The report on the interim results of G4S Botswana Limited financial statements have indicated that the business experienced growth in the revenue but saw a decline in profitability during the first six months of the year ended June 30 2012.
G4S Botswana Managing Director, Moraki Mokgosana, says the decline in profitability is mainly due to costs, which were incurred in the acquisition of the Facility Management Group (FMG).
Releasing the results, the CEO pointed out that with the cost containment and efficiency as well as pipeline of new business, the newly acquired business is anticipated increase in the footprint of the business.
Mokgosana was optimistic that the company will continue to achieve growth in operations and also improve profitability in 2012.
On the acquisition of FMG (PTY) LTD, which got effective June 01 this year, Mokgosana stated that G4S Botswana purchased FMG consideration of P12 198 848.
He added that the deal excluded Shield Security, which was sold to a minority shareholder prior to conclusion of the deal. He also said the company was then renamed G4S Facilities Management Botswana (Pty) Ltd and also PS Cleaning and Facilities Management Services rebranded G4S.
“The escalating fuel costs will continue to place pressure on margins in cash and alarm response businesses. Also the billing issues expected to be resolved by year end,” said Mokgosana.
On the issue of competitive landscape, the G4S MD pointed out that the competition in the security sector will continue to grow, especially in the provision of guarding services. He further said that G4S will continue to look for opportunities for “specialized” high margin integrated solutions.
He added that there are relatively lower entrants in other services with higher entry costs in cash solutions and technology enabled solutions.
“Proposed revision of licensing legislation will create opportunities for entry of other international players,” he stated.
On the manned security, Mokgosana further said that there is continued integration of manned and technology enabled security services. He added that there was an increase in minimum wage from P3.80 to P4.20 in April 2012 resulting in an effective 10.5 percent increase in wage costs. He stated that the increased focus on management of profitability of guarding contracts through control of wage to revenue ratio.
“The cash solution also faces mounting pressure on margins due to the economy. There are a lot of opportunities in the transportation of other assets in transit services fuelled by the mining sector,” said Mokgosana.
He also stated that rebranding of FMG to G4S provides an opportunity to leverage off the G4S brand and international expertise in providing outsourced solutions.
G4S Financial Director Graham Berndt revealed that the revenue contributions by product is lead by security systems by thirty seven percent (37 percent), followed by manned security by thirty-six percent (36 percent) and then cash service with twenty-five percent (25 percent)┬áand last cleaning and FMS by 1.5 percent and 0.5 percent, respectively.
Berndt pointed out the organic growth of 18, 9 percent whereas it was 4.5 percent in 2012 and add that the earnings per share┬áare 8, 98 thebe per share with the dividend of 7, 37 thebe per share.
“We remain confident about future developments and performance despite challenging economic conditions,” said Berndt.