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G4S Plc Organic revenue growth of 2.5%

G4S Plc (LON:GFS) provided the following update for the three months ended 30 September 2018. All figures and commentary are underlying, unaudited and stated at constant exchange rates. All comparisons are with the third quarter 2017, unless otherwise stated.

G4S CEO Ashley Almanza said “Organic revenue growth of 2.5% in the third quarter compares with 0.2% in the first half of 2018. Strong organic growth rates in security services in North America and Asia and in Cash technology solutions were partially offset by lower revenues in Benelux and conventional cash services.

We continue to exercise commercial discipline in markets where labour supply is tight and whilst this is expected to constrain revenue growth in 2018, our new contract wins and substantial, high quality pipeline provide good momentum into 2019”.

Group

Organic revenue growth was 2.5% for the third quarter, after 0.2% for the first six months, resulting in growth of 1.1% for the first nine months of 2018.

Secure Solutions

Organic growth in security revenues was 3.4% and this was partially offset by lower revenues in care and justice services, leading to 2.5% overall growth in Secure Solutions. All regions posted growth in security revenues.

In Africa and Asia, growth was 3.6% and 6.5% respectively. We continued to maintain a strong focus on premium security segments in these markets and this is reflected in our pipeline and sales.

In Europe & Middle East, security revenue was up 0.2% as growth in the UK and Middle East was partially offset by lower revenues in Benelux, reflecting self-constrained bidding in tight labour markets.

In the Americas, revenues rose by 5.7%, underpinned by a 6.5% increase in North America, where the combination of our manned security and technology enabled security solutions continued to generate a very positive response in the market.

Cash Solutions

Organic revenue growth was 2.9% as strong growth in technology enabled cash solutions, such as Retail Cash Solutions (RCS) and Cash360, more than offset lower revenues in conventional cash services. We now have over 23,000 cash automation locations (H1 2018: 21,500).

We continue to see strong interest in our technology and outsourcing solutions from both banks and retailers and, in October, we won another large retail store programme to implement G4S RCS across c600 stores in the USA at the end of Q1 2019.

Our pipeline in this new service area remains strong and we believe that this trend will accelerate as banks and retailers adopt new technology enabled cash solutions and increasingly outsource cash management to specialist service providers such as G4S.

We are well positioned to support and benefit from these changes with our strong market shares, established national networks and industry leading software and service solutions. We are continuing to invest in proprietary software and service development and sales capability to support and stimulate this important industry wide change. We believe this will fundamentally re-shape the way in which cash is managed across both developed and developing markets and expect that this will drive a positive change in our service and revenue mix over time.

Outlook

Our revenue growth, favourable sales mix and productivity programmes underpin our PBITA for 2018 which, after investment in new products and services, we expect to be in line with 2017 on a constant currency basis.

The Group’s new contract wins and substantial, high quality pipeline provide good revenue momentum into 2019.

G4S will announce FY 2018 results on 12 March 2019.