G4S, the security firm, has delivered an upbeat trading statement for the nine months to September 30th, despite reiterating that it will take a 50m-pound hit from the Olympic fiasco.
It has stated that its financial position continues to be strong and it "remains on track to meet its cash conversion target of 85% of PBITA [profit before interest, tax and amortisation] for the full year."
Regarding its provision for the Olympics it said: "Our current estimate remains that the loss on the London 2012 contract will be in the region of £50m and this amount was provided for at the half year and taken as an exceptional item. This estimate is based on our current expectation of the financial outcome including reasonable estimates of costs where at this date there is still uncertainty."
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In the first nine months of 2012, overall revenues compared to the same period last year, excluding the London 2012 contract, grew by 6.3% at constant exchange rates and by 4.1% at actual exchange rates. Including the London 2012 contract, revenues grew by 9.2% at constant rates and by 6.9% at actual exchange rates. As expected, the group operating margin was lower compared to the same period in 2011.
Overall the group margin was down 0.3% (excluding the London 2012 contract) on a constant currency basis, due to contract phasing in the UK government businesses and US government budgetary cuts. Cash solutions margins were broadly in line with the same period as last year, with a stronger performance in the cash solutions businesses in most developing markets.
The company explained that the US government market and some Continental European markets are still proving to be difficult and it expects these trends to continue. The North American commercial businesses are continuing to perform strongly and the UK has shown an improved performance. Its developing markets businesses, which account for more than a third of group profits, continue to achieve strong results.
It also stated that: "Our restructuring measures taken in 2012 to reduce overhead costs and continued focus on business improvement should help margins improve in 2013."
To September 30th ,overall organic growth was good at 5.5% (8% including the London 2012 contract), with 9% in developing markets and 4% (8% including the London 2012 contract) in developed markets.
Breaking this down by divisions:
In secure solutions, organic growth was 6% (9% including the London 2012 contract), despite an 11% decline in the US classified government business. Overall, growth was helped by a continued strong performance in developing markets, UK government and North America commercial businesses.
In cash solutions, organic growth was 3% overall. Developing markets grew 10% and developed markets were broadly flat. Organic growth in developed markets is expected to improve as new contract wins in the UK come onboard fully.
During the first nine months of the year, it also invested £8m in deferred consideration in respect of prior year acquisitions and £95m in capability-building acquisitions such as a leading security provider in Brazil, and fire and safety consulting businesses in Ireland, Netherlands and Belgium.
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