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Executives

Ashley Almanza - CEO

Himanshu Raja - Group CFO

Mel Brooks - Group Strategy & Commercial Director

Analysts

G4S PLC (OTCPK:GFSZF) Q2 2014 Earnings Conference Call August 13, 2014 3:30 AM ET

Ashley Almanza

Good morning, ladies and gentlemen, and a very warm welcome to G4S's Half Year Results and Presentation. I'm joined, as usual, by our Group CFO, Himanshu Raja. I'm pleased to say we also have in the audience today Mel Brooks. Mel would you mind standing up. Mel is our newly appointed Group Commercial and Strategy Director. For those of you who don't know Mel, until recently Mel led our Indian business, which went through a pretty significant transformation, a massive improvement delivered in the performance of that business over the last two years, I think. Some of the fruits of that legacy has not yet shown themselves, Mel, but we welcome Mel to the team. And he's providing real focus to our sales, business development and commercial efforts, and we'll talk more about that later in today's presentation.

Before we get started, the customary legal disclaimer which I think you've seen before and if you haven't I'm going to ask you to read it afterwards, please. Our agenda is as set out here. We'll touch on the results; we'll look at each of the regions in the business review and then we’ll provide a brief update on progress we’re making with our strategic plans that we outlined in November, there is a full update coming again this November that we’ll provide a preview on some of the areas that we’re working on. I’ll then hand over to Himanshu who’ll take us through the numbers in a bit more detail. We’ll wrap up then there will be plenty of time as we go for questions.

So first half results, hopefully by now you would have seen our statement revenues were up 4.1% particularly strong again in emerging markets with revenues up 12.1%. Profits benefiting from improving operational leverage were up 6.6% to £185 million and the profit improvement came quite importantly in businesses where we have either 100% ownership or high equity stake and that meant that that benefit drop down to earnings translated into 13.2% improvement in earnings.

Operating cash flow after one-off corporate items relating to the Olympics and electronic monitoring came in at £212 million, which was down 5% on the same period last year, excluding those two corporate items the Olympics and EM the cash flow from our operating business units below corporate level came in at £185 million which is up 25% year-on-year. Net debt was £1.68 billion and that included £109 million plus about £6 million to £7 million own costs for the electronic monitoring settlement. It also reflects normal seasonal pattern or shape to cash flow where our cash flows in the second half of the year are stronger than in the first half of the year and we would expect as in previous years that seasonal effect to unwind through the balance of the year.

Quite exceptional performance with pipeline conversion, new contract sales with a total contract value of £1.2 billion very, very pleased with that and annual value of about £600 million. So all-in-all good progress with our plans, satisfactory financial performance, but a lot to go for and much more still to do.

Turning to each of the regions, in Africa we saw again strong top-line growth, revenues up 12.7% and quite clear benefits from our operating leverage profit is up to 22%. We’ve introduced in most of our regions a program known as accelerated best practice, we’ll talk more about that in a few minutes. It builds on one of the strategic priorities we identified last year which was cost leadership. In Africa we’ve got three strands to this program, direct labour efficiency, vehicle route planning and organisational efficiency with the near-term emphasis on direct labour efficiency given that we employ over 100,000 employees in Africa.

Good growth in our technology sales in Africa in both cash and secure solutions must be said we’re starting from a low base but we’re very pleased with the progress that we’re seeing. There we’ve got a lot more to do in Africa in this area. And to that end we’ll be strengthening as we said we would do our sales and operations capability in a number of key vertical segments in Africa mining, oil and gas, risk services and security technology.

Asia Middle East revenue is up 11.5% and again the benefits of operating leverage taking profits up 23%, these results include three months of the Manus Island contract which ended in first week of April. And on the rolling 12 month basis that contract generated revenues of £60 million to £70 million.

In the Middle-East, we’ve set up our technology team. Again this was something we identified in our strategic review last year that this was a market with what we saw a strong potential for technology and system sales but didn’t have technical sales capability or operational capability. We started this process last year. I am pleased to say the team is now in place it’s up and running, I visited with them not long ago. They are establishing their credentials in the market and we’re beginning to see some flow in our sales pipeline. Very early days but pleased with the work that Dan, Chris and the team down the Middle-East have been doing on that.

And accelerated best practice shorthand ABP is also being rolled out in Asia Middle-East. The same three strands are being focused on but with particular emphasis on direct labour efficiency, we employ over 200,000 people in Asia Middle-East and organisational efficiency. Looking at the number of layers that we have in the organisation looking to shorten lines of communication and improve our commercial and operational agility.

In Latin America, revenue is up strongly 12.8% and this is broad-based growth across all our markets in our key customer segments. But as you can see, profits were down by 11% and this is attributable to legislation which prescribed a pay increase for security workers in Brazil that was in the half year hit of about £4 million which we expect to partially recover in the second half of this year. Our team in Latin America has got a structured program of engaging with our customers to adjust for the statutory increase in pay.

Of all our regions, this region has seen a greatest change in our leadership, our management team. We substantially strengthened our management capacity and our capability. This follows the appointment of a new regional president which we talked about in November, Martin Alvarez, who is an American Cuban, who has worked in America but also he has worked in eight countries over 15 years in Latin America. He is based in Latin America and we have been working with Martin to build a team around him and you will have seen I hope that we separated the America’s regions into two distinct regions, North America and Latin America, giving proper priority to what we see as two fundamentally very important, very attractive markets. So Martin has been working to build a strong management team around him the finance director sales, we now have for the first time a senior sales leader based in Latin America, operations and so on.

We are only just getting started with our program of accelerated best practice in Latin America given the other priorities and the only recent establishments of this as a independent region, we’re about six months behind the rest of the Group in Latin America with our accelerated best practice and we are recruiting subject matter experts to work in Latin America for Martin on some of these programs. We are also investing in sales and business development not only the new regional sales director but in each market focusing on effective vertical segments, we’re bringing new people into the organization, as we said we would.

Europe, revenue is down by about 1% in line with our expectations, profit down by 2%. I think everyone knows that about this time last year, in fact May last year, the Dutch government decided to end its program of private supply for public prisons and that Dutch prison contract has been progressively unwinding, it unwound more slowly than we expected and but that contract is now more or less ended.

We have consolidated management team in the regional HQ in Amsterdam. This is for the first time. For many years we have had a geographically dispersed management team in Europe and this is being consolidated under new leadership, we announced the appointment of Graham Levinson and much like we have been doing in Latin America, we have been building a new team with Graham based in Amsterdam and very pleased with the progress that we’ve seen there. There is tangible change in the performance management rhythm and routine in this business now. It’s very focused, it’s very systematic, it’s very disciplined and I am confident that over the next 12 to 18 months we are going to see real benefits flowing from this much improved performance management discipline.

Graham has accelerated the restructuring of our businesses in Netherlands, Belgium and Finland. This again is being done in a disciplined and systematic way and we’ve put project managers into support Graham in these efforts. Here too we are investing in sales and business development much to our surprise when we conducted our business review last year, we found countries without sales directors and we didn’t have a regional sales director, we now have a regional sales director and we’re systematically going through our portfolio to make sure we’ve got the right capability on the ground in each of our core markets.

North America, I think one of the standout performances of the fast half. Revenue is up 4% principally in our largest business commercial security but also in compliance and investigations which is a small but rapidly growing part of the business and our care and justice business which focuses on youth services also did very well. Great operational leverage, profits up almost 27% very focused efforts now on improving and maintaining direct labour efficiency and also a program now beginning to show some improvements in overhead efficiency.

Our U.S. government solutions business remains in the sales process, you will remember we stopped the process last year changed the package of assets re-launched the process. We had good buyer interest. We’ve now down selected to a single buyer, and we’re in detailed negotiations. However, I’m going to say again, there’ll only be a deal if we reach satisfactory terms, and we’re not there yet. The reason for setting this business, the principle reason is it’s operated under a proxy management structure. But it’s a good business and if we don’t reach satisfactory terms we’ll hold on to the business confident that at some point the asset market will be ready to receive this business.

The U.S. business is actually a very, very strong franchise when you go there and you meet the team and meet the customers it’s a strong franchise in the world’s biggest security market. We have a strong pipeline and we’re very pleased quite excited to see some early signs of market recovery too, too early to break out the champagne but we can see early market recovery or early signs I should say of market recovery in North America.

UK and Ireland again as expected revenue is down as the EM contract came to an end at the end of March this year but conversely profits were up this is the net effect of on the one hand starting to extract some benefits from our restructuring program but at the same time reinvesting some of the proceeds as we said we would do of those efficiencies back into the business, this is a business that needs strengthening in sales, business development, contract management, risk management and some of our core functions all of which we’ve been pursuing I am pleased to say with great energy and with some success.

Pleased, also that our cash solutions business is now showing improving performance particularly in the UK as we rationalise the branch network, rationalise the vehicle fleet and start to embed some performance management disciplines, progressively which to be fair have been started already. There is lot more to do particularly in our Irish business, our Irish business have been I’d say under managed for some time and we have replaced our management team and our Irish cash business we went out into the marketplace and got a seasoned executive who has worked for a long time in the cash space.

Our UK shared services program we announced this last year, this is taking nine accounting systems and six IT systems in rolling together in one single platform phase 1 goes live at the end of 2014 and then 2015 will be all about extracting the benefits through improving our business processes that the new technology will facilitate. Our sales pipeline remains strong in the UK I am pleased to see some positive momentum in Outsourcing and FM once more.

I’m going to move now on to an update on the strategy we outlined in November last year. As I said earlier we didn’t give you a comprehensive update in November so this is just a preview looking at some of those areas that we identified as strategic priorities. I’m going to start with organic investment. You will recall that when we completed our view we identified as I mentioned earlier that we’ve been under investing given the strength of our market positions and the potentially in those markets under investing in the organic growth opportunity. And as a result we decided to invest in incremental £15 million to £20 million per annum off the bottom-line in the first year and then as we roll forward to be progressively funded by cost efficiencies and I’m pleased to say we would be making good progress with that program starting with new sales leadership. Mel Brooks who I introduced earlier is our new Group Commercial and Strategy Director and we have appointed new sales leaders in three of our six regions that is Europe, Africa and Latin America meaning all six of our regions now have senior experienced sales executive, leading our sales executives in the region rather than just centrally.

We revised our sales incentive structures in three regions Africa, Latin America and North America and our European region is being reviewed at the moment. This is something we’re going to keep under review annually, it doesn’t mean we’ll change the structure each year but we want to just be a bit more explicit and more focused about ensuring that our sales objectives are matched by our sales incentive plan and essentially what we’re doing is we are increasing a variable pay, or performance related pay.

Under Mel’s leadership we’ve established a global sales forum this brings together our sales leaders from across the global business several times a year both physically and virtually enables our sales leaders to share best practice in areas such as sales operations, global account management, global opportunities and also product and service innovation. It also provides a neat powerful forum for us to sponsor the work that we’re doing to take proven products which are commercially successful in one market but totally absence in another market where we can see latent demand and export them into those markets and this forum gives us the senior sponsorship that we need. We need to do a bit more work on our senior management incentives below the executive committee to ensure that this collaboration is incentivised, that there is a good reason on both ends in that transaction for people to engage and chase a commercial objective.

There is undoubtedly increasing rigor in our sales performance management our sales processes we’ve gone from a quarterly and monthly at best sales routine to a weekly sales rhythm now. This is not uniformly the case everywhere across the business but where we’ve appointed new the three new sales leaders you can see within months an immediate impact as Mel and the team work on establishing a weekly sales rhythm to track sales performance. Lot more work to do there.

We’re embedding sector specialists, I referred to this in the case of Africa focusing on strong vertical segments, financial institutions mining, oil and gas and critical national infrastructure, energy, aviation, ports and so on. We’re embedding those in the regions previously these were held centrally that was necessary at the time to get the sector specialism going but we really need that capability on the ground in the markets where the demand exists and we’re doing that now. One of those examples is the technology team I referred to in Asia Middle East and I have already described what’s happening there.

Over the past 12 months we hired 263 people into sales, business development and sales support including operational support or technical support for sales globally. All those investment all these efforts are designed to achieve one thing and that is maximize our organic growth potential.

Our pipeline at the 1st July stood at £4.9 billion that compares to 4.7 billion at the beginning of the year. But that’s only half the story of course because we had very strong pipeline conversion, I would say quite exceptional, it’s not something we can take for granted as being in the bank every six months. But certainly in the first six months we had as I mentioned 1.2 billion TCV on an annual basis just over £600 million pipeline conversion which depletes the pipeline. At the same time our global sales teams we have to give credit to our colleagues around the world for this we were successful in replenishing the pipeline. So we still have a diverse pipeline and I am pleased to see not only strong conversion, but strong replenishment.

Now accelerated best practice, this started out as cost leadership and as we’ve gotten into cost leadership we’ve identified six distinct areas for best practice, we call it internally accelerated best practice. Direct labour efficiency, vehicle route planning, vehicle telematics, organisational efficiency, IT and procurement, those are the six areas they clearly defiant now. We have leaders for each of those programs and we’re progressively resourcing them and pushing them out into the regions.

Direct labour efficiency 39 countries in the initial scope covering 376,000 employees. We have 14 country reviews underway at the moment, these combined subject matter experts from our Service Excellence Centers SEC and experienced line managers from within the country is being reviewed, we bring those teams together and the objective is quite simple and that is to optimize our internal supply chain for labour to ensure that hours on the payroll, equals hours contracted, hours billed, hours collected, easy say in a very large business that takes real discipline and a systematic approach.

To aid this we’re building capability in regions that is to say we’re taking subject matter experts which were previously held centrally and deploying those into regions. This we hope will give us additional pace with this program but it will also ensure that when the initial phase of the program is over and the subject matter expert returns to their normal job we’ve retained subject matter expert capability in the region to ensure that the program is sustained.

Route planning and telematics we’re initially focused on 9,000 cash vehicles and all of these we plan to bring into a route planning regime by the end of 2015. Telematics which focuses as you know on fuel efficiency and driver behavior. We started this program already, we’re up to 2,300 vehicles, cash vehicles that have telematics and our plan is over the next 12 months to have another 2,000 vehicles fitted with telematic devices. Putting the devices in is just the first step, embedding that into the management routine, management learning how to use that tool will take a little bit longer, but we’re confident that this will bring significant benefits.

IT we have talked about before, we’re spending over £120 million per annum on IT. I continue to believe that that number is light, I think like most large organisations there is what I call shadow IT spend, I think we had that in our company. We appointed a Chief Information Officer earlier this year Martin Taylor, experienced seasoned IT executive reporting to Himanshu. And Martin has quickly taken stock of our IT estates and has come forward with clear plans which we are now resorting. And I will describe just a few of the stands, first of all we are globalizing our IT organization with a federated structure, highly vulcanized structure that we had before. That will bring significant organisational efficiencies. We’re rationalising our infrastructure; we’ve got a vast infrastructure in this company that will include telecommunications, fixed, mobile, voice, data and we are also rationalising in a number of development, internal development projects we have.

Martin Taylor, as part of his stock taking, has identified over 600 IT development projects in our company. He is working with his team to rationalise that down to a more manageable and sensible number. But the most important thing is we’re now putting in place the governance processes to ensure that the full and IT development projects is launched anywhere in the world is a proper business case and it has the appropriate executive sponsorship. In all of these areas we think the opportunity over the next three years, three to five years is very significant. I’ve to not only cost out but to improve the quality of what we have, upgrade the functionality of the IT systems that we have.

We talked also in November about procurement. The absence of any global procurement function in our company when we have non-payroll spend of approaching $2 billion. We appointed earlier this year Shaun Carroll, an experienced procurement executive, again reporting into Himanshu to bring procurements and financial and operational benefits closer together. Shaun has undertaken a baseline study and identified addressable spend of £1.3 billion, which confirmed this was ballpark estimate that we identified last year. And this addressable spend, 70% of it is spread across eight categories that we are appointing new category managers as we speak to go after this. This is a very significant prize for us again over the next three years.

Finally our portfolio management, you will remember we went through the portfolio looking at materiality, current performance, future prospects. In the last 12 months we have sold six businesses at attractive exit multiples. We’ve raised proceeds in aggregate of around £160 million. That doesn’t include the U.S. government solutions business which I mentioned a moment ago. And we’ve taken the decision to discontinue further 15 businesses. These are smaller businesses where they are challenged for reasons of materiality, market structure, performance, in aggregate they represent less than 1% of turnover and in a good year they breakeven. This is not a good use of our scarce management capital or shareholder funds.

That brings us to the end of the strategy update and I’d like to handover to Himanshu, who will take us through the numbers in a bit more detail, Himanshu?

Himanshu Raja

Thanks Ashley. Good morning. Before I take your through the numbers, you all have noticed that for the first time in our release this morning, the results have been reviewed by our auditors KPMG, that wasn’t our historic practice but is common practice across the FTSE. So to take you through the results, lastly said, it’s a solid progress in the first half of the year. And you all have seen from Ashley’s presentation that we’ve continued to breakout the segments just as we did last year to show you that continuity of disclosure. We’ve also provided you with a roll forward in the results for IFRS 10 for discontinued operations as well as for the impact of the strengthening sterling. And you will see in the appendix 2 the chart this morning we’ve shown the FX impact by region as well to help you.

The underlying results therefore on this chart, where we have shown the performance on a like-for-like basis of constant exchange rates. Revenues are up 4.1% to 3.4 billion, PBITA was 185 million up 6.3% from a 174 million in 2013, resulting in operating margin of 5.5% for the first six months up 10 basis points on the prior. You will also see that that PBITA performance is after corporate costs of 28 million, which was up 8 million year-on-year and this relates to the investment Ashley referred to in our corporate functions in finance and risk management in IT and in procurement of around 2 million and 6 million which is largely non-cash items, it’s the non-cash items related to pensions and to LTIPs.

Total cash generated was 212 million, which compares with 224 million in the prior. We have made good progress in driving cash flow improvement. At the operating level, we generated 185 million compared with 148 last year. And you will recall this time last year, we had the benefit of the 76 million Olympic receivables which affected the year-on-year comparison and this year we had 27 million in flow following the settlement of our electronic monitoring settlement with the UK government, so good underlying improvement in cash generation but there remains much more to do on cash and I'm going to come back to the theme of cash management and working capital and what more we are doing.

On our PBITA growth of 6.3% we saw improved operational gearing with earnings up 13.2% year-on-year and this arises because the profit improvement that we saw really comes from entities where we either have wholly-owned or majority owned ownership which means that the earnings grew faster than the profits and if you look at it the other way from minorities perspective remember the minority interest were 7 million constant year-on-year. Earnings per share were 5.6 pence against 5.4 pence this time last year an increase of 3.7% after the dilution effect of share placing.

And finally let us turn to FX. With the relative strength of sterling, FX movements continue to have a significant impact on our reported results to recognize of course in terms of foreign exchange effect on a transactional level our revenues and costs are in local currency. So there typically isn’t a transaction foreign exchange exposure but clearly there was a translation one. And if I apply the average 2014 exchange rates to the prior year the revenue impact would have been around 8% and the profit impact around 9%. And that is the slide in the appendix which shows you the breakdown by region.

Let me just now turn to the total results, again on a like-for-like basis adjusted for IFRS 10 and 11 and discontinued operations or on constant currency. Total and underlying revenues were 3.4 billion up 3.8% year-on-year, total PBITA was 179 million reflecting a net 6 million specific charge and the 6 million relates to two items, a 2 million credit on a 6 million charge. The 2 million credits simply relates to the successful settlement of the legal claim in Europe and notwithstanding the impairments we took last year we continue to pursue outstanding receivables or the legal claims where we believe there is a reasonable prospects of recovery and in line with our policy that flows through specific items what we call the middle column.

And the restructuring of 8 million relates mainly to our businesses in the UK and Europe where we’ve seen opportunity for further cost reduction, the point really on restructuring as we continue to rigorously monitor the progress on all our restructuring plan-by-plan, program-by-program and where there is a strong economic case to improve competitiveness, or to reduce the overheads we will continue to look at these.

Moving to earnings, total earnings were 78 million a significant improvement on 196 million loss, last June resulting from the balance sheet review and other charges taken. And total EPS was 5 pence compared with a loss per share of 14 pence last year. The interim dividend is maintained at 3.42 pence.

Let me just turn to the bottom half of the income statement, keying of the underlying PBITA over 185 million, our interest charge was 61 million in line with last year and this includes a non-cash charge of 10 million for the pension interest under IAS 19. On tax the 31 million charge represents an effective tax rate of 25% that’s a 1% increase from last year and it rises from the adoption of IFRS 10 and 11. It’s important to know the effective cash tax rate is unaffected by this.

Underlying earnings after tax were 86 million, an increase of 13.2% and as I explained the minority interest of 7 million were in line with last year reflecting the fact that profit improvement came from either wholly-owned or majority owned entities. And probably as a footnote before I leave this slide, you will see from the release this morning we showed a 30 million profit on disposal from the sale of our Canada cash business and our business in Norway and again consistent with the policy change we made last year this goes to specific items in middle column in other words we no longer regard profit on disposal as part of underlying performance.

Turning now to net debt, if I start with the net debt at the end of the year of 1.5 billion there is an IFRS 10 and 11 impact of 19 million where we deconsolidate the cash in entities that we now equity account for and this gives a restated net debt of 1.55 billion at 31 December. Cash generated from continuing operations comprises 185 million from our operating businesses and total cash therefore was 212 million overall a satisfactory performance but much more remains to be done here.

In terms of investing activities a net 2 million comprising CapEx, restructuring and disposal proceeds. June half we invested 57 million in capital expenditure and leases I just want to talk about and remind you all the enhanced capital disciplines we talked about at the end of the year. Really the CapEx number reflects just a more rigorous approach to make sure all CapEx spend is supported by a strong internal business case, strong internal rates of return. But it also is reflective of taking group wide approach as we talked about for example some of the work we are doing in IT programs where we are pruning IT programs and looking to see where this common spend pooling that together to do it once and therefore you see some degree of deferral from Q1 and H1 and to H2. So 57 isn’t the normal run rate that we’d expect we continue to invest in the business where we continue to see good business sources.

The restructuring of 20 million outflow was from the 2013 restructuring we announced and we received disposal of 79 million together with the settlement of lease liabilities of 10 which gives you the 89 total cash from Canada and Norway that I talked about, so net-net 2 million in investing activities against cash generation of 212. And if I just adjust for continuing operations you’ll see an almost doubling therefore of the net cash inflow from last year to this year.

In terms of use of funds interest paid of 66, tax of 39 and pensions of 21. And we paid dividends of 90 million including the dividends to our minority interests. Of course we have the out payments of 109 million which together with advisor’s fees was 116 million and therefore we finished the net debt of 1.68 billion.

In terms of net debt to EBITDA, net debt to EBITDA therefore at June was 3.1 million and the comparator was 2.8 million, we do expect net debt to come down, net debt to EBITDA to come down in the second half as first half cash is always exceedingly lower than the second half.

And let me just finish by talking about financing cash flow. The group remains astoundly financed, our funding profile remains robust with 955 million of unused license committed facilities and we have no material maturities until 2016. We have a strong focus on working capital management and we have changed our weekly rhythm just like Ashley talked about on the sales front. It’s also true on the cash flow and we no longer monitor cash on a monthly basis, but we monitor it and track progress on a weekly basis. And I have talked about putting in place times at the end of the year to move to that. We’ve also moved to make sure the cash is not just a massive for the finance organization and therefore operational management are engaged, and engaging with the customer and going off for that cash flow.

The finance function traditionally is involved in -- focused on the event to billing cycle and what that will do over times it will result in more timely billing and therefore start the whole collection cycle earlier. We’re also working on our upfront contracting in terms of cash terms with customers and suppliers. So focus on cash really all levels of the business. And overall we expect our next debt to EBITDA to continue to come down in the medium term and within our desired range of 2.5 times.

With that let me hand you back to Ashley.

Ashley Almanza

Thanks Himanshu. Right, just one slide to wrap up, in conclusion as we set out last year we’re executing against a clear and focused strategy. We have a diverse and growing sales pipeline but we’re not complacent, we’re investing heavily in sales and business development. As you heard from what I have said and Himanshu touched on it as well. We’re investing in beyond sales and business developments in some of our core functions, operations and finance HR and so on. We’re embedding performance management, capital management and cash management in our monthly reporting and performance management cycle and in some cases weekly.

I am very pleased to see that some of the initial opportunities that we identified last year, as we have got into those and worked them up, what has emerged is a stronger array of opportunities that we can get after and we’re defining those programs in a very structured way, resourcing them and getting after them. So in summary good progress, I think we can say satisfactory financial performance but a lot to go for still, much more to do before we realize the full potential of the company strategy.

Thank you very much. And we’re going to go now to a Q&A. We have I believe microphones, rolling microphones. So if you’d like to ask a question please raise your hand, we’ll bring a microphone to you. When asking a question we’d be grateful if you could give your name and state and your affiliation. Thanks very much.

Question-and-Answer Session

Robert Plant - JPMorgan

In terms of organic growth that was 5% in Q1, looks like it was 3% in Q2. You have mentioned Manus Island around 60s perhaps 2% for Manus Island. And Manus Island won’t have an annualized effect for the rest of the year. But would you expect the second half of organic growth to improve.

Ashley Almanza

There are several things going on in the contract portfolio. And I’ll start by focusing my answer with the observation again that this is a very large business and global sales approaching around $10 billion, we have thousands of contracts. It is the case that we had some big contracts, sometimes big contracts come into the portfolio, we celebrate, other times big contracts leave the portfolio and we work hard to ensure that we are replenishing the portfolio. What we have in the first half of this year is Manus Island as you say on the rolling 12 month basis that’s about £60 million to £70 million. We also have a Dutch prisons contract rolling up. And I’d say that came out progressively rather than suddenly as we initially anticipated. And that’s a similar size actually to manage.

And then lastly have electronic monitoring dropping out of the portfolio at the end of March and that was contracts without 40 million, £40 million to £45 million per annum. So clearly those three together are significant, we are neither complacent nor alarmed by this and these are as expected. We don’t expect the investment that we are making in sales and business development to have an immediate effect as you know even with strong pipeline conversion, what’s comes off the conversion is mobilisation. So we won’t see the benefits of all of the success that our sales teams has had in converging the sale pipeline in the first half of this year in this year. So I think steady as she goes really.

Kean Marden - Jefferies

Good morning, it’s Kean Marden from Jefferies. Can I ask a similar question, so if my math is correct the emerging markets like-for-like rates slowed from about 16% in the first quarter’s 8 in the second, clearly taking the Dutch present effect on that number but managed so which elements of the businesses sort of slowed down in Q2, can I get a bit more color on that? And I have second question but may be if you want to deal with that one first.

Ashley Almanza

Thanks, Kean. Emerging market Manus obviously we had a quarter impact in there. I think I was quite hopefully everyone in the room remembers that when we posted 16%, I said don’t put this in the bank or in the model in a linear fashion. Our business like a lot of other businesses simply won’t grow in a linear fashion. And apart from Manus Island, we saw our global secure logistics businesses slowdown somewhat and this was a function of a quite sharp drop in bullion movements. In no small part that was due to changed -- regulatory changes in India, which make it more expensive to import and put a closer cap on the imports. And if you want to import more, you just have to export. So there is no question, no doubt we had some effect and that is in emerging market segment as well. Beyond that there is nothing specific I would call that other than to say the business just won’t grow in a linear fashion, we will have periods where we are growing at 8%, below 8%, above the 8%. I don’t know if you want to add anything.

Himanshu Raja

No, I think that was right and there isn’t anything exceptional apart from the G4S go bullion and Manus.

Ashley Almanza

Okay. Second question.

Kean Marden - Jefferies

Just touches on ICT. Because obviously you got the initial scoping exercise I think there is an intention to go to market with a number of packages in the second half, can you just help us with the timeline around that and how those involve?

Ashley Almanza

Do you want to take that?

Himanshu Raja

So IT or ICT? From a procurement standpoint or go to market Kean?

Kean Marden - Jefferies

Yes the ICT. So I think you are outsourcing you packet bundling together some requirements and they are looking for suppliers?

Himanshu Raja

Yes, I mean the IT program actually it has got a number of dimensions. One of those is actually mentioned telco, data and voice. The intention is not to go big bang because actually as we’ve done the detailed work, we have more than 320 providers on a worldwide basis. So it’s about systematically going through those.

Ashley Almanza

That’s just telco.

Himanshu Raja

Just telco contracts…

Ashley Almanza

IT is over 2,000 suppliers in IT.

Himanshu Raja

So just the telco fixed voice data contracts over 320 suppliers and the devil is in the detail because on each of those you’ve got to understand what the remaining term is, what the volumes are, are there volume thresholds and then it’s about striking framework deal such that at the point of expiry we can wrap those contracts expiring into the framework. So there are some hard yards to go through the second half of this year and into the next year.

Ashley Almanza

I think if I add to that, the program that is now emerging, so first step was to go out and get a CIO bring him in, he’s done really a terrific job of getting around the business taking stock of the IT estate and then find the opportunities. It’s a three to five year program. Now I am pushing this hard as is reasonable to do so for that to be a three year program but I have to listen to the experts here because you got to do this right rather than just quickly. But I think the point really to make is that as you would expect the benefits are going to be progressive again not linear I am not using that phrase again. It won’t be the size of the price divided by five it will make some progress in year one I would expect to see that accelerating in year two and year three and so on. But I think it’s quite right for Martin Taylor, CIO to insist on the programs being well structured, well resourced and delivered in a disciplined fashion and to resist my attempts for him to accelerate but it’s a three to five year program.

George Gregory - Exane BNP Paribas

Good morning. It’s George Gregory from Exane BNP Paribas. Two questions if I may, firstly, Ashley you talked about the secure logistics business, could you just clarify first that business was previously held within your UK business is that correct, and second how big is that in rough terms?

Ashley Almanza

So since I’ve been here it’s not been in the UK business that business is being managed out of Asia Middle East and part of that emerging market segment but -- maybe historically it could have been, I think at some point it changed but certainly for the time I’ve been here. The size of the business around the 100 million so I think actually quite small given the size of the market the size of the opportunity in effect we should be a natural player in that market. We have so many of the ingredients that are necessary to be successful. So one of the pilots that I refer to when we talk about the global sales forum is looking at is what Mel calls the white face in our portfolio. We seemingly have market wining products and services in some markets and you look across our portfolio and there are white faces all over the place where we’re just not leveraging that capability into those market and one of the pilots we’re running is on global secure logistics to see whether we can take what has worked successfully in a small number of markets and trial them in markets where we think there is lots of potential. So for example in Africa we’ve quite a narrow footprint it’s good little business but the footprint is quite narrow, there is more we can do.

George Gregory - Exane BNP Paribas

And the second question in terms of your sales incentives which you restructured the three regions, can you talk a little bit about whether you’ve bought some of the KPIs around, our people actually being incentivised to try sales, is it purely sales or what other metrics you’re looking at?

Ashley Almanza

Yes, so we’re indeed addressing KPIs as well. So we’re looking and it isn’t by the way one size at all it is market-by-market and even within the region of variations depending on the mix of business in a country and local market practice. But we’re looking not only at sales, in some markets we’re looking at gross margin, we are also looking at sales efficiency and we will introduce other KPIs which really address the degree to which certainly sales management is managing the sales process effectively and so this is new ground which is why I said we’re going to keep this under annual review Mel and his global sales leadership team are really starting to get under the hood of it around things like sales efficiency and using what quite expensive tools that we have in our tool kit and to manage sales that we think are underutilized we’re not unique sales people don’t like necessarily always to be doing what they regard as admin, and to a large degree I agree with that. We want them talking to customers and pursuing leads but we got to do that with some discipline and some structure so that the KPIs which deal with that as well. So I expect as we roll forward we will get more of the balanced scorecard in our sales management program George.

Rory McKenzie - UBS

Good morning. It’s Rory McKenzie from UBS. First question on the balance sheet, do you think you can get down about 2.5 times target by this year will that require much progress on media disposals including the U.S. Government business for example. And secondly on the procurement opportunity, could you give a bit more detail around the eight areas you’ve indentified which ones you think are first and whether that is three to five year program or whether the savings there are sooner, if not will it again?

Ashley Almanza

Let me make a few introductory comments and then I’m going to ask Himanshu to add to those. On gearing it won’t be surprising so we’re not going to give a profit forecast and give an end point number for the end of the year. Himanshu pointed out that cash flow is seasonal. We see normal seasonality we’d expect that to unwind I think typically that 45% of our cash flow in the first half of the year. So normal pattern there, we do have the disposals program but the disposals program is not designed to gearing down its one of the effects but the principal purpose is to bring real strategic focus particularly in the long tail and in the case of the U.S. Government business it’s about the proxy management structure really, so I’ll ask Himanshu to comment and put color around a net debt in a moment and going to have to remind me again about the -- I should have made an apology, CPO that is also a three years to five years program Shaun, our Chief Procurement Officer, is getting the same degree of attention and encouragement to move that program forward with real energy and purpose but again we have to respect his expertise and we’re more interested in getting something which is solid and sustainable rather than a quick fix. I’ll let Himanshu talk about the categories, category management and the third area -- forgive me.

Himanshu Raja

Just a point on the net debt to EBITDA, I can’t stress enough this journey that we’re on to change the culture to a cash massive culture. So Ashley was talking about gross variable pay in one of the regions they put cash in as one of the variable measures, because they wanted to change the behavior within that particular region. So in every facet of our business we’ve got real focus on. It’s not just about revenue profit, it is profit they must convert the cash and we’re starting to see some of the benefit as well.

On procurement Shaun has been onboard less than 90 days, he’s done a great job in base lining spend, he’s now taking that to another level which is now to build the capability, bring on experienced category managers as well as just in the same ways with ICT go to that next level of detail. So the next big task for him will be to suck the information from the desperate legend information systems we have really starts to get to down to supply level detail. And then build the procurement programs. In terms of categories the top five are vehicles, surprisingly we have big insurance costs because the nature of our cash business in particular the property stay and systematically making sure we anticipate and address the property portfolio not only in the branch networks but also in the various administrative offices. And then it is usual things like just the travel, we don’t have global contracts with airlines or travel providers and things like professional fees. So those are top four, five.

Sylvia Foteva - Deutsche Bank

Sylvia Foteva from Deutsche Bank, I wanted to ask two questions please. Firstly on the savings and the investment, can you just update us on how much you have achieved during the first half? I believe you mentioned that Q1 savings was about 5 million? And then secondly on the new wins, I think the 660 number compares to the 440 if I am not mistaken. Can you just talk about which regions perhaps and sort of when the contracts will be due to start?

Ashley Almanza

I’ll start with the sales question and ask Himanshu to comment on savings program. On sales actually the pleasing thing is quite broad based. And so we’ve seen for example in Latin America new customers coming to the portfolio big new customers. And for the first time in our history in Latin America get a Pan Latin American contract with a science based company in Latin America. And in Europe and in Africa we had two very good contract wins in the cash management space, large cash utility Benelux and a Pan African contract was the major financial institution in Africa in UK very pleased to see some very large government contracts coming back into the portfolio.

And North America I said earlier for me one of the standout performances in the first half, six months it’s not all about six months but I think it was really very impressive performance out of North America. And the sales team and the general management team working very closely together in North America, we haven’t perfected it but it’s quite impressive when you don’t spend time, it’s good to see how they work together. If anything we have too much opportunity in North America, big challenges prioritizing and our sales effort. And we have some big wins in North America particularly in wholesale distribution, new contracts, contracted growth of existing or doubling our capacity in contracts in North America. So broad based which is always good to see. What I would call ultra large contracts in our portfolio accounted for about a third of that 1.2 billion. And I think we really want a balanced approach to the markets so that we don’t over time develop a narrow base comprising only ultra large contracts. And then if you add large contracts to that we start to get up to 50% to 60% of the total win and then the rest is what I would call solid bread and butter business across our contract portfolio. Cost savings.

Himanshu Raja

So we don’t breakout, as you know, cost savings, by program or individual line item. But you will see from today’s results that going forward the business is in four of the regions out of six, you’ve got a growth in profit is faster than the growth in revenue. And Ashley has talked about ABP, the six core programs that we run. And over and above that, there are always local initiatives going on to get after discretionary costs that always to optimize the operation. And well you will see the benefit is progressively and the improvement operating leverage region-by-region. What we will do is update you with more details in November when we meet and flush out the detail in those programs as well as help you track our physical progress for example on vehicles or on labour efficiencies to the number of countries that we cover.

Ashley Almanza

Thank you. If we go to the gentlemen in white shirt please.

Paul Checketts - Barclays Capital

Good morning, it’s Paul Checketts from Barclays Capital. I’ve got two I think, just knocked one off. The first one is on the gross margin. It’s been trending downwards for some time you’ve been in the business for a bit longer now. I wonder if you could give us some thoughts why that was happening, how much was market, how much was G4S and equally, whether you think you can now rest that? And the second one is on the UK pipeline; you’ve said it’s an encouraging situation at the minute. Can you give us a bit more flavor on whether how much of that is in the public sector and maybe if it’s in the private sector, which parts, please?

Ashley Almanza

Okay. I will ask Himanshu to comment on gross margin in a minute. I mean any comment I would make is that obviously if you look of what’s happened in Brazil that would have had an impact on the LATAM gross margin, we’ve partially recovered some of that. I am talking about the statutory pay increase. UK pipeline it’s again broad-based. The large contract wins were as it happens in the public sector. The largest of that being in DWP will what I call well fit to work but employment services is the proper term and is a very effective business, actually it’s I think not only by our assessment but by our other people’s assessment more importantly. It’s probably the leading employment service outsource provider in the UK. And so there was a big win there.

Beyond that I wouldn’t call out any single contract. It’s spread across customer segments financial institutions, less retail which we are comfortable with and perhaps in previous years, some new infrastructure projects that have been built, we have been successful. Our venting business has continued to be very successful at winning. E-contract I think is another area. And notwithstanding what happened at the Olympics which I’ve got is exceptionally. I think you take that aside and not to diminish the issue but our venting business is quite impressive it has a good reputation in the marketplace and we’ve seen good contract wins there as well, gross margin.

Himanshu Raja

Gross margin, you will appreciate a large number of moving parts. So let me make a couple of observations. So the first is there is a systematic focus particularly on PI price increase to that capture the labour indexation. We experienced typically over the beginning of the year and again we track of our -- in our performance management country-by-country not region-by-region, but country-by-country and we tracked what labour indexation was and what the price recovery was. And whatever we talked about it in terms of our one of our accelerated best practice but at least something that was just dramatically everywhere.

Actually when you look at the gross margin performance through the first half, three of the regions had reasonably good progress on gross margin and they were Asia and the Middle-East, North America; and in the UK we saw the benefits of the restructuring initiated last year. If you recall we talked about particularly in the cash business, it was about addressing the branch network and we are over a three year program rationalizing advanced network and improving the competitiveness and you see that flow that Ashley mentioned that in the slides.

We do see some pricing pressure. LATAM in fact is exclusively down to what we saw happening in Brazil with the legislative danger pay. Obviously in really a couple of markets, two or three markets in Africa. But actually there is a decent amount of focus on gross margin as a result cost and of course when you think about the accelerated best practice, group planning, telematics and direct labour efficiency, all play into the gross margin line and when we think about IT procurement and organisational efficiency we have a mix of gross margin and G&A, so overall a descent performance on gross margin but much more to do in that area like others.

Gideon Adler - Redburn Partners

Hi it is Gideon Adler from Redburn I’ve got two questions. The first on portfolio Himanshu you mentioned that actually divestment program is more around tapering the tail your portfolio than reducing the debt pile but the size of the suite it was probably towards the front end of your portfolio by absolute materiality. I was just wondering whether we should expect further disposals from this sort of front end of the portfolio going forward. And the second question is more of a culture one obviously you’re instituting a lot of change across the business it is the surface that industry and particularly for a grid like G4 that is 600,000 employees, I wonder how you get about mitigating the risk of disruption from these changes and also what the broad level of feedback seen from your employee base for the changes going on across the business? Thanks.

Ashley Almanza

Thanks. Yes, good questions. On Sweden that we wouldn’t class as a small tail-end business but neither would it, I think, qualify as a business that has been making a material contribution to the group Sweden, if you go back to what we said in November we looked at, we applied a number of lenses to the portfolio and one of the things we looked at is market structure and we try and form a view and ultimately we do. Right along we form a view is to whether or not that market structure needs some sort of fundamental change typically consolidation and it’s whether we’re buyer or seller in that process and it is our view that the market in Sweden requires consolidation in order for the industry to be sustainable and viable in that country.

And we think that this transaction creates a more sustainable business that brings benefits to customers and employees but clearly it realizes value for our shareholders. So we’ll continue to find those lenses but I stand by the comments we made earlier a lot of what we’re doing is really about bringing focus to our efforts, strategic focus for businesses that as I said 15 businesses are less than 1% to turnover and barely breakeven in a good year. So it’s not a good use of our scarce management capacity.

Cultural change, this is necessarily subjective reply to your question is that it's a very, very important question. It’s one that we talk about lots with the group executive, we engage with global leadership team on this. It’s not static and so I think to your point that employee response I think the initial response was extremely positive, broad based response in the fourth quarter of last year was that employees felt that we were standing up and we were saying this is who we are, this is what we do and this is what we’re trying to achieve that we put in place the program, we’re creating a common vision and giving people the sense optimism. And as the executive team travels around the world on business we always try and put into our schedule what we call Town Hall meetings.

And naturally it varies quite a lot actually and quite surprisingly and you learn quickly the cultural stereotypes are exactly that they stereotype you can go to a country where you expect not very many questions, or not very many sort of fox like questions to be quite surprised. So I think that optimism or that positive sentiment is still there, people understand what we’re trying to do, we invest quite a lot in communication, but frankly, we probably need to do more on communication, as there is really no limit to what you can do, in terms of staying connected with employees, colleagues across the group.

We also are acutely aware that you can kill an organization with change and we talked last year about for example not going for a big bang approach on IT, it’s very clear you don’t have to spend more than five seconds looking at our IT estate to know that a lot of it needs to change. It’s changing all at once would be a huge mistake, so a very structured program phased overtime deter on procurement. And we’re constantly balancing the change program against keeping employees focused on the marketplace, customers, competition and on operational delivery. And part of the answer to your question is about getting more in. So we’re hiring people into sales and business development. We have hired project managers for example in IT, because if you rollout a change program and you explain to a expansion management team, this is what we’re trying to do these are the benefits everyone can but into that. There is no loss of in fact there is no push back on that people can see the clear case.

What becomes more difficult is when you say to somebody by the way you have to do it with what you have already. So, do these after hours keep your day job going and we won’t do that. We certainly are asking more of our employees but I think they’re willing to give that but at the same time we’re putting more resource and so we talked quite a bit in the presentation, by putting subject matter experts into regions, sales specialists into regions, we’re also putting playground managers in to deal with things like procurement, IT, hiring category managers. It’s a balance, it doesn’t feel like a big push at the moment and I don’t feel like we’re pushing water uphill, there is quite a lot of pull from the organisation. I think people feel energized by having clarity about what we’re trying to achieve and everybody wants to work in a place where you feel good about you’re doing. And I think we’re getting there and we’re not there yet, so it’s a gradual cultural change is impossible in my view, impossible to define and certainly impossible to set a precise time table against and to use my favorite phase, it won’t be linear the rate of progress. And I’ll stop there I think it is right at the top of our list in the executive team, keeping the balance right.

Stephen Rawlinson - Whitman Howard

Stephen Rawlinson from Whitman Howard, just on that issue probably on the last question, it would be helpful if you could provide just a few metrics of expectation with regards to some of the softer side. But in particular one, I remember from last year was health and safety and that may be on that is probably quite easy to recall from various board meetings and statistics to hand. And in addition to that question as two of those. One with regard to global customers, I mean much of what you talk about today addressing with the customers on a regional basis. So if you’re able to give a sentence or two, please on how you address the global customers? And finally just on win rate, it would be helpful to know what historically the win rate was, how you’re going to improve it? I am assuming how much of that 4.9 million might convert into August?

Ashley Almanza

Health and safety first, I think I said it in this forum before but if I haven’t and you’ll hear for the first time. In the safety change program, you simply have to focus on input based measures in first incidence. And many companies have tried before to -- certainly in the national resources space. And this is an industry which I think in many ways is leading the world in health and safety. And to focus immediately at the start of the change program on outputs and you can’t really do it. You have to get everyone on the team particularly in our company which is a very largely focused on input measurements, by that I mean defining clear action plans, things you’re going to do is quite hard to draw a straight line between doing this thing and getting results at the other end in the beginning.

So for example it is mandatory this year for our global leadership team or to go on personal safety training and standard that includes us. And on this occasion we’ve gone and got outside help from a specialist who have worked with before in the oil and gas industry. Our global leadership team has gone on a safety training program for the first time, that’s about mind sets as much as anything else in creating greater awareness, creating a sense that all incidents are avoidable. Now that’s quite a hard thing in this industry for people to accept not least because many of incidence are tech related, that’s quite unique to this industry, not many industries where your employees go to work and face prospect of being attacked.

So we got series of input measures but the fine program for each region, each county to have health and safety management system and standard health and safety management system, needs to protect the leadership training, road safety programs, golden rules of safety. So these are things we can measure on an input basis. We can say everyone has to be trained by this state, you had to have health and safety management system by this state and we will audit some of those. So we have about 110 health and safety professionals spread across the group.

We’re making some changes to the composition of that group and how we manage that group, we are giving them more teeth and so we’ve created again more senior positions in each region that have a direct line of communication if not reporting line to the regional presidents in each region. And we’re going to audit this, as we go along to make sure this is happening. And other input base metric is what we describe is the 24 hour report. Any incidents about the certain severity levels that have set a 24 hour report produced and sensed to the group executive committee. Sounds bureaucratic business aspect of it which is necessarily so. But what it does it changes the perception in the organisation about the importance of what’s happening.

When a country manager hears or gets a phone call on a Sunday to say what happens from the Chief Executive or another member of the executive committee, it does over time start to change, understand the organisation of the importance that’s attached to this. I think I have said before that everyone on the group executive committee has a proportion of their bonus attached to execution of our input based health and safety improvement plan this year, that ranges can be up to 30% of total bonus. It’s somewhat experimental I think typically it’s going to be 15% of bonus that we are going to put in place an opportunity so for people to really get off to something. And I think it’s more than just the financial incentive or penalty, whichever way you look at it. It’s about changing mindsets.

We do track but I think you’re referring to hard KPIs or output-based KPIs, incidents. Our data record is not yet what it needs to be. So typically what you would expect to see in a large organisation is a pyramid of health and safety incidents. Everything from near misses through to HPI, high potential incidents, and actual severe injuries and, sadly, fatalities as well and you’d expect to see a representative relationship between those things and business by business the near miss is of course the leading indicator and again this is we are not breaking new ground, we are doing what other industries have done. But as we pointed out in the previous question, we have 600,000 employees spread across more than 100 countries. So again we have to be disciplined and patient and but the first and foremost, it’s about changing mindset get the leadership into the right place. We measure on a monthly basis our incidents. We certainly measure various incidents and of course we measure fatalities.

Unfortunately we’ve had 26 fatalities in first six months of the year and that I hesitate to say that it’s an improvement, it’s not really. I mean statistically numerically it is but it’s not really improvement. And it’s far too high. Each and every fatality is now investigated. It was but I would say the rigor and the speed of the investigation is greater now and we report those two the Board both the corporate social responsibility committee and the main Board and I am really very pleased to have in Clare Spottiswoode, somebody chairing our CSR committee who’s got a genuine passion for the subject and she certainly assists us, when she from time-to-time we ask Clare to travel different parts of the business, she is very good promoter of our health and safety campaign.

I can really it is hopeful for far too long. Your point is well made. We put in our annual CSR reports and hard KPIs. For the next few years, our efforts are focused on of course we’re going to keep track of the outputs but we have to start the change from within by changing behaviors and that’s going to be done in a systematic way. So we’re getting some external help. I don’t think there is anybody on executive committee or on a regional executive committee or on the global leadership team, 100 plus people who had any doubt about importance of this. And they do have any doubts, they only have to look at their performance contract to be a reminder that this is going to be something that we discuss as part of our performance appraisal in a positive and constructive way, but we will have a change in a way we manage this for sure. I can’t predict what the results will be.

Stephen Rawlinson - Whitman Howard

And the global customers and win rate?

Ashley Almanza

I beg your pardon. I talked for so long on that. Global customers, good point, it’s in area of increasing focus I mentioned that one of the things it’d be global sales form is doing is exactly that looking that how we are managing global accounts, we do have now some quite senior experience dedicated global account managers in some cases they dedicated to one or small number of global accounts. I think we are learning to be a bit more effective in anticipating other needs of our global customers, a bit more joined up globally in making sure that the global account manager based in London or New York or Johannesburg is aware if something happens in Delhi or Kuala Lumpur which might fit. So we’re not quite there but on telecommunications prices around customer, global customer management does need strengthening. We’ve got some I think again I’m going to quote North America. Each region I visited this is one of the things we talked about global account management, customer service, customer satisfaction, measurement and so on.

I think we’re probably most advanced in the UK and North America. It’s not to say there are some very good examples of global account management in any other regions. But we’re probably slightly ahead there, so more to do. So one of our strengths as we go to the marketplace is we are one of the few, if not the only security company in the world that can say to a global customer or potential customer where you are, we are or where you are, we can be. And that’s quite powerful proposition. So I think we’ve probably again this is another area. When I talked earlier about the review we did last year, coming to the conclusion we’re under-investing in the organic growth opportunity, this is one of those areas global account management.

Typically the way we approach global account management has been to focus on one or two service lines with a global customer. We’re now asking the question all the time, what about the other service lines we offer, why would this customer not benefit from having those service lines delivered by single provider. We’re getting some fraction I don’t think there is consistent picture across the globe. And then win rate, I give you a break from my voice and Himanshu you want to?

Himanshu Raja

Come back to you actually on run rates, after that long wait, on the trending.

Stephen Rawlinson - Whitman Howard

It is I mean anything but it again…

Himanshu Raja

Varies region-by-region…

Stephen Rawlinson - Whitman Howard

Exactly. Yes, country-by-country…

Himanshu Raja

So we’ll give some better in south line because an aggregate win rate is meaningless because the richness of the pipeline varies region-by-region assets refurbishment. So we come back to similar.

Stephen Rawlinson - Whitman Howard

Okay.

Himanshu Raja

Okay. And we are going to go to the back and for -- if not our last question then our penultimate question I know people have got things to do.

Ed Steele - Citigroup

Thanks Ed Steele, Citi.

Himanshu Raja

Hi Ed.

Ed Steele - Citigroup

Two questions please. First, on this 1.2 billion of new sales going to 616 annualized and obviously that was up quarter, so year-on-year it looks very impressive, could you give us more context around how impressive it is. So was last year’s first a normal one obviously it is tough, can you just help us understand what this really need kind o last few years level of wins please? That’s first question.

Ashley Almanza

Okay. So first question I think on a like-for-like basis it is up and it would be stretching to say we have the perfect record going back but this is our record shows, it is as I said an exceptional performance in that space. We not now sitting back assuming that the sales machine is loyal in every six months 1.2 we roll in and most of you pleased either. But I think when you look at 1.2 in the context of our sales book then I think that’s a very satisfactory performance and beyond that I don’t think we can comment I don’t think we’d be at this long enough to say it’s going to be 1.1 or 1.4 for the second half as we sit here I would regard it as an exceptional performance. Clearly the amount of -- a bit like the industry I came from, the more successful you are producer, the hard you have to work it and refurnishing. So the front end of the funnel is got to keep feeling, that’s way it’s a nice problem to have we welcome that problem but I sort of tie just one of the earlier questions about the scale of change in company bringing a lot of new people into sales and business development.

We’re appointing new sales leaders and I think that does mean that this went all fall into place just won’t be a domino effect. We’re going to make progress more quickly in some quarters and then we’re going to be consolidating as new sales leaders try different things. The market always be out for the same level of business. So there is a degree of what the market is doing as well and I comment on North America, really hard to know whether what we’ve seen in North America in first half of this year is a trend or just a good six months, the time will tell. So I’m sorry I completely more precise in that but I think it is like-for-like comparison with 440 and I think it probably against even a long run historical data set is an exceptional performance second part.

Ed Steele - Citigroup

You talked a lot about health and safety today, and also in the past; obviously that’s a break, your predecessors, and it’s obviously a great thing. Do you think it goes far as putting odd countries if you can’t get health and safety good track records I think maybe South Africa cash, for example?

Ashley Almanza

It’s very good question, I don’t think we’re going to need pull out of any countries but what we will do and have done in the last six months is terminated some services. So I mean it’s very interesting because what the riskiest business we have when it comes to personal health and safety, by some distance its Afghanistan and Iraq. Think about what’s happening in Iraq today we have near enough 3000 people in Iraq and it happens based in the South and we’re important part of the security at Baghdad International Airport; we have a secure business park outside of Baghdad and we have not had a single fatality in the past 12 months in Afghanistan and Iraq. Now either attack, or non-attack, the after attack related fatalities are highest source, recall the fatalities as road traffic accidents. So in relation to attack there are also this is that we will terminate. The first of it is we’re engaged with the customer and say can we deliver the sales in different way so that our people and your people and your customers and everyone can be safer. And in most cases the customer agrees to that and in some very rare cases in the last six month just because not being possible let say logistically for that change that we made, we’ve terminated the surface I don’t accept that happen frequently.

Safety is one of the things where when you think you’ve got the answer, you look again and you find suddenly that the better answer to something that you saw was the best answer. So we can -- but I don’t think we’ll need to withdraw from many countries, just yes.

Ladies and gentlemen thank you very much for coming along and thank you so much for your active engagement, we really appreciate the interest, Himanshu and I and the rest of our management team will be remaining behind, so if you have time please stop for refreshments and we’ll be happy to continue the conversation. We look forward to seeing you on November 13. Thanks very much.

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