
Loan notes | 17 | (358) | - | (56) |
Lease liabilities | 17 | (93) | (157) | (89) |
Trade and other payables | (1,214) | (1,192) | (1,079) | |
Current tax liabilities | 10 | (100) | (51) | (53) |
Provisions | 16 | (123) | (167) | (64) |
Liabilities of disposal groups classified as held for sale | 13 | (37) | - | (280) |
(2,137) | (1,894) | (2,010) | ||
Non-current liabilities | ||||
Bank loans | 17 | (300) | (621) | (533) |
Loan notes | 17 | (1,778) | (1,806) | (1,656) |
Lease liabilities | 17 | (209) | (266) | (221) |
Trade and other payables | (52) | (41) | (41) | |
Retirement benefit obligations | 15 | (367) | (532) | (475) |
Provisions | 16 | (121) | (139) | (121) |
Deferred tax liabilities | 10 | (5) | (8) | (4) |
(2,832) | (3,413) | (3,051) | ||
Total liabilities | (4,969) | (5,307) | (5,061) | |
Net assets | 543 | 625 | 302 | |
EQUITY | ||||
Share capital | 388 | 388 | 388 | |
Share premium | 258 | 258 | 258 | |
Reserves | (113) | (60) | (375) | |
Equity attributable to equity holders of the parent | 533 | 586 | 271 | |
Non-controlling interests | 10 | 39 | 31 | |
Total equity | 543 | 625 | 302 |
1 The consolidated statement of financial position as at
Page 23
Consolidated financial statements
For the six months ended
Consolidated statement of cash flows (unaudited)
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Restated1 | |||
£m | £m | £m | |
Operating profit | 271 | 167 | 145 |
Adjustments for non-cash and other items (see note 18) | (27) | 122 | 373 |
Increase in inventories | (3) | (10) | (8) |
Increase in receivables | - | (75) | (28) |
Increase/(decrease) in payables | 109 | (12) | 22 |
Net cash flow from operating activities before tax (see note 18) | 350 | 192 | 504 |
Tax paid | (30) | (47) | (90) |
Net cash flow from operating activities | 320 | 145 | 414 |
Investing activities | |||
Purchases of non-current assets | (44) | (66) | (127) |
Proceeds on disposal of property, plant and equipment | 4 | 2 | 17 |
Disposal/closure of subsidiaries/businesses | 522 | 15 | 12 |
Cash, cash equivalents and bank overdrafts in disposed entities | (148) | (1) | (1) |
Acquisition of subsidiaries | (2) | (4) | (4) |
Interest received | 11 | 8 | 20 |
Sale of investments | 21 | (10) | (6) |
Cash flow from equity-accounted investments | 4 | 2 | 4 |
Net cash from/(used in) investing activities | 368 | (54) | (85) |
Financing activities | |||
Dividends paid to equity shareholders of the parent | - | (95) | (150) |
Dividends paid to non-controlling interests | (5) | (11) | (22) |
Purchase of own shares | (3) | (8) | (11) |
Proceeds from new borrowings | 300 | 594 | 526 |
Repayment of borrowings | (259) | (460) | (460) |
Interest paid | (71) | (89) | (142) |
Repayment of lease obligations | (61) | (86) | (157) |
Transactions with non-controlling interests | (2) | (4) | (14) |
Net cash flow used in financing activities | (101) | (159) | (430) |
Net increase/(decrease) in cash, cash equivalents and bank overdrafts | 587 | (68) | (101) |
Cash, cash equivalents and bank overdrafts at the beginning of the period | 519 | 673 | 673 |
Effect of foreign exchange rate movements on net cash held | 20 | (5) | (53) |
Cash, cash equivalents and bank overdrafts at the end of the period | 1,126 | 600 | 519 |
1 Operating cash flow for
Page 24
Notes to the financial statements
Alternative Performance Measures - (as per Note B)
The following table shows a reconciliation of changes in cash, cash equivalents and bank overdrafts to movement in net debt.
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |||
2020 | 2019 | 2019 | |||
Restated1 | |||||
£m | £m | £m | |||
Net increase/(decrease) in cash, cash equivalents and bank overdrafts (page 24) | 587 | (68) | (101) | ||
Adjustments for items included in cash flow excluded from net debt: | |||||
Cash, cash equivalents and bank overdrafts in disposed entities | 148 | 1 | 1 | ||
Sale of investments | (21) | 10 | 6 | ||
Proceeds from new borrowings | (300) | (594) | (526) | ||
Repayment of borrowings | 259 | 460 | 460 | ||
Repayment of lease obligations | 61 | 86 | 157 | ||
Items included in net debt but excluded from cash flow: | |||||
Net (cash)/debt in disposed/acquired entities | (87) | 4 | 3 | ||
New leases | (36) | (30) | (78) | ||
Net decrease/(increase) in net debt before foreign exchange movements | 611 | (131) | (78) | ||
Effect of foreign exchange rate movements | (79) | 1 | 10 | ||
Net decrease/(increase) in net debt after foreign exchange movements | 532 | (130) | (68) |
1 The reconciliation of changes in cash, cash equivalents and bank overdrafts to movement in net debt as at
Page 25
Notes to the financial statements (continued)
1) Basis of preparation and accounting policies
These condensed consolidated interim financial statements (the “interim financial statements”) comprise the unaudited consolidated results of
The financial information in these interim financial statements for the half year to
The interim financial statements of the Group presented in this half-yearly results announcement have been prepared in accordance with IAS 34 – Interim Financial Reporting, as adopted by the
On
In the six months following the
The Group has considerable financial resources including committed, unutilised credit facilities of £650m and net cash of £1,126m at
This view is underpinned by sensitivity analysis which has been carried out to model the potential financial impact on the Group of the pandemic over 2020. This sensitivity analysis assumes that the adverse impact which occurred in the second quarter of the year will lessen, but nevertheless be significant, over the quarter to
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors consider it appropriate to adopt the going concern basis in preparing the consolidated interim financial statements.
2) Specific items and other separately disclosed items
The Group’s consolidated income statement and segmental analysis note separately identify results before specific items. Specific items are those that in management’s judgment need to be disclosed separately in arriving at operating profit by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
All specific items are evaluated and approved by the Group’s Audit Committee prior to being separately disclosed. The Group seeks to be balanced when reporting specific items for both debits and credits, and any reversals of excess provisions previously created as specific items are classified consistently as specific items. Specific items may not be comparable with similarly-titled measures used by other companies.
Page 26
Notes to the financial statements (continued)
2) Specific items and other separately disclosed items (continued)
In general, provisions recognised for future losses on onerous contracts are charged to the consolidated income statement within Adjusted PBITA. However, where onerous contract charges are significant by virtue of their size, they are separately charged within specific items. Such losses are distinct from “in-year” losses, which are utilised against provisions for onerous contract losses.
Releases of onerous contract provisions originally charged as specific items are separately credited within specific items.
In order to provide further clarity in the consolidated income statement, the Group also discloses separately certain restructuring costs, profits or losses on disposal or closure of subsidiaries, costs of major corporate restructuring, acquisition-related amortisation and expenses and goodwill impairments. Restructuring costs that are separately disclosed reflect costs incurred relating to the Group’s 2018 to 2020 productivity programme announced in 2017. This programme is of a strategic nature and, as such, is monitored and approved by the Group’s Executive Committee. In addition, the Group has disclosed separately the costs incurred in the Cash Solutions separation and subsequent sale of the majority of the Group’s conventional cash businesses to Brink’s.
3) Adoption of new and revised accounting standards and interpretation
There was no material effect from the adoption of any other new standards or interpretations in the period ended
- Annual Improvements to IFRS Standards 2015-2017 Cycle;
- IFRS 9 amendments – Prepayment features with negative compensation;
- IAS 28 amendments – Long term interests in associates and joint ventures;
- IFRS 3 amendments – Definition of a business; and
- IAS 1 and IAS 8 amendments – Definition of material.
New standards not yet effective
As disclosed in the 2019 Integrated Report and Accounts, the Group early adopted the Amendments to IFRS 9, IAS 39 and IFRS 7 in respect of Interest Rate Benchmark (IBOR) Reforms early, with effect from
- IFRS 16 amendments – Covid-19 Related Rent Concessions
- IFRS 17 – Insurance contract
4) Accounting estimates, judgments and assumptions
The preparation of financial statements in conformity with adopted IFRS requires management to make judgments, estimates and assumptions that affect the application of the Group’s accounting policies with respect to the carrying amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These judgments, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions and, in some cases, actuarial techniques. Although these judgments, estimates and associated assumptions are based on management’s best knowledge of current events and circumstances, the actual results may differ.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The judgments, estimates and assumptions which are of most significance in preparing the Group’s consolidated interim financial statements are the same as those that applied to the consolidated financial statements for the year ended
- The investigation opened by the SFO in 2013 in the UK, in respect of the Group’s Electronic Monitoring contract, was a key judgment in the consolidated financial statements for the year ended
31 December 2019 . Our subsidiaryG4S Care and Justice Services (UK) Limited has agreed a Deferred Prosecution Agreement with the SFO and this judgment has now been resolved (see page 10). - In
April 2020 , the Group received requests for information from theBelgian Competition Authority (“BCA”) and theUS Department of Justice Antitrust Division (“DoJ”) in connection with contract tenders principally inBelgium . Given the early stage of the inquiry process, it is not possible to determine a reliable range of potential outcomes (see page 36).
Page 27
Notes to the financial statements (continued)
5) Operating segments and revenue
The Group operates on a worldwide basis and derives its revenue and the majority of its operating profit from its four Secure Solutions regions: Africa,
Segment information is presented below:
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Revenue by reportable segment | £m | £m | £m |
Africa | 197 | 211 | 425 |
1,357 | 1,309 | 2,703 | |
449 | 453 | 940 | |
1,165 | 1,299 | 2,590 | |
Total Secure Solutions | 3,168 | 3,272 | 6,658 |
Cash Solutions | 357 | 535 | 1,100 |
Total Revenue | 3,525 | 3,807 | 7,758 |
Adjusted profit before interest, tax and amortisation (Adjusted PBITA) by reportable segment | |||
Africa | 15 | 17 | 30 |
82 | 61 | 136 | |
36 | 31 | 70 | |
70 | 92 | 179 | |
Total Secure Solutions | 203 | 201 | 415 |
Cash Solutions | 27 | 60 | 134 |
Adjusted PBITA before corporate costs | 230 | 261 | 549 |
Corporate costs | (31) | (27) | (48) |
Adjusted PBITA | 199 | 234 | 501 |
Specific items (net) | (9) | 7 | (13) |
Serious Fraud Office Deferred Prosecution Agreement | (50) | - | - |
Restructuring and separation costs | (25) | (36) | (57) |
- | - | 18 | |
Gain/(loss) on disposal/closure of subsidiaries/businesses | 171 | (1) | (7) |
- | (35) | (291) | |
Asset impairment | (13) | - | - |
Amortisation of acquisition-related intangible assets | (2) | (2) | (6) |
Operating profit | 271 | 167 | 145 |
The Group’s revenue by customer type can be analysed as follows:
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Revenue by customer type | £m | £m | £m |
Major corporates | 1,353 | 1,339 | 2,761 |
Government | 752 | 831 | 1,640 |
Financial institutions | 512 | 591 | 1,235 |
Retail, leisure and consumers | 524 | 626 | 1,263 |
Private energy/utilities | 216 | 225 | 459 |
Transport, ports and aviation | 168 | 195 | 400 |
Total Revenue | 3,525 | 3,807 | 7,758 |
Page 28
Notes to the financial statements (continued)
6) Operating profit
The income statement can be analysed as follows:
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Continuing operations | £m | £m | £m |
Revenue | 3,525 | 3,807 | 7,758 |
Cost of sales | (2,973) | (3,158) | (6,419) |
Gross profit | 552 | 649 | 1,339 |
Administration expenses | (262) | (442) | (897) |
Net impairment losses on financial and contract assets | (8) | (7) | (11) |
- | (35) | (291) | |
Asset impairment | (13) | - | - |
Share of profit after tax from joint ventures | 2 | 2 | 5 |
Operating profit | 271 | 167 | 145 |
Operating profit includes items that are separately disclosed for the six months ended
·Administration expenses include Covid-19 related government support income of £30m that partially mitigated the financial effect of lost revenue, incremental safety and operating costs and the cost of continuous employment for staff whose roles would have otherwise been at risk given the impact of the pandemic (see page 2);
·The specific item charge for the period was £9m (six months ended
·Specific item charges incurred during the six months ended
·Specific item charges incurred during the year ended
·There were no specific item credits during the period (six months ended
·A charge of £50m has been recognised in relation to the Deferred Prosecution Agreement entered into with the UK’s Serious Fraud Office (“SFO”) which was announced on
·Restructuring and separation charges of £25m (six months ended
Page 29
Notes to the financial statements (continued)
6) Operating profit (continued)
- During the period, the Group recognised a net gain of £171m (six months ended
30 June 2019 : loss of £1m; year ended31 December 2019 : loss of £7m) primarily in relation to the sale of the majority of the Group’s conventional cash businesses. Disposals during both the six months ended30 June 2019 and the year ended31 December 2019 related to a small profit recognised on the disposal of a parking management business inEstonia offset by costs incurred on business closures and historical disposals, primarily relating to disposals made by the Group during 2018; - In the year to
31 December 2019 , the Group recognised a goodwill impairment of £205m to fully impair the goodwill in respect of itsUK Cash Solutions business; - In the year to
31 December 2019 , the Group also recognised goodwill impairments of £86m comprising of: £35m (six months ended30 June 2019 : £35m) in respect of its Brazil Secure Solutions business; £40m (six months ended30 June 2019 : £nil) in relation to the Group’s Facilities Management business in theUK ; and £11m (six months ended30 June 2019 : £nil) in respect of the Group’s Secure Solutions business in theUnited Arab Emirates ; - During the first half of 2020 the Group recognised an impairment charge of £13 million in respect of the carrying value of certain branches in the
UK Cash Solutions business reflecting the decision to restructure the network of cash branches in light of the step down in volumes experienced over the period and, in particular, in recognition of the potential medium-term impact of Covid-19 on the business (HY 2019: £nil). The Group believes that cash in theUK will continue to represent an important form of payment for the foreseeable future and that, following this restructure, G4S will be well placed to exploit new opportunities as the market evolves; and - Amortisation of acquisition-related intangible assets was £2m (six months ended
30 June 2019 : £2m; year ended31 December 2019 : £6m).
7) Discontinued operations
There was no profit or loss from discontinued operations during the period (six months ended
For the six months ended
None of the Group’s businesses currently held for sale, sold or closed meet the criteria to be classified as discontinued operations in the current period (six months ended
8) Disposals, closures and other transactions
On
During the six months ended
Page 30
Notes to the financial statements (continued)
8) Disposals, closures and other transactions (continued)
The gain on disposal/closure of subsidiaries/businesses of £171m (six months ended
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
200 | - | - | |
Acquisition related intangible assets | 3 | - | - |
Non-acquisition related intangible assets | 1 | - | - |
Property, plant and equipment | 138 | 6 | 6 |
Other non-current assets | 37 | - | - |
Cash, cash equivalents and bank overdrafts | 148 | - | - |
Other current assets | 159 | 3 | 2 |
Retirement benefit obligations | (50) | - | - |
Lease liabilities | (61) | - | - |
Other liabilities | (148) | (5) | (7) |
Net assets of operations disposed/closed | 427 | 4 | 1 |
Plus: effect of foreign exchange rate movements | 1 | - | - |
Less: non-controlling interests | (24) | - | - |
Plus: movements in opening debtors/creditors in respect of prior period disposals1 | 1 | - | 12 |
Net impact on the consolidated statement of financial position due to disposals/closures | 405 | 4 | 13 |
Gain/(loss) on disposal/closure of subsidiaries/businesses | 171 | (1) | (5) |
Total consideration | 576 | 3 | 8 |
Satisfied by: | |||
Cash received | 530 | 5 | 5 |
Disposal costs paid | (7) | - | - |
Additional consideration received relating to disposals completed in prior period1 | 2 | 2 | 15 |
Additional costs paid relating to disposals completed in prior period | (3) | - | (8) |
Net cash consideration received in the period | 522 | 7 | 12 |
Deferred consideration receivable 2 | 67 | - | - |
Accrued disposal and other costs | (13) | (4) | (4) |
Total consideration | 576 | 3 | 8 |
1 Consideration received in 2019 includes £8m of receivables that were collected in the year relating to amounts owed to the Group following the disposal of the US Government Solutions business in 2014 which is classified as a discontinued operation.
2 Approximately 70% of the deferred consideration is expected to be received in H2 2020.
Other transactions
During the period ended
During the year ended
Page 31
Notes to the financial statements (continued)
9) Net finance expense
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Interest and other income on cash, cash equivalents and investments | 5 | 9 | 16 |
Other finance income | 1 | 1 | 5 |
Finance income | 6 | 10 | 21 |
Interest on bank overdrafts and loans | (14) | (15) | (32) |
Interest on loan notes | (24) | (28) | (51) |
Net interest payable on loan note related derivatives | (4) | (6) | (11) |
Loss arising from interest rate swaps derivatives not in a hedging relationship | - | - | (1) |
Loss arising from fair value adjustment to the hedged loan notes | (1) | (3) | - |
Gain arising from change in fair value of derivative financial instruments hedging loan notes | 1 | 3 | - |
Interest on lease liabilities | (10) | (12) | (24) |
Other interest charges | (2) | (3) | (9) |
(54) | (64) | (128) | |
Finance costs on defined retirement benefit obligations | (6) | (5) | (11) |
Finance expense | (60) | (69) | (139) |
Net finance expense | (54) | (59) | (118) |
10) Tax
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Current tax expense | 61 | 38 | 93 |
Deferred tax (credit)/expense | (14) | 1 | 14 |
Total income tax expense for the period | 47 | 39 | 107 |
The effective tax rate on continuing operations was 22% (six months ended
The lower effective tax rate compared with the prior period is primarily driven by the tax exempt status of most of the gains arising on the disposal of the majority of the Group’s conventional cash businesses to Brink’s, the impact of the upwards revaluation of deferred tax assets following the reversal of the previously enacted decrease of the
At
Page 32
Notes to the financial statements (continued)
10) Tax (continued)
At
At
In determining the appropriate level of provisions in respect of such challenges, the Group applies a risk-based approach which considers factors such as the quantum of the charge, the countries party to the transaction and the relevant statutes of limitation. An assessment is also made of the likelihood that compensating adjustments will be obtained under the relevant tax treaties to mitigate the level of double taxation which could arise. As the Group operates in a significant number of countries, determining the appropriate level of provisions inevitably involves a significant level of judgment which is typically influenced by the Group’s evolving experience of tax controversy in different countries. The Group has open tax years in a number of countries involving a number of issues, with the most material disputes typically being in respect of cross-border transactions.
At
(
At any point in time, the Group is typically subject to tax audits in a number of different countries. In situations where a difference of opinion arises between the Group and a local tax authority in respect of its tax filings, the Group will debate the contentious areas and, where necessary, resolve them through negotiation or litigation. The Group relies upon advice and opinions from the Group tax department, local finance teams and external advisors, to ensure that the appropriate judgments are made when establishing accounting provisions in relation to such disputes.
11) Dividends
Pence | DKK | 2020 | 2019 | |
per share | per share | £m | £m | |
Amounts recognised as distributions to equity holders of the parent during the period | ||||
Final dividend for the year ended | 6.11 | 0.5321 | - | 95 |
Interim dividend for the six months ended | 3.59 | 0.2905 | - | 55 |
- | 150 |
No interim dividend is proposed for the six months ended
12) Earnings per share attributable to equity shareholders of the parent
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
From continuing and discontinued operations | |||
Earnings/(loss) | |||
Profit/(loss) for the period attributable to equity shareholders of the parent | 167 | 59 | (91) |
Weighted average number of ordinary shares1 (m) | 1,547 | 1,547 | 1,547 |
Earnings/(loss) per share from continuing and discontinued operations | |||
Basic and diluted (p) | 10.8 | 3.8 | (5.9) |
1 Stated net of the average number of shares held in the
Page 33
Notes to the financial statements (continued)
13) Disposal groups classified as held for sale
On
The entities subject to the transaction comprise principally all of the Group’s conventional cash businesses in
As the disposal did not represent the Group’s exit from providing cash-in-transit or cash-processing operations, the businesses subject to the disposal were not presented as discontinued operations as at
During the six months to
Revenue from businesses not yet completed and sitting within the disposal group as at
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
As at 30 June | As at 30 June | As at 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Assets | |||
28 | - | 221 | |
Acquisition-related intangible assets | - | - | 3 |
Property, plant and equipment and non-acquisition-related intangible assets | 20 | 9 | 161 |
Deferred tax assets | 1 | - | 18 |
Trade and other receivables1 | 21 | - | 122 |
Inventories | 2 | - | 6 |
Cash and cash equivalents | 15 | - | 203 |
Comprising: | |||
Cash at bank and in hand | 15 | - | 129 |
Stocks of money within cash-processing operations2 | - | - | 41 |
Cash in ATMs | - | - | 33 |
Total assets of disposal groups classified as held for sale | 87 | 9 | 734 |
Liabilities | |||
Bank overdrafts | (2) | - | - |
Trade and other payables2 | (12) | - | (136) |
Lease liabilities | (13) | - | (77) |
Bank loans | (1) | - | (1) |
Retirement benefit obligations | (9) | - | (57) |
Provisions | - | - | (8) |
Deferred tax liability | - | - | (1) |
Total liabilities of disposal groups classified as held for sale | (37) | - | (280) |
Net assets of disposal groups | 50 | 9 | 454 |
1 Net of trade receivable loss allowance of £nil (2019: £2m).
2 Trade and other payables includes £nil (2019: £41m) of cash-processing liabilities related to stocks of money held within cash-processing operations.
The disposal group was tested for impairment at the date of classification as held for sale and the Group determined that the disposal group’s fair value less costs to sell was in excess of its carrying value and therefore no impairment was required.
Page 34
Notes to the financial statements (continued)
14) Cash and cash equivalents, overdrafts and customer cash-processing balances
The Group’s Cash Solutions businesses provide a range of cash handling and processing services on behalf of customers. These services include collection, segregated storage and delivery of customer cash, with title to the cash handled remaining with the customer throughout the process. For these services, customer cash is never recorded in the Group’s balance sheet.
A number of other cash-processing services are provided to customers, such as the sale and purchase of physical cash balances, and the replenishment of ATMs and similar machines from customer funds held in Group bank accounts. These funds, which are generally settled within two working days, are classified as “funds within cash-processing operations”, along with the related balances due to and from customers in respect of unsettled transactions, and are included gross within the relevant balance sheet classifications.
As at 30 June | As at 30 June | As at 31 December | |
2020 | 2019 | 2019 | |
Funds within cash-processing operations | £m | £m | £m |
Stocks of money, included within cash and cash equivalents | 13 | 68 | 31 |
Overdraft facilities related to cash-processing operations, included within bank overdrafts | (1) | (23) | (13) |
Liabilities to customers in respect of cash-processing operations, included within trade and other payables | (13) | (45) | (19) |
Receivables from customers in respect of cash-processing operations, included within trade and other receivables | 1 | - | 1 |
Funds within cash-processing operations (net) | - | - | - |
Whilst cash and bank balances used in these services are not formally restricted by legal title, they are restricted by the Group’s own internal policies such that they cannot be used for the purposes of the Group’s own operations. For the purposes of the Group’s consolidated statement of cash flow, funds within cash-processing operations are therefore recorded net of the related balances due to and from customers in respect of unsettled transactions, within cash, cash equivalents and bank overdrafts, and hence have no impact on the Group’s statutory cash flow.
A reconciliation of cash, cash equivalents and bank overdrafts at the end of the period per the consolidated statement of financial position to the corresponding balances included within the consolidated statement of cash flow is included in note 17.
15) Retirement benefit obligations
The Group’s main defined benefit scheme is in the
The Group’s
The
The most recent triennial valuation in respect of the
Page 35
Notes to the financial statements (continued)
16) Provisions and contingent liabilities
Employee benefits | Restructuring | Claims | Onerous customer contracts | Property and other1 | Total | |
£m | £m | £m | £m | £m | £m | |
At | 19 | 1 | 106 | 21 | 38 | 185 |
Additional provisions in the period | 2 | 9 | 60 | 5 | 4 | 80 |
Utilisation of provisions | (1) | (5) | (9) | (4) | (6) | (25) |
Unused amounts reversed | - | - | (1) | - | (1) | (2) |
Unwinding of discounts | - | - | - | - | 2 | 2 |
Exchange differences | 1 | - | 3 | - | - | 4 |
At | 21 | 5 | 159 | 22 | 37 | 244 |
Included in current liabilities | 123 | |||||
Included in non-current liabilities | 121 | |||||
244 |
1 Property and other includes £11m (
Additional provisions in the period in respect of claims include a charge of £50m in relation to the Deferred Prosecution Agreement with the UK’s Serious Fraud Office (“SFO”) which was announced on
The Group is involved in disputes in a number of countries mainly in respect of activities related to its operations. Currently there are a number of disputes open in relation to the application of local labour law, commercial agreements with customers and subcontractors and claims and compliance matters, in some cases in the course of litigation. In addition, the interpretation of labour laws and regulations in a number of countries where the Group operates is complex and there is inherent judgment made when applying those laws and regulations that are open to interpretation. As such, there is risk that further disputes and claims from employees could arise in the future. Where there is a dispute or where there is a risk of a dispute or claims in the future and where, based on legal counsel advice, the Group estimates that it is probable that the dispute will result in an outflow of economic resources, provision is made based on the Group’s best estimate of the likely financial outcome. Where a reliable estimate cannot be made, or where the Group, based on legal counsel advice, considers that it is not probable that there will be an outflow of economic resources, no provision is recognised.
The Group is currently involved in a number of claims in
During 2019 the Group received a claim seeking damages for alleged losses following the reduction in the G4S share price in 2013. At this point, the Group is unable to make a reliable estimate of the merit, outcome or impact of any potential litigation relating to this claim, therefore no provision has been made in respect of it.
In
The Group is party to a number of other on-going litigation processes in relation to interpretation of local labour law and regulations in a number of countries, where it is expected that these matters will not be resolved in the near future. At this stage, the Group's view is that these cases will either be resolved in a manner favourable to the interests of the Group or, due to the nature and complexity of the cases, it is not possible to estimate the potential economic exposure. In addition, in the ordinary course of business, other contingent liabilities exist where the Group is subject to commercial claims and litigation from a range of parties in respect of contracts, agreements, regulatory and compliance matters, none of which is expected to have a material impact on the Group.
Judgment is required in quantifying the Group's provisions, especially in connection with claims and onerous customer contracts, which are based on a number of assumptions and estimates where the ultimate outcome may be different from the amount provided. Each of the provisions reflects the Group's best estimate of the probable exposure at
Page 36
Notes to the financial statements (continued)
17) Analysis of net debt
A reconciliation of net debt to amounts in the consolidated statement of financial position is presented below:
As at 30 June | As at 30 June | As at 31 December | |
2020 | 2019 | 2019 | |
Restated1 | |||
£m | £m | £m | |
Cash and cash equivalents | 1,329 | 955 | 745 |
Receivables from customers in respect of cash-processing operations2 | 1 | - | 1 |
Bank overdrafts | (204) | (310) | (367) |
Liabilities to customers in respect of cash-processing operations3 | (13) | (45) | (19) |
Net cash and bank overdrafts included within net assets of disposal groups held for sale | 13 | - | 159 |
1,126 | 600 | 519 | |
Investments | 52 | 76 | 69 |
Bank loans | (308) | (638) | (555) |
Loan notes | (2,136) | (1,806) | (1,712) |
Lease liabilities | (302) | (423) | (310) |
Fair value of loan note derivative financial instruments | 22 | 37 | (24) |
Net debt included within net assets of disposal groups held for sale4 | (14) | - | (79) |
Total net debt | (1,560) | (2,154) | (2,092) |
1 Restated for the effect of IFRS 16 – Leases, see note 1.
2 Included within trade and other receivables.
3 Included within trade and other payables.
4 Excluding cash and bank overdrafts.
18) Reconciliation of operating profit to net cash flow from operating activities
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
£m | £m | £m | |
Operating profit | 271 | 167 | 145 |
Adjustments for non-cash and other items: | |||
- | 35 | 291 | |
Asset impairment | 13 | - | - |
Amortisation of acquisition-related intangible assets | 2 | 2 | 6 |
(Gain)/loss on disposal/closure of subsidiaries/businesses | (171) | 1 | 7 |
Depreciation of property, plant and equipment | 87 | 102 | 204 |
Amortisation of non-acquisition-related intangible assets | 11 | 11 | 22 |
Share of profit from joint ventures | (2) | (2) | (5) |
Impairment of leased right of use assets | - | - | 1 |
Net exchange loss on non-functional currency intercompany trading balances | - | - | 3 |
Equity-settled share-based payments | 1 | 3 | 3 |
Increase/(decrease) in provisions | 60 | (4) | (107) |
Additional pension contributions | (28) | (26) | (52) |
Operating cash flow before movements in working capital | 244 | 289 | 518 |
Increase in inventories | (3) | (10) | (8) |
Increase in receivables | - | (75) | (28) |
Increase/(decrease) in payables1,2 | 109 | (12) | 22 |
Net cash flow from operating activities before tax | 350 | 192 | 504 |
1 Operating cash flow for the six months ended
2 Movement in payables for the six months ended
Page 37
Notes to the financial statements (continued)
19) Fair value of financial instruments
The Group's financial instruments with carrying amounts significantly different to their fair values are shown below. For all other financial instruments, the carrying value is not considered to be materially different to the fair value.
30 June | 30 June | 30 June | 30 June | 31 December | 31 December | ||
2020 | 2020 | 2019 | 2019 | 2019 | 2019 | ||
Carrying amount | Fair value | Carrying amount | Fair value | Carrying amount | Fair value | ||
Level1 | £m | £m | £m | £m | £m | £m | |
Loan notes carried at amortised cost | |||||||
Public loan notes | 1 | 1,404 | 1,381 | 1,383 | 1,416 | 1,308 | 1,343 |
Private loan notes | 2 | 732 | 767 | 423 | 443 | 404 | 414 |
The carrying amounts and fair values of the Group’s derivative financial instruments indicating those which are designated as hedging instruments are shown below:
30 June | 30 June | 31 December | |||
2020 | 2019 | 2019 | |||
Hedge relationship | Level1 | £m | £m | £m | |
Derivative assets carried at fair value | |||||
Interest-rate swaps | Fair value hedge | 2 | 10 | 10 | 8 |
Cross-currency swaps | Cash flow hedge | 2 | 49 | 45 | - |
Derivative liabilities carried at fair value | |||||
Interest-rate swaps | Not in a hedging relationship | 2 | - | (1) | - |
Cross-currency swaps | Cash flow hedge | 2 | (3) | (1) | (32) |
Cross-currency swaps | Net investment hedge | 2 | (34) | (16) | - |
1 Fair value hierarchy level, as defined by IFRS 13 - Fair value measurements. Level 1 - i.e. using unadjusted quoted prices in active markets for identical financial instruments. Level 2 - i.e. using inputs other than quoted prices in active markets that are observable for the asset and liability, either directly or indirectly.
The Group’s investments of £52m (
20) Post balance sheet events
In
Page 38
Alternative Performance Measures
BASIS OF PREPARATION
The Group applies the basis of preparation for its statutory results shown on page 26. To provide additional information and analysis, enabling a full understanding of the Group’s results and to easily identify the performance of the Group’s on-going businesses, the Group also makes use of a number of Alternative Performance Measures (“APMs”) in the management of its operations and as a key component of its internal and external reporting. These APMs are prepared and presented in accordance with the following basis of preparation.
Whilst broadly consistent with the treatment adopted by both the Group’s business sector peers and by other businesses outside of the Group’s business sector, these APMs are not necessarily directly comparable with those used by other companies.
Adjusted results
In order to allow a full understanding of its results, the Group separately discloses the effects on profit of strategic restructuring activities, costs of major corporate restructuring, acquisition-related amortisation, goodwill impairments and profits or losses arising on the acquisition or disposal of businesses (together, “separately disclosed items”). The Group also discloses separately those items that the Group believes need to be shown separately to allow a more fulsome understanding of the results for the period because of their size, nature or incidence (“specific items”).
Adjusted measures of profit and earnings are stated before the effects of separately disclosed and specific items; the related tax effects; and tax-specific charges or credits which have a material impact such as those arising from significant changes in tax legislation. Adjusted measures of profit are provided to allow the trading results of the Group to be assessed separately from the effects of corporate actions (such as acquisitions, disposals and strategic restructuring) and the effects of significant or unusual items.
A reconciliation of Adjusted PBITA to operating profit is provided on page 12.
Underlying results
To provide a better indication of the performance of the Group’s on-going business for the period, the Group separately presents its underlying results. Underlying results are defined as the adjusted results of the Group (i.e. stated before the effect of specific and separately disclosed items) excluding the results of onerous contracts and businesses that have been sold or closed in the current and comparative periods. Underlying results therefore exclude the results of businesses that were classified as discontinued in prior periods and also exclude the results of the conventional cash businesses, sold in
Underlying results for the comparative periods are re-presented to remove the effect of businesses disposed of or closed in the current period to enable a like-for-like comparison of the results of the Group’s on-going activities at the end of the most recent reporting period.
A reconciliation of the underlying results to the statutory results is included on page 4.
Constant currency results
In order to allow readers to assess the performance of the Group’s business before the effect of foreign exchange movements, the Group also presents its comparative results (excluding cash flows) retranslated to sterling using the average rates for the current period. Cash flows are not retranslated but are presented at historical exchange rates. Comparative results for hyperinflationary economies are translated at current period closing exchange rates when presenting constant currency results. For both 2020 and 2019 the only hyperinflationary economy in which the Group operated was
A reconciliation of the constant currency results for the period to the statutory results is included on page 44.
Business reporting structure
In line with its strategy for managing the business, the Group reports separately the underlying results of its Cash Solutions and Secure Solutions businesses. The results for the Secure Solutions business are further divided geographically into the following regions:
- Africa;
Americas ;Asia ; andEurope &Middle East .
The Group reports separately the results of onerous contracts and the results of its disposed businesses, being those that have been sold in the current or prior periods, including the results of those businesses where the sale has been agreed but not yet completed.
These components, together with the impact of restructuring costs, specific items and other separately disclosed items constitute "continuing operations". Discontinued operations, in accordance with IFRS 5, represent areas of the business which are being managed for sale or closure but which represent separate major lines of business. The Group has not classified any operations as discontinued in any of the periods presented. All amounts recorded as discontinued relate to businesses sold prior to
Page 39
Alternative Performance Measures
BASIS OF PREPARATION (continued)
Financial performance indicators
The key financial measures used by the Group in measuring progress against strategic objectives are set out below, and are reconciled for the current and prior period to the Group’s statutory results on pages 4 and 44:
·Revenue
Statutory revenue arising in each of the underlying, onerous contracts and disposed business components. Underlying revenue is a Key Performance Indicator (“KPI”).
·Organic revenue growth
Organic revenue growth is calculated based on revenue growth at constant currency, adjusted to exclude the impact of any acquisitions during the current or prior periods.
·Adjusted profit before interest, tax and amortisation (“Adjusted PBITA”)
The Group uses Adjusted PBITA as a consistent internal and external reporting measure of its performance, as management views it as being more representative of financial performance from the normal course of business and more comparable period to period. Adjusted PBITA excludes the effect of separately disclosed items (being restructuring and separation costs, goodwill impairment, amortisation of acquisition-related intangible assets and profits or losses on disposals or closures of businesses) and specific items, which the Group believes should be disclosed separately by virtue of their size, nature or incidence, as explained on pages 26 and 27. Further details explaining the reasons for excluding these items are provided on pages 52 and 53 of the Group’s 2019 Integrated Report and Accounts. Underlying Adjusted PBITA is a KPI.
·Operating cash flow
Net cash flow from operating activities before tax. Underlying operating cash flow excludes restructuring and separation spend and is a KPI.
·Operating cash flow conversion
Operating cash flow presented as a percentage of Adjusted PBITA.
·Earnings
Profit attributable to equity shareholders of
·Earnings per share (“EPS”)
Profit attributable to equity shareholders of
·Net debt to Adjusted EBITDA
The ratio of total net debt, including net debt reported within net assets of disposal groups held for sale, to adjusted earnings attributable to equity shareholders before interest, tax, depreciation and amortisation (“Adjusted EBITDA”). This ratio is a factor in the board's assessment of the financial strength of the Group, and forms the basis of a key measure of compliance with covenants in respect of the Group's borrowing facilities.
·Free cash flow
Movement in net debt before foreign exchange movements excluding the impact of acquisitions and disposals of subsidiaries/businesses and dividends paid to equity holders of the parent. Free cash flow is a KPI.
Certain of these financial performance indicators in respect of underlying results also form the basis of a significant element of performance measurement used in the determination of performance-related remuneration and incentives, as described on page 53 of the Group’s 2019 Integrated Report and Accounts.
Page 40
Alternative Performance Measures
A. Reconciliation of operating profit to movements in net debt & free cash flow
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Restated1 | |||
£m | £m | £m | |
Operating profit | 271 | 167 | 145 |
Adjustments for non-cash and other items (see note 18) | (27) | 122 | 373 |
Net working capital movement (see note 18) | 106 | (97) | (14) |
Net cash flow from operating activities before tax (see note 18) | 350 | 192 | 504 |
Adjustments for: | |||
Restructuring and separation spend | 24 | 18 | 47 |
- | - | 87 | |
Cash flow from continuing operations | 374 | 210 | 638 |
Analysed between: | |||
Underlying operating cash flow | 364 | 164 | 633 |
Disposed businesses | 14 | 47 | - |
Onerous contracts | (4) | (1) | 5 |
Investment in the business | |||
Purchase of fixed assets, net of disposals | (40) | (64) | (110) |
New leases | (36) | (30) | (78) |
Restructuring and separation spend | (24) | (18) | (47) |
Disposal/closure of subsidiaries/businesses (see note 8) | 522 | 15 | 12 |
Acquisition of subsidiaries | (2) | (4) | (4) |
Net (cash)/debt in disposed businesses | (87) | 4 | 3 |
Net investment in the business | 333 | (97) | (224) |
Net cash flow after investing in the business | 707 | 113 | 414 |
Other uses of funds | |||
Net interest paid | (60) | (81) | (122) |
Tax paid | (30) | (47) | (90) |
Dividends paid | (5) | (106) | (172) |
Purchase of own shares | (3) | (8) | (11) |
Transactions with non-controlling interests | (2) | (4) | (14) |
- | - | (87) | |
Other | 4 | 2 | 4 |
Net other uses of funds | (96) | (244) | (492) |
Net decrease/(increase) in net debt before foreign exchange movements | 611 | (131) | (78) |
Net debt at the beginning of the period | (2,092) | (2,024) | (2,024) |
Effect of foreign exchange rate movements | (79) | 1 | 10 |
Net debt at the end of the period | (1,560) | (2,154) | (2,092) |
Free cash flow | |||
Net decrease/(increase) in net debt before foreign exchange movements | 611 | (131) | (78) |
Disposal/closure of subsidiaries/businesses (see note 8) | (522) | (15) | (12) |
Net cash/(debt) in disposed businesses | 87 | (4) | (3) |
Acquisition of subsidiaries | 2 | 4 | 4 |
Dividends paid to equity holders of the parent | - | 95 | 150 |
Free cash flow for the period | 178 | (51) | 61 |
1 Operating cash flow for
Page 41
Alternative Performance Measures
B. Reconciliation of changes in cash, cash equivalents and bank overdrafts to movement in net debt
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | |
2020 | 2019 | 2019 | |
Restated1 | |||
£m | £m | £m | |
Net increase/(decrease) in cash, cash equivalents and bank overdrafts (page 24) | 587 | (68) | (101) |
Adjustments for items included in cash flow excluded from net debt: | |||
Cash, cash equivalents and bank overdrafts in disposed entities | 148 | 1 | 1 |
Sale of investments | (21) | 10 | 6 |
Net movement in borrowings | (41) | (134) | (66) |
Repayment of lease obligations | 61 | 86 | 157 |
Items included in net debt but excluded from cash flow: | |||
Net (cash)/debt in disposed/acquired entities | (87) | 4 | 3 |
New leases | (36) | (30) | (78) |
Net decrease/(increase) in net debt before foreign exchange movements | 611 | (131) | (78) |
Effect of foreign exchange rate movements | (79) | 1 | 10 |
Net decrease/(increase) in net debt after foreign exchange movements | 532 | (130) | (68) |
1 The reconciliation of changes in cash, cash equivalents and bank overdrafts to movement in net debt as at
C. Group net debt to Adjusted EBITDA ratio
Six months ended 30 June | Six months ended 30 June | Year ended 31 December | Rolling 12 months to 30 June | Rolling 12 months to 30 June | |
2020 | 2019 | 2019 | 2020 | 20191 | |
£m | £m | £m | £m | £m | |
Adjusted PBITA (page 20) | 199 | 234 | 501 | 466 | 495 |
Add back: | |||||
Depreciation | 87 | 102 | 204 | 189 | 224 |
Amortisation of non-acquisition-related intangible assets | 11 | 11 | 22 | 22 | 21 |
Adjusted EBITDA | 297 | 347 | 727 | 677 | 740 |
Exclude EBITDA relating to businesses sold or closed in the period | (18) | (48) | (102) | (72) | 4 |
Adjusted EBITDA excluding businesses sold or closed in the period | 279 | 299 | 625 | 605 | 744 |
Net debt per note 17 | 1,560 | 2,154 | |||
Net debt to Adjusted EBITDA ratio | 2.58x | 2.90x |
1 Rolling 12 month figures for
Page 42
Alternative Performance Measures
D. Reconciliation of quarterly year-on-year underlying organic revenue growth1 and regional year-on-year organic revenue growth1
Underlying results | 2020 Organic Revenue Growth | |||||
Q1 | Q2 | H1 | ||||
Secure Solutions | 2.9% | (3.2%) | (0.2%) | |||
Cash Solutions (total) | (2.3%) | (30.0%) | (16.5%) | |||
Cash Solutions (ex RTS)2 | (4.3%) | (39.3%) | (22.4%) | |||
Total Group | 2.5% | (5.3%) | (1.5%) | |||
Underlying results | 2019 Organic Revenue Growth | |||||
Q1 | Q2 | H1 | Q3 | Q4 | FY | |
Secure Solutions | 4.7% | 4.5% | 4.6% | 4.6% | 4.5% | 4.5% |
Cash Solutions (total) | 4.4% | 0.3% | 2.3% | 2.3% | 3.1% | 3.0% |
Cash Solutions (ex RTS)2 | (7.2%) | (13.5%) | (10.4%) | (10.5%) | (7.1%) | (6.9%) |
Total Group | 4.7% | 4.1% | 4.4% | 4.4% | 4.4% | 4.4% |
1 Organic revenue growth has been calculated by adjusting underlying constant currency revenue growth to remove the effect of acquisitions in the current and prior periods. In computing organic revenue growth, 2020 revenue to June has been adjusted by £1m to reflect the acquisition of a Canadian security systems company during the period. Revenue in 2019 has not been adjusted.
2 RTS relates to Retail Technology Solutions businesses in
2020 Regional Organic Revenue Growth | ||||||
Underlying results | Q1 | April | May | June | Q2 | H1 |
Africa | (0.1%) | (4.6%) | (1.0%) | (1.1%) | (2.3%) | (1.5%) |
6.9% | 5.4% | 2.0% | 4.2% | 3.9% | 5.4% | |
4.2% | 1.4% | (3.4%) | (2.3%) | (1.5%) | 1.4% | |
(1.4%) | (12.8%) | (13.6%) | (8.3%) | (11.6%) | (6.5%) | |
Secure Solutions | 2.9% | (3.0%) | (5.1%) | (1.6%) | (3.2%) | (0.2%) |
Cash Solutions | (2.3%) | (35.5%) | (33.5%) | (20.0%) | (30.0%) | (16.5%) |
2.5% | (5.8%) | (7.5%) | (2.9%) | (5.3%) | (1.5%) |
Page 43
Alternative Performance Measures
E. Reconciliation of statutory results by segment to underlying results by segment
Statutory results total operations | Onerous contracts | Disposed businesses | Underlying results at actual rates | Exchange differences | Underlying results at constant rates | |
Revenue by reportable segment (£m) | ||||||
Six months ended | ||||||
Africa | 197 | - | - | 197 | - | 197 |
1,357 | - | (2) | 1,355 | - | 1,355 | |
449 | - | (6) | 443 | - | 443 | |
1,165 | (12) | (17) | 1,136 | - | 1,136 | |
Cash Solutions | 357 | - | (135) | 222 | - | 222 |
3,525 | (12) | (160) | 3,353 | - | 3,353 | |
Six months ended | ||||||
Africa | 211 | - | - | 211 | (11) | 200 |
1,309 | - | (6) | 1,303 | (18) | 1,285 | |
453 | - | (11) | 442 | (5) | 437 | |
1,299 | (60) | (26) | 1,213 | 2 | 1,215 | |
Cash Solutions | 535 | - | (262) | 273 | (7) | 266 |
3,807 | (60) | (305) | 3,442 | (39) | 3,403 | |
Year ended 31 | ||||||
Africa | 425 | - | - | 425 | (24) | 401 |
2,703 | - | (9) | 2,694 | (47) | 2,647 | |
940 | - | (24) | 916 | (21) | 895 | |
2,590 | (86) | (51) | 2,453 | (7) | 2,446 | |
Cash Solutions | 1,100 | - | (541) | 559 | (16) | 543 |
7,758 | (86) | (625) | 7,047 | (115) | 6,932 | |
Adjusted PBITA by reportable segment (£m) | ||||||
Six months ended | ||||||
Africa | 15 | - | - | 15 | - | 15 |
82 | - | - | 82 | - | 82 | |
36 | - | - | 36 | - | 36 | |
70 | - | (1) | 69 | - | 69 | |
Cash Solutions | 27 | - | (11) | 16 | - | 16 |
Adjusted PBITA before corporate costs | 230 | - | (12) | 218 | - | 218 |
Corporate costs | (31) | - | - | (31) | - | (31) |
Total Group Adjusted PBITA | 199 | - | (12) | 187 | - | 187 |
Six months ended | ||||||
Africa | 17 | - | - | 17 | (2) | 15 |
61 | - | - | 61 | 1 | 62 | |
31 | - | - | 31 | (1) | 30 | |
92 | - | (2) | 90 | 2 | 92 | |
Cash Solutions | 60 | - | (36) | 24 | - | 24 |
Adjusted PBITA before corporate costs | 261 | - | (38) | 223 | - | 223 |
Corporate costs | (27) | - | - | (27) | - | (27) |
Total Group Adjusted PBITA | 234 | - | (38) | 196 | - | 196 |
Year ended 31 | ||||||
Africa | 30 | - | - | 30 | (2) | 28 |
136 | - | - | 136 | 1 | 137 | |
70 | - | (1) | 69 | (2) | 67 | |
179 | - | (4) | 175 | - | 175 | |
Cash Solutions | 134 | - | (77) | 57 | (1) | 56 |
Adjusted PBITA before corporate costs | 549 | - | (82) | 467 | (4) | 463 |
Corporate costs | (48) | - | - | (48) | - | (48) |
Total Group Adjusted PBITA | 501 | - | (82) | 419 | (4) | 415 |
Page 44
Alternative Performance Measures
F. Reconciliation of underlying prior period results by segment
Underlying as previously reported | Movements in businesses sold and completed or closed1 | Restated underlying results at actual rates2 | Exchange differences3 | Underlying results at constant rates2 | |
Revenue by reportable segment (£m) | |||||
Six months ended | |||||
Africa | 211 | - | 211 | (11) | 200 |
1,309 | (6) | 1,303 | (18) | 1,285 | |
453 | (11) | 442 | (5) | 437 | |
1,239 | (26) | 1,213 | 2 | 1,215 | |
Cash Solutions | 535 | (262) | 273 | (7) | 266 |
3,747 | (305) | 3,442 | (39) | 3,403 | |
Year ended | |||||
Africa | 425 | - | 425 | (24) | 401 |
2,703 | (9) | 2,694 | (47) | 2,647 | |
940 | (24) | 916 | (21) | 895 | |
2,504 | (51) | 2,453 | (7) | 2,446 | |
Cash Solutions | 1,100 | (541) | 559 | (16) | 543 |
7,672 | (625) | 7,047 | (115) | 6,932 | |
Adjusted PBITA by reportable segment (£m) | |||||
Six months ended | |||||
Africa | 17 | - | 17 | (2) | 15 |
61 | - | 61 | 1 | 62 | |
31 | - | 31 | (1) | 30 | |
92 | (2) | 90 | 2 | 92 | |
Cash Solutions | 60 | (36) | 24 | - | 24 |
Adjusted PBITA before corporate costs | 261 | (38) | 223 | - | 223 |
Corporate costs | (27) | - | (27) | - | (27) |
Total Group Adjusted PBITA | 234 | (38) | 196 | - | 196 |
Year ended 31 | |||||
Africa | 30 | - | 30 | (2) | 28 |
136 | - | 136 | 1 | 137 | |
70 | (1) | 69 | (2) | 67 | |
179 | (4) | 175 | - | 175 | |
Cash Solutions | 134 | (77) | 57 | (1) | 56 |
Adjusted PBITA before corporate costs | 549 | (82) | 467 | (4) | 463 |
Corporate costs | (48) | - | (48) | - | (48) |
Total Group Adjusted PBITA | 501 | (82) | 419 | (4) | 415 |
Other financial KPIs (£m) | |||||
Six months ended | |||||
Profit before tax | 175 | (34) | 141 | - | 141 |
Profit after tax | 129 | (25) | 104 | - | 104 |
Earnings | 119 | (22) | 97 | - | 97 |
Earnings per share (p) | 7.7 | (1.4) | 6.3 | - | 6.3 |
Operating cash flow4 | 209 | (45) | 164 | - | 164 |
Year ended | |||||
Profit before tax | 383 | (76) | 307 | (2) | 305 |
Profit after tax | 280 | (56) | 224 | (1) | 223 |
Earnings | 263 | (50) | 213 | (1) | 212 |
Earnings per share (p) | 17.0 | (3.2) | 13.8 | (0.1) | 13.7 |
Operating cash flow | 633 | (119) | 514 | - | 514 |
1 Disposed businesses include the results of all businesses that have been sold or closed by the Group between
2 Underlying results are APMs as defined and explained on page 39 and, for both 2019 and 2020, they exclude the results of businesses sold as part of the conventional cash disposal, the effect of onerous contracts and specific and other separately disclosed items. Underlying results are reconciled to statutory results on page 4 and 44.
3 The results of both comparative periods have been re-presented at average exchange rates for the six months ended
4 Underlying results for operating cash flow in
Page 45
Supplementary information
For further enquiries, please contact: | ||
Director of Investor Relations | +44 (0) 207 9633189 | |
Media enquiries: | ||
Head of Media | +44 (0) 759 5523483 | |
Press office | +44 (0) 207 9633333 |
High resolution images and b-roll are available to download from the G4S media library, available through the results centre at www.g4s.com.
Notes to Editors:
G4S is the world’s leading global, integrated security company, specialising in the provision of security services and solutions to customers. Our mission is to create material, sustainable value for our customers and shareholders by being the supply partner of choice in all our markets.
G4S is quoted on the London Stock Exchange and has a secondary stock exchange listing in
Presentation of Results:
A webcast for investors and analysts is taking place today at 09.00 and can be viewed by webcast using the following link:
https://kvgo.com/IJLO/G4S_plc_Half_Year_Results_2020
Should you prefer to join by telephone, you can do so by dialling one of the following telephone numbers and entering the code: 5038810#
Standard international number: +44 (0) 20 3003 2701
Financial Calendar:
November 2020 – Q3 2020 Trading update
Page 46
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