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G4S Botswana has reported a significant financial decline for the first half of 2024, prompting its board to withhold an interim dividend. While the company experienced a year-on-year revenue increase of 5.4 percent, its losses widened considerably, resulting in a reported loss before tax of USD .6 million, compared to a profit of USD 88,000 during the same period last year.
Revenue for the first two quarters of 2024 has reached P115.8 million, up from P109.9 million in 2023. This growth was primarily driven by improvements in the Manned Security Services (MSS) division, which benefited from a price increase related to a 23.5 percent statutory wage hike that took effect in February 2024. However, the gains in MSS were overshadowed by underperformance in other areas, particularly in the Cash Services and Electronic Security Services (ESS) divisions.
The company’s gross profit fell sharply, declining 17.5 percent from the prior year. G4S cited several factors contributing to this decline, including rising labour costs and a reduction in Deposita sales within the Cash Services division. Demand for Deposita machines, which facilitate quick and efficient cash deposits, notably decreased compared to the same period in 2023, when the company secured a major sale to a key banking client. This decline, along with cost pressures from wage increases, directly impacted overall profitability.
As of June 2024, G4S finds itself once again in a loss-making position, reporting a pre-tax loss of P8.2 million and a total comprehensive loss of P8.5 million. With full-year results still pending, there are growing concerns that losses could deepen further by year-end, potentially exceeding the previous year’s figures. The pattern of mid-year profitability followed by significant year-end losses highlights the persistent challenges G4S faces in stabilising its financial performance.
The 23.5 percent wage hike has proven to be a significant burden, necessitating adjustments to severance and leave provisions. These changes resulted in higher costs in the first half of the year, compounding the already tight margins across service lines. The wage increase occurred amid national inflation of only 3.9 percent, further exacerbating the financial strain on the company. Despite these challenges, G4S emphasised improved performance in the MSS division on a year-on-year basis. G4S also faced substantial impairments in its financial assets, with net impairment losses rising to P6.7 million, up from P2.2 million during the same period in 2023. This increase was attributed to lower debt collections in the first half of the year and changes in the company’s credit loss estimation models. Notably, the 2023 model assumed a longer collection period of 60 months, compared to 36 months in 2024, resulting in a higher impairment charge.
Despite this loss-making position, G4S maintained a relatively strong balance sheet. As of June 30, 2024, the company reported total assets of P154.8 million, down slightly from P174.7 million in the same period in 2023. Cash and cash equivalents improved, rising to P14.2 million from P12.7 million in 2023. However, trade and other receivables saw a sharp decline, dropping from P40.2 million in 2023 to P29.7 million in 2024. This decrease reflects the company’s ongoing efforts to enhance its debt collection processes, identified as a key priority for the remainder of the year.
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The remainder of 2024 will be critical for G4S as it seeks to stabilise its operations and address the financial challenges that have plagued its performance in the first half of the year. Management has outlined several initiatives aimed at improving debt collection and controlling costs, but the company remains cautious about its outlook. In its statement, the board reiterated that the dividend decision would be revisited at the end of the year, pending a recovery in financial performance. However, with rising costs and impaired profitability, the path to recovery remains uncertain.
