G4S Botswana Security Systems achieves 60% increase in PBT

By Published On: June 12th, 2019Categories: Analysis

Read the G4S Botswana Limited 2018 Annual Report

We have extracted the financial summary from the 2018 Annual Report of G4S (Botswana) Limited, listed on the Zimbabwe Stock Exchange under the share code G4S.bw. G4S (Botswana) Limited provides security solutions for individual and business needs in Botswana. It operates in the following sectors: Manned Security provides integrated security solutions to airports, energy, mining, construction, custodial services, cash solutions, hospitality and financial institutions.

We continue to do business under a very tough economy which has resulted in low consumer household spending. The knock- on effect has seen some customers failing to honor their contractual agreements in terms of payments for services provided. Consequently we have had to shed off non-paying customers. We have seen the closure of mines such as BCL and the Tati Copper Nickel mine, which has had a negative effect on the overall performance of the business. As a result, we have had to be prudent with regard to the customer base that we have. We have established a Customer Services Division and have started to automate some of our processes as a way of promoting customer interactions. We also had to take some stringent measures to ensure profitability such as to review loss making contracts, and terminate some of them, particularly in the facilities management space which obviously impacted the topline, leading to a 6% decline in revenue.

It has really been a tough year locally and internationally with sluggish growth and in Botswana with major shutdowns of enterprises.. We have also seen a marginal decline of P0.77million (1%) in the uptake of our Manned Security Services as a result of over-trading in that space as well as citizen reservation for government and parastatals business which we are excluded from. Closure of some of our major clients in BCL and Tati Nickel also had a negative impact in this business line. We have however seen a 40% growth in our cash 360 or Deposita which continues to do well in the retail market. Our revenue over and above being impacted negatively by closure of business, exclusion from government business, we had to shed of no-profitable contracts, particularly in the facilities management business. This saw our revenue declining by 6% in 2018 to P206 million. As a result of the decline in our revenue, we had to ensure that we run a very efficient business with increased productivity. By optimising our processes we managed to get efficiency gains as a result of reducing our cost of sales by P11million (8% reduction). This yielded a positive change in our gross margin of 2% moving it to 41% in 2018. As a result of these efforts, we saw a significant rise in our security systems business PBT by 40% to P18.9m. Our administration expenses remained flat when one discounts the P2 million once-off restructuring costs, thereby providing a solid base for an efficient business moving forward. All these concerted efforts did protect the bottom line resulting in a 5% decline on our Profit Before Tax (PBT) to P38.8 million.

We have had two solid years of above average gross margin and PBT% when compared to our industry. We continue to deliver impressive results for our shareholders albeit in tough trading conditions and whilst 2018 was a tough trading year, it was still the second highest PBT in G4S history with 2017 being the highest. The last two years have been about reorganising the business, and now we are consolidating and setting ourselves for sustainable growth in the future. Having a solid base of a well resourced and capitalised business, we now shall be accelerating consolidation with top- line organic growth in 2019 and beyond. Our 5 year strategy ( 2019 -2023) seeks to growth the business at around 6%. This will be driven by new technologies solutions in the systems space, expansion to new geographical areas in cash alarm monitoring and response business as well as new products in cash solutions. We are now ready to deploy fully integrated risk and security solutions for our customers encompassing all our business line offerings. This will assist on customer retention and solidifying the already existing relationships thereby bolstering business growth. Whilst competition is getting tougher, we believe that our strong market position, commercial discipline, positive cash growth and growing expertise in technology solutions will provide reassurance to our stakeholders and speaks to a very positive outlook in our business. Our 5 year forecasts speaks to average annual growth rates of:

  • Revenue: 6%
  •  PBT: 9%
  •  OCF: 10%

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