Group 4 Securicor Interim Results to 30 June 2006.

Presentation on theme: "Group 4 Securicor Interim Results to 30 June 2006."— Presentation transcript:

1 Group 4 Securicor Interim Results to 30 June 2006

2 Chief Executive Officer Nick Buckles Introduction

3 Results Highlights  Group turnover up 8.5% to £2,189.8 million (2005: £2,019.0m)  Good organic turnover growth of 7.3% (2005: 6.9%)  PBITA up 4.7% to £120.1 million (2005: £114.7m)  Margin of 5.5% (2005: 5.7%) (excluding Germany cash services, margins improved to 5.9% from 5.8%)  Cash flow generation of £95.7 million, 81% of PBITA (2005: 63%)  Adjusted earnings per share increased to 4.9p (2005: 4.8p) (excluding Germany cash services, adjusted earnings per share is 5.3p)  Interim dividend up 30% to 1.69 pence per share (DKK 0.186) (2005: 1.30p/DKK 0.143)  Margin pressure continues in some European security services markets  Strong performances elsewhere, particularly in New Markets and the US  Substantive discussions underway for the divestment of Germany cash services

4 Trevor Dighton Chief Financial Officer Financial Summary

5 Continuing Turnover by Business Line Six months ended 30 June 2006 Note : At 2006 exchange rates £m

6 Continuing Turnover by Geography Six months ended 30 June 2006 Note : At 2006 exchange rates £m

7 Continuing PBITA by Business Line Six months ended 30 June 2006 Note : At 2006 exchange rates £m

8 Continuing PBITA by Geography Six months ended 30 June 2006 Note : At 2006 exchange rates £m

9 Continuing PBITA Margin by Business Line Six months ended 30 June 2006 Note : At 2006 exchange rates %

10 Continuing PBITA Margin by Geography Six months ended 30 June 2006 Note : At 2006 exchange rates %

11 Profit and Loss Account Six months ended 30 June 2006 £m20062005 PBITA120.1112.2 Interest (before pensions and financial instrument fair values) (21.8)(17.3) PBT (before amortisation, exceptional items, pensions interest and financial instrument fair values) 98.394.9 Amortisation(17.3)(15.4) Exceptional items-(19.3) Pensions interest and financial instrument fair values (0.6)(2.1) PBT80.458.1 Tax(24.6)(22.2) Discontinued operations-(4.3) PAT55.831.6

12 Taxation Six months ended 30 June 2006 £m Pre amortisation and pensions interest Amortisation and pensions interest Total Profit / (loss) before tax 98.3(17.9)80.4 Tax (charge) / credit (30.0)5.4(24.6) Tax rate30.5%

13 Earnings per Share Six months ended 30 June 2006 £m20062005 PBITA from continuing operations120.1112.2 Interest (before pensions and financial instrument fair values) (21.8)(17.3) 98.394.9 Tax(30.0)(30.6) Adjusted PAT68.364.3 Minorities(6.0)(4.1) Adjusted profit attributable to shareholders 62.360.2 Average number of shares (m)1,266.31,265.1 Adjusted EPS (p)4.9p4.8p Adjusted EPS excluding Germany Cash Services is 5.3p

14 Balance Sheet 30 June 2006 £m June 2006 June 2005 December 2005 Goodwill and other intangibles 1,4351,3911,441 Tangible fixed assets346343355 Other non-current assets158144167 Current assets (excl cash)836807866 Current liabilities (excl debt) (788)(749)(859) Non-current liabilities (excl debt) (343)(368)(343) Net debt(670)(653)(657) Net assets974915970

15 Operating Cash Flow Six months ended 30 June 2006 £m20062005 Group PBITA118.6110.7 Depreciation43.244.8 Working capital movement (33.3)(42.7) Cash generated from operations 128.5112.8 Capital expenditure(32.8)(42.8) Operating cash flow95.770.0 Operating cash flow as % of PBITA 81%63%

16 Reconciliation of cash generated by operations 30 June 2006 £m2006 Operating cash flow (G4S definition)95.7 Add back capital expenditure32.8 Cash outflow on exceptional items and discontinued operations (9.8) Additional pension contributions(24.2) Tax paid(38.4) Cash from operating activities (statutory definition) 56.1

17 Cash Flow Six months ended 30 June 2006 £m20062005 Cash from operating activities (statutory definition) 56.143.9 Interest(22.7)(23.8) Net capital expenditure(32.8)(42.8) Acquisitions, disposals and others(39.8)(29.6) Movement in net debt(39.2)(52.3) Exchange movement26.8(14.6) Opening net debt(657.3)(586.4) Closing net debt(669.7)(653.3)

18 Pensions Six months ended 30 June 2006  Actuarial assumptions rolled forward from December  Financial assumptions updated to June  Short-term volatility during the period  Discount rate of 5.4% adopted in June  Deficit at June the same as December : £217m (£152m after tax)  Increases in asset values and discount rate offset by increase in inflation  Additional cash contributions of £24.2m for year paid in H1 (no P&L implications)  Hold 70% of assets in equities and believe in long-term equity outperformance over bonds

19 Dividend Six months ended 30 June 2006  Interim dividend of 1.69p per share (£21.4m)  Increase of 30% on 2005 interim dividend  Will be paid in December  Dividend cover (on adjusted EPS) 2.9 times  Dividends to be progressively increased so as to reduce cover to 2.5 times over the medium-term

20 Chief Executive Officer Nick Buckles Trading Review

21 Organic Turnover Growth Six months ended 30 June 2006 Europe North America New Markets Total Manned Security4.5%7.8%17.4%7.8% Security Systems4.1%(17.6)%25.9%6.5% Cash Services4.9%3.6%16.6%6.2% Total4.6%7.4%17.8%7.3%

22 Manned Security * Includes share of associates Turnover £m EBITA * £m Margins At 2006 exchange rates H106H105H106H105H106H105 Europe703.7673.533.535.34.8%5.2% North America535.9497.328.926.55.4%5.3% New Markets295.2237.122.618.27.7% Exchange differences(37.0)(1.8) At actual exchange rates 1,534.81,370.985.078.25.5%5.7%

23 Manned Security Europe UK  Growth remained negative  Profit improvement due to cost control and synergy benefits  Customer retention rate improved to over 90%  Licensing completed on schedule  Positive organic growth expected to return in the second half Netherlands  Market continues to improve  Achieved double digit organic growth  Margins down slightly due to re-negotiation of Justice Services contract

24 Manned Security Europe France  Strong growth due to new contract wins  Aviation contract losses and labour cost pressures impacted margins Other  Good performances from Luxembourg, Finland, Ireland, Austria, Slovakia, Hungary and Denmark  Contract losses and price re-negotiations in Sweden in late 2005  Material contract reductions in Greece, without proportionate reduction in direct labour cost  Mandatory increases in labour costs in Israel, yet to be recovered

25 Wackenhut  Strong organic growth overall  Government and Nuclear sectors performed particularly well  New opportunities developing in Government sector  Well placed to take advantage of these new opportunities Manned Security North America

26  Strong organic growth of 17.4%, margins maintained at 7.7%  UAE, India, Kazakhstan, Macau and Argentina achieved strong growth of over 20%  Africa returned to growth, after a difficult 2005  South Africa back on track, following settlement of industry-wide strike action Manned Security New Markets

27 Manned Security Justice Services  Strong growth continued in the period  Margins weaker due to changes in re-bid monitoring contract  Won 3 year Immigration Removal Centre contract in Scotland  Opportunities in the Middle East and the UK

28 Security Systems Turnover £m EBITA * £m Margins At 2006 exchange rates H106H105H106H105H106H105 Europe170.9164.112.711.87.4%7.2% North America1.41.70.0 0.0% New Markets29.321.63.62.012.3%9.3% Exchange differences(1.6)(0.1) At actual exchange rates 201.6185.816.313.78.1%7.4% * Includes share of associates

29 Security Systems  Continued good performances from Denmark, UK and Israel due to strong market positions and excellent technical competencies  Lack of specialisation or critical mass in Netherlands, France, Belgium and Germany affecting H1 performance  New Markets achieved organic growth of 26%, with impressive performances from Africa and Middle East  Integration of European systems businesses into Security Services should be completed by year end

30 Cash Services Turnover £m EBITA * £m Margins At 2006 exchange rates H106H105H106H105H106H105 Europe352.8335.023.524.06.7%7.2% North America44.039.20.52.61.1%6.6% New Markets56.649.57.86.413.8%12.9% Exchange differences(9.1)(0.8) At actual exchange rates 453.4414.631.832.27.0%7.8% * Includes share of associates

31 Cash Services Europe Germany  Operating at a significant loss, impacting divisional results  No improvement in market conditions in 2006  Pricing environment remains difficult  New business won at increased prices  Major contract lost at much reduced prices  Disposal discussions expected to be completed in the second half

32 Cash Services Europe UK  Strong margins and good growth record maintained  Service levels continue to be high, customer satisfaction is good  Won some business from Post Office  Attack levels remain high, but police support is helping in some areas  Opportunities from traditional services and new product areas Others  Good margins maintained in the Netherlands  Strong growth and margin improvement in France  Hungary, Ireland and Belgium performing well  Sweden continues to improve, despite continued attacks

33 Cash Services North America & New Markets Canada  Slightly improved organic growth  Margins still impacted by operating costs relating to 2005 robbery  New management team in place  Benefiting from focus on direct labour costs and contract pricing New Markets  Continued strong organic growth of 16.6%  Particularly strong growth and margin development in Latin America, Middle East and Africa

34 Strategy & Outlook

35 Growth opportunities  Further opportunities in New Markets, as cash services businesses move through development phases  Global coverage ensures strong point of differentiation to service International Accounts  On-going opportunities in new and existing markets for Global Risks and Justice Services  Continued development of product innovation and expertise in a number of areas

36 Margin progression  Continue to drive growth in traditional sectors  Tight cost control  Effective management of resources  Focus on bringing underperforming businesses into line with group’s margin targets

37 Acquisitions & Divestments  Acquisition strategy remains unchanged  Bolt-ons across all service areas – several acquired during the period  Fill geographic gaps in Security Services, including Brazil, Spain, Portugal and South Korea  Carefully selected acquisitions in Cash Services  The right businesses, in the right markets, with the opportunity to deliver appropriate level of return on investment

38 Overall Summary & Outlook  Solid set of results – continuing to build on the platform created by the merger  Despite challenges in some markets, businesses performing well overall  Germany cash services expected to be sold in the second half  Security systems and manned security to be combined by the year end  Expecting to achieve strong underlying performance in 2006  Good earnings growth to continue into the future

39 Q&A

40 Group 4 Securicor Interim Results to 30 June 2006