Full Year 2014 G4S PLC Earnings Presentation

GFS.L - G4S PLC
Full Year 2014 G4S PLC Earnings Presentation
Mar 10, 2015 / 09:00AM GMT 

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Corporate Participants
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   *  Ashley Almanza
      G4S plc - Group CEO
   *  Himanshu Raja
      G4S plc - CFO
   *  Helen Parris
      G4S plc - Director of IR

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Conference Call Participants
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   *  Rob Plant
      JPMorgan - Analyst
   *  Andy Grobler
      Credit Suisse - Analyst
   *  Kean Marden
      Jefferies - Analyst
   *  Ed Steele
      Citi - Analyst
   *  George Gregory
      Exane BNP Paribas - Analyst
   *  Sylvia Foteva
      Deutsche Bank Research - Analyst
   *  Stephen Rawlinson
      Whitman Howard - Analyst
   *  Karl Green
      Credit Suisse - Analyst
   *  Paul Checketts
      Barclays - Analyst
   *  Gideon Adler
      Redburn Partners - Analyst
   *  Allen Wells
      Morgan Stanley - Analyst

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Presentation
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 Ashley Almanza,  G4S plc - Group CEO   [1]
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 Good morning, everybody. A very warm welcome to everyone here and everyone joining by webcast to the G4S 2014 full-year results presentation.

 I'm joined, as usual, by Himanshu Raja, our Group CFO, and we have other members of the executive team in the audience. So for those of you attending in person, please take the opportunity afterwards -- looking ahead, I believe we are offering refreshments. So please take the opportunity, if you can, to stay on and chat to the rest of the management team.

 Before we begin, the usual customary obligatory disclaimer, which I'll ask you please to read in your own time.

 This is our agenda for this morning. We'll start with a review of the results highlights for 2014. We'll then turn to each of the regions, do a business review, provide a short update on our strategy and our plan. And then I'll hand over to Himanshu who will take us through the numbers in a bit more detail. We'll wrap up and there will be plenty of time for questions and answers.

 So results highlights; beginning with growth, our revenues and our sales pipeline.

 We saw strong growth again for 2014 in our emerging markets; up 8.9%. Very strong performance in North America, a continuation of what we saw in the first half of the year; up 6.9% year on year. And in UK, Ireland and Europe, as expected, we saw revenues decline slightly.

 Meaning that for the Group overall we saw revenues rise by 3.9%. And this is after taking into account the previously reported cessation of three major contracts; electronic monitoring in the UK, Dutch prisons contract in Europe and Manus refers to Manus Island, a very large contract we had with the Australian Government in Papua New Guinea.

 I'm pleased to say that we continued in the second half with the progress that we showed in the first half of the year in building our sales and our pipeline.

 We had new contract sales of GBP2.1 billion for the year, which was roughly a 10% increase on the previous year. That's total contract value. Roughly one-half of that, GBP1.1 billion, relates to annual contract value.

 And at the same time, of course, when you have a successful year with new contracts, you're depleting your pipeline. So you need to put proper resource and attention to restocking that pipeline. And I'm pleased to say that we've been doing that energetically and with some success. And our pipeline stands at GBP5.5 billion at the end of the year.

 So we're building on a globally diverse revenue base and a globally diverse pipeline, which you'll see as we go through the presentation.

 Of course, at G4S our strategy is focused not only on growth but on productivity, and we believe that the combination of growth and productivity will create very material value for our shareholders in the long run.

 Our productivity programs, as I think you all know, go under the banner of accelerated best practice. We have a significant number of well-defined and now resourced programs targeting productivity initiatives. These cover operations, safe, reliable, effective and efficient operations; organizational efficiency; procurement, IT, property. And we're going to talk a bit more about that later in the presentation.

 The combination of top-line growth and the first signs of benefits from our restructuring programs and our accelerated best practice programs coming through; offset to some degree by our reinvestment, GBP20 million annual reinvestment, in sales and business development. But that combination saw profit before interest, tax and amortization, PBITA, rise by 7.9% to GBP424 million.

 Huge focus on cash flow across the Company in 2014. That will continue in 2015. We saw cash flow from our operating businesses rise to GBP526 million. That's a 25% year-on-year increase.

 Earnings up 11.7%. EPS up 5.4%. The difference between those numbers obviously reflecting the increase weighted average number of shares in issue after the placement in 2013.

 And the Board has recommended, on the back of the progress made and the prospects for the business, a 5% increase in the final dividend.

 Overall, I think, good progress but very clearly we're just getting started and we have a long, long way to go with our program.

 Let's turn now to the regions, starting, as we usually do, with Africa.

 Top-line growth over 10%. Very strong bottom-line growth. This is a combination of inherent operational gearing and some of our restructuring and ABP programs feeding through to the bottom line.

 Some of that is being reinvested in our sales and business development capability. In this area and in this region we still have a lot of work to do to get our sales and business development capability to the level that we want to see in order to really grasp the organic opportunity in Africa.

 We have focused on mining, oil and gas, risk services and security technology. Cleary, there's a lot going on in that space at the moment with the decline in commodity prices. But right now we have our hands full and we need to continue to invest in order to grow.

 In Asia Middle East revenues were up 5.7%. We started to make progress with the accelerated best practice in this region and the emphasis is on the word started. Because you will understand that this takes planning, then you have to go out and hire people, put them into the organization. It takes a while for them to connect with the rest of the organization and get some momentum. So we made a good start.

 The focus in Asia Middle East is on customer service management, direct labor efficiency, route planning and, of course, organizational efficiency.

 Here, too, we have invested very heavily in sales and business development, focusing on systems and technology, risk services, facilities management and care and justice services.

 After these investments, and after taking into account absorbing the impact of losing the Manus contract at the end of the first quarter, profits rose by 3.9%. Still significant investment to be made in this region to capture the full potential of the organic opportunity.

 Latin America, very strong top-line growth; almost 15%. And, pleasingly, this was across all markets and all sectors.

 Following the appointment of Martin Alvarez in November 2013, we then established Latin America as a standalone region in April 2014. You will remember that this was originally part of one region called the Americas, covering both North America and South America, and it was run out of North America.

 We were very fortunate in securing Martin Alvarez as our Regional President based in Latin America. He's lived and worked in Latin America all of his working life. He's lived and worked in eight countries in Latin America. And we set about working with Martin to build a leadership team. And we now have a CFO, a regional sales director, an ops director, an HR director and a number of new line managers looking after countries or clusters of countries.

 And that process continues, but I'm really delighted with the progress that we've made in building a Latin American management team living and working in Latin America. And I think that will pay huge dividends going forward.

 Here, too, we're investing in sales and business development right across the board; all sectors, all service lines.

 And we're just getting started with building pan-regional accounts and connecting the Latin American sales effort to our global account management, which is run by Mel Brooks -- Mel if you want to put your hand up. Mel Brooks, who joined us in 2014 from previously running India, leading our strategy and commercial global effort.

 And so Mel is working with Latin America and the other regions to improve our global account management and our growth in global accounts generally.

 We are just getting started with accelerated best practice programs in Latin America. Again, the process is one of, first of all, getting the management team on board with the program and then going out and hiring subject matter experts. So, for example, we've now put our first subject matter expert in labor efficiency into Latin America, working for Martin Alvarez.

 So you build the capability and then you go after the opportunities. We're just getting started. There is no benefit in these numbers for any of our ABP programs.

 After absorbing a mandatory statutory wage increase in Brazil, we posted year-on-year growth of 11.4% on the bottom line.

 Europe, I mentioned earlier, declined slightly revenues of 0.6%. That reflects the cessation of the Dutch prison contract at the end of the first quarter.

 Here, too, we have mobilized our accelerated best practice programs under the new leadership of Graham Levinsohn.

 Many of you will know Graham Levinsohn. He's been in the Company for a while. He took on the leadership of Europe at the end of 2013. His regional management team has been almost entirely replaced. Most of the country leadership remains in place, but we have had a heavy program and still are recruiting sales people.

 You may remember that we had no regional sales leader at all in Europe and many of our countries did not have a sales director or a sales leader. And we're attending to that, as we must do, if we are going to grow our pipeline and that's what we intend to do.

 We have focused on organizational efficiency, labor efficiency and procurement. Our restructuring programs have been focused on the Netherlands, Belgium and Finland. These were launched at the end of 2013. They are on track and they are delivering bottom-line benefits.

 Combination of a decline in revenue, benefits coming through from restructuring and ABP programs, to some degree offset by reinvesting in sales and business development, saw profits rise by 3.7%.

 North America. I said at the half year that I thought North America was the standout performance regionally and I think they probably carry that mantle, won that prize, at the end of term. Full-year performance really very, very pleasing; very impressive performance in a highly competitive market.

 Revenues up 6.9%, again broadly based but making good progress in some of our targeted vertical segments.

 This is a region which has probably had more management structure and more process than the rest of the Group. And so our focus has been, over the last 18 months, on sales, getting the pipeline back up and getting our sales performance moving with less attention paid to accelerated best practice.

 Generally a well-run region, but we recognize that there's always room for improvement and, under new leadership, John Kenning joined us at the end of the year. We're now turning our attention to some of our accelerated best practice opportunities. This is labor and overhead efficiency, alongside procurement, IT and shared services, which we started earlier in the year.

 Bottom line. Combination of top-line growth and operating leverage saw profits rise by, I think, a fairly impressive almost 34%.

 The team in North America successfully implemented health plans which are compliant with the Affordable Care Act. Most of the plans were already compliant or substantially compliant, so this was not as big a change for us as perhaps the industry as a whole. Nevertheless, we're not making any assumptions about this improving, nor detracting, from our competitiveness in the market.

 I mentioned a change in regional leadership. Grahame Gibson, I think, will be known to many of you. He's been with our Company for a long time, been a longstanding member of the Board. Grahame will retire from the Board at the AGM and from the Company in October. This has been a planned retirement and we have been working for some time looking for the ideal successor to Grahame.

 Again, we've been, I think, very, very fortunate with the appointment of John Kenning. John came previously from OfficeMax but before that a long career in technology and, indeed, security technology. He worked for Tyco for many years; deep experience in national and global account management and, clearly, a good understanding of security technology. I think he's going to add -- he is already, in fact, adding a lot to our Group executive team and undoubtedly making a contribution in the region.

 John is working with the rest of the North America team, a very strong line team in North America, and they're working together to strengthen our pipeline even further. We enter 2015, I think, with a very good pipeline in North America and I think we're quite excited about the prospects in that market.

 UK and Ireland. Again, as expected, revenues declined slightly. This was fundamentally a reflection of the electronic monitoring contract coming to an end. A little bit of housekeeping as we went through the contract portfolio and moved out contracts, which were, frankly, not profitable and somebody else could do a better job of serving.

 Restructuring has, as you know, been focused in Europe and the UK. And our restructuring program in the UK is making good progress and delivering benefits, alongside the shared service center, which Himanshu and his team have been leading. And we went live with that shared service center in the third quarter of 2014.

 I think this brings together nine disparate accounting systems and multiple IT systems. And we will begin in 2015, I think, to really see the benefits of that project.

 Profits. Despite revenues coming down, the benefits of our restructuring program flowed through to the bottom line and profits were up 8.2%.

 Here, too, we have new regional leadership. I was delighted at the start of this year to confirm Peter Neden as the Regional President for this region. Peter has a career-long experience in the services industry. He's been with G4S for a considerable time. He knows the UK extremely well.

 His specialty has been business development and government contracts and he's already making a very positive impact on that business.

 The focus in the UK is very, very clearly on rebuilding our pipeline in all of our segments, including central and local government services.

 So I want to move from the regional overview, please, to just talk briefly about our strategy.

 I mentioned earlier that our strategy brings a number of components together. Behind our strategy we have a clear plan and that plan brings together growth and productivity, together with active portfolio management, active risk management and disciplined financial management. And we believe that the combination of those components will create material value for our shareholders.

 This graph is quite busy and really the purpose of the chart is to show that, first of all, the size of the prize is considerable. If you look at the middle column there, we're going after some very substantial prizes.

 And on the right-hand side, what we're highlighting here is that our business plan is underpinned by a clearly defined set of programs. Each of those programs is resourced. Each program is reflected in the performance contracts of the 220 members of our global leadership team across our business globally.

 I want to just take a moment to update you on the progress that we've been making in a number of these areas.

 Starting with people and values, our entire program rests upon our customers, our people and our values.

 Now you'll know that there's been significant management change in this Company over the last 18 months. By the middle of this year we will have eight new members of the 12-strong Group executive committee. That includes Himanshu, our CFO; Mel, our Group Commercial and Strategy Director. Four of the six regions have new leaders, so quite considerable change in the Group executive team.

 In addition, we have set about strengthening the regional leadership teams. I commented on that a moment ago. In each of our regions where we have new leaders we've built new teams around them. And, indeed, in the regions where we've not changed leadership, we've continued to strengthen the regional management teams.

 Across our global leadership team of 220 we have made 114 new appointments; 64 external hires and I'm really delighted to say 50 internal promotions, reflecting one of the early views that we had, and one of the early views I had when I joined the Company, that the operating culture was largely strong and sound. We've seen some of our good people come through and be promoted internally, which is great to see.

 Our new hires have been focused in a number of areas: sales; business development; general management, that is to say, business unit managing directors, country managing directors; operations; finance -- I'd say almost the entire finance leadership team has been replenished and we have a really strong finance team under Himanshu's leadership; and risk management, also coming under Himanshu. There has been a fundamental change in the way that we resource and approach risk management.

 And I think all of these changes will pay very substantial dividends as we move through our business plan.

 Of course, we are making additional hires beyond the global leadership team, particularly in sales and business development.

 I want to take a minute to talk about values. Given the recent history, the last three years in our corporate history, it was very important that, as a leadership team, we set about reinforcing the Group's values. The Group has had for many years good values, but at times we've perhaps not given them the attention they deserved.

 So we set about in a structured systematic way to reinforce those values through communication, training and, of course, compliance.

 We added a new value, health and safety, which we, together, have talked about before. And our goal in health and safety is very simple. It's zero harm. We understand that we operate a very large company in complex environments, doing inherently risky work, so we don't set that goal lightly. We know it's difficult to achieve, especially in relation to attack-related injuries and, sadly, fatalities. But, nevertheless, it is a proper goal for our Company.

 Health and safety has a virtue of its own. Everybody here wants to be safe as they go about their business daily. Well, there's no reason why that doesn't apply to everyone in our Company. And everyone has an obligation to not only look after their own safety, but those around them; those with whom we work and those who we serve.

 There is, however, beyond the obvious rationale for health and safety, there are very, very strong and clear commercial reasons for focusing on this.

 Firstly, a business that has good health and safety performance generally, almost unfailingly, is a well-managed and commercially successful business. When you see a business that has good health and safety performance almost invariably that is a commercially high-performing business.

 Secondly, it's of growing importance to our customers. And I think our industry ignores this at their peril. There's no question, particularly our larger customers, but I have no doubt that it will become a pervasive criteria for our customers, they are interested in our health and safety performance and what we can do to help them with their health and safety performance.

 And I'm really, really delighted to say that in some of our businesses our customers are beginning to not only acknowledge but to value our health and safety performance.

 And I think that gives us a powerful incentive, apart from the obvious moral imperative, to go after health and safety, and go after it we did in 2014.

 Every single member of our global leadership team, 220 people, went through mandatory safety leadership training. Every single member of our global leadership team had safety objectives in their performance contracts in 2014 and they will have in their contracts, including me, in 2015.

 We substantially revised and improved our health and safety reporting and root-cause analysis and we put in place safety critical reviews aimed at identifying improvements in our health and safety practices.

 The follow up to those safety critical reviews, I can assure you, has been much more rigorous than perhaps it has been historically, with this getting the attention of the Board and the Group executive committee, as well as the folks across our organization who are charged with making the change.

 Notwithstanding all of that progress, and I really am pleased with the progress that we've made, our performance remains fundamentally unsatisfactory.

 I'm really sorry to report that in 2014 we lost 41 of our colleagues. That compares with 49 in 2013, but it is a very large and unacceptable number. 19 of those were in attack-related incidents. 22 were in non-attack related, principally road traffic incidents, which we must and will address aggressively.

 So, whilst we pay tribute to the courage and the commitment of our colleagues who really gave their lives serving our customers, protecting customers or their property, it serves to motivate me, the Executive team and everyone in the global leadership team to do a better job. And I can assure of one thing. Everyone in the global leadership team is committed to improving our health and safety performance.

 I'll end by saying this is of growing importance to our customers and I firmly believe it will increasingly become a distinctive part of G4S' service proposition, particularly to large customers.

 Now I want to move on to growth. We've talked through the presentation so far about sales and business development. We said 18 months ago we were going to invest between GBP15 million and GBP20 million incrementally in sales and BD and we have done that.

 Our run rate is up GBP20 million. We made 391 new hires in sales and business development.

 We said that we would extend proven services from one market into another market and we have started to do that.

 Most of this is happening intra-region at the moment. So particularly within Europe, UK, North America, but we are just beginning to find ways of transferring those services across regions. Progress is modest at this stage, but it's very clear that the promise is there.

 In service innovation and systems and technology, again, we've put more resource into this and we're beginning to move, in 2014, some of our new products and new service lines out of pilot phase into a commercial phase. And, of course, we continue to invest in vertical or sector specialists in extractive industries; ports, aviation and technology companies.

 And we invested in global account management, lots of work still to do in global account management, and customer satisfaction management.

 We have now in place a global tool so that we can measure periodically and systematically customer satisfaction across our business. And that's the first step in making appropriate interventions in improving customer satisfaction.

 Productivity. We've talked at some length about safety performance.

 Direct labor efficiency is probably our biggest and most complex best practice program. It's a multi-year program. We have now hired and deployed subject matter experts to each of our six regions, and Himanshu is working with the regions to get those subject matter experts moving forward with direct labor efficiency.

 Route planning and telematics. We've made more progress than we anticipated 18 months ago, but I remind you this is the first step. This is about, at this stage, getting our fleet equipped with telematic devices and hooked up to route-planning software. That's the first stage.

 The second stage, and perhaps the more difficult and more important stage, is getting the management routines and disciplines embedded in your operations so that you start to extract the benefits of that technology. And we are now starting that phase in 2015.

 Organizational efficiency and restructuring. Well, you know that we've led with restructuring in the UK and in Europe. We're now extending that to the other regions and to the corporate center. We've been investing very heavily in the corporate center; building finance, risk management, our global sales team, procurement, IT, for our global functions. And we now have to turn our attention also to efficiencies in the other regions and in corporate center.

 Procurement. You will know that this Company 12 months ago didn't have a global procurement function, didn't have a global procurement team. We didn't know really what we were spending the money on, who we were spending it with.

 We now have a Chief Procurement Officer and eight senior category managers working to that CPO and with the regions to target procurement saving opportunities in every part of our business. We have massively improved our visibility on how much we're spending, what we're spending it on and with whom we're spending the money.

 And that then is the first step for us to start looking at consolidating our supply chains and sitting down with our suppliers to have meaningful negotiations about better terms and conditions. We're at a very early stage, but the prize here is significant; addressable spend of GBP1.3 billion per annum.

 Our procurement team has hooked up with our IT team. Again, we had no global IT function. We didn't know how much IT cost us as a company. We made a first estimate of GBP120 million. We now know that that is north of GBP150 million per annum and we have a highly fragmented IT estate, which doesn't give us the sort of functionality and productivity a modern company should expect from IT.

 We have, I think, a highly capable new CIO, Nick Folkes, and the team around him, greater visibility on the total cost of ownership and, working with procurement, we are now beginning to put our first deals in place.

 We recently concluded deals with Google and with HP. Google will supply us with our global desktop applications, also known as productivity suites, at a lower cost and with higher functionality. And HP we've done a global, although not exclusive, global deal on end-user computing devices; gives us lower cost and better control of demand.

 There's two sides to the procurement equation. It's getting hold of the supply side and there's better control of demand, and we're going to get both of those in time.

 So pleased with the progress we're making but this is, again, a large multi-year opportunity for the Company.

 And then, of course, property costs, one of our largest costs. And we started with the UK beginning, as we should do, with head office. And the Group executive will be vacating its head office and moving in with our cousins in the UK region. We'll be living comfortably in a shared office in Victoria. And we're going to take that approach and extend it to all of our regions, having a close look at our property costs.

 I will hand over to Himanshu in a second.

 Portfolio management. You will remember that we did a deep and extensive review of our portfolio in 2013 and we identified a long tail of businesses in the portfolio.

 Some of the businesses in that tail were small with huge potential to grow and our objective was to keep them, invest in them, nourish and grow them and that's what we're doing.

 Some small- and medium-sized businesses lived in markets with adverse market structure, limited materiality and, frankly, a long history of poor profitability. We have sold eight businesses and we're discontinuing a further 20 businesses.

 This has a very significant positive effect in terms of reducing management dilution, these small businesses attracted a disproportionate amount of management time; it gives us sharper strategic focus; and we've realized some quite substantial proceeds in the process.

 So I think we can say we've made good progress with our portfolio management.

 This has been a collective effort. I want to acknowledge Soren Lundsberg at the back of the hall who's been instrumental in the execution of these transactions.

 CapEx. Working capital cash flow management has been an area of intense focus over the last 12 months and I'm going to hand over to Himanshu, who is going to take us through the financials and talk a bit more about those initiatives as well. Himanshu?

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 Himanshu Raja,  G4S plc - CFO   [2]
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 Thanks, Ashley, and good morning to everyone. You'll have seen from Ashley's presentation that we've made good progress in terms of operational and strategic execution against our plans. And I'm pleased to say that that progress is reflected in the overall financial performance of the Company.

 I'm going to take you through both our underlying performance as well as in more detail the specific items we refer to in our release, and that's consistent with the reporting framework we established, if you recall, at the beginning of 2013.

 Turning to the underlying numbers, these show the performance on a like-for-like basis at constant exchange rates for our continuing operations.

 Revenues are up 3.9% to GBP6.75 billion, with continued strong growth in emerging markets, which grew at 8.9% overall, strong growth in North America and, as expected, the 1% decline in Europe and in the UK and Ireland from the completion of our Dutch prisons and electronic monitoring contracts.

 PBITA at GBP424 million was up 7.9% from the GBP393 million base in 2013. And you'll know that the growth in PBITA was faster in both emerging and in developing markets, showing the operating leverage coming through in profit performance.

 Ashley has talked about the accelerated best practice. We've seen good traction on accelerated best practice, where we deploy it, and we see that benefiting both gross margin and in the reduction of overheads. And this is reflected in the overall operating margin of 6.3%; up 30 basis points year on year. And remember this is after GBP20 million investment we made in sales and business development, and is also after our corporate costs of GBP60 million.

 The corporate costs are up GBP19 million year on year, reflecting the very necessary investments we made in global functions in financial and risk management, in IT and in procurement. But it also reflects around GBP12 million of non-cash costs related to pensions and LTIPs, which we flagged to you at the half year.

 Our earnings were up 11.7% to GBP210 million and the earnings per share was 13.6p against 12.9p at the same time last year; an increase of 5.4% after the dilution effect of the share placing in 2013.

 And cash. Cash generated from continuing operations was GBP553 million, up 11.5%, and when you take the cash from our operating businesses that was up 25% to GBP526 million; the difference simply being the timing differences on the known one-off items, the receipt of the Olympic receivable of GBP76 million in 2013 and the GBP27 million receivable in 2014 following our EM settlement with UK Government.

 So a good overall improvement in cash and cash generation, but there remains more to do and I'm going to return in my close as to what more we can do on cash and cash improvement.

 Let me know turn to specific items. You recall at the half year we wrote back GBP23 million on profit on disposals to specific items. And the full year you see both charges and credits going through this line; the profit from discontinued operations of GBP63 million and GBP21 million of pension settlement gains. So let me go through the details, starting with contracts and other impairments.

 You'll be familiar with our contracts. We have new processes around risk management and governance of our contracts. Every quarter we perform an analytical and financial review of over 200 contracts. And those that warrant close inspection, we perform deep dives, using our Contract 360 process. And under IFRS we're required to review the outlook on these contracts on an annual basis.

 The GBP45 million increased provision is in respect of UK Government contracts, all of which were identified in our impairment review last year. So what you see going through the yearend is a true up, which reflects our best estimate of the future losses on the remaining lives of those contracts.

 In addition, as part of our normal yearend process, we also recorded a net GBP11 million charge from the re-measurement of the carrying value of assets and liabilities. You'll recall last year we did an extensive balance sheet review across the Company down to every operating unit and the GBP11 million simply represents a true up of that.

 And last, but not least, a GBP10 million charge for portfolio businesses that Ashley referred to, which we're in the process of selling or closing.

 On discontinued operations and profit on disposals, during the year we divested eight businesses and booked a profit on disposal of GBP71 million, principally from the sale of Canada Cash, from Sweden, from Norway and from our US government solutions business. And the GBP71 million profit was offset by GBP8 million of operating losses, giving us a net profit of GBP63 million.

 Together with the rationalization of our smaller portfolio businesses, these divestments sharpen our strategic focus, as Ashley talk about, and significantly enhance the quality of earnings of our continuing operations.

 On restructuring, the GBP29 million relates mainly to businesses in the UK and in Europe. We continuously monitor the implementation against all of our restructuring plans.

 And, to remind you, the investment we make in restructuring follows the same process as every call on capital. It must generate a double-digit internal rate of return, a good cash profile and, in the case of restructuring, a payback of between 12 and 36 months. And where there is a good economic case to improve competitiveness and reduce overheads, we will continue to look at these.

 And finally, tax, interest expense and non-controlling interests were a net credit of GBP20 million; principally from the recognition of our deferred tax assets.

 The bottom line on specific items was a GBP12 million charge compared to the GBP454 million at this time last year.

 Now let me turn to the bottom half of the income statement.

 Keying off the underlying PBITA of GBP424 million, our underlying interest charge was GBP120 million; GBP2 million lower than last year due to the lower average net debt during the year. And this includes a non-cash charge of GBP22 million for pension interest under IAS 19.

 For 2015 I expect the total interest charge, including pension interests, to be at around GBP115 million, with the reduction of GBP7 million due to a reduction in the overall IAS 19 pension deficit and due to the low yield rates that we see.

 You'll recall our debt largely comprises medium-term loan notes, which were issued at fixed coupon rates. So our core interest charge is, therefore, expected to be around GBP100 million for 2015.

 And finally tax. The effective tax for the year was 25% and I expect the same tax rate for 2015.

 The underlying profit after tax was GBP228 million and below the line I've shown the split of profit attributable to equity holders and then to minority interests.

 You'll know with the adoption of IFRS 10 and 11 we've seen a different profile of minority interests and for 2014 the minority interest is GBP18 million. And I expect this to continue to grow to just over GBP20 million in 2015.

 Let me now turn to net debt.

 You'll see the full movements on net debt shown on the waterfall chart there, starting with the net debt of GBP1.5 billion. You see an impact for IFRS 10, 11 of GBP19 million, really arising from the deconsolidation of cash in entities that we now equity account for. And this gives a restated opening net debt of GBP1.55 billion.

 Cash generated from our operating businesses was GBP526 million. And then we received the outstanding receivable of GBP27 million from the EM settlement. Total cash generated from continuing operations was, therefore, GBP553 million.

 In terms of investing activities, we invested GBP138 million in CapEx and this reflects both the new and more rigorous processes we have around capital discipline, but also the deferment of some of our spend as we start some Group programs under common capital umbrellas so that we spend once and we get the operating leverage wherever possible, such as our emerging IT programs and the program to transition our productivity suite to Google that Ashley referred to.

 For 2015 I expect CapEx to be around GBP150 million.

 The GBP47 million spend in restructuring was the flow through of the previously announced restructuring in 2013 and some 2014 restructuring.

 And finally, we received gross proceeds of GBP177 million from disposals.

 Let me turn to the use of funds.

 We paid interest and tax, GBP114 million and GBP81 million respectively.

 Our pension deficit payments were GBP42 million. Our defined contribution scheme, by the way, was closed to future accrual in 2011, so what the GBP42 million represents is the annual deficit payment plan, which is indexed at 6% per annum for the next eight years.

 Our dividends paid to equity and minorities, going across the chart, were GBP149 million. And then the EM settlement. And the balance at the end relates to discontinued operations, movements in customer cash balances, FX and net debt movements.

 We finished the year with net debt of GBP1.58 billion and net debt to EBITDA was 2.8 times; down from the 3.1 times at the half year, as expected.

 Let's look at financing.

 We remain soundly financed and have access to unutilized and committed funds of around GBP1 billion.

 In January of this year we refinanced our revolving credit facility, extending the maturity to 2020. And we had really strong interest and appetite from the market and were able to secure both improved pricing and terms and conditions. And we now have a facility with 16 relationship banks.

 We have no significant debt maturities until 2017 and continue to have flexible access to long-term capital markets.

 Together with the continued focus on driving operating cash flow, we expect our net debt to EBITDA to continue to come down in the medium term and to be within our comfort range of less than 2.5 times.

 Before handing back to Ashley, let me just turn to my last slide. You will now be familiar with our approach to disciplined financial management that we continued to implement throughout 2014.

 We operate a single pool of capital where all investment opportunities, including revenue and restructuring, need to deliver a greater than 10% internal rate of return and, for restructuring payback, a payback within 12 and 36 months.

 You know we have a more disciplined contract review process in terms of contracts we bid for and in the in-life review process, and I personally perform a financial review of our largest 200 contracts on a quarterly basis.

 We continue to look for restructuring opportunities to reduce overheads and to improve productivity and we have a strong focus on working capital management.

 Overall, 2015 was a good performance and you should not pencil in a 25% increase year on year on operating cash flow every year. And whilst we've made some progress on what I have previously called our cash matters agenda, with finance and operations working more closely together, we have more to do.

 DSO has improved modestly by two days on a rolling three-month average basis, but our DPO remains below our DSO. And on the procurement side, as we begin to strike new deals, we're looking to strike better working capital terms through those negotiations.

 And lastly, in November I reported that during 2014 we've significant strengthened our financial and risk-management capability across the Group.

 With that, let me hand back to Ashley.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [3]
------------------------------
 Thanks, Himanshu. Right, we're going to wrap up and then go to Q&A.

 We know that G4S is today the world's leading global integrated security company. Our mission is simple and clear. We want to be the supplier of choice in every service we offer and in every market in which we operate. And we know that if we achieve that consistently we'll be creating value for our customers and material value for our shareholders.

 To achieve that, we are now executing against a clear and focused strategy. We're building on a diverse revenue base and a diverse pipeline and we're investing in both growth and productivity. And we think the combination of those will create material value for this business.

 We made good progress in 2014 on a number of fronts; commercially, operationally and financially. But there is much, much more to do. We're really just getting started. The progress that we've made and the prospects for this business are reflected in the Board's recommendation to increase the dividend by 5%.

 Thank you very much for your attention and we'd be happy to take questions.

==============================
Questions and Answers
------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [1]
------------------------------
 Can I ask you, please, when asking a question raise your hand. We have roving microphones. If you give your name and affiliation we'd be grateful. And we're also joined by listeners and viewers on a webcast and we're going to take questions from the web as well.

------------------------------
 Rob Plant,  JPMorgan - Analyst   [2]
------------------------------
 Rob Plant, JPMorgan. The margin improved by 10 basis points in H1 and then it was 30 basis points for the full year, so 50 basis points H2. How much benefit was there from the discontinued businesses, which, presumably, didn't have the same margin as the Group? And how much was an improvement in H2 from the productivity cost initiatives?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [3]
------------------------------
 I'm going to ask Himanshu to cover the numbers in detail, but if I could just make a few overarching comments.

 As I mentioned in the presentation, in 2013 we set out a program to review our portfolio. We knew that in the long tail we had some businesses which had not only underperformed historically but that, more than likely, were going to underperform going forward.

 And our objectives -- we had multiple objectives, really. The first was to bring focus to management's efforts. The second was to improve the quality of the Company's earnings, because these underperforming businesses were not only generating lower returns, but volatile returns; loss making one year, profitable the next year.

 And so what you see coming out in disposals and discontinuances is the result of a systematic piece of work to improve the portfolio, improve our focus and improve the quality of earnings going forward.

 Himanshu, can you give some numbers around that, please?

------------------------------
 Himanshu Raja,  G4S plc - CFO   [4]
------------------------------
 Rob, if you trace through all the divestments, we, excluding government solutions, which is a proxy business, divested around GBP500 million of revenues and at overall margin of around 1.5%; so really were thin-margin businesses.

 I just want to add a note also on the 20 businesses in the process of being discontinued. Those are, as Ashley said, much smaller businesses but under the IFRS definition it's quite a narrow definition of what you can put through the discontinued line and what goes in continuing earnings.

 But just to illustrate, for example, we had a physical locksmith business in Finland, providing padlocks and secure locks. That's the type of business we're talking about, a really non-core small business where we realized good proceeds and good value for.

------------------------------
 Rob Plant,  JPMorgan - Analyst   [5]
------------------------------
 Thanks for that. So of those 20 and revenue and the profit loss contribution --

------------------------------
 Himanshu Raja,  G4S plc - CFO   [6]
------------------------------
 Of those 20, you see that, Rob, in our statement. It's GBP98 million of revenue and it's GBP10 million of losses in 2014. And on the financials, all the numbers are on a like-for-like basis so they come out of both 2014 and they come out of 2013. And you see that in page 4 of our statement.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [7]
------------------------------
 Thanks, Himanshu. I want to just add that when you look at this through a commercial lens, the portfolio rationalization over the last 18 months, the turnover that's come out of the business is about GBP700 million at an average net margin of just over 2% and we've generated gross proceeds GBP0.25 billion.

 So I think this has, on the whole, been a good piece of work and puts us on, as I said, a stronger base going forward; higher quality earnings from these businesses. Thanks, Rob.

------------------------------
 Andy Grobler,  Credit Suisse - Analyst   [8]
------------------------------
 Andy Grobler, Credit Suisse. Three, if I may. Firstly, just on the margin again, looking at the underlying progression of 30 basis points, can you break out how much of that was gross margin versus SG&A improvements?

 Secondly, through 2015 with the ABP, where do you see the greatest benefits coming through in this year, given that some are shorter, some are much longer cycle programs?

 And then thirdly, you talk a lot and passionately about health and safety. If you benchmark yourself versus the industry, where do you think you are at the moment? Where do you think -- it's quite clear where you want to get to. How do you get to that point?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [9]
------------------------------
 I'll ask Himanshu to comment in detail on the margin progression. I think gross margin, pleasingly, held up more or less flat year on year, but Himanshu can go through the details.

 So I think most of the benefit is below the GM level and is obviously a complex -- that's a simple statement, with some complex moving parts. That is to say we're extracting benefits in operational efficiency and reinvesting some of that into our operating procedures, which hits our operating routines, which hits cost of sales.

 So it's, I think, overall, a good result at the GM level but I'm going to come back to Himanshu at the end to ask you, please, to put some color on there.

 2015 ABP. We're not reliant on one program working out. That's the great thing. We've got multiple sources, the phrase we use, multiple sources value to draw on here.

 I think our continued restructuring of the business will make a meaningful contribution.

 I think we'll begin to see a contribution from procurement. In fact, we know we will begin to see a contribution from procurement. But I think, really, procurement this year is getting up and running. We've got some early wins under our belt, but it's much more about getting set up to go after the big prizes the back end of this year and into 2016.

 We talked about telematics. We've made more progress than we had expected to make at this stage in terms of getting the fleet fitted with the equipment.

 I think that the hard work starts now of embedding that in the management chain, right from the driver through to the branch manager, ensuring that we're using that technology to A, improve customer service, to turn up when the customer expects us to turn up, to get there on time and to optimize route planning so that we minimize fuel costs and wage costs.

 So the hard work starts now really on telematics. That will make some contribution but, again, it's a multi-year program.

 Direct labor efficiency; multi-year program. And I think the costs of pursuing that program will probably balance the benefits in 2015.

 IT, I think we're really still in the investment phase.

 Do you want to comment on any of the ABP? I'll come back to health and safety. Anything on ABP? And pick up gross margins at the same time.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [10]
------------------------------
 Just on the IT ABP, the last year, 2014, was largely about infrastructure programs; so beginning to get our arms around telco networks, around infrastructure. End-user computing, Ashley mentioned. We mentioned productivity, which is what we know as email and all of the other future functionality. So that program is now rolling forward.

 Really 2015 onwards will be about starting to address applications, core applications. I think I've spoken before about having nearly 200 ERP systems around the world. We started shared service journeys in the UK and the US, and there's more of that to come. But there's a plethora of HR and other operational systems that we've got to start to get our arms around.

 On gross margin and on SG&A, gross margin, as Ashley said, stayed roughly flat at around 20% gross margin percentage year on year. But that's a function of a number of moving parts.

 On the one hand, region by region, market by market, you see differences in price compression offset by price indexation, where we're able to pass it on. And we've spoken previously, for example, about not being able to fully recover some of the danger pay in Latin America, and you see that coming through on the Latin American gross margin.

 But, overall, you get constant gross margin year on year.

 And then on overheads, we see again really three principal moving parts.

 One, the benefits of the restructuring programs, which yield around a GBP26 million, GBP27 million benefit on SG&A on restructuring offset by the investments that flow through corporate cost in risk management, finance, IT and procurement and, of course, the investment we made in our sales BD of around GBP20 million this year.

 So you can work that through your numbers and see the progression.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [11]
------------------------------
 Health and safety. Actually one of our challenges getting started on this program was that our benchmarking data was not as good as you would want it to be. We were not comparing like with like. I think, in some cases, the data was causing us to feel comfortable when we shouldn't feel comfortable.

 The Company didn't have a Group head of health and safety. For a company of our size and for the business that we're engaged in that didn't feel right and we hired a very, very experienced head of Group health and safety. This man has worked in operations and in safety in industrial and extractive industries all in his career. Very experienced individual. He's helping us to get proper benchmarking in place.

 At this stage, what it tells us, and we've more work to do, is that we're not 1 million miles away from the benchmark. In other words, we're average. But that's not what we want to be. We don't want to be average in our business.

 So the benchmarking data I'm quite cautious about and I say this to the management team, and when I travel around the business I tell everybody, because, unsurprisingly, and this is not unique to this industry, all of you will have seen it, I saw it in my previous industry, benchmarking data typically reflects averages. And you'll go to a business and if the data's good, pretty quickly they'll show you the data and say: Look, we're okay. Keep moving, nothing to look at here.

 And we want to get past that and say everything we do can be improved, and particularly in the case of health and safety.

 There are 41 families who -- we've lost a colleague and I can assure you when this happens and you go to the business, the impact on the team is devastating. The impact on the family is just as devastating. That's the moral imperative, too.

 I think look at the benchmark, but not get too carried away if you look good against the benchmark. Focus on the outcome. What happened? And focus on the mindset and the effort that's going into managing health and safety.

 And I'll end by saying this is a shareholder-accretive initiative. Our customers will increasingly care about this. We will set ourselves apart if we succeed with this initiative. I'm absolutely confident of that. I know, because I was on the other side of -- I was on buy side of this in my last career. It matters deeply. Extractive industries and manufacturing companies have tended to lead, but others will follow.

------------------------------
 Andy Grobler,  Credit Suisse - Analyst   [12]
------------------------------
 Thank you.

------------------------------
 Kean Marden,  Jefferies - Analyst   [13]
------------------------------
 Kean Marden, Jefferies. I've got three quick ones as well, if I can. You obviously renegotiated the Google and the HP agreements. I see everyone's already focused on cost savings. Can you talk to a percentage saving that you might have secured on those? I suspect the answer is no, but I'll try.

 Secondly, one for Himanshu. You mentioned you review 200 contracts each quarter. Can you give us comfort that onerous contract revisions won't be a regular feature of the results over the next couple of years?

 And then secondly, I wonder if you can expand on John Kenning's appointment. His CV looks to have quite a bit of technology in systems on it and I wonder whether that points to the direction of the business in the future. Thanks.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [14]
------------------------------
 So on Google, you're absolutely right, we're not going to disclose all the details but the savings are meaningful. Once we're -- this year is about getting those applications in place.

 In 2016, when we look on a like-for-like basis, we will measure the savings in single millions. Now I'm not going to say low- or high-single millions, because I want the team to stay, the team and the supplier, to stay incentivized on delivering as much benefit as possible.

 We'll get increased functionality from that as well. And we think it's got wider applications beyond desktop apps to some of our operational apps. And that was one of the reasons that we were attracted, not just cost, but attracted to Google that we can see application in our operations as well.

 I'm going to deal with John Kenning and then let you take the rest, please, Himanshu.

 You're quite right. John has substantial experience in technology and security technology and that certainly figured in our thinking when we were searching in the marketplace. We do see an opportunity to grow our systems and technology business and we've seen that starting to work.

 We've taken some of our proven products and services from North America and we've started to sell them in the Asia Middle East region for the first time in the last 18 months. Last year we had $100 million of sales in systems and technology in Asia Middle East. It's not a massive number, but I think it's a pretty creditable start for the team down there, starting from scratch.

 And I think John brings not only systems and technology experience. This is a proven executive. Very successful track record in general management and a particularly strong track record in managing large sales and business development teams, including global sales teams.

 And so that knowhow, the combination of technology and globalizing sales from a particular service or product line, is very attractive to us and he's working closely with Mel on further developing our customer-facing technology strategy.

 But those, if you like, were the -- that was the icing on the cake. Fundamentally this is an experienced, proven executive, who, as I said, is already making a positive contribution at both Group and regional level.

 You will meet him, I'm sure. I think we'll bring John over for the half-year results, along with some of the other members of the team, and you'll get an opportunity to meet John.

 Himanshu?

------------------------------
 Himanshu Raja,  G4S plc - CFO   [15]
------------------------------
 Contracts question. I do review 200 contracts. They're reviewed first at the regional level, then they come up to me and I do a financial analytical review. And I participate in the deep dives that we do.

 It's worth just pointing out, these contracts were the same set of contracts we would have had a year ago. They're the UK Government contracts, legacy contracts, and they would not pass our risk-management and take-on processes today.

 For example, on one of those contracts, we take on the demand-side risk, entirely. There's no cap and collar, for example, on that contract.

 I think it would be naive of me to sit here and say a contract will never go bad, but certainly we have the rigor and the processes in place, both for take on and for in-life review of those contracts. And we are committed to continued strength of our capability in that area.

------------------------------
 Helen Parris,  G4S plc - Director of IR   [16]
------------------------------
 So the follow-on question that I've had from Andy Brooke at RBC was over what time will these contract provisions be released to the P&L?

------------------------------
 Himanshu Raja,  G4S plc - CFO   [17]
------------------------------
 Well, there are half a dozen contracts in there that have different contract lengths; principally two main contracts, which have between them an average remaining life of five years, and then a number of smaller ones.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [18]
------------------------------
 Some of them are considerably longer than that.

------------------------------
 Ed Steele,  Citi - Analyst   [19]
------------------------------
 Ed Steele, Citi. Two questions. First of all, could you give us a flavor for the underlying market trend in UK cash and some of the European security services markets, please?

 And secondly, on your current visibility what can you see in terms of one-off cash and P&L costs for 2015, please?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [20]
------------------------------
 I'm going to ask Himanshu to pick up the second. Let me talk about -- I think your first question was market trends in the UK and European cash businesses.

------------------------------
 Ed Steele,  Citi - Analyst   [21]
------------------------------
 UK cash and then Europe generally.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [22]
------------------------------
 So in UK cash you will know that we -- well, let's talk about the market first and then the particular.

 The market, we know that banks are looking to improve the efficiency of their operations. They're closing branches and looking to reduce the costs of cash handling. That is, to the industry, both a threat and an opportunity. I think the threat is obvious; the volumes decrease. The opportunity is to work with the banks to help them to reduce their costs and we have been doing so.

 We process a lot of cash for both retailers and financial institutions. We have the capacity to increase in the UK the amount of cash we process. And I think we have the wherewithal and the ability to move beyond that.

 We're not alone in looking at this, by the way, at full outsourcing, so let's call it bank branch outsourcing, ATM, estate management and so on. We have that capability and that's something that we're going to be working on this coming year and I expect beyond the coming year.

 In Europe it depends on the market you're in. In some parts of Europe you see that trend in a very pronounced form. Scandinavia, we happen not to be heavily present in the Scandinavian cash market but, clearly, that has been a market that has seen banks and regulators working together to transform the payment cycle.

 In other parts of Europe that's far less evident and what we've seen is cash move from branches to ATMs. That's been the significant trend in recent years.

 As it happens, our European cash business has done very well in the last 12 months, won lots of new business. So I think that European cash business, regardless of what the market trend is, is growing its sales book in a very impressive way.

 I think that's a combination of things. We have a strong management team in our European cash business. That now reports to Graham Levinsohn, who is, as you know, expert in cash handling.

 And the business in Europe, I think our business in Europe has been more innovative than our business in the UK in a number of ways; developing new ways of delivering the same service and developing and delivering new services to customers in a way which I don't think has been as strong in the UK.

 And, indeed, I think, at times we've probably been complacent in the UK. And you will have seen that we lost the Tesco contract last year and I think that's a real wake-up call to us and our UK cash business.

 We have put that business under Graham Levinsohn, the UK cash business, and we have spent some considerable time looking for a new leader and we now have secured -- have we? Debbie? No, okay. We haven't announced it, sorry. So we have secured a very experienced executive from this industry and when we do announce it, soon I hope, you will, I'm sure, recognize the name.

 And so I think it's a combination of things, Ed. As I said, in our view there remains significant opportunity in developed markets to help our customers change the way that they handle cash and, in so doing, grow our business. And, of course, our emerging market cash business is continuing to grow.

 Final comment I'd make is our UK cash business, which is where we started, was undoubtedly inefficient and had grown uncompetitive and, although we haven't seen the growth in revenues, we have seen profitability improving in that business. So work in progress; a lot more to do.

------------------------------
 Ed Steele,  Citi - Analyst   [23]
------------------------------
 (multiple speakers) And one-offs next year?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [24]
------------------------------
 Oh I beg your pardon. Oh sorry, yes, that's Himanshu's question.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [25]
------------------------------
 As I sit here today, Ed, there aren't one-off P&L charges that I'm aware of.

 Of course, we'll continue to look at restructuring where we see opportunities to improve productivity or to reduce overheads and you see the benefit of that coming through on the numbers.

 On the cash side, important to note when we declare a contract onerous, it doesn't get forgotten about. We work really actively with the customer to manage contract terms, demand side as well as on the supply side, to mitigate the effect of those. But the cash impact of the onerous contracts will be around GBP6 million to GBP8 million for 2015.

------------------------------
 George Gregory,  Exane BNP Paribas - Analyst   [26]
------------------------------
 George, Exane BNP Paribas. Three questions, please. First, Ashley, I wondered whether you could elaborate a bit on direct labor efficiency. You said it was complex and large. Interested to hear what you're actually doing behind the scenes.

 Secondly, in terms of vehicle route planning, if I look back to your prior strategy update I had a number of, I think, 9,000 by the end of 2015. You're now talking 7,000. I just wanted to know whether there was a change in numbers or what's going on there.

 And finally, in terms of organic growth, I know you don't like to give guidance but, based on the pipeline and the wins, do you expect to be within your 5% to 8% range in 2015? Thanks.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [27]
------------------------------
 I'll take organic growth first. None of you will be surprised to hear that we see that the 5% to 8% as a long-term growth potential of the business. We don't give targets in any year.

 I think, though, that everybody who follows the Company, and the sell side in particular, has got -- looking at 2015, we can see where consensus is. I think people have worked through the losses and the wins and have come to a sensible position. So we're quite comfortable with, in broad terms, where the market sees top-line growth. And I think that would put us in the postal code of our long-term guidance.

 Direct labor efficiency is complex. We're looking at transforming the way we manage labor efficiently in 39 countries; 376,000 employees. That's not all of our employees but we're targeting the countries where we think we can have the greatest impact.

 It is a multi-year program that starts first with disaggregating your performance, disaggregating your labor efficiency and understanding, on a comparative basis across the portfolio, what is driving one business to be better than another business. And then setting about effectively putting in place a playbook for the whole Group that says: This is the G4S way of managing labor efficiently.

 Having put that template in place and got everybody to understand that across the Group, and that's easy to say but not a trivial exercise, we need the systems in place to support that effort.

 In some cases, we will have to make a start without the systems. We just cannot get the systems in fast enough in a way which means we'll be spending money in a disciplined fashion. And that's okay. We can still make progress without the systems. The systems can follow on behind.

 What we have managed to do is, first of all, define the playbook, get it out to the leadership teams in those 39 businesses, appoint subject matter experts, typically people who understand, who have come up through operations and worked in labor-scheduling operations, understand what we're trying to achieve. And they have been deployed and assigned to each of the six regions.

 Dave Brailsford won't thank me for making this comparison, but it is a bit like that, where you're looking for constant incremental improvement in the way you manage labor efficiently. And, of course, I've just given you the nice cleansed version of reality.

 We know that, for example, when we grow rapidly in a marketplace that maintaining all of your indicators, your stats, on labor efficiency becomes quite challenging because you're mobilizing new contracts, you're having to hire new people, deploy them to new assignments. You're still figuring out how to deliver that service efficiently on a new site. And so your productivity can be variable, which is why I compare it to constant incremental improvement that you see in some sports.

 So bit of color there. Just getting started. I think we've made good progress in disaggregating our current performance, creating an internal league table, developing and distributing a playbook to the leadership team and putting subject matter experts into each of those teams.

 Route planning. We might have, in our presentation, confused incremental and cumulative deployments. I actually think by the end of 2015, we're going to have installed more.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [28]
------------------------------
 Yes and it's also a function of same team that looks to optimize the use of the fleet. So if telematics have become uneconomic, depending on the route and the route plan that you run. So you'll see in Ashley' presentation today there's been a rebalance. Also we've done better on route scheduling, where we saw opportunities for route scheduling.

 We've more or less completed the telematics on the cash fleet and we're now turning our attention on the telematics side to the secure solutions fleet that transports labor fundamentally. So it's optimizing both of those together.

 And when you look at Ashley's update from today, there'll be a combination of around 11,000 vehicles focused on route scheduling and 4,000, which is predominantly the cash fleet, with telematics completed. And we're getting started on telematics in the secure solutions fleet.

------------------------------
 Sylvia Foteva,  Deutsche Bank Research - Analyst   [29]
------------------------------
 Sylvia Foteva, Deutsche Bank. I have three questions, please. The first one is just a clarification following from Rob's question on your margins. So you've provided the profitability under the old way of reporting. So your PBITA will be [GBP14 million]. So the margin is up 10 basis points on that basis, which is the same as in H1.

 So I was just wondering, obviously now you've added back the small -- the disposals basically, the loss on disposals. So it seems like the run rate in the margin hasn't actually changed H1 versus H2. Is that correct or am I lost in the accounting?

 Question number two, at the H1 stage following the Serco results, we were obviously asking about contracts like COMPASS. You said that you've provided enough for those contracts so I'm just wondering what's changed.

 And the last question. Looking at your North American performance, that is very impressive and the margin is obviously up a lot. Could you just comment on trends in pricing, wage growth and also the impact from the non-wage employment costs, like state unemployment insurance? Thank you.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [30]
------------------------------
 I'm going to ask Himanshu to talk about margins and onerous contracts, but I just can't resist, I'm afraid. You mentioned the old way of reporting. Under the old way of reporting, we would have taken another GBP91 million, GBP92 million of profit to underlying results. So our margins would have been a bit better actually.

------------------------------
 Sylvia Foteva,  Deutsche Bank Research - Analyst   [31]
------------------------------
 H1 GBP14 million out.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [32]
------------------------------
 Pardon?

------------------------------
 Sylvia Foteva,  Deutsche Bank Research - Analyst   [33]
------------------------------
 H1 GBP14 million over.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [34]
------------------------------
 I see, okay. I misunderstood your question, my apologies. Look, let me talk about North America and then ask Himanshu to talk about margins and providing for onerous contracts.

 As you said, very good progress in North America. As I mentioned, our focus has not been on, in North America over the last 18 months, restructuring or accelerated best practice. Our focus has been on getting the pipeline moving again and getting our sales moving again. And I think the team down there have done a terrific job.

 In doing that, our pricing -- this is a fiercely competitive market and I think you have to differentiate your product and your service, and we do that.

 I think our technology service is differentiated and, for sure, our man security, our risk consulting and our investigations businesses differentiate us in the market. I said we have a strong franchise. I believe that from the information we get from our customers. But, nevertheless, it's a fiercely competitive market.

 In terms of state insurance, healthcare costs and so on, I mentioned, certainly in terms of healthcare, that our programs were largely compliant and I think the impact of change was less for us. But, like all of our competitors, increases in insurance costs and increases in state taxes and so on have ultimately to be passed on to customers. And this is why it's important for us, I think, to continue to invest in having a premium service.

 Our CPO officer program, I think, has been very successful in creating a niche for us in the market, where we're starting to grow. I think our concentration on some of the vertical segments, technology sector, distribution and logistics, financial institutions, has also paid dividends. And I think we're setting ourselves apart slightly in that market.

 But ultimately, procurement, just as we're investing in procurement, our customers invest in procurement and procurements are an intrinsic part of the process so you can't get away from pricing pressure.

 Himanshu, margins and onerous contracts.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [35]
------------------------------
 We talked about the COMPASS contract in November. Might be helpful, I think, to just take you through the dynamics of how those contracts work because they're different for each provider. There are three providers in the market and there are two demand-side dynamics. There are two supply-side dynamics.

 The demand-side dynamics is the incoming caseload that you have and how fast that is processed through the system before those service users are made available on the supply side.

 And on the supply side you have to do two things. One, match it to the appropriate accommodation and, secondly, to make sure there's enough physical accommodation in place. And that hits different providers in different ways.

 For us, we saw, following our Q3 conversation in November, a different type of demand and different profile of demand coming to the G4S geographies that we were unable to match to both the physical availability of accommodation and type of accommodation.

 And, therefore, as we went through the yearend, we were obliged through the IFRS process to sit down, look at our assumptions, work with the customer to see whether we're going to be seeing that sort of caseload sustained. And we've worked with the customer to find what we think is the best estimate that drives the yearend provisions. So that was the change from what other providers might have seen when that caseload hits those providers.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [36]
------------------------------
 Can I just emphasize a point that Himanshu made, which is the provision of that service to the Home Office is spread, as you know, across three suppliers. Each have their own geographical region. And I think the key point here is not all of those contractors are experiencing the same change in service demand at the same time.

 And what Serco experienced in the third quarter, we experienced in the fourth quarter. So if you compare the first nine months to the last quarter, the rate of growth in our caseload doubled at the end in the fourth quarter versus what we'd seen. So that's why you saw the difference in timing between the recognition, I think, of impairment in Serco and G4S.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [37]
------------------------------
 I think Sylvia's last question was a margin progression one. All the figures, Sylvia, they are presented on a like-for-like basis. So it's not that those discontinued operations get stripped out in 2014 but not in 2013.

 What you see in the GBP424 million, therefore, is the underlying PBITA from continuing operations and the higher quality of earnings and, therefore, like the Finland locks business is not in those numbers because that's not a core business going forward and for which we've realized value.

 In terms of H1, H2, therefore, on that like-for-like basis you see roughly a 30 basis points improvement from H1 to H2.

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 Stephen Rawlinson,  Whitman Howard - Analyst   [38]
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 Stephen Rawlinson. One question. Retention rate. You're losing 10% per annum there. Can you just talk to me about whether that's, please, if that's contracts or revenue? Should we be expecting fewer losses in the future on that number? And is there any consistent themes in price, quality or service that is causing you to lose that?

 And I guess, also, it might be that you could add in terms of your business development teams, what they're incentivized to do; either win new work or keep the old stuff?

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 Ashley Almanza,  G4S plc - Group CEO   [39]
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 I think at the third quarter I mentioned this and said I think by many 90% retention is regarded as a good result but when you turn it on its head and say, well that means each year you start having to fill 10%, it's measured on revenue, not numbers of contracts, so it's an opportunity for us.

 In 2014 that includes, of course, three very large contracts. In fact, three plus a medium-sized contract. So electronic monitoring, Dutch prisons, Manus, the large ones, and then, of course, Tesco as well, which in 2015 would, I think, have been around GBP20 million revenue, which is lost.

 Your question about incentivization is, I think, very interesting because historically sales and BD have been incentivized on new business as opposed to customer retention.

 So when we look today across our Company at customer relationship management, global account management, measuring and responding to customer satisfaction, what we found was that we didn't have a consistent approach.

 And, indeed, it was not possible as a service company 18 months ago to say: Can I benchmark customer service across our Group? Can I see who is delivering? Polling customers regularly. So are we doing it on a comparable basis across the Group, asking the same questions, doing it to the same frequency, polling the same sample from our population of customers so that we end up with comparable data and then have a conversation about why it's working well in some areas and not so well in other areas?

 So we have, through the course of 2014, been investing in putting that system in place under Mel's leadership. And going into 2015 we will, for the first time, be able to start to do that. We need to build up a data history for it to become more meaningful, but we've got the tools now to do that.

 Not only sales, but also our operations people have in their performance contracts a component of their total incentives will be determined by customer retention. It's not purely a function of sales; it's also your CRM folks and your operations. So why do customers leave us?

 Again, having just said that we don't have a global sales management system that allows us to do this systematically, I can still say that we have a good enough understanding of why customers, certainly large customers, why they leave us when they do. And it typically comes down to two things; service and price. And we don't like to lose any of those.

 You should not take my next comment in any way as being complacent, because I agree with you, I think it's one of our huge opportunities in the Company. If you can make just a small dent in that retention rate you can really have a very powerful effect on your growth rate and your profitability.

 It typically is more expensive to acquire a new customer than it is to hold on to an existing customer. Not always, and actually sometimes we say: This customer's not for us. We're the wrong company to serve this customer. We just can't make it work. But that's very infrequent and we don't like it when it happens.

 In 2014 we won GBP2.2 billion TCV, GBP1.1 billion round numbers ACV, and 10% would have been, in revenue terms, a loss of about [GBP650 million]. So you can see that there's a big opportunity there for us.

 We are changing the way that we incentivize, first of all, the objectives we set for our management teams across the Group, the way we incentivize them against those objectives. I would say all of this is in the category of getting started. It's a big opportunity.

 Did I cover all of your -- thanks very much, Stephen.

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 Karl Green,  Credit Suisse - Analyst   [40]
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 Karl Green, Credit Suisse. A couple of questions. Just in terms of the health and safety comment you made about customers increasingly value that, are you seeing that come through in the numbers in terms of better win rates where health and safety has been an important component? Or is it something people are actually prepared to pay a premium for, where you're able to demonstrate superior health and safety performance?

 My second question is just around the technology where you said that there were a number of programs going from pilot phase to commercialization. Could you just elaborate there and what's your plans?

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 Ashley Almanza,  G4S plc - Group CEO   [41]
------------------------------
 So on health and safety I think this is multifaceted. I think for some large clients this is increasingly going to be a ticket to the ball. You're just not going to get invited to the ball unless you can demonstrate that you have a proper health and safety management system, that you have the resource in your company to manage this adequately and that you're going to operate on their site safely. This is new, I think, in our industry but I'm sure it's going to be an increasing trend.

 Let's say, and in many cases now we're developing the capability and, indeed, we are getting in with those clients. Once you're in, I think if you deliver strong safety performance it vastly improves your chances, back to Stephen's question, of retaining that account when it comes up periodically for review.

 Do you get a premium price? Well, to the extent that the number of competitors that are able to demonstrate their capability is smaller. In other words, it's a smaller set. As the customer standard rises, to the extent that others don't also invest in health and safety and raise their performance, there'll be a smaller population of suppliers competing for that business and, in principle, we will have more selling power and we should see better margins.

 I don't think we should put that in the bank. I think that it's much more a case of us being a preferred supplier. And in some cases we'll have negotiated rather than bid arrangements where we've got a distinctive health and safety capability.

 So can I give you a precise measure of how it will show up, when it will show up? No, I can't. But am I confident it will? Yes. And we see it in some of our customers now saying to us; This is a very, very important part of our relationship going forward.

 Technology. I think there are a couple of good examples. We have a business called Deposita, which manufactures cash recyclers in South Africa. And we wanted to develop products that could be sold not only in South Africa but across Africa and then develop products which could be exported to other markets. And that project moved out of pilot into commercial phase in the back half of 2014 and we began to sell units out of South Africa into Asia Middle East. Small, not huge, modest, but I think a good start.

 And then the other is one we talked about last year, which is US Cash 360. We had a pilot program going with one of the world's largest retailers and that has now moved into commercial phase with them placing firm orders. For a number of reasons it's still commercially sensitive; not from our point of view but from the customer's point of view. And I'm hoping we'll be able to say more about that at the half year.

 And the interesting thing with that Cash 360 program is that we worked with an anchor client in the pilot project and, as we've moved into commercial phase, we've also been successful in bringing in a new anchor client who's placed firm orders straightaway.

 So, again, fairly modest but, I think, with lots of promise, lots of potential in that market.

 And the third example I'll mention is one I touched on earlier, which is we had no systems and technology business in Asia Middle East. That is largely a function of transferring knowhow and capability, but it's also required innovation in the systems that we offer to the market in, for example, the Middle East, are not the same as the systems that we're offering in North America.

 So we've had to combine transfer of expertise with some innovation and we've had $100 million of new sales in Asia Middle East. Again, in the context of our Group $10 billon, it's modest but I think it's a good start.

 So there are three examples.

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 Paul Checketts,  Barclays - Analyst   [42]
------------------------------
 Paul Checketts, Bar Cap. I've got three questions as well, please. Two are on new work. If you look at the work that you're prepared to do now, are there things within the portfolio that have been done historically that now wouldn't get past your filters? Maybe you could talk a bit about what wouldn't.

 And the second one is about the pipeline. How much of that (technical difficulty)?

 And then number three, can you just tell us how much sales we have from technology currently within (technical difficulty)?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [43]
------------------------------
 (technical difficulty) and what would cause us not to do that.

 Fundamentally, the first question is can we do this job? Can we deliver the service reliably for the customer? Second question is when we look at the terms and conditions under which we have to deliver that service, can we manage the risks? And the third question is the risk-reward balance appropriate?

 Last year, 2014, our two single biggest sales opportunities where we were a clear contender and the customers engaged with us, I would say, energetically to keep us in the process, we withdrew from the process.

 Now we withdrew from the process for the first reason, but also that has an effect on the second and third factors. The principal reason was that, when we looked at the service delivery model, we could not get comfortable that that service could be delivered by our Company reliably and consistently in accordance with the KPIs in the contract.

 We actually thought that the service model could be changed and we engaged with the customer and said: If you change the service delivery model, we're in and we'll bid and we'll bid to win, but we can't bid otherwise.

 And those were our two single biggest new contract wins in 2014.

 I'm not going to say who the customers were because there's a continuing relationship on the other end of their contracts. So yes, there is work that we won't do.

 Himanshu touched on one. If you're taking volume risk, you need to be able to manage that volume risk. And, ideally, you don't want it to be open ended, so you want a cap and collar on volume risk.

 Other lessons learnt in our recent past is so-called TFC clauses, termination for convenience. That was the Dutch prison. We spent millions, millions of pounds mobilizing for that contract and we signed a contract which allowed the customer to terminate for convenience with no demob or unamortized mobilization compensation. We can't do that sort of business.

 Interestingly, when some of those contracts have come to our investment committee and we've declined to move forward, on one or two occasions, we go back to the client first of all. The first thing we do is go back to the client and we say: We're really sorry, we can't do this. And so it's not a question of just strong arming the market. We go and we explain. We say: We'd love to work with you, but we can't do it and this is why.

 In a number of cases the client has accepted that and modified the contract. In other cases the client says: That's the contract, take it or leave it. And we leave it.

 So that was your first question.

------------------------------
 Himanshu Raja,  G4S plc - CFO   [44]
------------------------------
 Third question, around GBP700 million, technology revenues.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [45]
------------------------------
 And you had another question, Paul?

------------------------------
 Paul Checketts,  Barclays - Analyst   [46]
------------------------------
 It was just how much of the pipeline is with the UK Government?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [47]
------------------------------
 Most of the pipe is outside the UK Government. We're really rebuilding, we'll get you the specific numbers, we're rebuilding our UK Government pipeline.

 There are some big programs in there, I shouldn't diminish that. But, as I said earlier, the strength of our Company is that we have a diversified revenue base and a diversified pipeline.

------------------------------
 Paul Checketts,  Barclays - Analyst   [48]
------------------------------
 Thanks.

------------------------------
 Gideon Adler,  Redburn Partners - Analyst   [49]
------------------------------
 Gideon Adler, Redburn. Two questions, please. The first on portfolio. You told us that around 60 of the countries you operate in generate the bulk of your core EBIT.

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 Ashley Almanza,  G4S plc - Group CEO   [50]
------------------------------
 Sorry, could you repeat that, please?

------------------------------
 Gideon Adler,  Redburn Partners - Analyst   [51]
------------------------------
 You said around 60 of your countries you operate in generate the bulk of your core EBIT when you first joined the business. You've now tapered the number of countries you're in down to around 100. I'm just wondering if you'd give us a sense of materiality of the incremental opportunity now. I mean how many more countries you wish to exit and, within that mix, what the profitability is in those businesses.

 And the second question on working capital, Himanshu. You touched on a couple of working capital metrics in your presentation. Could you wrap that into some guidance around where you see underlying working capital for 2015?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [52]
------------------------------
 We're just below 100 now and I think, for now at least, the obvious and the large opportunities to improve the portfolio have been attended to.

 Portfolio management, though, is not a one-off exercise, although clearly there's been an intense concerted effort to improve the portfolio. But it's an ongoing part of performance management and ongoing part of capital discipline.

 We will, I think, in the course of any year be reviewing at least a dozen businesses. My hope and my expectation is that we will manage to turn most of those -- if a business warrants that kind of look, then we will be able to restructure and put that business back on a path to growth.

 So I would say, sitting here right now, there's nothing material in view. But the caveat is if a business' prospects change, if the market structure changes, then we have to reconsider that. We have to look at the business again.

 Working capital?

------------------------------
 Himanshu Raja,  G4S plc - CFO   [53]
------------------------------
 Working capital. You will see in our statement today in the statutory cash flow statement around GBP90 million but that benefited from EM receivables and EM fees. And when you strip those out, working capital was flat year on year 2013 to 2014.

 I think it's the first time on an underlying basis we achieved that. In previous years we saw lots of supplier holdbacks and so on affecting that number.

 I referenced a modest improvement in DSO. The two or three key things I look at are DSO on a rolling three-month basis. I look at event to billing, and we've got a lot more to do on the timeliness of when we bill and, therefore, to start the collection cycle. And the third thing I look at is the aging profile.

 There's more to do on DSO. There's more to do on aging profile. And the harder yardage is around event to billing because it requires process and system change. So we'll just keep going after it and keep [reminding] the teams to focus on it.

 Of course, Helen would point out when you're growing you're always going to be consuming some working capital. That's why I say for this year to have held it flat was a good performance.

------------------------------
 Allen Wells,  Morgan Stanley - Analyst   [54]
------------------------------
 Allen Wells, Morgan Stanley. Just a couple quickly from me. Just on the pipeline, obviously we have on our side, obviously, limited transparency on that. But of that GBP5.5 billion of annual contract value, could you give us indication of in terms of timing of decisions on that one? Will most of that be decided in 2015?

 And you touched on the fact there are some large opportunities in there. Obviously I don't expect you to give the names of those but, in terms of regions, subsectors, anything you can provide in terms of flavor of what looks attractive at the moment. That's the first couple of questions.

 And then finally, you touched on the Africa business in commodities, but maybe more generally on things like oil and gas as well, could you give us a couple of words on how your customers are being impacted by the oil price environment at the moment?

 And then from your side, where the risks are from customer-cutting activity levels, but also where the opportunities are on a cost side if there are any at all.

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [55]
------------------------------
 Sorry, could you repeat the last bit?

------------------------------
 Allen Wells,  Morgan Stanley - Analyst   [56]
------------------------------
 Oil prices, where the opportunities are for you guys are in terms of cutting costs. Is there any benefit coming through there?

------------------------------
 Ashley Almanza,  G4S plc - Group CEO   [57]
------------------------------
 So on the pipeline, when you have a year like we had last year and we had a large number of wins, what that does is obviously it depletes the pipeline, if you imagine this is a funnel, at the bottom end of the funnel.

 So we look at prospects, suspects, bidding and negotiating. So you deplete the bidding and negotiating part of your pipeline. And our efforts to restock, as you would expect, you fill the top of the hopper first and then it flows down.

 So I'm going to ask Himanshu to comment on the numbers in a second, but the shape of the pipeline has changed and actually there's no reason why we can't and shouldn't give you the visibility we have in the past on the shape of the pipeline. So we'll put a slide up on the website through Helen's team.

 So I would say the shape has changed in a way which means many of those decisions are going to be at the back end of the year and some will actually click over.

 Our experience tells us that bid timetables, whatever you've got in your salesforce.com system, bid timetables move to the right, typically. There are some large opportunities -- actually, again, it's spread happily across the Group.

 In terms of services and markets, we see in Asia Middle East more opportunities in technology, facilities management, construction, ports, aviation; in Africa lots of oil and gas, as you would expect, and I'll pick up now the point.

 Clearly, everybody is looking again at investment projects. Where this tends to bite is projects that have not been sanctioned and not yet started.

 So in many cases our order book is -- our current revenue is obviously dealing with projects that are either under construction or completed and we're providing security for operations.

 Projects that have been sanctioned but not yet completed tend to go ahead. And much of our revenue and sales book in Africa, for example, is addressing that opportunity.

 But there is no doubt that mine expansions, exploration programs, drilling programs, projects not yet sanctioned will slow down, are slowing down, and that will have some effect on the whole market.

 Can we help our clients? I think we can. One of the things we're trying to do in Africa, very early days, is provide more security technology. It's more difficult to do in a relatively low wage environment; the arbitrage between wage cost and technology is not as great as it is in developed markets. But I think in large infrastructure projects there is an opportunity for us to offer better technology solutions that reduce the cost of service to our clients and improve our profitability.

 We've been talking to some very large clients in East Africa about that. The only caution I would offer immediately is those tend to be long, long conversations. They can go on for a very long time, so we've not penciled anything in this year in terms of sealing a deal.

 Other sectors and service lines, we've talked about Asia Middle East, Africa. Actually Africa, one of the areas where we've seen good demand and continuing demand is in financial institutions.

 This might be more your business than ours, but there are some quite interesting trends in financial institutions in Africa where, somewhat against the trend that we talked about in developed markets, new entrants are winning lots of market share by going back to the old bank branch model. And we've been winning quite a lot of business, particularly in Southern Africa, from those new entrants.

 Our risk-consulting business has done well in North America. So, typically, our risk-consulting business is being concentrated in Africa, in Asia Middle East, and we've seen a big uptick in risk consulting and investigations in North America.

 Other aspects of the pipeline, I touched on this European cash. We won a lot of business last year in European cash, which we'll start to mobilize this year.

 Farmer, agricultural sciences. In Latin America we're starting to win some good pan-regional accounts. In some cases it's been a question of bringing those accounts together where, let's say, we've had 10 out of 15 pieces of the jigsaw and we've gone to the client and said: We can put in place a master service agreement and bring them all together and, by the way, we'd like the other five accounts while we're at it.

 So we've made good progress, I'd say, in farmer and agricultural sciences retail in Latin America.

 Our cash business in Latin America is small and not -- it's a nice business but, relative to some of the other players and the size of the market, fairly small. So we're not seeing a lot of growth there at the moment in terms of new markets and new accounts.

 So that's a color and flavor and we'll put the pipeline on the website so you can see how the shape has changed. But the simple message is the top of the pipeline's gotten bigger as the bottom is being depleted as we win contracts.

 It looks like we've finally exhausted you. Can I thank you all for attending today and for your interest and your active engagement? We'll be staying for refreshments. If you're able to stay, please do stay. Otherwise, we look forward to seeing you at the half-year results. Thank you very much and good day.




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