G4S results impresses as improved cash flow helps trim debt

G4S impressed investors with full year results as it reported progress with its turnaround strategy delivered revenue growth of 6.3% and earnings growth of 16.6%.

The total dividend of 9.41p per share was held at the same level as the prior year, as statutory revenue for the calendar year rose 10.6% to £7.6bn and profits before interest, tax and amortisation were up 17.9% on a statutory basis to £461m.

Underlying numbers, at constant exchange rates and excluding results from businesses identified for sale or closure and onerous contracts, showed revenues up 6.3% to £6.8bn, with PBITA up 10% to £454m.

Helped by a focus on working capital management, operating cash flow, after pension deficit contributions of £39m, was increased by almost two thirds to £638m, leading to net debt shrinking slightly to £1.67bn from £1.78bn.

This meant the group's year-end ratio of net debt to EBITDA improved to 2.8 times from 3.4 a year before.

Management have pledged to maintain the dividend until net debt/EBITDA is below 2.5x.

Based on the transformation strategy set out at the end of 2013, chief executive Ashley Almanza said "good progress" had been made in 2016.

"We now have much stronger foundations, growing competitive capabilities and an attractive array of market opportunities. Our transformation strategy is expected to produce further performance improvements and underpins our aim of delivering sustainable, profitable growth."

G4S's two business segments are now Secure Solutions, which includes running prisons, detention centres and airport security, and Cash Solutions, where the company transports, processes, securely stores and manages cash around the globe.

During the year the FTSE 250 group won new contracts with an annual value of £1.3bn, the same as the previous year, and amassed a total contract value of £2.5bn, up from £2.4bn in 2015.

The pipeline was replenished and grown to an annual value of £6.8bn at the 31 December year end, with contract retention rates of around 90%.

On outlook, Almanza said 2016, the Group made good progress with its transformation strategy. We now have much stronger foundations, growing competitive capabilities and an attractive array of market opportunities. We believe that the long-term demand for our core services remains positive and that the Group's transformation strategy will produce further performance improvements and underpin our aim of delivering sustainable, profitable growth.